Municipalities have no power over oil and gas development within city limits

In December 2011 Kaiser Exploration obtained a licence to drill four oil wells in a small parcel of southern Alberta prairie. Several months later Goldenkey Oil received the rights to drill three exploratory fracking wells in a similar area. Before long both of the Calgary-based oil companies’ projects faced heated public and political opposition.

A petition against Goldenkey’s relatively small project has received 8000 signatures to date while a public information forum organized by opponents to Kaiser’s project was filled to capacity.

“It was at the local church and we were told to expect about 100 people. I would say about 600 showed up” says forum organizer Dawn Stewart. “The ERCB [Energy Resources Conservation Board now the Alberta Energy Regulator] spokesperson that was there had said he never expected that many people to attend.”

Both situations motivated MLA Ken Hughes then energy minister to initiate a policy review before a cabinet shuffle replaced him with Diana McQueen.

The sticking point for the companies’ drilling plans is their proximity to urban neighbourhoods. Kaiser’s original plan was to drill for oil behind a Walmart in the northwest Calgary neighbourhood of Royal Oak 400 metres from the nearest homes.

Stewart says residents of Royal Oak and Rocky Ridge doubted the safety of placing an oil operation beside communities with a combined population of 18000 on land containing an underground water storage facility for pre-treated drinking water and with only one arterial road that could be used for evacuation in an emergency.

“We were told an emergency plan was set for the drilling site but the city was responsible for the residents” Stewart adds.

Kaiser eventually compromised with the disapproving community and agreed to move the wells 2.3 kilometres away from the city.

Goldenkey’s intention to drill within Lethbridge city limits however has not changed.

“The proposed exploratory wells are happening in the fastest growing area of our city” laments Lethbridge Mayor Chris Spearman. “We’re putting in a $55-million aquatic centre we’re putting in a $40-million ice centre with hockey rinks and a curling rink — it’s right next to high schools there’s a private developer who wants to put in a $35-million mixed commercial development and then this comes out of the blue that they want to drill for oil and gas exploratory wells and if it’s successful there will be more wells…. People who bought homes in the area and developers who want to build in the area are saying what the heck?”

Spearman’s instinct was to tell Goldenkey they couldn’t drill in the city which he did when the Lethbridge city council passed a resolution in November 2012 opposing urban oil and gas exploration within city limits on the grounds it would hinder development and burden the city with associated health and financial risks.

Shortly after Lethbridge learned what Calgary was coming to realize: municipalities have no power to prohibit oil and gas activities on city land — or anywhere else for that matter.

Regardless of whether the city owns the land in question (in Lethbridge’s case it does; in Calgary’s case the land where Kaiser holds a drilling lease belongs to the province) the provincial government retains the mineral rights. Spearman says the government sells tenures to drill based on geology not compatibility with pre-existing activity in the area.

“We can control through municipal planning the location of all other industries. We create industrial parks and we can locate refineries and we can locate food processing plants distilleries; we can put them all into an industrial park in an area of the city that doesn’t affect residential or commercial development.

“The exception here is that oil and gas can happen anywhere. It can happen downtown if somebody gets the lease for that…. What’s frustrating from a municipal standpoint is there is no way to really combat this. We can go through the AER — the Alberta Energy Regulator — but really we would have no greater say than anybody.”

Calgary Ward 1 Coun. Ward Sutherland got involved in the urban drilling issue in 2012 when he was still the president of the Rocky Ridge Royal Oak Community Association. Due to the time Sutherland spent learning about the arcane regulations that permit urban drilling he is now a local expert. Sutherland says that since joining city council in October 2013 Mayor Naheed Nenshi has tasked him with leading communication between council and the Alberta government on the subject.

The AER states there are currently 16 oil wells operating within Calgary city limits. Calgary has been pushing the provincial government to rewrite its policies on urban drilling since 2012.

Sutherland contends oil and extraction does not need to be banned outright. “For example there is a well in Forest Lawn that’s a little over a kilometre away from Erin Woods residents” Sutherland says. “We looked around and there was no effect sound smell or anything and in fact no one knew there was actually a pump-jack a kilometre away because it was in an industrial area.”

However he does want municipalities to have the power to judge a drilling proposal the same way they judge other industrial activities and be able to say “no.”

“From a city’s perspective what we’re looking at is minimum setbacks to residential minimum setbacks to businesses zoning… egress and entrances whether the roads are verified for hazardous goods depending on what’s going on…. So it would be basically going through all the departments — planning zoning all that stuff — and it would need to meet specification” Sutherland explains.

The councillor says he was alarmed when he learned Calgary doesn’t have the power over oil extraction that it does with other industries within its boundaries and was further alarmed that the regulatory policy the government uses to sell extraction tenures was last amended 40 years ago.

The provincial government hasn’t been entirely resting on its laurels through the controversy. In 2012 Hughes pledged a review of the outdated policy and promised a new one would be ready by summer 2013. It wasn’t. Nor was the review complete by the revised December 2013 deadline.

Current Energy Minister Diana McQueen says she still plans to conduct the urban drilling policy review but she hasn’t committed to a new deadline.

“We’ve got a number of files we’re looking at that’s certainly one” she says.

McQueen says the Energy Ministry will develop a stakeholder engagement process in “coming weeks.” In the meantime she is confident in existing processes that allow parties affected to file a statement of concern with the AER to review any drilling project.

“A municipality like any other [affected party] could file a statement of concern…. We have a really strong regulatory process in this province. The regulator looks at many things whether they be environmental land issues those things. We’ve got years of experience with regards to regulatory process and thousands and thousands of wells and so there’s a really effective process in place” says McQueen.

Lethbridge has filed a statement of concern with the AER but Spearman suggests the regulatory framework needs an overhaul to balance the interests of municipalities with energy companies.

“I think it’s incumbent on the province to bring forward an urban drilling policy…. It’s been a contentious issue in the past two years in three different locations and it’s going to continue to happen” he says. “I’d go so far as to say there should be a freeze on future urban drilling until that policy comes forward and I’ll be proposing that to our sitting council at our next council meeting [March 3].”

Spearman points to the Athabasca Regional Plan and draft South Saskatchewan River Basin Plan to support his argument that the Alberta government’s first priority is supporting energy extraction not balancing all stakeholders’ interests.

“That’s the number one outcome for our land and water use under the proposed South Saskatchewan Regional Plan. The provincial legislation that’s referenced is the Responsible Energy Development Act the Mines and Minerals Act the Gas Resources Preservation Act the Gas Utilities Act the Oil and Gas Conservation Act the Coal Conservation Act the Coal Sales Act the Environmental Utilities Act and the Hydro and Electrical Energy Act. So you can see that the Municipal Government Act is not referenced there so municipalities have no say whatsoever” he says.

Hope for municipal power may also lie in the long foretold city charters. The concept of rewriting the Municipal Government Act to give larger cities like Calgary greater autonomous powers through a city charter could theoretically include control over drilling rights within city limits. But that may be a long way off and no politician is ready to speculate.

“It’s way too early to talk about that” says McQueen.