IN THE PROVINCIAL COURT OF ALBERTA CRIMINAL DIVISION HER MAJESTY THE QUEEN. - and - ALL-CAN ENGINEERING AND SURVEYS LTD.

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1 IN THE PROVINCIAL COURT OF ALBERTA CRIMINAL DIVISION Between HER MAJESTY THE QUEEN - and - ALL-CAN ENGINEERING AND SURVEYS LTD. CROWN STATEMENT OF FACTS IN SUPPORT OF A GUILTY PLEA SUMMARY OF THE CHARGE ALL-CAN ENGINEERING AND SURVEYS LTD. has entered a guilty plea to count # 4 of the information as amended, alleging that on September 21, 2009, as a party to the offence, did fail to provide information as requested under the Water Act contrary to section 142(1)(b) of the Water Act. The maximum penalty for the offence is $500, but given the extraordinary mitigating factors, the Crown is recommending a penalty of $50,000.00, $40, of which would be directed to a creative sentencing project as authorized under section 148(1) of the Act. BACKGROUND DEVON CANADA CORPORATION planned to construct a pipeline to deliver sweet natural gas from a new well to their existing West Ferrier gas gathering system (and potentially additional wells) in what is described as the Dutch area west of Rocky Mountain House, Alberta. The area where the pipeline was to be constructed is approximately half way between Rocky Mountain House and Nordegg on the south side of Highway 11. In 2008, DEVON CANADA began exploring route options for the pipeline. The project was to be completed in two stages. The western leg, which was through a protected wildlife area for ungulates (mainly elk) and the technically challenging valley of Jackfish Creek, was originally planned to be completed by the fourth quarter of The eastern leg was to be completed in the first quarter of Pursuant to the Code of Practice for Pipelines and Telecommunications Lines Crossing a Water Body, DEVON CANADA was required to submit a Notice to the Director with respect to the pipeline route. The Code of Practice notification is not a mere administrative requirement. The Code requires the person constructing the pipeline to identify all water bodies and plan appropriate measures to protect the aquatic environment.

2 DEVON CANADA planned to use horizontal directional drilling to cross under water bodies and road but this technique can result in a frac-out A frac-out is a release of the bentonite clay used to carry drill cuttings and to lubricate the drill string. Drilling mud, while not toxic per se, has a direct physical effect on the aquatic environment, aquatic organisms may be smothered and suffocate. While most aquatic organisms have adapted to natural fluctuations in suspended sediments loads during spring run-off, they cannot necessarily tolerated large quantities of sediment where drilling mud is released. Frac-outs are a particular risk in connection with horizontal directional drilling under water bodies because, if there is frac-out to surface, the mud has the potential to enter the water body through pre-existing fractures in the bedrock. The high pressure of horizontal directional drilling can force the drilling mud through these fractures to surface. In order to protect water bodies from frac-outs, the design of the directional drill must ensure that the bore is place at a depth within optimal soil/rock conditions under the stream be to adequately reduce the risk of a frac-out. This may affect the length of the drill, since there are technical limits to the arc that the drill can achieved. Additionally, the existence of a water body crossing as regulated under the Code requires a professional engineer to prepare and sign off on a plan that meets the minimum design and construction standards to protect the aquatic environment. CHRONOLOGY September 29, 2008 DEVON CANADA approached Alberta Sustainable Resource Development with a proposed pipeline project within a Class C Critical Wildlife Habitat Zone east of Rocky Mountain House. October 2-22, 2008 DEVON CANADA hired ALL-CAN ENGINEERING to undertake a legal survey of the original proposed route which included walking every foot of the proposed right of way. October 29 The final construction and legal plans of the original proposed route were issued by ALL-CAN. The plan included a table listing the crossings to be encountered during construction including all water body crossings. The table accurately identified all water bodies. November 10 DEVON CANADA submitted their Environmental Field Report (EFR) to the Department identifying wildlife and environmental concerns. Unbeknownst to ALL-CAN, the EFR included a listing of all watercourse crossings based on the original survey prepared by ALL-CAN. 2

