Canadian Natural Resources Limited v. Wood Buffalo (Municipality), 2013 ABQB 91

Court of Queen ’ s Bench of Alberta Citation: Canadian Natural Resources Limited v. Wood Buffalo (Municipality), 2013 ABQB 91 Date: 20130207 Docket: 1113 00044, 1113 00090 Registry: Ft. McMurray Between: Canadian Natural Resources Limited Applicant - and - The Regional Municipality of Wood Buffalo, The Regional Municipality of Wood Buffalo Composite Assessment Review Board and The Minister of Justice, Attorney General for Alberta Respondents _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Gerald A.

Verville _______________________________________________________ Background [ 1 ] Canadian Natural Resources Limited (CNRL) challenges two preliminary decisions of the Regional Municipality of Wood

Buffalo Composite Assessment Review Board (CARB). [ 2 ] A stay of proceedings on the merits was granted by this Court. CNRL then sought leave to appeal the preliminary decisions pursuant to s. 470 of the Municipal Government Act, RSA 2000, c M-26 (MGA). Leave was granted on three questions. [ 3 ] CNRL submits that the CARB erred in making certain rulings, and requests that this Court cancel the CARB decisions and refer the matter back to the CARB with directions.

Facts [ 4 ] On March 1, 2010, the Municipality of Wood Buffalo (Municipality) rendered an assessment notice in the sum of approximately $2.4 billion to CNRL for machinery and equipment at CNRL ’ s Horizon Oil Sands Project.

This followed a five-year process of consultation and provision of information to the assessor. [ 5 ] On March 5, 2010, the Municipality issued an amended assessment notice in the sum of approximately $3.2 billion. [ 6 ] CNRL filed a complaint with the CARB regarding the amended notice. [ 7 ] On October 7, 2010, following a preliminary hearing held from September 7 to 9, 2010, the CARB issued Board Order CARB 007/2010-P (CARB 007). [ 8 ] On January 4, 2011, following a preliminary hearing held on December 6 and 7, 2010, the CARB issued Board Order CARB 027/2010-P (CARB 027). [ 9 ] CNRL issued originating applications seeking relief in relation to both CARB 007 and CARB 027.

They are the second and fourth of four preliminary decisions of the CARB. [ 10 ] Following preliminary hearings, the CARB scheduled a three week hearing on the merits to commence on May 2, 2011. CNRL applied to this Court for a stay of those proceedings until the two applications before this Court were heard. On March 25, 2011, Martin J. heard the application for a stay and on April 1, 2011, she granted the stay: Canadian Natural Resources Ltd v Wood Buffalo (Regional Municipality) , 2011 ABQB 220 , 516 AR 51 (Stay Decision) .

She held that the case involved special circumstances warranting interlocutory intervention in the ongoing CARB process. [ 11 ] CNRL then sought leave to appeal on what it submitted were a number of questions of law. The application was heard by Sulyma J. on September 30, 2011.

She issued a decision on March 14, 2012 - Canadian Natural Resources Ltd v Wood Buffalo (Regional Municipality) , 2012 ABQB 177 , [2012] AJ No 829 (Leave Decision) - granting CNRL leave to appeal on three issues arising out of CARB 007 and 027. [ 12 ] On September 24, 2012, the City of Edmonton (City) applied to become an intervenor in this appeal. On November 22, 2012, Belzil J. granted that application. [ 13 ] The CARB has not yet heard any evidence in relation to the merits of CNRL's 2010 complaint. Litigation by Installments

[ 14 ] The CARB 007 and 027 preliminary decisions are interlocutory in nature.

