Terasen Pipelines (Corridor) Inc v R&M Schroter Enterprises Ltd, 2013 ABQB 482

Court of Queen ’ s Bench of Alberta Citation: Terasen Pipelines (Corridor) Inc v R&M Schroter Enterprises Ltd, 2013 ABQB 482 Date: 20130822 Docket: 0603 15034 Registry: Edmonton Between: Terasen Pipelines (Corridor) Inc Appellant - and - R&M Schroter Enterprises Ltd., Robert Schroter, ATCO Gas and Pipelines Ltd., The County of Strathcona No. 20, Encana Pipelines Ltd., Helen Simmons, ATCO Midstream Ltd., Marwood Cedar Homes Limited, G.F.M.

Construction Ltd., Grace Slater, J-Dan Farms Ltd., Avrum Wright, Cold Lake Pipeline Limited, and Karyl Wright Respondents _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice J.M. Ross _______________________________________________________ Introduction [ 1 ] The within statutory appeal is brought by the Appellant Terasen Pipelines (Corridor) Inc. (“Terasen” or the “Operator”) pursuant to

section 26 of the Surface Rights Act , RSA 2000, c S-24 against a decision of the Surface Rights Board (the “Board”) regarding the amount of compensation awarded to four Respondents (the “Landowners”) for work space taken on their property.

Background and Decision Under Appeal A. Right of Entry Orders [ 2 ] In 2001 and 2002, Right of Entry Orders (“ROEs”) were granted to Terasen against a number of properties, including the Landowners’ four properties that are the subject of this appeal: ∙ SE 31-53-22-W4M - R&M Schroter Enterprises Ltd. (the “Schroter lands); ∙ SW 23-54-22-W4M - Helen Simmons (the “Simmons lands”); ∙ SW 36-54-22-W4M - Grace Slater (the “Slater lands”); and ∙ SE 23-54-22-W4M - Avrum Wright (the “Wright lands”). [ 3 ] The ROEs in each case provided: The Operator be and is hereby granted right of entry in respect of the surface of the land (

a) shown outlined in green on Plan A attached hereto (hereinafter “the right of way”) for or incidental to the construction, operation or removal of two pipelines; and (

b) shown coloured in green on Plan B attached hereto (hereinafter “the work area”) for purposes incidental to the construction of the pipelines; The owner and any person claiming by, through or under the owner shall have the right to use the right of way for agricultural purposes, subject to the Operator’s right to enter thereon at any time to exercise the rights granted by this Order; . . .

Upon completion of construction of the pipelines, including satisfactory restoration of the right of way, the Operator shall cause the work area to be reclaimed in accordance with such standards as may be prescribed pursuant to the Environmental Protection and Enhancement Act , and shall thereupon obtain a Reclamation Certificate and request partial termination of this Order as it relates to the work area . . . [ 4 ] The Plans attached to each ROE outlined the areas of right of way and work area and set out the total area required for each, as summarized below: ∙ the Schroter lands: 2.20 acres for right of way; 7.88 acres for work area; ∙ the Simmons lands: 1.26 acres for right of way; 3.12 acres for work area; ∙ the Slater lands: 2.99 acres for right of way; 4.58 acres for work area; and ∙ the Wright lands: 2.27 acres for right of way: 8.25 acres for work area. [ 5 ] In 2002 and 2003, Terasen constructed a dual pipeline system between Fort McMurray, Fort Saskatchewan and Sherwood

Park (“Corridor Pipeline Project”). A portion of the project extends approximately 30 kilometres from a heavy oil upgrader at the Shell Scotford Refinery to terminals near Sherwood Park. It is this upgrader portion of the Corridor Pipeline Project that crosses the four properties, all of which are located in Strathcona County. B. Compensation: Smith Park [ 6 ] On July 22 and 23, 2002 a hearing was held by the Surface Rights Board regarding compensation for right of entry orders regarding eleven parcels of land ( not including the subject ROEs) crossed by the upgrader portion of the Corridor Pipeline Project.

The decision issued on October 9, 2002, setting compensation at $6000 per acre for the pipeline rights of way and $3000 per acre for temporary work spaces: Corridor Pipeline Limited v Smith Park Farm Ltd (Decision Nos. 2002/0125 to 2002/0136) (“ Smith Park ”). [ 7 ] John Wasmuth, Appraiser with Canadian Resource Valuation Group Inc., provided an extensive appraisal report and gave expert opinion evidence on behalf of the Operator at the Smith Park hearing.

He concluded that the highest approved use/highest and best use of the lands was agriculture general for agricultural production and that the value of the lands at the time of the taking was $1600 per acre. In regard to work space, he gave the opinion that this use should be compensated by reference to the fair rental value of the lands for a two year period, at $48 per acre per year, or $96 per acre. [ 8 ] The Smith Park decision summarized the evidence and arguments and determined compensation for rights of way and work space as follows: The Board is again faced with very divergent opinions as to compensation.

The Operator views this as farmland now and in the distant future. Farmland is valued at $1,600.00 per acre by the Operator’s appraiser Mr. Wasmuth. The Operator agrees there is some adverse effect and some intangibles and offers $3,000.00 per acre. The Respondents feel strongly the line has a serious impact on their land. This is especially true as this land has really become a pipeline corridor. . . . What then is the most fair and reasonable lump sum payment? The Board would again point out that

Section 29 of the Surface Rights Act is always available to anyone who becomes seriously impacted by the line.

Section 29 reads: “The Board may (

b) review, rescind, amend or replace a decision or order made by it;”. The Board will not speculate too far into the future, but will endeavour to determine what is fair and reasonable compensation at the time of the Right of Entry Order. What then is fair? In the Board’s view the $3,000.00 per acre offer is low and the $8,000.00 per acre request is high. The most cogent evidence is the $5,000.00 per acre paid to a small number of adjacent landowners, or $6,000.00 per acre paid to landowners in the conservation area.

This is also the amount paid by Alberta Energy Corporation in 1981 and 1984 on many of these lands. Land values were not higher in those years and interest rates were very much higher. Accordingly the Board finds $6,000 per acre reflects reasonable compensation as of the date of the Rights of Entry Orders. As to the workspace : The Operator, under the Right of Entry Order, was granted areas in addition to the right of way for workspace during the construction phase.

The Order restricts the use of the workspace for purposes incidental to the construction, and states that the space must be terminated upon completion of the construction of the pipelines. Recently, Alberta Environment has advised the Board that it will not issue a partial reclamation certificate on workspaces associated with pipelines. Under the Environmental Protection and Enhancement Act , RSA 2000 and its regulations, workspace is included in the definition of specified land.

Operators under that Act must obtain a reclamation certificate on specified land and no Board Order can be terminated without a reclamation certificate. The combined effect of Environment’s refusal to issue a partial reclamation certificate and the legislation, means that the area granted for workspace remains indefinitely part of the Right of Entry Order. What then is the value of the workspace? Compensation for the work area at 50% of the right of way value has been universally accepted by landowners and operators for many years. There is no clearer pattern of dealings in the pipeline industry.

In the Board’s view, there is justification for 50% value. While the Right of Entry Order is in effect, no permanent facilities can be placed on the

workspace, thus eliminating any ongoing adverse effect. Following the completion of construction, the workspace cannot be used for the operation, maintenance, repair or replacement of the pipelines. In the Zubick decision, supra, Sanderman J. made the comment that he found the compensation paid on workspace high. It may be that Justice Sanderman was unaware that the area granted for workspace was not temporary and remained part of the Right of Entry Order for an indefinite term. The Board will follow the pattern of dealings and awards $3,000.00 per acre for the work area. C.

Compensation: The Decision under Appeal [ 9 ] On April 19, 2006, a hearing was held by the Board on the issue of compensation for the subject ROEs. The matter had originally been set for hearing in July 2002, but had been adjourned. [ 10 ] At the hearing, the Board was urged by Terasen to base its findings on Smith Park . An appeal to Smith Park had been abandoned.

