Encana Corporation v. ARC Resources Ltd., 2011 ABQB 431

Court of Queen ’ s Bench of Alberta Citation: Encana Corporation v. ARC Resources Ltd., 2011 ABQB 431 Date: 20110707 Docket: 0601 12266, 0601 12267, 0601 14382, 0601 12766, 0801 03839, 0801 03861, 0801 14295 Registry: Calgary

Docket : 0601 12766 Between: Encana Corporation Plaintiff Defendant by Counterclaim - and - ARC Resources Ltd. Defendant Plaintiff By Counterclaim Docket : 0601 12266, 0601 12267, 0601 14382 And Between: Encana Corporation Plaintiff - and - Devon Canada Corporation Defendant Docket : 0801 03839 And Between: ConocoPhillips Canada Resources Corporation Plaintiff - and - Encana Corporation Defendant Docket : 0801 03861

And Between: Direct Energy Marketing Limited Plaintiff - and - Encana Corporation Defendant Docket : 0801 14295 And Between: Carbon Development Partnership, Carbon Development Corporation and Encana Corporation Plaintiffs Defendants by Counterclaim - and - ARC Resources Ltd. Defendants Plaintiffs by Counterclaim _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice C.A.

Kent _______________________________________________________ [ 1 ] Actions were commenced by and against Encana Corporation (Encana) and Carbon Development Corporation (CDC) and Carbon Development Partnership (CDP) on the issue of the ownership of coalbed methane (CBM). The actions were to proceed to trial

in March, 2011. In December, 2010, the provincial government amended the Mines and Mineral Act , R.S.A. 2000, c. M-17 ( MMA ). As a result of that amendment, I granted the Applicants—ConocoPhillips Canada Resources Corp., Devon Canada Corporation, Direct Energy Marketing Limited, and ARC Resources Ltd.—leave to bring a

summary judgment application because of the statutory amendment. It must be noted that not all the leases that constitute the claims are the subject of this application. The Applicants acknowledge that for some leases the wording is not sufficiently clear to meet the test for

summary judgment. Although the argument at trial will be the same, they say that unlike the leases that constitute this application, a factual foundation will be required. The Legislation [ 2 ] The relevant sections of the MMA are: Section 1(1)(p)(

i) In this Act, (p) “minerals” means all naturally occurring minerals, and without restricting the generality of the foregoing, includes (

i) gold, silver, uranium, platinum, pitchblende, radium, precious stones, copper, iron, tin, zinc, asbestos, salts, sulphur, petroleum, oil, asphalt, bituminous sands, oil sands, natural gas, coal, anhydrite, barite, bauxite, bentonite, diatomite, dolomite, epsomite, granite, gypsum, limestone, marble, mica, mirabilite, potash, quartz rock, rock phosphate, sandstone, serpentine, shale, slate, talc, thenardite, trona, volcanic ash, sand, gravel, clay and marl, but

Section 2 Application of Act This Act applies (

a) to all mines and minerals, pore space and related natural resources vested in or belonging to the Crown in right of Alberta, and (

b) where the context so permits or requires, to all wells, mines, quarries and minerals in Alberta. RSA 2000 cM 17 s2; 2010 c14 s2

Section 10 Gold and silver It is hereby declared that no grant from the Crown, whether relating to land, minerals in land or otherwise, has operated or will operate as a conveyance of gold and silver unless gold and silver are expressly named and conveyed in the grant. 1983 c36 s6

Section 10.1

Coalbed methane

(1) Coalbed methane is hereby declared to be and at all times to have been natural gas. (2) Subsection (1) does not affect any conveyance, agreement, agreement for sale, lease, joint venture or any other contract that specifically grants, leases, excludes, excepts or reserves rights in land in respect of coalbed methane and that was entered into before the coming into force of this

section by (

a) the owner of the title to natural gas in the land, or any person holding natural gas rights through that owner, and (

b) the owner of the title to coal in the land, or any person holding coal rights through that owner.

(3) The owner of the title to natural gas in any land, and any person holding natural gas rights through that owner, has no right of action and shall not commence or maintain proceedings against the Crown, the owner of the title to the surface of the land or the coal in the land, or any person holding coal rights through the owner of the title to the coal for damages or compensation because of extraction, production or removal of coalbed methane from the land if that extraction, production or removal occurred before the coming into force of this section.

(4) It is deemed for all purposes, including for the purposes of the Expropriation Act, that no expropriation occurs as a result of the enactment of this section.

(5) No person has a right of action and no person shall commence or maintain proceedings (

a) to claim damages or compensation of any kind, including, without limitation, damages or compensation for injurious affection, from the Crown, or (

b) to obtain a declaration that the damages or compensation referred to in clause (

a) are payable by the Crown, as a result of the enactment of this section. 2010 c20 s2

Section 15.1 Pore space

(1) It is hereby declared that (

a) no grant from the Crown of any land in Alberta, or mines or minerals in any land in Alberta, has operated or will operate as a conveyance of the title to the pore space contained in, occupied by or formerly occupied by minerals or water below the surface of that land, (

b) the pore space below the surface of all land in Alberta is vested in and is the property of the Crown in right of Alberta and remains the property of the Crown in right of Alberta whether or not

(

i) this Act, or an agreement issued under this Act, grants rights in respect of the subsurface reservoir or in respect of minerals occupying the subsurface reservoir, or (ii) minerals or water is produced, recovered or extracted from the subsurface reservoir, and (

c) the exception of pore space under this

section is deemed to be an exception contained in the original grant from the Crown for the purposes of section 61(1) of the Land Titles Act . (2) Subsection (1) does not operate to affect the title to land that, on the date on which this

section comes into force, belongs to the Crown in right of Canada.

(3) The Minister may enter into agreements with respect to the use of pore space.

(4) It is deemed for all purposes, including for the purposes of the Expropriation Act , that no expropriation occurs as a result of the enactment of this section.

