Date: 20071010

Docket: T-955-05

Citation: 2007 FC 1044

Ottawa, Ontario, October 10, 2007

PRESENT:     The Honourable Madam Justice Hansen

 

 

BETWEEN:

 

HEARTLAND RESOURCES INC.

Applicant

 

 

and

 

 

SABLE OFFSHORE ENERGY INC.

and MARITIMES & NORTHEAST

PIPELINE MANAGEMENT LTD.

Respondents

 

 

REASONS FOR JUDGMENT AND JUDGMENT

 

Introduction

[1]        This appeal, pursuant to section 101 of the National Energy Board Act, R.S.C. 1985, c. N-7 (NEB Act or Act), is from an Arbitration Committee’s decision dismissing Heartland Resources Inc.’s (Heartland or the Appellant) compensation claim under Part V of the NEB Act for damages suffered as a result of the construction of a natural gas processing plant, a pipeline and related pipeline infrastructure by Sable Offshore Energy Inc. (SOEI) and Maritimes & Northeast Pipeline Management Ltd.  (M&NP) (collectively the Respondents).

 

Background

[2]        The Appellant holds a mineral exploration licence (licence) issued under Nova Scotia’s Mineral Resources Act, S.N.S. 1990, c.18.  The licence entitles the Appellant to search and prospect for minerals and to extract minerals for test purposes in the approximately 1800 acres covered by the licence in the Goldboro/Seal Harbour, Guysborough County areas in Nova Scotia.

 

[3]        The Respondents are involved in the Sable Offshore Energy Project.  In 1998, the Respondents served notices pursuant to section 87(1) of the NEB Act on the Appellant.  SOEI’s notice, related to the construction of a natural gas processing plant and other pipeline facilities.  M&NP’s notice was for its proposed natural gas pipeline and other pipeline facilities.

 

[4]        The National Energy Board (NEB) approved the Respondents’ applications.  Subsequent to obtaining the approval, SOEI acquired the title to the approximately 200 acres of land on which its gas plant and other pipeline facilities are located.  Similarly, M&NP acquired the title to approximately 3.64 hectares of land and the necessary easements for its installations.  These lands fall entirely within the area covered by the Appellant’s licence.

 

[5]        Following an unsuccessful attempt at negotiation initiated by the Appellant pursuant to subsection 88(1) of the NEB Act, the Appellant served a notice of arbitration on the Minister pursuant to section 90(1) of the Act.  The Appellant’s request was for a determination of the compensation due for damage it sustained by reason of the Respondents’ exercise of the powers granted to them under the Act.  After receiving written submissions from the parties, the Minister appointed an Arbitration Committee to resolve the dispute. 

 

Arbitration Committee’s decision

[6]        The Arbitration Committee concluded that the Appellant’s claim was beyond its jurisdiction to award damages as provided in section 97 of the Act.  The Committee found that the Appellant had failed to establish that the damages it claimed were “caused by” the Respondents as required by section 84 of the Act and that the Appellant was not an “owner of lands” as contemplated by section 90 of the Act.

 

[7]        The Arbitration Committee also considered the merits of the claim in the event that it had erred on the issue of jurisdiction.  The Committee concluded that there was no convincing evidence to establish any diminution in the value of the Appellant’s mineral exploration licence or damages as a result of the Respondents’ activities.  

 

[8]        The Appellant raises the following issues:

 

1.                  Did the Committee err in law in finding that it did not have jurisdiction and/or in refusing to exercise its jurisdiction?

 

2.                  Did the Committee err by failing to deal with the issue of costs as required by section 99 of the NEB Act?

 

3.                  Did the Committee make erroneous findings of fact without regard to the material before it?

 

[9]        Prior to the hearing, the Appellant abandoned its ground of appeal concerning the admissibility of certain evidence and at the hearing indicated that it would not pursue any further an argument based on a breach of a principle of natural justice.

 

Appellant’s submissions

 [10]     There are two aspects to the jurisdiction issue.  First, the Appellant submits it was beyond the Arbitration Committee’s authority to rule on its own jurisdiction.  Second, the Appellant submits the Committee erred in concluding that it did not have jurisdiction to award the claimed compensation.