I am mindful that as a general principle of law, review of interlocutory decisions is not available except in extraordinary circumstances: Robertson v Edmonton (City) Police Service , 2003 ABCA 279 , 339 AR 169 , Martselos v Poitras , 2008 FC 1413 , [2008] FCJ No 1813 at paras. 13 -15 , Bear Hills Charitable Foundation v Alberta (Gaming and Liquor Commission) , 2008 ABQB 766 , 463 AR 276 , and ADM v Canadian Institute of Actuaries , 2008 ABQB 522 , 467 AR 263 . [ 15 ] Among the rationales for this rule listed in Robertson at para. 4 , are the following: - the later final result of the hearing on the merits, or any appeal from that final result, might well make the present appeal's result academic - the reviewing court cannot see whether any error is harmless and does not affect the final result - a difficult question of law should not be decided in a vacuum - premature appeals pose a grave danger of disrupting and delaying the hearing or trial - any inconvenience felt from not deciding the preliminary point, or having to retrace steps later, if it actually occurs, can usually be compensated in costs - if the appellant loses the ultimate decision on the merits, he or she can always appeal and raise the question now raised. [ 16 ] In my view, all of these comments apply to this case.

During the hearing, the parties persuaded me that at this time, given the steps taken to arrive to this point, a decision on the merits was warranted and was welcomed by all those involved. I have decided to address the merits but not without some misgivings. Based on the information before the Court and the time elapsed pending this interlocutory appeal, in my view it is speculative that any efficiencies will ultimately have been gained or costs avoided as a result of appealing the interlocutory rulings as opposed to appealing a final decision.

Issues [ 17 ] The following are the issues on which leave to appeal was granted: 1. Did the CARB err in finding that the Municipality had complied with CNRL ’ s s. 299 request? 2. Did the CARB err in finding that CNRL failed to raise equity as an issue in its complaint form and was therefore precluded from raising it in the hearing on the merits? 3. Did the CARB err in finding that each party bears the onus to prove the included cost amount they believe is correct? [ 18 ] I will address standard of review separately in relation to each issue.

Prior to embarking on a discussion of the issues, it is helpful to review the applicable statutory framework. Statutory Framework

[ 19 ] The current regime came into effect on January 1, 2010 (Bill 23 - the Municipal Government Amendment Act , 2009). As a result of legislative amendments, a new single level process replaced a two level system which had allowed appeals from the local Assessment Review Board to the Municipal Government Board (MGB).

These changes were intended to improve the assessment complaint and appeals process with the key objective being to have a well-managed, fair and efficient assessment and property tax system in which taxpayers have confidence. [ 20 ] Assessors assess “ property ” in a municipality according to the scheme set out in the MGA . Under s. 284(1)(r)(ii), “ property ” includes an improvement. “ Improvement ” is defined in s. 284(1)(j)(iv) as including “ machinery and equipment ” , which is further defined in s. 284(1)(

l) as having the meaning set out in the regulations.

Section 1 (

j) of the Matters Relating to Assessment and Taxation Regulation , AR 220/2004 (MRAT) provides a detailed definition of “ machinery and equipment ” . [ 21 ]

Section 293 of the MGA provides in part: 293(1) In preparing an assessment, the assessor must, in a fair and equitable manner, (

a) apply the valuation and other standards set out in the regulations, and (

b) follow the procedures set out in the regulations.

(2) If there are no procedures set out in the regulations for preparing assessments, the assessor must take into consideration assessments of similar property in the same municipality in which the property that is being assessed is located. [ 22 ] Alberta ’ s machinery and equipment regime is essentially a self-reporting system with the taxpayer providing detailed cost information.

Assessment of machinery and equipment is a “ regulated assessment ” ; the assessor conducts an assessment in accordance with s. 9 of MRAT : Valuation standard for machinery and equipment 9(1) The valuation standard for machinery and equipment is that calculated in accordance with the procedures referred to in subsection (2).

(2) In preparing an assessment for machinery and equipment, the assessor must follow the procedures set out in the Alberta Machinery and Equipment Assessment Minister's Guidelines .

(3) For the purposes of

section 298(l)(

z) of the Act, an assessment must be prepared for machinery and equipment that is not part of linear property as described in section 284(1) (

k) of the Act, and the assessment must reflect 77% of its value. [ 23 ] Simply put, under the applicable guidelines, the assessment of machinery and equipment is calculated as follows: (Base Cost) X (Assessment Year Modifier) X (Depreciation Factor) X (Additional Depreciation) [ 24 ] Section 310(1) of the MGA requires assessment notices to be sent no later than July 1 each year. Section 310(1.1) requires amended assessment notices to be sent no later than the date tax notices are required to be sent under

Part 10.

