Holding Frackers Accountable for Groundwater Pollution:
An Analysis of Canada’s Liability Regimes for Hydraulic Fracturing
By Adam Shedletzky, University of Toronto Law School
For Environment Probe
July 2012
Hydraulic fracturing (fracking) is a fast-growing and controversial method of extracting
petroleum, natural gas, or other substances from wellbores drilled into reservoir rock
formations.1 Tonnes of sand, water, and chemicals are injected at a high pressure into rock,
resulting in fractures that enable the extraction of various natural resources.2
There are many environmental concerns related to fracking, including high water use,
disposal of wastewater, the potential for surface water and groundwater contamination
with fracking fluids or hydrocarbons, the potential to cause seismic events, and the
potential for air pollution. Several jurisdictions, including France,3 Quebec,4 and Nova
Scotia,5 have temporary moratoriums on various forms of fracking, while New South Wales,
in Australia, is coming to the end of its ban.6 In-depth studies have been ordered to
investigate the environmental effects of fracking in both the USA7 and Canada.8
Several cases of suspected groundwater contamination due to faulty well casings from
1
Philippe A. Charlez, Rock Mechanics: Petroleum Applications (Paris: Editions Technip, 1997), 239.
Retrieved 14 May 2012. International Energy Agency, World Energy Outlook 2011: Are We Entering
a Golden Age of Gas? 9 November 2011. Retrieved 3 March 2012: “Based on the assumptions of the
GAS Scenario, from 2010 gas use will rise by more than 50% and account for over 25% of world
energy demand in 2035."
2
Ben Parfitt, Fracture Lines: Will Canada’s Water be Protected in the Rush to Develop Shale Gas?
Program on Water Issues, Munk School of Global Affairs, University of Toronto, September 15, 2010.
3
Tara Patel, "France to Keep Fracking Ban to Protect Environment, Sarkozy Says," Businessweek. 4
October 2011. Retrieved 22 February 2012.
4
Bertrand Marotte, “Shale gas play a no man's land in Quebec,” Globe and Mail, updated 17 March
2011. www.theglobeandmail.com/globe-investor/shale-gas-play-a-no-mans-land-inquebec/article1935124/. Retrieved 15 May 2012.
5
Michael MacDonald, Canadian Press, “Fracking on hold for two years in Nova Scotia,” 16 April
2012. metronews.ca/news/halifax/106301/fracking-on-hold-for-two-years-in-nova-scotia/.
Retrieved 15 May 2012.
6
New South Wales Government (Division of Resources and Energy) website.
www.dpi.nsw.gov.au/minerals/community-information/coal-seam-gas/what-is-the-governmentdoing . Retrieved 15 May 2012.
7
US Environmental Protection Agency website. www.epa.gov/hfstudy/index.html. Retrieved 21
February 2012.
8
Shawn McCarthy, “Shale gas producers facing increased scrutiny,” Globe and Mail,
updated 05 Oct. 2011, www.theglobeandmail.com/report-on-business/industry-news/energy-andresources/shale-gas-producers-facing-increased-scrutiny/article4199265/. Retrieved 8 June 2012.
1
fracking operations have been documented,9 and one landmark case concerning fracking
for shallow coal bed methane, Ernst v. Encana,10 is currently making its way through the
courts in Alberta.
This paper will focus on the legal provisions governing groundwater pollution due to
fracking for shale gas.11 More specifically, it will examine the legal liability regimes that
regulate the compensation of individuals and the public in the event of groundwater
pollution due to fracking activities in Ontario, British Columbia, and Alberta.12 It will
conclude with several recommendations for strengthening the regulatory regime to
enhance frackers’ incentives to take care and to ensure that those who are adversely
affected by fracking can be “made whole.”
Overview of the Canadian Regulatory Scheme
Statutes and Regulations
The development and regulation of oil and gas resources within a province’s boundaries,
including fracking, are under provincial jurisdiction.13 Pollution of groundwater is similarly
under provincial jurisdiction and is prohibited under provincial environmental and water
acts.14
Some aspects of oil and gas development are also under federal jurisdiction. Although
Environment Minister Peter Kent has maintained that the federal government can regulate
shale gas development,15 it is unlikely that it would play a leading role, especially in
9
Amy Mall, Incidents where hydraulic fracturing is a suspected cause of drinking water
contamination, U.S. Natural Resources Defense Council, December 2011. Retrieved 23 February
2012.
10
Ernst v. Encana Corporation website. www.ernstversusencana.ca/the-lawsuit. Retrieved May 14,
2012.
11
The major Environmental Protection Agency study in the United States also focuses on the
potential for groundwater pollution.
12
Other possible avenues of liability, including tailing ponds, seismic activity, and gas flaring, are
areas that deserve further research but are beyond the scope of this paper. Similarly, this paper
does not investigate the adequacy of the safety standards imposed on fracking operations by
regulators, or consider the broader question of whether fracking should be permitted.
