LAND AND PROPERTY RIGHTS TRIBUNAL
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Citation: |
Vold v Ember Resources Inc, 2023 ABLPRT 901831 |
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Date: |
2023-05-03 |
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File No.: |
RC2021.1008 |
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Order No.: |
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Municipality: |
Ponoka County |
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In the matter of a proceeding commenced under section 36 of the Surface Rights Act, RSA |
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2000, c S-24 (the “Act”). |
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And in the matter of land in the Province of Alberta within the: |
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SW 1⁄4-30-43-22-W4M as described in Certificate of Title No. 052 058 550 (the “Land”), particularly the area granted for a well site, and access road, Alberta Energy Regulator Licence No. 0325868 (the “Site”). |
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Between: |
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Operator |
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- and - |
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Diane Vold and Lynden Vold |
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Applicants |
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Before: |
Lana Yakimchuk |
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Barbara A. Samuels |
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(the “Panel”) |
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Appearances by written submissions:
For the Applicants: Paul Vasseur, Landowners’ Representative
For the Operator: Thomas Owen, Owen Law, for Ember Resources Inc.
DIRECTION TO PAY PURSUANT TO
SECTION 36(6) OF THE ACT
The Tribunal directs the Minister to pay out of the General Revenue Fund the sum THREE THOUSAND NINE HUNDRED and FORTY-FOUR 00/100 DOLLARS ($3,944.00), (the “Compensation”) to Diane and Lyndon Vold, jointly of Ponoka County, in the Province of Alberta for the remaining compensation that became due in the years 2020, and 2021.
DECISION AND REASONS
[1] The title to the Site is in the name of Diane Vold and Lynden Vold. The Operator is Ember Resources Inc. (“Ember”).
[2] The Applicants filed an application under section 36 of the Act seeking recovery of unpaid compensation due under a surface lease agreement, which was signed on January 18, 2005, for the above Site. On March 22, 2021, the Applicants signed an Application for the above Site to claim outstanding amounts due on the Surface Lease anniversary dates of January 18, 2020, and 2021. The Applicants claim a total amount of $1,972.00 which was withheld from each of the annual payments totalling $3,944.00, due for the years 2020 and 2021 Surface Lease anniversary dates.
[3] On July 30, 2021, a Notice and Demand for Payment (“Notice”) was sent by Tribunal administration to Cordero Energy Inc. (“Cordero”) and Ember Resources Inc. (“Ember”), Cordero’s amalgamation successor, as noted in the Alberta Corporate Registry. The Notice demanded Ember to pay the Applicants the total amount of compensation outstanding for the 2020, and 2021 due dates.
[4] In response to the Notice, submissions were received from both Ember and the Applicants.
[5] A decision (LPRT2022/SR0965) on the Application was released to the parties on July 12, 2022. In that decision’s preliminary matters, the Panel found that the Application form as submitted, was incomplete as required by Rule 14(2) and (3)(e). The Tribunal did not consider the incomplete application. The Panel directed the Applicants that they had 45 days from the date of the decision to submit a completed Condition of Leased Area Form (COLA) to the Tribunal and if they failed to do so, the Application would be considered withdrawn, and the file would be closed.
[6] On July 25, 2022, further information on the condition of the leased land was submitted to the Tribunal by the Applicants.
ISSUES
[7] The issues before the Panel are:
(1) Who is an Operator for the purpose of section 36 of the Act?
(2) Is there money past due and unpaid by the Operator to the Applicants under the Right of Entry Instrument?
(3) Should the Tribunal direct the Minister to pay the Applicants any of the money past due under section 36(6) of the Act?
(4) Should the Tribunal suspend and terminate the Operator’s rights?
(5) Should the Tribunal award costs under section 39 of the Act, and if so in what amount?
DECISION
[8] The Panel decides:
(1) For the purposes of section 36 of the Act, the Operator is Ember Resources Inc.