[ 25 ] Under s. 305, the assessor may amend the assessment if the assessor determines that there has been an error, omission or mis- description in any of the information shown on the assessment roll. Once a complaint has been filed, the assessor has no jurisdiction to change or amend the assessment roll. [ 26 ] The assessed person may request information from the assessor under ss. 299 and

Section 299 provides: 299 (1)An assessed person may ask the municipality, in the manner required by the municipality, to let the assessed person see or receive sufficient information to show how the assessor prepared the assessment of that person ’ s property.

(1.1) For the purposes of subsection (1), “ sufficient information ” in respect of a person ’ s property must include (

a) all documents, records and other information in respect of that property that the assessor has in the assessor ’ s possession or under the assessor ’ s control, (

b) the key factors, components and variables of the valuation model applied in preparing the assessment of the property, and (

c) any other information prescribed or otherwise described in the regulations.

(2) The municipality must, in accordance with the regulations, comply with a request under subsection (1). [ 27 ] An assessed person or a taxpayer may complain of an assessment: s. 460 of the MGA . The powers of assessment review boards are described in s. 467: 467(1) An assessment review board may, with respect to any matter referred to in section 460(5), make a change to an assessment roll or tax roll or decide that no change is required.

(2) An assessment review board must dismiss a complaint that was not made within the proper time or that does not comply with section 460(7).

(3) An assessment review board must not alter any assessment that is fair and equitable, taking into consideration (

a) the valuation and other standards set out in the regulations, (

b) the procedures set out in the regulations, and (

c) the assessments of similar property or businesses in the same municipality.

(4) An assessment review board must not alter any assessment of farm land, machinery and equipment or railway property that has been prepared correctly in accordance with the regulations.

[ 28 ] Assessment review boards are not bound by the rules of evidence or any other law applicable to court proceedings and have power to determine the admissibility, relevance and weight of any evidence: s. 464(1). Section 8(2) of the Matters Relating to Assessment Complaints Regulation , AR 310/99 (MRAC) sets out the time lines for disclosure: 8(2) If a complaint is to be heard by a composite assessment review board, the following rules apply with respect to the disclosure of evidence: (

a) the complainant must, at least 42 days before the hearing date, (

i) disclose to the respondent and the composite assessment review board the documentary evidence, a

summary of the testimonial evidence, including a signed witness report for each witness, and any written argument that the complainant intends to present at the hearing in sufficient detail to allow the respondent to respond to or rebut the evidence at the hearing... (

b) the respondent must, at least 14 days before the hearing date, (

i) disclose to the complainant and the composite assessment review board the documentary evidence, a

summary of the testimonial evidence, including a signed witness report for each witness, and any written argument that the respondent intends to present at the hearing in sufficient detail to allow the complainant to respond to or rebut the evidence at the hearing... (

c) the complainant must, at least 7 days before the hearing date, disclose to the respondent and the composite assessment review board the documentary evidence, a

summary of the testimonial evidence, including a signed witness report for each witness, and any written argument that the complainant intends to present at the hearing in rebuttal to the disclosure made under clause (

b) in sufficient detail to allow the respondent to respond to or rebut the evidence at the hearing. [ 29 ]

Section 9 of the MRAC sanctions certain types of non-disclosure: 9(1) A composite assessment review board must not hear any matter in support of an issue that is not identified on the complaint form.

(2) A composite assessment review board must not hear any evidence that has not been disclosed in accordance with

section 8.

(3) A composite assessment review board must not hear any evidence from a complainant relating to information that was requested by the assessor under

section 294 or 295 of the Act but was not provided to the assessor.

(4) A composite assessment review board must not hear any evidence from a municipality relating to information that was requested by a complainant under

section 299 or 300 of the Act but was not provided to the complainant. [ 30 ] Section 470(1) of the MGA provides that an appeal lies to the Court of Queen’s Bench on a question of law or jurisdiction with respect to a decision of an assessment review board.

Section 470.1 provides that the Court may confirm or cancel the decision. If the Court of Queen’s Bench cancels a decision, the Court must refer the matter back to the assessment review board, and the board must rehear the matter and deal with it in accordance with the opinion of or any direction given by the Court on the question of law or the question of jurisdiction.