It was submitted that Smith Park should be regarded as an established pattern of dealing, and that there was no cogent reason for the Board to depart from its previous findings. [ 11 ] John Wasmuth again gave expert evidence, based on the appraisal report he had previously prepared and presented. The highest approved use/highest and best use of the lands continued to be agriculture general for agricultural production. Mr.

Wasmuth remained of the view that the value of the lands at the time of the taking was $1600 per acre. [ 12 ] In its decision dated October 26, 2006, the Board observed that it “must confine its consideration of land value to the effective time of taking between late 2001 and early 2002.” The Board accepted Mr. Wasmuth’s evidence regarding the value of the lands. This finding is not under appeal. [ 13 ] Regarding compensation for right of way, the Board concluded: [I]t appears that all parties agree that the Respondent landowners are entitled to compensation beyond the fee simple market value of the land.

The area of disagreement then, is focused on the exact amount of compensation due to the Respondents for adverse effect and other factors. What is fair? Upon review of the reasons in support of land value for the rights of way as fixed by the Board in the Smith Park decision (supra) , the Board is satisfied that $6,000.00 represents fair compensation at the time of taking. When subtracted from the Smith Park award of $6,000.00 per acre, the Respondents have received an extra $4,400.00 per acre over and above the appraised market value.

Stated another way, the Respondents were compensated for the value of the land ($1,600.00 per acre) plus an amount equal to 275% of land value ($4,400.00). Even if a somewhat higher baseline market value is applied, the Board is satisfied that the Respondents have been amply compensated for adverse effect to the remaining lands and other factors of both a tangible and intangible nature. Accordingly the Board awards $6,000.00 per acre. This award is not under appeal. [ 14 ] The Board decision regarding compensation for work area is set out below:

Temporary Workspace More than four years have elapsed since the right of entry orders came into effect. This fact gives rise to the Board’s concern as to the “temporary” status of the workspaces granted under the Orders. Black’s Law Dictionary (revised fourth edition) defines “Temporary” as follows: That which is to last for a limited time only, as distinguished from that which is perpetual, or indefinite, in its duration.

During the hearing, the Board confirmed the following: ∙ The temporary workspaces are included in their respective right of entry orders. ∙ The right of entry orders remain in effect until a reclamation certificate is obtained and the Operator makes application for and is granted termination of said Orders. ∙ In accordance with s.16 of the Act , the Right of Entry Orders vest in the Operator . . . “the exclusive right, title, and interest in the surface of the land in respect of which the order is granted . . .”.

The Board also confirmed the following excerpt taken from the Operator’s letter to one of the Respondents (Grace Slater) dated March 16, 2000. Therein, the Operator writes: “Additional working space will also be required during the construction process. After construction, [Terasen] will undertake reclamation and restoration of the affected area in accordance with the Conservation and Reclamation Plan for the right-of-way as approved by Alberta Environment.

Once the restoration is completed, [Terasen] will have no further need of the temporary working space and its permanent interest will be restricted to the width of the permanent right-of-way.” The Operator did not provide the Board with applications for reclamation certificates in respect of the temporary work spaces taken under the Orders. Instead, the Board was informed that the Operator is in the process of mediation with Alberta Environment on the issue of obtaining partial reclamation certificates.

Upon failure of this process, the Operator states that it will apply to the Environmental Appeal Board for a hearing, and if necessary, the Operator is prepared to take this matter to the Court of Queen’s Bench and as a last resort, to the Alberta Court of Appeal. The Court : In Zubick v. Corridor (supra) Justice Sterling Sanderman states the following: [81] . . . I am aware, according to the evidence I heard, that the industry practice is to award work space compensation as a 50 per cent value of the right of way award. No supportable reasons were given for picking this percentage other than “it is done ”.

This type of approach is completely illogical. [83] From my perspective, the assigning of a 50 per cent value to the work space is not only illogical but wrong. I cannot conceivably see how the value of the use of the work space can approach 50 per cent of the value of the right taken. I do not believe that a supportable argument can be made that the value approaches 50 per cent of the right of way taken. It would be considerably less. The Surface Rights Board :

The Smith Park decision (supra) was produced by the Board some time after Zubick v Corridor (supra) and therein the Board states: In the Zubick v. Corridor (supra) decision the Court found the compensation paid on workspace high. It is the Board’s view that the Court based this comment on the fact that the area granted for workspace was temporary, and would not remain part of the Right of Entry Order for an indefinite term. The Operator ’s Appraisal Report : In his appraisal report (Exhibit 1, page 86) Mr. Wasmuth highlights a distinction drawn between rights of way and temporary workspace in the Right of Entry Orders as set out in clause 1. (

a) and (b): “IT IS ORDERED that: 1. The Operator be and is hereby granted right of entry in respect of the surface of the land (

a) shown outlined in green on Plan A attached hereto (hereinafter “the right of way”) for or incidental to the construction, operation, or removal of two pipelines ; (Board ’s emphasis) and (

b) shown coloured in green on Plan B attached hereto (hereinafter “the work area”) for purposes incidental to the construction of the pipelines ;” (Board ’s emphasis) Further in Exhibit 1, page 86, Mr. Wasmuth adds: “Per Clause 1(

b) of the Right of Entry Orders, in respect of work areas, [Terasen] was only granted temporary use of these areas “for purposes incidental to the construction of the pipelines”. We are informed by representatives of [Terasen] that the period of use of the work areas during the construction process will not exceed two years.

Therefore the valuation task is to determine the value of the temporary use of the work areas as identified on plan B attached to the SRB Right of Entry Orders.” The Board ’s Determination : Having considered the foregoing, the Board is not satisfied that the Respondents have been fairly compensated for the “temporary workspace”. In its letter of March 16, 2000, the Operator declares that after the work spaces are reclaimed it will have no further need for these lands and “its permanent interest will be restricted to the width of the permanent right-of-way”.

The Board disagrees with the Operator’s assertion that its permanent interests will be restricted to the width of the rights of way. On the facts, the Board finds that in accord with s.16 of the Act the Operator retains exclusive right, title and interest in the lands taken for temporary workspace. In the result, the temporary workspaces are no longer temporary. Rather, they remain in the permanent possession of the Operator. On behalf of the Operator, Mr. Wasmuth draws a distinction between Clause 1.(

a) and (

b) as they appear in the Right of Entry Orders.

Subclause (

a) specifies a use of the rights of way “for or incidental to the construction, operation or removal of two pipelines”. Subclause (

b) specifies the work area is to be used “for purposes incidental to the construction of the pipelines”. It is granted that the Right of Entry Orders distinguish between the respective purposes of the lands taken. However, the Board cannot find a logical reason in support of awarding 50 per cent of the per acre compensation granted for the rights of way as fair payment for the work spaces. In this instance, the Board agrees with Justice Sanderman’s finding in Zubick v. Corridor (supra) . Specifically, his concern is that there are no supportable reasons for picking this percentage other than “it is done”.

He further characterizes this approach as “completely illogical”. The Board also finds the 50 percent approach to be unacceptable. By analogy, a rational seller of land or any other property is not likely to agree to accept one hundred percent for the part taken that the purchaser proposes to use, and 50 percent for the part taken that the purchaser proposes not to use. This is illogical, unfair, and most probably unacceptable to any reasonable person.

During the hearing, the Operator did not provide the Board with any evidence to show that it has applied in a timely manner, or at all for reclamation certificates in respect of the temporary work spaces. From the Board’s perspective, the issue of partial reclamation certificates is fraught with uncertainty. The Right of Entry Orders issued more than four years ago. Now, the Operator is telling the Board that it is prepared to go to great lengths in the pursuit of this issue. Meanwhile, the Respondent Landowners are left in an untenable position. The Board has genuine sympathy for the Operator’s position.

However, the regulations imposed by Alberta Environment are beyond the Board’s jurisdiction. At the outset of the hearing, the Operator exhorted the Board to not depart from the $6,000.00 per acre land value paid for the rights of way. At this juncture, the Board finds that it must apply this amount to the work spaces as there can be no cogent distinction made between the lands taken.

