Canada: I'm Taking My Gas And Going Next Door: Restrictions On The Export Of Natural Gas From Alberta

When someone seeks to remove natural gas from Alberta, they must first receive approval from the Alberta Energy Regulator (the Regulator).¹ Commentators suggest that the Legislature introduced this requirement to ensure that Alberta's petroleum resources remained sufficient to satisfy its future energy demands.²

This legislative regime is backstopped by significant penalties. For example, when a company exports gas without a permit from the Regulator, it is liable for a fine of up to $500,000; any officers, directors, or agents of the company can also be found liable in their personal capacity.³

There is some uncertainty as to whether these export restrictions are constitutionally valid, or whether they encroach on federal jurisdiction over matters of interprovincial trade.⁴

In December, 1973, the Alberta Legislature passed an amendment to the Gas Resources Preservation Act, [the Act] limiting its application to gas or propane derived from petroleum or natural gas recovered pursuant to a production right granted under the Mines and Minerals Act and the province's regulatory scheme.⁵ The amendment passed but never became law.⁶ There is speculation that it was passed to address the possibility that the Act would be declared unconstitutional and were this to occur, the Legislature could enact the amendment and limit the restriction to gas reserves that it owned.⁷

Similar restrictions are often included as express terms in Crown mineral leases. It may be that these contractual restrictions were included to safeguard against similar questions of jurisdiction and constitutionality, shoring up the Crown's right to regulate the export of gas in which it had a proprietary interest.

These restrictions can be of some concern to producers. The permitting requirement in the Act applies to a person who "produces or has the right to produce gas or propane in Alberta" and "proposes" or "causes" the gas to be removed from Alberta.⁸ The lease restrictions are similarly worded, applying to the lessee of the mineral estate.

However, section 2(c) of the Act expands its application to a person who appears to have made "an arrangement with the owner of the gas or propane produced in Alberta" to export that gas beyond provincial borders. This implies that in practice, the Act applies to the person (or company) who actually removes the gas from the province.

The broad language of the Act appears to require producers to hold export permits before the gas they produce can be exported from Alberta. In practice, however, as long as the producer delivers the gas to a permitted midstream company or agent, or sells the gas within the province, it is likely that they have discharged their obligations under this regime.

Footnotes

1. Gas Resources Preservation Act, RSA 2000, c G-4, s 2.[the Act]

2, David Breen, Alberta Petroleum Industry and the Conservation Board (The University of Alberta Press, 1993).

3, The Act, ss 18 and 19.

4, See: AR Thompson, "Implications of Constitutional Change for the Oil and Gas Industry" (1969) 7:3 Alta L Rev 369); Robert C Muir, "Utilization of Alberta Gas" (1975) 13 Alta L Rev 64 [Muir].

5, Muir at 68.

6, Ibid.

7, Ibid.

8, The Act, s 2(a).

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