In the Oil Patch – the Limitation Bell Tolls for Thee

In a 2024 case, the Court of Appeal of Alberta upheld the decision of the trial court which ruled in an environmental loss case that the limitation period should not be extended for the owner to sue the potential tortfeasors who installed the pipeline which subsequently failed.

In 2024 ABCA 60 (CanLII) | Paramount Resources Ltd v Grey Owl Engineering Ltd | CanLII the Alberta Court of Appeal addressed whether the governing limitation period ought to be extended beyond 10 years as this was an environmental loss. The Environmental Protection and Enhancement Act (the “EPEA”) gives the Court discretion to extend the limitation beyond 10 years under certain circumstances.

Project History
                
Paramount Resources Ltd. (successor in ownership to Apache Oil Company), the owner and operator of a pipeline, had sought to convert its pipeline from a steel pipe (which had failed due to corrosion) to a carrier pipe with a fiberglass pipe insert. Grey Owl Engineering Ltd, W.F. Holdings Ltd., Custom Fiberglass Contractors Ltd, Chief Pipeline Contractors Limited and Crossfire Energy Services Inc. (collectively the “Defendants”) were involved in this matter as project managers, fiberglass installers and suppliers. On April 11, 2018 -14 years after the construction work had ended-, an environmental leak occurred, resulting in more than $20 million in damages to remediate the damages. Paramount claimed that the Defendants had failed to meet their obligations on a number of issues including failure to bury the pipeline deep enough in the first place to avoid freezing.

Case Grounds

In February 2019, Paramount filed a suit against the Defendants, alleging negligence with respect to deficiencies in the construction of the pipeline. The Defendants responded with a motion for summary dismissal of the negligence claim, arguing that the suit had been filed after the 10-year limitation period pursuant to Section 3(1)(b) of the Act. Paramount contested that this period had passed or, in the alternative, cross-applied for an extension of the limitation period under Section 218 of the EPEA. According to this section, a judge may extend a legally enforced limitation period in Alberta for the commencement of a civil proceeding that is based on allegations of adverse effects caused by a substance released into the environment.

Extension of Limitation

Since the 10-year limitation period provided by Section 3 of the Act had expired, Paramount requested an extension pursuant to Section 218 of the EPEA. This section indicates that the Court may grant the extension in an environmental matter, even if the request is made after the expiry of the limitation period.

In deciding whether to approve this request, the Court found that it was necessary to balance the objectives of the Act (ending potential liabilities so that people can move forward and recognizing practical problems of lost records and faded memories) against those of the EPEA (protection of the environment and acknowledgment of the reality that environmental damages can go undetected for long periods of time). In this case, the Court below found that documents were missing due to the passage of time, which confirmed that the Act’s objectives conflicted with the basis of considerations for an extension. The Court of Appeal refused to interfere with that finding.

The Court of Appeal acknowledged that there are competing policy objectives in the legislation:

1. The Polluter Pays principal that the polluter ought not to avoid responsibility due to the passage of time; and
2. Environmental contamination may be difficult to detect so discoverability principles may be unfair in some situations.

Decision

At the end of the day, the Court of Appeal found that the Learned Chamber’s Judge’s decision was an exercise in discretion and the Court of Appeal was unwilling to interfere with that exercise of discretion.

As a result, the extension requested by Paramount was declined and the lower Court’s decision dismissing the claim was upheld.

Should you have any questions or need further information on this insight or on related Energy or Pollution matters, please contact Don Dear, K.C., in our Calgary office who can help you understand how he or other colleagues at Clyde & Co can help.