Bue v. Alliance Pipeline Ltd.

Bue v. Alliance Pipeline Ltd.
Court (s) Database
Federal Court Decisions
Date
2006-06-07
Neutral citation
2006 FC 713
File numbers
T-2393-03, T-2394-03, T-2395-03, T-2396-03, T-2397-03, T-2398-03, T-2399-03, T-2400-03, T-2401-03, T2402-03, T2403-03, T-777-04
Notes
Digest
Decision Content
Date: 20060607
Dockets: T-2393-03, T-2394-03, T-2395-03, T-2396-03,
T-2397-03, T-2398-03, T-2399-03, T-2400-03,
T-2401-03, T2402-03, T2403-03, T-777-04
Citation: 2006 FC 713
Toronto, Ontario, June 7, 2006
PRESENT: The Honourable Mr. Justice Campbell
BETWEEN:
BYRON BUE, RAYMOND BUE, BEV COLLINS HOLDINGS LTD.,
BRIAN FAST, TERESA FAST, SCOTT GABERT, TRICIA GABERT,
RAYMOND GILKYSON, VICKI GILKYSON, STIRLINGHANSON,
LAURA HANSON, MARIO MAROUELLI, JAMIE MAROUELLI,
LLOYD OLLEY, KATHERINE OLLEY, KANE PIPER, FRANK THEDERAHN,
IRMA THEDERAHN, GWEN SMITH AND DALE SMITH
Appellants
and
ALLIANCE PIPELINE LTD.
Respondent
AND BETWEEN:
ALLIANCE PIPELINE LTD.
Appellant on Cross-Appeal
and
BYRON BUE, RAYMOND BUE, BRIAN FAST, TERESA FAST, RAYMOND GILKYSON, VICKI GILKYSON, STIRLING HANSON,
LAURA HANSON, LLOYD OLLEY, KATHERINE OLLEY, KANE PIPER, GWEN SMITH AND DALE SMITH
Respondents on Cross-Appeal
REASONS FOR ORDER AND ORDER
[1] Alberta is a major producer of natural gas which is brought to market, both provincially and inter-provincially, by a web of underground pipelines running through privately owned lands. The present proceeding concerns objections by owners to the compensation awarded in the Alberta sector of an interprovincial pipeline built to deliver natural gas from Northeastern British Columbia to Chicago, Illinois.
[2] The Governments of Alberta and Canada consider the building of pipelines to be in the public interest, and, consequently, have regulated the taking of landowners' rights in order to allow the industry to develop. This taking with respect to pipelines within federal jurisdiction is by the National Energy Board Act, R.S.C. 1985, c.N-7 (the NEB Act). In the present proceeding, twelve objections to decisions made under the NEB Act are consolidated for consideration. The decisions are those of an arbitration panel (the Committee), appointed under the NEB Act, in which compensation for the rights taken from the Applicants (the Landowners) by the builder of the pipeline (Alliance) is determined. In the process leading to the making of the compensation determinations, two considerations came into play: the fact that the Committee was the first to interpret the present compensation provisions of the NEB Act; and the fact that, as there is a body of Alberta law which has developed with respect to Provincial pipeline compensation, the Committee was called upon to determine its relevance.
[3] Before the Committee, and in the present proceeding, Mr. Lars Olthafer, Counsel for Alliance, and Mr. Darryl Carter, Counsel for the Landowners, each presented a principled perspective on the manner in which the NEB Act should be interpreted and the Alberta law should be viewed. In the perspectives presented, there is some agreement, but there are also important differences. Mr. Olthafer argued that the compensation provisions of the NEB Act should be interpreted on the basis of long established principles of expropriation law, whereas Mr. Carter argued that the application of those principles results in an unrealistic, and, therefore, unfair and unintended interpretation of the NEB Act, and a more critical approach is required.
[4] The review of the decisions made by the Committee has been consolidated in the present proceeding because each exhibits several common determinations. However, the Committee also made a number of individual determinations based on facts unique to certain Landowners. In these reasons, the generic elements are first reviewed in Section II and each unique determination is considered in Section III.