(5) No person has a right of action and no person shall commence or maintain proceedings (

a) to claim damages or compensation of any kind, including, without limitation, damages or compensation for injurious affection, from the Crown, or (

b) to obtain a declaration that the damages or compensation referred to in clause (

a) is payable by the Crown, as a result of the enactment of this section. 2010 c14 s2

Section 64 Coal rights Except as provided in

section 72, this Part applies to coal rights that are the property of the Crown in right of Alberta. 1983 c36 s7

Section 67 Rights granted by lease

(1) A coal lease grants the right to the coal that is the property of the Crown in the location in accordance with the terms and conditions of the lease but, subject to subsection (2), does not grant any rights to any natural gas, including coalbed methane.

(2) The Minister, on the recommendation of the Energy Resources Conservation Board that it is necessary to do so for safety or conservation reasons, may authorize the lessee of a coal lease to recover natural gas, including coalbed methane, contained in a coal seam in the location of the coal lease. RSA 2000 cM 17 s67; 2003 c18 s15 ; 2005 c28 s8 ; 2007 cA 37.2 s82(16) The History [ 3 ] In 1881, the federal government granted to Canadian Pacific Railway title to 25 million acres of land and mines and minerals.

Since that time, the CPR or its successor leased petroleum and natural gas rights to companies including the Applicants or their predecessors. There are 446 leases at issue between the Applicants and the Respondents. Not all the leases have the same language.

A sampling of the wording of the leases is as follows: (a) “all the petroleum and natural gas, natural gasoline and related hydrocarbons other than coal, and also including sulphur as recovered in solution or in association with any of the liquid or gaseous hydrocarbons...” (b) “all the petroleum and natural gas and related hydrocarbons which are owned by the Lessor except coal and valuable stone... (c) “petroleum, natural gas and related hydrocarbons except coal... (d) “natural gas and related hydrocarbons except coal...” (e) “petroleum, and natural gas, natural gasoline and related hydrocarbons, other than coal...” and (f) “natural gas and includes associated substances to the extent only that the rights belonging thereto belong to the Lessor by virtue of its ownership of natural gas rights...” Legislative History of MMA

section 10.1 [ 4 ] The Applicants provided excerpts from statements made by the Energy Minister during first and second reading of the proposed amendment which was to add

section 10.1 to the MMA . When Bill 26 was introduced, he made the introductory remarks reproduced below: Legislative Assembly, Alberta Hansard , No. 34 (27 October 2010) at 980 (Ron Liepert). Mr. Speaker, this legislation contains three major provisions. One, it provides coal-bed methane ownership certainty by declaring that coal-bed methane is and always has been natural gas for both Crown and freehold minerals.

Two, it recognizes that existing agreements entered into by the natural gas owner or their lessee that specifically granted coal-bed methane rights to the coal owner or coal owner’s lessee will not be affected.

Three, it protects coal owners and their lessees, surface owners, and the government from being sued by natural gas owners or their lessees for extraction, reduction, or removal of coal-bed methane prior to enactment of this legislation. [ 5 ] At the time of second reading, the Minister provided the additional explanatory comments given below: Legislative Assembly, Alberta Hansard , No. 35 (28 October 2010) at 1012-3 (Ron Liepert). The amendments in Bill 26 provide coal-bed methane ownership certainty by declaring that coal-bed methane is and always has been natural gas for both Crown and freehold minerals. ...

The consultation considered several freehold issues, including split-title mineral ownership. These stakeholders did not reach a consensus on a legislative approach to clarifying the ownership issue. Some companies have initiated court action to clarify ownership; however, these court cases have been in progress for four years and may take several or even many more years to resolve. Also, a court decision, Mr. Speaker, may only apply in certain circumstances. Therefore, clarity is needed now to help development of Alberta’s CBM resources. In fact, back in 2003 the hon.

Member for Edmonton-Gold Bar stated that Alberta needed to take a lead role in the development of our CBM by removing the uncertainty that surrounds entitlement to coal-bed methane underlying Crown and freehold lands in this province. I’m pleased to say today that we are pretty much doing what the member suggested back in 2003 ... Bill 26, the Mines and Minerals (Coalbed Methane) Amendment Act, 2010, clarifies CBM mineral ownership by indicating that CBM is and always has been a natural gas for both Crown and freehold minerals.

CBM is therefore owned by the natural gas mineral owner and not the coal mineral owner. ... There have been precedents for this type of legislation in Alberta, previous Alberta declaratory statutes enacted to clarify ownership rights, including declaring that sand and gravel belonged to the surface rights owner in 1951, declaring that clay and a fine-grained carbonate-rich mud known as marl belonged to the surface rights owner in 1961, and declaring that a large list of natural substances belonged to the mineral owner, also in 1961.

Now, an amendment to the Mines and Minerals Act in 2003, which I mentioned earlier, stated that the Crown [coal lease] did not grant any rights to the natural gas, including CBM, and this indirectly clarified ownership of CBM on Crown land but did not apply to freehold land. In 2003 the British Columbia government passed the Coalbed Gas Act, legislating that CBM must be considered to be and always has been natural gas and is therefore owned by the natural gas owner. ...

By passing Bill 26, the Mines and Minerals (Coalbed Methane) Amendment Act, 2010, we will be able to remove a potential barrier to the development of CBM on freehold land, which in turn may encourage additional development of Alberta’s abundant CBM resources. The Test for

Summary Judgment [ 6 ] Rule 7.3(1) of the Rules of Court provides as follows: 7.3(1) A party may apply to the Court for

summary judgment in respect of all or part of a claim on one or more of the following grounds: (

a) there is no defence to a claim or part of it; (

b) there is no merit to a claim or part of it; (

c) the only real issue is the amount to be awarded. [ 7 ] The test for

summary judgment under new rule 7.3 is the same as under the old rules: Manufacturers Life Insurance Co. v. Executive Centre at Manulife Place Inc. , 2011 ABQB 189 at para. 11 ; BA Capital Inc. v. Stream Oil & Gas Ltd. , 2011 ABQB 91 (Master) at paras. 3-4 . [ 8 ] An expression of this rule was given by the Alberta Court of Appeal in Tottrup et al. v. Clearwater No. 99 (Municipal District) , 2006 ABCA 380 , 401 A.R. 8.

