Canadian Natural Resources Limited appeal dismissed by Alberta Court of Appeal

The Alberta Court of Appeal has dismissed the appeal of Canadian Natural Resources Limited (CNRL) of a Court of Queen's Bench surface rights decision made in favour of landowners.  The most important ground of appeal revolved around criticisms which the Court of Queen’s Bench made of one of the CNRL’s witness’ expert evidence. There is case law which was not disputed on the appeal. It holds that if a pattern of dealings has been established, then compensation for compulsory imposition (or renewal) of a surface lease for an oil or gas well may be based on the negotiated amounts in those prior contracts between others. The Court of Queen’s Bench concluded that no such applicable pattern of dealings had been proved here (paras. 89, 118 and 155). That was a rejection of most of the evidence of this expert witness.

The Court of Queen's Bench had summarized the reasons for its rejection of the pattern of dealings evidence:

a) There was no definition, precise or general, of the area to which this pattern was said to apply.

b) There was no information with respect to how many sites, overall, are within the area.

c) There was no indication of how many sites were reviewed in order to ascertain the comparables, nor any indication of why other sites reviewed were not comparable.

d) There was no explanation of why this pattern was applicable to a certain area.

e) There was no information provided with respect to the number of parties, either operator or landowner, represented within the comparables.

f) There was no information with respect to the negotiation process.

g) With respect to the chart showing CNRL irrigation and dryland leases, almost half of the leases do not fit the compensation pattern.

h) There was no explanation of why leases that were presented as comparables but that did not fit the compensation pattern supported the pattern of dealings.

i) There was no explanation as to why initially only new agreements were considered appropriate comparables, but why later, rent reviews were also considered to be properly included.

The Court of Appeal found that the Court of Queen's Bench, as finder of fact, was entitled to reject the expert evidence of pattern of dealings.  There was no reversible error in the lower court decision.

Read the Alberta Court of Appeal decision at: 2010 ABCA 91 (CanLII).

Read the Alberta Court of Queen's Bench decision at: 88 Alta. L.R. (4th) 298