Bue v. Alliance Pipeline Ltd., 2006 FC 713

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, 2^nd 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 stated:

The use of the provisions of the Railway Act for this taking is something of an anachronism. This kind of taking might now be brought under modern expropriation legislation. There are no legislative directions as to the method of determining compensation and it seems to me that I must apply the jurisprudence that has developed in respect of similar kinds of takings under other legislation, unless that jurisprudence is expressed to be founded on a statutory base. General principles of compensation require a tribunal to consider the value to the owner of what is taken. If there were evidence from which one could determine the value of the entire unit both before and after the taking that would, in my view, be the prima facie measure of compensation. General principles dictate that an effort be made to determine the market value of what was taken.

I take as a starting point the market value of the land taken. This is not a fee simple taking. The taking is for indeterminate period of time and the value of the residuary interest is difficult, virtually impossible, to assess. The practice has developed in Alberta, and elsewhere, of ignoring the residual value (a practice accepted in Dau v. Murphy Oil Co. Ltd. 70 W.W.R. 339, 7 D.L.R. (3d) 512, affirmed [1970] S.C.R. 861">[1970] S.C.R. 861). I did not understand the taker to contend otherwise, subject to its view on "parcel values".

It is clear to me from the authorities that, apart altogether from the question of the residual interest value, recognition must be given to the fact that small parcels taken out of large parcels would, assuming a market, fetch a higher per unit price than the average per unit value of the whole parcel.

(pp.756-757)

[55]            However, Justice Stevenson went on to question the evidentiary value of compensation paid for other easements as a consideration in determining market value of the lands in question:

I turn now to the value of the parcel taken. There is some evidence of the compensation paid for other easements. In Livingston v. Siebens Oil & Gas Ltd., [1978] 3 W.W.R. 484, 8 A.R. 439, 15 L.C.R. 32 at 37 (Alta. C.A.), McDermid J.A. discusses the value of such evidence where a pattern is established. In assessing the evidence relating to easement compensation here, I apply considerable caution. In the first place, these are not transactions between willing vendors and purchasers: the "vendors" may have been aware of the threats of expropriation. Secondly, I do not know if they were "informed vendors" knowledgeable as to their rights and the value. If the taker, for example, suggested that fee simple valuation on a per acre basis was the proper test - as argued here - it would affect the bargain made. The difficulties inherent in the kind of evidence illustrated by the fact that the taker here urges that weight be given to easements it took, but is somewhat skeptical of evidence relating to easements given by another landowner to another company.

(p.758)

[56]            Given the determination that the market for small parcels would determine the market value of the lands in question, nevertheless, Justice Stevenson was faced with the need to make an accommodation for lack of evidence:

Neither appraiser was able to provide a solid small parcel comparable. On large parcel sales a reliable range appears to be in the area of $300 to $350. In the absence of reliable small parcel sales I would make an arbitrary allowance for the fact that a smaller parcel is involved rather than penalize the owner.

(p.759)

[57]            On appeal, Justice Haddad endorsed Justice Stevenson's comment that it was appropriate to look to decisions from other jurisdictions for guidance; however, he did not agree with the approach that was adopted to arrive at market value:

The arbitrator was not presented with a "solid small parcel comparable" and it was the absence of such evidence which formed the basis of his conclusion that the case before him was a proper one for an arbitrary increase in the compensation to be awarded. He did have before him evidence to substantiate the fact that the highest and best use of the land, present and future, was agricultural and he was able to establish the price range for large parcel sales to be in the area of $300 to $350 per acre. In the light of those facts I feel bound to say, with respect, that the basis on which he proceeded was wrong in principle. In my view, to establish value, he should have adopted the method approved by this Court in The Queen v. Bonaventure Sales Ltd., supra, by taking the market value of each quarter section and then applying the per acre value thereof to the land taken by the appellant. In complete fairness I should add that the arbitrator did not have the benefit of the Bonaventure Sales judgment before him as it was pronounced subsequent to the date of his decision.

(pp.203-204)

(...)

Accordingly, I am persuaded that 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.

(p.206)

[58]            In addition to Cochin, the full range of pipeline compensation cases decided in Alberta under its Surface Rights Act was argued before the Committee. In the development of the law in Alberta, judicial opinions provided a range of views on the determination of compensation because, by s.26(6) of the Alberta Surface Rights Act, an appeal to the Court of Queeen's Bench from a decision of the Alberta Surface Rights Board is "in the form of a new hearing". However, appeals to the Alberta Court of Appeal have resulted in a uniform approach with the current being expressed in the 1985 cases of Nova v. Petryshen (1983), 27 L.C.R. 276 and Nova v. Bain et al (1985), 33 L.C.R. 91, both of which were decided according to a definition of market value similar to that which was introduced into the NEB Act by the 1983 amendments.

[59]            In the inital step in Petryshen, Justice Bracco of the Alberta Court of Queen's Bench gave reasons for varying an arbitration compensation award. On the appeal of this decision to the Alberta Court of Appeal, Justice Stevenson, who since his decision in Cochin had become a member of that Court, with approval, quoted Justice Bracco's reasons as follows:

Firstly, I find that the board erred in accepting an evaluator's report as to the market value of the land in question and mistakenly rejected evidence of valuation agreements made in the same area and shortly before it considered this case. The board acknowledged that it had evidence as to agreements reached between farmers in the same area and, indeed, including the appellant.

(p.277)

( ... )

In Siebens Oil & Gas Ltd. v. Livingston (1978), 15 L.C.R. 32 at p. 36, [1978] 3 W.W.R. 484, 8 A.R. 439 (C.A.), McDermid J.A. states as follows:

... it is most important that when both parties have shown that they are satisfied by establishing a course of dealing in any area this is very relevant evidence to be considered by the Board. The Company may in an individual case pay more than it thinks is fair, for various reasons, and as the Board states little weight can be given to individual cases, but in an area where there is a course of dealing between oil companies and surface owners whereby a standard rate of compensation has been paid and accepted, this evidence should at the very least be given great weight by the Board.

Clearly it was an error for the board to ignore such cogent and weighty evidence and embark on the very uncertain task of attempting to identify and evaluate the numerous factors that must be considered to determine a just compensation. Such a procedure is appropriate when there is no evidence of comparable agreements reached for identical benefits between willing sellers and willing buyers where the parties, the land, the subject-matter of the agreement and the timing are all comparable and applicable.

(pp.277-278)

Justice Stevenson then added the following statement:

This appeal falls to be decided on a narrow ground in the circumstances. Paraphrasing McDermid J.A. in Siebens Oil & Gas Ltd. v. Livingston (1978), 15 L.C.R. 32, [1978] 3 W.W.E. 484, 8 A.R. 439 (C.A.), the board was not bound to set compensation in the amount agreed to by others negotiating compensation for similar holdings, but where, as here, a pattern has been established the board should depart from that pattern only with cogent reasons. No reasons for departing from that pattern were put forward by the board and in that situation Bracco J. was fully entitled - if not obliged - to interfere. In these circumstances the board erred in fixing the compensation. If the board rejected that evidence it was obliged, in our view, to express its reasons in order to comply with the strictures expressed by McDermid J.A. We can only speculate on the reasons why the board might have rejected the evidence and the appellant's argument failed to establish why it should be rejected. A finding based on compensation for comparable transaction does, of course, take into account residuary value because the figure is compensation for all but those items excluded under the agreement.

(p.282)

[60]            Justice Stevenson's next opportunity to confirm his view on the same issue is when he spoke for Justice Leiberman and Justice Haddad in Bain:

The Surface Rights Board had found a pattern of dealings in the area, following Siebens Oil & Gas Ltd. v. Livingston (1978), 15 L.C.R. 32 [1978] 3 W.W.R. 384 [sic], 8 A.R. 439 (C.A.). At the trial the operator presented evidence to meet and overcome this finding.

(p.92)

( ... )

It is this finding that is under attack.

It is clear from authorities in this court, most recently our decision in Petryshen et al v. Nova, An Alberta Corp. (1982), 27 L.C.R. 276, 23 Alta. L.R. (2d) 193, that if the board, or on an appeal, the court, finds a pattern established it not only should apply the results of that pattern, it should not depart from it without having good reason for doing so.

(Emphasis in the original)

(p.93)

Therefore, the caution Justice Stevenson expressed in Cochin about the value of the evidence of compensation paid for other easements, is displaced in Bain by an acceptance that strong weight is to be placed on a pattern of dealings.

                        3. The Committee's determinations

[61]            The Committee determined that it was "influenced most" by the Alberta Court of Appeal's decision in Cochin which was decided under the NEB Act before the 1983 amendments. However, the Committee considered the decision in Cochin in the context of a subsequent decision of Justice Stevenson's upon which it placed critical reliance. After reviewing the reasons of both Justice Stevenson and Justice Haddad as quoted above, the Committee said this:

The arbitrator in the Cochin proceedings was Stevenson J. (as he then was). Later, as a member of the Alberta Court of Appeal, he delivered the judgment of the court in Patson Industries Ltd. v. City of Calgary (1983) 30 L.C.R. 30. Stevenson J.A. (as he then was) referred to the approach taken in Cochin; he wrote;

"Undoubtedly the question for the board was the value of what was taken. Undoubtedly small parcels will, generally speaking, fetch higher prices on a per unit basis than larger ones. Undoubtedly part of a tract of land is to be valued on the basis of the value of that part if solid comparable sales are available. The key is that reliable comparable sales must be available; if not the per acre approach is permissible: Re: Cochin Pipelines Ltd. and Rattray et al. (1980) 22 L.C.R., 198, 117 D.L.R. (3d) 442, 27 A.R. 32 (Alta C.A.)