(2) The written evidence proves remaining compensation in the amount totalling $3,944.00 is payable to the Applicant by the Operator for the years 2020 and 2021.
(3) The Panel finds it is reasonable to direct the Minister to pay the full amount of $3,944.00 owed, ($1,972.00 annually), for the years 2020 and 2021.
(4) The decision to suspend or terminate the Operator’s rights is reserved.
(5) Costs in the amount of $131.25 are payable by the Operator to the Applicants.
ANALYSIS
1. Who is an operator for the purpose of section 36 of the Act?
[9] For the purpose of recovery of compensation applications, the definition of the word operator is set by s. 36(1) and (2) of the Act. Specifically, s. 36(1) and (2) expands the definition of operator so that it has a broader meaning than in the rest of the Act.
Section 36(1)(c) – AER Licence Holder
[10] Under s. 36(1)(c) the holder of a license issued by the Alberta Energy Regulator (AER) is an operator. This includes the person who held the license on the due date and successors to the license. AER Well License No. 0325868 for the Site is in the name of Ember Resources Inc. The Panel finds that Ember is an operator under s. 36(1)(c) on the Surface Lease anniversary due dates of January 18, 2020, and 2021.
Section 36(1)(d) – Working Interest Participants
[11] Under s. 36(1)(d) working interest participants (“WIPs”) are operators. The Panel finds that Ember is a WIP operator under s. 36(1)(d) on the 2020, 2021 due dates because the AER Well Summary Report dated May 19, 2021, for AER Well Licence No. 0325868 shows Cordero Energy Inc., (predecessor to Ember), amalgamated with Ember in 2005, and was the 100% working interest participant at this site. The license was transferred from Cordero to Ember on January 8, 2009. The Panel finds that Ember is the WIP operator under s. 36(1)(d) on January 18, 2020, and 2021.
Section 36(1)(e) – Holder of a surface lease
[12] Under s. 36(1)(e) the holder of the Surface Lease for the Site is an operator. This includes persons who held the surface lease at the time of non-payment and their successors. The Panel finds Ember is an operator for the purpose of s. 36(1)(e) on the 2020 and 2021 due dates because in its submission Ember admits to being the holder of the Surface Lease, a cheque stub in evidence shows Ember’s payment for the Surface lease, and Caveat No. 052 054 563 listed on the Certificate of Title No. 052 058 550 confirms the Surface Lease holder of the Site is Ember.
2. Is there money past due and unpaid by the Operator to the Applicant under the Right of Entry Instrument?
[13] Certificate of Title No. 052 058 550 shows Lynden and Diane Vold are owners, and the compensation is supported by the Application and supporting documentation. The rate of compensation is $3,000.00 per year, as stated in the January 10, 2020, letter from Ember to the Applicants. The Applicants reported receipt of $2,014.00 compensation that includes both 2020 and 2021. This amount was confirmed in Ember’s letter of January 10, 2020, to the Applicants. This leaves a total outstanding payment of $1,972.00 that includes payment for 2020 and 2021. The Applicants declared in writing that this Compensation has not been paid and in evidence was a cheque stub for the Site that showed the reduced amount of $2,014.00 was paid by Ember for the 2021 due date.
[14] By letter on January 10, 2020, Ember offered the Applicant a change in Compensation rate from $3,000.00 to $2,014.00 per year, but the Applicants did not accept that change. There is no record of a s.27 Tribunal decision ordering a reduction in compensation for this lease, nor an agreement between the Applicants and the Operator to a reduction.
[15] Section 27 of the Act sets out the process for either party to a surface lease to trigger a review of the annual compensation rate associated with that surface lease. Section 27(14) states:
(14) The operator shall give a notice that complies with subsection (5) to the other party on or within 30 days after every 5th anniversary date after the date notice should have been given under subsection (4) for as long as the surface lease or right of entry order, as the case may be, is in effect and subsections (6) to (13) apply to that notice.