13
Oil, Gas & Salt Resources Act, R.S.O. 1990, c. P.12; Oil & Gas Activities Act, S.B.C. 2008, c. 36; Oil &
Gas Conservation Act, R.S.A. 2000, c. O-6.
14
Ontario: Environmental Protection Act, R.S.O. 1990, c. E.19, s.1(1); Ontario Water Resources Act,
R.S.O 1990, c. O.40, s.1(1). Alberta: Water Act, R.S.A. 2000, c. W-3, s.1(1)(fff); Environmental
Protection and Enhancement Act, R.S.A. 2000, c. E-12,s.1(11)(yyy). British Columbia: Environmental
Management Act, S.B.C. 2003, c. 53, s.1(1).
15
CBC News, “Ottawa has power to stop hydro-fracking in N.B.,” 16 November 2011.
www.cbc.ca/news/canada/new-brunswick/story/2011/11/16/nb-federal-environment-minister-
2
relation to groundwater pollution.
The National Energy Board regulates pipelines that cross provincial boundaries, “frontier”
oil and gas exploration not covered by federal or provincial agreements, and the export of
natural gas. It does not, however, have authority to impose legal liability on fracking
operators.16
The federal Fisheries Act17 does not apply to groundwater pollution since there are no fish
in groundwater, and the Canada Oil & Gas Act does not apply to operations under provincial
jurisdiction.18
Under the Canadian Environmental Protection Act (CEPA), the federal government can
regulate in relation to an “environmental emergency,”19 defined as an act that has “an
immediate or long-term harmful effect on the environment.”20 The act grants it the ability
to hold an individual or corporation liable for “restoring any part of the environment
damaged by or during the emergency.”21
However, these provisions are intended to provide a "safety net," so if “no other federal or
provincial regulations exist that adequately respond to environmental emergencies, the
Canadian Environmental Protection Act can be used to fill the gap.”22 Oil or gas spills,
except those involving pipelines, have been prosecuted using provincial statutes rather
than the CEPA.23
The Common Law
Common-law actions of nuisance and negligence are generally available to individuals to
seek an injunction or recover damages from a company that has polluted their
groundwater. This is in contrast to the nuclear industry, where, in the event of an accident,
hydro-fracking.html . Retrieved 8 June 2012.
16
National Energy Board website. www.neb-one.gc.ca/clf-nsi/rthnb/whwrndrgvrnnc/rrspnsblteng.html . Retrieved 14 May 2012. Also see Willms & Shier,
www.willmsshier.com/newsletters.asp?id=64#s6 . Retrieved 14 May 2012.
17
Fisheries Act, R.S.C., 1985, c. F-14.
18
Canada Oil and Gas Operations Act, R.S.C., 1985, c. O-7, s.3.
19
Canadian Environmental Protection Act, 1999, S.C. 1999, c. 33, s.194.
20
Ibid., s.194(a).
21
Ibid., s.205(1)(a), s.272.
22
Environment Canada, A Guide to Understanding the Canadian Environmental Protection Act,
1999. www.ec.gc.ca/lcpe-cepa/default.asp?lang=En&n=E00B5BD8-1&offset=12&toc=show .
Retrieved 14 May 2012.
23
See Smith Brothers Excavating Windsor Ltd. v. Camion Equipment & Leasing Inc. (Trustee of)
(1994), 21 C.C.L.T. (2d) 113 (Ont. Gen. Div); Jones v. Mobil Canada Ltd. (1999), 248 A.R. 1 (Alta. Q.B.),
para. 142; Ball v. Imperial Oil Resources Ltd., [2010] A.J. No. 379, 2010 ABCA 111.
3
the government has the ability to stay all proceedings against nuclear operators and create
a parallel process to administer claims.24 The ability to sue under the common law will be
discussed near the end of this paper.
Provincial Statutes and Regulations
Each of Ontario, Alberta, and British Columbia has separate legislation to govern the
development of oil and gas resources, protect the environment, and specifically protect
water resources.
In all three provinces, both individuals and the government have the ability to initiate
proceedings against a company that has breached the statutes or regulations. However, the
Attorney General, who has the exclusive authority to represent the public in court, can
intervene and continue or stay the proceedings.25 This means that in practice, citizens
cannot choose to sue a company for a statutory violation without the consent of the
Attorney General.
Alberta and British Columbia have formal policies in place to take over private
prosecutions, whereas Ontario does not.26 The courts will not review a decision by the
Attorney General to intervene in a private prosecution unless there has been “flagrant
impropriety,”27 meaning that in nearly all cases, the Crown can simply choose not to
prosecute a company.
Ontario
In Ontario, the Oil, Gas & Salt Resources Act (OGSR),28 the Environmental Protection Act
(EPA),29 and the Ontario Water Resources Act (OWRA)30 could all potentially apply to the
24
Nuclear Liability Act, R.S.C. 1985, c. N-28, s.18-19.