Counsel for the landowners asks the Committee not to apply the en bloc per acre approach. He emphasizes that the words en bloc do not appear in the NEB Act. He stresses that the approach which the Committee should take is to determine the value to the landowner of the rights that have been taken from him. Using his words, the Committee should take a global approach to matters of compensation.

Notwithstanding Mr. Carter's submission, 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 present NEB Act. From the definition of "lands", the words "easement" and "right' are the most applicable to what Alliance has taken from the landowner.

(pp.14-15)

[62]            On the basis of this analysis, the Committee's determinations with respect to market value of the lands taken vary on a geographical basis with a distinction being made between Peace River lands, and Strathcona, Lamont, and Edson lands.

                                    a. Peace Riverlands

[63]            The Committee's central findings in these arbitrations is as follows:

(...) the Committee is satisfied on the uncontradicted evidence presented to it, by witnesses testifying for both the Company and the Applicants, that there is a recognized market in the Grande Prairie or Peace River area of North-western Alberta and North-eastern British Columbia for the easements or rights taken by Alliancefrom the Applicants. The Committee was told of a widely recognized and generally agree "going rate" for permanent right-of-way for pipeline easements over agricultural property in the Peace Riverregion. The appraisers for both parties acknowledged this "market", as did the landowners, the landmen and counsel. The gross number acknowledged by all parties was $1,450/acre, and all parties agreed this was overwhelmingly paid under provincial legislation which requires a $500/acre right of entry fee as a component of compensation. The issue of the Committee was whether the sum was an indivisible or gross amount of $1450 or whether it was $950 for rights to land (admittedly much higher than most en bloc fair market value) plus the right of entry fee. In other words, did the provincial right of entry fee find its way into compensation awarded under Federal legislation? A good deal of evidence was provided on this point. For the reasons stated hereafter, we are satisfied the "market" for the "rights" or "lands" taken was $950/acre with the right of entry fee a separate component of $500/acre for a total of $1450. The agreed "going rate" or market value of the "lands" taken as temporary workspace is based upon 50% of the going rate for permanent right-of-way, or one half of the $950 per acre figure. Experts for both parties said as much.

(...)

The NEB Act contains no provision for a right of entry fee similar to Section 19 of the Surface Rights Act of Alberta. It is clear on the evidence that the amount of the payment "for the rights" or "for the interest in land" is the going rate or market value of $950 per acre. These terms are included in the definition of "lands" in the NEB Act. In the NEB Act the definition of "lands" does not include an "entry fee" or a "right of entry fee". In determining compensation the Committee is of the view that the market value of the lands taken (Section 97(1)(a)) does not include an entry fee or right of entry fee.

The Committee also considered whether, in the circumstances of the landowners, the $500.00/acre entry fee was an "other factor" Section 97(1)(i) we should consider in determining compensation. We have concluded that the evidence before us does not support the inclusion of entry fee in the determining compensation under the NEB Act.

(Fast Decision, NE, p.14, p.18)

               

                                    b. Strathcona, Lamont, and Edson lands

[64]            An example of the Committee's generic market value finding in these arbitrations is as follows:

The applications of the land owners in Strathcona County and the County of Lamont differed from those of the Grande Prairie landowners' applications as the Applicants abandoned the pattern of dealings as a method of valuation of the land and adopted for their proposed method of compensation for the land a valuation described in the Berrien Associates Ltd. appraisal for compensation dated August 2001 as small parcel values. (Exhibit No. 57).

( ... )

Mr. Berrien is of the view that as the land taken by the authority is by definition a small parcel that means the committee should be valuing the land taken as a small parcel taking. The small parcel comparisons he adopts as the basis for valuation are lands which are country residential.

By contrast, Canadian Resources Valuation Inc. in its appraisal on behalf of the Respondent has stuck to a more traditional approach and has based the land valuations on a pro rata determination of the en bloc market value of the particular agricultural lands which the pipeline has crossed.

( ... )

Mr. Berrien states that based on country residential values the land is worth $6,000 and acre (page 1350). The committee questions that assumption because the land in question is not country residential. It is agricultural. (...) The method suggested by Mr. Berrien confuses agricultural land with country residential land and does not address the issue of the fair market value of the lands actually taken. The committee rejects the valuation methodology suggested by Mr. Berrien.

On the evidence presented to it, the committee accepts the conventional en-bloc market value analysis presented by John Wasmuth in the Canadian Resource Valuation Group Inc. appraisal (see Exhibit No. 102) to establish the value of the lands taken. This was the only reliable valuation method presented to the Committee to establish the value in the case of this Applicant and the other County of Strathconaand Countyof Lamont applicants. This approach is consistent with the test articulated by Stevenson, J.A. (as he then was) in the Patson Industries Ltd. case. As noted elsewhere there was different evidence before this Committee in respect of the property located in the Peace River region.

Therefore, we direct that the compensation for the acquisition of the Applicants' lands shall be in the sum of $660.00 per acre for the 3.60 acres of permanent right of way and $330.00 per acre for the 2.95 acres of temporary work space.

(Emphasis added)

(Thederahn Decision: pp.12-14)

4. The standard of review of the determinations

[65]            The objective on the present Appeals is to review the Committee's findings to conclude whether any are made in reviewable error, and if such a conclusion is reached, to decide its effect on the decisions as a whole. In order to accomplish this objective, it is first necessary to categorize the Committee's findings.

[66]            As described above, the standard of review for findings of law is correctness, the standard of review for findings of fact and law is reasonableness, and the standard of review for findings of fact is patent unreasonableness.     With respect to how to characterize the features of the Committee's determination of market value, the following passage from Jones and de Villars, Principles of Administrative Law 4^th ed. (Toronto: Carswell, 2004) at p. 433 is helpful:

As the Supreme Court of Canada noted in Southam (which also involved a statutory appeal, rather than an application for judicial review), it may be very difficult to determine whether a particular alleged error is an error of law, an error of fact, or a mixed error of law and fact (and the correct characterization of the error will probably have significant consequences for the determining the appropriate standard of review):

The parties vigorously dispute the nature of the problem before the Tribunal. The appellants say that the problem is one of fact. The respondent insists that the problem is one of law. In my view, the problem is one of mixed law and fact.

Section 12(1) of the Competition Tribunal Act contemplates a tripartite classification of questions before the Tribunal into questions of law, questions of fact, and questions of mixed law and fact. Briefly stated, questions of law are questions about what the correct legal test is; questions of fact are questions about what actually took place between the parties; and questions of mixed law and fact are questions about whether the facts satisfy the legal tests. A simple example will illustrate these concepts. In the law of tort, the question what "negligence" means is a question of law. The question whether the defendant did this or that is question of fact. And, once it has been decided that the applicable standard is one of negligence, the question whether the defendant satisfied the appropriate standard of care is a question of mixed law and fact. I recognized, however, that the distinction between law on the one hand and mixed law and fact on the other is difficult. On occasion, what appears to be mixed law and fact turns out to be law, or vice versa.

(Emphasis in the original)

Applying the law of negligence analogy provided to the situation in hand results in the following analysis: the test for determining the market value of a particular tract of land is a question of law and must be correct; the finding of value features of the land in question is a question of fact and must not be patently unreasonable; and applying the value features of the land to the test is a question of mixed fact and law, and the result must be reasonable.

[67]            Confirmation that these standards are appropriate comes most recently from Justice Picard's decision in Moller et al. v. Minister of Transportation (2004) 85 L.C.R. 81 (C.A. Alta.) decided under the Alberta Expropriation Act, R.S.A. 2000, c. E-13 as follows:

This is an appeal of the valuation of a small parcel of land by the Land Compensation Board for the Province of Alberta (the "Board") [80 L.C.R. 203 sub nom. Tomshak v. Alberta].

The appellants/owners allege that the Board erred in applying the wrong test and in rejecting the evidence they provided. As to the former, the standard of review is correctness. The latter involves issues of mixed law and fact. Larsen v. Calgary(City) (2003), 330 A.R. 189, 2003 ABCA 197, 80 L.C.R. 161, says that the test in that situation is reasonableness simpliciter and this Court must determine whether the Board's reasons, when taken as a whole, support the decision.

                        5. Conclusion

                                    a. "The Test" to be applied

[68]            The Alberta experience involves finding a suitable comparable upon which to base a finding of market value for a given pipeline right-of-way. In my opinion, the Alberta experience of formulating a test for finding a suitable comparable provides a solid basis for determining the correct test.

[69]            Attached as Appendix II are relevant provisions of the Alberta Surface Rights Act, R.S.A. 2000, S-24. Section 25(1) presents the factors which "may" be taken into consideration in determining compensation for a pipeline right of way in the Province, which are similar to those that "shall" be taken into consideration under s.97(1) of the NEB Act.

[70]            Given the similarity of the definition of market value in the NEB Act and s.25(1)(a) ofthe Alberta Surface Rights Act, and given the careful effort that the Alberta Court of Appeal has made to find a fair and just approach to the very complex problem of land acquisition compensation, I find that "the Test" by which the market value of lands under s.97(1)(a) of the NEB Act is to be determined is that developed by the Court of Appeal of Alberta as expressed in Patson, Petryshen and Bain, but with an important clarification.