The Court noted at paras. 11-12 that “trials are primarily to determine questions of fact” and that a trial is therefore not required if the facts are not in dispute and the legal issues involved are sufficiently settled that they can be “fairly decided on the record before the court”. [ 9 ] The Court of Appeal in Tottrup noted that different types of cases call for different approaches. For an application based simply on the factual merits of the case courts apply a two-stage test. First, the moving party must prove on a balance of probabilities that there is no genuine issue for trial.

This being done, the evidentiary burden then shifts to the respondent to show that there is a genuine issue for trial. In the end, for

summary judgment to be granted, “[i]t must be beyond doubt that no genuine issue for trial exists”: Tottrup at para. 10 citing Pioneer Exploration Inc. Estate (Bankrupt) v. Euro-Am Pacific Enterprises Ltd. 2003 ABCA 298 , 339 A.R. 165

at para. 19. Similarly, in the context of an application for

summary dismissal of an action, “it must be ‘plain and obvious’, or ‘clear’ or‘beyond real doubt’ that the action should be summarily disposed of”: Tottrup at para 10. The Respondents note that if a chambers judgemust assess the quality and weight of the evidence to arrive at

summary judgment, the “beyond doubt” standard has not been satisfied:Liu v. Tangirala, 2004 ABCA 171 at para. 2; De Shazo v. Nations Energy Co., 2005 ABCA 241, 367 A.R. 267 at para. 17. This does notmean, however, that

summary judgment does not involve an examination of the facts. When considering an application for

summaryjudgment, “the court has an obligation to conduct a careful review with an eye to determining whether there are undisputed factssufficient to resolve the matter, even when the action is complex.”: De Shazo at para. 18. [10] On the other hand, the Court of Appeal in Tottrup notes there are other types of

summary judgment applications: [11] ... In some cases the facts are clear and undisputed. The ultimate outcome of the case may depend on the

interpretation of somestatute or document, or on some other issue of law that arises from undisputed facts. In such cases the test for

summary judgment is notwhether the issue of law is “beyond doubt”, but whether the issue of law can fairly be decided on the record before the court. If the legalissue is unsettled or complex or intertwined with the facts, it is sometimes necessary to have a full trial to provide a proper foundation forthe decision. In other cases it is possible to decide the question of law summarily[.] [11] The Ontario Court of Appeal has held that

summary judgment is inappropriate to decide a significant question of lawinvolving the definitive

interpretation of a legislative provision: Romano v. D’Onofrio, (2005) (ON CA), 77 O.R.(3d) 583, 262 D.L.R. (4th) 181 at paras. 7-9.

Summary judgment is also denied where a determination of the issue requires a carefulanalysis of a complex legal test such as the Anns/Kamloops test in a negligence case: Milne v. Alberta (Workers’ Compensation Board), 2008 ABQB 710, 100 Alta. L.R. (4th) 311 at paras. 54, 60. [12] The Supreme Court of Canada has said that the bar on a motion for

summary judgment is high. “It is essential to the properoperation of the justice system and beneficial to the parties that claims that have no chance of success be weeded out at an early stage.Conversely, it is essential to justice that claims disclosing real issues that may be successful proceed to trial.”: Canada (AttorneyGeneral) v. Lameman, 2008 SCC 14, 1 S.C.R. 372 at paras. 10-11. [13] Finally, the Respondents argue that there is one more bar to

summary judgment apart from those stated or implied by Rule7.3(1), which is that

summary judgment is inappropriate if granting it would unnecessarily complicate a trial that is going to proceed inany event: Figueroa v. Petro Andina Resources Inc., 2009 ABQB 434 at para. 18. Where there are overlapping issues and repetition ofevidence, there is a risk of inconsistent verdicts between

summary judgment and the trial: Murphy Oil Co. Ltd. v. The Predator Corp.Ltd., 2002 ABQB 629, 319 A.R. 328. [14] In this case, the Applicants say that

section 10.1 is a complete answer to the claims for

summary judgment. It is simply amatter of statutory

interpretation. The Respondents say that these actions are complex and therefore should not be decided by way ofsummary judgment. Moreover, they say, there are facts in dispute which must be determined before the correct application of section10.1 can be done. [15] My approach to this application will be as follows. I will look at

section 10.1 having regard to the rules of statutoryinterpretation to see if the meaning is as obvious as the Applicants say. If on a preliminary basis, it appears to be obvious, I will considereach of the Respondents’ arguments to determine if either the Applicants’

interpretation is wrong or because of factual disputes orcomplexity, this must be left to trial. Declaratory Relief [16] The Respondents argue that another principle is relevant specifically in the context of the subset of actions in which no actualtrespass has been alleged. In those actions the Applicants have merely sought a declaration of rights. The Respondents assert that inrespect of these actions the claim is merely hypothetical. [17] While courts have jurisdiction to provide declaratory relief in the context of hypothetical claims, courts will often exercise

discretion to refuse relief in such circumstances: Lord Woolf, Zamir and Woolf: The Declaratory Judgment, 3d ed. (London: Sweet &Maxwell, 2002) at para. 4.042. “A claim for a declaration of right is most hypothetical when that right is not disputed by the defendant”,and a declaration would not be made in such circumstances merely to provide the applicant with certainty: ibid. at para. 4.056. [18] The availability of declaratory judgment for hypothetical questions was considered by the Supreme Court of Canada in Operation Dismantle Inc. et al. v. The Queen et al., (SCC), [1985] 1 S.C.R. 441, 18 D.L.R. (4th) 481.

In that case (atpara. 31), the Court quoted from Fager, The Declaratory Judgment Action (1971), at 5: The remedy [of declaratory relief] is not generally available where the controversy is not presently existing but merely possible orremote; the action is not maintainable to settle disputes which are contingent upon the happening of some future event which may nevertake place.