British Columbia: Criminal Justice Branch, Ministry of Attorney General, Crown Counsel Policy
Manual: Private Prosecutions , 18 November 2005. www.ag.gov.bc.ca/prosecution-service/policyman/. Alberta: Justice and Solicitor General website, Private Prosecutions.
justice.alberta.ca/programs_services/criminal_pros/crown_prosecutor/Pages/private_prosecution
s.aspx . Retrieved 14 May 2012. Ontario: Ministry of the Attorney General website, Private
Prosecutions. www.attorneygeneral.jus.gov.on.ca/english/private_prosecution.asp . Retrieved 14
May 2012.
26
Ibid.
27
Werring v. B.C. (Attorney General) (1997), 122 C.C.C. (3d) 343 (B.C.C.A), Kostuch (informant) v.
Alberta (Attorney General) (1995), 101 C.C.C (3d) 321 (Alta. C.A.), Campbell v. A.G. of Ontario (1987),
31 C.C.C (3d) 289, aff’d. 35 C.C.C (3d) 480 (C.A.).
28
Oil, Gas and Salt Resources Act, R.S.O. 1990, c. P.12 [OGSR].
29
Environmental Protection Act, R.S.O. 1990, c. E.19 [EPA].
30
Ontario Water Resources Act, R.S.O 1990, c. O.40 [OWRA].
25
4
leakage of natural gas or fracking fluids into groundwater.31 Both the OGSR and the EPA
contain “override” clauses indicating that the provisions of their respective acts should
prevail over other acts.32 This is potentially significant, as the language of the offences and
the maximum penalties differ by act.33
Prosecutions for spills in Ontario have been exclusively brought under the EPA.34 Only
three cases have been brought under the OGSR, and none have had to do with spills. This is
understandable, as Part X of the EPA is exclusively related to spills. Moreover, the EPA’s
override clause is specific, stating that “Where a conflict appears between any provision of
this Act … and any other Act … in a matter related to the natural environment or a matter
specifically dealt with in this act … the provision of this Act or the regulations shall
prevail.”35 On the other hand, the OGSR’s override clause is more general in nature.
Under the EPA, the government has two options to attempt to hold a fracking company that
pollutes groundwater accountable. Both originate from the prohibition under S.14(1) of the
EPA that “a person shall not discharge a contaminant or cause or permit the discharge of a
contaminant into the natural environment, if the discharge causes or may cause an adverse
effect.”36
The government can first impose on a corporation an “environmental penalty” ordered by
the Director in an amount up to $100,000 per day.37 This penalty is subject to absolute
liability, meaning that the company may be held liable regardless of whether it took all
reasonable steps to prevent the contravention or if it “held an honest and reasonable belief
in a mistaken set of facts that, if true, would have rendered the contravention innocent.”38
As will be discussed below, this is unique, as all other statutory offences related to
groundwater pollution have a “due diligence” defence available to the accused.
Additionally, the government can prosecute a company using S.186(1) of the EPA, which
holds that every person who contravenes the act is guilty of an offence. A company is liable
for a daily penalty of $25,000 - $6,000,000 for a first conviction, $50,000 - $10,000,000 for
31
Ibid. at s.30(1); EPA, supra note 29 at s.14(1); OGSR, supra note 28 at s.19(1)(e).
OGSR, supra note 28 at s.18(1); EPA, supra note 29 at s.179(1).
33
The maximum penalty under the OGSR is $500k per offense (s.19(2)), whereas the EPA and the
OWRA permits for a maximum administrative penalty of $100k per day (EPA, s.182(5); OWRA,
s.106.1(5)) and a maximum penalty for a conviction of up to $10M per day for repeat offenders
(EPA, s.187(4); OWRA, s.109(2)).
34
See e.g. R. v. Petro Canada (2003), 49 C.E.L.R. (N.S.) 60, 171 C.C.C. (3d) 354, 63 O.R. (3d) 219, 222
D.L.R. (4th) 601, 168 O.A.C. 247.
35
EPA, supra note 29, s.179(1).
36
Ibid., s.14(1).
37
Ibid., s.182(1)(1)(a)(i), s.92(1).
38
Ibid., s.182(1)(6).
32
5
a second conviction, and $100,000 - $10,000,000 for a third conviction.39 Monetary benefits
accruing to the company as a result of the release can be added to the penalty.40 Individuals
are liable for a daily penalty of $5,000 - $4,000,000 for the first offense, $10,000 $6,000,000 for the second, and $20,000 - $6,000,000 for the third.41 Individuals can also be
imprisoned for a term of not more than five years.42
Importantly, the government can hold company directors and officers personally liable for
not taking “all reasonable care” to prevent the corporation from “discharging or causing or
permitting the discharge of a contaminant”.43 The onus is on the director or officer to prove
that he or she exercised his or her duty appropriately.44 The maximum penalty allowable is
the same as above for individuals.45
For both individuals and corporations prosecuted under S.186(1), the court may consider
the administrative “environmental penalty” described above in determining the amount of
the fine, which can lead the fine to be less than the minimum prescribed in the act.46 There
does not appear to be any discretion for the court to impose additional monetary penalties
over and above the statutory maximum, as there is in Alberta and British Columbia. This
may be due to the fact that the maximum penalties in Ontario are already very high.
