Executive Summary: Key Legal and Evidentiary Issues

• Smoking Diesel Contracting Ltd. and Trent Zelman sought judicial review of an administrative penalty for subletting public land to Northgate Industries without the Director's consent, contrary to the Public Lands Act.

• The Board unreasonably interpreted "notice of the director" under s 59.7(b) of the Act as requiring the Director's personal knowledge, rather than constructive institutional knowledge through enforcement agents.

• Prominent signage naming Northgate as the camp operator was visible during Public Land Officer inspections in 2016 and 2017, constituting objective "evidence of a contravention" that should have triggered the two-year limitation period.

• Procedural fairness was breached when the Board provided the Minister with an undisclosed Briefing Note, though no remedy was warranted as the Minister simply adopted the Board's open recommendations.

• The Board failed to provide transparent and intelligible reasons for excluding certain preparation costs and additional expenses from the net proceeds calculation.

• Application for judicial review was granted, the Minister's decision was quashed, and the entire contravention process was declared time-barred.

The origins of the dispute

In January 2013, Alberta Environment and Parks (AEP) issued a ten-year Departmental Miscellaneous Lease to Smoking Diesel Contracting Ltd., a company owned by Trent Zelman, for public lands in the Regional Municipality of Wood Buffalo, south of Fort McMurray. The lease was designated for an Industrial Campsite and Storage Yard. Smoking Diesel subsequently partnered with Northgate Industries Ltd. to build and operate a work camp on the leased land. Under their arrangement, Smoking Diesel handled site preparation, maintenance, reclamation, and some administrative work, while Northgate paid Smoking Diesel for the use of the lands and was responsible for infrastructure and costs associated with running the camp. The camp operated briefly, and relatively unremuneratively, from December 2014 to April 2015.

Signage and inspections at the site

In November 2013, two signs were installed on the leased land. A reefer van trailer was emblazoned with a large sign reading "Northgate Industries Ltd. Waddell Open Camp" and "Smoking Diesel/Northgate Industries Partnership," parked on the leased land facing the main road and clearly visible from the roadway. A sign reading "Northgate Waddell Camp" was installed at the main intersection near the leased land. Although the camp closed permanently in April 2015, Northgate's camp equipment and the signage remained in place until they were removed in January 2020. Public Land Officers from AEP inspected the site on July 22, 2016, and July 25, 2017, noting concerns about erosion and weed control in 2016 and recommending follow-up for weed control in 2017. Neither officer made note of any other apparent contraventions, or evidence of any contraventions.

The investigation and administrative penalty

The alleged sublease only came to the attention of the Director of Environmental Investigations on January 24, 2019, when the Director's staff conducted an interview with Northgate about a different matter and "obtained information" indicating that Smoking Diesel had allegedly sublet the leased land. A subsequent online search and site visit confirmed Northgate's presence on the leased land. On November 27, 2020, the Director sent a preliminary assessment of administrative penalty to the Applicants, and on January 15, 2021, the Director issued a Notice of Administrative Penalty totalling $905,533.34 — comprising $15,000.00 in fines for two counts of contravening section 43(1) of the Act (subletting without consent) and one count of contravening section 54.01(5) of the Act (receiving money for access to public land), and $890,533.34 in proceeds. This represented every penny Smoking Diesel had received from its operations related to the lease, together with the fines assessed.

The appeal to the Public Lands Appeal Board

On January 27, 2021, Smoking Diesel appealed to the Public Lands Appeal Board, which reduced the proceeds from $890,533.34 to $240,782.57 on a net basis while maintaining the $15,000 administrative penalty with adjustment factors varied. The Board found that the Director first became aware of the contraventions on January 24, 2019, placing the penalty within the Act's two-year limitation period. It found insufficient evidence to prove AEP made a promise, explicitly or by practice, not to take enforcement action regarding unauthorized subletting of leases, and declined to admit several witness affidavits the Applicants wished to introduce. On December 1, 2021, the Minister accepted the Board's reasons and adopted the Smoking Diesel Decision. It is against that action that the judicial review was advanced.

The Minister's consideration of the Briefing Note

The Court found that the Board improperly provided the Minister with a confidential Briefing Note and Memorandum that were not disclosed to the Applicants, contravening the principle established in Normko Resources Inc v Alberta (Minister of Environment and Parks), 2022 ABQB 474. The Board should have provided these documents to the Applicants as part of the report pursuant to s 124(5) of the Act, and the failure to do so constituted a breach of procedural fairness and natural justice. However, because the Minister simply adopted the Board's reasons and the Applicants suffered no prejudice — as the ultimate decision remained exactly what the Board had openly decided — no remedy was warranted on this ground.

The critical limitation period question

The decisive issue was whether the administrative penalty was issued within the two-year limitation period prescribed by s 59.7(b) of the Act. The Board had interpreted "notice of the director" as requiring the Director to personally become aware of the evidence of a contravention, and had applied a subjective conception of "evidence of a contravention" that focused on whether the individual officer perceiving the information understood it to be evidence. Justice Devlin found both interpretations unreasonable. The Court held that knowledge of evidence of a contravention in the hands of employees within the relevant Director's reporting chain, who have responsibility to deal with that information, must constructively extend to the Director for the limitation provision to properly serve its purposes. The Court further held that "evidence of a contravention" must be assessed objectively: it must include information which gives rise to an objectively reasonable inference that a contravention may be occurring, regardless of whether the specific officer on site recognized it as such. The signage prominently naming Northgate as the camp operator on land leased to Smoking Diesel plainly met this objective threshold, as it raised a clear inference that a sub-lease may have occurred.

The proceeds calculation and insufficient reasons

The Court also found that the Board failed to provide transparent and intelligible reasons for excluding eight of eleven preparation costs and various additional costs from the net proceeds calculation. The Board did not address these costs, nor did it explain why they were not deducted. While the Court could not quantify the unsubstantiated additional costs — described as "internal costs" for which the Applicants had not kept records — it determined that three preparation costs should have been deducted: Site Development Supervision ($36,900.00), Tenants Insurance ($2,493.00), and Bilsky Contracting/Lowbed ($3,969.00). This would have resulted in an additional $43,362.00 reduction, reducing the total Administrative Penalty to $197,420.57, had the decision not been quashed on the limitations issue.

The ruling and outcome

Ultimately, Justice Devlin granted Smoking Diesel's application for judicial review. The Court concluded that the limitation period was triggered by July 25, 2017 — the date of the second Public Land Officer inspection — at the latest, when enforcement agents would have observed the signage constituting evidence of the contravention. Any PLO seeing it would have been duty-bound to raise the matter within the Director's reporting chain, and this institutional knowledge would trigger the limitation period. Because the Notice of Administrative Penalty was not issued until January 15, 2021 — well beyond two years from that date — the Director's enforcement action was limitation barred. The Court quashed the Minister's decision, Ministerial Order 89/2021, and declared the matter at an end. The Administrative Penalty totalling $240,782.57 was quashed in favour of Smoking Diesel Contracting Ltd. and Trent Zelman. No exact costs award was determined, as the parties were given 30 days to submit on costs if unable to agree.