Date: 20030523
Docket: T-645-01
Citation: 2003 FCT 641
OTTAWA, ONTARIO, this 23rd day of May 2003
Present: The Honourable Justice Dolores M. Hansen
BETWEEN:
ALLIANCE PIPELINE LTD.
Appellant
and
JOE BOKENFOHR and LIL BOKENFOHR
Respondents
REASONS FOR ORDER AND ORDER
[1] This is an appeal from an order of the Pipeline Arbitration Committee (the "Committee") regarding the amount of advance compensation payable to Joe Bokenfohr and Lil Bokenfohr (the "respondents") by the appellant, Alliance Pipeline Ltd. ("Alliance") for the acquisition of permanent and temporary easements over the respondents' lands for the construction of a pipeline.
[2] At the request of the parties, this appeal and Alliance's appeal from a decision of the same Committee concerning the amount of an advance payable to Brian Peter Fast and Teresa Georgina Fast in Court file T-644-01 ("Fast") were heard together. In many respects, the reasons in this matter and the Fast appeal mirror each other.
[3] The appellant owns and operates the Canadian portion of a recently completed natural gas mainline and lateral facilities extending from the northeast region of British Columbia to a point near Chicago, Illinois. The Canadian portion of the pipeline ends at the Canada-United States border crossing near Elmore, Saskatchewan.
[4] Alliance applied to the National Energy Board ("NEB") pursuant to Part III of the National Energy Board Act ("NEBA") on July 3, 1997 for a certificate of public convenience and necessity authorizing the construction and operation of the pipeline. Alliance received approval from the NEB for the construction of the pipeline on November 26, 1998.
[5] Under section 87 of the NEBA, a pipeline company requiring lands for the purposes of a section or part of a pipeline is required to serve notice on the owners of such lands describing, among other things, the lands required by the company and details of the compensation offered by the company for the lands. Alliance served the required notice on the respondents stating that it required a total of 7.14 acres of permanent easement and a total 5.79 acres of temporary work space from two quarter sections of their lands. The offer of compensation in the notice was $900 per acre of permanent easement and $450 per acre of temporary work space.
[6] The basis for Alliance's offer of compensation was the en bloc per acre bare land market value (the "en bloc market value") of the respondents' lands. The en bloc market value is calculated by determining the market value of the titled unit from which the lands are required and dividing it by the number of acres in the titled unit. Based on a real estate market survey conducted by a qualified land appraiser, the en bloc market value of the respondents' lands was estimated to be $900 per acre.
[7] Alliance made a further offer of compensation to the respondents for the purposes of settlement and easement acquisition by agreement. Alliance offered the respondents compensation of $1500 per acre of permanent easement and $500 per acre of temporary work space.
[8] According to Alliance, the offer was based on levels of compensation paid by other pipeline companies operating in the area, including provincially-regulated companies which are required to pay a supplemental $500 per acre "entry fee" under the Alberta Surface Rights Act, S.A. 1983, c. s-27.1 for permanent rights of entry.
[9] Alliance states that its purpose in making the further offer was to complete its land acquisition program in a timely manner, to avoid construction delays, and to avoid costly arbitration proceedings. Alliance recognized that it would, as a practical matter, have to pay landowners compensation in accordance with the amounts they were accustomed to receiving from provincially-regulated pipeline companies, regardless of what the landowners were entitled to under the NEBA.
[10] The respondents refused Alliance's settlement offer. Alliance applied for a right of entry order to acquire the required interests in the respondents' lands pursuant to section 104 of the NEBA. The NEB granted Alliance a right of entry order at which time Alliance paid to the respondents an advance of compensation equal to 100% of the compensation set out in the section 87 notice, that is $900 per acre of permanent easement and $450 per acre of temporary work space.
[11] Subsequently, pursuant to section 105 of the NEBA, the respondents applied for an arbitrated determination of the appropriate amount of the advance of compensation for the acquisition of the interest in their lands.
The Legislative Framework
[12] In the following discussion of the legislative framework, only those parts of each of the provisions relevant to this appeal are cited. The NEBA sets out the procedures by which private lands may be acquired for the purposes of a pipeline. Once a certificate of public convenience and necessity is issued, the pipeline company is required to give the affected landowners notice in accordance with the provisions of section 87 of the NEBA. It states:
| 87. (1) When a company has determined the lands that may be required for the purposes of a section or part of a pipeline, the company shall serve a notice on all owners of the lands, in so far as they can be ascertained, which notice shall set out or be accompanied by
(a) a description of the lands of the owner that are required by the company for that section or part;
(b) details of the compensation offered by the company for the lands required;
©) a detailed statement made by the company of the value of the lands required in respect of which compensation is offered;
(d) a description of the procedure for approval of the detailed route of the pipeline; and
(e) a description of the procedure available for negotiation and arbitration under this Part in the event that the owner of the lands and the company are unable to agree on any matter respecting the compensation payable.