[71]            The decision in Patson establishes that the finding of a "reliable" comparable sale of land is the prime objective. It seems obvious that to be considered "reliable" a comparable sale must be relevant; that is, its market value must be based on factors common to those that exist with respect to the subject lands. Therefore, the existence of such a sale is compelling evidence upon which to base a finding of market value of the subject lands. However, the decision in Paston recognizes that the market value of the subject property must be determined even if a reliable comparable cannot be found, and, therefore, only when a reliable comparable sale or sales cannot be found, the en bloc per acre method is permissible to use in determining market value.

[72]            The decisions in Petryshen and Bain direct that right-of-way agreements can be considered comparable sales, and if a pattern of agreements is found, the pattern should be applied as a comparable, unless good reason is found for not doing so. That is, in these latter decisions, the Alberta Court of Appeal is saying that strong weight should be given to relevant agreements that constitute a pattern. This is not to say that a single agreement is, or a few agreements are, not relevant. It is for the decision-maker to decide the relevance of the evidence of "comparables", and if a "comparable" is found to be relevant, to decide the weight to be given to it.

[73]            I find that it is an error of fact and law to simply disregard the existence of any agreement in a given geographic area without determining the relevance of the agreement. As the finding of weight to be given to a comparable, if found to be relevant, is a finding of fact it is reviewable on the standard of patent unreasonableness (see: Cross and Tapper on Evidence, 10^th Edition, p.81).

b. Did the Committee apply "the Test"?

[74]            I find that the Committee did apply the Test to the Peace River, Strathcona, Lamont, and Edson lands.

[75]            It is obvious that, in all areas, the Committee searched for reliable comparable sales. Indeed, as described immediately below, the Committee determined that a certain group of agreements, the NOVA agreements, were irrelevant to determining market value in all geographic areas. In my opinion, this finding of fact and law is reasonable, given the line of analysis that the Committee provided in its reasons for reaching this conclusion.   

[76]            With specific reference to the Peace River lands, in its search for reliable comparable sales, the Committee correctly found previous right-of-way agreements in the area to be relevant as comparable sales which, because of their pattern, were properly given strong weight as reliable comparable sales in determining the market value of the Landowners' lands in that area.

[77]            The Committee's application of the Test with respect to the Strathcona, Lamont, and Edson lands is less obvious than that for the Peace River lands; however, I find it was accomplished. From the reasons provided, it is certain that the Committee was searching for reliable comparable sales and, in the course of the search, dismissed the evidence of small parcel residential comparables as irrelevant. It is also certain that, as a result of giving weight to the existent pattern of agreements in determining market value in the Peace River area, the Committee correctly accepted that it is essential to consider agreements in determining market value.

[78]            However, I find that there is a fundamental error in the Committee's application of the available evidence to the Test.

[79]            As stated, the finding of value features of lands under consideration is a question of fact and must not be patently unreasonable, and applying the value features of the land to the Test is a question of mixed fact and law, and the result must be reasonable. In the record before the Committee there was evidence of individual agreements reached in the Strathcona, Lamont, and Edson area. On this point, in his argument, Mr. Carter confirms this:

63.       It should be noted that in Alliance's Reply to Notice of Arbitration in the Marouelli case, at para. 14 it stated that its settlement offer to the Marouellis was $1300 per acre. The Committee by applying the en bloc formula awarded half of that! The large discrepancy should have indicated to the Committee that there was something wrong with the en bloc approach.

64.       The evidence of agreements for pipeline rights-of-way at much more than the en bloc also ought also [sic] to have been considered by the Committee. Of course there was no evidence of all the agreements Alliance had entered into with other landowners because the Committee had refused document production (Ground 1). There was however evidence of Alliance's agreement with the Hutterite Colony in Strathcona County at $8000 per acre. Alliance admitted that this was not the en bloc value. From the transcript at p. 1697:

Mr. Carter: Okay. So are you suggesting that the Hutterite colony's compensation was based on the en bloc market value of the land?

Mr. Hushion: Oh, no, we never suggested that.

(Landowners: Memorandum of Fact and Law, p.15)

And further:

203.     [...] In fact Alliance's own counsel had presented three agreements to Mr. Berrien in cross-examination (p. 1389) and these agreements were entered as Exhibits 60(a), (b), and (c) (see p. 1425). Each of these agreements showed compensation at $2000 per acre (and the $500 per acre entry fee would be on top).

204.     Furthermore Alliance admitted that it compensated the Hutterian Brethren Colony in the Strathcona County at $8000 per acre for the permanent right of way and $2000 per acre for the temporary workspace (See Ex. 65 and 66 - confirmed by Mr. McCall at p. 1690).

205.     Mr. Berrien's report (Ex 57) had a two-page listing of pipeline agreements for the County of Strathcona including the Hutterian Brethren example (Ex. 57, pp. 50-51). There was also:

●           Ex. 64, the Schedule of Payments prepared by Progress Land Ltd. the same company that represented Alliance

●           Ex. 67 between Shell Canada and Novagas, and

●          Ex. 68-73 with Corridor Pipeline Ltd.

(Landowners: Memorandum of Fact and Law, p.45)

[80]            In its reasons, the Committee does not provide any analysis of the agreements on the record before moving on to find that the en bloc method of determining market value "was the only reliable valuation method presented". That is, as there is no line of analysis within the reasons which led it from the evidence on the record to the conclusion stated, I find that the conclusion was made in reviewable error of fact and law.

[81]            Therefore, I find that the Committee's determination of market value with respect to each of the Strathcona, Lamont, and Edson's lands is made in reviewable error. In my opinion, this reviewable error requires that the arbitrations with respect to these lands must be redetermined.

c. The role of experts in determining market value

[82]            A comment is required about the role of expert witnesses in determining market value. As stated in s.4(1)(g) and s.8(1)(h) of the Pipeline Arbitration Committee Procedure Rules, 1986, SOR/86-787, quoted in the excerpt attached to these reasons as Appendix III, appraisers are involved in the determination of market value. However, the test for market value under the NEB Act is a matter of law, whatever a given appraiser might hold for a professional or personal opinion. That is, the appraiser should supply an opinion on the test established by law; it is not for the appraiser to express an opinion in whatever manner he or she might think appropriate.

[83]            On this basis, where the test is a matter of controversy, in my opinion, it is appropriate for Counsel for either landowners or a company to instruct an appraiser on the test to be applied in reaching an opinion. Therefore, in a situation of uncertainty with respect to the test to be applied, as was the case in the arbitrations under review, no criticism should be made of either party for giving this kind of direction because doing so is entirely reasonable.

d. The deduction of the Peace River entry fee

[84]            As stated, the finding of value features of the land in question is a question of fact and must not be patently unreasonable. In my opinion, deducting the entry fee from the amount paid under the agreements in Peace River results in a finding of a value feature of the lands in question; there is no basis for saying that the finding is patently unreasonable.

e. The question on the Cross-Appeal

[85]            Alliance's cross-appeal raises this question: did the Committee err by awarding compensation to the Peace River landowners based upon evidence of a "pattern of dealings"? For the reasons provided, I find that the answer is "no".

            C. Is the Committee correct in its interpretation of the periodic payment provisions of the NEBAct?

[86]            In their Notices of Arbitration, the Landowners requested the Committee to make a compensation award involving periodic payments:

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.

The short-hand description for the type of award requested is "land rent". As explained in the Committee's reasons quoted below, a basis for the Landowners' request is the precedent of agreements of this nature having taken place in Alberta known as the NOVA agreements.

[87]            The agreements constitute an annual compensation program instituted by NOVA, the owner and operator of the principal gas transmission system in Alberta, in connection with its pipeline rights-of-way acquisitions in agricultural areas starting in the early 1980s. The NOVA program had at its core the assessment of fee simple land values generally in accordance with conventional expropriation and appraisal principles, and involved the annual payment of a prescribed percentage of the per acre fee simple land value, subject to review by private arbitration, if necessary, every five years. The program was devised in the face of political pressure and organized landowner opposition during a period of high inflation, high interest rates, and cost-of-service regulation. NOVA also found itself repeatedly before the Alberta Surface Rights Board because of area pricing established by small oil and gas operators anxious to get their production tied in. The effect of the program, which is ongoing given its broad acceptance by the owners to whom it was offered over a span of approximately 20 years, was to require NOVA to pay the owner the fee simple value of the lands within the right-of-way every five years for the life of the pipeline (Olthafer, ALR, p.104).

[88]            The Committee's opinion with respect to the relevance of the NOVA agreements and the correct interpretation of s.98(1) reads as follows:

The NEB Act permits periodic payments, at the option of the applicants (see sections 98(1), (2), and (3), s. 90(2), and section 86(2) (a) and (b). The Applicants assert that the primary periodic compensation scheme in the industry is that paid by NOVA, being 20 percent of fair market value per annum for each of five years, plus a 30 percent right-of-entry payment in the first year and a review after five years. The Applicants suggest that this plan should therefore be our guide or template for directing periodic compensation. The Applicants further submit that NOVA effectively constitutes a "market" or pattern of dealings for periodic compensation, since NOVA has been dominant in this area and has a number of pipelines either on the same lands as the Applicant or in close proximity.

The evidence and submissions of Applicants' counsel did not stop there, however. He urges that the NOVA formula be adapted by inserting a small parcel comparable value as the fair market value equivalent, in calculating annual rental or compensation. As is the case in most areas, small parcel equivalents represent a significant increment in value over the en bloc value of agricultural land. An equivalent increase in annual payment would therefore follow from using the higher base value.