In addition, unlike under the environmental penalty, a due diligence defence is open to the
accused charged under S.186(1) of the EPA. This means that the accused may avoid liability
by proving that he or she took all reasonable care. This includes if he or she took all
reasonable steps to avoid the particular event giving rise to the offence, or if he or she
reasonably believed in a mistaken set of facts, which, if true, would render the act or
omission innocent.47 While the Government must prove beyond a reasonable doubt that
the defendant committed the prohibited act, the defendant must only establish on the
balance of probabilities that he or she has a defense of reasonable care.48
The Minister of the Environment also has broad discretion to require a company or
individual to take immediate action “in respect of the prevention, elimination and
amelioration of the adverse effects and the restoration of the natural environment.”49
However, because amelioration and restoration are not always possible, injunctive relief
39
Ibid., s.187(3-4).
Ibid., s.189.
41
Ibid., s.187(3), s.187(5).
42
Ibid., s.187(5)(b-c).
43
Ibid., s.194(1-2).
44
Ibid., s.194(2)(1)(a).
45
Ibid., s.187(3)(4), s.187(5).
46
Ibid., s.188(1)(16).
47
Ibid., s.99(3); R. v. Sault Ste. Marie (City) (1978), 7 C.E.L.R. 53 (S.C.C.) [Sault Ste. Marie].
48
Ibid.
49
EPA, supra note 29, s.97.
40
6
alone may not be sufficient.
There is no specific requirement that companies carry sufficient insurance, or be capable of
paying large environmental penalties related to the escape of gas or toxic fluids from a
fracking operation. There is a “Waste Well Disposal Security Fund,” but that governs the
disposal of waste water, not the unintentional leakage of fracking fluids or natural gas into
groundwater.50 The Lieutenant Governor in Council has discretion to make a regulation to
force companies to hold a certain amount of insurance,51 yet there is no guidance or
requirement specifically for fracking operators. Other acts, such as the Nuclear Liability Act,
require companies to hold sufficient insurance to pay the maximum penalty allowable
under the act.52
Alberta
Fracking operations in Alberta are subject to Alberta’s Environmental Protection and
Enhancement Act (EPEA).53 S.109(2) of the EPEA prevents a person from releasing into the
environment a substance that “causes or may cause a significant adverse effect,” defined as
an impairment of or damage to the environment, human health, safety, or property. The
maximum penalty is $500,000 per day.54 If the release of a dangerous substance is done
knowingly, the maximum penalty is increased to $1,000,000 per day.55
Monetary benefits accruing to the company as a result of the release can be added to the
penalty,56 and directors and officers can be held accountable for the release as well.57 A due
diligence defence similar to that in Ontario is open to the accused.58
The court has discretion to direct the offender to “take any action the court considers
appropriate to remedy or prevent harm to the environment” over and above any other
penalty that may be imposed by the Act.59 For example, after ducks landed and died in one
of its tailing ponds, Syncrude was ordered to pay $2,200,000, significantly over the
maximum penalty, to fund one research and one conservation project.60 The projects were
directly related to preventing a similar type of harm from occurring in the future by
researching migratory pressures birds face in the oil sands region and acquiring
50
Ibid., s.47.
Ibid., s.176(1).
52
Nuclear Liability Act, supra note 24, s.15(1).
53
Environmental Protection and Enhancement Act, R.S.A. 2000, c. E-12, s.109(1-2) [EPEA].
54
Ibid., s.228, s.231.
55
Ibid., s.109(1), s.228.
56
Ibid., s.230.
57
Ibid., s.232.
58
Ibid., s.229.
59
Ibid., s.234(1)(b).
60
R. v. Syncrude Canada Ltd., [2010] A.W.L.D. 5187, 56 C.E.L.R. (3d) 124.
51
7
conservation land that would provide important habitat for the birds.61 In the case of
groundwater pollution from fracking, a judge could conceivably order the company to
provide money to study a better leak-monitoring regime or a more secure material to
prevent future leaks.
Alberta has an Oil & Gas Conservation Act (OGCA), but the act is focused on regulating the
safety of drilling operations.62 The OGCA gives the Energy Resources Conservation Board
the ability to order an injunction to “prevent further escapes” of natural gas,63 yet the
maximum penalty for an infringement is only $1,000 per day.64 There is no “override
clause” in the OGCA, and it appears that a single act or omission can result in simultaneous
charges under several acts.