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87. (1) Après avoir déterminé les terrains qui peuvent lui être nécessaires pour une section ou partie de pipeline, la compagnie signifie à chacun des propriétaires des terrains, dans la mesure où leur identité peut être établie, un avis contenant, ou accompagné de pièces contenant_:
a) la description des terrains appartenant à celui-ci et don't la compagnie a besoin;
b) les détails de l'indemnité qu'elle offre pour ces terrains;
c) un état détaillé, préparé par elle, quant à la valeur de ces terrains;
d) un exposé des formalités destinées à faire approuver le tracé détaillé du pipeline;
e) un exposé de la procédure de négociation et d'arbitrage prévue à la présente partie à défaut d'entente sur quelque question concernant l'indemnité à payer.
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[13] Where an interest in the required lands cannot be acquired by agreement, right of entry may be granted by order of the NEB pursuant to section 104 of the NEBA provided the company has complied with certain notice and information requirements.
| 104. (1) Subject to subsection (2), the Board may, on application in writing by a company, if the Board considers it proper to do so, issue an order to the company granting it an immediate right to enter any lands on such terms and conditions, if any, as the Board may specify in the order.
(2) An order under subsection (1) shall not be issued in respect of any lands unless the company making the application for the order satisfies the Board that the owner of the lands has, not less than thirty days and not more than sixty days prior to the date of the application, been served with a notice setting out
(a) the date the company intends to make its application to the Board under subsection (1);
(b) the date the company wishes to enter the lands;
©) the address of the Board to which any objection in writing that the owner might wish to make concerning the issuance of the order may be sent; and
(d) a description of the right of the owner to an advance of compensation under section 105 if the order is issued and the amount of the advance that the company is prepared to make.
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104. (1) Sous réserve du paragraphe (2), l'Office peut, sur demande écrite d'une compagnie et s'il le juge utile, rendre une ordonnance accordant à celle-ci un droit d'accès immédiat à des terrains aux conditions qui y sont éventuellement précisées.
(2) L'Office ne peut rendre l'ordonnance visée au paragraphe (1) que si la compagnie qui la demande le convainc que le propriétaire des terrains a, au moins trente jours et au plus soixante jours avant cette date, reçu signification d'un avis indiquant_:
a) la date de présentation de la demande;
b) la date à laquelle la compagnie entend pénétrer sur les terrains;
c) l'adresse du bureau de l'Office où il peut adresser ses observations écrites;
d) son droit à une avance sur le montant de l'indemnité visée à l'article 105 si l'ordonnance est accordée, ainsi que la somme que la compagnie est prête à verser à ce titre.
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[14] Where a company and a landowner cannot reach an agreement as to the amount of compensation payable under the NEBA, section 88 permits either party to request that the matter be negotiated. Subsection 88(1) provides that the amount of the compensation payable under the Act or any issues related to the compensation may be the subject matter of the negotiations. Additionally, where a party wishes to dispense with negotiations, under section 90 the party may request that those issues of compensation referred to in subsection 88(1) be determined by arbitration.
| 90. (1) Where a company or an owner of lands wishes to dispense with negotiation proceedings under this Part or where negotiation proceedings conducted under this Part do not result in settlement of any compensation matter referred to in subsection 88(1), the company or the owner may serve notice of arbitration on the other of them and on the Minister requesting that the matter be determined by arbitration.(2) Where a company and a person who has had an award of compensation made in his favour or has entered into an agreement respecting compensation with the company are unable to settle any claim for damages arising out of the operations of the company or any matter respecting the compensation payable where annual or other periodic payments have been selected, the company or the person may serve notice of arbitration on the other of them and on the Minister requesting that the matter be determined by arbitration.
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90. (1) Pour passer outre à la procédure de négociation ou en cas d'échec de celle-ci sur toute question visée au paragraphe 88(1), la compagnie ou le propriétaire peut signifier à l'autre partie et au ministre un avis d'arbitrage.
(2) En cas de désaccord entre la compagnie et le bénéficiaire, par décision ou par entente, d'une indemnité, sur une demande de dommages causés par les activités de la compagnie ou sur toute question touchant l'indemnité à payer dans les cas où les versements périodiques constituent le mode de paiement choisi, l'un ou l'autre peut signifier à l'autre partie et au ministre un avis demandant que la question soit réglée par arbitrage.
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[15] The factors to be considered by an arbitration committee in determining compensation are set out in section 97.
| 97. (1) An Arbitration Committee shall determine all compensation matters referred to in a notice of arbitration served on it and in doing so shall consider the following factors where applicable:
(a) the market value of the lands taken by the company;
(b) where annual or periodic payments are being made pursuant to an agreement or an arbitration decision, changes in the market value referred to in paragraph (a) since the agreement or decision or since the last review and adjustment of those payments, as the case may be;
(c) the loss of use to the owner of the lands taken by the company;
(d) the adverse effect of the taking of the lands by the company on the remaining lands of an owner;
(e) the nuisance, inconvenience and noise that may reasonably be expected to be caused by or arise from or in connection with the operations of the company;
(f) the damage to lands in the area of the lands taken by the company that might reasonably be expected to be caused by the operations of the company;
(g) loss of or damage to livestock or other personal property affected by the operations of the company;
(h) any special difficulties in relocation of an owner or his property; and
(i) such other factors as the Committee considers proper in the circumstances.