Alliance suggests the NOVA formula is a land rental model entered into for reasons specific to NOVA. Alliance further submits there are significant differences between the right-of-entry granted to Alliance and the rights granted to NOVA under its form of easement agreement, including, for example, the right of NOVA to re-enter for multiple pipelines on the basis of the same compensation. Further, Alliance argues that NOVA is effectively unique in the industry and is not an industry standard; that it is not sufficiently dominant to create a pattern by itself, that its arrangements are established under a provincial regulatory framework; and finally, that the imposition of a small parcel value as a base for calculation is an unwarranted adaptation of NOVA resulting in inflated compensation far in excess of that contemplated by the NEB Act or, in fact, paid by NOVA itself.

Alliance further submits that the reference in the NEB Act to periodic payments is not intended to impose a compensation scheme equivalent to land rent, but merely to give landowners the option as to how they want to receive their compensation.

We are persuaded by the evidence that NOVA does not constitute an industry standard or pattern of compensation. We agree that the election of landowners to take compensation over time does not imply a statutory framework by which we should impose a compensation scheme equivalent to land rent. Finally, we find on the evidence that the imposition of a small parcel country residential comparable is an unsupported adaptation of the NOVA program, which results in compensation exceeding that provided by the NEB Act.

The Applicant has the right to elect to take all or a portion of the compensation over a period of time. It is not within the mandate of an arbitration Committee to exercise that election for the landowner and impose a particular annual or periodic payment arrangement. Therefore the Applicant will have forty-five days from the date of this decision to inform Alliance in writing of the selected payment option. Failing receipt of such notification, Alliance is directed to pay the full amount of the compensation to the Applicants in a lump sum payment.

(Emphasis added)

(Fact Decision, p.22-23)

                        1. The intention of Parliament

[89]            The Committee's opinion with respect to the relevance of the NOVA agreements and the correct interpretation of the Landowners contend that it was an error of law for the Committee to find that the election given to them for annual or periodic payments under the NEB Act does not contemplate a scheme equivalent to "land rent" because this finding is contrary to the intention of Parliament in enacting the changes to the NEB Act which received royal assent on December 13, 1981 and came into force in 1983.

[90]            Therefore, the issue for determination is whether the Committee was correct in concluding that NEB Act does not authorize the payment of land rent. In the present Appeals, the Landowners argue that a statement of government intention in enacting the 1983 amendments to the NEB Act, and the correct interpretation of s.98(1), allow an arbitration order to be made on the NOVA "land rent" formula. As evidence of the Federal government's intention in passing the 1983 amendments, the Landowners rely on a statement made in the House of Commons about Bill C-60, which was the government bill introduced to amend the NEB Act. Alliance objects to the statements being considered.

[91]            The Landowners' argument is as follows:

Alliance's position was that landowners could not expect compensation in the nature of rent for their land. At p. 20 of Fast 2003 for example, the Committee referred to Alliance's position as follows:

Alliance further submits that the reference in the NEB Act to periodic payments is not intended to impose a compensation scheme equivalent to land rent ..."

And the Committee agreed with Alliance's position. It has ruled (also at p. 20):

We agree that the election of landowners to take compensation over time does not imply a statutory framework by which we should impose a compensation scheme equivalent to land rent.

But this ruling by the Committee was totally contrary to the intention of Parliament in enacting the changes to the NEB Act in 1981. To confirm this, I would like to refer to [the] statement made by the Minister of Energy when the legislation was introduced in the House of Commons [Hansard, March 6, 1981, Tab 8] as follows at p. 8006:

Owners whose land will be taken will be given option as to whether they prefer to receive periodic payments, in the form of land rental, with the right to have the amount of these payments reviewed at five-year intervals. This option will eliminate the need which now exists to anticipate, in advance, all types of damages which may be caused to an owner by the construction of a pipeline.

The law is now well-established that, in determining the intent of Parliament, an tribunal (sic) may examine Hansard. The Supreme Court in Reference Re Firearm Act (2000) 185 DLR 577 [Tab 9] stated at para. 17:

A purpose is often stated in the legislation, but it may also be ascertained by reference to extrinsic material such as Hansard ...

The Minister had clearly stated that landowners would have the option of receiving periodic payments "in the form of land rental". Yet the Committee decided the opposite, stating that the legislation "does not imply a statutory framework by which we should impose a compensation scheme equivalent to land rent." The Committee's ruling was diametrically opposed to the intent of Parliament as expressed by the then Minister of Energy and the Committee's ruling cannot be allowed to stand.

(Emphasis added)

(Landowners: Memorandum of Fact and Law, pp. 10-11)

[92]            In response, Alliance argues that the ambiguity in the words of s.98 cannot be overcome by reference to statements in Hansard but only through consideration of the plain and ordinary meaning of the words used in both the English and French versions of the provision. Indeed, Alliance argues that such extrinsic evidence as Hansard has long been considered as unreliable, and is subject matter to be considered with much caution, and, therefore, should not be considered in the present Appeals.

[93]            I agree with the Landowners that the state of the law has been advanced by the Supreme Court of Canada to the point of receptivity to the use of Hansard evidence as long as it is "relevant and reliable and is not assigned undue weight" (Reference Re Firearm Act (2000) 185 DLR 577 at para. 17). However, I also find that this debate is not important to the present Appeals because the extrinsic evidence tendered does not support the Landowners' interpretation of s.98 of the NEB Act.

[94]            The statement in the House of Commons relied upon by the Landowners is that of the Minister of Energy, Mines and Resources, the Honourable Marc Lalonde, on March 6, 1981 at the time C-60 was tabled for second reading and to be referred to the Committee of the Whole. In the Landowners' argument presented to the Committee the statement is quoted as follows:

House of Commons Debate

To ensure that land owners receive fair compensation, the bill includes a list of the types of damages which must be compensated for. Owners whose land will be taken will be given option as to whether they prefer to receive periodic payments, in the form of land rental, with the right to have the amount of these payments reviewed at five-year intervals. This option will eliminate the need which now exists to anticipate, in advance, all types of damage which may be caused to an owner by the construction of a pipeline.

(Emphasis added)

(Landowners: July 23, 2001, p.21)

However, the statement as it appears in Hansard is not exactly as it was quoted in the Landowners' argument to the Committee.

[95]            Attached as Appendix V is the full Hansard statement made by Minister Lalonde. The passage relied upon in the Landowners' argument is not accurate when compared to this official version. In the official version the phrase "in the form of land rental" does not appear, but instead the phrase "in the nature of a land rental" is present. The difference makes a difference; the former is substantive while the latter is descriptive. But the discrepancy between the arguments and the official version is really not the point as it appears that the Committee did not decide on the Hansard evidence.

[96]            The point is that when the passage relied upon by the Landowners is considered in the full context of what Minister Lalonde said, the passage cannot be viewed as support for their argument about the correct interpretation of s.98(1). The passage is used in the context of a broad description of procedural, not substantive, changes to the NEB Act; that is, the phrase is an element of a description of the procedure of exercising the option to receive periodic payments, and not the substance of the periodic payments which can be received.

[97]            As a result, I cannot find there is any intention expressed in the Hansard statement to support the Landowners' argument.

                        2. The relevance of Albertajurisprudence

[98]            In further support of their argument, the Landowners have cited cases in which periodic payment awards have been made under the AlbertaSurface Rights Act. As quoted in Appendix II, by s.25(7) of the Surface Rights Act, an open ended discretion to make periodic payments is provided by the Alberta legislation. However, as a highly restricted allowance is set in the NEB Act under s.98, I find the Albertajurisprudence on this issue is irrelevant.

[99]            With respect to the correct interpretation of s.98(1), Alliance argues that, by the application of the principles of statutory interpretation as stated in Section II(A)(4) above, the provision does not allow for the kind of request made by the Landowners. I agree.

[100]        By its wording, s.98(1) allows for periodic payments for compensation for the acquisition for lands taken, but in a very restricted way. As the provision reads, first an arbitration committee makes an award for compensation, and then it directs that that award be paid by annual or periodic payments as specified by the landowner, but only if the option is exercised to make such a specification. If the option is exercised, the arbitration committee is required to make the order in the terms specified, and, by s.86(2)(b), the order is subject to review every five years if the annual or periodic payments extend that far into the future. Read as a whole, the NEB Act does not admit to any other interpretation, and there is no other evidence to support an argument that the ordinary meaning of the words in s.98(1) should not be given effect. Therefore, I find that the periodic payment provisions of the NEB Act do not authorize the payment of "land rent".

[101]        With respect to the Committee's conclusion that the NOVA agreements do not constitute an industry standard or pattern of compensation is a finding of fact and must be reviewed on the standard of patent unreasonableness. As found, the Committee did apply the Test for determining market value, and in the course of doing so, found that, while the NOVA agreements do establish a pattern, they are irrelevant to the determination of the lands in question. As there is nothing perverse or capricious about this finding, and as it was made on the evidence on the record, I find it is not patently unreasonable.

[102]        Therefore, I find that the Committee is correct in its interpretation of the periodic payment provisions of the NEB Act.

D. Does the Committee's decision with respect to production of documents constitute a breach of due process?

[103]        The following request for production of documents made by Mr. Carter was sent to Mr. Olthafer by letter dated March 5, 2001:

Pursuant to s. 93(3) of the National Energy Board Act my clients will require production from Alliance of all documents related in any way to:

a)       all the right-of-way acquisitions by Alliance from other landowners in British Columbia and Alberta,

b)       all payments in money or in kind made to such other landowners, and

c)       discussions, negotiations, understandings and agreements between Alliance and the other pipelines companies regulated by the National Energy Board Act.

