Enbridge Gas Distribution ordered to pay back Metrolinx over $2.3 million in pipeline relocation costs

Enbridge Gas Distribution was recently ordered by the Superior Court of Justice to pay back to Metrolinx more than $2.3 million that Metrolinx had earlier paid Enbridge for pipeline relocation costs.  Metrolinx operates an urban rail transit service in the Greater Toronto Area and required the relocation and/or removal of certain parts of Enbridge's gas distribution system in the vicinity of the rail lines.  The question before the Court in this application was who should bear the costs of relocation and removal.  Metrolinx had paid the costs to Enbridge without prejudice to its right to go to Court to try to recoup them.

Metrolinx referred to crossing agreements that had been made between its predecessor, Canadian National Railway (CN), and Enbridge's predecessor, Consumers Gas, that provided that Enbridge would bear the cost of any relocation or removal.  For instance, a 1958 Agreement and a 1963 Agreement both provided:

Should it become necessary or expedient for the purposes of repair or improvement on the said railway that the said pipe crossing be temporarily removed or relocated the applicant [now Enbridge] shall upon request of the railway and at the sole cost and expense of the applicant forthwith remove or relocate the works.

Enbridge argued that the agreements were not assigned or transferred to Metrolinx and that the agreements related to federally-regulated activities.  Therefore, because Metrolinx was a provincial agency, it could not rely upon the agreements.

The Court disagreed.  It accepted the Metrolinx position that the rights that it claimed and the payment obligations of Enbridge were granted to CN by Consumers Gas as a matter of contract.  Justice Morgan explained:

... like all market transactions, they occurred within a particular regulatory environment, but that fact does not undermine the contractual nature of the rights and obligations in question.  Metrolinx' position accurately reflects the governing documentation and legal state of affairs between the parties.  It may well be the case that the Crossing Agreements were an outgrowth of federal regulations that prevailed at the time of their signing.  Nevertheless they are valid contracts, and remain so whether or not the relevant federal regulations continue to govern either of the parties. 

Read the decision at: Metrolinx v Enbridge Gas Distribution Inc.

Alberta Court rules in favour of landowner over crossing agreement

In 1948, CPR and Calgary Power Ltd. reached an agreement providing Calgary Power with the right to place three towers carrying power transmission wires on and over CPR property abutting the north side of 10th Avenue S.E. in the City of Calgary.  The agreement also provided that either party could terminate the agreement by giving three months' notice, and on termination Calgary Power would be obligated to remove the towers and wires and make good any damage caused to the property.  If the removal did not happen within one month of termination, CPR could undertake the work itself at the expense of Calgary Power or take ownership of the towers and wires.  Under the agreement, Calgary Power was to pay to CPR an annual rental of $40.00.

Flash forward to more recent times.  The power transmission facilities on the property have been expanded.  The original agreement and subsequent amending agreements have been assigned by Calgary Power to a company called Enmax.  CPR has sold its lands to a development company called Remington.  Remington wanted to develop the former CPR lands and advised Enmax of the plans.  Enmax told Remington that a 20 metre utility right-of-way would be required and that Remington would need to bear the cost of any changes, including the conversion of the overhead power lines to underground lines. 

Remington's response to Enmax was to provide a notice of termination under the existing agreements.  Enmax was directed to vacate the Remington lands (the former CPR lands) on or before June 30, 2005.   Despite that direction, Enmax has refused to remove the transmission towers and lines from the lands.  Remington says that its development will be severely compromised with the continued presence of high voltage transmission lines.  It believes such a continued presence will acutely influence potential purchasers or tenants in its intended mixed use residential/commercial development.

Remington applied to the Court of Queen's Bench for orders requiring Enmax to vacate the lands.  Enmax argued in response that the agreements between CPR and Calgary Power were personal contracts between a railway company and a utility company and could not be assigned to Remington without the consent of Enmax.  There were also questions raised about whether the agreements actually created true rights-of-way or whether the rights granted were simply a personal licence which could not be assigned or transferred.

The Court found that the agreements did create utility rights-of-way, which through legislation were not subject to all of the Common Law rules surrounding valid easements and rights-of-way.  Further, the Court ruled that if it was wrong about the nature of the agreements, and they did create mere licences, CPR still had the right to assign the agreements to Remington without the consent of Calgary Power or Enmax. 

For those reasons, the Court found that Remington was entitled under the agreements to terminate and require Enmax to remove its facilities.  Of course, that dealt only with the private relationship between the parties.  The transmission facilities are also subject to public regulation by the Alberta Utilities Commission (AUC).  The Court directed Enmax to make an application to the AUC to remove the transmission lines, and ruled that the lines could not be removed or relocated in the absence of an order from the AUC.

This decision is reminiscent of an earlier Alberta Court decision involving a landowner named Randolph Hill.  He purchased land from a railway company and was assigned an agreement that gave him the right to require a pipeline company to remove its pipeline.  The Court agreed that he had that right, but then the company simply went to the National Energy Board and obtained a Right of Entry Order.  The ROE Order now permits the pipeline to remain in place and, further, allows the company to abandon the line in place. 

Hill will no doubt be seeking compensation for this expropriation of his rights under the agreement.  It will be interesting to see how much those rights are worth.  What would someone pay for an agreement that would allow them to free their lands from the encumbrance of a pipeline corridor?  That has to be worth a lot on the open market.  Remington may very well find itself in a similar position.  The AUC may decline to order the removal of the transmission lines, in which case Remington's rights under the CPR agreements will have effectively been expropriated.

Read the decision at: Remington Development Corporation v. Enmax Power Corporation.