(2) For the purpose of paragraph (1)(a), "market value" is the amount that would have been paid for the lands if, at the time of their taking, they had been sold in the open market by a willing seller to a willing buyer.
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97. (1) Le comité d'arbitrage doit régler les questions d'indemnité mentionnées dans l'avis qui lui a été signifié, et tenir compte, le cas échéant, des éléments suivants_:
a) la valeur marchande des terrains pris par la compagnie;
b) dans le cas de versements périodiques prévus par contrat ou décision arbitrale, les changements survenus dans la valeur marchande mentionnée à l'alinéa a) depuis la date de ceux-ci ou depuis leurs derniers révision et rajustement, selon le cas;
c) la perte, pour leur propriétaire, de la jouissance des terrains pris par la compagnie;
d) l'incidence nuisible que la prise des terrains peut avoir sur le reste des terrains du propriétaire;
e) les désagréments, la gêne et le bruit qui risquent de résulter directement ou indirectement des activités de la compagnie;
f) les dommages que les activités de la compagnie risquent de causer aux terrains de la région;
g) les dommages aux biens meubles, notamment au bétail, résultant des activités de la compagnie;
h) les difficultés particulières que le déménagement du propriétaire ou de ses biens pourrait entraîner;
i) les autres éléments dont il estime devoir tenir compte en l'espèce.
(2) Pour l'application de l'alinéa (1)a), la valeur marchande des terrains correspond à la somme qui en aurait été obtenue si, au moment où ils ont été pris, ils avaient été vendus sur le marché libre.
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[16] Under section 98, an Arbitration Committee has the authority to fix the form of payment, interest payable, and other terms to be included in an award of compensation. It provides:
| 98. (1) Where an Arbitration Committee makes an award of compensation in favour of a person whose lands are taken by a company, the Committee shall direct, at the option of that person, that the compensation or such part of it as is specified by that person be made by one lump sum payment or by annual or periodic payments of equal or different amounts over a period of time.
(2) Where an Arbitration Committee makes an award of compensation in favour of any person other than a person referred to in subsection (1), the Committee may direct, at the request of that person, that the compensation or such part of it as is specified by that person be made by annual or periodic payments of equal or different amounts over a period of time and that there be a periodic review of the compensation or part thereof.
(3) Every award of compensation made by an Arbitration Committee in respect of lands acquired by a company shall include provision for those matters referred to in paragraphs 86(2)(b) to (f) that would be required to be included in a land acquisition agreement referred to in section 86.
(4) An Arbitration Committee may direct a company to pay interest on the amount of any compensation awarded by the Committee at the lowest rate of interest quoted by banks to the most credit-worthy borrowers for prime business loans, as determined and published by the Bank of Canada for the month in which
(a) the company entered the lands in respect of which the compensation is awarded, or
(b) the damages suffered as a result of the operations of the company first occurred,
as the case may be.
(5) Interest may be awarded under subsection (4) from the date the event referred to in paragraph (4)(a) or (b), as the case may be, occurred or from such later date as the Arbitration Committee may specify in its award.
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98. (1) S'il s'agit d'une indemnité relative à des terrains pris par une compagnie, le comité d'arbitrage, au choix de l'indemnitaire, ordonne que le paiement se fasse en tout ou en partie sous forme de paiement forfaitaire ou de versements périodiques de montants égaux ou différents échelonnés sur une période donnée.
(2) S'il s'agit d'une autre indemnité, le comité d'arbitrage peut, à la demande de l'indemnitaire, ordonner que le paiement se fasse en tout ou en partie sous forme de versements périodiques de montants égaux ou différents échelonnés sur une période donnée et que l'indemnité ou la partie en question fasse l'objet d'un examen périodique.
(3) La décision du comité d'arbitrage accordant une indemnité pour des terrains acquis par une compagnie doit renfermer des dispositions correspondant à celles qui, aux termes des alinéas 86(2)b) à f), doivent être incorporées dans un accord d'acquisition de terrains.
(4) Le comité d'arbitrage peut ordonner à la compagnie de verser, sur le montant de l'indemnité, des intérêts au taux le plus bas auquel les banques accordent des prêts commerciaux à risque minimum aux emprunteurs jouissant du meilleur crédit et qui est fixé et publié par la Banque du Canada pour le mois, selon le cas, au cours duquel_:
a) la compagnie a pénétré sur les terrains visés par l'indemnité;
b) les dommages causés par les activités de la compagnie ont commencé.
(5) Les intérêts peuvent courir à compter de la date où l'événement mentionné à l'alinéa (4)a) ou b), selon le cas, s'est produit ou à compter de la date ultérieure mentionnée dans la décision du comité.
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[17] Section 86 referred to in subsection 98(3) provides:
| 86. (1) Subject to subsection (2), a company may acquire lands for a pipeline under a land acquisition agreement entered into between the company and the owner of the lands or, in the absence of such an agreement, in accordance with this Part.