[5] The individual applications consolidated in the present proceeding are statutory appeals (the Appeals) of the Committee's decisions, governed by s.101 of the NEB Act which allows an appeal from an arbitration decision on a question of law or a question of jurisdiction. Following the Supreme Court of Canada's decision in Dr. Q v. College of Physicians and Surgeons of British Columbia, [2003] 1 S.C.R. 226 which, at paragraph 21, directs that a statutory appeal is to be conducted as a judicial review, it is agreed that the present Appeals are judicial review applications to be determined according to s.18.1 of the Federal Courts Act, 2002, c.8, s.14which is quoted in Appendix IV of these reasons. It is also agreed that, pursuant to the decision in Dr. Q, in applying s.18.1, the Committee's decisions are to be reviewed according to a pragmatic and functional analysis to determine the standard of review with respect to the Committee's findings of law, mixed fact and law, and fact. Given that the Committee is ad hoc and, therefore, not specialized, and given the limited nature of the protection from appeal provided by s.101, it is agreed that the outcome of the analysis is that findings of law must be correct, and findings of fact and law must be reasonable. With respect to findings of fact made by the Committee, it is also agreed that they must not be patently unreasonable.
[6] The difference in the standards of "reasonableness" and "patent unreasonableness" is described by Justice Iacobucci in paragraphs 52 to 55 of Law Society of New Brunswick v. Ryan, [2003] 1 S.C.R. 247:
The standard of reasonableness simpliciter is also very different from the more deferential standard of patent unreasonableness. In Southam, supra, at para. 57, the Court described the difference between an unreasonable decision and a patently unreasonable one as rooted "in the immediacy or obviousness of the defect". Another way to say this is that a patently unreasonable defect, once identified, can be explained simply and easily, leaving no real possibility of doubting that the decision is defective. A patently unreasonable decision has been described as "clearly irrational" or "evidently not in accordance with reason" (Canada (Attorney General) v. Public Service Alliance of Canada, [1993] 1 S.C.R. 941, at pp. 963-64, per Cory J.; Centre communautaire juridique de l'Estrie v. Sherbrooke (City), [1996] 3 S.C.R. 84, at paras. 9-12, per Gonthier J.). A decision that is patently unreasonable is so flawed that no amount of curial deference can justify letting it stand.
A decision may be unreasonable without being patently unreasonable when the defect in the decision is less obvious and might only be discovered after "significant searching or testing" (Southam, supra, at para. 57). Explaining the defect may require a detailed exposition to show that there are no lines of reasoning supporting the decision which could reasonably lead that tribunal to reach the decision it did.
How will a reviewing court know whether a decision is reasonable given that it may not first inquire into its correctness? The answer is that a reviewing court must look to the reasons given by the tribunal.
A decision will be unreasonable only if there is no line of analysis within the given reasons that could reasonably lead the tribunal from the evidence before it to the conclusion at which it arrived. If any of the reasons that are sufficient to support the conclusion are tenable in the sense that they can stand up to a somewhat probing examination, then the decision will not be unreasonable and a reviewing court must not interfere (see Southam, at para. 56). This means that a decision may satisfy the reasonableness standard if it is supported by a tenable explanation even if this explanation is not one that the reviewing court finds compelling.
(see Southam, at para. 79)
[7] Further, with respect to how to determine if a finding is patently unreasonable, in Voice Construction Ltd. v. Construction & General Workers' Union, Local 922, [2004] 1 S.C.R. 609, Chief Justice McLachlin at paragraph 18 says that "a definition of patently unreasonable is difficult, but it may be said that the result must almost border on the absurd". The present review is governed by s.18.1, and Chief Justice McLachlin's description aligns with the statement in s.18.1(4)(d) as to when a finding of fact made by the Committee is to be found to be made in reviewable error, being when it is made in a "perverse or capricious manner, or without regard for the material before it".
[8] The rather large record in the present consolidated Appeals includes a number of sources of information: the decisions under review; a memorandum of fact and law from each of the Landowners and Alliance; the written arguments made by Mr. Carter and Mr. Olthafer to the Committee in 2001; Mr. Olthafer's written argument on the costs issue made to the Committee in 2004; and, by consent, an article written by Mr. Olthafer entitled "Recent Developments in Surface Rights Law", Alberta Law Review, Vol. 43, No. 1 (July 2005) which provides a useful concise description of the background to the Appeals and the issues addressed by the Committee. In these reasons, where an arbitration decision is quoted, the name of the Landowner is stated, and where a source is used, it is referenced respectively as: (Landowners: Memorandum of Fact and Law); (Alliance: Memorandum of Fact and Law); (Landowners: July 23, 2001); (Alliance: August 17, 2001); (Alliance: April 8, 2004); and (Olthafer, ALR).