Therefore, the Board orders the Operator to pay the Respondent Landowners in the amount of $6,000.00 per acre for the workspaces and so fixes. [ 15 ] It is this aspect of the Board order, the determination that work space be compensated at 100% of the value of the permanent right of way, that is the subject of this appeal. Evidence on the Appeal [ 16 ] Terasen brings this appeal under

section 26 of the Surface Rights Act . Pursuant to s 26(6), the appeal “shall be in the form of a new hearing.” New evidence was called on behalf of both the Operator and the Landowners. For the most part, no objection was taken to the new evidence. Three of the Landowners objected to evidence in the form of a new report prepared by Mr. John Wasmuth entitled “Addendum Report (Pattern of Dealings)” ( the “POD Report”). In an earlier decision, I determined that the POD Report was admissible: Terasen Pipelines (Corridor) Inc v R&M Schroter Enterprises Ltd , 2012 ABQB 741 , 108 LCR 1 (the “ Admissibility Decision ”).

A. Pattern of Dealings [ 17 ] Mr. Wasmuth gave expert evidence presented in two reports: an abridged version of the Appraisal Report that he had presented before the Board in Smith Park and in the case under appeal, and the POD Report. He was qualified to give expert opinion evidence in the areas of agrology, agricultural economics, real property appraisal and valuation in the context of expropriation and surface land rights. [ 18 ] Mr.

Wasmuth’s evidence in relation to the Appraisal Report confirmed the views he had expressed before the Boards in Smith Park and the within matter that the highest approved use/highest and best use of the lands was agriculture general for agricultural production and that the value of the lands at the time of the taking was $1600 per acre. As the Board accepted this evidence and these findings are not under appeal, I will not review this evidence in detail, nor the evidence of Brian Gettel, an appraiser who testified on behalf of the Landowners.

[ 19 ] Mr. Wasmuth also confirmed his opinion that work area should be compensated by reference to the fair rental value of the lands for a two year period, at $48 per acre per year, or $96 per acre. This opinion was not accepted by the Board in Smith Park , and was not advocated in this case either before the Board or on appeal. [ 20 ] The main part of Mr. Wasmuth’s evidence related to the POD Report. [ 21 ] The POD Report describes the pattern of dealings approach to determining compensation as a reference to “‘comparables’ as measuring tools for compensation”, including “(

i) individual settlements or deals between other landowners and the same or different operator; (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” (citing, E Todd, The Law of Expropriation and Compensation in Canada , 2d ed (Scarborough, Ont: Carswell, 1992) at 443 ). [ 22 ] The purpose of the POD Report was to determine whether a pattern of dealings existed regarding amounts paid by pipeline operators to obtain pipeline rights of way and work space in the area of the Corridor Pipeline Project between 2000 and 2002.

Both negotiated payments and Board or court awarded payments were reviewed. Mr. Wasmuth explained that the two types of payments are interrelated. On the one hand, Board and court orders may be based on negotiated payments where they have given rise to a pattern of dealings. On the other, right of way agreements typically provide that negotiated payments will be topped up if the Board or a court awards a higher amount to landowners in the area. Further, Board or court orders may have an impact on subsequent agreements. In the POD Report and in his evidence, Mr.

Wasmuth reviewed a number of occasions relating to the Corridor Pipeline Project and other pipeline projects in which these types of interrelationships were played out. [ 23 ] The POD Report reviews right of way agreements and caveats within the selected study areas registered from 2000 to 2007. The reviewed data pertained to five pipeline projects in the area: the Corridor Pipeline (2000 - January 2002), the Alberta Oilsands Pipeline (AOSPL) Stage 3 (2003 -2004), the Access Pipeline (2005), the Enbridge Waupisoo Pipeline (2006 - 2007) and the Corridor Pipeline Expansion (2006 -2007). [ 24 ] Mr.

Wasmuth explained that there was no data prior to 2000 because the Corridor Pipeline Project was the first in this area since the 1980s. While the issue was the existence of a pattern of dealings between 2000 and 2002, it was useful in his view to consider data in the period following the effective date. By analogy, he noted, the selection of comparable sales in a market value analysis may include sales both before and after the effective date. [ 25 ] The reviewed data is summarized at page 19 of the POD Report: D.17 The entire cohort of data from the five pipeline projects includes over 1,036 data records . . .

Except for 252 samples highlighted within Table D.3 relative to the Corridor Pipeline, the consideration paid for TWS [temporary work space] was exactly 50% of the consideration paid for permanent pipeline R/W [right of way]. Out of the 252 samples that varied from the 50% relationship, 223 were the result of the Court’s decision on Corridor Pipeline Limited v Zubick et al, wherein the Court increased the compensation for pipeline R/W to $1,200.00 per acre, but left the compensation for TWS at $500/acre as previously awarded by the SRB.

Although this is a variance, it is relatively minor as it provides a relative amount of 42% for TWS, compared to pipeline R/W. D.18 There remains only a small cohort of 29 data records that indicate any substantive departure from the 50% relationship of consideration for TWS versus pipeline R/W. These relate to 29 R/W agreements entered into voluntarily between Corridor Pipeline Limited and landowners holding land in Strathcona County that is covered by the AIH-ASP [Alberta Industrial Heartland - Area Structure Plan].

Most of this land was designated for future Heavy Industrial (IH) and Medium Industrial (IM) development under the AIG-ASP given third reading and passed on June 26, 2001. A substantial portion of this plan area had already been developed in prior years for Heavy Industrial use. In these 29 cases, the owners entered into voluntary agreements that provided for only a nominal payment of $250 per acre for the required TWS.

Compared to the consideration paid for permanent R/W, these amounts paid for TWS represent only 6% to 2% respectively of the $4,000 and $10,000 paid for pipeline R/W. [ 26 ] In relation to the 29 cases discussed in paragraph D.18 and other instances of temporary work space agreements, Mr. Wasmuth noted that the these agreements are typically not registered against the title to the affected lands.

[ 27 ] Mr. Wasmuth’s conclusions as to POD are set out at page 23 of the POD Report: E.1 Considering the information obtained relative to amounts paid for pipeline R/W and TWS involving major transmission lines from northeastern Alberta to the Edmonton Area, it is my opinion that these five pipeline projects . . . demonstrate a clear “Pattern of Dealings ” wherein the consideration paid for TWS is 50% of the consideration paid for pipeline R/W. This pattern is clearly demonstrated by over 900 negotiated R/W agreements in the region of northeastern Alberta.

E.2 Relative to the area of the four subject properties involved in this appeal to the Court of Queen’s Bench, being the area zoned “AG Agriculture: General” in Strathcona County, there is a “Pattern of Dealings ” demonstrated at $6,000 per acre for permanent pipeline R/W and $3,000 per acre for TWS relative to the December 2001/January 2002 time period. This pattern is supported by over 70 R/W agreements acquired by Corridor Pipeline, AOSPL and Access Pipeline between 2001 and 2005 in the same AG land use area. ( emphasis in original ) [ 28 ] Mr.

Wasmuth was extensively cross-examined regarding the underlying right of way agreements and caveats on which his opinion was based. There were a few cases in which amounts had been incorrectly recorded. Regarding some agreements, the authors had not obtained direct access to agreements and had relied on reports by land agents (these occasions are noted in the POD Report). In some cases, there was no available information about temporary work space agreements; Mr. Wasmuth assumed that in these cases there were unregistered private agreements dealing with work space.

Since 2005, Board ROEs have not distinguished between right of way and work area; Mr. Wasmuth did not include these cases in the analysis. Further, a number of Board orders issued after the order under appeal, followed the same approach of making equal awards for right of way and work area, and these were not included in the analysis. [ 29 ] Mr.

Wasmuth explained the circumstances or reasoning behind a number of the “gaps” in the data, and affirmed that, after correcting any errors and taking into account information that had not been included, his conclusions as to the existence of patterns of dealings remained unchanged. [ 30 ] In addition to pattern of dealings evidence, Mr. Wasmuth also testified regarding situations in which landowners may be compensated twice or more for the same area of land, when new pipelines are laid parallel to older lines, in land that had previously served as work area for construction of the older lines.