(2) A company may not acquire lands for a pipeline under a land acquisition agreement unless the agreement includes provision for
(a) compensation for the acquisition of lands to be made, at the option of the owner of the lands, by one lump sum payment or by annual or periodic payments of equal or different amounts over a period of time;
(b) review every five years of the amount of any compensation payable in respect of which annual or other periodic payments have been selected;
(c) compensation for all damages suffered as a result of the operations of the company;
(d) indemnification from all liabilities, damages, claims, suits and actions arising out of the operations of the company other than liabilities, damages, claims, suits and actions resulting from
(i) in the Province of Quebec, the gross or intentional fault of the owner of the lands, and
(ii) in any other province, the gross negligence or wilful misconduct of the owner of the lands;
(e) restricting the use of the lands to the line of pipe or other facility for which the lands are, by the agreement, specified to be required unless the owner of the lands consents to any proposed additional use at the time of the proposed additional use; and
(f) such additional matters as are, at the time the agreement is entered into, required to be included in a land acquisition agreement by any regulations made under paragraph 107(a).
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86. (1) Sous réserve du paragraphe (2), la compagnie peut acquérir des terrains par un accord d'acquisition conclu avec leur propriétaire ou, à défaut d'un tel accord, conformément à la présente partie.
(2) L'accord d'acquisition doit prévoir:
a) le paiement d'une indemnité pour les terrains à effectuer, au choix du propriétaire, sous forme de paiement forfaitaire ou de versements périodiques de montants égaux ou différents échelonnés sur une période donnée;
b) l'examen quinquennal du montant de toute indemnité à payer sous forme de versements périodiques;
c) le paiement d'une indemnité pour tous les dommages causés par les activités de la compagnie;
d) la garantie du propriétaire contre les poursuites auxquelles pourraient donner lieu les activités de la compagnie, sauf, dans la province de Québec, cas de faute lourde ou intentionnelle de celui-ci et, dans les autres provinces, cas de négligence grossière ou d'inconduite délibérée de celui-ci;
e) l'utilisation des terrains aux seules fins de canalisation ou d'autres installations nécessaires qui y sont expressément mentionnées, sauf consentement ultérieur du propriétaire pour d'autres usages;
f) toutes autres questions mentionnées dans le règlement d'application de l'alinéa 107a) en vigueur au moment de sa conclusion.
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[18] The issuance of a right of entry order under section 104 may also give rise to arbitration proceedings related to the determination of the amount of the advance of compensation payable. Section 105 states:
| 105. Where a company has been granted an immediate right to enter any lands under subsection 104(1), the owner of the lands is entitled to receive from the company an amount as an advance of the compensation referred to in subsection 88(1) and where the owner has not received an advance or is not agreeable to the amount of the advance offered by the company, the owner may serve a notice of arbitration on the company and on the Minister requesting that the matter be determined by arbitration.
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105. Si le droit d'accès visé au paragraphe 104(1) est accordé, le propriétaire des terrains a droit à une avance sur le montant de l'indemnité prévue au paragraphe 88(1); s'il n'a pas reçu cette somme ou la trouve inacceptable, il peut signifier à la compagnie et au ministre un avis demandant que la question soit réglée par arbitrage.
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[19] In addition to these sections of the NEBA, where a company intends to oppose a notice of arbitration, pursuant to section 8 of the Pipeline Arbitration Committee Procedure Rules, 1986, SOR/86-787 the company must file a reply with the Committee. The reply must:
| 8(1)...
(h) be accompanied by an appraisal report showing all the facts taken into account by the company in arriving at the amount of compensation offered and setting out, where applicable,
(i) the value assigned by the company to the lands, exclusive of the improvements to or things grown on the lands, including a consideration of the current use of the lands, the zoning, the developments projected and any other factor that might affect the lands,
(ii) the value assigned by the company to the improvements to or things grown on the lands, and
(iii) the estimated amount of the damage to the remaining lands of the owner;
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8(1)...
h) être accompagnée d'un rapport d'évaluation indiquant tous les facteurs considérés dans le calcul de l'indemnité et précisant, le cas échéant :
(i) la valeur que la compagnie attribue aux terrains, compte tenu de leur utilisation actuelle, du zonage, des projets de développement et de tout autre facteur touchant les terrains, sauf les améliorations qui y ont été apportées et la culture qui y est faite,
(ii) la valeur que la compagnie attribue aux améliorations apportées aux terrains et à la culture qui y est faite,
(iii) le montant estimatif des dommages causés aux autres terrains du propriétaire;
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Submissions of the Parties to the Committee
[20] To provide a context for the Committee's decision and the issues raised in this appeal, it is necessary to set out briefly the parties' submissions to the Committee. The parties agree that the purpose of an advance payment of compensation is to provide some interim financial relief to the landowner pending the final determination of compensation by arbitration. As well, the NEBA does not provide any guidance regarding the determination of the amount of an advance. Finally, the determination of the amount of the advance relates solely to the acquisition of the lands and not to any damages that might be claimed as a result of the construction of the pipeline.