[9] To keep these reasons concise, the relevant sections of the NEB Act are attached as Appendix I, and will not be quoted in the reasons except for emphasis.
I. Background
A. The scheme of the NEB Act and events leading to the present Appeals
[10] The source for the following description, with minor editing, is: (Olthafer, ALR, pp.93-94 and pp.96-97).
[11] Until 1983, compensation under the NEB Act (National Energy Board Act, R.S.C. 1970, c. N-6, s. 75) was determined in accordance with certain specified provisions of the Railway Act which were applied mutatis mutandis to federally-regulated pipelines. The Railway Act (R.S.C. 1970, c. R-2, ss.160-161), which had not been significantly amended since 1919, provided for compensation for the acquisition of lands to be fixed by a superior court judge in the event that a company and an owner did not agree as to the amount of compensation payable. The arbitrator was given virtually no guidance as to how to ascertain the compensation payable, being merely directed to proceed in such a way as he or she deemed best. There was no requirement for the company to pay an advance of compensation to the owner, and the costs of arbitration could be awarded against either party.
[12] The NEB Act was amended in 1983 to modernize the statutory procedures used by pipeline companies under federal jurisdiction to acquire lands. Among other things, the amendments, which are essentially unchanged to this day, provided for: the codification of the types of damage for which compensation should be payable (s.97); an advance payment on the compensation payable upon the issuance of a right of entry to the company (s.105); the referral by the Minister of Natural Resources of compensation disputes, including in relation to the amount of the advance payment, to an ad hoc arbitration committee whose procedures are set out in regulations (ss.88, 90, 91, 105, 107(d)); owners to be given the option to receive the compensation payable to them as a lump sum, or by periodic payments subject to review, having regard to changes in market value of the lands, at five-year intervals (s.98); the payment by the company of the owners' reasonable costs for arbitration (s.99); and an appeal to the Federal Court Trial Division from the decision of an arbitration committee on questions of law and jurisdiction (s.101).
[13] On July 3, 1997, Alliance applied to the National Energy Board (NEB), pursuant to Part III of the NEB Act, for a certificate of public convenience and necessity authorizing the construction and operation of a natural gas pipeline. Alliance received approval from the NEB for the construction of the pipeline on November 26, 1998 (Board Certificate No. GC-98) and approval by Order in Council, P.C. 1998-2176, on December 3, 1998.
[14] The Alliance Pipeline comprises approximately 2,990 kilometres of natural gas mainline and 698 kilometres of lateral pipelines extending from gathering points in northeast British Columbia and northwest Alberta to a delivery point near Chicago, Illinois. The Canadian portion of the system, totalling approximately 2,257 kilometres of pipelines, was constructed between June 1999 and November 2000, and ends at the Canada-United States border crossing near Elmore, Saskatchewan.
[15] Under the NEB Act, a pipeline company that requires lands for the purposes of a section or part of a pipeline is by s.87 required to serve notice on the owners of such lands describing, among other things, the lands required by the company, the procedures for approval of the detailed route of the pipeline, the value of the lands required, and details of the compensation offered by the company. Alliance was therefore required to serve notice on each of the owners of lands along its planned pipeline route in Canada of its requirement of permanent rights-of-way and temporary work spaces.
[16] The basis for Alliance's offers of compensation set out in its notices was the per acre market value of the subject lands known as the en bloc approach. Alliance offered the full per acre market value for each acre of permanent right-of-way, and half of the market value for each acre of temporary work space which was only acquired for a period of two years from the start of construction. The compensation offers set out in Alliance's s.87 notices did not account for the residual and reversionary value to the owners of the rights-of-way. In accordance with s.86(2)(a) of the NEB Act, the owners were given an election to take the compensation offered as a lump sum, or by annual or periodic payments calculated by simply dividing the lump sum amount over the number of years over which payments were to be made, being ten years.