 

[11]      The Appellant relies on Balisky v. Canada (Minister of Natural Resources), 2003 FCA 104 as authority for the proposition that if there is a right to compensation under the NEB Act, there is a right to arbitration.  The Appellant adds that, in effect, this same proposition was confirmed in Maritimes and Northeast Pipeline Ltd. v. Elliott, 2004 F.C. 553 (F.C.) aff’d 2005 FCA 229.

 

[12]      As to the Arbitration Committee’s authority to rule on its own jurisdiction, the Appellant takes the following position.  Under subsection 91(2) of the NEB Act, an Arbitration Committee shall not be appointed unless the Minister is satisfied that the matter referred to in the notice of arbitration is a matter to which Part V of the NEB Act applies.  Moreover, subsection 97(1) provides that an arbitration committee shall determine all compensation matters referred to in a notice of arbitration served on it.  The Appellant contends that by appointing the Arbitration Committee the Minister determined that the matter of compensation set out in the Appellant’s notice of arbitration was one to which the statutory arbitration provisions in Part V apply.  Relying on the decision in Elliott, the Appellant submits that the Minister may not lawfully appoint an Arbitration Committee unless the circumstances come within the statutory provisions.  Accordingly, the role of the Arbitration Committee is limited to a determination of all compensation matters referred to in the notice of arbitration as required by subsection 97(1) of the Act.

 

[13]      The Appellant also points out that the Respondents made submissions to the Minister objecting to the appointment of an Arbitration Committee.  The Appellant maintains that the Minister’s determination that the Arbitration Committee had jurisdiction was binding on the Committee and, as such, the issue was res judicata having already been decided.  The Appellant submits that if the Respondents were of the view that the Minister erred, they should have brought a judicial review proceeding as in the Balitsy and Elliott cases.  By raising the issue of jurisdiction with the Arbitration Committee, the Respondents were, in effect, appealing the Minister’s decision to the Committee.

 

[14]      The Appellant also argues that having “attorned” to the negotiation provision in Part V of the Act, the Respondents accepted that the Appellant was an “interested person” and could not question the jurisdiction of the Committee.

 

[15]      The Appellant adds that the wording of the Respondents’ section 87 notices demonstrates an acknowledgement on their part that the Appellant is an “owner of lands” and has interest “in” lands.

 

[16]      As to the issue of the jurisdiction to award compensation, the Appellant submits that the Arbitration committee erred in law in finding that it was not an “interested person” as contemplated in section 75 of the NEB Act.

 

[17]      The Appellant submits that the decision in Balisky stands for the proposition that when a company that has been given the authority to construct and operate a pipeline takes land or causes damage arising from the construction or operation of the pipeline and compensation is not agreed upon with the person whose land is taken or who suffers damage, either party may serve a notice of negotiation or arbitration.  The legislative intent is to make whole anyone who suffers loss as a result of the activity of the company.

 

[18]      Subsections 112(1) and 81(1) of the Act establish a “controlled area” of thirty meters and forty meters respectively in all directions from a pipeline.  The Appellant submits that because of the restrictions imposed by these two provisions, the Appellant cannot meaningfully explore or mine its property in the controlled areas without leave of the NEB.  In addition to the significant impact on the value of its licence, this will result in delay, costs and the added risk that the NEB may not grant leave or may impose heavy restrictions.

 

[19]      The Appellant submits that in Balisky Justice Rothstein held that section 84 of the Act does not exclude claims arising from the operation of subsection 112(1).  Further, the Court recognized that a claim for damages in relation to a “controlled area” was an appropriate matter for consideration by an arbitration committee.

 

[20]      The Appellant maintains that the Committee erred by failing to consider and recognize the tangible restrictions and significant impact on it arising from the Respondents’ construction, presence and operation of the pipeline infrastructure.

 

[21]      The Appellant also raised an ancillary issue concerning costs.  The Appellant argues that the Respondents having invoked proceedings under Part V of the Act, the Committee was obliged pursuant to section 99 of the Act to consider the matter of costs even though it had concluded that the Appellant was not a “person interested”.