Such lines were laid in three of the four subject properties in this case. On the Simmons property, the Access Pipeline right of way now lies over the Corridor Pipeline work area. Simmons received compensation from both Terasen and Access. On the Wright property, the AOSPL and Access Pipeline rights of way occupy Corridor work area. Wright has received compensation from Terasen, AOSPL and Access. On the Slater property, the Access and Enbridge Pipeline rights of way occupy the entire Corridor work area. Ms.

Slater sold her property prior to construction of the new pipelines, so did not receive compensation from Access or Enbridge. B. Reclamation of the Subject Properties [ 31 ] Tim Bossenberry is a pipeline environmental planner. He was the Lead Environmental Inspector during the construction of the Corridor Pipeline Project. He gave expert evidence regarding the use of right of way versus work area and reclamation of the lands. [ 32 ] Work began on the subject properties in July 2002.

Work including reclamation on each property required less than two months. [ 33 ] The work commenced with stripping topsoil off both the right of way and work area, and storing it on a portion of the work space. The pipeline trench was then excavated in the right of way. Some of the spoil from the excavation was stored beside the excavation on the right of way, and excess amounts were stored on work space. After the pipeline has been installed in the trench, spoil is replaced and excess amounts of spoil are piled or spread out. The topsoil is then replaced across the right of way and work area.

[ 34 ] Pipeline companies are required to follow construction and reclamation conditions approved by Alberta Environment. The goal of reclamation is to return the lands to “equivalent land capability”. In the case of agricultural land this means ensuring that lands disturbed by pipeline construction are returned to their inherent ability to sustain vegetation.

This requires measures such as tilling subsoil to relieve compaction from construction equipment, removing rocks and replacing topsoil evenly and contoured over replaced subsoil and spoil. [ 35 ] The success of the reclamation process on the subject lands was tested by Mr. Bossenberry during the spring of 2003. He looked for areas of subsidence and took measurements to assess the depth of topsoil and the decompaction of subsoil. In September 2004, he assessed vegetation on the reclaimed areas to determine whether the goal of equivalent land capability had been reached. [ 36 ] Mr.

Bossenberry concluded that Terasen had complied with the construction and reclamation conditions approved by Alberta Environment, that it had made use of the work areas on the subject properties for a maximum of 60 days, and that there had been no alteration or change in land capability on these areas. [ 37 ] Mr. Bossenberry acknowledged that Alberta Environment determines whether lands have been properly reclaimed when it issues reclamation certificates. He had not applied for reclamation certificates for the subject lands.

To deem lands reclaimed, Alberta Environment would require, in addition to the 2002-2004 reports regarding construction and reclamation, evidence regarding any subsequent issues relating to subsidence and vegetation, and an assessment of the current condition of the lands. [ 38 ] Leonard Knapik gave evidence on behalf of the Landowners. He is a professional agrologist with expertise regarding reclamation process and reclamation certificates. He critiqued a number of the reclamation and testing procedures employed by Mr. Bossenberry. [ 39 ] Mr.

Knapik inspected the Schroter lands in April 2012 and concluded that they would not qualify for a reclamation certificate at that time due to soil and drainage problems resulting from uneven distribution of topsoil and compacted subsoil. He examined the Simmons and Wright lands in 2006. He was of the view that the stream bank on the Wright property had not been properly reclaimed. In addition, there was significant subsidence along the pipeline trench on both properties. Mr.

Knapik acknowledged that the subsidence was on the rights of way and that subsidence is a very common problem with pipelines. [ 40 ] Cliff Wallis is a professional biologist who testified on behalf of the Landowners. [ 41 ] Mr. Wallis drew a distinction between reclamation, which involves returning land to productive use for agricultural production, and restoration, which involves re-establishing the natural state of lands. He testified that creek banks on the Wright and Schroter lands had not been restored, as they had not been replanted with native shrubs and trees.

Some areas may take decades to return to their natural state. Mr. Wallis critiqued the Bossenberry reports for failing to assess the state of the creek beds, as distinct from agricultural lands. He acknowledged, however, that the only way to avoid damage in the area of creeks is to directionally drill under them, and that this was not required by Alberta Environment for the Corridor Pipeline Project. He also acknowledged that the standard for reclamation in 2002-2004 was the attainment of equivalent land capability.

He was aware that Terasen is now funding tree planting on the Wright lands, and restoration of rights of way on all of the subject properties. C. Reclamation Certificates and Partial Discharge of ROEs [ 42 ] The Board has the authority to partially terminate an ROE as it pertains to work area under s 28 of the Surface Rights Act ; however the work area must have been reclaimed and a reclamation certificate must have been issued under the Environmental Protection and Enhancement Act , RSA 2000, c E-12. Reclamation certificates are issued by Alberta Environment. [ 43 ] Documents filed by agreement indicated that:

1. On August 26, 2002, Alberta Environment stated in a letter to the corporate solicitor of Terasen that it: . . . has for some time now, not been issuing reclamation certificates prior to the abandonment of a pipeline. Nor has it been our practice (or legislative responsibility) to issue certificates for the right of way immediately following construction and reclamation activities . . . [Alberta Environment] has not been issuing reclamation certificates in these instances because it is not an effective use of the department’s enforcement resources . . .

In terms of environmental benefit in comparison to human resource allocation, issuing reclamation certificates at temporary work space locations is deemed to be of minimal value to overall environmental protection. 2. On August 29, 2002, the Board issued a memorandum signed by S. S. Schumacher, Q.C., Chair, stating: The Surface Rights Board recently received information that Reclamation Certificates would no longer be issued by Environmental Protection with respect to Work Space required to construct a pipeline.

As you know it was the practice in the industry to recognize Work Space as temporary and subject to termination upon issuance of a Reclamation Certificate thereby attracting a smaller compensation (usually 50%) than the main Right of Way. The Alberta Surface Rights Board had a meeting on August 20, 2002, attended by representatives of Alberta Environmental Protection and the Alberta Energy and Utilities Board where we were advised the industry had been consulted prior to the change in its policy effective August 2, 2001.

As a result of that meeting, the Surface Rights Board decided that hereafter, considering the change in policy as to Reclamation Certificates, all plans relating to pipeline Rights of Way should indicate a Right of Way large enough to accommodate construction activities because the Board will hereafter make no distinction between Work Space and Right of Way in determination of compensation. 3.

On March 21, 2012, the Board solicitor wrote to Terasen’s counsel, referencing the August 29, 2002 memorandum and an additional memorandum of November 21, 2002, stating: . . . during the time that Brian Gifford was Chair of the Surface Rights Board, the Board in a written document rescinded the two Memoranda referenced above. . . . at this time Board administration is unable to produce the written document(

s) by reason that it has been destroyed, is lost or cannot be found and another record of the written document has not been made. The Surface Rights Board will continue to determine compensation for pipeline right of entry based on the facts of each case.

Decisions regarding compensation will be made based on the relevant legislation, evidence and argument submitted by the parties. [ 44 ] Michelle Dawson, Director of Regulatory Affairs for InterPipeline (Corridor) Inc (the current name for Terasen) testified regarding the policy change by Alberta Environment in relation to reclamation certificates for work spaces. [ 45 ] Ms. Dawson observed that work spaces are normally larger than rights of way.

The width of right of way depends on the type of pipeline; while the work area depends on requirements of the construction process, and must be sufficiently large to ensure safety in that process. The impact of pipeline construction on landowners is minimized if the operator’s interest in workspace is terminated after the construction period.

[ 46 ] Work space may be provided either by agreements with landowners or in ROEs. If the former, the operator’s rights regarding work space are typically not registered against title and end when construction is finished. Whether work space is provided by agreement or by ROE, it is used in the same way and for the same period of time. [ 47 ] In 2005 Terasen sought a reclamation certificate for ROE work space on another property on the Corridor Pipeline, which was denied by Alberta Environment. Terasen appealed the denial to the Environmental Appeals Board.