[16] If Ember wished to have the rate of compensation reviewed, s.27 provides the opportunity to issue its required notice under s.27 and enter into negotiations with the Applicants. Then if the parties did not agree to a rental rate, Ember could apply to the Tribunal to determine the rate of compensation. If the Tribunal issued a compensation order, the order would operate to amend the surface lease with respect to the compensation only, notwithstanding anything contained in the surface lease. The January 10, 2020, letter alone does not vary the rate of compensation and it appears to fall outside of the notice requirements under s.27(4) and s.27(14) to initiate a review effective in 2020. The Panel refers to Shepstone v. Alberta (Surface Rights Board), 2000 ABQB 1003:
[13] It seems logical that if nothing is done within the proverbial reasonable time and the operator did not give the notice required pursuant to s.27(4) then the rental established for the prior 5-year time period of the lease would prevail for the next 5-year period of the lease (barring of course a mid-term amending agreement being reached by the parties).
[17] Since Ember did not avail itself of the provisions of the Act, and specifically s.27, the only option available to adjust the annual compensation rate is for the parties to do so via a mutual agreement, and no evidence was provided that this occurred.
[18] Ember seeks to make submissions, but it does so while refusing to pay the compensation it owes to the Applicant. Ember misunderstands the purpose of s.36, which is to ensure that the Owner is paid what is owed. Operators should not be encouraged to simply fail to pay the full amount of compensation so that they can then make submissions through the s.36 hearing process on the amount of compensation the Minister should pay. If Ember wishes to make submissions on the appropriate rate of compensation, it can pay the full amount of compensation it is required to pay to the Applicant and then seek a review of the rate of compensation under s.27.
[19] The Panel finds that the payment proposed and made by Ember for the January 18, 2020, and 2021 payment due dates was a unilateral decision made by Ember based on Ember’s opinion of what the annual compensation should be and did not operate to vary the rate of compensation payable under the Surface Lease. No evidence was presented by either party related to any efforts made to engage in discussions, exchange of information or negotiations prior to or subsequent to the January 10, 2020, letter. The rate paid by Ember for the 2020 and 2021 payment due dates was not negotiated with, or agreed to, by the Applicant. There is no evidence before this Panel to show that the contract annual rental rate of $3,000.00 was altered by mutual agreement.
3. Should the Tribunal direct the Minister to pay the Applicant any of the money past due under section 36(6) of the Act?
[20] On August 16, 2021, Ember asked that the Tribunal hear more extensive submissions on the factors to be considered in exercising its discretion under subsections 36(5) and 36(6) of the Act. Sections 36(5) and 36(6) address the issues of suspending and terminating an operator’s right to enter a site and the Tribunal’s ability to direct the Minister to pay the money owed if the operator does not comply with the compensation order. An extension of 60 days was granted to provide responses to the Demand Notices. Ember’s submission is silent with regard to the issue of whether the Operator made appropriate payment for the 2020 and 2021 payment due dates.
[21] The Operator has not provided satisfactory evidence of payment to the Tribunal within the specified time (compliance with the Notice and Demand to pay), has not provided any evidence that the amount demanded was not owed, or that there was an error. The Panel is not satisfied that the contract has been amended. Even if the Operator had sought a review of the rate of compensation under s.27, it is not entitled to pay less than the contractual amount until it obtains a new compensation order from the Tribunal.
[22] Section 36 provides a remedy in the case where an operator has ceased making payments as required under a surface lease agreement, a contract between two parties. This position is supported by Devon Canada Corporation v Alberta (Surface Rights Board), 2003 ABQB 7, 337 AR 135 (“Devon”). The Tribunal merely enforces this agreement under s.36. Section 36(4) does not introduce any other factors, such as public interest, but is a simple determination of whether non-payment under a surface lease has occurred.
[23] With regard to s.36(6), the Operator argued:
“Ember takes the position that for the purposes of s.36(6), the Tribunal must assess what proper compensation would be under the Leases, and that this should be the limit which the treasury should be ordered to pay to the Lessors.