Alberta’s Water Act is concerned with the licensing of activities that can have an impact on
water65 and does not penalize unplanned discharges into water.
At the time of writing, there is a landmark case, Ernst v. Encana,66 moving forward in the
courts. The case concerns groundwater contamination allegedly caused by fracking for
shallow coal bed methane near Rosebud, Alberta. The plaintiff has sued not only the gas
company but also the Province and its energy resources regulator. She is alleging the
breach of several statutes, including the OGCA, EPEA, and Water Act, and has proceeded
with several common-law causes of action. The result will be the first major Canadian case
regarding a spill from a fracking operation, and should be closely watched.
In Alberta, there are significant requirements for “security” to be paid for the eventual
reclamation of oilfield waste management facilities, but this would not apply to fracking
operations that leak gas or fracking fluids into groundwater.67 The Minister does have
discretion to require that security be provided or insurance be held68 in a specified
amount,69 but there is no specific regulation requiring that fracking operators be capable of
repaying significant environmental penalties.
61
Ibid. at para 6.
See e.g. EPEA, supra note 53, s.10.
63
Oil and Gas Conservation Act, R.S.A. 2000, c. O-6, s.104.
64
Ibid., s.110.
65
Water Act, R.S.A. 2000, c. W-3, s.1(1)(b).
66
Ernst v. Encana Corporation website. www.ernstversusencana.ca/the-lawsuit. Retrieved May 14,
2012.
67
Oil and Gas Conservation Act, supra note 63, Alta. Reg. 151/71 – Oil and Gas Conservation
Regulations Part 16.6 – Security.
68
EPEA, supra note 53, s.88(2)(1), s.135(1).
69
Ibid., s.86(1)(c).
62
8
British Columbia
Leaks or spills from oil and gas operations can be subject to charges under BC’s
Environmental Management Act (EMA)70 and the newly enacted Oil and Gas Activities Act
(OGAA).71 BC’s Water Act explicitly does not apply to wells regulated under the OGAA.72
Under the EMA, a person must not introduce waste into the environment in such a manner
or quantity as to cause pollution,73 or introduce or cause or allow waste to be introduced
into the environment in the course of conducting a prescribed industry, trade, or
business.74 The maximum penalty is $1,000,000 per day,75 and monetary benefits accruing
to the corporation from the leak may be recovered.76 British Columbia also has a similar
provision to Alberta, granting the court discretion to impose further penalties for “remedial
or preventive action.”77
The OGAA requires individuals or Corporations carrying out an “oil and gas activity” to
prevent spillage, which includes natural gas leaking or spilling from a well, flow line,
activity, facility, or “any source apparently associated [with natural gas].”78 The maximum
penalty is $1,000,000 per day or three years imprisonment or both.79 However, the
Lieutenant Governor in Council may make a regulation that could set a maximum fine at a
lower level than the act prescribes.80
There have not yet been any charges laid under the OGAA, as it was only passed in 2010,81
yet the language of the act makes clear that it would apply. There is no “override clause” in
the OGAA, and there does not appear to be any statute limiting the ability of the Crown to
charge the accused under two statutes for the same act or omission.
In both acts, an employee, officer, director, or agent of the corporation who authorized,
permitted, or acquiesced in the offence can be held liable for the offence, whether or not
the corporation is convicted.82 The due diligence defence also applies to individuals and
70
See e.g. R. v. B. Cusano Contracting Inc, 2011 Carswell BC 3476.
Oil & Gas Activities Act, S.B.C. 2008, c. 36, s.37(1)(a) [OGAA].
72
Water Act, R.S.B.C. 1996, c. 483, s.1.
73
Environmental Management Act, S.B.C. 2003, c. 53, s.6(4) [EMA].
74
Ibid., s.6(2).
75
Ibid. s.120.3, s.122.
76
Ibid. s.125.
77
Ibid., s.127(1)(c).
78
OGAA, supra note 71, s.1, s.37(1)(a).
79
Ibid., s.86(1), s.86(8).
80
Ibid., s.86(6-7).
81
BC Oil and Gas Commission, Oil and Gas Activities Act Chronology.
www.bcogc.ca/OGAA/chronology.aspx. Retrieved 13 May 2012.
82
EMA, supra note 73, s.121; OGAA, supra note 71, s.86(11).
71
9
corporations charged in BC.83
There is no specific requirement that a fracking operator carry a sufficient amount of
insurance to be capable of paying a monetary penalty. There is a Waste Management Trust
Fund,84 yet that fund is for the purposes of environmental clean up necessitated by the
inadequate closure of waste management facilities.
The Common Law
Although groundwater polluters may be prosecuted under the statutes discussed above,
individuals whose property rights have been violated by pollution have an additional
avenue of recourse: They are able to sue to recover damages or obtain an injunction under
the common law. Several common law doctrines, including trespass to land, nuisance,
Rylands v. Fletcher, and negligence, are potentially applicable and will be discussed below.
