LAND AND PROPERTY RIGHTS TRIBUNAL
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Citation: |
Klassen v Ember Resources Inc, 2023 ABLPRT 900302 |
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Date: |
2023-07-06 |
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File No. |
RC2021.2592 |
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Decision No. |
LPRT2023/SR900302 |
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Municipality: |
Kneehill 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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S 1⁄2-9-31-26-W4M as described in Certificate of Title Nos. 851 086 256 and 911 080 401 +1 (the “Land”), particularly the area granted for a well site and access road, Alberta Energy Regulator (“AER”) Licence No. 0332731 (the “Site”). |
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Between: |
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Ember Resources Inc., |
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Operator, |
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- and - |
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James Lester D. Klassen and Janice Marie Klassen, |
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Applicants. |
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Before: |
Laura Dunham Lana Yakimchuk (the “Panel”) |
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Appearances by written submissions:
For the Applicants: Paul Vasseur, Representative
For the Operator: Kari Swennumson, Lead, Surface Land Coordinator, Ember Resources Inc.
DECISION AND REASONS
BACKGROUND
[1] On November 30, 2021, the Applicants filed an application under section 36 of the Act seeking recovery of allegedly unpaid compensation in the amount of $2,916.00 outstanding for the years 2020 and 2021 (“Application”) under a surface lease agreement for the above Site dated May 12, 2005 (“Surface Lease”). The Applicants also claim costs.
[2] On July 15, 2022, a Notice and Demand for Payment was sent to Ember Resources Inc. (“Ember”) demanding payment in the amount of $3,047.25.
[3] On September 29, 2022, a second Notice and Demand for Payment was sent to Ember demanding payment in the amount of $3,309.75.
[4] On February 17, 2023, Ember wrote to the Tribunal attaching a letter from Ember to the Applicants dated December 1, 2022 regarding outstanding payments (“Ember Payment Letter”). The Ember Payment Letter advises that Ember has deposited $14,664.00 into the Applicants’ bank account for outstanding rental payments, which sum includes the outstanding amount of $1,458.00 due for each of the years 2020 and 2021 under the Surface Lease. Included with the Ember Letter was a record of a deposit to the Applicants’ account in the amount of $14,664.00.
ISSUES
[5] The issues before the Panel are:
(1) Which corporations are Operators for the purposes of section 36 of the Act?
(2) Is there money past due that has not been paid by the Operators to the Applicants under a surface lease or compensation order?
(3) Should the Tribunal award costs under section 39 of the Act, and if so in what amount?
DECISION
[6] The Panel decides:
(1) For the purposes of section 36 of the Act, the Operator is Ember.
(2) Ember does not owe compensation under the Surface Lease for the years 2020 and 2021. Although Ember did not pay the full amount owing when it was due on May 12th for the years 2020 and 2021, it subsequently paid the balancing owing for both years on December 1, 2022.
(3) The Operator shall pay to the Applicants costs in the sum of ONE HUNDRED THIRTY-ONE and 25/100 DOLLARS ($125.00 plus GST of $6.25 = $131.25).
ANALYSIS
1 Who is an operator for the purpose of section 36 of the Act?
[7] For the purpose of recovery of compensation applications, the definition of the word “operator” is set by sections 36(1) and (2) of the Act. Specifically, sections 36(1) and (2) expand 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
[8] Under section 36(1)(c) the holder of a licence issued by the AER is an operator. This includes the person who held the licence on the due date and successors to the licence.
[9] Routine searches were conducted by Tribunal Administration. According to AER Well Summary Report dated November 2, 2022 (“AER Well Summary Report”), AER Well Licence No. 0332731 for the Site was transferred to Ember on November 15, 2013 and remains in the name of Ember. The Panel therefore finds that Ember is an operator under section 36(1)(c) on the 2020 and 2021 due dates.
Section 36(1)(d) – Working Interest Participant
[10] Under s. 36(1)(d) of the Act, a working interest participant is an operator. The Panel finds that Ember is an operator under section 36(1)(d) on the 2020 and 2021 due dates as the AER Well Summary Report shows that Ember is a working interest participant on the Site effective November 15, 2013 with a 100% interest.
Section 36(1)(e) – Holder of a Surface Lease
[11] Under section 36(1)(e) of the Act, 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 Applicants submitted a letter dated April 8, 2020 from Ember to the Applicants with the subject line “RENTAL REVIEW of Alberta Surface Lease dated May 12, 2005” for the Site (“Ember Rent Letter”). In the Ember Rent Letter, Ember admits that it is the holder of the Surface Lease for the Site.
[12] The Panel therefore finds that Ember is also an operator under section 36(1)(e) for the 2020 and 2021 due dates as it is the leaseholder of the Site.
2. Is there money past due and unpaid by the Operators to the Applicants under a surface lease or compensation order?
[13] The Ember Rent Letter’s subject line is “RENTAL REVIEW of Alberta Surface Lease dated May 12, 2005” for the Site. However, the Ember Rent Letter does not indicate that it is a formal notice under section 27(14) or section 27(5) of the Act.
[14] The Ember Rent Letter informs the Applicants that Ember has decided to adopt a “new formula” to adjust annual compensation payments. Using this new formula, Ember proposes to adjust the current annual payment for the Site from $3,790.00 to $2,332.00 effective May 12, 2020. The letter also indicates the following:
“If you are in agreement, please acknowledge by dating, signing and returning the duplicate copy of this letter to our attention in the self-addressed envelope. In anticipation of your acceptance, your upcoming rental payment will be in the amount of our proposed offer, by whichever form of payment you previously arranged. Please note that any payment directed into your account, including the cashing of any cheques, is NOT deemed as acceptance of this offer.