The appeal led to an unsuccessful attempt at mediation, and was not afterwards pursued by Terasen. Since that time, Terasen has not applied for reclamation certificates, as it was felt that this process would not be successful. Terasen has not applied for reclamation certificates on the subject properties. [ 48 ] After the effort to obtain a reclamation certificate failed, Terasen met with Alberta Environment regarding applications for overlapping exemptions, passing on Terasen’s responsibility for reclamation of work areas to other operators. These applications were made in circumstances described by Mr.

Wasmuth, where other operators laid pipelines parallel to the Corridor Pipeline, in land that was previously work area for the Corridor Pipeline. The operator of the newer pipeline takes over responsibility for reclamation of these lands. Terasen has successfully applied for overlapping exemptions from Alberta Environment with respect to the Simmons, Slater and Wright lands. Where an overlapping exemption has been approved by Alberta Environment, Terasen has applied to the Board for a partial termination of the ROE in relation to work area covered by the overlapping exemption.

As of the appeal hearing, Terasen had received a partial termination of the ROE on the Slater lands. [ 49 ] Ms. Dawson also gave evidence about the procedure involved when Terasen requires access to the right of way after construction is complete, for purposes of maintenance or operational activities. The landowner is notified if any ground disturbance will be involved, and is compensated for any damages. If work area is required for access or maintenance, the landowner is paid a negotiated amount as consideration for use of the area.

This process was followed with respect to work that occurred during 2011 and 2012 on the Simmons and Wright lands. Law and Analysis A. Standard of Review [ 50 ] The appeal is brought pursuant to s. 26 of the Surface Rights Act : 26

(1) The operator or any respondent named in a compensation order may appeal a compensation order made under this Act to the Court of Queen’s Bench as to the amount of compensation payable or the person to whom the compensation is payable or both. . . .

(6) An appeal to the Court shall be in the form of a new hearing.

(7) The Court (

a) has the power and jurisdiction of the Board in determining the amount of compensation payable and the person to whom the compensation is payable, (

b) shall determine the amount of compensation payable and the person to whom the compensation is payable, (

c) shall (

i) confirm the order of the Board, or (ii) direct that the compensation order be varied in accordance with its judgment, and (

d) shall make directions as to costs of the appeal in accordance with subsection (9).

[51] The issue on this appeal is the amount of compensation, or, more precisely, the Board’s decision that work area should becompensated at the same rate as right of way.

This is an issue of fact or, “if valuation principles such as pattern of dealing” are involved,an issue of mixed fact and law: Imperial Oil Resources Ltd v 826167 Alberta Inc, 2007 ABCA 131 at para 17, 404 AR 212; leave toappeal to the SCC refused, [2007] SCCA No 303 (“Imperial Oil”). [52] Even though the appeal is in the form of a “new hearing”, the appeal/new hearing is constrained by deference to the Board’sexpertise; and the Board’s findings of fact and analysis should be accorded substantial weight: Lamb v Canadian Reserve Oil & Gas, (SCC), [1977] 1 SCR 517 at 527, 8 NR 613.

The standard of review on an appeal of a Board compensation orderinvolving an issue of fact or mixed fact and law is reasonableness: Imperial Oil at paras 8, 18. The parties agree that the reasonablenessstandard applies in this case. [53] The application of the reasonableness standard involves an assessment of both the reasons and outcomes of a decision.

Areviewing court must look for “the existence of justification, transparency and intelligibility within the decision-making process” and“whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law”:Dunsmuir v New Brunswick, 2008 SCC 9 at para 47, [2008] 1 SCR 190 (“Dunsmuir”). [54] Reading the tribunal’s reasons in the context of applying the reasonableness standard is an “organic exercise.” Reasons “mustbe read together within the outcome and serve the purpose of showing whether the result falls within a range of possible outcomes”:Newfoundland and Labrador Nurses’ Union v Newfoundland & Labrador (Treasury Board), 2011 SCC 62 at paras 12, 14, [2011] 3SCR 708, [2011] 3 SCR 708. [55] The role of new evidence on the appeal in relation to application of the reasonableness standard was commented on inImperial Oil at para 15: Reception of new evidence may “undermine the factual substratum of the Board’s decision and thus rob the decision of the value of theBoard’s expertise: [Mattel Inc v 3894207 Canada Inc, [2006] 1 SCR 772, 2006 SCC 22]. [56] The role of evidence was further elaborated in Enbridge Pipelines (Athabasca) Inc v Karpetz, 2010 ABQB 108 at para 43,495 AR 9, leave to appeal to the ABCA refused, 2010 ABCA 185 (“Karpetz”): New evidence introduced at trial which contradicts or undermines the evidence heard by the SRB can cast doubt on the reasonablenessof the SRB’s decision (Imperial Oil, supra, at para 20).

However, new evidence which would tend to undermine the decision itself,regardless of whether evidence on a similar point actually was before the SRB, may also cast doubt on the reasonableness of the SRB’sdecision. In other words, and regardless of how the SRB reached its decision, new evidence adduced on appeal may render its decisionunreasonable. B.

Is the Board Decision Reasonable? [57] Terasen submits that the Board decision to compensate work area at the same rate as right of way is not justifiable norintelligible, and does not fall within a range of possible outcomes given the evidence that was before the Board and the new evidence onappeal. [58] Terasen raises three arguments regarding unreasonableness: the effect of the August 29, 2002 memorandum; the “permanenceerror”; and the “pattern of dealings error”. (

i) The August 29, 2002 memorandum

[ 59 ] The August 29, 2002 memorandum signed by the Chair of the Surface Rights Board stated that, as a result of the Alberta Environment change in policy as to Reclamation Certificates, “all plans relating to pipeline Rights of Way should indicate a Right of Way large enough to accommodate construction activities because the Board will hereafter make no distinction between Work Space and Right of Way in determination of compensation.” [ 60 ] This memorandum was later rescinded.

Whether the rescission occurred before or after the Board hearing in this case is not clear. [ 61 ] The duty of a panel of the Board hearing an application for compensation, as stated by the solicitor for the Board in a March 21, 2012 letter to Terasen’s counsel, is “to determine compensation for pipeline right of entry based on the facts of each case’, taking into account “relevant legislation, evidence and argument submitted by the parties”. [ 62 ] There is nothing in the reasons for decision of the Board, or on the record, or in other evidence, to indicate that the Board had regard in any way for the August 29, 2002 memorandum.

The Board’s reasons clearly reflect the facts of the case before it, the relevant legislation, and the evidence and argument submitted by the parties. [ 63 ] A challenge to a quasi-judicial tribunal decision on the basis that it has followed a standard policy, rather than made a determination based on the facts of the case before it, amounts to an allegation of procedural unfairness.

The onus is on the challenger to prove that the procedure followed by the tribunal was unfair: Robert W Macaulay & James LH Sprague, eds, Practice and Procedure Before Administrative Tribunals , vol 2 (Toronto, Ont: Thomson Carswell, 2004) at 17-14. That onus has not been met. (ii) The “permanence error ” [ 64 ] The Board held that the “temporary workspaces [were] no longer temporary”, but remained “in the permanent possession of the Operator”. [ 65 ] Terasen argues that the Board’s determination is based on an unreasonable

interpretation of s 16 of the Surface Rights Act . The Board held that “[i]n accordance with s. 16 of the Act , the Right of Entry Orders vest in the Operator . . . ‘the exclusive right, title, and interest in the surface of the land in respect of which the order is granted’.” [ 66 ]

Section 16 of the Surface Rights Act provides: 16(1) A Right of Entry Order vests in the operator, (

a) Unless otherwise provided in the Order, the exclusive right, title and interest in the surface of the lands in respect of which the Order is granted, other than . . . [ 67 ] Terasen notes that the words “unless otherwise provided in the Order” were omitted from the Board’s reference to s 16. Terasen argues that the omitted words are important because the ROEs granted different rights with respect to right of way and work area: The Operator be and is hereby granted right of entry in respect of the surface of the land (

a) shown outlined in green on Plan A attached hereto (herein after “the right of way”) for or incidental to the construction, operation or removal of two pipelines ; and

(

b) shown coloured in green on Plan B attached hereto (hereinafter “the work area”) for purposes incidental to the construction ofthe pipelines. (emphasis added) [68] The Board decision recognized the distinction in the ROEs, but found that it did not justify different compensation: It is granted that the Right of Entry Orders distinguish between the respective purposes of the lands taken. However, the Board cannotfind a logical reason in support of awarding 50 per cent of the per acre compensation granted for the rights of way as fair payment for thework spaces. . . . . .