These documents are required because Alliance takes the position that its offers to all landowners have been consistent and equitable. Alliance also alleges that its policy regarding annual payments is consistent with that of all the other federally-regulated companies.

[104]        This request was made with respect to the Landowners' original Notice of Arbitration, quoted above in paragraph 26, which only cited the request for an order for periodic payments and made no mention of the relevance of agreements made between Alliance and other landowners. However, the Amended Notice of Arbitration dated May 25, 2001, made the same request for an order but did mention the relevance of the NOVA agreements. Nevertheless, even though the production arguments and the Committee's decision on the production issue were rendered under the original Notice of Arbitration, in a letter of argument dated March 23, 2001, Mr. Carter did make specific mention of the relevance of comparable existing agreements as follows:

In cases such as these arbitrations, it is a well-established principle that evidence of agreements made for comparable takings is relevant. See for example Nova v. Bain et al (1985) 33 L.C.R. 91 and Halliday Estate v. Newfoundland Light & Power Co Ltd. (1980) 20 L.C.R. 325.

If the evidence of such agreements is relevant, documents and records relating to them must of course be produced.

What is more, Alliance itself has made these documents relevant by referring to the large number of easements which it has acquired.

[105]        The Committee's decision on the production issue is paragraph 14 of its "Conference Directions" dated May 17, 2001 as follows:

Upon our review of the limited facts contained in the Notice of Arbitration, as it now reads, the Committee declines to make a direction that the Respondent produce the documents as requested by the Applicant. However, in the Respondent's Reply it has referenced factual matters, other than those set out in the appraisal report, that were taken into account by the company in arriving at the amount of compensation offered; see paragraph 14. We therefore direct that the documents which related to all of the facts taken into account by the Respondent be produced to the Applicant. Rule 8(1)(h). Also, the facts set out in the Applicant's Amended Notice of Arbitration may establish that there are other relevant documents. The Applicant may bring another application if circumstances warrant.

[106]        In my opinion, since the request for disclosure was extensive and non-specific, it is reasonable to conclude that the Committee's decision not to compel disclosure was made on the basis that the request was considered to be overly broad, that is, either not relevant in content, or unreasonable in nature.

[107]        In my opinion, the responsibility for this conclusion lies with the Landowners. While the Landowners did provide an argument that document production was relevant to their arbitrations, in my opinion, there was no reasonable way to link the request made to this argument. That is, since the demand did not focus on agreements made in the areas in which the Landowners' lands are situated, and since it was not made with a detailed convincing argument to show that the agreements are relevant to determining the market value of the lands in question, I find that the Committee's decision was fair. Consequently, I do not find that it constitutes a breach of due process.

            E. Is the finding with respect to the controlled area made in reviewable error?

[108]        Section 112(1) of the NEB Act provides that, unless leave is obtained from the NEB, a facility cannot be constructed, and power-operated equipment and explosives cannot be used within 30 meters of a pipeline which is referred to as the "controlled area". The Minister made a determination under s.91(2)(b) of the NEB Act that the controlled area was not a matter for arbitration.

[109]        On September 13, 2002, Justice Tremblay-Lamer of this Court dismissed the application by the Landowners for judicial review with respect to the Minister's decision regarding the controlled area and, in so doing, held that the s.84(1)(a) requirement that matters referred for arbitration be "directly related to the activities of the company" precluded the referral of a compensation claim for the "controlled area" to such proceedings. Justice Tremblay-Lamer reasoned that the "controlled area" was a requirement of Parliament in the interests of public safety and the environment that did not "require the immediate participation of the pipeline company", and was therefore not "directly related to" the activities of acquisition of lands for, or construction and maintenance of, a pipeline, as required by the NEB Act (Balisky et. al. v. Canada (Minister of Natural Resources), 2002 FCT 976 at paras. 26-27).

[110]        In February 2003, the Landowners successfully appealed this decision to the Federal Court of Appeal, which directed the Minister to refer the matter of compensation for the "controlled area" to arbitration. As in the Trial Division, the Federal Court of Appeal's decision turned on the interpretation of s.84 of the NEB Act defining the scope of compensation matters to which the NEB Act arbitration provisions apply. The Federal Court of Appeal held that the exclusion under s.84 should be read more narrowly than did the Minister or Justice Tremblay-Lamer, and reasoned that the "controlled area" did not arise, whether directly or indirectly, from any of the listed activities of the company, but rather from the mere existence of the pipeline. Accordingly, it did not come within the ambit of any of the exceptional provisions of s.84, and an arbitration committee could, therefore, properly award compensation for the "controlled area", not as a taking, but for injurious affection if appraisal or other evidence demonstrated a diminution in the value of the affected lands (Balisky et. al. v. Canada (Minister of Natural Resources), 2003 FCA 104 at paras. 26-34). The Supreme Court of Canada did not grant Alliance leave to appeal, and, therefore, the Federal Court of Appeal's decision constitutes the final word on the matter.

[111]        Alliance did not seek to stay the Federal Court of Appeal's decision pending the Supreme Court of Canada's consideration of Alliance's leave application. As the Committee had yet to render its decisions, Alliance requested that the matter of the "controlled area" be referred to the Committee. The Minister granted Alliance's request, and the Committee agreed to hold its decisions in abeyance to allow the parties to present evidence and submissions on the "controlled area". However, the Landowners did not avail themselves of the opportunity to present additional evidence to the Committee, and relied simply on the submissions of Counsel (Alliance: Memorandum of Fact and Law, pp.12-13).

[112]        As a result, in its October 25, 2004 decision at p.20, the Committee made the following determination:

We reiterate, there was no new or further evidence adduced to deal with the controlled area although both counsel were afforded the opportunity to do so (...) The Committee has considered the evidence of the two appraisers who testified on behalf of the parties and the evidence of the parties themselves. The Committee notes the absence of evidence on the matters referred to the Committee by counsel and is satisfied there is no evidentiary basis, at this time, to award the Applicants any compensation in respect of the controlled area.

The Committee's conclusion that there is no evidentiary base is a finding of fact; and, in my opinion, no basis has been shown to support a conclusion that it is patently unreasonable. Therefore, the finding is not made in reviewable error.

            F. Was the Committee correct in determining that it had no jurisdiction to review its decision of September 5, 2003?

[113]        In its September 5, 2003 decision, the Committee gave an interpretation of s.98(1) which , in Section II(C) above, I have found to be correct. To reiterate, by its wording, s.98(1) allows for periodic payments for compensation for the acquisition for lands taken, but in a very restricted way. As the provision reads, first an arbitration committee makes an award for compensation, and then it directs that that award be paid by annual or periodic payments as specified by the landowner, but only if the option is exercised to make such as specification. If the option is exercised, the arbitration committee is required to make the order in the terms specified, and, by s.86(2)(b), the order is subject to review every five years if the annual or periodic payments extend that far into the future.

[114]        The Landowners objected to this finding, and requested the Committee to entertain a "review" in which the argument would be made that the Committee should set the periodic payments. In its decision of October 21, 2004, at paragraph 7, the Committee dismissed the review request as follows:

Counsel for the Landowners urged that we make a direction as to amount and duration (of the annual or periodic payments), on the basis that the parties have been unable to agree between themselves. He relies on the provisions of Section 90(2) to suggest that we have jurisdiction in this regard. In our view Section 90(2) is intended to apply in review situations, or where events occur subsequent to the award requiring the input and direction of the Committee. Further, in our view, Section 90(2) can only be invoked through the filing of a notice of arbitration, which has admittedly not taken place here.

[115]        In the present Appeals, the Landowners argue that the Committee misunderstood the basis upon which the request was being made. It is presently argued that the review request was made under s.88, as incorporated by s.90(1), which, thereby, gave the Committee jurisdiction on any issue relating to compensation. That is, since Alliance and the Landowners have been unable to reach an agreement on the annual or periodic payment issue subsequent to the Committee's decision under s.88(1), the matter can be reviewed by the Committee under s.90(1). I find that this is not a correct interpretation of the provisions since both require service of notice on the Minister, and the Minister to take action, before either formal negotiation or formal arbitration procedures can be implemented.

[116]        In any event, with respect to the Landowners' review application, the Committee interpreted s.100(2) of the NEBAct to find that it had no jurisdiction to conduct a substantive review. I find that the Committee was correct in this determination.

            G. Is the Committee's award of costs made in reviewable error?

[117]        In its October 25, 2004 decision, two questions of law were decided by the Committee with respect to costs to be awarded under the NEB Act: the meaning of the phrase "amount of compensation offered by the company" in s.99(1) and s.99(2); and the limit of the discretion that an arbitration committee can exercise under s.99(2). These determinations are reviewable on the standard of correctness.

                        1. The correct meaning of "amount of compensation offered by the company"

[118]        With respect to the meaning of the phrase "amount of compensation offered by the company" in s.99(1) and s.99(2), at paragraph 19 the Committee found as follows:

Mr. Carter has acknowledged, and in fact the evidence is clear, that there were two offers of compensation to the Landowners by Alliance prior to the arbitration hearings. The initial offers were contained in Section 87 Notices and the second offers were offers of settlement made to each Landowner. Both offers were rejected by the Landowners. The expressed intent of Alliance, in its offers of settlement, was to offer compensation in excess of what it considered was require to be paid pursuant to the Act. The offers of settlement were made for the purpose of achieving settlements, in part, because of the costs of arbitration and to be in compliance with the requirements of the Act. Even in those instances which will be discussed later, where the Committee ordered an award of compensation above the threshold amount, the offers of settlement were still considered a reasonable interpretation of the company's obligation. It is the nature of business that offers and counter offers go back and forth between parties, and that is also the case in a formal process for dispute resolution, such as these arbitrations. We are of the view that the offers of settlement also constituted "compensation offered by the company" and must be considered by the Committee under Section 99 of the Act. They were presented by Alliance before these proceeding (sic) were embarked upon and were well known to all involved before the hearings commenced.