Finally, if the Court of Queen’s Bench finds that the only ground for appeal established is a defect in form or a technical irregularity and that no substantial wrong or miscarriage of justice has occurred, the Court may deny the appeal, confirm the decision of the assessment review board despite the defect or irregularity, and order that the decision takes effect from the time and on the terms that the Court considers proper. [ 31 ] It is also open for an assessed person to request a compliance review under s. 27.6 of MRAT :

27.6(1) In this section, “ compliance review ” means a review by the Minister to determine if a municipality has complied with an information request under

section 299 or 300 of the Act and this Part.

(2) An assessed person may make a request to the Minister, in the form and manner required by the Minister, for a compliance review if the assessed person believes that a municipality has failed to comply with that person ’ s request under

section 299 or 300 of the Act.

(3) A request for a compliance review must be made within 45 days of the assessed person ’ s request under

section 299 or 300 of the Act.

(4) If, after a compliance review, the Minister determines that a municipality has failed to comply with a request under

section 299 or 300 of the Act, the Minister may impose a penalty for non-compliance against the municipality in accordance with the Schedule. Questions 1. Did the CARB err in finding that the Municipality had complied with CNRL ’ s s. 299 request? a. Background [ 32 ] CNRL wrote to the Municipality on March 18, 2010 requesting information regarding the basis for the amended assessment: Canadian Natural received the "Revised Annual Property Assessment Notice for 2010" mailed on March 5, 2010 and the "Industrial Assessment Calculation Detail Report" sent by e-mail on March 12, 2010 by Harry Schmidt.

On March 12, 2010, Canadian Natural sent an e-mail to Harry Schmidt requesting the details supporting the M&E "Adjustment Factor" that increased Canadian Natural's assessment by $809.8 million and asked him to supply this information by March 17, 2010. Canadian Natural has not received a reply to the initial request. Canadian Natural formally requests you provide the key factors, components and variables of the valuation model applied in preparing the "adjustment factor" for the Canadian Natural - Horizon's M&E 2009 Assessment (Roll Number 8992004911).

Canadian Natural wants to know how you arrived to $1,441.5 million installed cost adjustment increase included in the "Industrial Assessment Calculation Detail Report" that represents $809.8 million increase in assessment value. (see line highlighted in red in the Industrial Assessment Calculation Detail Report attached). Canadian Natural is requesting this information according to

Section 299 and 300 MGA and expects to receive a reply in no more than five days, the time spent by RMWB to generate the revised assessment. [ 33 ] Harry Schmidt responded on behalf of the Municipality on March 22, 2010: Further to your letter of March 18, 2010, requesting information according to

Section 299 and 300 of the MGA . Your request asks for details supporting the "Adjustment Factor" of $1,441.5 Million ($809.8 million Assessment). The Adjustment is based on the following: 1. The total capital expenditures for the Horizon Oil Sands Project as reported in the 2009 Property Tax Report dated December 1, 2009

1. The total capital expenditures for the Horizon Oil Sands Project as reported in the 2009 Property Tax Report dated December 1, 2009 = $10.135 Billion 2. The 2009 Property Tax Report suggests the total assessable costs for the Project to be $4.389 Billion 3. After calculating the 2009 assessment based on the above, the total assessed value for the Project was $2.663 Billion (or 26.3% of the total capital cost) 4. Industry has provided the RMWB with 2009 Assessment Factors for determining "CAPEX COST CONVERSION to ASSESSED VALUES", for various Project Types (copy attached) .

Based on these Factors the assessed value of a Greenfield - Mine/Extraction Project should be approximately 34.26% of total capital expenditures, and for a Greenfield - Up-grader Project it should be approximately 39.6% of total capital expenditures. (i.e. 34.26% to 39.6%) 5. Based on the above, the minimum assessed value for the Horizon Oil Sands Project should be approximately 34.26% of the total capital expenditure for the Project. (i.e. $10.135 X 34.26% = $3.472 Billion) 6. The "Adjustment Factor" is to account for the difference between an assessed value of $2.663 Billion and $3.472 Billion.