The Board also finds the 50 percent approach to be unacceptable. By analogy, a rational seller of land or any other property is notlikely to agree to accept one hundred percent for the part taken that the purchaser proposes to use, and 50 percent for the part taken thatthe purchaser proposes not to use. This is illogical, unfair, and most probably unacceptable to any reasonable person. [69] Terasen argues that this aspect of the Board decision is not reasonable, as it treats the distinction between right of way andwork area as merely related to its use of the lands.

To the contrary, the combined effect of the ROEs and Surface Rights Act, s 16 wasthat Terasen had no right to use the work area after construction. [70] The evidence established that when Terasen required access to work area after construction was completed, it negotiated withthe Landowners and paid consideration for use of the work area.

The work area was treated differently by both the Operator and theLandowners from the right of way, with respect to which the Operator continues to have a right of access for maintenance or otheractivities related to operation of the pipeline. [71] There was some debate during argument on the appeal as to whether the Operator has an ongoing right of access to work areato perform activities such as repair of subsidence, on the basis that these activities involve reclamation of the lands, which is incidental toconstruction.

I do not need to decide the exact scope of the Operator’s right of access to work area following construction.

If the Operatorhas any such right, it is significantly more restricted than its ongoing right of access to the right of way. [72] The question is not, however, whether there is any distinction between right of way and work area, but whether the distinctionthat exists makes the Board’s decision that work area is permanent unreasonable. [73] The Board acknowledged the distinction, but found that, whether or not the work area was in “use” by the Operator, itremained in the “permanent possession” of the Operator.

The evidence established that: work area was included in the ROEs; the ROEswould remain in effect until the Operator applied for and was granted partial termination; until that time, the Operator would continue topossess the “exclusive right, title, and interest in the surface of the land” as provided in the ROEs. The evidence before the Board alsoestablished that, four years after the issuance of the ROEs, the Operator had not applied for termination, and was not in a position to doso as it was unable to obtain partial reclamation certificates required as a condition of termination.

When, or whether, the Operator wouldbe able to do so was “fraught with uncertainty”. [74] From the perspective of the Landowners, their lands remain subject to ROEs in that rights are registered against the titles tothe land, even if those rights are limited and not in current use. It was reasonable for the Board to focus its attention on the “untenable”position of the Landowners, rather than the limited rights of the Operator.

Expropriation law requires that compensation be based on “thevalue to the owner, and not the value to the taker”: Dau v Murphy Oil, (SCC), [1970] SCR 861 at 863. [75] Apart from the issue of overlapping exemptions, which I will consider separately, the evidence presented on the appealaffirmed the Board’s view that work area is in the permanent possession of the Operator.

Regarding the Schroter lands, which do notqualify for an overlapping exemption, the ROE including work area remains on title more than ten years after its issuance, and Terasenhas not applied for a reclamation certificate or partial termination of the ROE. I do not suggest that there would be any point in Terasen

taking these steps; Terasen, like the Board, has to operate within the policies established by Alberta Environment. Further, on this appeal, I have no more jurisdiction than the Board did to review the actions of Alberta Environment, and must, like the Board, determine the issue of compensation in view of the resulting impact on the Landowners. [ 76 ] There was also evidence on the appeal regarding the impact of the continuing registration of the ROEs.

While there was no evidence that the Operator has claimed or exercised any ongoing right of access to work area, there was evidence that the Landowners are restricted in their rights to use the work area. Pursuant to s. 16 of the Act and the ROEs , the Landowners are prevented from using both the right of way and the work area for anything but agriculture.

Despite the agricultural zoning, the Landowners’ property not subject to ROEs could be used for a variety of purposes including: care centre, dwelling, equestrian centre, group home, home business, manufactured home, religious assembly, veterinary service, bed and breakfast, and boarding facility: Strathcona County, by-law No 8- 2001, Land Use Bylaw , s 12.2.

In addition, municipal setbacks prohibit construction of a residence or commercial or industrial building within 15 metres of both the right of way and the work area: Strathcona County, by-law No 8-2001, Land Use Bylaw , s 6.7. [ 77 ] There was evidence of procedures that have been adopted in other instances by operators and landowners to provide for temporary work spaces. The parties have agreed to exclude work spaces from registered rights of entry, and to provide limited term rights of access under unregistered agreements.

This evidence suggests that the Alberta Environment policy regarding reclamation certificates may be perceived as harmful to the interests of both operators and landowners, to the extent that they will cooperate to avoid the impact of the policy. It does not, however, change the factual situation that was before the Board in this case. [ 78 ] Terasen points to the evidence of overlapping exemptions on three of the four subject properties as evidence that its work space was, in fact, temporary.

On the Simmons, Slater and Wright properties, the work areas defined in the ROEs have since become rights of way for newer pipelines laid parallel to the Corridor Pipeline. Terasen has applied for and obtained overlapping exemptions from Alberta Environment, exempting it from its obligation to reclaim these areas. Terasen has also applied to the Board for partial termination of the ROEs, and at the time of the appeal hearing, had been granted a partial termination with respect to the Slater lands.

Terasen argues that on these three properties its work space no longer exists. [ 79 ] The Board was aware that a de facto pipeline corridor was emerging in the area. The Landowners’ appraiser, Mr. Gettel, testified before the Board regarding parallel utility rights of way already existing on the subject properties, and anticipated future rights of way. His focus was the impact that this could have on the potential for future development of the lands.

However, there was no evidence before the Board regarding the overlapping of Terasen work space by subsequent pipeline developments, some of which had not yet commenced at the time of the Board hearing. There was also no evidence regarding applications for overlapping exemptions, all of which post-dated the Board hearing. [ 80 ] The Surface Rights Act sets out relevant consideration in 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. [ 81 ] The Board was aware that under ss. 25(1)(

a) and (b), it must confine its consideration of land value to the time of taking, between late 2001 and early 2002. It found Mr. Gettel’s evidence regarding the adverse effects of a de facto pipeline corridor on future development of the lands to be too remote to consider. Similarly, in Smith Park , the Board refused to “speculate too far into the future” in determining what was “fair and reasonable compensation at the time of the Right of Entry Order.”

[ 82 ] The Landowners argue that the Court should not reduce compensation based on events occurring after the Board’s decision. Alternatively, they argue that if these subsequent facts put in evidence by Terasen are to be considered, the Court should also consider evidence that the subject lands have significantly increased in value since the date of the ROEs. [ 83 ] In the Admissibility Decision , I concluded that the POD Report was admissible, notwithstanding that it was based in part on right of way agreements and compensation orders that post-dated the ROEs and the Board ’ s decision.

This finding, of course, did not determine the weight to be given this or other new evidence. [ 84 ] As I noted in the Admissibility Decision , the Alberta Court of Appeal in Ranger Oil Limited v Ferguson , 1997 ABCA 52 at para 27 , 47 Alta LR (3d) 346 approved the Queen’s Bench judge’s consideration of evidence of “certain events post-dating the Board hearing”, but added that “there may be cases where it would not be appropriate to take account of post-entry evidence”. [ 85 ] The Board was aware of the potential for future pipelines on the subject properties, and would have been aware that these pipelines could not be placed in Terasen’s right of way, but potentially could be placed in its work space.

This is a distinction between right of way and work space that was not specifically considered by the Board. [ 86 ] The significance of this distinction depends on whether and when there is new pipeline construction in the work space on particular lands. If, on a particular property, a new pipeline overlaps all of the former work area within a year or two, that is a very different situation from another property where a new pipeline is constructed years later, or a property where there is no new construction.