[119]        In my opinion, the phrase has a formal meaning. Section 87 of the NEB Act requires that, when lands are required by a company, the company must formally set out in a formal notice, served on the landowners concerned, certain features of the contemplated taking, including "details of the compensation offered by the company for the lands required". By s.99, the payment of legal and appraisal costs related to the taking to be paid by the company are determined by the relationship between the arbitration award and "the amount of compensation offered by the company". The similarity connotes the same figure is contemplated in each section. In addition, neither section refers to "offers of settlement" which would be made subsequent to the provision of the "details of the compensation offered by the company for the lands required".

[120]        Therefore, I find that the Committee's interpretation of the phrase "amount of compensation offered by the company" is an error of law. As a result, given that the Committee awarded costs under s.99(1) and s.99(2) on the basis of a reviewable error, a redetermination of costs is required on all the arbitrations before the Committee.

                        2. The limit of the discretion that an arbitration committee

can exercise under s.99(2)

[121]        In all but three awards, the Committee's determinations of compensation for the lands taken did not exceed 85% of the settlement offers made. With respect to the limit of the discretion that an arbitration committee can exercise under s.99(2), in paragraphs 16, 17, and 20, the Committee found as follows:

In considering costs under Section 99(2) there is no direction in the legislation that provides guidance to the Committee. It is our view that if Alliance appeared to the Committee to be acting in bad faith or took advantage or was duplicitous, those factors would affect our discretion in awarding costs against it. But the parameter under s. 99(2) is not simply measured by reasonableness." [sic] There must be more.

It is our view that we have to consider what the imposition of costs was meant to address in the legislation. Given that costs can only be awarded against a company as opposed to the Landowners and given the reduced threshold of an Award that the Landowner needs to meet to be entitled to costs, the Act encourages a company to be generous in its compensation offers. The Committee finds that Allianceendeavoured to make generous offers of compensation in it (sic) settlement offers. For us to exercise our discretion against Alliance when it had acted in accordance with our view the intent of the Act and had, in effect, exceeded the threshold would be inappropriate; unless the company had done something else to suggest to the Committee that it should exercise its discretion against Alliance or other factors take effect such as costs incurred prior to an offer or to evaluate an offer.

( ... )

The Committee is of the view that unless the 85% threshold is met, there is no obligation upon an arbitration Committee to award costs under Section 99 unless other factors would suggest that costs be awarded.

[122]        In reaching its interpretation of s.99(2), the Committee applied a precedent. Paragraph 21 of the decision reads as follows:

This Committee approves of the discussion of costs of the Arbitration Committee in Richard, Houle and Houle v. TransCanada Pipelines Limited. In considering its discretion to award costs, the Committee is of the view that the 85% threshold method of calculating costs is to discourage pipeline companies from making unreasonable offers of compensation. It also holds a party accountable for protracted or unreasonable proceedings.

[123]        The decision in Richard, Houle and Houle v. TransCanada Pipelines Limited is that of an arbitration committee acting under the NEB Act.    Alliance's argument on costs states the result of the decision as follows:

The Committee reasoned at pp.60-61 that s.99 is intended not only to level the playing field to discourage pipeline companies from making inordinately low offers of compensation, but also "to discourage landowners from holding pipeline companies to ransom by pursuing unmeritorious claims in the expectation that the whole or part of their costs will nonetheless be paid by the pipeline company." The Committee concluded that, if claims have little merit in fact and law, it would not be an appropriate case to exercise its discretion in favour of the landowners.

(Alliance: April 8, 2004, pp.3-4)

[124]        If s.99(2) comes into play in a given arbitration, the provision does not specify a limit on the discretion to award costs, and, in my opinion, none can be arbitrarily placed. There is no basis to say that because a pipeline company must pay any costs awarded under s.99 that the award of costs under s.99(2) can only be made where some blame falls on the company. This might be a factor in a given case, but such a factor should not be converted into a limiting rule. The exercise of the discretion depends on the circumstances of each case.

[125]        The NEB Act provides that even in a situation where a landowner is not successful in attaining an award that is greater than 85% of the last offer that the pipeline company makes, nevertheless, there might be good reason for the landowner to have taken the matter to arbitration. It is in this kind of situation that, even if a landowner does not succeed in meeting the offer threshold, costs might still be awarded under s.99(2). For example, the present arbitrations were the first under the NEB Act subsequent to the 1983 amendments. As a result, a wide range of novel issues were required to be resolved.     It is within the discretion of the Committee to consider the effort made to resolve these issues as good cause to exercise its discretion to award costs.

[126]        In my opinion, the Committee's approval of the opinion in Richard, Houle and Houle v. TransCanada Pipelines Limited has the effect of setting an arbitrary standard, and, therefore, I find it constitutes an error of law. As a result, in addition to the reason provided in Section II(G)(1) above, this reviewable error supplies a reason to order a redetermination of costs.

                        3. The Committee's application of s.99(1)

[127]        Even though the requirement to conduct a redetermination on costs means that all issues on costs are open to argument and decision, I am able to express the following opinion with respect to the application of s.99(1).

[128]        Under s.99(1) the Committee made determinations of reasonable expenses. Alliance argues that, as a matter of discretion, the Committee's findings are not reviewable in the present Appeals. I do not agree. There is no impediment on judicial review under s.18.1 of the Federal Courts Act to reviewing a finding on costs; however, as the award of costs is a matter of discretion, deference should be given, with the result that the standard of review is patent unreasonableness. On this basis, for a landowner or company to succeed on judicial review, a costs award must be shown to have been made in a perverse or capricious manner or without regard to the material before the arbitration committee concerned.

[129]        In its October 21, 2004 decision, the Committee applied s.99(1) to only three decisions in which the arbitration awards exceeded the settlement offers made by Alliance: Bev Collins Holdings Ltd., Scott and Tricia Gabert, and Dale and Gwen Smith. With respect to each of the Bev Collins and Gabert awards, the Committee was critical of Mr. Carter for having instructed their appraiser to "not conduct the appraisal on the basis of the Act", and, thus, did not award costs for the appraisals. As mentioned in Section II(4)(c) above, as the test for determining market value was uncertain in the arbitrations being conducted by the Committee, it is understandable that Counsel for either party should instruct an appraiser on the test that should be applied in reaching an opinion. In my opinion, no costs expended for appraiser opinion developed on this basis should be considered unreasonable. However, I am unable to find that the exercise of the Committee's discretion is patently unreasonable.

[130]        By paragraphs 12 and 13 of the Amended Notice of Appeal with respect to the October 21, 2004 decision, the Landowners dispute the Committee's findings that no weight was given to non-expert witnesses called by the Landowners. As the weight to be given to evidence is a finding of fact to be made by the Committee, I cannot say, in the examples cited, that the Committee's determinations were patently unreasonable.

III.        Extra Grounds of Appeal Arising from the Committee's September 5, 2003 Decision

[131]        In the written argument made on these Appeals, Mr. Carter defines specific issues that must be addressed (Landowners: Memorandum of Fact and Law, pp. 44-52). The Landowners argue that the Committee's decisions are made in reviewable error on the grounds specified.

            A. (Gabert Ground 16) Neglecting to consider the evidence of other agreements in the Strathcona area between landowners and companies such as Corridor Pipeline Ltd., NovaGas and even Alliance itself (e.g. with the Hutterian Colony) as well as agreements Alliance entered into evidence (Exhibit 60).

[132]        This issue is addressed in Section II(B) above.

B. (Gabert Ground 17) Deciding that there was insufficient proof to establish long term damage to the land (Gabert 2003 Decision, p. 17) in the face of evidence to the contrary from the landowner as well as the soil experts, Mr. Bardak and Mr. Twardy.

[133]        In determining there was insufficient evidence to establish long term damage to the land, the Committee made the following finding:

Compensation for Damages:

Regarding the damage claim with respect to these Applicants, Doug Gabert, father of Scott and Tricia Gabert, provided us with his personal opinion that a property with a pipeline had a lower marketability than a property without one (page 1056). Mr. Gabert is not an expert and he provided no appraisal basis to substantiate his statement. Mr. Berrien, the Applicants' appraiser, acknowledged that a pipeline does not injuriously affect agricultural use. Therefore this claim is not substantiated.

Doug Gabert testified that the contractors damaged the soil and that the admixing of soil had caused irreversible long-term environmental damage. He assessed this claim at $200,000.00. However the expert witness who testified on behalf of the Applicants Russell Bardak stated (page 1256) that a capability assessment was not conducted to determine the full impact of the pipeline right-of-way. Mr. Bardak stated on (page 1268) "I concluded the pipeline construction has had an impact that may diminish agricultural capability." On cross-examination Mr. Bardak agreed to the suggestion that construction may not affect agricultural capability. This equivocal statement serves to undermine the claim of the Applicants. They have not advanced with sufficient certainty any expert opinion that there is diminished agricultural capability.

The evidence of Mr. Twardy, an expert agrologist, (page 1554 and page 1565) was that up to 20% admixing of topsoil is acceptable for admixing according to guidelines used by Alberta Environment. Mr. Twardy indicated that reclamation was completed in October of 2000 and an August, 2001 visit clearly showed no reduced canola growth on the right-of-way. The Committee has concluded there was insufficient proof to establish long-term damage to the right-of-way or temporary workspace. As a consequence this part of the Applicant's claim will not be awarded compensation.