[17] Alliance also made further lump sum only offers of compensation to owners for the purposes of settlement and right-of-way acquisition by agreement which typically significantly exceeded the estimated en bloc market value of their lands. Such offers, in Alberta, were based upon, among other things, the amounts paid by other pipeline companies operating in the area of the owners' lands, including provincially-regulated companies which are required to pay a supplemental $500 per acre entry fee under the Alberta Surface Rights Act, R.S.A. 2000, c.S-24. In so doing, it recognized that it would, as a practical matter, have to pay owners amounts they were accustomed to receiving from provincially-regulated companies in Alberta, including a supplemental $500 per acre entry fee under the Alberta Surface Rights Act.
[18] The majority of owners in Alberta opted to enter into land acquisition agreements for amounts based on an assessment of area pricing for pipeline rights-of-way, or a "pattern of dealings". A number of owners, however, did not. In those instances, Alliance was required to apply to the NEB for right of entry orders pursuant to s.104, and to pay to the owners an advance of compensation pursuant to s.105.
[19] A number of owners sought to have their compensation claims determined under the NEB Act. Where a company and owner cannot reach an agreement as to the amount of compensation payable under the NEB Act for the acquisition of lands, or for damages suffered as a result of construction of the pipeline, the company or the owner may request the matter to be negotiated or arbitrated under s.88 and s.90 of the NEB Act. The functions of negotiation and arbitration under the NEB Act fall within the ambit of the Minister of Natural Resources (Minister). As a result, the owners served notices of arbitration upon the Minister and Alliance pursuant to s.90 of the NEB Act. As required by s.91 of the NEB Act, the Minister appointed pipeline arbitration committees, and, in turn, served the notices of arbitration upon them.
[20] The Committee in the present appeals held three sets of hearings in the Fall of 2001, organized around each of the geographical groups of Landowners and issued its final compensation decisions in respect of each Landowner on September 5, 2003. The Committee subsequently considered the Landowners' requests for a review of its order of September 5, 2003, and pursuant to s.99, the costs to be awarded with respect to the arbitrations conducted. On October 21, 2004, the Committee released one decision addressing both matters in relation to all the Landowners. Both decisions are the subject matter of the present Appeals.
B. Related proceedings
[21] In addition to the present Appeals, two separate applications have been made to the Court by the Landowners: an appeal of an order made under s.105 of the NEB Act, the result of which is not relevant to the present appeals (Alliance Pipeline Ltd. v. Fast, [2003] F.C.J. no.824); and a judicial review of a decision of the Minister pursuant to s.91(2)(b), the results of which are relevant to the present Appeals as described below in Section II(E).
II. Review of the Generic Issues Determined by the Committee
[22] The present Appeals share generic issues which are addressed in this Section of the reasons. In addition, individual appeal issues with respect to some of the Landowners are addressed in Section III below.
[23] On certain issues, for example, the test to be applied for determining the market value of the lands taken from the Landowners, the decisions rendered by the Committee contain a generic finding on the basis of the geographic location of the lands taken as follows:
Peace River Area:
Byron Bue: T-2393-03
Raymond Bue: T-2394-03
Brian and Teresa Fast: T-2396-03, with respect to each of the following lands:
N.E. 25-73-9-W6M
NW 27-73-8, W6
SW 33-73-8, W6
Raymond and Vicki Gilkyson: T-2398-03
Stirling and Laura Hanson: T-2399-03
Lloyd and Katherine Olley: T-2401-03
Kane Piper: T-2402-03
Dale and Gwen Smith: T-777-04
Strathcona Countyand LamontCounty:
Scott and Tricia Gabert: T-2397-03
Mario and Jamie Marouelli: T-2400-03
Frank and Irma Thederahn: T-2403-03
Edson:
Bev Collins Holdings Ltd.: T-2395-03
[24] As described above, the Appeals are not appeals on the merits of the Committee's determinations. That is, on any given issue, I am not entitled to replace my judgment for that of the Committee, but am only able to exercise my discretion to provide a remedy under s.18.1 of the Federal Courts Act with respect to reviewable errors found in the Committee's decisions.
