Alberta Court of Appeal denies leave to pipeline landowners in compensation case

Back in February, I reported on a decision of the Alberta Court of Queen's Bench in which a decision of the Surface Rights Board awarding annual compensation to landowners was overturned and the "Pattern of Dealings" approach to compensation was again imposed (see: February 23, 2010).  The landowners involved sought leave to appeal the Court decision, but leave has now been denied by the Alberta Court of Appeal. 

In its decision, the Alberta Court of Appeal determined that the findings of the Court of Queen's Bench judge were reasonable and again upheld the "Pattern of Dealings" approach to compensation (i.e. the compensation to be awarded to a landowner may be determined by looking at the pattern of compensation paid by a company to other landowners in similar circumstances).  However, importantly, the Court did leave open the possibility for annual compensation in the right case - a "real" case for ongoing compensation rather than a "conjectural" one:

The principles providing for the determination of compensation for pipeline rights of way based on established patterns of dealings are well established in the industry and before the Board. In essence, the applicants believed they had established a novel basis for compensation by persuading this Board to invent a compromise position for compensation that allowed for an annual component in lieu of a larger lump sum payment. Macklin J. was not persuaded, on the record before him, that it was reasonable to include an annual component for future potential adverse effects to the applicants’ use of their land within the meaning of s. 25(1)(c) and 25(1)(d) of the Act because (a) the basis for doing so was conjectural and/or redundant to the rationale for the lump sum payment and (b) the procedural difficulty and cost of validating and reviewing an annual payment component every five years for each claimant would be unnecessarily burdensome having regard to the fact that there would again be a need to predict on an arbitrary basis the future from that point.

In deciding whether leave to appeal should be granted or denied in this case, it is not necessary for me to say, nor would I suggest, that an annual payment component cannot be considered to be a valid part of a compensation package for a subsurface pipeline. It is also unnecessary for me to say whether procedural cost and difficulty arising from five year reviews of annual payment components would be a valid reason to refuse an annual payment component if the basis for such were lifted from the conjectural to the real. It is, however, sufficient to say that, on the record before Macklin J. and the Board, it was reasonable for Macklin J. to conclude that an arguable justification for departing from the established PoD to include an annual payment component was not lifted from the conjectural or redundant and it was unreasonable for the Board to conclude otherwise. To disturb Macklin J.’s conclusions in those respects, having regard to the standard of review, would require a clear ground of appeal of arguable substance which does not exist here. [emphasis added]

Read the decision at: Enbridge Pipelines (Athabasca) Inc. v. Karpetz.

The Alberta Government's take on the no annual compensation decision

Court Decision Regarding Annual Compensation for Pipelines in Alberta

Click on the link above to read the report posted by Alberta's Department of Agriculture and Rural Development about last week's Court of Queen's Bench decision on annual compensation for pipeline landowners. The government's take on the decision:

What does this all mean?  Bottom line is that the arguments for annual compensation, were not supported at the court level.  This means that while landowners may continue to negotiate for annual compensation, there is now a greater requirement for cogent evidence to depart from the pattern.  Landowners continue to have a right to bring other arguments to regulatory proceedings and they may continue to pursue policy or legislative change if they wish.

What do farmers think of this response?

Annual Compensation Decision for Landowners from Alberta Surface Rights Board overturned by Court

The Alberta Court of Queen's Bench has overturned a promising annual compensation decision made by the Surface Rights Board in Alberta . The SRB had ordered Enbridge Pipelines Inc. to pay landowners on the Waupisoo Pipeline an upfront payment for permanent rights-of-way and temporary work space as well as annual compensation into the future for ongoing impacts of the pipeline. Enbridge argued on appeal that the compensation award should have been decided on the "pattern of dealings" approach (i.e. what all of the other pipeline companies have been paying).

In its decision, the SRB found that there would be "ongoing and/or recurring compensable losses ... and ... it was only reasonable to award annual compensation since only an annual award provides for compensation that is contemporaneous with the events/factors that are attracting the award of compensation." To succeed on the appeal, the Court ruled that "Enbridge must establish that either the [SRB] decision, on its face, was unreasonable or that the new evidence introduced on appeal has the effect of making it so."

In the Court's view, the possibility of future losses was not a "cogent reason" to depart from a pattern of dealings approach, "unless perhaps a particular landowner's anticipated losses would be highly unusual and significant." Here's what the Court had to say about "pattern of dealings":

"From the perspective of harmony among neighbours with respect to compensation, nothing could be more divisive than learning that a neighbour received greater compensation for the RoW or TWS. Neighbours would understand, however, that if one of them sustains additional damages, he or she should receive additional compensation. If damages are not suffered, no additional compensation should be paid. However, for the simple acquisition of those rights associated with having a RoW through a landowner's property, ideally the operator should pay the same amount to each affected landowner. The best indicator of the appropriate amount is the [pattern of dealings] with those in the same vicinity. An established [pattern of dealings] evidences both an approach and a value negotiated between knowledgeable parties. The wisdom of the market place should prevail in those circumstances."

On that basis, the Court found that the SRB decision was unreasonable. My question to the Court would be how the pattern of dealings could possibly evidence negotiated value or "the wisdom of the market place" when one party has a right to expropriate the land of the other where no deal is reached. While it is the case that no landowner would want to find out that his or her neighbour is being paid more by the same pipeline company for the same land in the same area, the "pattern of dealings" approach seems likely to be a "race to the bottom" for landowners.

Read the Alberta Court of Queen's Bench decision in Enbridge Pipelines (Athabasca) Inc. v. Karpetz at:
http://www.canlii.org/en/ab/abqb/doc/2010/2010abqb108/2010abqb108.html

Edmonton Journal: "AltaLink's wallet soothes landowners"

AltaLink's wallet soothes landowners

The Edmonton Journal has reported that landowners along a planned high-voltage direct current line have been "soothed" by talk of increased compensation. The lines will run between 50-metre high towers, and AltaLink, the utility company, is offering to pay an annual fee to landowners of $1,178 for each tower on cultivated land and $471 for each tower on uncultivated land.

There is an additional lump sum to be paid for the 55-metre wide right-of-way (contrast this with the fairly standard 18-20 metre wide easement for oil and gas pipelines) along with a crop loss payment, entry fee payment and a $10,000 bonus for signing the easement.

However, the final route for the line has not yet been decided and an application to the Alberta Utilities Commission won't be made until later in 2010 or early in 2011.

What do you think about the proposed compensation? Although AltaLink's Vice-President is cited in the article as saying that a 240-kV tower would previously have brought only $150 to $200 compensation, for the size of the easement taken and the impact, visual and otherwise, of a major transmission line and towers through a farm, the annual payment seems unremarkable - at least when compared with similar payments for oil and gas wells and other above ground oil and gas facilities.