Please call me if you wish to discuss how we might proceed on a go forward basis. [ 34 ] There was no further request or communication between the parties in relation to the s. 299 request. [ 35 ] At the September 2010 preliminary hearing, CNRL objected to the Municipality's filing of Exhibit R20 (the Schmidt/Thomson Report), a document created after the Municipality ’ s March 22, 2010 response.

CNRL argued that the Municipality had failed in its obligation to respond to CNRL's s. 299 request and, therefore, should be precluded from being able to rely upon the report under s. 9(4) MRAC. [ 36 ] CNRL took the position before the CARB that s. 9(4) was intended to prevent a municipality from providing ex post facto reasons for an assessment, and that it is unfair for a municipality to increase an assessment and not provide details, when the taxpayer has a strict time line within which to file a complaint.

If the Municipality could not provide details when requested, it should not be permitted to do so later. [ 37 ] The Municipality argued before the CARB that it responded to the request as framed, and pointed to s. 27.6 MRAT which provides a remedy to taxpayers who are dissatisfied with responses under s. 299, i.e. a compliance review by the Minister. It further submitted that R20 had no bearing on the s. 299 request, but rather reflected the review of the cost reporting that the Municipality told CNRL it would be doing.

The information was provided to CNRL as soon as it became available. [ 38 ] The CARB (CARB 007 at 17) declined to exclude R20, finding that the Municipality had responded to the s. 299 request by providing all the documentation it had in its possession relating to the question that was asked, being how the Municipality arrived at $1,441.5 million installed cost adjustment increase included in the industrial Assessment Calculation Detail Report.

Further explanation was not requested, nor was a compliance review requested. [ 39 ] The CARB recognized that the strict time lines in the legislation are too short for responding to this type of evidence, but held that this could be addressed by allowing time to respond to the report. It granted an extension of time to reply. b. Standard of Review

[ 40 ] The standard of review applicable to the CARB decisions under the new scheme has been addressed in other cases: Ruppert v Calgary Assessment Review Board and City of Calgary (18 November 2010), Calgary 1001-11405 (ABQB), Associated Developers Ltd v.Edmonton (City) , 2011 ABQB 592 , 50 Alta LR (5th) 219 . Therefore, an exhaustive standard of review analysis is unnecessary: Dunsmuir v New Brunswick , 2008 SCC 9 , [2008] 1 SCR 190 at paras. 57 and 62 . [ 41 ] This issue involves

interpretation of the MGA , the CARB ’ s home statute. In my view, it is not one of the questions outlined in para. 30 of Alberta (Information and Privacy Commissioner) v Alberta Teachers' Association Information and Privacy Commissioner , 2011 SCC 61 , [2011] 3 SCR 654 ( ATA ) to which the correctness standard continues to apply . It is specific to the CARB ’ s administrative regime, especially given the fact that the CARB is not bound by the rules of evidence or any other law applicable to court proceedings and has power to determine the admissibility, relevance and weight of any evidence: s. 464(1) MGA.

I conclude that the reasonableness standard applies. c. Positions of the Parties [ 42 ] CNRL submits that the policy behind taxpayer information rights is to ensure taxpayers have an appropriate avenue to discover the basis for preparation of their assessments. Under the prior regime, this was facilitated by a two level system which allowed appeals from the local Assessment Review Board to the MGB.

Along with the new single level of complaint, more stringent time lines, and the need to address issues in the complaint form, come enhanced taxpayer discovery rights and limits on the assessor's ability to call evidence at the CARB which was not disclosed upon a s. 299 or s. 300 request.

CNRL argues that without these protections, the complaint process becomes one-sided, unfair and prejudicial to the taxpayer. [ 43 ] CNRL further argues that it requested the basis for the increase in the amended assessment, and that the assessor ’ s response indicated that it was based on tax planning factors set out in a third party tax planning study prepared by the Oil Sands Development Group (OSDG Report), which factors are unrelated to the regulated assessment process.