[21] Within these parameters, the parties differed with respect to the approach the Committee should adopt in determining the adequacy of the amount of the advance. Alliance took the position that the determination of the amount of the advance should not be confused with a determination of the final amount of compensation payable under the NEBA. Specifically, Alliance argued that the debate as to whether the final compensation should be based on the "pattern of dealings" or the "en bloc" value should be left to the hearing into the amount of compensation payable under the NEBA and that any determiantion of this issue was beyond the jurisdiction of the Committee. Alliance submitted that the Committee should be guided by three general propositions. First, is there an objectively valid basis for the amount of the advance of compensation paid to the landowners. Second, does the amount of the advance bear a substantial correlation to the compensation the landowners would arguably be entitled to for acquisition of the lands under the NEBA. Third, does the amount of the advance as determined by the Committee prejudice the position of either party in the final determination of the compensation the landowners are entitled to pursuant to an arbitration under section 90 of the NEBA.
[22] Alliance noted that although the respondents were offered a settlement based on the pattern of dealings, this offer should not be confused with the market value arrived at under the NEBA. Alliance maintained that its position that market value should be determined by the en bloc value was fully supported by the terms of the NEBA. Accordingly, there was an objectively valid basis for the advance and the advance was related to the compensation the respondents would arguably be entitled to receive under the NEBA.
[23] Finally, given that an advance representing 100% of the market value was paid to the respondents, Alliance argued that no additional amount should be paid pending final resolution of the issue of compensation.
[24] In contrast, the respondents argued that the Committee should consider which of Alliance's two offers was made in good faith and was consistent with the provisions of the NEBA. The respondents took the position that the amount of the offer of settlement made by Alliance, which Alliance maintains was made in good faith, and was based on the amounts of compensation being paid to other landowners in the area is an appropriate amount for the advance pending final arbitration. The respondents maintained that compensation under the NEBA does not simply equate to the en bloc market value of the land. They argued that compensation as contemplated by the NEBA should be interpreted more broadly. They asserted that compensation is for the "bundle of rights" being acquired by the company. Therefore, in their view, the amount of compensation should take into account various other factors such as the company's right to take, a recognition of the incremental value of a smaller parcel, and the incentive on the company to avoid costly and time consuming arbitration proceedings. The respondents argued that the best measure of the appropriate compensation for the "bundle of rights" taken by the company is that which is freely negotiated with other landowners in the vicinity, taking into account, as it does, all of the factors bearing on each party.
The Committee' Decision
[25] At the arbitration hearing, evidence was presented by three representatives of Alliance: Mr. Hushion and Mr. McCall, employees of Alliance, and Mr. Wasmuth, a qualified appraiser. The respondents did not adduce their own viva voce evidence but did cross-examine Alliance's witnesses.
[26] In its review of the evidence, the Committee took note of Alliance's acknowledgment that the fair market value of the en bloc parcel was not the sole measure by which it expected to ultimately settle with landowners and the distinction it drew between a section 87 offer and a settlement offer. According to Alliance's evidence, a settlement offer, in addition to taking into account the en bloc market value, would also take into account a number of other factors including an analysis of what other area landowners were accustomed to receiving from other pipeline operators, an analysis of the pattern of dealings of landowners with Alliance and other operators, the areas of influence of other pipelines on its right-of-way, and its practice of stepping down the compensation as the distance increased from the other pipeline believed to have an influence on the amount of the compensation.
[27] The Committee also took note of Alliance's evidence concerning the rationale for its settlement offer to the respondents. The offer included the equivalent of the $500 per acre fee provincially regulated companies are required to pay under the provincial legislation that landowners in the area were accustomed to receiving from other pipeline operators. The increment only applied to the permanent easement and was conditional on an agreement having been reached.
[28] In its reasons, the Committee agreed with the position taken by Alliance that the advance should, to the extent possible, be related to the final amount of compensation payable. The Committee also recognized that at the time of the advance not all of the factors relevant to a final determination of the compensation may be known and that known factors may change over time. However, in the Committee's view, the advance should reflect those "factors that the company knows, in good faith, will ultimately form part of the basis of freely negotiated compensation arrangements".
[29] Following a review of the relevant provisions of the legislation and in particular section 97, the Committee concluded that compensation under the NEBA is more broadly based than Alliance's arithmetic formula. Further, where other factors exist and are reasonably known, in the Committee's view, there was no rationale for limiting the amount of the advance to en bloc formula advanced by Alliance.
[30] The Committee also observed that although Alliance's settlements with other landowners were concluded on a different basis than the en bloc market value, there was no evidence linking the other compensation agreements to the respondents' property. Further, as no evidence was led regarding the specific characteristics of the respondents's property nor was any contrary evidence adduced with respect to value on either the en bloc or small parcel basis, the Committee stated it was unable to assess the impact of these factors on the compensation otherwise payable.
[31] The Committee concluded:
Given, however, that the $500 per acre increment was described by alliance as the equivalent of a "right of entry" fee, and given Alliance's confirmation of its preparedness to pay this fee effectively to any landowner and given that Alliance seeks to rely on its offer of this amount as evidence of its good faith, we are of the opinion that it is appropriate that the $500 per acre increment be paid as part of the advance, and so direct.