Conjectural or speculative issues, or feigned disputes or one-sided contentions are not the proper subjects for declaratory relief. [19] The Court continued with this quotation from Sarna: “The court does not deal with unripe claims, nor does it entertainproceedings with the sole purpose of remedying only possible conflicts.”: The Law of Declaratory Judgments (1978) at 179. [20] However, preventive declaratory judgments are still available in some circumstances: Borchard, Declaratory Judgments (2ded. 1941) at p. 27, cited in Operation Dismantle at para. 32: ... no “injury” or “wrong” need have been actually committed or threatened in order to enable the plaintiff to invoke the judicial process;he need merely show that some legal interest or right of his has been placed in jeopardy or grave uncertainty.... [21] The requirement for declaratory relief then is that there be more than mere hypothetical consequences.

A “cognizable threat”to a legal interest is required: Operation Dismantle at para. 33. [22] This is not really hypothetical. Drilling for gas is risky and expensive. It is prudent for the Applicants to ask to have theownership of CBM determined, in this application or if necessary, at trial. The Rules of Statutory

Interpretation [23] Statutory

interpretation in Canada is guided by Elmer Driedger’s “modern principle”, which is that “the words of

an Act are tobe read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of theAct, and the intention of Parliament.”: Rizzo & Rizzo Shoes Ltd. (Re), (SCC), [1998] 1 S.C.R. 27, 154 D.L.R. (4th) 193at para. 21, citing Elmer A. Driedger, Construction of Statutes, 2d ed. (Toronto: Butterworths, 1983) at 87. [24] Furthermore, “[i]t is presumed that the ordinary meaning of a legislative text is the meaning intended by the legislature. In theabsence of a reason to reject it, the ordinary meaning prevails.”: Ruth Sullivan, Sullivan on the Construction of Statutes, 5th ed.(Markham: LexisNexis, 2008) at 24. [25] The

Interpretation Act also requires that every enactment “shall be construed as being remedial, and shall be given the fair,large and liberal construction and

interpretation that best ensures the attainment of its objects.”: R.S.A. 2000, c. I-8, s. 10. [26] The modern approach to statutory

interpretation requires a purposive analysis. All legislation is presumed to have a purposethat the courts can discover or reconstruct through

interpretation. “In so far as the language of the text permits,

interpretations that areconsistent with or promote [the] legislative purpose should be adopted, while

interpretations that defeat or undermine [the] legislativepurpose should be avoided.”: Sullivan at 255. Moreover, “[e]very word in a statute is presumed to make sense and to have a specific role

to play in advancing the legislative purpose”: Placer Dome Canada Ltd. v. Ontario (Minister of Finance), 2006 SCC 20, [2006] 1 S.C.R.715 at para. 45, citing Ruth Sullivan, Driedger on the Construction of Statutes, 3d ed. (Toronto: Butterworths, 1994) at 159: Driver IronInc. v. International Association of Bridge, Structural, Ornamental and Reinforcing Ironworkers, Local Union No. 720., 2011 ABCA 55at para. 11. Courts should therefore avoid adopting

interpretations that render any part of a statute meaningless or redundant: Hill v. Hill(Park Lane) Ltd., [1949] A.C. 530 at 546, 2 All E.R. 452 (H.L.), cited in Placer Dome at para. 46: Driver Iron at para. 11. [27] In assessing the purpose and intent of legislation, legislative history materials such as Hansard may be used if they arerelevant and reliable: Sullivan on the Construction of Statutes at 612; Rizzo at para. 35. In some cases considerable weight can be givento such materials: Re Tschritter and Sohn et al., (1989), 1989 ABCA 83 , 57 D.L.R. (4th) 579 at 587 (ABCA).

However, courtsmust take care not to give undue weight to such extrinsic materials, considering the political nature of legislative debate and the fact thatindividual statements may not reflect the intent of the legislature as a whole: Rizzo at para. 35; R. v. Heywood, (SCC),[1994] 3 S.C.R. 761 at para. 43; Glaxo Wellcome Inc. v. R. (1996), (TCC), 96 D.T.C. 1159, [1996] 1 C.T.C. 2904 atparas. 22, 24, aff’d (1998), (FCA), 98 D.T.C. 6638, [1999] 4 C.T.C. 371 (Fed.

C.A.). [28] The timing and circumstances of the passage of the legislation may also be considered: Re Woodward Estate (1971), (BC CA), 21 D.L.R. (3d) 681 at 700 (BCCA) aff’d (SCC), [1973] S.C.R. 120; Quebec (A.G.) V. Healey, (SCC), [1987] 1 S.C.R. 158 at 177-8. [29] While the modern contextual approach to statutory

interpretation does afford courts the flexibility to consider more than thecommon grammatical meaning of the words in the enactment, courts are generally not free to read in terms that are not there. “It is onlywhen words are ‘reasonably capable of bearing’ a particular meaning that they may be interpreted contextually.”: R. v. McIntosh, (SCC), [1995] 1 S.C.R. 686 at para 28. [30] There is an interpretive presumption that the legislature does not intend to abolish, limit, or otherwise interfere with privateproperty or common law rights, unless the intention to do so is expressly stated or necessarily implied.

Therefore legislation that curtailsprivate rights is strictly construed: Sullivan on the Construction of Statutes at 476; Spooner Oils Ltd. v. Turner Valley Gas ConservationBoard, (SCC), [1933] S.C.R. 629 at para. 22; Re Gordon MacKay & Co. and Dominion Rubber Co., (ON CA), [1946] 3 D.L.R. 422 (Ont. C.A.) at para. 7. Courts are to “lean against”

interpretations of statutes that would allow one partyto appropriate the property of another: Pyke v. TriGlo Enterprises Ltd. (2001), (ON CA), 55 O.R. (3d) 257 (Ont. C.A.)at para 77; Homeplan Realty Ltd. v. Avco Financial Services Realty Ltd., (SCC), [1979] 2 S.C.R. 699 at para 17. [31] Finally, some enactments are intended to remove doubts or correct misunderstandings of the existing law. Such declaratoryenactments declare not only what the law is for the future but also what the law has always been. Such acts are therefore usually held tohave retroactive effect: Western Minerals Ltd. v.

