Oilsands tailings fine not even close to maximum allowed, despite regulator's claims

An image of the industrial wastewater leak at Imperial Oil's Kearl Mine site north of Fort McMurray. (Source: Nick Vardy)

The Alberta Energy Regulator could have fined Imperial Oil at least 26 times more in connection with oilsands tailings leaks at one of its sites in northern Alberta, according to environmental law experts.

When the Alberta Energy Regulator (AER) announced Imperial Oil had to pay a $50,000 administrative penalty, it said this was the maximum base amount allowed under the Environmental Protection and Enhancement Act.

This statement is "misleading" and "clearly wrong," Nigel Bankes, an emeritus professor of law at the University of Calgary, told Canada’s National Observer in a phone interview. Bankes is an expert in environmental and natural resources law.

The regulations state the maximum administrative penalty is $5,000 per day for major contraventions such as this one.

The AER used the maximum daily amount, but applied it on a monthly basis, which reduced the penalty by more than 95 per cent, Drew Yewchuk, a former staff lawyer with the University of Calgary’s public interest law clinic, told Canada’s National Observer.

"That's extremely weird," said Yewchuk, who likened it to staying at a hotel for 10 months and they decided to instead charge you for 10 days.

Had the penalty been applied per day, as allowed under the legislation, Imperial Oil would be on the hook for more than $1.3 million. In the second quarter of 2024, Imperial Oil reported $1.13 billion in profit.

Last year, it came to light that toxic tailings had been seeping from Imperial Oil’s Kearl site for nine months and downstream communities were not properly notified.

It took a massive spill of 5.3 million litres in February for the long-term seepage, which Imperial Oil first noticed in May 2022, to be made public through an environmental protection order.

The AER’s investigation is still ongoing, this penalty only addresses the seepage that began in 2022.

"Administrative penalties are carefully evaluated by the AER to ensure they are fair and proportionate to the severity of the contravention," an AER spokesperson wrote in an emailed statement to Canada’s National Observer.

The spokesperson reiterated the press release’s statement that $50,000 was the maximum base penalty allowed under the regulation.

"It's absolutely not the maximum," Yewchuk said.

The AER’s decision said applying the daily maximum would have resulted in "a disproportionate high response … especially in light of the fact that the actual known environmental impacts of the contravention, to date, appear minimal."

The regulations consider the potential for adverse effects — not the actual impact.

The decision goes on to say the $50,000 penalty serves as sufficient deterrence to both Imperial Oil and the industry in general.

"That's not enough reasoning to justify a 95 per cent reduction compared to what the table calls for," said Yewchuk.

The regulations state that the regulator also has the option to assess and collect a separate, one-time amount if the company might have obtained an economic benefit by not complying with the rules. The AER chose not to do this.

Yewchuk said it's rare for the regulator to impose this one-time payment for economic benefits, but not unheard of.

Earlier this year, the regulator handed a one-time administrative penalty to Tallahassee Exploration Inc. for failing to monitor and report its methane emissions, he pointed out.

"The AER calculated what it would have cost for them to do the methane measuring that they were supposed to," Yewchuk explained. The result was a $191,885 penalty.

In the case of Imperial Oil, the AER could have calculated an economic benefit penalty based on what it would have cost to pay enough staff to do more checks and routinely monitor tailings areas, install more monitoring wells or use better materials, Yewchuk said.

Additionally, the AER charged Imperial Oil with two acts of noncompliance, but only fined it for one.

For the other incident, the regulator gave Imperial Oil some homework: the company must produce a "lessons learned" report to share with other oilsands operators, as well as "a plan to ensure tailings seepage mitigation and monitoring processes are completed" by Nov. 1.

After that, Imperial Oil must also develop a research plan to study the environmental impacts of oilsands tailings water.

"This is the work that Imperial is supposed to be doing, just to run the mine," Yewchuk said. "They're supposed to be monitoring it. They're supposed to be researching what to do about the tailings … ways to deal with the tailings, to get rid of them, to decontaminate them, to stop expanding tailings areas, and they haven't done it."

The 40-page decision indicates the AER suggested a $51,000 penalty even before receiving Imperial Oil’s submissions, and ultimately removed the extra $1,000.

"That's odd to me," said Yewchuk.

"I would have thought that they were going to suggest something higher and have Imperial convince them to walk them back."

This summer, Laurie Pushor, president of the AER, announced he will not return to his role when his contract expires in April 2025.