3 November 25, 2008 DEVON contacted the Department to request a meeting to discuss another route for the pipeline. DEVON CANADA was concerned that the proposed location for the Jackfish Creek crossing involved a technically difficult directional drill and, if there were a frac-out, DEVON CANADA would not be able to access the valley to contain the drilling fluid. December 5, 2008 ALL-CAN was advised that the project was cancelled until further notice. A final bill for was submitted for the work undertaken to date. January 26, 2009 DEVON CANADA contacted ALL-CAN requesting their assistance in considering alternative routes. Rather than a full legal survey, the request at that point was that contours be added to the photo composite that had already been prepared and to order LIDAR photos for an area roughly 800 meters on either side of Jackfish Creek. LIDAR is a new electronic mapping system. While there are advantages to using LIDAR, there are limitations to the new technology. Although the shadowing on the various images would indicate the presence of a valley, they may not show water flowing. Based on the LIDAR images, DEVON CANADA ultimately determined that the safest route would be to cross Jackfish Creek further to north, approximately 200 meters south of the highway. However, there was no ground truthing of the LIDAR section of the route. March 26, 2009 At a meeting with government officials, DEVON CANADA presented a new route based on a LIDAR developed map. Part of the new route was to run under what was locally known as Baker Road. May 11-12, 2009 As representatives from DEVON CANADA and ALL-CAN were reviewing the LIDAR generated images of the Jackfish Creek directional bore, the DEVON representative, who was familiar with area where the pipeline would cross Baker road, advised the ALL-CAN representative of a wet area on the east side of Baker Road and a channel or valley on the west side of the road. The representative of DEVON CANADA asked the ALL-CAN representative to plot the water body. That was done but inexplicably, reference to the water body was not carried over to subsequent plans, a mistake for which the Supervisor for ALL-CAN took personal responsibility: Q. how come with all of the other maps suddenly it wasn t there? A. I think that was an error on my part. I mean having worked on this drawing, it is a separate drawing due to the file size and data structure It should have probably been moved to the PLA sketches and it wasn t. That s an error of mine. 3

4 In a formal admission by ALL-CAN indicated that: At this time was recognized from the LIDAR a potential channel west of Baker Road, and sketched this on the drawing. Unfortunately this channel was overlooked when the phase 3 final survey was completed in the field and not noted on the final plan of survey. May 22, 2009 DEVON CANADA provided Alberta Sustainable Resource Development with the LIDAR plan that had been prepared by ALL-CAN. The legend included the water bodies to be crossed but did not include the crossing at Baker Road. June 10, 2009 ALL-CAN ENGINEERING was awarded a second contract with respect to the new route. The project details and scope of work was to be at the direction of the DEVON representative. Unlike the original contract, the entire route was not surveyed at this point. ALL-CAN Supervisor: According to the A little bit of ground truthing was done at the time. Our crews went out a couple of times. I can t remember if [the DEVON representative] was on site with them or not, but they were picking up specific ground truthing things that they were asked to check out mostly at the east end of the line, a couple of little re-routes around topographical features, that type of thing. Still nothing actual surveyed with variance and distances, just kind of handheld to get around so we could complete the picture. As to why the second route was not completely surveyed at this juncture, the ALL-CAN Supervisor indicated as follows: Q. I mean Devon is the owner of the project A. And it s not ours. They just tell us to survey it where it needs to be surveyed. July 26 30, 2009 Because the new route passed through traditional aboriginal hunting grounds near the Baker Road Crossing, consent was required from two First Nations communities. To facilitate that process, DEVON CANADA arranged for a tour of the site. In preparation for that tour, DEVON CANADA requested that ALL-CAN flag the boundary of the Right of Way so that the site would be visible from the ground. In the course of this work on July 29 th, ALL-CAN crews noted the culvert under Baker Road, but as the crews were flagging for First Nations consultation rather than performing a survey, not formal field notes were prepared. July 30, 2009 The final construction plan for the new pipeline route was issued by ALL-CAN. The plan made no mention of the Baker Road Crossing. 4