Gaumont, (SCC), [1953] 1 S.C.R. 345, [1953] 3 D.L.R. 245 at 264-5;Sullivan on the Construction of Statutes at 682-3. Argument of the Applicants [32] The Applicants’ argument is reasonably straightforward. They say that

section 10.1 of the MMA declares CBM to be naturalgas. Since the Respondents’ reservations are for coal and the leases have granted natural gas, the reservations do not include CBM. Coaland natural gas are both enumerated substances in the definition of mineral in the MMA. Neither coal or natural gas are defined. Section10.1 says CBM is natural gas. It cannot also be coal. They say that subsections 10.1(2) and (3) confirm this

interpretation because thosesubsections distinguish between the coal owner and the natural gas owner when they speak about an exception to

section 10.1 (10.1(2))and when they bar claims as a result of the removal of CBM prior to the amendment (10.1(3)). [33] The Applicants argue that the legislative history—more particularly the comments of the Minister of Energy at both first andsecond reading of the amendment—confirms their

interpretation. They say that those remarks deal with the purpose of the amendmentincluding settling the issues outstanding in these actions. [34] The Applicants say that the amendment is declaratory with a result like that in Western Minerals Ltd. v. Gaumont, (SCC), [1953] 3 D.L.R. 245. That case dealt with the effect of The Sand and Gravel Act, S.A. 1951, c. 77, now

section 58 ofthe Law of Property Act, R.S.A. 2000, c. L-7 (“LPA”). The Sand and Gravel Act had declared at

section 3 that “[t]he owner of the surface

of land is and shall be deemed at all times to have been the owner of and entitled to all sand and gravel on the surface of that land and all sand and gravel obtained by stripping off the overburden, excavating from the surface, or otherwise recovered by surface operations.” This legislation was enacted after a lower court decision in the case that granted ownership of the sand and gravel to the mineral owner but before the appeal was decided. Both the Court of Appeal and the Supreme Court of Canada found the amendment to be determinative of the issue. [ 35 ] Preliminary consideration of the Applicants’ argument is persuasive. The plain wording of

section 10.1(1)—CBM is ... and at all times ... [has] been natural gas—combined with the statements in the Legislature from the Minister of Energy, strongly supports an

interpretation of

section 10.1 to be that the owner of natural gas owns the CBM. I have placed considerable weight on what the Minister said in his two statements. These were statements made by the responsible minister introducing a Bill. This did not come from an opposition member nor was it part of the raucous exchange that can occur during Question Period or debate on a Bill. The Minister spoke about ownership and about ongoing litigation which can only mean this litigation. [ 36 ] Having made that preliminary finding, I turn to the Respondents’ arguments to determine if my preliminary view is incorrect or if it leaves me in doubt so that

summary judgment should not issue. Argument of the Respondents [ 37 ] The Respondents make six arguments. They contend that MMA

section 10.1 does not apply to purely private minerals nor to private leases. Even if it does apply, CBM was reserved by the Respondents as part of the coal reservations, and the leases embodying those reservations are therefore saved by

section 10.1(2). The Respondents claim further that

summary judgment is not available because there are relevant factual disputes that require a full trial, because there are complex, novel, and intertwined issues of fact, law, and policy, and because

summary judgment would complicate the other related trials that are proceeding later.

Section 10.1 does not apply to private minerals nor to private leases [ 38 ] First, the Respondents contend that the newly enacted

section 10.1 of the MMA does not apply to privately-held minerals, except where title is split between the Crown and a freeholder. Subsection 2(

b) provides that the MMA applies to “all” mines and minerals only “where the context so permits or requires”. The Respondents note that when subsection 2(

b) was enacted in 1933, the purpose stated in the Notes to the Bill was to make the Act applicable to private lands “where the context expressly makes it so applicable”: Bill 44,

An Act to amend The Provincial Lands Act , 3d Sess., 7th Leg., Alberta, 1933, Note (assented to 11 April 1933), S.A. 1933, c. 24 . If a provision could apply to all mines and minerals, including freehold minerals, simply by virtue of being silent with respect to its application, subsection 2(

b) would be meaningless.

Section 10.1 must apply to Crown lands by virtue of

section 2(a), which provides that the Act applies to all Crown minerals. Similarly in the case of freehold minerals where title is split with the Crown, the combined effect of subsections 2(

a) and 2(

b) is to require the application of the MMA to those lands; the split-title context requires that the Act, including

section 10.1, apply to such private minerals. However there is nothing in

section 10.1 or elsewhere in the Act that requires general application to all freehold minerals. Contrast this with

section 15.1, enacted at the same time, which makes specific references to “any land in Alberta” and “all land in Alberta”. [ 39 ] Similarly, the Respondents say that private leases are not affected by MMA

section 10.1. Given the interpretive presumption against interference with private rights (above), and given that neither

section 2 nor

section 10.1 expressly say that the 10.1 declaration applies to private leases, such application should not be read in. Furthermore, where the legislature has intended to clarify or modify freehold mineral ownership, it has done so expressly. Examples include MMA

section 10 and LPA sections 55 and 58. Of particular note, whereas LPA subsection 58(1) defines what sand and gravel is, subsection 58(2) provides the correlative statement of what it is not. There is no analogue to this in MMA

section 10.1. The LPA provisions expressly identify to whom they apply and to what each owner is and is not entitled, things that MMA

section 10.1 fails to do. [ 40 ] Even if

section 10.1 is effective to declare that all CBM is natural gas, such a declaration need not be construed to affect ownership. The owner of the coal could still own the CBM, even if it is natural gas. Put another way, even if the CBM is natural gas, that does not mean it is not also coal, as it is gas from coal. Legislation that has the effect of declaring that one person owns a resource, and another does not, must state both positions. Such reciprocal declarations can be found in British Columbia’s Coalbed Gas Act , S.B.C. 2003, c. 18, which provides in

section 1 that “coal ... does not include coalbed gas” and in subsection 3(1) that coalbed gas is natural gas, thus stating both what it is and what it is not. Furthermore

section 4 the Coalbed Gas Act provides in subsection (1) that a natural gas tenure includes coalbed gas rights and in subsection (2) that a coal tenure does not include coalbed gas rights. This approach is also taken in MMA

section 10 and LPA sections 55 and 58 (above).