The response did not point to any discrepancies in CNRL ’ s reporting of costs, nor did it take issue with the quantum reported regarding any category of costs or methodologies employed by CNRL. According to CNRL, the effect of s. 9(4) MRAC and the response should be that the assessor is limited to defending the amended assessment on the basis of the OSDG Report. The taxpayer is effectively frozen to the issues in the complaint form and lack of a similar constraint on the assessor would be unfair.

The disclosure under s. 299 should be at least sufficient to provide the taxpayer with an understanding of the regulated assessment principles upon which the assessor is relying. The s. 299 response constitutes the assessor's formal position concerning the detailed basis for the amended assessment. A municipality would be free to assert an alternative basis for an assessment in a subsequent year. If this were not the case, municipalities would be encouraged to make arbitrary assessments without a proper basis.

CNRL also notes that it was not necessarily interested in having the Municipality sanctioned through a compliance review by the Minister. [ 44 ] The Municipality argues that a s. 299 request may be made at any time of the year, not just in the context of a complaint. There is a short period of time within which to reply to such a request. It submits that s. 299 is reasonably interpreted as imposing a point-in-time, as opposed to a continuing, obligation.

The Municipality further submits that much of s. 299 MGA and s. 27.1 MRAT does not apply to machinery and equipment, but applies rather to property assessed at a market value valuation standard.

Section 27.1 provides: 27.1...(a) "coefficient" means a number that represents the quantified relationship of each variable to the assessed value of a property when derived through a mass appraisal process; (b) "factor" means a property characteristic that contributes to a value of a property; (c) "valuation model" means the representation of the relationship between property characteristics and their value in the real estate marketplace using a mass appraisal process; (d) "variable" means a quantitative or qualitative representation of a property characteristic used in a valuation model. [ 45 ] The Municipality submits that the CARB reasonably held that the purpose of s. 9(4) MRAC was to ensure that a municipality does not withhold relevant information in its possession.

The other information it had at the time was CNRL ’ s own cost report. The

Municipality argues that given the type of property in issue, the CARB ’ s

interpretation and conclusion was reasonable. [ 46 ] The City submits that s. 299 MGA requires a municipality to allow an assessed person to see or receive sufficient information about how the assessor prepared the assessment, but not necessarily all information that defends an assessment or shows that it is correct. Section 9(4) MRAC does not direct that only evidence produced by a municipality in response to a s. 299 request may be used to defend an assessment before the CARB. Sections 8(2)(

b) and (

c) MRAC permit a municipality and complainant to file disclosure and evidence in response to positions taken and information provided by the other party. The City cites Boardwalk Reit LLP v Edmonton (City) , 2008 ABCA 220 at para 77 , 437 AR 347 , leave denied [2008] SCCA No 328 for the proposition that a s. 299 request will usually be made before a complaint is filed (although it is not a condition therefor) and consequently, it would often be impossible for the municipality to provide the information that it would use to defend its assessment.

As well, Boardwalk speaks to “ existing ” information, and reasonable responses in light of the request and applicable time limits. [ 47 ] The CARB submits that the request said, in essence: on what basis did you change the assessment? The s. 299 response in this case must be assessed having regard to this request. Options were available to CNRL to request further information or ensure compliance; it could also have indicated in the complaint document that there had been problems with disclosure. d.

Analysis [ 48 ] As I understand CNRL ’ s position, it does not take issue with the proposition that further information may be admitted by the CARB. Rather, its argument focuses on the unfairness in the Municipality ’ s apparent change in theory or argument justifying the assessment after its s. 299 response. [ 49 ] The Supreme Court has held that deference means that tribunals have a margin of appreciation within the range of acceptable and rational solutions.

A court reviewing for reasonableness must consider 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 at para. 47 . [ 50 ] In my view, the CARB ’ s decision that the Municipality had complied with CNRL's s. 299 request was not unreasonable and falls within a range of possible defensible outcomes. Restricting the evidence before it to that which was provided under s. 299 would render s. 8(

b) and (

c) MRAC meaningless. The CARB was alive to the fact that the volume of material in question warranted an extension of time to respond. CNRL ’ s real issue was with the Municipality ’ s apparent change in theory. It was not unreasonable for the CARB to choose not to sanction that change in theory through a restrictive application of s. 9(4). 2. Did the CARB err in finding that CNRL failed to raise equity as an issue in its complaint form and was therefore precluded from raising it in the hearing on the merits? a.