5 August 2009 DEVON CANADA hired AECOM, an environmental consulting firm, to assess water body crossings in connection with the pipeline and to prepare the Code of Practice notification. DEVON CANADA s expectation was that AECOM would assess all water body crossings along the route of the pipeline. However AECOM based their work solely on the ALL-CAN construction plan which did not include to the Baker Road crossing. When the DEVON CANADA representative asked AECOM whether additional crossings had been identified, AECOM advised that it had not indentified any additional crossings. Unbeknownst to DEVON CANADA, AECOM did not walk the actual route of the pipeline between Baker Road and Jackfish Creek, but only walked up Jackfish Creek itself. When AECOM did not see any water bodies flowing into Jackfish Creek from the east side where Baker Road is located, they assumed that there were no water bodies that needed to be assessed. It seems that, at least during certain times of the year, the Baker Road Creek does not flow into Jackfish Creek and simply dissipates into the Jackfish Creek flood plain. In the result, the Code of Practice Notification prepared by AECOM was based on the table prepared by ALL-CAN. ALL-CAN was not privy to the dealings between DEVON CANADA and AECOM and Alberta Environment investigators did not learn of the discussions between AECOM and DEVON until after charges had been laid. September 17, 2009 DEVON CANADA submitted a formal application for the new route to SRD which included a new Environmental Field Report (EFR) referencing the water bodies listed by AECOM. While the EFR properly referenced Jackfish Creek and the other water body crossings east of Baker Road, the Baker Road Creek crossing was not included. ALL-CAN was not aware that their work had been relied upon for that purpose. September 21, 2009 AECOM submitted the Code of Practice notification to Alberta Environment with no mention of the Baker Road Crossing. ALL-CAN was not aware that their work had been relied upon for that purpose. 5

6 SUBSEQUENT EVENTS October 9, 2009 DEVON CANADA awarded the contract for the horizontal drill of Jackfish Creek to CANADIAN HORIZONTAL DRILLING LTD. The contract contained a standard clause indicating that changes to the design required prior written authorization by DEVON CANADA. October 15, 2009 In a separate contract with DEVON CANADA, ALL-CAN then undertook a legal survey of the pipeline route to set the boundaries for areas of construction. The survey field crew was aware of the existence of the Baker Road Creek and marked it with survey posts on either side. The lead hand described the creek as 1 to 3 meters wide and documented its existence in the field notes that were then sent back to ALL-CAN s main office. October 20, 2009 DEVON CANADA asked ALL-CAN to make a slight revision to the right of way near Baker Road and to stake out the temporary workspaces from bore entry, exit and access. To facilitate this, another ALL-CAN surveyor cut a small sight-line through the bush and he too discovered the Baker Road Creek. In his statement to the investigator, he described the channel as obvious and flowing. The creek is noted in his field notes and prominent in a hand drawn sketch of the area. That same day, ALL-CAN issued a revised construction plan which included the few areas that had been drawn but did not include the recent field observations and accordingly, the revised construction plan did not identify Baker Road Creek. October 21, 2009 Sustainable Resource Development gave their approval for the new route. October The survey notes from October 20 th were faxed to ALL-CAN S office. According to the formal admission provided by ALL-CAN, this information was not added to the plan as the plan was already basically complete. October 23, 2009 ALL-CAN made some minor changes to the construction plan to reflect the surveys done in connection with the various work sites and access and entry points for the drilling rigs, but the information from the field staff with respect to the Baker Road Crossing was not included. October 28, 2009 The tender for the Dutch Pipeline was awarded to CHALLAND PIPELINE LTD. CHALLAND in turn, hired EVEREAD DIRECTIONAL DRILLING to do the actual work. The contract contained a standard clause indicating that changes to the design required prior written authorization by DEVON CANADA. 6

7 November 20 December 3, 2009 The horizontal directional drilling of the Jackfish Creek bore proceeded without incident. DEVON CANADA had hired COMPLETE CROSSINGS LTD. to provided environmental oversight and monitoring of the Jackfish Creek crossing. December 3, 2009 At 2230 hours, as drilling was almost complete, the crew performing the horizontal directional drill under Jackfish Creek discovered a frac-out 150 meters upslope from Jackfish Creek. Drilling was suspended. December 4, 2009 The frac-out upslope of Jackfish Creek was reported to Alberta Environment. Later that day, preparation for the Baker Road directional drill by EVEREADY began. EVEREADY s field Supervisor walked the drill path prior to pulling the cable across the drill path and discovered Baker Road creek which he described as a channel that was frozen with ice to the bottom of the channel. As he later told investigators, in his experience the bore would normally have been deeper if it were passing under a water body. Puzzled, he reviewed the construction plan but there was no watercourse marked. He raised the issue with his contact with CHALLAND PIPELINES. While there is disagreement as to the specifics of that conversation, the ultimate result was that because the water body was not on the construction plan, drilling proceeded. There was no attempt to contact DEVON CANADA. December 5, 2009 At approximately 1430 hours, there was a second frac-out at the Baker Road Crossing. COMPLETE CROSSINGS were able to supply the rig with silt fences and instructed the crew as to containment. Temperatures were in the minus 30 to 40 degrees range, which aided the containment and remediation efforts. EVERYREADY and CHALLAND supervisors discussed whether they should adjust the drill depth but as channel containment was in place, they decided to continue drilling at the same depth. December 6, 2009 At 1130 hours, COMPLETE CROSSINGS notified Alberta Environment of the frac-out at the Baker Road Crossing. December 8, 2009 Alberta Sustainable Resource Development requested an explanation as to why the Baker Road crossing had not been identified. 7