[ 41 ] With the introduction of MMA

section 10.1, the required reciprocal declarations are now in place, but only in the context of Crown minerals (including minerals where titles is split between the Crown and a freeholder). The first part of the pair of declarations is

section 67, which provides that a lease of Crown coal does not grant natural gas, “including coalbed methane”. Its correlative is

section 10.1 , which provides that CBM is natural gas (and thus implies that a lease of natural gas is a lease of CBM). Because

section 67 applies only to Crown coal, this “loop” is only completed with respect to Crown coal, not freehold coal. This combination of sections 10.1 and 67 operates similarly for split title lands. For Crown natural gas and freehold coal the

section 10.1 declaration takes the CBM from the freeholder and gives it to the Crown. However, for purely freehold minerals the required reciprocal declarations are not present. Since there is no express language to alter private rights, the interpretive presumption operates to exclude any effect on the private leases at issue. [ 42 ] Whereas the Applicants contend that restricting the application of

section 10.1 to Crown minerals and split-title minerals where title is split with the Crown would fail to give the

section any effect, the Respondents argue the

section does has effect and consequence even in that limited context, as explained above. Because

section 10.1 can be given effect without it applying to freehold minerals, this addition should not be read-in: R. v. McIntosh . [ 43 ] Furthermore, the Respondents argue that application of

section 10.1 to all freeholdings creates some absurd results because of an irreconcilable conflict between subsections 10.1(1) and (2). The problem arises when an owner of all mines and mineral has leased the natural gas to one party and then leased the CBM to another. Subsection 10.1(2) should operate to save the second (CBM) lease, but this is in conflict with subsection 10.1(1) if it operates to deem that the CBM has already been leased to someone else. [ 44 ] Similarly, the Respondents contend that an application of

section 10.1 to all freeholdings results in subsection 10.1(3) being inadequate for its purpose. Subsection 10.1(3) bars lawsuits by natural gas rights holders against coal rights holders for CBM production before the enactment of the section. If

section 10.1 applied to all freehold minerals, a gas lessee could sue for production of CBM after the enactment of

section 10.1, notwithstanding a CBM lease excepted from

section 10.1 by subsection 10.1(2). If it was intended that

section 10.1 was to apply to all freehold minerals, suits would have been barred for the duration of any agreement that came within subsection 10.1(2). [ 45 ] With respect to legislative intent, while the Respondents argue that it is inappropriate to ascribe meaning to

section 10.1 based on the extrinsic evidence cited by the Applicants (specifically the statements of the Energy Minister in Hansard ), they note nonetheless that the application of

section 10.1 to only Crown minerals and freehold minerals where title is split with the Crown accords with the extrinsic evidence in that it provides certainty of mineral ownership (Crown minerals and freehold minerals where title is split with the Crown) and it ends at least some court actions.

Section 10.1 now does directly what

section 67 did only indirectly. On the other hand, certainty would not result if the

section were applied to all freeholdings of minerals because, as noted above, subsections 10.1(1) and (2) would be in irreconcilable conflict with each other, and the anti-suit provision in subsection (3) would be inadequate for its purpose, resulting in more court actions not fewer. [ 46 ] The

interpretation that the Respondents give to

section 10.1 is strained. First, I do not accept that

section 2 requires there to be an express statement in

section 10.1 that it applies to all freehold minerals.

Section 2 says that the MMA applies to all minerals “where the context so permits or requires ...”. If

section 2 is interpreted to require an express statement in any

section that the

section applies to freehold land, then the context of the

section would be irrelevant. Interpreting

section 2 to require an express statement would make the words “the context so permits” irrelevant. Such an

interpretation must be avoided. [ 47 ] Secondly, I do not agree that

section 10.1 only applies to freehold minerals in circumstances where title is split between the Crown and private owners. There are no words in the

section that point to that

interpretation. Nothing in what the Minister says shows an intention to limit the

section to split titles. It is an artificial

interpretation with no foundation. [ 48 ] Thirdly, I do not accept that

section 10.1 was simply to correct an omission in

section 67. Legislation like British Columbia’s Coalbed Gas Act or the Sand and Gravel Act are clearer. However, if the only purpose of

section 10.1 was to clarify

section 67, it would have been made part of or placed following

section 67, not after

section 10 which deals with gold and silver. Placed where it is, and worded as it is in broader terms than

section 67,

section 10.1 stands alone. [ 49 ] The Respondents have cited other sections of the MMA ( sections 10 and 15.1 ) and the LPA (sections 55 and 58) to argue a

restrictive meaning of MMA

section 10.1. There is no doubt that other sections have used other words that make it clearer what thesection applies to. That does not, however, mean that

section 10.1 must be limited. Rather, it requires a closer examination of

section 10.1in the context of the legislative history to determine its meaning. [50] That takes me to the issue of ownership. The Respondents say that

section 10.1 does not deal with ownership. I disagree. TheMinister said that the purpose of the

section was to address the question of ownership of CBM. He said, for example, that one of theprovisions of the amendment was to provide “... coalbed methane ownership certainty ...” and that the amendment “... clarifies CBMmineral ownership ...”: Hansard, 28 October 2010. [51] Finally, I do not agree that there is a conflict between subsections 10.1(1) and 10.1(2), even in light of the position of theApplicants in response to the Respondents’ argument that there is a conflict. In my view, if the owner leased natural gas to A and CBMto B all before this amendment, subsection 10.1(2) protects B’s lease.

I do not see a conflict, but that is not the question that I am beingasked to resolve. That may need to be dealt with another day. Coalbed methane was reserved by the Respondents [52] The Respondents have argued that it is not enough that the MMA declares CBM to be natural gas; it does not say that it is notcoal. CBM can be both natural gas and coal, being natural gas from coal (above). The Respondents contend further that CBM comprisesan integral part of the coal, bound to the coal by a process known as adsorption, and that this methane is not gaseous under undisturbedin situ conditions.

