Canadian Natural Resources v Ashland Inc, 2018 ABQB 1042

Court of Queen’s Bench of Alberta Citation: Canadian Natural Resources v Ashland Inc, 2018 ABQB 1042 Date: 20181211 Docket: 1401 11479 Registry: Calgary Between: Canadian Natural Resources, by Its Managing Partner, Canadian Natural Resources Limited and Canadian Natural Resources Limited Plaintiffs - and - Ashland Inc, Occidental Petroleum Corporation, Plains Marketing LP, Marathon Petroleum Company LP and Goldcorp Inc Defendants _______________________________________________________ Reasons for Decision of J.T.

Prowse, Q.C., Master in Chambers _______________________________________________________ [ 1 ] The issue in this application is whether, pursuant to the Limitations Act , RSA 2000, c L-12 (the “Act”), the defendant Occidental Petroleum Corporation (“Occidental”) is entitled to immunity from this claim by the plaintiff Canadian Natural Resources (“CNRL”). [ 2 ] For a number of years CNRL was searching for the successors-in-interest to two separate 16% interests in an oil and gas joint venture so that CNRL could bill each of the successors for 16% of the remediation costs which were being incurred by CNRL as operator. [ 3 ] One 16% interest was initially owned by Northwestern Refining Company (“Northwestern”) and the other 16% interest was

initially owned by McWood Corporation (“McWood”). [ 4 ] This application deals with the McWood interest. [ 5 ] CNRL finally located and commenced this action against Occidental in 2014 as the successor-in-interest to the McWood 16% interest. [ 6 ] Occidental says that, with reasonable due diligence, CNRL could have identified it as the successor-in-interest to the McWood interest more than 2 years prior to the issuance of this claim. Accordingly Occidental seeks to have the action against it summarily dismissed.

Chronology of events • July 6, 1965 - a Memorandum of Agreement (the “MOA”) was signed by four parties: Great Plains Development Company of Canada Ltd., Northwestern, McWood and Yellowknife Bear Mines Limited. • The interests of the parties were as follows: (

a) Great Plains – 26% (

b) Northwestern – 16% (

c) McWood – 16% (

d) Yellowknife – 42% • CNRL is the successor to Great Plains and is the operator. • 2005 - the Alberta Energy and Utilities Board contacted CNRL’s predecessor to advise that reclamation and remediation work was required on a number of abandoned wells, allegedly drilled pursuant to the MOA. • June 1, 2008 - CNRL began incurring costs in carrying out the reclamation and remediation work of the MOA wells. To date the remediation costs total $2,811,268.28.

CNRL quickly identified the successor-in-interest to Yellowknife and has been collecting its share (42%) of the remediation costs. • March 10, 2009 - CNRL mistakenly believed that Ashland Inc. (“Ashland”) was the successor-in-interest to both the Northwestern and McWood interests in the MOA. CNRL had identified Ashland as the alleged successor-in-interest through corporate searches and research done by its legal department in late 2007. On March 10, 2009, CNRL sent an authorization for expenditure to Ashland for 32% of the remediation costs incurred up to that date.

Ashland failed to respond, or refused to sign the AFE. • August 6, 2009 - CNRL sued Ashland as the alleged successor-in-interest to both the Northwestern and McWood interests in the MOA for 32% of the remediation costs • December 17, 2009 - Ashland’s lawyer sent a letter to CNRL on this date identifying Marathon Petroleum LLC as successor-in- interest to the Northwestern interest, and Plains Marketing LP (“Plains”) as the successor-in-interest to the McWood interest (the “2009 Ashland Letter”). • August 30, 2010 - relying on the 2009 Ashland Letter CNRL discontinued the action against Ashland. • November 2013 - CNRL says it discovered that Occidental was the successor-in-interest to the McWood interest.

This action was commenced within 2 years, on October 22, 2014. Occidental argues that CNRL ought to have discovered that Occidental was the successor in interest to the McWood interest much earlier than 2013 [ 7 ] Occidental says that, as a result of the 2009 Ashland Letter, CNRL had information that would have quickly identified Occidental’s role as successor to the McWood interest, had CNRL acted with reasonable diligence. [ 8 ] Specifically Occidental questions why CNRL did not simply write to Plains after it received the 2009 Ashland Letter.

The Ashland Letter identified Plains as being the successor-in-interest of the McWood 16% interest. [ 9 ] CNRL obviously thought that the Ashland Letter was a credible source, because it discontinued its action against Ashland based on that letter. [ 10 ] When CNRL did write to Plains, approximately 3 ½ year later, Plains wrote back about 6 months later and identified Occidental as being the successor-in-interest to the McWood interest. [ 11 ] And so, Occidental argues, had CNRL simply written Plains in January of 2010, it would have very likely learned of Occidental’s involvement by July of 2010, more than four years prior the issuance of the statement of claim against Occidental.

[ 12 ] Occidental bases its “ought to have known” argument on

section 3 of the Act which states: 3(1) Subject to ... if a claimant does not seek a remedial order within (a) 2 years after the date on which the claimant first knew, or in the circumstances ought to have known , (

i) that the injury for which the claimant seeks a remedial order had occurred, (ii that the injury was attributable to the conduct of the defendant , and (iii) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding, the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of the claim. (emphasis added) [ 13 ] Occidental says that the burden lies on CNRL to show that it used reasonable due diligence in attempting to identify Occidental as being the successor-in-interest to McWood, and cites in support the decision in McDonnell v Csaki , 2014 ABQB 452 , 2014 CarswellAlta 1328 at para 28 : What a plaintiff "ought to have known" also incorporates an expectation of reasonable diligence by the plaintiff or his or her counsel.