[25] Pursuant to s.97(1) of the NEB Act, the Committee was required to deal with all compensation matters referred to in the notices of arbitration served. By an Amended Notice of Arbitration each of the Landowners stated the nature of the decision sought from the Committee as follows:
The Applicant seeks a compensation order requiring Alliance to make an initial payment of $1000 per acre and subsequent annual payments of $200 per acre during the period of time that the right of entry order is in effect. The "per acre" calculation is to be based on the area of land covered by the right of entry order whether labelled as permanent right of way or temporary workspace.
(Byron Bue Amended Notice of Arbitration, May 25, 2001)
[26] The Committee's decision with respect to the Appeals was delivered on September 5, 2003 with respect to the issues raised in the Landowners' notices of arbitration, with the issues of interest and costs being reserved. Subsequently, Mr. Carter requested the Committee to review its findings with respect to periodic payments. In its further decision dated October 21, 2004, the Committee did make some arithmetic and transcription errors, but found it was not in a position to accede to Mr. Carter's review request. However, in that decision, costs were determined.
[27] I find that the Committee's decisions raise five main issues for determination in the present Appeals with respect to all of the Landowners:
● Is the Committee correct in its interpretation of what is in issue in making a determination of compensation under s.97(1)?
● Are any of the Committee's findings of market value made in reviewable error?
● Is the Committee correct in its interpretation of the periodic payment provisions of the NEB Act?
● Does the Committee's decision with respect to production of documents constitute a breach of due process?
● Is the finding with respect to the "controlled area" made in reviewable error?
● Was the Committee correct in determining that it had no jurisdiction to review its decision of September 5, 2003?
● Is the Committee's award of costs made in reviewable error?
A. Is the Committee correct in its interpretation of what is in issue in making a determination of compensation under s.97(1)?
[28] It is common ground that, by s.90(1) of the NEB Act which incorporates s.88, there are two main categories of compensation payable in connection with right of entry orders: compensation for the acquisition of lands; and compensation for damages suffered as a result of the operations of the pipeline company concerned. These two categories are seen as independent "silos" of compensation, and, as a result, certain compensation factors can be placed in one or the other.
[29] Eric Todd in the Law of Expropriation and Compensation in Canada, 2nd Edition 1992, (Carswell) (p.432, 442), explains that, in determining compensation for pipeline rights-of-way, three elements require consideration: residual and reversionary rights; "injurious affection", that is, "adverse effect" to the remaining land; and the value of the portion of land impressed with the right of way (p.431, 442). The point of contention concerns the approach that should be adopted in determining compensation for these elements as they are described in s.97 of the NEB Act.
[30] In the decisions under review, the Committee did not specify compensation for residual and reversionary rights. Alliance acknowledges that, on policy grounds only, it acceded to this fact, and, therefore, it is not an issue in the present Appeals (Memorandum of Fact and Law, para. 103).
1. The Landowners' argument
[31] The source for the following description, with minor editing is: (Landowners: July 23, 2001, pp.1-2).
[32] The first category of compensation referred to in s. 88 is called "compensation for the acquisition of lands" but it is clear that the right of entry order issued by the NEB does not result in a transfer of freehold title. Rather, it gives the company a right of way over a portion of the owner's land to construct, operate and maintain a high-pressure natural gas pipeline.
[33] Since the acquisition is not an acquisition of freehold title, the question arises as to how to best characterize the "acquisition of lands". The acquisition is best characterized as a taking of rights, commonly called "surface rights", in relation to the land. The company is given certain rights by the issuance of the right of entry order, and, correspondingly, certain rights are taken away from the landowner.
[34] By keeping in mind that the subject is an acquisition of rights, many of the pitfalls connected with treating the matter as a land sale can be avoided.
[35] Compensation in connection with the acquisition of the land is not for "land value" or for any other individual factor to be considered in assessing compensation. Rather it is for the surface rights taken from the landowner.