They argue that this is comparable to the solution gas in Borys v. Canadian Pacific Railway, (UKJCPC), [1953] A.C. 217, [1953] 2 D.L.R. 65 (P.C.). In Borys, the Privy Council held that natural gas that is in liquid form or dissolved inoil at initial reservoir conditions—before the reservoir is disturbed and pressure released by exploration or production—belongs to thepetroleum rights holder, not the natural gas rights holder. This

interpretation was upheld by the Supreme Court of Canada in Anderson v.Amoco Canada Oil & Gas, 2004 SCC 49 , [2004] 3 S.C.R. 3. The Respondents say that, following Borys, not all natural gas isnatural gas. Rather, methane that is bound up in coal in situ should go with the coal, just as solution gas goes with the petroleum pursuantto Borys.

This being the case, the exclusion of coal from the leases at issue also operates to exclude CBM. [53] In addition to the analogy to the solution gas in Borys, the Respondents rely on property law and contract construction fortheir conclusion that the leases did not include CBM. The Respondents contend that pursuant to common law property principles, anowner of coal has a fee simple estate in the entire stratum containing the coal, and in all else found therein.

A reservation and exceptionof coal reserves a right of property and absolute ownership over the stratum or strata containing the coal, and is not merely a right toenter the lands to win the minerals: The Duke of Hamilton v. Graham, [1871] L.R. Vol. 2, 166 at 178, per Lord Westbury, followed inLittle v. Western Transfer and Storage Co. (1922), (AB CA), 18 Alta. L.R. 407 (S.C.A.D.) at paras. 22 and 29, appliedin Banner Coal Co. v. Gervais, (AB CA), [1922] 3 W.W.R. 1103 (Alta. S.C.A.D.) at 1104.

Where a freeholder grantsland excepting mines, he severs his estate vertically, and the entire stratum belongs to him: Eardley v. Granville (1876), 3 Ch. D. 826 at834, per Jessel, M.R..

Consequently when coal was reserved in the leases at issue, no part of the coal was leased, even CBM as “naturalgas”. [54] The Respondents contend that on a proper construction of the leases at issue, gases from coal were not intended to be leased.They have adduced evidence that the vernacular meaning of coal at the time of the leases was a complex mixture of organic andinorganic compounds including everything in the strata. “[W]here it can be ascertained that a particular vernacular meaning is attributedto words under circumstances similar to those in which the expression to be construed is found, the vernacular meaning must prevail”:Borys at 70-1.

As further evidence that coal gases were not intended to be leased by the coal owner, the Respondents note that for manyof the leases at issue, where the leased substances were to include both petroleum and natural gas, coal was excepted, but where theleases were for petroleum only, coal was not expressly excluded, because there was no question that coal might contain petroleum. If allnatural gas—including gases produced from coal—was intended to go to the lessee, there would have been no need to mention “coal” atall.

This intention is confirmed further by the commercial context in which the leases were concluded. The business purpose of the leaseswas to enable the search for petroleum and natural gas, in particular by geophysical work and test drilling to locate “structures favourableto the accumulation of petroleum and natural gas”.

The fact that CBM is not found in “structures” or through geophysical work, togetherwith the conduct of the lessees in targeting petroleum and natural gas from geological formations other than coal, is indicative of theintent not to lease CBM. [55] The Respondents argue that their construction of the leases is further supported by the realities of coal mining, which requirecontrol over the gases from coal for safety and conservation reasons.

The leases indicate an intent to protect the coal for mining in theirrequirements, for example, that the lessee cement between zones to prevent the flow of substances between strata and that the lesseemake provision for the disposal of waste so that it would not interfere with the opening of a mine.

[ 56 ] Given that CBM is not gaseous in situ , any production of CBM by the gas lessees would require them to produce gas by processes such as fracturing the coal. The logical extension of the gas lessees’ claims would be to allow them to engage in subterranean coal gasification processes that would consume all of the coal resource to convert it to gas.

This cannot have been the intent of any such gas leases. [ 57 ] Furthermore, the Respondents contend that lessors could not have intended to grant a lease that would reduce the value of its estate beyond the value of the CBM itself nor in a way that did not optimize overall recovery in accordance with conservation principles.

They claim that CBM extraction by a natural gas lessee would damage the overall value of the coal asset such that the cumulative value to the two owners would be less than the overall value had it remained in the hands of a single owner, for reasons related to the cost of abandoning CBM wells prior to in situ gasification (which would remain the right of the coal owner), other ill effects of methane production on future in situ gasification, and impediments to other processes that would be the right the coal owner to undertake, including methanogenesis, surface gasification, and even traditional coal mining. [ 58 ] Finally, the Respondents cite US appellate authority in which leases similar to the leases at issue were found not to have indicated an intent to grant rights to CBM: Continental Resources of Illinios, Inc. v.

Illinois Methane LLC , 364 Ill. App. 3d 691 (App. Ct. 2006); Cimarron Oil Corp. v. Howard Energy Corp. , 909 N.E. 2d 1115 (Ind. Ct. App. 2009) .

Of particular note the Respondents say, the court in Cimarron found that in situ , CBM is not a gas; that there is a requirement for the coal miner to retain control of the gas for safety reasons; that a gas lessee would have to damage the coal resource to produce CBM and this was an unlikely intent of a natural gas lease; that for conservation reasons the resource is more valuable in the hands of the coal owner; that given CBM’s non-gaseous state in situ , the lessor cannot have intended to grant the lessee the right to create gas and then extract it, because taken to its logical conclusion that would grant the natural gas lessee the right to in situ gasification of the coal, which cannot have been intended; and that at the time of the leases there was no contemplation of profitable CBM production, and it was not a reasonable conclusion that the intent was “to permit invasion of a valuable land asset, the coal bed, should a means of making profits arise in the future”: Cimarron at para. 243.

