Bennett Jones
On November 13, 2013, two environmental organizations filed a petition that challenges the lawfulness of the BC Oil and Gas Commission's (OGC) practice in granting approvals for the short-term use of water in hydraulic fracturing and other oil and gas operations, and seeks to quash certain specific approvals.
Section 8 of the B.C. Water Act gives the OGC the power to grant approvals for short-term water usage. An approval may be granted for the diversion or use of water if that diversion or use "is required for a term not exceeding 24 months." The procedure for obtaining an approval is less onerous than that for obtaining a license.
It is alleged that the OGC has a practice of granting approvals "that combine to exceed one term or the statutory time limit." The petitioners argue this is unlawful because a water license is required if the use or diversion of water is required "for more than one term" or "for more than 24 months."
The OGC's Short-Term Use of Water Application Manual states that while most approvals do not exceed 12 months, those approvals granted for up to 24 months are generally for "seismic activity, winter road construction, water source dugouts, or the initial exploration phase of a hydraulic fracturing project." The manual also provides that an approval cannot be extended, and that a new application must be made if the holder of the approval wishes to use the same water source beyond the initial term.
The specific approvals challenged in the petition permit water withdrawals from "water source dugouts", a source that the OGC began regulating in March 2011 when it issued Directive 2011-02. The directive defines both a "water source dugout" and a "borrow pit". A borrow pit is an excavation resulting from the extraction of material (borrow) for fill, the construction of roads and well pads, and other oil and gas related activities. A water source dugout is a borrow pit in which water has naturally accumulated (through snowmelt, rainfall or groundwater inflow).
The directive requires approvals for the use, on Crown land and for oil and gas purposes, of water from borrow pits and water source dugouts. It also creates an obligation to obtain an approval before withdrawing any naturally accumulated water from a "water storage site". Companies holding approvals are required to submit data quarterly regarding their monthly withdrawals. Under the directive, unless a company has tenure on the land on which a borrow pit or water source dugout is located, section 8 approvals can be granted to multiple companies. While water may be withdrawn by any company holding an approval, the directive states that "there is no guarantee or precedence to the water."
If the petition is successful, companies that require water beyond the initial term of an approval including water from a water source dugout may now have to apply for a water license, a more onerous process, instead of merely applying for a further short term approval. This will likely add to the regulatory burden on oil and gas companies.