Ember submits that the Tribunal’s function under s.36(3) is not to enforce payment under a Lease, but to ensure that the Landowner is fairly compensated for any loss. Payment beyond this would constitute unjust enrichment at the expense of the taxpayer.
Ember submits that the rental payments it has made under these Leases represent fair compensation for the actual loss of use and adverse effect on the Landowner.
Given that the funds paid under this section. are taken from the public purse, Ember submits that the public interest is also engaged in this analysis, and that the Tribunal must consider this in its reasoning.
Ember submits this does not prejudice the lessors as they still have available to them the usual civil remedies for enforcing the lease as a commercial contract through the courts in order to recover any outstanding balance.”
[24] In Devon Canada Corporation v Alberta (Surface Rights Board), 2003 ABQB 7, 337 AR 135 (“Devon”), the Court of King’s Bench considered the Tribunal’s responsibility when considering an order under s.36(5) and (6) and held at paragraph 29:
... the function of subsections 36(5) and 36(6) appears to me to provide the surface owner with some assurance that if they cooperate with providing the oil industry access to their lands, they need not fear the operator will not pay them.
The sections provide a pragmatic solution whereby the surface owner need only prove the existence of a lease and that rent has not been paid. Upon proof of such, in most cases, the province would then pay the rent and the operator would then face the province, seeking reimbursement from the operator.
... if the ... owner’s claim is unjustified, is patently absurd, or provides an unjust enrichment, the Board should be able to use its discretion under s. 36(6) to refuse to direct that Alberta taxpayers pay the rental arrears.
[25] According to Devon, the Panel's decision to direct the Minister to pay out of the General Revenue Fund is discretionary. This was confirmed by the Alberta Court of King’s Bench in Provident Energy Ltd v Alberta (Surface Rights Board), 2004 ABQB 650.
[26] Ember seeks to make submissions, but it does so while refusing to pay the compensation it owes to the Applicant. Ember misunderstands the purpose of s.36, which is to ensure that the Owner is paid what is owed. Operators should not be encouraged to simply fail to pay the full amount of compensation so that they can then make submissions through the s.36 hearing process on the amount of compensation the Minister should pay. If Ember wishes to make submissions on the appropriate rate of compensation, it can pay the full amount of compensation it is required to pay to the Applicant and then seek a review of the rate of compensation under s.27.
[27] Section 36(9) speaks to what occurs if the Minister is directed to pay.
(9) Where the Minister pays money under subsection (6) or (7),
(a) the amount paid and any expenses incurred, whether by the Crown or by a private agency, in collecting or attempting to collect the money owing, constitute a debt owing by the operator to the Crown, and
(b) a written certificate issued by or on behalf of the Minister certifying the payment of the amounts referred to in clause (a), including expenses, may be entered as a judgment of the Court of King’s Bench for those amounts and enforced according to the ordinary procedure for enforcement of a judgment and that Court.
[28] In a recent decision, Praskach Farms Ltd. v Lexin Resources Ltd., 2020 ABSRB 85 (“Praskach”), the Tribunal concisely summarizes the scope of authority under s.36 of the Act, the factors to consider direct the Minister to pay either the full amount of Compensation owing or a reduced amount if payment if the full amount is unjustified. The Tribunal held (at paragraphs 10):
[10] There are two factors particularly important for considering annual compensation and whether directing the Minister to pay the full amount owing is unjustified. ... this is not a review of compensation under section 27, however, the loss of use and adverse effect are components of fair compensation which the Board can consider when determining if directing the Minister to pay the full amount owing is justified.
and this Panel adopts and applies the reasoning from Praskach.
[29] The Applicant has stated that the site is fenced, to keep cattle out of harm’s way. The land is being used for crops. It is still being visited by workers to monitor production and swabbing. The well is still operational, production continues as a typical Ember lease site, and there is still equipment on the site.