Issues
[32] The appellant raises the following issues:
1. Whether the Committee erred in law by failing to properly consider and construe the principles of compensation as codified by section 97 of the NEBA. In particular:
a) Did the Committee fail to consider the market value of the lands having regard to their highest and best use, and, instead, gave exclusive weight to settlements Alliance had entered into with other landowners in the area of the respondents' lands?
b) Did the Committee err by concluding that paragraph 97(1)(a) of the NEBA suggests a "small parcel increment may be called for, if the facts support it"?
c) Did the Committee fail to take into account such other considerations under paragraph 97(1)(i) as the residual and reversionary value of the lands to the respondents?
2. Did the Committee err in applying the $500 entry fee provincially-regulated companies are required to pay under the Alberta Surface Rights Act, supra, to lands acquired under the NEBA?
[33] Since Alliance essentially raised the same issues and advanced the same arguments in this matter as it did in Fast, before turning to a discussion of the specific issues, an examination of Alliance's interpretation of the Committee's decision is required.
[34] In its written submissions, Alliance's interpretation of the decision is that the amount of the advance fixed by the Committee was $1400 per acre of permanent easement and $950 per acre of temporary work space. In oral argument, counsel for Alliance noted that it was unclear in the reasons if the Committee intended its order to apply only to the permanent easement or to both the permannet easement and the temproary work space. Regardless of this lack of clarity, Alliance submits that the Committee's approach in this matter appears to differ from the approach adopted in the Fast arbitration. Alliance takes the position that in Fast the Committee "held it to its settlement offer". In the present case, the Committee directed it to pay an additional $500, the equivalent of the right of entry fee, in addition to the amount paid pursuant to its section 87 offer.
[35] While I agree with Alliance that the Committee's conclusion is unclear with respect to the temporary work space, in my opinion the Committee determined the amount of the advance to be $1500 per acre of permanent easement. I reach this conclusion for two reasons. In my opinion, in its conclusion set out earlier in these reasons, the Committee was simply explaining its rationale for the inclusion of the equivalent of a "right of entry" fee in the global amount of the advance. Within this context, the committee observed that Alliance sought to rely on its settlement offer, which included the $500 increment, as evidence of it good faith negotiations. The specific reference to the settlement offer and not to the section 87 offer leads me to conclude that the Committee intended that the amount of the advance was to be the amount of the settlement offer.
[36] Second, the same Committee also made the determination in the Fast arbitration. In those reasons, delivered on the same date as the reasons in the present case, the Committee noted the similarities between the two matters and appears to have adopted its reasons in this matter. From this, I infer that the Committee intended consistent determinations in the two matters and did not adopt a different approach in its determination of the amount of the advance in the present case.
Issue 1(a): Did the Committee fail to consider the market value of the lands having regard to their highest and best use, and, instead, gave exclusive weight to settlements Alliance had entered into with other landowners in the area of the respondents' lands?
[37] Alliance submits that the Committee erred by giving weight to and taking into account settlements it had concluded with other area land owners instead of the market value of the lands in reaching its decision.
[38] Alliance's submissions are premised on its assertion that a determination of the amount of compensation must be based on an assessment of the highest and best use to which the lands could reasonably have been put by the landowner and not the value of the lands to the pipeline company for their use as a pipeline easement.
[39] Alliance maintains that the "primary factor" to be considered in the determination of compensation for the acquisition of land under the NEBA is the market value of the lands to be taken by the company. Subsection 97(2) defines market value as the amount that would have been paid in the open market, between a willing buyer and a willing seller.
[40] Additionally, Alliance points to the factors to be considered in an appraisal for the purpose of determining compensation in the Pipeline Arbitration Committee Rules, 1986 as supporting its view that the "highest and best use" having regard to the landowner's use of the land is intended to form the basis of an appraisal to determine the market value of the land acquired under the NEBA. In the present case, Alliance argues that the highest and best use of the lands in question is for agricultural purposes.
[41] Based on these propositions, Alliance argues that the Committee's approach is incorrect for two reasons.
[42] First, these settlements reflect amounts of compensation that take into account extraneous factors. They include the $500 per acre right of entry fee being paid by provincially-regulated companies. As well, they take into account factors such as Alliance's desire to complete its land acquisition program in a timely manner; to maintain good public relations and its image as a good corporate citizen; and to avoid the costly arbitration process.
[43] Second, by taking these settlements into account, the Committee effectively adopted a "pattern of dealings" approach to establish easement values. Alliance takes the position that this approach is incorrect and contradictory to the fundamental principles of land valuation as codified by the NEBA.
[44] Alliance submits that a market for pipeline easements does not exist since pipeline easements cannot be said to be freely traded on an open market. Therefore, compensation settlements for pipeline easements granted under the "spectre of expropriation" cannot be fairly construed as being freely negotiated between a willing buyer and a willing seller as contemplated under subsection 97(2).
[45] In this respect, Alliance argues that the en bloc method is more compatible with the scheme of the NEBA. A market for titled units from which the easements are acquired does exist. This, in Alliance's view, makes their approach more suitable than the pattern of dealings approach adopted by the Committee.
[46] Alliance also maintains that the pattern of dealings approach is conceptually unsound in light of both the national scope of the NEBA and the physical characteristics of pipeline developments. Alliance argues that since the NEBA regulates the development of pipelines across Canada, the principles of landowner compensation must be consistent throughout Canada. In adopting a pattern of dealings approach, the applicant submits, the Committee was improperly influenced by the fact that northern Alberta is home to many pipelines, however, no evidence of a pattern of dealings would exist if the pipeline were to traverse many areas of Canada.