The Respondents suggest that as the lease in Cimarron did not expressly reserve coal, and the Respondents’ leases did, the reasoning applies a fortiori . [ 59 ] Not all “gas” is “gas”: Borys (above). The Respondents argue that it therefore follows that a declaration that CBM is “natural gas” does not mean that it is “natural gas” within the intent of a particular lease.

The phrase “natural gas” in the leases at issue meant conventional natural gas found in non-coal formations such as sandstone and carbonate. [ 60 ] I agree with the Respondents that if I need to consider what CBM is, either from a scientific or an etymological perspective, then this will have to go to trial. However, I do not need to do so. Even if I accept that scientifically and etymologically, CBM is coal, that is irrelevant. The Legislature has declared it to be natural gas. The leases give natural gas to the Applicants. A Borys analysis is irrelevant.

An argument that the coal owner owns the entire stratum (an argument that cannot stand based upon the Borys analysis) is irrelevant. It does not matter what the lessors of natural gas may have intended to lease or reserve. The legislature has declared, in effect, that by leasing natural gas they also leased CBM. Only parties who turned their minds specifically to CBM are protected from the operation this declaration (by subsection 10.1(2)), and then only to the extent that their contracts specifically dealt with CBM itself.

Subsection 10.1(2) exempts leases excluding “coal ” from the effect of subsection 10.1(1) [ 61 ] The Respondents have argued that a reservation of coal includes a reservation of CBM (above). They argue further that agreements that specifically exclude/reserve coal also “specifically … reserve[] rights in land in respect of coalbed methane”, as required by the MMA to fit into the subsection 10.1(2) exemption.

It is not required that CBM be specifically mentioned; the subsection merely requires that rights in land in respect of CBM be specifically reserved. [ 62 ] If a reservation of coal includes a reservation of CBM, and if subsection 10.1(2) does not require a specific mention of CBM, then it follows that the leases at issue are saved by MMA subsection 10.1(2) such that subsection 10.1(1) has no effect, and the CBM remains with the coal owner. [ 63 ] I do not accept the Respondents’

interpretation of

section 10.1(2). “Specifically” in that

section means “specifically CBM” so that if an instrument reserves (or leases, etc.) CBM, it is saved from the operation of

section 10.1 . The Respondents’ argument that “specifically” only requires a reservation of coal does not make sense.

Factual disputes preclude

summary judgment [ 64 ] The Respondents contend that a number of factual determinations must be made to settle this dispute, and argue that the analysis that must be undertaken is such as can be done only in a full trial. Among the facts that must be determined are the meaning and nature of “coalbed methane” for the purposes of the MMA ; the legislature’s intended application of

section 10.1 ; and the vernacular meaning of “coal” at the time of the leases—in particular whether it included CBM. To consider the Applicants’ construction of

section 10.1, extrinsic materials need to be assessed for weight, which cannot be done in

summary judgment. [ 65 ] For reasons given above, I disagree that there need to be factual determinations.

Section 10.1 is clear. There may indeed need to be a factual determination of the precise nature of CBM in some other context, but it is not necessary to decide it for the purpose of this application. The clear effect of

section 10.1 is that coalbed methane—regardless of its nature—is a substance granted to the natural gas lessees. Novel and complex case [ 66 ] Citing Romano v. D ’Onofrio and Tottrup , the Respondents say that this case involves “complex, novel and intertwined issues of fact, law and policy” that cannot be decided on

summary judgment. In particular they note the Ontario Court of Appeal’s interdiction against deciding points of law that are both significant and unsettled: Romano v. D ’Onofrio at paras 7-9. The Respondents claim that the application of MMA

section 10.1 is such a point of law. They claim further that there are public policy considerations that can only be undertaken properly in the context of a full trial, specifically the policy of lessening the overall value of a resource without compensation, as they claim will happen if the Applicants succeed, and the policy reasons behind the requirement of a coal owner to own and control the coal and everything in it. [ 67 ] This issue—the

interpretation of

section 10.1—is not complex. It requires application of the principles of statutory

interpretation. As I have said above, a detailed analysis of the science of CBM, the history of ownership of coal and gas, and the effect that my

interpretation of

section 10.1 may have do not make the issue of

interpretation complex if all of those matters are unnecessary for my decision. I do not accept that all amendments to legislation require a trial. If the court is able to interpret the legislation after considering and then rejecting arguments that a factual foundation is necessary, then

summary judgment can be granted. In the words of Tottrup , I can decide this on the record before me. Tottrup does not preclude

summary judgment in a case such as this.

Summary judgment will complicate trial [ 68 ] Finally, the Respondents argue that

summary judgment is inappropriate because it will complicate the trials that are not subject to this application but with which the facts and law are intertwined. The matters to be decided in this application overlap with the matters to be decided at trial. Both sets of actions concern the meaning and effect of a reservation of “coal”, the meaning of “coalbed methane”, and so forth. If these matters are dealt with by way of

summary judgment there is a risk of inconsistent verdicts. It is also likely that the Applicants would use

summary judgment to argue that certain issues have become res judicata for the split title dispute. For these reasons the Respondents contend that all of the issues should be addressed at the same time, at trial. [ 69 ] I have made no findings of fact so there cannot be any inconsistent factual findings. I have interpreted

section 10.1. The

interpretation will be the same at trial. Conclusion [ 70 ] The Applicants’ application for

summary judgment that coalbed methane was a substance granted to the lessees is granted.

Heard on May 25, June 2 and 3, 2011. Dated at the City of Calgary, Alberta this 7th day of July, 2011. C.A. Kent J.C.Q.B.A. Appearances: Christian J. Popowich Katherine Reiffenstein Code Hunter LLP for Encana Corporation, Carbon Development Partnership and Carbon Development Corporation J.P. Peacock, Q.C. Peter Linder, Q.C. Johanna Price Peacock Linder & Halt LLP for ARC Resources, Direct Energy Marketing Limited (formerly Centrica Canada Limited) Randall W. Block, Q.C. Karen A. Salmon Borden Ladner Gervais LLP for ConocoPhillips Michael Mestinsek Evan Dickinson Stikeman Elliott LLP for Devon Canada Corporation