 

 

Relevant Statutory Provisions

[22]      The following are the relevant statutory provisions:

National Energy Board Act, R.S.C. 1985, c. N-7

 

 

Mineral Resources Act, S.N.S. 1990, c.18

Definitions

 

2. In this Act,

 

…

 

(h) “exploration licence” means a licence by which the holder thereof is granted, pursuant to Section 28, the right to search and prospect for minerals within an area designated in the licence;

 

…

 

Rights conferred

 

38. Subject to Sections 39, 40 and 101, the rights conferred by a licence are, and are limited to, prospecting and searching for minerals, extracting minerals for test purposes and applying for a mining lease for all or a part of the area held under a licence.

 

Prohibited entry or working of private land

 

39. No licensee, legal representative of the licensee or person acting on behalf of the licensee shall enter upon, pass over or work private land for the purpose of gaining access to and working the licence except with the consent of the owner or tenant or pursuant to Section 100.

 

Prohibited entry or working of Crown lands

 

40. No licensee, legal representative of the licensee or person acting on behalf of the licensee shall enter upon and work Crown lands except with the consent of the Minister or of a person designated by the Minister and upon such terms and conditions as are specified by the Minister.

 

 

Standard of Review

[22]      SEOI submits that although determinations regarding jurisdiction, a question of law, are usually reviewed on a standard of correctness, in Toronto (City) v. C.U.P.E. Local 79, [2003] 3 S.C.R. 77, the Supreme Court of Canada qualified this general proposition and held that a wider degree of deference ought to be accorded to expert tribunals when the factors of the functional and pragmatic approach (particularly expertise) indicate that such deference is the legislative intention.

 

[23]      Relying on Pelletier v. Gazoduc Trans-Quebec & Maritimes Inc. (1999), 68 L.C.R 286 (F.C.), SEOI submits that an Arbitration Committee has expertise entitling it to some deference on questions of law.  In the present case, SOEI argues that the Committee’s determinations on the questions of jurisdiction should be reviewed on a standard of reasonableness.  M&NP agrees with this position.

 

[24]      The Respondents also submit that Arbitration Committee’s findings of fact should be reviewed against a standard of patent unreasonableness.

 

[25]      The Appellant submits that all appeals under section 101 of the NEB Act are to be reviewed on a standard of correctness.  The Appellant also adds that since perverse findings of fact can amount to an error of law, no deference should be given to the Committee’s factual determinations.

 

[26]      Given that the issues of jurisdiction in this case are questions of law, the Committee’s findings on jurisdiction will be reviewed on a standard of correctness.  Further, as these issues are determinative of the outcome of this appeal, a consideration of the parties’ positions on the standard of review applicable to the Committee’s findings of fact is unnecessary.

 

Analysis

[27]      In my opinion, the Appellant’s position with regard to the Committee’s authority to rule on its own jurisdiction is not supported by the statutory provisions or the jurisprudence.  Upon being served with a notice of arbitration under paragraph 91(1)(b) of the NEB Act, the Minister is obliged to appoint a Committee and to serve the Committee with the notice of arbitration.  Paragraph 91(2)(b) provides, however, that if the Minister is satisfied that the matter is one to which the arbitration procedures under Part V do not apply, the Minister shall not appoint a Committee. 

 

[28]      First, it should be observed that section 91 only concerns the duties of the Minister upon being served with a notice of arbitration.  It does not concern the Committee’s authority to consider its own jurisdiction.  Second, having regard to the obligation imposed on the Minister to refer the matter to arbitration unless he is satisfied that the arbitration provisions do not apply and the fact that at this stage of the process the Minister may not have sufficient evidence on which to make a determination concerning the applicability of the provisions lead to the conclusion that paragraph 91(2)(b) simply provides for an initial screening by the Minister of those matters he is satisfied do not fall within the arbitration provisions.   