(Committee Decision in Gabert, p.17)

[134]        With respect to Mr. Gabert's evidence, the Committee found it admissible but gave it no weight because Mr. Gabert lacked the type of qualifications that the Committee was seeking from witnesses who could offer an opinion on the fact in issue. There is nothing patently unreasonable about this finding.

[135]        With respect to the Committee's consideration of the expert evidence, there is no basis to find that the conclusions expressed are patently unreasonable.

C. (Thederahn Ground 24) Deciding that there was insufficient proof to establish long term damage to the land (Thederahn 2003 Decision, p. 17) in the face of evidence to the contrary from the landowner as well as the soil experts, Mr. Bardak and Mr. Twardy.

[136]        The issue raised in the notice of application and addressed by Mr. Thederahn has to do with damage to land with respect to the depth of the topsoil. Alliance may have taken action to rectify the damage but, nevertheless, Mr. Thederahn gave the following evidence in support of his claim:

In case you don't know it, it takes approximately 100 years to produce a half an inch of topsoil.

What I am referring to here when I have 12 inches here and 9 inches there, and I've only got 4 inches in the centre, if you average it off, I would say I lost another five off. This has been taken away and will never be replaced in my lifetime.

(Transcript of Hearing before the Committee, pp.1211-1212)

[137]        However, the Committee found as follows:

Compensation for Damages:

With respect to damages suffered by the Applicants as a result of the construction or operation of Alliance on their lands, Mr. Frank Thederahn claimed (on page 1239) his only damages was for depth of soil of the right-of-way. Mr. Thederahn and his counsel provided no evidence to quantify this claim or to establish any loss in this regard. Alvin Twardy is an expert agrologist who inspected the properties with respect to the land reclamation deficiencies. He gave extensive evidence on the work done on the Thederahn property. The evidence given by Mr. Twardy (page 1571 on behalf of Alliance is that on August 21, 2001 topsoil was brought in to repair the area which had insufficient depth of topsoil. His evidence was not contradicted by Mr. Thederahn. Based on Mr. Twardy's evidence it is the Committee's view that the problem had been rectified. No evidence was provided to us by Mr. Thederahn that the viability of the land was affected for purposes of agricultural use.

(Committee Decision in Thederahn, pp.17-18)

[138]        It is obvious that the Committee dismissed Mr. Thederahn's evidence in favour of that of the expert witness. I interpret this finding as a finding of weight, and, as a question of fact, to constitute a reviewable error, it must be patently unreasonable. There is no basis for making this finding.

D. (Marouelli Ground 1)       Failing to consider the evidence of the Appellants themselves. The Committee paid no attention to the fact the pipeline was very close to the Appellants' residence and yardsite. It also ignored the fact that the Appellants' lands were not complete quarter sections but rather long, narrow strips of 80 acres each meaning that the Alliance right-of-way had a special encroachment on the Appellants' land.

[139]        In advancing this ground of Appeal, Mr. Carter only supplies the following statement in argument:

222.     At page 18 of the Marouelli decision the Committee stated:

As is the case in most areas, small parcel equivalents represent a significant increment in value over the en bloc value of agricultural land.

223.     The Committee had failed to realize the Marouelli land was not just agricultural land. The pipeline right of way passed through their yardsite. The pipeline was only 75m from their house and the right of was closer yet (never mind the controlled area) yet the Committee made no mention of this whatsoever. And the Marouelli land was in smaller parcels (80 acres rather than 160 acres). The Marouelli case was another example of the Committee's ignoring the personal evidence of landowners (see Ground 28).

(Landowners: Memorandum of Fact and Law, pp.49-50)

[140]        I am unable to provide a decision on this ground of Appeal because the argument is deficient; it does not disclose sufficient detail about the evidence before the Committee to allow any conclusion to be reached.

E. (Olley Ground 4) Deciding that there could be no compensation for intangible losses (see Decision, p. 22).

[141]        Given my interpretation of s.97(1) of the NEB Act provided in Section II(A) above, this ground of Appeal is dismissed.

F. (Olley Ground 5) Deciding the case as if Berrien & Associates had provided a report for that case when in fact they had not (see Decision, p.12).

[142]        The landowners argue that it was an error for the Committee to refer to Berrien & Associates as "the appraisers for both parties" when in fact the Landowners did not call any appraisal evidence. I agree that the statement is an error, but as no consequence was argued, I find it is of no consequence. Therefore, pursuant to the discretion provided in s.18.1(3) of the Federal Courts Act to act or not act on error found, I can find no basis to act.

G. (Bev Collins Holdings Ltd. Ground 7) Making an award of compensation that the Appellant would only be entitled to if it did not avail itself of the right to have compensation paid on an annual or periodic basis pursuant to s. 98(1) of the Act (see p. 14 of the Bev Collins Holdings 2003 decision).

[143]        The finding is as follows:

An Addendum to Report VI - Edson was prepared by Mr. Wasmuth (Exhibit 114). In this report Mr. Wasmuth provides his further opinion concerning "Injurious Affection in Respect of the Alliance Pipeline Easement on Bev Collins Holdings Ltd. Property". It was his initial opinion that "it is too speculative to anticipate and assess future damages for injurious affection at this time ..." (Exhibit 113 p. 79). In his Addendum Mr. Wasmuth concludes that the injurious affection to the Applicant lands "in terms of the maximum current loss or damage is", in so far as this damage is attributable to the Alliance pipeline installation is the sum of $2,200.00. Subject to the right of the Applicant to elect a periodic payment, this additional report is the only evidence of such damage. In the event the Applicant elects to receive the compensation for the acquisition of its lands as a lump sum then the Committee directed that this additional sum of $2,200.00 is to be paid together with the lump sum.

[144]        By s.98(1), at the option of the landowner, compensation determined to be payable can be divided between forms of payment, being lump sum or annual or periodic, and divided with respect to the amount of compensation to be dedicated to each form of payment. As well, if annual or periodic payments are elected, the compensation is to be paid according to the terms specified by the landowner. With respect to Bev Collins Holdings Ltd, the Committee determined that the compensation payable for injurious affection is $2,200. As a result, the Committee was required to pay the compensation according to the full range of options specified by the landowner pursuant to s.98(1), and not just to pay the $2,200 compensation if the landowner specified a lump sum payment with respect to it, or any other compensation found to be payable for any other reason.

[145]        Therefore, in my opinion, the Committee's finding is made in error of law which must be rectified on a redetermination.

IV.        Results Arising from the Reviewable Errors Found

[146]        Each of four reviewable errors found in the Committee's decisions require relief to be ordered:

●           The error of fact and law made in applying the Test for market value to the Strathcona, Lamont, and Edson lands requires that these arbitrations be redetermined.

●           The error of law made in the interpretation of the phrase "amount of compensation offered by the company" in s.99(1) and s.99(2) requires that costs on all arbitrations be redetermined.

●           The error of law made in imposing an arbitrary standard in the application of s.99(2) requires that costs on all arbitrations be redetermined.

●           The error of law made in applying the correct interpretation of s.98(1) in the case of Bev Collins Holdings Ltd. requires that this arbitration be redetermined.

ORDER

Accordingly, for the reasons provided, pursuant to s.18.1(3)(b) of the Federal Courts Act:

1.         I set aside the Committee's decision of October 21, 2004 with respect to each of the Appeals in this consolidated proceeding, and refer the matter of costs back to a differently constituted arbitration committee for redetermination in accordance with the reasons provided.

2.         I set aside the Committee's decision of September 5, 2001 with respect to each of the following Appeals:

            ●           Scott and Tricia Gabert: T-2397-03;

●          Mario and Jamie Marouelli: T-2400-03;

●          Frank and Irma Thederahn: T-2403-03; and

●           Bev Collins Holdings Ltd.: T-2395-03;

and refer the matters back to a differently constituted arbitration committee for redetermination in accordance with the reasons provided.

3.        The Cross-Appeals are dismissed.

4.        With respect to the award of costs on the present Appeals in this consolidated proceeding, in considering the factors provided in Rule 400(3) of the Federal Courts Rules, and having regard to the importance and the complexity of the issues raised for determination and the results achieved, I award costs of each Appeal to the Landowner Appellant in Tariff B, Column III of the Federal Courts Rules.

                                                                                                            "Douglas R. Campbell"

APPENDIX I

Relevant Provisions of the National Energy Board Act, R.S.C. 1985, c. N-7

APPENDIX II

Surface Rights Act, R.S.A. 2000, S-24

Determining compensation

25(1)    The Board, in determining the amount of compensation payable, may consider

                (a)            the amount the land granted to the operator might be expected to realize if sold in the open market by a willing seller to a willing buyer on the date the right of entry order was made,

                (b)            the per acre value, on the date the right of entry order was made, of the titled unit in which the land granted to the operator is located, based on the highest approved use of the land,

                (c)            the loss of use by the owner or occupant of the area granted to the operator,

                (d)            the adverse effect of the area granted to the operator on the remaining land of the owner or occupant and the nuisance, inconvenience and noise that might be caused by or arise from or in connection with the operations of the operator,

                (e)            the damage to the land in the area granted to the operator that might be caused by the operations of the operator, and

                (f)             any other factors that the Board considers proper under the circumstances.

(...)

(7)    In determining the amount of compensation payable, the Board may fix certain amounts payable in the manner and over the periods the Board decides.