In general, an individual is able to sue under the common law only if the pollution has not
been “expressly or impliedly authorized” or is not an “inevitable consequence” of a
legislatively authorized action.85 Furthermore, a statute must not have explicitly limited the
application of the common law.
Pollution from fracking is not protected by such statutory or regulatory limitations. The
pollution of groundwater is not “expressly or impliedly authorized,” nor is it an “inevitable
consequence” of a fracking operation. The extraction process for natural gas is explicitly
intended to prevent groundwater pollution. A company could attempt to claim that since
there are detailed regulations outlining what type of fracking operation is legal, and
groundwater pollution nonetheless occurred, it was an “inevitable consequence” of a
legislatively-authorized action. This claim would be unlikely to succeed, as the act of
extracting natural gas was authorized, not the pollution of groundwater, and such pollution
was not anticipated as a consequence of permitting fracking operations.
The fact that a statute makes an action an offence and imposes a fine, as is the case with
fracking, does not derogate from the rights of an injured party.86 Moreover, there are
“savings clauses” that explicitly preserve civil remedies in most of the key acts discussed
above.87 Only Ontario’s Oil & Gas Salt Resources Act does not have a specific “savings
clause.” However, since all public charges for spills of contaminants have been brought
83
Sault Ste. Marie, supra note 47; OGAA supra note 71, s.86(13) and s.37(3).
EMA, supra note 73, s.136, s.138.
85
Tock v. St. John's (City) Metropolitan Area Board (1989), 1989 CarswellNfld 21 (S.C.C.).
86
Canada (Attorney General) v. Ewen (1895), 1895 CarswellBC 18 (B.C. S.C.); Groat v. Edmonton
(City) (1928), 1928 CarswellAlta 116 (S.C.C.).
87
British Columbia: OGAA, supra note 71, s.87; EMA, supra note 73, s.120. Alberta: EPEA, supra note
53, s.217. Ontario: EPA, supra note 29, s.190(1)(10) and s.122.
84
10
under the Environmental Protection Act, and not the OGSR, it is unlikely that an individual
would be denied a civil remedy due to the lack of a savings clause.
The absence of clauses explicitly limiting an individual’s right to use the common law to
address pollution from fracking contrasts sharply with limitations found in The Nuclear
Liability Act.88 If the Governor in Council believes that the total liability of a nuclear incident
could exceed $75,000,000, or that it is in the “public interest” to provide special measures
for compensation, he or she can, by proclamation, hold that the nuclear operator is no
longer liable under the common law, and all proceedings are forever stayed.89 At that point,
a Commission is established that has “exclusive jurisdiction” to hear and determine every
claim brought before it arising out of the specific nuclear incident.90
The provincial environmental protection acts and oil and gas acts have no similar clauses.
The amount that an individual can sue for under the common law is thus not “capped.”91
Trespass to land
Trespass to land is defined as:
entering upon the land of another without lawful justification, or placing, throwing or
erecting some material object thereon without the legal right to do so. Such interference
must be direct rather than consequential. To constitute trespass the defendant must in
some direct way interfere with the land possessed by the plaintiff. The requirement of
directness differentiates trespass from nuisance, which is committed when the
defendant makes a use of his land that indirectly affects the land of the plaintiff.92
One legal scholar suggests that the law of trespass would likely not be applicable to spills as
they would not be considered direct interferences: “Oil spills that wash onto the plaintiff's
land, waste that is carried down rivers to the plaintiff's land, and herbicides, pesticides, and
airborne pollutants that drift in the wind to the plaintiff's land are likely to be regarded as
indirect interferences with land. Damage caused by indirect interference may be actionable
as a nuisance.”93
Nonetheless, Ernst v. Encana does make a claim in trespass94 in addition to several other
88
Nuclear Liability Act, supra note 24.
Ibid., s.18-19.
90
Ibid. s.20, s.24.
91
See e.g. Ernst v. Encana supra note 10.
92
G.H.L. Fridman, The Law of Torts in Canada, 2nd ed. (Toronto: Carswell, 2002), 37-38. See also
Anmore Development Corp. v. Burnaby (City), 2005 BCSC 1477.
93
Philip H. Osborne, The Law of Torts, 3d ed. (Toronto: Irwin Law Inc., 2007), 279. See also Smed v.
Greens Golf & Country Club, 2011 ABQB 5, [2011] A.W.L.D. 2314, [2011] A.W.L.D. 2216.
94
Ernst v. Encana, supra note 10, at para 227.
89
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common-law causes of action. Trespass to land may apply to fracking as the fracking fluids
that ultimately cause polluted groundwater are injected directly into the ground, in
contrast to an oil spill that indirectly affects land. The outcome of this claim will be
instructive as to the application of the trespass doctrine to groundwater pollution due to
fracking activities.