 

[29]      As to the Appellant’s reliance on the statement in Elliott at paragraph 14 that the Minister is obliged to “ascertain whether or not the claim is one for which compensation is provided by the statute”, this was said in the context of a discussion concerning the Minister’s statutory duty under paragraph 91(2)(b).  It does not stand for the proposition that a referral to arbitration is determinative of the Arbitration Committee’s jurisdiction. 

 

[30]      With respect to the Appellant’s reliance on section 97 that the Committee must determine all matter of compensation referred for arbitration and not engage in a consideration of jurisdiction, statutory entitlement is a fundamental question and the starting point for any determination regarding compensation. 

 

[31]      I also reject the argument based on the section 87 notice.  It is trite law that consent to jurisdiction cannot confer jurisdiction on a court or tribunal that it does not otherwise have. 

 

[32]      Finally, section 101of the Act provides for an appeal from a decision of an Arbitration Committee on a question of law or jurisdiction to this Court.  In Gazoduc at paragraph 13, in the context of a discussion of an earlier provision in the legislation regarding the same right of appeal from an Arbitration Committee’s decision on jurisdiction, Justice Denault stated that “[t]here is no doubt that the Arbitration Committee not only had the authority, but also the obligation to rule on its contested competence.”

 

[33]      The remaining jurisdictional question is whether the Committee erred in concluding that the claim was not within its jurisdiction under Part V of the NEB Act. 

 

[34]      The statutory entitlement to compensation is found in section 75 of the NEB Act. A company is required to make full compensation to all “persons interested” for damage sustained by them by reason of the exercise of the powers granted to the company by the Act. 

           

[35]      While section 75 creates an entitlement to compensation, it must be read in the broader context of Part V of the Act and, in particular, the negotiation and arbitration provisions.      

           

[36]      The NEB Act provides that a company or an “owner of lands” may initiate the negotiation proceedings pursuant to subsection 88(1) and the arbitration proceedings under subsection 90(1) by serving the relevant notice on the Minister.  According to subsection 88(1) and incorporated by reference in subsection 90(1), to come within the arbitration provisions of the Act two criteria must be met.  First, the party seeking arbitration must be either a company as defined in the Act or an “owner of lands”.  Second, the compensation being sought must come within the purview of section 84.            

           

[37]      Although “owner of lands” is not defined in the legislation, section 85 states that the word “owner” used in sections 86 to 107 means any person entitled to compensation under section 75.  As to the definition of “lands”, it is found in section 2 of the Act.  It reads:

"lands" means lands the acquiring, taking or using of which is authorized by this Act or a Special Act, and includes real property and any interest or right in real property or land and, in the Province of Quebec, any immovable, any right in an immovable and the right of a lessee in respect of any immovable. Those interests and rights may be in, to, on, under, over or in respect of those lands;

 

 

It should be noted that this definition of “lands” came into force in 2004.  However, any difference between this definition and the earlier version is not material to this discussion.

 

[38]      However, in Elliott, Justice Layden-Stevenson concluded that the meaning of the word “lands” in subsection 90(1) was not restricted to the section 2 definition.  Instead, it “means ‘lands’ as that term is ordinarily used and understood.”

           

[39]      As noted above, the Appellant’s mineral exploration licence was issued under Nova Scotia’s Mineral Resources Act.  Section 38 of this Act provides that the “rights conferred by a licence are, and are limited to, prospecting and searching for minerals, extracting minerals for test purposes and applying for a mineral lease for all or part of the area held under a licence.”  Sections 39 and 40 provide that the holder of an exploration licence may only enter onto private or Crown lands with the consent of the owner/tenant or the responsible Minister.

           

[40]      In Nova Scotia Business Capital Structure v. Coxheath Gold Holding, [1994] N.S.J. No. 480, the Nova Scotia Court of Appeal considered the nature of the rights conferred by an exploration licence.  Although the Court was considering the earlier version of section 38 found in the Mineral Resources Act 1975, S.N.S. c. 12, the changes to the provision are not material for the purposes of this discussion.  The Court observed that the rights conferred by a licence issued under the Act were “entirely dependant on the wording of the statute.”  The Court concluded that there was nothing in the Act from which it could be found that “the Legislature intended to confer a proprietary right in the lands or minerals covered by the licence.”  As the Mineral Resources Act only confers on the holder of a mineral exploration licence the rights detailed above, the Appellant does not have an interest in land and is, therefore, not an “owner of lands” for the purposes of the negotiation and arbitration provisions of the Act.              

