Government departments and public authorities have a legal right to take land for public works like a hydroelectric dam, bridge, or highway. The process for doing so, which include giving prior sufficient notice to affected landowners, providing a hearing for affected landowners, and paying fair market compensation for expropriated lands, are set out in the Expropriation Act. However, is there something else outside of the legislated process that constitutes a de facto expropriation which the courts acknowledge should be compensable as well?
That was a question before the Alberta Court of Queen’s Bench in a decision released in early April of 2022. At stake were royalties worth an estimated $190 million. The adversaries were a group of companies with interests in a large coal mine southwest of Edmonton versus the governments of Alberta and Canada. The case is Altius Royalty Corporation v Her Majesty the Queen in Right of Alberta, 2022ABQB 255https://canlii.ca/t/jnlhv.
The plaintiffs were Altius Royalty Corporation, Genesee Royalty Limited Partnership and Genesee Royalty GP Inc. and they have a royalty interest in coal produced from the Genesee Coal Mine located about 70 kilometres southwest of Edmonton. Coal extracted from the mine fuels the nearby Genesee Power Plant that supplies electricity to Edmonton and environs. The Government of Canada enacted regulations to phase out coal-fired generation by 2030. The power plant’s owners entered into an agreement with the Province of Alberta to cease all coal-fired emissions from the plant by December 31, 2030. Consequently, the plaintiff companies will no longer receive royalty payments after that date. The companies argued that because governments had in effect shut down the mine and the companies’ royalties were lost as of 2030, this constituted a de facto expropriationof their interest so must be compensated.
Expropriation is a legal process by which title to private land is transferred to government or a government agency for a public works project. However, a few judicial decisions have recognized that something other than an absolute transfer of title may be possible and thus is compensable, i.e., a de facto expropriation. Such an expropriation has two elements: 1. the acquisition of a beneficial interest in the property or flowing from it; and 2. the removal of all reasonable uses of the property.
De facto expropriation was considered by the Court of Appeal of Alberta in Alberta (Minister of Infrastructure) v Nilsson, 2002 ABCA 283 https://canlii.ca/t/5ftf, which said at paragraph 51: “In such cases, while title nominally rested with the original owner, the degree of interference with the owner’s property rights mandated compensation for the loss of the property.” In Manitoba Fisheries Ltd. V The Queen , [1979] 1 SCR 101 https://canliiconnects.org/en/summaries/72273, the Supreme Court of Canada had to decide whether federal legislation that created a Crown fish exporting business had resulted in a monopoly which effectively denied an exporting trade for private exporters. The legislation said that private fish businesses could only export if they were granted an export permit or an exemption. However, the Crown corporation never granted any export permits or licences. The plaintiff fisheries company sought compensation for the loss of its physical assets and markets. A majority of Supreme Court judges agreed that the effect of the legislation was to transfer a private company’s property to the Crown and ordered the Crown to pay compensation for this loss. The Supreme Court of Canada was also asked to weigh in on another resource case involving harm to private interests, that of British Columbia v Tener, [1985} 1 SCR 533 https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/50/index.do. The respondents owned mineral claims on land located in a provincial park. Provincial legislation stipulated that a park use permit was necessary for any person wishing to conduct mining operations in provincial parks and the respondents were told no permits would be issued in accordance with a policy in force at that time. A majority of the Supreme Court held that the holders of the mining claims were being deprived of the value of their interests so should be compensated for their economic loss.
A Master in Chambers had granted a summary dismissal of the plaintiffs’ claim for compensation under de facto expropriation, in a decision reported at Altius Royalty Corporation v Alberta, 2021 ABQB 3 https://canlii.ca/t/jccjg. A summary judgment is awarded when there is no defence, no merit to a claim, or the only real issue is the amount of compensation to be awarded. The party who made the motion to dismiss (in this case the defendants) has the burden of proving on a balance of probabilities there is no merit to a claim.
In a nutshell, the plaintiffs’ argued that de facto expropriation occurred when they lost their property interest in the extraction of coal at the Genesee Mine with the projected end of royalty payments after 2030. However, the Master found that the environmental regulation by Canada to meet domestic and international standards did not constitute a taking. Nor did the actions of Alberta, which included entering into an “off coal” agreement compensating the power plant owner and other persons impacted by the plant’s eventual closure, constitute takings or actionable wrongs that are subject to compensation.
In upholding the decision to dismiss the action, the Honourable Justice Price rejected the plaintiffs’ argument that although legal title to the coal would remain with them after 2030, the Crown would acquire a beneficial interest in the coal as it would remain in a natural state underground. Justice Price saw no evidence that the Crown would in any way recover an absolute interest in the coal. Nor was there any evidence the Crown would have any interest in maintaining the coal in a natural state. Instead, the honourable justice saw the Crown’s public interest in reducing Canada’s production of greenhouse gases as manifested by being a signatory to the 2015 Paris Agreement and the domestic regulatory regime that followed. In short, the first requirement of the test for de facto expropriation was not met because the Crown had not obtained a beneficial interest in the property or flowing from it.