Other circumstances may be relevant as well, such as whether the landowner (or the operator) receives compensation for the new pipeline, and in what amount. [ 87 ] A distinction that is property-specific does not, in my view, support the approach to compensation advocated by Terasen, that compensation for all work space should be discounted by the same amount.

That would result in overcompensation in some cases and undercompensation in other cases. [ 88 ] Had there been evidence before the Board regarding new pipeline construction in work space on a particular property, and had the Board declined to take it into consideration in determining compensation for work space, that may have been unreasonable. However, there was no such evidence before the Board. [ 89 ] The Board held that it should not speculate about future development where the evidence before it was remote.

This seems to me to be an eminently reasonable approach, and was advocated by Terasen in Smith Park and in this case. Had evidence regarding future pipeline development been presented to the Board, at least some of this evidence might also have been speculative and properly discounted by the Board. [ 90 ] The Board also commented, in Smith Park and in Corridor Pipeline Limited v Dupre (Decision No 2002/0124) (“ Dupre ”), on the potential to vary its orders under s 29 of the Surface Rights Act should a future event have a serious impact.

The Board might properly have held that future pipeline development could be considered in a s 29 application. [ 91 ] The question on this appeal is whether the new evidence makes the Board decision unreasonable. Certainly it does not with respect to the Schroter lands, where there is no new pipeline to date. Further, with regard to the other properties, the impact on the assessment of compensation should vary depending on the circumstances. The new pipelines were built at different times. The degree of overlap with Terasen work area differed.

The compensation received by the Landowners from the new pipelines presumably also differed. Ms. Slater did not receive compensation for the new pipelines because she had sold her property. [ 92 ] There are obvious difficulties in having the Board determine compensation based on future events. There is also a more straightforward way to deal with concerns that landowners will be overcompensated for parallel pipelines, which is to consider the issue when assessing compensation for the right of way for the later pipeline.

If land granted to an operator as right of way is work area and thus, already subject to restricted use by the landowner, it seems to me, that is a relevant consideration under s 25(1)(

c) of the Surface Rights Act which deals with “the loss of use by the owner or occupant of the area granted to the operator.” Other factors might also have to be taken into account, such as any increased burden or risk from having more than one pipeline on the lands.

[93] I conclude that the new evidence regarding parallel pipelines does not render the Board decision unreasonable.

Given the lackof evidence before the Board, the difficulties with determining compensation based on future events, and the unfairness of permitting theOperator to reduce compensation based on post-hearing events while restricting the Landowners to evidence of value at the date of entry,it was reasonable and remains reasonable for the Board to determine compensation without reference to future pipelines. [94] The Board’s conclusion that the “temporary workspaces” had ceased to be temporary, and remained “in the permanentpossession of the Operator” is reasonable. (iii) The “pattern of dealings error” [95] The Board found that there was no “logical reason in support of awarding 50 per cent of the per acre compensation grantedfor the rights of way as fair payment for the work spaces” and that there was “no cogent distinction made between the lands taken.” [96] Terasen submits that a clear pattern of dealings existed at the time the ROEs were issued that compensation for the work areawas valued at 50% of the right of way value.

Cogent reasons are required to depart from a pattern of dealings.

Terasen submits that theBoard reasons on this point were “far from cogent”. [97] Pattern of dealings evidence has long been accepted by the Board and in Alberta courts. [98] In Livingston v Siebens Oil & Gas Ltd, (1978), 1978 ALTASCAD 83 , 8 AR 439, [1978] AJ No 729 (Alta CA)(“Livingston”), the Court of Appeal stated at paras 7, 11: [I]n an area where there is a course of dealings between oil companies and surface owners whereby a standard rate of compensation hasbeen paid and accepted, this evidence should at the very least be given great weight by the Board.

The Board is not bound to set compensation at the same amount as is offered by the oil company for there may be reasons for thecompanies offering higher prices than they think they are bound to pay; it is a matter to be weighed by the Board. However, where thereare such a number of deals established so that it may be said that a pattern has been established by negotiations between the landownersand oil companies in a district, then the Board should only depart from such compensation with the most cogent reasons.

I think itshould be accepted that no matter how expert outsiders are that the oil companies and landowners have the better judgment as to whatcompensation should be paid in their own interests. (emphasis added.) [99] In Petryshen v Nova (1982), 1982 ABCA 318 , 23 Alta LR (2d) 193, 27 LCR 276 (Alta CA), rev’g in part, (1982),23 Alta LR (2d) 193 at 194 (Alta QB)(WL), the Court of Appeal affirmed the decision of the Queen’s Bench which varied thecompensation award granted by the Surface Rights Board, based on the Board’s error in rejecting evidence of valuation agreementsmade in the same area shortly before the dispute between the parties (i.e. “pattern of dealings” evidence).

The Queen’s Bench decisionreferred to Livingston and stated at para 7: Clearly it was an error for the board to ignore such cogent and weighty evidence and embark on the very uncertain task of attempting toidentify and evaluate the numerous factors that must be considered to determine a just compensation.

Such a procedure is appropriatewhen there is no evidence of comparable agreements reached for identical benefits between willing sellers and willing buyers where theparties, the land, the subject matter of the agreement and the timing are all comparable and applicable. [100] In Nova v Bain (1985), 1985 ABCA 15 , 36 Alta LR (2d) 289, [1985] 4 WWR 460 (Alta CA), the Court of Appealdismissed the appeal by Nova which challenged the finding by the Court of Queen’s Bench that “[t]he evidence of a pattern of freely

negotiated pipeline right-of-way settlements in the same general area during approximately the same time frame was simply overwhelming.” The Court of Appeal held at para 5: It is clear from authorities in this court, most recently our decision in Petryshen v. Nova, An Alta. Corp. (1983), 23 Alta.

L.R. (2d) at 200, 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. [ 101 ] Pattern of dealings evidence was also considered in Imperial Oil at paras 21-23 and in Karpetz at paras 37, 54-56 (QB) and paras 4-5, 27-29 (CA denial of leave to appeal).

In both cases, the courts held that the Board had not provided sufficient reasons to depart from the pattern of dealings evidence of the operators. [ 102 ] Generally, pattern of dealings evidence involves particular compensation amounts, as with Mr. Wasmuth’s evidence that for properties in the area of the four subject properties there was a pattern of dealings demonstrated at $6000 per acre for right of way and $3000 per acre for work space.

However, the Board and the courts have also considered pattern of dealings evidence in terms of the relationship between amounts paid for right of way and work space. [ 103 ] In Zubick v Corridor Pipeline Ltd , 2002 ABQB 452 , 315 AR 274 (“ Zubick ”), Sanderman J was of the view that this “industry practice” had little value in assessing compensation (at paras 81-84): I decline to increase the award for work space. The Board ordered $500 per acre in this regard.

I am aware, according to the evidence I heard, that the industry practice is to award work space compensation as a 50 per cent value of the right of way award. No supportable reasons were given for picking this percentage other than, “it is done”. This type of approach is completely illogical. There is no direct correlation between the two awards. Just because it is done this way, does not make it right. If one is to take a principled approach in assessing the proper compensation for the taking of the right of way, one should also do that in assessing proper compensation for the work space.

From my perspective, the assigning of a 50 per cent value to the work space is not only illogical but wrong. I cannot conceivably see how the value of the use of the work space can approach 50 per cent of the value of the right taken. I do not believe that a supportable argument can be made that the value approaches 50 per cent of the right of way taken. It would be considerably less.

I would have reduced the $500.00 per acre award made by the Board, but no evidence was led before me on this point that would allow me to come to a principled decision in this regard. [ 104 ] The Board in Smith Park considered this finding. The Board characterized the “industry practice” as a pattern of dealings: Compensation for the work area at 50% of the right of way value has been universally accepted by landowners and operators for many years. There is no clearer pattern of dealings in the pipeline industry.