It will not suffice to wait idly for information to come to hand. Some research and inquiry may be expected of a reasonable plaintiff as part of determining what ought to have been known .

The burden is not high to establish at least a triable issue on due diligence , but it is usually expected that the plaintiff to put forward some evidence of steps taken to ascertain the identity of tortfeasors and give a reasonable explanation for why information was not obtainable with due diligence earlier — and doing nothing for two years after an accident except possibly requesting a police report will not usually amount to due diligence. (emphasis added) [ 14 ] While the above quote is in the context of ascertaining the identity of a tortfeasor, it is equally applicable in the context of ascertaining a successor-in-interest to a joint venture.

CNRL’s response [ 15 ] CNRL resists Occidental’s

summary dismissal application with two arguments: (

i) The affidavit used by Occidental to support its application is sworn by someone without any personal knowledge and in contravention of Rule 13.18(3). (ii) CNRL acted with reasonable diligence to discover the successor-in-interest to the 16% McWood interest. The affidavit used by Occidental and Rule 13.18(3) [ 16 ] Rule 13.18 provides as follows: An affidavit may be sworn (

a) on the basis of personal knowledge, or (

b) on the basis of information known to the person swearing the affidavit and that person’s belief.

(2) If an affidavit is sworn on the basis of information and belief, the source of the information must be disclosed in the affidavit.

(3) If an affidavit is used in support of an application that may dispose of all or part of a claim, the affidavit must be sworn on the basis of the personal knowledge of the person swearing the affidavit. [ 17 ] CNRL objects that Occidental’s deponent does not have personal knowledge of events. Indeed, Occidental’s deponent was not personally involved given that a number of the relevant events occurred over 50 years ago, but the facts in issue in this application are confirmed by the affidavit and cross-examination of CNRL’s deponent. As a result I find this objection to be without merit.

CNRL’s due diligence [ 18 ] CNRL asserts that it acted with due diligence in ascertaining by November of 2013 that Occidental was the successor-in- interest to the McWood interest under the MOA. [ 19 ] The steps taken by CNRL are listed in paragraphs 16 through 25 of the affidavit of CNRL’s deponent.

I will not repeat them here. [ 20 ] Unfortunately, what are reasonable steps for an oil company acting as operator to take in tracking down missing joint venture participants is not something of which I can take judicial notice. [ 21 ] Contrast this situation with the situations considered in McDonnell and Argent v Gray , 2015 ABQB 292 , 2015 CarswellAlta 870. In those cases the steps by the plaintiffs did not involve a specialized area such as the steps one should take in tracking down missing joint venture participants.

[ 22 ] In this case neither Occidental nor CNRL provided expert evidence as to whether the steps taken by CNRL to locate Occidental were reasonable. [ 23 ] The question then is as to onus. [ 24 ] Section 3(5) (

a) of the Act says that CNRL has the burden of proving that it’s claim against Occidental was commenced within the required 2 year period. [ 25 ] That the onus rests of the plaintiff is reinforced in the quote from the McDonnell case set out at paragraph 13 of these reasons. [ 26 ] CNRL needs to do more than just list the steps it took to locate Occidental, it needs to adduce expert evidence that those steps constitute reasonable due diligence.

There is no expert evidence to assist the Court in determining whether the due diligence conducted by CNRL was reasonable, and I am not willing to take judicial notice that CNRL’s efforts were reasonable. [ 27 ] In any event, I am persuaded by Occidental’s submission, stated above, that had CNRL simply written Plains in January of 2010, it would have very likely learned of Occidental’s involvement by July of 2010, more than four years prior to the issuance of the statement of claim against Occidental.

Continuation of reclamation work [ 28 ] CNRL notes that reclamation work has been ongoing since 2008, with additional costs being incurred every year, so that there would in no event be any defense to reclamation costs occurring during the two years prior to the issuance of this claim on October 22, 2014. I agree with CNRL’s submission in this regard. [ 29 ] There is case law which says that a plaintiff must commence an action before all of its damages are known, and add ongoing damages later.

That case law is cited in 1142730 Alberta Ltd. v Smok’in Guns Transport Ltd. , 2018 ABQB 173 , 2018 CarswellAlta 415 at para’s 14 to 21. [ 30 ] However, CNRL’s claim is not a claim in tort, where an action can be commenced and then ongoing damages added later. It is a claim for breach of contract against Occidental for failing to pay CNRL’s monthly invoices for ongoing remediation costs. A new cause of action arises with each unpaid monthly invoice. Conclusion [ 31 ] CNRL’s claim against Occidental is dismissed with respect to any monthly invoices for remediation costs issued before October 22, 2012.

If the parties cannot agree on the disposition as to taxable costs of this application they may seek a ruling from me in that regard. Heard on the 11 th day of December, 2018. Dated at the City of Calgary, Alberta this 12th day of December, 2018. J.T. Prowse, Q.C. M.C.C.Q.B.A. Appearances: Shannon L. Kelley Parlee McLaws LLP for the Plaintiffs

Michael E. Mestinsek and Fraser Turnbull Stikeman Elliott LLP for the Defendant, Occidental Petroleum Corporation