Nuisance
A private nuisance is the “unreasonable and substantial interference with another’s
reasonable use and enjoyment of land.”95 Whether the defendant’s use of his or her own
property is lawful is irrelevant, and a party can be held liable in nuisance without being
negligent.96
The Supreme Court of Canada has explained that actionable nuisances include “only those
inconveniences that materially interfere with ordinary comfort as defined according to the
standards held by those of plain and sober tastes,” -- that is, it shields only against
“interferences to their enjoyment of property that were unreasonable in the light of all the
circumstances.”97
Pollution of groundwater may fit this description, and in fact it has been found to be an
actionable nuisance on several occasions.98 For example, in Steadman v. Erickson Gold
Mining, a plaintiff was able to recover for groundwater pollution due to silt from a
defendant’s road-building operation, and in Jackson v. Drury Construction, a plaintiff
recovered after the effects of a construction company’s blasting operations resulted in
groundwater pollution.99
Although there is no due diligence defence open to the defendant under the law of
nuisance, courts do consider whether the defendant took all reasonable precautions to
prevent the spill.100 As one judge explained, this “may be a factor, but is not conclusive. It
then may become a question of policy of who should bear the loss; the party that creates
and controls the hazardous substance or the innocent party that suffers damage.”101
95
Halsbury’s Laws of Canada, “Environment”, at para HEN-337.
Ibid .
97
Tock v. St. John's Metropolitan Area Bd., [1989] S.C.J. No. 122 at para. 16, [1989] 2 S.C.R. 1181 at
1191 (S.C.C.).
98
See e.g. Steadman v. Erickson Gold Mining Corp. (1989), 35 B.C.L.R. (2d) 130 (B.C. C.A.); Jackson v.
Drury Const. Co. (1974), 4 O.R. (2d) 735 (C.A.).
99
Ibid.
100
See Fleming, The Law of Torts, 10th ed. (North Ryde, N.S.W.: LBC Information Services, 1011) at
506.
101
Smith Brothers Excavating Windsor Ltd. v. Camion Equipment & Leasing Inc. (Trustee of) (1994),
21 C.C.L.T. (2d) 113 (Ont. Gen. Div). See also Jones v. Mobil Canada Ltd. (1999), 248 A.R. 1 (Alta.
Q.B.), para. 142.
96
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It should be noted that taking “all reasonable precautions” is a difficult standard to obtain,
and different from the “reasonable care” due diligence defense in statutory offences. In
Jones v. Mobil Canada, contamination from the company’s buried flare pit polluted Jones’
groundwater and caused injury to Jones’ cattle. The court found that Mobil Canada “should
bear the burden of the highest standard of care,” which was not met, even though it
operated consistently with industry practice.102
Relating this defence to fracking, if a company could show that it used the highest possible
standard in constructing a well, and nonetheless groundwater was polluted, it could
possibly escape liability under nuisance law. The onus would be on the defendant in this
case.103
One impediment to using the common law arises from the difficulty in establishing a link
between a particular fracking operation and groundwater pollution. In the United States,
there have been a number of disputes over whether contaminants naturally occur in
groundwater or have migrated there from a current fracking operation, previous gas
extraction, or above-ground spills. One solution shows promise: The addition of tracers to
fracking fluids would facilitate the identification of the origin of pollution and help
establish liability for it.
An injunction and damages are both potential remedies for a claim in nuisance. An
injunction is a traditional remedy, yet damages may be substituted for an injunction in
particular circumstances. The accepted criteria for this are 1) the injury to the plaintiff’s
legal rights must be small, 2) it must be capable of being estimated in money, 3) it can be
adequately compensated by a small monetary payment, and 4) granting an injunction
would be oppressive to the defendant.104
Punitive damages may be awarded, but this is done very rarely in Canada.105
Rylands v. Fletcher
Rylands v. Fletcher is an extension of the tort of nuisance. One respected legal reference
concisely defines the rule, and applies it to the drilling for oil and gas:
if someone brings or accumulates substances on his land during the course of a
“non-natural” use of the land and those substances escape and cause damage to others,
he is “absolutely” liable. This is distinguished from “strict liability” where a defence of
due diligence may still be available … [In] the context of the oil and gas industry, the
102
Jones v. Mobil Canada Ltd. 72 Alta. L.R. (3d) 369, [2000] 1 W.W.R. 479, 248 A.R. 1 at para 151.
Fleming, supra note 100 at 506.
104
Canada Paper Co. v. Brown, [1922] S.C.J. No. 7, 63 S.C.R. 243, at 252, per Duff J. (S.C.C.). See also
Duchman v. Oakland Dairy Co., [1928] O.J. No. 102, [1929] 1 D.L.R. 9 (Ont. C.A.).
105
See e.g. De Gregorio v. Osborne, [2004] O.J. No. 2156, 20 R.P.R. (4th) 181 (Ont. S.C.J.).
