Recourse From Unreasonable Decisions By Surface Rights Board

Article by Michael Dixon, 2007, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Energy - Oil & Gas, October 2007

On October 4, 2007, the Supreme Court of Canada dismissed a landowner's application for leave to appeal the decision of the Alberta Court of Appeal in Imperial Oil Resources Ltd. v. 826167 Alberta Inc., 2007 ABCA 131 (Imperial Oil).

The Court of Appeal's decision upheld a ruling of the Court of Queen's Bench, which significantly reduced a landowner's favourable award of compensation by the Surface Rights Board (the Board). The Supreme Court of Canada's refusal to grant leave to appeal crystallizes the law in Alberta with respect to the manner in which such compensation is quantifiable, the obligations of the Board to follow that scheme, and the nature and right to appeal decisions made by the Board.

In particular, this decision demonstrates that recourse is available from unreasonable awards of compensation by the Board.

Surface Rights Regime In Alberta

At common law, the holder of a mineral right has the right to enter and use the surface of the land in order to explore for and to develop the minerals. In Alberta, however, the Surface Rights Act, R.S.A. 2000, c. S-24, overrides the common law and strikes a compromise between agriculture and the oil and gas industry. In addition, under the legislative scheme in Alberta, the holder of a pipeline or power line permit has a statutory right to acquire land to build the pipeline or power line.

The Surface Rights Act requires that the resource company or other person wanting to use the surface of the land (known as the operator) obtain a right to do so in one of two ways: either by obtaining the consent of the landowner and any occupants of the land, usually through a surface lease or grant of easement; or alternatively, by obtaining a Right of Entry Order from the Board. Where a Right of Entry Order is granted, the Board will hold a hearing to determine the amount of compensation payable by the operator to the landowner and any occupants. In addition, where a surface lease or Right of Entry Order provides for payments of compensation on an annual or continuing basis, after five years and every five years thereafter, either the operator or landowner may apply to the Board to have that compensation varied.

The Board's Decision

The lands in question in Imperial Oil comprised surface leases for 58 well sites and six access roads located in the North...