APPENDIX III

National Energy Board Act

Excerpt from the

Pipeline Arbitration Committee Procedure Rules, 1986, SOR/86-787

APPENDIX IV

Federal Courts Act, 2002, c.8, s.14

APPENDIX V

Commons Debates: March 6, 1981

GOVERNMENT ORDERS

National Energy Board Act

Measure to Amend

Hon. Marc Lalonde (Minister of Energy, Mines and Resources) moved that Bill C-60, to amend the National Energy Board Act, be read the second time and referred to Committee of the Whole.

He said: Mr. Speaker, first I should like to thank the House for its co-operation in accepting the proposal to consider this bill in such an expeditious manner. I will try not to abuse the indulgence of the House, but I have a few comments concerning the nature of the bill. It has great significance, and it would be only fair to Canadians if I took this opportunity to put a summary on the record concerning the nature of this bill so that everyone will know exactly what it tries to do.

Therefore, it gives me great pleasure to move second reading of Bill C-60, to amend the National Energy Board Act, which received first reading by the House on February 10, 1981. The purpose of this bill is to modernize the statutory procedures used by pipeline companies under federal jurisdiction to acquire lands for their pipelines.

The provisions of the bill will greatly expand the recognition of the rights of the affected land owners, not only in so far as the amount of compensation they receive is concerned, but also by providing them the right at a public hearing to inquire into the appropriateness of the route selected by the company. It is my belief that the bill I am presenting substantially incorporates all the major recommendations of the Law Reform Commission of Canada expressed in its 1975 working paper on the subject of the various expropriation powers conferred under federal statutes.

Before going any further, I wish to express my indebtedness to the Senate of Canada and to my colleague, the Hon. Senator Olson, for their invaluable work in the preparation of this bill.

Currently, the acquisition of land by pipeline companies is governed by the provisions of the Railway Act. This statute, which has not been significantly amended since 1919, has served its purpose, but no longer reflects the views of our society as to the balance that should be drawn between the public interest and the rights of the owners of private property. The Law Reform Commission has criticized the existing procedure, primarily on the ground that no opportunity is given to land owners to question the detailed route chosen by the pipeline company. It has also been criticized on the basis of a lack of codification of the types of damage which should be compensated for, a feature which is common to modern expropriation statutes, including the Expropriation Act of Canada. The present bill addresses those concerns to a degree which, I suggest, makes it one of the most fair and even-handed expropriation statutes in Canada.

I would now like to briefly describe the features of the bill. They can be divided into three main areas: first, the approval of the detailed route of the pipeline; second, the determination of the compensation payable to land owners; and third, the provision governing acquisition by the pipeline company of the right to proceed with construction where agreement has not been reached with the land owner.

Hon. members should note that all of the procedures contained in the bill will be available, not only to land owners whose property will actually be taken for the pipeline, but also to those owners of neighbouring land who will be adversely affected by the proximity of the pipeline. These owners will be notified of the intention of the company to apply to the National Energy Board for approval of its detailed route, and they will be entitled to file objections with the board. If an objection is received regarding any part of the route, the board is required to hold a hearing in that locality, at which time the land owners will have a right to be heard. The board can either alter the route of the pipeline or it can minimize the damage caused by imposing terms and conditions on the approval which will regulate, among other things, the method and timing of acquiring the land and of constructing the pipeline.

To ensure that land owners receive fair compensation, the bill includes a list of types of damage which must be compensated for. Owners whose land will be taken will be given option as to whether they prefer to receive periodic payments, in the nature of a land rental, with the right to have the amount of these payments reviewed at five-year intervals. This option will eliminate the need which now exists to anticipate, in advance, all types of damage which may be caused to an owner by the construction of a pipeline.

As further protection, the bill ensures that every land owner will be advised of his rights under the statute before he enters into any binding contract with the company. As soon as the company identifies the land that it may need for its pipeline, it will be required to serve a notice on every owner advising not only the amount of compensation the company is offering but also explaining, in detail, the various procedures available under the act for his protection, including the right to dispute the route selected.

The procedure for determining disputes as to the amount of compensation will now be removed from the courts. Once the detailed route of the pipeline has been approved and the company is unable to reach agreement with the land owner, either party may apply to me to appoint a negotiator to assist in the bargaining. If the negotiation is unsuccessful, either party may apply to me to have the matter submitted to an arbitration committee for binding determination. Except in a case where the compensation demands of the land owner are unreasonable, the pipeline company will pay the costs of all of these proceedings, including the hearing before the National Energy Board for approval of the detailed route.

Finally, where the company is unable to conclude an agreement with the land owner, it may nevertheless acquire access to this land for construction purposes by applying to the National Energy Board. At least 30 days before this application, the company must advise the land owner of its intention to apply, and the land owner will be entitled to send written objections to the Board. In grating the company access to the land the Board can impose terms and conditions to minimize the damage caused.

Wherever a company receives such a right of entry the land owner becomes entitled to an advance payment on the compensation which will be payable to him. Any disagreement with respect to the amount or the payment of that advance can be submitted for arbitration.

[Translation]

Mr. Speaker, once enacted, this bill will apply to all oil and gas pipelines under federal jurisdiction whose detailed route has not been approved by the National Energy Board when the Act is implemented. Moreover, the procedure concerning the determination of the compensation will apply to land owners who have not entered into an agreement with a company and who have not yet been expropriated under the present provisions. Thus, the bill will apply to the northern Foothills pipeline and the Quebec-Maritime gas pipeline extension.

[English]

The Foothills Pipe Line company has indicated that if the bill should be passed into law at some point prior to the completion of the Alaska Highway Gas Project, it would be prepared to make adjustments which further reflect the new approach provided for under Bill C-60.

[Translation]

Consequently, quick passage of this bill will enable land owners affected by the construction of the northern pipeline to benefit from these new provisions. Finally, passage of Bill C-60 will certainly be an improvement and an undeniable advantage for land owners in Quebec, New Brunswick and Nova Scotiawho will have to part with some of their lands for the construction of a gas pipeline that we have committed ourselves to complete as quickly as possible.

[English]

I trust that the House will agree with me that the bill represents a great step forward in the fair treatment of private parties affected by some of the major public interest projects on the horizon.

The implementation of these new procedures can be expected to produce certain effects on the construction of pipeline projects. First, it will produce some delay in the construction of these projects. Primarily, this will result from the requirement that hearings be held in order to approve the detailed route of a pipeline. The bill contains provisions which will ensure that these delays are no longer than is absolutely required. I would suggest that whatever delays are unavoidable constitute a very small price to pay for a significant improvement in the fairness of these procedures.

The bill will also produce some increase in the cost of pipeline projects. In almost all cases the companies will bear the cost of implementing these procedures. It is expected that there will be some increase in the average amount of compensation paid to each land owner. This will result from the measures taken to ensure that land owners are advised of their rights, and also from the provision for compensation for all sorts of damage, including damage suffered by land owners adjacent to the pipeline right-of-way. I know of many people in the prairies, in particular, who will be very interested in this improvement in our legislation.

[Translation]

I believe that we have to expect an increase in the number of arbitration cases to determine compensation in view of the relaxing of the arbitration procedure and the various provisions under which the company building a pipeline will pay the costs considered reasonable of all the proceedings started by an owner who disagrees with the amount of compensation offered.

The statistical data which I have received from the National Energy Board show that in previous cases of pipeline construction by major companies, very few compensation settlements were subjected to arbitration as they represent as little as 0.6 per cent of the owners involved. This figure might point to the generosity of the companies, but it also probably indicates the lack of understanding of owners concerning their rights or a reluctancy on their part to undertake costly appeal procedures about the amount of compensation granted. It seems to me that the provisions we are proposing here will help to restore the balance between the rights of the pipeline companies and those of the land owners, since the costs incurred in obtaining equitable compensation are no less of a burden for the owner than the damages he sustains.

This bill will also result in an increase in the operating cost of the pipeline once it has been built. That increase will stem from the fact that the companies will have to compensate the land owners for damages caused in the maintenance and operation of the pipeline. That aspect of the matter was somewhat overlooked in the old act, in the sense that negotiations were left entirely to the discretion of the companies and the land owners. No procedure was provided for settling claims by arbitration. I think I can say that the principles of justice and fairness demand that this type of damage not be treated any differently from those that are suffered when the pipeline is built.

Mr. Speaker, I therefore move second reading of the bill and thank all parties for their co-operation in passing this important bill in good time, for I feel sure it will benefit a large number of Canadians in the years to come.

(Emphasis added)

FEDERAL COURT

NAMES OF COUNSEL and SOLICITORS OF RECORD

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

STYLE OF CAUSE:               BYRON BUE, RAYMOND BUE, BEV COLLINS HOLDINGS

LTD., ET. AL. v. ALLIANCE PIPELINE LTD.

                                                          

PLACE OF HEARING:         Edmonton, Alberta

DATES OF HEARING:         May 1-3, 2006

REASONS FOR ORDER

AND ORDER BY:                 CAMPBELL J.

DATED:                                  June 7, 2006

APPEARANCES:

Mr. J. Darryl Carter, Q.C.                                 FOR THE APPELLANTS

Mr. Lars H. Olthafer                            

Ms. Laura Estep                                                FOR THE RESPONDENT

SOLICITORS OF RECORD:

Darryl Carter & Company        

Grande Prairie, Alberta                                      FOR THE APPELLANTS

                                                   

Fraser Milner Casgrain                 

Barristers & Solicitors

Calgary, Alberta                                                FOR THE RESPONDENT