8 December 11, 2009 In response to the request for information of December 8 th, COMPLETE CROSSINGS, on behalf of DEVON CANADA provided a formal report admitting that: The HDD crossing of Baker Road was not labelled correctly on the construction drawings, as a small permanent creek was missed. The creek is located in a steep draw on the west side of Baker Road, approximately 20m from the road edge. As discussed before a bore line walk could easily be made to ensure that all natural features are labelled correctly on the construction drawings. Measures taken for better communication between the surveyor and the consultant and a more thorough assessment by foot, not by truck, could also be regarded as mitigation measures. January 5, 2010 In response to an inquiry from Alberta Sustainable Resource Development as to why the Baker Road crossing was not identified in the Environmental Field Report and survey plan, DEVON CANADA admitted that they had failed to identity the water body in part because: The extended timeline and the start/stop nature of the project contributed to key details being overlooked specifically west of Baker Road. It has been determined that at the time of the EFR preparation it was believed that some type of watercourse was present. However, since the plan did not note a crossing and the QAES assessment did not classify a crossing, no crossing was included in the EFR The watercourse did not show up on the ALL-CAN mapping data base used to develop the original survey plan and field survey work also failed to identity then. Office personnel did manually mark something on a LIDAR picture of the Baker Road area on one version, but it did not show up on subsequent versions. That specific LIDAR drawing was being used as part of the Jackfish Creek crossing design and not the road crossing. To prevent future occurrences, DEVON CANADA recommended that: 100% of ROWs are to be walked and investigated by qualified personnel (where safe to do so) regardless if it is part of a larger bore, to ensure all watercourses are indentified. AGGRAVATING FACTORS The Expertise of the Corporate Accused The company is well respected and well known for its considerable expertise. A company of this calibre is held to a very high standard when it comes to protecting the environment. MITIGATING FACTORS Cooperation in the course of the investigation The investigator was impressed with the openness and frankness of ALL-CAN personnel. 8

9 The guilty plea The company has not disputed the facts but raised a legal issue as to the culpability of a contractor for an offence committed by its principal. Upon careful legal assessment, the company then indicated that a plea would be entered. According the company should be given full credit as if this had been an early guilty plea. The extraordinary step of sharing evidence of due diligence with the Crown ALL-CAN was under no obligation to disclose the evidence in support of a claim of due diligence to the Crown in advance but did so in the full knowledge that of what the consequences might be, similar to the situation in Regina v. Geon Canada Ltd. The company also instructed their legal counsel to give the Crown advance notice of the legal challenge that they were contemplating. The contribution to the offence by other parties ALL-CAN was responsible for the original mistake in failing to carry forward the information that it had with respect to the existence of the Baker Road Crossing, but that mistake was compounded by other parties who also were in a position to correct that error. Liability as a party to the offence rests upon ALL-CAN s original mistake but also its failure to have a system in place to check for errors after the fact. As Judge Fradsham remarked in Regina v. Waters & Rogers: As submitted by the Crown, human errors are to be expected in any human Endeavour. When the defense of due diligence is not available, and here Van Waters concedes that it is not available when it tenders its guilty plea, the error constitutes a culpable violation of the legislation. The accused must answer for that error, and one of the circumstances to be considered by the sentencing Court is what the accused did to prevent the occurrence (even though those acts are insufficient to provide a viable defense). Since human errors are inevitable, it is insufficient for the accused to say that it gave proper instruction to its employees and expected them to perform in accordance with them. The point is that the best of instructions cannot prevent violations borne of human error. It falls to the accused to put in place systems which are designed to counteract the inevitable human error. The need for such systems increases proportionately with the risks associated with an error occurring in the accused's operations. 9

10 The courage of the accused in sharing lessons learned These proceedings are an embarrassment to a company with such a high reputation for excellence but the company is willing to subject itself to further inquiry and review in a formal root cause analysis exercise to be conducted by the University of Calgary. As in the Suncor case, the company has agreed to share that information with other companies so as to prevent future offences. This openness and a willing to learn from a bad experience are consistent with the company s approach throughout these proceedings. All of which is respectfully submitted. Susan McRory Environmental Coordinator Specialized Prosecutions Alberta Justice. 10