[30] There is no evidence to convince the Panel that payment of the full Compensation is unjustified, patently absurd or would result in overpayment to the Applicant. Ember’s submission does not address the quantum of the compensation in any detail, other than to opine that it is excessive. It was open to Ember to provide submissions more specific to the Site but it chose not to do so and did not explain why. Even if Ember succeeded in convincing the Panel that it should not direct the Minister to pay the full amount owed under the Surface Lease, this finding would not absolve Ember of its obligation to pay the full amount under the Surface Lease agreement.
[31] Ember’s submission concluded by asking for a further delay in the proceeding; “that the Board hear submission on the factors to be considered in exercising its discretion under these two sections” [s. 36(5) and 36(6)].
[32] The Panel finds that Ember provided a submission in response to the Notice and Demand for Payment triggered by the Application. Ember had the opportunity to include a fulsome response to the Application, including disputing anything in the Application that Ember did not agree with, by providing evidence, detail, or argument to support Ember’s position. The submission addressed the Tribunal’s discretion with regard to section 36(5) and 36(6). Ember’s submission did not provide any evidence to demonstrate that the Minister should pay less than the current rate of compensation for the Site.
[33] The Panel finds that providing a further opportunity for Ember to make submissions on this same topic is unfair to the Applicants, as it merely extends the process without a good reason to do so, and results in an undue delay to receiving payments due. Section 36 provides a relatively inexpensive avenue for lessors to obtain compensations payments they are due under surface lease agreements or amendments to the annual compensation rate that may occur between the parties.
[34] The Panel finds that the full amount of remaining Compensation outstanding, $1,972.00 for 2020 and 2021, is due and payable. The Panel finds that at the time the Compensation became due, the Operator, Ember, was and remains liable for the Compensation due to the Applicant.
[35] The Minister is directed to pay a total of $3,944.00 to the Applicant out of the General Revenue Fund under section 36(6) for the compensation that became due in 2021 and 2022.
4. Should the Tribunal suspend and terminate the Operator’s rights?
[36] The Tribunal can suspend and terminate an operator’s rights to access the Site when appropriate. The Panel reserves its decision to suspend and terminate at this time, however, if the Operator attempts to access the Site but still does not pay compensation, the Tribunal may issue a suspension/termination order.
5. Should the Tribunal award costs under section 39 of the Act, and if so in what amount?
[37] The Applicants’ Representative filed an invoice for costs for this Application amounting to $131.25. Section 39(1) of the Act puts costs of and incidental to proceedings under the Act in the discretion of the Tribunal. Rule 31(2) the Surface Rights Rules provides guidance as to the factors the Tribunal may consider when awarding costs.
[38] In Bear Canyon Farms Holdings Ltd. v Apex Energy (Canada) Inc. 2018 ABSRB 64 (CanLII) (“Bear Canyon”), the Tribunal held at paragraphs 17 and 20:
[17]: ...s.36 application costs tend to be on low side as the applications are only 2 pages, not complex and most of the info comes from applicants. The board administration performs all necessary searches and prepares the statutory declaration and [they] are decided generally without an in-person hearing...
[20] In the opinion of the panel, an experienced professional should be able to file a s.36 application within one hour or less.
[39] This Panel applies the reasoning in Bear Canyon to the costs claimed by the Applicants. The Panel finds the Application is not complex and the Applicants’ representative is an experienced professional and should be able to file a s.36 application within one hour or less. The Panel therefore accepts the Applicants’ requested cost calculation and awards costs for one hour of professional assistance at a rate of $125.00/hour plus 5% GST, for a total of $131.25.
[40] Costs in the amount of $131.25 are payable by the Operator to the Applicants.
COSTS ORDER:
[41] IT IS ORDERED that costs in the amount of ONE HUNDRED THIRTY ONE and 25/100 DOLLARS ($131.25 inclusive of GST) are payable by the Operator to the Applicants, jointly.
Dated at the Calgary in the Province of Alberta this 3rd day of May 2023.
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LAND AND PROPERTY RIGHTS TRIBUNAL |
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Barbara A. Samuels, Member |