           

[41]      The Appellant also submits that the fact that it was served with the section 87 notice demonstrates that the Respondents at that time were of the view that it was a “person interested” within the meaning of the Act.  As well, it applied for and was granted status at the detailed route hearings and was found to be a “landowner” by the Board.  First, as pointed out by the Respondents, the Appellant was served with the section 87 notices as a holder of the “mineral rights or claims on the land” and not as a landowner.  Further, the notices stated that no rights were required from the Appellant.  Second, quite apart from the fact that there was no acknowledgment on the part of the Respondents that the Appellant was an “owner of lands” the Appellant’s right or interest is derived from the statute under which it was granted and not from the section 87 notices. 

           

[42]      As to the Appellant’s assertion that in its decisions in relation to the detailed route hearings the Board found that it was a landowner, the statement relied upon was a general statement regarding the importance of establishing positive working relationships with those parties holding “rights in the land” made in the context of Respondents’ failure to consult with the holders of mineral exploration licences.  In my view this falls far short from being a determination that the Appellant is an “owner of lands” as that term is used in the negotiation and arbitration provisions of the legislation.  I also note that the specific objections raised by the mineral exploration licence holders including the Appellant were dealt with in separate chapters in the reasons entitled “Mineral Rights Objections”.  In these chapters, there is nothing to support the Appellant’s contention that the Board viewed the licence holders as landowners.

 

[43]      Finally, contrary to the Appellant’s submission, the Balisky decision does not stand for the broad proposition that any claim for compensation in relation to a “controlled area” is an appropriate matter for consideration by an Arbitration Committee regardless of the nature of the claimant’s interest.  In that case, unlike in the present case, the claim for compensation was advanced by the owner of the lands in the controlled area.  Further, the analysis is confined to the interests of landowners. 

 

[44]      For the above reasons, I conclude that the Arbitration Committee was correct in finding that it did not have the jurisdiction to consider the Appellant’s claim for compensation.  Having so concluded, I also reject the Appellant’s argument that the Committee was obliged pursuant to section 99 of the Act to consider the matter of costs even though it had concluded that the Appellant was not a “person interested”.

 

[45]      Accordingly, the appeal will be dismissed with costs to the Respondents.

 

 

 

JUDGMENT

 

THIS COURT ORDERS AND ADJUDGES that:

            The appeal is dismissed with costs to the Respondents.

 

 

 

 

“Dolores M. Hansen”

 

 

 

FEDERAL COURT

 

SOLICITORS OF RECORD

 

 

DOCKET:                                          T-955-05

 

 

STYLE OF CAUSE:                          HEARTLAND RESOURCES INC v SABLEOFFSHORE ENERGY LTD et al.

 

 

PLACE OF HEARING:                    Halifax, Nova Scotia

 

DATE OF HEARING:                      February 8, 2007

 

REASONS FOR JUDGMENT:       HANSEN J.

 

DATED:                                             October 10, 2007

 

 

 

APPEARANCES:

 

Mr. Kevin MacDonald	FOR THE APPLICANT
Mr. William Moreira Mr. David Henley	FOR THE RESPONDENT SABLE OFFSHORE ENERGY LTD..
Mr. Martin Kay	FOR THE RESPONDENT MARITIMES & NORTHEAST PIPELINE LTD.

 

 

SOLICITORS OF RECORD:

 

Crowe Dillon Robinson Halifax, Nova Scotia	FOR THE APPLICANT
Stewart McKelvie Halifax, Nova Scotia	FOR THE RESPONDENT SABLE OFFHSORE ENERGY LTD.
Bennett Jones Calgary, Alberta	FOR THE RESPONDENT MARITIMES & NORTHEAST PIPELINE LTD.