[47] With respect to physical characteristics, Alliance argues that the linear nature of pipeline developments renders them fundamentally unsuitable to the pattern of dealings approach. The pattern of dealings approach ignores the inherent value of the lands being traversed. Since over the course of the pipeline, landowners will be separated by only a fence line, application of the pattern of dealings approach would result in all landowners receiving the same compensation for their lands, regardless of specific characteristics such as proximity to municipalities, quality of soil, and productivity.
[48] In their written submissions, the respondents did not address the specific arguments advanced by Alliance on this appeal. Instead, they rely on their submissions to the Committee and brief oral submissions made at the hearing of the appeal. In general, the respondents take the position that the appellant's arguments are directed at issues relevant to a determination of the final amount of compensation and were not issues to be decided by the Committee.
[49] The respondents submit that Alliance opted to rely exclusively on the en bloc market value for the purpose of determining the amount of the advance. In the respondents' view, the Committee correctly found that the advance should have some relation to the ultimate amount of the compensation and concluded that it should be something more than the en bloc value and based its decision on the available evidence.
[50] In the circumstance of the present case, the Committee committed no reviewable error by taking into account and relying on evidence concerning Alliance's settlements with other landowners and the settlement offer made to the respondent. Alliance's assertion that the amount of the advance should be limited to the en bloc market value is inconsistent with its position that the amount of the advance should bear a substantial correlation to the final compensation that the landowner would be arguably entitled to under the NEBA and is not supported by the provisions of the NEBA. It is clear both by the separation of "value" and "compensation" in subsections 87(b) and (c) and the enumeration of the factors in subsection 97(1) of the NEBA that market value is only one of the factors to be considered in the determination of compensation. In my view, the Committee correctly concluded that the amount of the advance should bear some relationship to the final amount of compensation and, accordingly, the advance should be based on something more than the en bloc market value.
[51] The only evidence before the Committee, other than Alliance's evidence of the en bloc market value, was the amount of compensation being paid by other area operators which in turn formed the basis for Alliance's settlements with other landowners and its settlement offer to the respondents. As well, Alliance sought to rely on its settlement offer to the respondents as evidence of its "good faith" negotiations. Recognizing that compensation under NEBA is more broadly based than the en bloc market value and in the absence of any other evidence or any contrary evidence regarding value or other specific characteristics in relation to the respondents' lands, the Committee properly relied on the evidence concerning settlements in order to arrive at some measure of the final amount of compensation payable. As counsel for the respondents aptly stated in oral argument in relation to the evidence before the Committee, "the Committee had what it had".
[52] Additionally, the debate as to whether the en bloc method of valuation or the pattern of dealings approach is more compatible with the legislative scheme and should be adopted in the determination of the final amount of compensation under the NEBA was not an issue before the Committee. In fact, counsel agreed that resolution of that question and any other issues related to the determination of the final amount of compensation was beyond the mandate of the Committee. I accept the respondent's submission that the appellant is attempting to argue the merits of a determination of the final amount of compensation.
Issue 1(b): Did the Committee err by concluding that paragraph 97(1)(a) of the NEBA suggests a "small parcel increment may be called for, if the facts support it"?
[53] In its reasons, the Committee states:
...We note that s.97 makes reference to the market value of the "lands taken" as opposed to the "en bloc" value, suggesting that a small parcel increment may be called for, if the facts support it....
[54] Alliance submits that expropriation principles and the NEBA require that the value of the lands be considered from the perspective of the highest and best use to the landowners and not to the use to which the company wishes to put them. Further, the appellant argues that since there is no market for pipeline easements per se the phrase "lands taken by the company" simply provides clarification as to which lands reference is being made.
[55] Alliance acknowledges that the impact of this error on the magnitude of the award is not readily apparent, however, Alliance states that it is reasonable to infer that it must of had some bearing on the overall amount of the advance. In the appellant's view, it suggests that the Committee was predisposed to an arbitrarily inflated award such as would result from the reliance on settlements instead of market value.
[56] I do not accept this argument. In its reasons, the Committee did not suggest that the value ascribed to those lands would be the value to the company, but only noted that the en bloc formula assumes that all small parcels of land within the quarter section have the same value where, in fact, there may be significant differences in the value of the lands to the landowners. With respect to the second aspect of the appellant's argument, the Committee observed that a small parcel increment may be a consideration where it is supported by the facts. However, the Committee also noted that no evidence was adduced regarding value on a small parcel basis. As a result, the Committee concluded that it was not in a position to draw any conclusion with respect to what impact this might have on the amount of compensation. On my reading of the Committee's reasons, it is clear that the small parcel factor had no bearing on the determination of the amount of the advance.
Issue 1(c): Did the Committee fail to take into account such other considerations under paragraph 97(1)(i) as the residual and reversionary value of the lands to the respondents?
[57] Alliance submits that the Committee erred by failing to consider the residual and reversionary values of the lands to the respondents in its consideration of "other factors" under paragraph 97(1)(i) of the NEBA.