[36] Historically the cases have referred to compensation for rights: in (Murphy Oil Co. Ltd. v. Dau (1969), 70 W.W.R. 339 where the Alberta Court of Appeal stated at page 341 that "it follows, however, that there is a compulsory taking of part of the owner's right of enjoyment of the affected lands which must be regarded as an expropriation of the rights of which he is thus deprived"; in Dome Petroleum v. Juel (1982), 28 L.C.R. 82 where Justice Berger at p. 87 referred to the farmer's "loss of his rights to decide for himself whether or not he wants to see oil and gas exploration and production carried out on his land"; and in Re Pacific Petroleums Limited (1958), 24 W.W.R. 509 at pp. 514-15 where the British Columbia Court of Appeal states that "a claim for compensation by the owner or occupant does not arise with respect to a transaction completed in the past but on the contrary does arise with respect to a grant to a right of entry, and operations, which are to continue into the future for an unknown period".
[37] Section 97 of the National Energy Board Act lists a number of factors which an arbitration committee must consider in assessing compensation. It should be noted that the section refers to factors such as nuisance, inconvenience, noise and damage to the land "that might be reasonably expected". These are matters, therefore, which are expected to occur in the future, not ones that have already occurred.
[38] Logically, compensation must be for a loss of rights because compensation is to be assessed at the time of the taking. At the time of the taking, the land is not sold; there is no nuisance or disturbance or other tangible loss because none of the company's operations have taken place. Rather, there is a taking of the owner's rights.
[39] On the basis of this argument, the Landowners take the position that s.97 of the NEB Act should be interpreted so as to require a "global award" to be made for compensation for rights taken, after all the factors in s.97(1) have been considered together.
2. Alliance's response
[40] Alliance's interpretation of the Landowners' argument is that, the compensation for land acquisition is a broader undertaking than simply assessing the market value of the lands acquired, and should account for various other factors such as alleged, but unquantifiable, ongoing adverse effects and injurious affection under s.97(1)(d), and the catch-all "other factors" under s.97(1)(i) (Alliance: Memorandum of Fact and Law, p.9). Alliance's response to this argument is that, by the duty to give adequate reasons, a pipeline arbitration committee deciding compensation under s.97 is required to consider and assess each head of compensation separately, thus precluding a "global award".
3. The Committee's determination
[41] In the decisions under appeal, the Committee dismissed the Landowner's "global award" argument, and, in doing so, made reference to the definition of "lands" in s.2 of the NEB Act as follows:
Notwithstanding Mr. Carter's submission [that the Committee should take a global approach to matters of compensation], the Committee is satisfied that it must make a determination of the market value of the lands as those terms "market value" and "lands" are defined in the NEB Act. From the definition of "lands", the words "easement" and "right" are the most applicable to what Alliance has taken from the landowner.
(Fast Decision, NE, p.14)
[42] While the Committee did recognize that a right is being affected when the market value of lands is being addressed under s.97, the Committee determined that what is being assessed is the market value of an easement. The Landowners do not object to an easement being the subject of the determination, their major concern is with respect to the approach adopted by the Committee in coming to the determination; that is, the Committee dismissed the "global award" argument. As a result, the Committee found that the assessment of the "market value of lands taken" does not include consideration of factors such as ongoing adverse effects.
4. Conclusion
[43] The general approach to statutory interpretation is stated in Sullivan and Driedger on the Construction of Statutes, 4th ed. (Toronto: Butterworths, 2002) at 20 as follows:
1. It is presumed that the ordinary meaning of a legislative text is the meaning intended by the legislature. In the absence of a reason to reject it, the ordinary meaning prevails.
2. Even if the ordinary meaning is plain, courts must consider the purpose and scheme of the legislation, and relevant legal norms. They must consider the entire context.
3. In light of these considerations, the court may adopt an interpretation that modifies or departs from the ordinary meaning, provided the interpretation adopted is plausible and the reasons for adopting it are sufficient to justify the departure from ordinary meaning.
[44] In s.97, an arbitration committee is required to take into consideration a fixed list of factors "where applicable" and, indeed, any other factor it considers "proper". To effect the obvious intended purpose of the provision, which is to provide either a landowner or a pipeline company a complete arbitration opportunity, I find that the words "where applicable" and "proper" should be given the ordinary meaning of "where found to be relevant" and "relevant", respectively.