The Board made the same finding in Dupre , which issued about a week before Smith Park . [ 105 ] In both Smith Park and Dupre , the Board considered Justice Sanderman’s criticism. As stated in Smith Park : In the Zubick decision, supra , Sanderman J. made the comment that he found the compensation paid on workspace high. It may be that Justice Sanderman was unaware that the area granted for workspace was not temporary and remained part of the Right of Entry Order

for an indefinite term. [ 106 ] In Karpetz , Macklin J found that the Board had not provided cogent reasons for departing from a pattern of dealings setting compensation for right of way at $1900 per acre and work space at $950. The Board had ordered up front compensation for both right of way and work space in the amount of $700, plus annual rental of $100 per acre reviewable every five years.

In regard to relative compensation for right of way and work space, Macklin J held, at para 58: There were no reasons given for awarding [$700 per acre], nor were there any reasons given for why compensation for the TWS [work space] should equal that of the RoW [right of way]. The temporary work space is exactly that; temporary. Within two or three years, it will no longer be used and Enbridge is obliged to restore it to its “full equivalent land capability”.

As with the RoW lands, each landowner is still entitled to use the property subject to a restriction for any use that might interfere with the operation of the pipeline by Enbridge. [ 107 ] I accept Terasen’s submission that a clear pattern of dealings existed at the time the ROEs were issued under which compensation for work area was valued at 50% of the right of way value. [ 108 ] It is not surprising that Terasen did not present evidence on this point before the Board, given the unqualified statements in Smith Park and Dupre that there was no clearer pattern of dealings in the pipeline industry.

These statements were not based on evidence particular to those decisions, but on the Board’s familiarity with the industry. [ 109 ] In any event, Terasen has now presented expert evidence to support the Board’s previous findings. In the POD Report, Mr. Wasmuth concluded that there was, in the area in question at the time of the ROEs, a clear pattern of dealings that consideration paid for work space was 50% of consideration paid for right of way. Cross examination did not undermine this conclusion.

There were occasional errors or omissions in his report, although not beyond what one would expect when such a large body of data has been reviewed. Nonetheless, the pattern remained overwhelmingly clear. There was more variability in the later data, which appears, in large part, to be due to the repercussions of the Board decision under appeal and similar decisions. That increase in variability does not affect the validity of Mr.

Wasmuth’s conclusion, which related to a pattern of dealings at the time the ROEs were issued. [ 110 ] In the within case, the Board did not expressly find that this pattern of dealings existed, but in my view, it did so implicitly. The Board noted Terasen’s submission that Smith Park should be regarded as an established pattern of dealings and that there was no cogent reason to depart from this pattern. The Board expressly applied Smith Park in relation to consideration for right of way.

Subsequently, when deciding not to distinguish between compensation paid for right of way and work space, the Board held that “there can be no cogent distinction made between the lands taken.” Considered in context, the Board decision amounts to an acceptance that a pattern of dealings existed, an application of that pattern of dealing with regard to compensation for right of way, and a determination that there was a cogent reason not to follow the pattern of dealings with respect to compensation for work space. [ 111 ] That brings me to Terasen’s submission that the Board reasons on this point were “far from cogent”. [ 112 ] I note that it is not my role, on this appeal, to come to my own conclusion regarding whether there was or was not a cogent reason to depart from the pattern of dealings.

This is an issue of mixed fact and law on which the standard of review is reasonableness: Imperial Oil at para 17.

My role is to determine whether the Board, in concluding that a cogent reason existed, demonstrated “justification, transparency and intelligibility within the decision-making process” and whether the Board decision is “ within a range of possible, acceptable outcomes which are defensible in respect of the facts and law”: Dunsmuir at para 47 . [ 113 ] Terasen submits that the Board decision lacked justification and intelligibility because, in determining not to follow the pattern of dealings, it quoted from and relied on Zubick and Smith Park , and, given the results of these decisions, the reliance was misplaced. [ 114 ] In Zubick , in a part of the decision quoted by the Board, Sanderman J held that it was completely illogical to award 50% of right of way compensation for work space, and that the real value of work space would be considerably less.

The Board returned to this statement when coming to its own conclusion that right of way and work space should be compensated at the same rate:

[T]he Board cannot find a logical reason in support of awarding 50 per cent of the per acre compensation granted for the rights of way as fair payment for the work spaces. In this instance, the Board agrees with Justice Sanderman’s finding in Zubick v. Corridor (supra) . Specifically, his concern is that there are no supportable reasons for picking this percentage other than “it is done”. He further characterizes this approach as “completely illogical”. The Board also finds the 50 percent approach to be unacceptable.

By analogy, a rational seller of land or any other property is not likely to agree to accept one hundred percent for the part taken that the purchaser proposes to use, and 50 percent for the part taken that the purchaser proposes not to use. This is illogical, unfair, and most probably unacceptable to any reasonable person. [ 115 ] Terasen argues that: While purporting to agree with Justice Sanderman, the Board attributed the exact opposite meaning to Justice Sanderman’s words, twisting his phrases entirely out of context to suit its intended purpose.

Justice Sanderman indicated that the pattern of dealing wherein temporary workspaces were compensated at 50% of the right of way was completely illogical and “ ought to be considerably less ”, yet the Board relied on this statement to justify its finding that the temporary workspace be compensated at considerably more than had typically been done. [ 116 ] Terasen submits that the Board’s “misinterpretation” of Zubick , whether it was “mistake or deliberate perversion” undermines its decision. [ 117 ] In my view, the Board neither mistook nor perverted the Zubick decision.

Rather, Terasen’s submission fails to distinguish the principle stated by Sanderman J and the application of that principle to the facts. [ 118 ] The Board was not mistaken about the Zubick decision; it quoted the paragraphs relied upon by Terasen. In those paragraphs Sanderman J stated the principle that any relationship in industry practice (or pattern of dealings) between compensation for right of way and compensation for work space could not be justified solely because “it was done”, it should reflect real differences, or presumably similarities, in the value of the rights taken.

Justice Sanderman also commented on the likely result of the application of that principle in the case before him, that the value of the work space would be less than 50% of the value of right of way. However, he also noted that there was no evidence before him on this point, so he declined to change the Board award. [ 119 ] The Board applied this principle to a different set of facts. They held, on the evidence before them, that the value of the rights taken was essentially the same and therefore the compensation should be the same.

This is not a perversion of the Zubick decision; it is an application of it. [ 120 ] Terasen also argues that the Board referred to Smith Park in a misleading way, in that it cited Smith Park in support of its decision, but then came to a different conclusion on the value of work space. [ 121 ] It is clear that the Board was aware of the result in Smith Park . This is set out in a number of places in the Board decision, commencing with its

summary of Terasen’s submission. However, the Board only relied upon Smith Park in support of its conclusion regarding compensation for right of way, not regarding compensation for work space. [ 122 ] The Board was faced with ROEs that issued very close in time to those considered in Smith Park and Dupre , and with a very similar factual context in relation to the duration of work space. In Smith Park , the Board summarized the facts as follows: The Operator, under the Right of Entry Order, was granted areas in addition to the right of way for workspace during the construction phase.

The Order restricts the use of the workspace for purposes incidental to the construction, and states that the space must be terminated upon completion of the construction of the pipelines. Recently, Alberta Environment has advised the Board that it will not issue a partial reclamation certificate on workspaces associated with pipelines. Under the Environmental Protection and Enhancement Act , RSA 2000 and its regulations, workspace is included in the definition of specified land. Operators under that Act must obtain a

reclamation certificate on specified land and no Board Order can be terminated without a reclamation certificate. The combined effect of Environment’s refusal to issue a partial reclamation certificate and the legislation, means that the area granted for workspace remains indefinitely part of the Right of Entry Order. [ 123 ] Based on these facts, the Board in Smith Park and Dupre distinguished Zubick and declined to accept Mr. Wasmuth’s rental value approach to compensation for work space. The Board cited the indefinite duration of work space to justify its determination that a higher value should be attributed to work space, consistent wit

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