[58] Alliance relies on the Alberta Court of Appeal decision in Re Cochin Pipe Lines Ltd. v. Rattray et al (1980) 117 D.L.R (3d) 442. The issues raised in that appeal centred on an arbitrator's determination of compensation pursuant to the National Energy Board Act, R.S.C. 1970, c. N-6, the predecessor to the current legislation, for the taking of a pipeline easement. One of the issues raised by the appellant was that arbitrator failed to value the residual interest in the right of way to the landowner and to set this off against the value of the lands taken. In particular, Alliance relies on Haddad J. A.'s statements at page 451:
...where there exists a residual interest in favour of a land-owner the value of that interest, in the course of fixing compensation, cannot be ignored....
In giving consideration to the residual value the tribunal charged with the duty of fixing compensation must evaluate the evidence to determine such value.
[59] Although Haddad J.A. found that in the circumstances of the case under review it could not be disputed that a residual interest existed, he also noted at page 452:
...the fact is that at the hearing no effort has been made on the part of the appellant to attach a value to the residue and, indeed, no evidence was called to support a residual value. From my examination of the record the appellant did not, in this particular case, either at the time of expropriation or during the arbitration hearing, elect to raise this issue. It refrained, in so far as I am able to determine, from advancing the proposal that the arbitrator take that interest into account in fixing compensation. The claim for residual interest is raised by the appellant for the first time on appeal.
[60] The Court's conclusion is of particular relevance to the facts of the present case and the argument being advanced by Alliance. In the absence of evidence to support a residual value, Haddad J.A. concluded, at page 454, that the Court should not "attempt to make any arbitrary valuation of the residual interest".
[61] In the present case, Alliance is correct that the Committee did not specifically address in its reasons the issue of the residual and reversionary values of lands in the present case nor in the Bokenfohr arbitration. However, Alliance also acknowledges that no evidence was adduced regarding the residual and reversionary values of the respondents' lands. Without commenting on the content of "other factors" under paragraph 97(1)(i) of the NEBA, given the absence of any evidence concerning the values of any residual or reversionary interests I am unable to conclude that the Committee erred by failing to take this into account in reaching its decision.
Issue 2: Did the Committee err in applying the $500 entry fee provincially-regulated are required to pay under the Alberta Surface Rights Act, supra, to lands acquired under the NEBA?
[62] Section 19 of the Surface Rights Act, supra, requires a company to pay an entry fee of $500 per acre in addition to any compensation payable with respect to the right of entry. Alliance submits that the Committee's reliance on its settlement offers as the best indicator of the amount of compensation to which the respondents will ultimately be entitled imposes a provincially-mandated fee on a federally-regulated body and was beyond the Committee's authority. Alliance argues that this is clearly demonstrated by the Committee's statement that "the $500 per acre increment [should] be paid as part of the advance".
[63] This argument is analogous to its argument discussed earlier in these reasons that reliance on Alliance incorporates extraneous factors including the $500 per acre entry fee into the determination of the amount of the final compensation. The reasons for rejecting that argument apply to this argument and will not be repeated here. The Committee's reliance on Alliance's own view of the appropriate level of compensation does not equate to the imposition of the provincially mandated fee.
[64] Alliance also submits that the Committee erred by extending the equivalent of the right of entry fee to the temporary work space even though there was no evidence that other area operators paid such a fee or that it was included in its settlement offers.
[65] As noted earlier, Alliance's written submissions were based on its interpretation that the Committee's determination of the amount of the advance simply increased the amount of the section 87 offer by an amount equivalent to the right of entry fee. In oral argument, Alliance acknowledged that it was not clear if the Committee intended its direction to apply to the temporary work space as well as the permanent easement.
[66] As stated earlier in these reasons, in my opinion, the Committee concluded that the amount of the advance for the permanent easement was the amount of Alliance's settlement offer. Within the context of Alliance having only included the equivalent of the right of entry fee in its settlement offer, and having regard to the Committee's observations concerning Alliance's preparedness to pay the equivalent of the fee to any landowner, Alliance's reliance on its settlement offer and the reference to advance in the singular, I am led to the conclusion that the Committee's direction referred only to the permanent easement and not the temporary work space. Accordingly, this argument is rejected.
Conclusion
[67] For these reasons, the appeal is dismissed with cost to the respondents.
ORDER
THIS COURT HEREBY ORDERS THAT: the appeal be dismissed with costs to the respondents.
"Dolores M. Hansen"
J.F.C.C.
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-645-01
STYLE OF CAUSE: ALLIANCE PIPELINE LTD v. JOE BOKENFOHR and LIL BOKENFOHR
PLACE OF HEARING: EDMONTON, AB
DATE OF HEARING: April 18, 2002
REASONS FOR JUDGMENT OF HANSEN, J
DATED: May 23, 2003
APPEARANCES:
Lars H. Olthafer FOR APPELLANT
Darryl Carter, Q.C. FOR RESPONDENT
SOLICITORS OF RECORD:
Fraser Milner Casgrain
Calgary, Alberta FOR APPELLANT
Carter Lock & Horrigan
Grande Prairie, Alberta FOR RESPONDENT
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