[45] Section 97 is both narrow and broad in scope. The provision provides a list of factors which effectively names all issues which an arbitration committee might be asked to determine. That is, if a land owner wishes arbitration with respect to the value of lands taken, the notice would ask for this determination as a "compensation matter", and, similarly, if damage to lands is the issue, the notice would ask for a determination on the issue, and so on. Indeed, a notice of arbitration might contain many issues. But, the scope of the provision, that is, what a committee is authorized to decide, is narrowed by the notice served.
[46] However, when it comes to making a specific determination, an arbitration committee has wide scope with respect to what it can consider. The factors mentioned can be cross-referenced with respect to a particular request, if they are found to be relevant. In this way, everything relevant is on the table to consider when making a specific determination. However, in my opinion, in the application of s.97, any damage factor is not relevant to the value of lands taken.
[47] Principle support for this finding comes from the agreement that there are two main categories, or silos, of compensation payable in connection with right of entry orders, being compensation for the acquisition of lands, and compensation for damages suffered as a result of the operations of the pipeline. Section 97 must be given an interpretation which achieves the purpose of distinguishing between the two. Therefore, it is not possible to interpret s.97 so as to make a determination of the market value of lands taken, and combine it with another factor to constitute what is referred to as a "global award" of compensation for the surface rights taken. I agree with Alliance's argument that each head of compensation is to be assessed separately.
[48] Therefore, I find that the Committee is correct in its interpretation of s.97(1).
B. Are any of the Committee's determinations of market value made in reviewable error?
[49] Both before the Committee, and on the present Appeals, on behalf of Alliance, Mr. Olthafer presented an argument that long-standing principles of expropriation law should be applied to pipeline right-of-way compensation awards. This argument is concisely framed as follows:
Surface rights legislation has sometimes been curiously distinguished from expropriation law "as a statutory scheme expressly founded on compensation rather than valuation." In either context, what is involved is the acquisition, pursuant to statutory powers, of a property interest without the consent of the owner. Differences in particular statutory provisions notwithstanding, the reasons for significant differences between compensation for, on the one hand, a statutory right of entry for an oil or gas pipeline, and, on the other, an expropriation of a sewer pipeline easement are not readily apparent, though arguably irrelevant policy considerations may be a significant factor. Accordingly, although expropriation law, per se, does not strictly apply to surface rights of entry, the compensation principles upon which it is founded ought to, provided that they are applied correctly.
The general principle underlying statutory compensation is that the owner whose property rights are taken is entitled to economic reinstatement. With respect to partial takings for pipeline rights-of-way, the determination of statutory compensation has -- as it has for other partial takings such as highways -- traditionally involved the discrete consideration of the market value of the interest taken, and the injurious affection to the remaining lands of the owner as a result of the taking. [...]
A. EXPROPRIATION COMPENSATION PRINCIPLES
The cornerstone of expropriation compensation for the interest in land taken is the market value of the land having regard to its highest and best use. The basic and most fundamental principle of compensation in the event of an expropriation of land interests is that the value at the moment before expropriation is the relevant value for establishing the amount of compensation owing as articulated in Re Lucas and Chesterfield Gas and Water Board, [1909] 1 K.B. 16 at 29 (C.A.) as follows:
The principles upon which compensation is assessed when land is taken under compulsory powers are well settled. The owner receives for the lands he gives up their equivalent, i.e., that which they were worth to him in money. His property is therefore not diminished in amount, but to that extent it is compulsorily changed in form. But the equivalent is estimated on the value to him, and not on the value to the purchaser, and hence it has from the first been recognized as an absolute rule that this value is to be estimated as it stood before the grant of the compulsory powers. The owner is only to receive compensation based upon the market value of his lands as they stood before the scheme was authorized by which they are put to public uses.
There are therefore two fundamental steps in determining compensation for the taking of an interest in land. The first is to assess the highest and best use to which the lands could reasonably have been put, without regard to the purpose for which they are expropriated, and then fix the compensation to be awarded to the owner based on the market value of the lands at that highest and best use (see: Farlinger Developments Ltd. v. East York (Borough of) (1975), 61 D.L.R. (3d) 193 (Ont. C.A.)).
The highest and best use of lands is not necessarily their actual or current use. It is the highest and best use to which the lands could reasonably be expected to be put. For instance, lands in agricultural use may in fact be, in whole or in part, ripe for subdivision. However, that assessment must be based on reasonable expectation, and not mere speculation.
