Enbridge Line 10 Replacement Pipeline: Landowner intervention persuades Enbridge to rethink pipeline route

The National Energy Board ("NEB") has approved the application by Enbridge Pipelines Inc. for the Line 10 Replacement Pipeline Project.  Line 10 is an oil pipeline that has operated in the Hamilton, Ontario area since the 1960's.  Enbridge also operates Line 11 adjacent to Line 10 within a shared easement.  Late in 2015, Enbridge applied to the NEB for permission to replace Line 10 in large part to avoid increasing integrity issues with the pipe.  Enbridge's proposed replacement pipeline would require less intervention and would also be larger in diameter than the existing pipeline.

For the majority of the replacement pipeline, Enbridge proposed to follow its existing Line 10 / Line 11 corridor; the existing Line 10 would be decommissioned in place and a new pipe would be installed next to it.  However, in certain locations, Enbridge asked for permission to move away from its existing pipeline corridor and to build the replacement pipeline within a new corridor to be established on previously unaffected properties.  Those locations that Enbridge wanted to avoid were golf courses.

In its application to the NEB, Enbridge suggested that it was necessary to route its replacement pipeline through previously undisturbed farm land because by doing so it would minimize the environmental and socio-economic impacts of its project.  In other words, Enbridge took the position that creating a new pipeline corridor through previously undisturbed agricultural lands would cause less impact than constructing and operating its pipeline through golf courses that already accommodated Enbridge's existing two-pipeline corridor.  

Landowners in the vicinity of two of the golf courses along Enbridge's existing Line 10 corridor challenged Enbridge on its theory.  They joined together and formed the Copetown Landowners Group ("CLG"), and intervened in the NEB hearing process.  CLG engaged an expert in pipeline routing and land use planning and submitted lay and expert evidence to the NEB that demonstrated the obvious - creating a new pipeline corridor through previously undisturbed farm land in order to avoid disturbing previously disturbed golf courses (which would still, in any event, house the operational Line 11 and the decommissioned Line 10) would not minimize the environmental and socio-economic impacts of the project.  

Ultimately, Enbridge revisited its proposed pipeline route in the area where it had intended to construct the replacement pipeline across lands owned by CLG members.  Enbridge still did not choose to install the replacement pipeline adjacent to its existing Line 10 and Line 11 pipelines, but it did adjust its route to follow another nearby utility corridor (one that actually was located between the existing Enbridge corridor and its proposed corridor through the CLG-owned lands).  The nearby utility corridor was already home to an electrical transmission line and multiple underground pipelines.

CLG's participation in the NEB Line 10 hearing demonstrates the importance of landowner involvement in the project approvals process.  But for the intervention of the CLG landowners, it is unlikely that Enbridge would have adjusted its proposed route to follow an existing previously-disturbed corridor.  Enbridge wanted, for its own reasons, to avoid installing its replacement pipeline through golf courses.  Enbridge was determined to create a new pipeline route through previously undisturbed farm land.  And in the absence of any opposition, it is unlikely that the NEB would have questioned the proposal, even though it would create a third utility corridor through prime farm land. 

Landowners have to be ready to participate in the regulatory process to protect their interests and the interests of their communities.  It seems that no one else, including local municipalities, will do it for them.

Read the NEB's decision at: NEB Line 10 Replacement Decision.

Ontario Court of Appeal confirms test for grantor's easement of necessity remains "strict necessity", not "practical necessity"

In Ontario, an easement of necessity may arise where land that is sold is inaccessible except by passing over adjoining land retained by the seller (i.e. an implied grant by the seller of an easement that allows the purchaser to access the purchased lot).  The easement must "be necessary to use or access the property", and necessity is determined at the time of the grant (the situation at the time the property was sold).

It is also possible for the easement to arise in the opposite direction, where the grantor (the party selling the land) requires an access easement across the land being sold or transferred.  That was the situation reviewed recently by the Ontario Court of Appeal in Toronto-Dominion Bank v. Wise.  In a case where the grantor or seller seeks an easement over the land that he or she transferred, the test is one of "strict necessity".  The test to be met by a grantor seeking an easement is supposed to be more difficult than where a grantee seeks an easement because "grantors are not permitted to derogate from the terms of their grant of land.  If they want to reserve an easement, they should do so explicitly at the time they make the grant.  An easement of necessity will be found only if it was necessary in order for the grantor to be able to use his or her property at the time of the grant."

In the Toronto-Dominion Bank v. Wise case, the application judge in the Superior Court had found that a landlocked waterfront property had an easement of necessity over a neighbouring property in spite of the availability of water access.  The judge found that the water access was "impractical".  On appeal, the Court of Appeal reversed the decision on the basis that the water access, whether inconvenient or impractical, was available, and that the property in question was not rendered unusable.  The test to be applied was not "practical necessity" (as the judge at first instance had proposed), but remained one of "strict necessity".

Read the decision at: Toronto-Dominion Bank v. Wise.