We understand that you may have some questions or concerns about our offer. As mentioned in our information package, we will be applying this formula to all of our leases as they come up for review. If you believe this offer is unacceptable, please be prepared to justify your position, and back it up with specific, detailed data from your farming operation. Ember will be more than happy to discuss any concerns you may have . . .”
[15] The signature lines are crossed out and are not signed by the Applicants.
[16] The Applicants also submitted copies of deposit records from Ember showing payments made pursuant to the Surface Lease. The first deposit record shows a payment deposited on April 3, 2019 in the amount of $3,790.00. The second deposit record shows a payment deposited on May 7, 2020 in the amount of $2,332.00.
[17] There is no evidence before the Panel that the parties entered into any negotiations to vary the compensation, that an application was made under Section 27 to the Tribunal to vary the compensation, that the Surface Lease includes a clause where the parties agreed to a formula to reduce the compensation, or that the Surface Lease has been amended to vary the compensation to $2,332.00 per year.
[18] In Downey v Ember Resources Inc., 2022 ABLPRT 38 (“Downey”), the Tribunal considered the same issue of Ember attempting to reduce the compensation payable by way of a similar letter. It determined that if Ember wished to have the rate of compensation in the surface lease varied and could not reach an agreement with the owner, its remedy was to give notice to the owner under section 27 of the Act. If the parties could not agree to a compensation rate, Ember could apply to the Tribunal to determine the rate of compensation, and the Tribunal could issue a compensation order that would operate to amend the surface lease with respect to the compensation only. As Ember did not avail itself of the provisions of the Act, and there was no evidence that the surface lease had been amended to vary the compensation, the Tribunal found that the payment proposed by Ember was a unilateral decision made by Ember and that it did not vary the compensation rate.
[19] The Panel adopts and applies the reasoning in Downey with respect to this issue in this proceeding. The annual compensation rate for the years claimed is not varied by the Ember Rent Letter and remains at $3,790.00.
[20] The Applicants submit that they are owed a total of $2,916.00 for the 2020 and 2021 compensation payments ($1,458.00 per year). Ember did not pay the full compensation of $3,790.00 per year which was owed under the Surface Lease, but only paid $2,332.00 for each of the years 2020 and 2021.
[21] Ember submits it paid the Applicants on December 1, 2022 for the outstanding amounts due for the years 2020 and 2021. The Ember Payment Letter indicates that Ember has deposited $14,664.00 into the Applicants’ bank account for outstanding payments, which includes the outstanding amount of $1,458.00 due for each of the years 2020 and 2021 under the Surface Lease, for a total of $2,916.00. Included with the Ember Payment Letter was a record of a deposit of $14,664.00 to the Applicants’ account.
[22] After a review of the evidence, the Panel determines that Ember did not pay the full amount owing when it was due on May 12th for the years 2020 and 2021. However, on December 1, 2022, Ember paid the balancing owing for both years. Therefore, the Panel finds that Ember does not owe any further compensation under the Surface Lease for the years 2020 and 2021.
3. Should the Tribunal award costs under section 39 of the Act, and if so in what amount?
[23] The Applicants filed an invoice from Paul Vasseur for costs in the sum of $393.75 for services to develop three section 36 applications, including this Application. 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) of the Surface Rights Rules provides guidance as to the factors the Tribunal may consider when awarding costs, which are
(a) the reasons for incurring costs;
(b) the complexity of the proceeding;
(c) the contribution of the representatives and experts retained;
(d) the conduct of a party in the proceeding;
(e) whether a party has unreasonably delayed or lengthened a proceeding;
(f) the degree of success in the outcome of a proceeding;
(g) the reasonableness of any costs incurred; and
(h) any other factor the Tribunal considers relevant.
[24] The evidence is that Ember did not initially pay the full compensation amount owing for the years 2020 and 2021 based on its unilateral decision to reduce the payment amounts under the Surface Lease. The Applicants thereafter brought this Application to claim the outstanding amounts, retaining the services of Paul Vasseur to assist them. It was only after Notices and Demands for Payment were sent to Ember that Ember paid the outstanding amounts.
[25] The Panel therefore finds that the Applicants only incurred costs because of Ember’s unilateral decision to reduce the compensation amount under the Surface Lease and thereafter not paying the full amounts owing when due in the years 2020 and 2021. It was reasonable for the Applicants to file an Application in 2021, and employ the services of a representative for assistance, to obtain the outstanding amounts due to them from Ember.
[26] Regarding the quantum of costs, 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. (Emphasis added)
[27] This Panel applies the reasoning in Bear Canyon to the costs claimed by the Applicants. The Panel therefore awards costs for one hour of professional assistance for this Application at a rate of $125.00/hour plus 5% GST ($6.25).
[28] Costs in the amount of $131.25 are payable by the Operator to the Applicants.
ORDERS:
[29] An Order shall issue awarding the Applicants Costs as set out in this decision.
Dated at the City of Edmonton in the Province of Alberta this 6th day of July, 2023.
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LAND AND PROPERTY RIGHTS TRIBUNAL |
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Laura Dunham, Member |