The market value of a property is typically determined using the direct sales comparison approach (see: Patson Industries Ltd. v. Calgary (City of) (1981), 24 L.C.R. 181 at 188 (Alta. L.C.B.), as cited in The Law of Expropriation and Compensation in Canada:
The direct sales comparison approach compares the subject property with market data, including the sale prices of comparable properties. From this comparison, and after making appropriate "adjustments", the appraiser reaches a conclusion as to the price, or range of prices, for which the subject property might have been sold, had it been available for sale, at the date of the expropriation.
The identification of sales of comparable properties is not always a simple matter, however, particularly when the interest acquired is a partial taking of a kind for which there effectively is no open market of willing sellers and buyers (pipeline easements, for example, are not created by owners and offered for sale on an open market).
(Olthafer, ALR, pp.96-97)
[50] However, the Landowners argue that: the application of general expropriation principles to the particular circumstances of the taking of lands for pipeline right-of-ways perpetrates a fiction; the Courts in Alberta have acknowledged this fact, and have adapted the principles accordingly; and support exists in the academic literature that an adaptive approach should be taken:
Nothwithstanding some similarities between the "forced sale" of expropriation and the "forced rent" of a surface right of entry it is now clearly established that a surface rights case does not involve expropriation law "but rather ... a statutory scheme expressly founded on compensation rather than valuation". In so far as surface rights legislation deals with mines and mineral owners it is not expropriation legislation and therefore should not be restrictively construed like expropriation legislation. It has been stated that the acquisition of a statutory right of entry is not the same as the expropriation of an easement and that compensation in the two cases is not based on the same principles. However, although in general expropriation law does not apply, it may be appropriate to apply some expropriation principles provided that they are applied correctly.
(Todd, p.436)
(...)
As already noted a surface right of entry case may involve particular difficulties in establishing values under the various statutory heads of compensation. Consequently, resort is increasingly made to unconventional types of "comparables" as measuring tools for determining compensation either under the specific heads or as a lump sum package, usually referred to as a "global amount". There is no statutory basis for awarding compensation as a "global amount". However, as noted above, such amounts may be fixed as a result of bargaining between groups of landowners and one or more operators and become the basis of subsequent compensation awards in other cases.
The unconventional "comparables" take the form of (i) individual settlements or deals between other landowners and the same or different operating companies; (ii) a pattern of individual settlements or deals; or (iii) an area agreement reached on behalf of a number of landowners with one or more operating companies.
(Emphasis in original) (Footnotes omitted)
(Todd, p.443)
1. The relevance of the Albertaexperience to the interpretation of the NEBAct
[51] As mentioned in Section I above, prior to 1983, compensation disputes under the NEB Act were determined by the arbitration procedure found in the Railway Act. That legislation stipulated that a Superior Court Judge, sitting as an arbitrator, shall determine compensation, but by s.161(2) was only given this direction: "the arbitrator shall proceed to ascertain the compensation in such way as he deems best...".
[52] The 1983 amendments to the NEB Act brought into place a scheme for determining compensation, including by s.97(1)(a) and s.97(2), establishing that the market value of lands taken is the amount that would have been paid for them if, at the time of their taking, they had been sold in the open market by a willing seller to a willing buyer.
[53] A point of contention before the Committee and in the present Appeals is the relevance of the decades of experience with assessing market value of pipeline right-of-ways in Alberta. Given that the Committee was faced with making a precedent setting decision with respect to the 1983 amendments, there is no question that it was appropriate for the Committee to carefully consider the Alberta experience for guidance.
2. The Albertaexperience
[54] Only one arbitration resulted in a decision under the pre-1983 NEB Act, being the Alberta case of Cochin Pipe Lines Ltd. v. Rattray [1979] 6 W.W.R. 755 ( Q.B.); (1981), 22 L.C.R. 198 (C.A.). The case concerned compensation for the taking of a 60 foot strip of farm land for a right-of-way for a high pressure pipeline for the transmission of hydrocarbon liquids under the authority of the NEB. As the arbitrator, charged with proceeding as "he deems best", Justice Stevenson