Funding to Support Public Input into NEB Modernization

Funding to Support Public Input

Natural Resources Canada (NRCan) is offering funding to support the development of research, studies or position papers related to the six themes of the NEB Modernization review: (1) Governance; (2) Mandate; (3) Decision-making roles; (4) Legislative tools for lifecycle regulation; (5) Indigenous engagement; and, (6) Public participation. This is in addition to the funding mentioned in the Terms of Reference that was made available to support the participation of Indigenous peoples.


Who can apply?

Funding is available to interested public stakeholders such as non-governmental organizations or associations.


How funding will be allocated

Limited funding may be provided on a case-by-case basis, subject to the established criteria below.
Funding decisions will be based on the following assessment criteria:

• Proposals must be less than $25,000 in total (including tax). Note that travel costs and capital costs are not eligible.
• All work must be completed by April 1, 2017. To maximize perspectives received through this process, funding is limited to one approved proposal per organization.
• Proposals must detail the deliverable (e.g. report, study, position paper) that your organization will produce and the timeline.
• Proposals must describe how the project contributes to the NEB Modernization review.
• Proposals must include details on the level of effort and resources that will be allocated to the proposal (e.g. resources to be used and their salaries). NRCan will use this information to confirm whether or not the cost of the proposal is fair and reasonable.
• Should your proposal be selected to receive funding, you will be contacted directly by NRCan officials. Final products must be provided to NRCan electronically in Microsoft Word format.
• Recipients who have already been allocated funding for Indigenous participation in the NEB Modernization review are not eligible for funding to support public input.

Eligible activities
Research, studies or position papers related to one of the six themes of the NEB modernization review:

1. Governance;
2. Mandate;
3. Decision-making roles;
4. Legislative tools for lifecycle regulation;
5. Indigenous engagement; and,
6. Public participation.

More information on these six themes can be found in the expert panel’s Terms of Reference.


Funding level

A maximum of $25,000 (including taxes) is available per applicant.


How to apply?

If you think your organization or association can contribute to the NEB Modernization review process, submit a proposal between two and five pages in length to NRCan.NEBModernization-ModernisationONE.RNCan@Canada.ca(External link) with the subject line “Public input funding proposal” and your organization’s name.

Should you wish, you may also mail your application to:

National Energy Board Modernization Secretariat
Natural Resources Canada
580 Booth Street,17th Floor
Ottawa, ON  K1A 0E4

Application Deadline

Applications will be accepted until January 31, 2017. Funding is limited and will be distributed on a case-by-case basis.

Merry Christmas!

It's been a busy year; so busy that this is the first time I've posted to my blog since July.  I'm looking forward to posting more regularly again in 2017.  There's been no shortage of interesting legal decisions affecting rural and agricultural landowners.

I wish you and your families a joyous Christmas!

Warranty claim about under-powered high-clearance sprayer ends up in court

The Queen's Bench in Saskatchewan recently dismissed a claim by a farmer who alleged that a high-clearance sprayer he'd purchased was under-powered.  In 2010, the farmer of 2,300 acres spent considerable time researching options and decided on a 2010 Agchem 1184 RoGator ("1184") at a purchase price of $328,500 (before trade-in). The sprayer was delivered on May 11, 2010.  The farmer started using the sprayer on May 12, 2010 and complained that day to the sales representative that the sprayer was under-powered.  Namely, it was working too hard at the speed at which the farmer wished to operate.

Over the next several days, adjustments were made to the engine and tests were conducted.  The representative of the manufacturer concluded that the sprayer was working as intended.  The farmer disagreed and continued to complain that the machine was under-powered.

The farmer invoked Section 36 of Saskatchewan's The Agricultural Implements Act, R.S.S. 1978, c. A-10, and sent a notice of rejection.  Under the Act, the vendor then had seven days in which to try to remedy the problem.  However, by that time, the vendor and the manufacturer had already concluded that there was no problem with the machine.  No further action was taken.

Ultimately, the farmer demanded his money back.  He parked the sprayer at the farm and never used it again.  It was sold at public auction in 2012.  The farmer sued the vendor for breach of warranty on the basis that the machine did not perform well for the work it was intended.

The Court found that the farmer failed to discharge his burden of proving that the warranty in Section 36(4) of the Act was breached - "Every contract for the sale of a new implement is deemed to include a warranty that, if the new implement is properly used and operated, it will perform well the work for which it is intended."  The Court accepted the evidence of the manufacturer's representative who found that the sprayer operated properly - he observed that the sprayer was spraying properly and at an acceptable speed (given wet field conditions).  The Court also took note of the fact that the machine appeared to have completed its spraying operations successfully; in 2010, the sprayer was used for 1,400 acres with no evidence of any adverse effect on crop performance. The farmer's claim was dismissed.

Read the decision at: Coward v Kramer Ltd.

Court of Appeal reverses Bear Creek natural severance ruling

The Court of Appeal for Ontario has overturned a recent Superior Court decision that found a property to have been severed naturally by a creek.  The owners of the property wished to deal with the property on the basis that it was severed into two parts by the creek running through it.  The local municipality challenged that view, but the Superior Court ruled that there was a natural severance resulting in two separate parcels of land.