103
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issue becomes whether the drilling for and production of oil and gas is a “non-natural”
use of land by a surface lessee. That may be a questionable position to take in western
Canada as the leases contemplate the very activity which would need to be determined
to be “un-natural” to found liability under this doctrine. Perhaps this is why counsel
often approach oil and gas surface liability disputes from a negligence or nuisance
perspective.106
The recent Ontario Court of Appeals decision in Smith v. Inco Ltd.107 likewise suggests that
the Rylands rule would not be applicable to fracking operations. The court referenced the
Supreme Court of Canada decision, Tock v. St. John’s: “[T]he touchstone for the application
of the rule in Rylands v. Fletcher is to be damage occurring from a use inappropriate to the
place where it is maintained.”108 Planning legislation and government regulations
controlling where, when, and how activities can be carried out will be relevant
considerations in assessing whether a particular use is “non-natural,”109 and compliance
with those regulations is “an important consideration.”110
On the other hand, there has yet to be a definitive definition of the Rylands rule from the
Supreme Court of Canada, or from courts of appeal in Alberta, or British Columbia. The
Supreme Court denied leave to appeal the Smith v. Inco decision. Therefore, there still is a
possibility that the Rylands rule could apply to fracking, and the major fracking case in
progress as of the publication of this paper, Ernst v. Encana, is making a Rylands claim in
Alberta.111
Negligence
In order to succeed in a claim based on negligence, a plaintiff must show that the defendant
owed the plaintiff a duty of care, that the defendant failed to fulfill that duty, that the
plaintiff suffered damages as a result, and that the damages are not too remote.112 The law
of negligence is complex and context-specific, and will not be discussed in this paper other
than to state that it clearly applies.
Conclusion
Because the use of fracking in the extraction of shale gas in Canada is still very limited,
there has been little opportunity to test the laws governing it. The lack of precedent makes
106
Halsbury’s Laws of Canada, “Oil and Gas,” at para HOG-91.
Smith v. Inco Ltd. (2011), 2011 ONCA 628.
108
Ibid. at para 91.
109
Ibid. at para 97.
110
Ibid. at para 100.
111
Ernst v Encana, supra note 10 at para 226.
112
Halsbury’s Laws of Canada, “Environment,” at para HEN-340.
107
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it unclear whether the current legal liability regime is sufficient to ensure the sustainability
of the fracking industry and the safety of the groundwater it potentially endangers.
There are several flaws with the current regulatory scheme. The Crown can choose
whether to prosecute a polluting company or give it a free pass, with little recourse for
concerned citizens. As long as a company takes “all reasonable precautions,” groundwater
pollution could go unpunished (except, in some circumstances, in Ontario), and adversely
affected individuals uncompensated. Individuals can sue under the common law, but only
for damage to their own property. Additionally, there do not appear to be specific
provisions to ensure that fracking operators are financially able to pay any fines or
damages awarded against them.
On the other hand, those fracking for shale gas are subject to greater liability than are some
other players in the energy industry. The current scheme leaves frackers open to
potentially unlimited liability.113 The high daily fines, especially in Ontario and British
Columbia, could lead to possible bankruptcy if the maximum fine is awarded for a longterm leak of fracking fluids or gas into groundwater. Additionally, there is no prohibition
on common-law actions nor is there a cap on damages, leading to the potential for
enormous penalties.
As governments around the world conduct environmental reviews of this burgeoning
industry, it would be wise to further consider the implications of the current regulatory
scheme and design a system of legal liability that ensures that 1) fracking operators have
every incentive to take care and 2) adversely affected individuals can be “made whole.”
Incorporating the following recommendations would be a strong starting point:
• Eliminate the due diligence defence. At a minimum, limit the defence by creating a twotier regulatory scheme that imposes some level of absolute liability for administrative
penalties and strict liability for criminal prosecutions.
• Ensure that administrative penalties are set at a level that accurately reflects potential
damage.
• Require fracking operators to hold sufficient insurance to be capable of cleaning up
groundwater pollution and paying substantial fines or damages.114
• Explicitly permit citizens to prosecute fracking operators for statutory violations where
the Crown is unwilling to do so.
• Provide the court with explicit authority to impose additional penalties over and above
113
Regulations under the Canada Oil and Gas Operations Act limit liability in relation to the
exploration, drilling, production, processing, and transportation of oil and gas in areas under federal
jurisdiction. Liability for spills, for example, may be limited to between $10,000,000 and
$40,000,000, depending on where they occur.
114
This could take the form of a minimum requirement of $10,000,000, with ministerial discretion
to increase this amount dependent on the potential for large-scale pollution of a population centre’s
groundwater.
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the maximum in the case of negligence.
• Require companies to include a tracer in their fracking fluids so any potential
groundwater contamination can be easily linked to a specific fracking operation.
• Ensure that individuals directing fracking operations are held personally liable for
statutory and/or common-law violations.
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