On appeal, the Court of Appeal found that the evidence put before the lower court "was not capable of establishing that the Creek as it passed over the respondents' property was a navigable stream ... Title to the bed of the Creek does not lie with the Crown.  There is no natural severance of the respondents' property."  In the original application, the main issue was whether the creek had been navigable at the time of the original grant of lands in the area.  If it had been, then ownership of the creek bed was reserved to the Crown and the properties bisected by the creek would be divided into two severed parts.

Read the decision at: Middlesex Centre (Municipality) v. MacMillan.

Federal Court of Appeal overturns Northern Gateway approval

The Federal Court of Appeal has quashed the decision by the Federal Cabinet to approve the Northern Gateway pipeline project on the basis that Canada failed to consult adequately with First Nations on the pipeline route.  With changes to the National Energy Board Act made by the previous government, pipeline projects like the Northern Gateway project are subject only to a review by the National Energy Board.  The NEB then makes a recommendation to the Federal Cabinet, which has the ultimate say in whether a project is approved.

The appeal court ruled that Canada failed in its approach to consultation with First Nations on the project, noting that the government carried out consultations in a "brief, hurried and inadequate" way.

Read the decision at: Federal Court of Appeal.

TransCanada pipeline easement beneath swimming pool nixes property sale

The Plaintiffs in this case wanted to sell their residential property.  They listed the property for sale and the Defendant agreed to purchase it for $1,685,000.  The Agreement of Purchase and Sale was dated August 25, 2014 and the transaction was scheduled to close on November 28, 2014.  The property featured a pool, cabana and patio in the backyard.

After entering into the Agreement of Purchase and Sale, the Defendant discovered that a TransCanada Pipelines Limited ("TCPL") easement ran directly under the pool, cabana and patio.  An agreement provided that TCPL could remove the pool and cabana if necessary, and the agreement and the easement were the subjects of ongoing litigation between the Plaintiffs and TCPL.  The Agreement of Purchase and Sale between the Plaintiffs and the Defendant did not expressly reference the easement or the litigation.

The Defendant discovered the easement on November 6, 2014.  On November 7, 2014, the Defendant advised the Plaintiffs that he would not close the deal, and requested the return of the $50,000 purchase deposit.  The Plaintiffs refused to return the deposit and commenced an action against the Defendant for damages resulting from the failure to close the deal.  The Defendant counterclaimed for the return of the deposit.

As the Court explains in its decision on the claim and counterclaim, the Plaintiffs had constructed the pool, cabana and patio in 2011 without the consent of TCPL.  The TCPL easement dated from 1992, but the Plaintiffs were apparently unaware of it when excavations began (it was actually the second of two TCPL easements on the property).  TCPL permitted the Plaintiffs to encroach on the TCPL easement on certain conditions including:

(a)   The owners agree to sign a formal agreement prepared by TCPL which will be registered against the title of the land and will carry forward with future ownership;

(b)   In the event TCPL’s future operations, new installations, integrity or maintenance programs require the removal of the improvements (the pool and cabana) situated on its easement, the Owner agrees to remove the improvements immediately upon receipt of notice. The Owners and TCPL agree to equally share (50/50) the cost to remove the improvements;

(c)   The Owners covenant and agree that upon the Owner’s sale or disposition of the Lands, the Owners shall fully disclose the restrictive covenant to any prospective purchaser.

A letter containing those terms was registered on title to the property, but the Plaintiffs did not otherwise advise the Defendant of the letter or the subsequent litigation between TCPL and the Plaintiffs.

After the Defendant failed to close the transaction, the Plaintiffs defaulted on their mortgage and the property was sold under power of sale in May, 2015 for $1,730,000.  Although the sale price was higher than the price the Defendant would have paid, the Plaintiffs claimed they received $78,100 less in the power of sale because of the difference in the real estate commission charged (5% vs. 2.5%).

The Plaintiffs brought a motion for summary judgment seeking the damages they claimed from the Defendant.  Instead, the Court dismissed the Plaintiffs' claim and granted judgment to the Defendant for the return of the $50,000 deposit.  The Court ruled that the Defendant was entitled to rescind the Agreement of Purchase and Sale because the (second) TCPL easement and associated encroachment agreement and litigation had not been disclosed to the Defendant in the Agreement of Purchase and Sale.  As the Court noted:

The reference to a single easement in Schedule A of the APS did not provide the defendant with notice or disclosure of the 1992 easement or the June 2, 2011 letter agreement. Schedule A did not referentially incorporate the 1992 easement or make it part of the APS. This is especially true when the wording of Schedule A is compared to the wording of Schedule A in the earlier Purbas APS, which specifically referenced the TCPL litigation. Accordingly, the existence of the 1992 easement, the June 2, 2011 letter agreement, the unexecuted “Agreement To Install Swimming Pool and Cabana”, and the cloud of the litigation in relation to the plaintiffs’ refusal to execute the agreement, all meant that the plaintiffs did not comply with paragraph 10 of the APS which required the title to be free from all registered restrictions except as specifically provided in the agreement.

Read the decision at: Savo and Robichaud v Moursalien.