Background [ 51 ] During the December 2010 hearing, CNRL argued that it should be allowed to address the issue of equity, taking the position that it had raised this issue in its Complaint filed April 28, 2010: ISSUE 1 Can an assessment be arbitrarily increased by a rule of thumb calculation in Alberta? Is the increase in the assessment of the machinery and equipment by amended notice dated March 5, 2010 based upon any factual circumstances that can be supported by the Assessor? Is the amended assessment illegal?

Is the amended assessment beyond the jurisdiction of the Assessor? Does an assessor act in a quasi-judicial capacity and as such is there a duty for the Assessor to act impartially and without undue influence by municipal officials? Is the Amended assessment driven by tax motivation or bad faith, and an abuse of process? The Amended Assessment Notice arbitrarily adding $1,441,500,000 in costs to the Horizon Plant should be vacated in its entirety. Grounds of Appeal The Amended Assessment added $1,441,500,000 in assessable costs to the machinery and equipment.

This addition is based upon an arbitrary allocation of a factor developed for municipal budget estimates, and merely represents a benchmark ratio for assessable costs from total capital expenditure estimates. In applying this wholly arbitrary factor, the Assessor has increased the assessment by $809,823,170. There has been no error, omission or mis-description of any of the information shown on the original assessment roll. All property was assessed in the original assessment. The Amended Notice is beyond the authority to issue amended notices pursuant to

section 305 of the Municipal Government Act . The machinery and equipment at the subject property is to be assessed on reported costs in accordance with the Alberta Machinery and Equipment Guidelines and the Construction Cost Reporting Guide. Throughout the project, CNRL worked closely with the Assessor in reporting costs pursuant to its statutory obligations. The Assessor met with CNRL and conducted site inspection on 9 occasions. CNRL has regularly reported costs to the Assessor and the Assessor has not taken issue with current renditions.

The Assessor has had total disregard for the legislated process and placed into the assessment an arbitrary adjustment factor. The Assessor did so without any consultation with CNRL. The third party Report upon which the factor is based is founded on estimates only and proxy calculations. There is no relationship between the third party Report and CNRL's costs, CNRL's management of its project, or the business philosophy and strategies employed by CNRL in the investment in its facilities.

The third party Report cautions that actual assessments are to be done in accordance with regulations and are based on the specific characteristics of each individual project. They are a point in time estimate. The third party Report recognizes actual construction schedules and costs will differ between projects and that the CapEx to assessment ratios in the Report are only a quick approximation of assessed value of an oil sands project based on capital cost estimates. The amended assessment is solely based upon a hunch by the Assessor and not with empirical data.

The amended assessment introduces non-assessable costs and non-assessable property into the assessment contrary to, and inequitable with, established cost reporting for industrial facilities. To CNRLs knowledge the Assessor has not used this rule of thumb method to adjust the assessments of any other industrial facilities. Discussion with Assessor CNRL has requested the Assessor provide to it the foundation of the amended assessment.

The only justification given by the Assessor is that the adjustment factor was applied to account for the difference between the reported cost assessed value and the percentage ratio of estimated capital expenditures to assessment contained in the third party report.

There is no basis in fact or law for the arbitrary adjustment and the increase of $809,823,170 in assessed value as a result of the factor should be removed from the assessment. [emphasis added] [ 52 ] The Municipality argued before the CARB that despite the passing reference to equity in the complaint, this was a new issue and the CARB was prohibited under s. 9(1) MRAC from hearing any matter in support of an issue not identified in the Complaint. [ 53 ] The CARB decided (CARB 027 at 11) that CNRL had not raised, in its complaint form, the issue of equity as detailed in its written submissions, and therefore the CARB could not hear any evidence on that issue pursuant to s. 9 MRAC.

It found that the list of issues identified in the complaint dealt with the ability of the assessor to alter the assessment, but did not raise the specific matter of “ equity ” as a separate issue. It noted that CNRL ’ s materials for the merit hearing did not mention any complaint in relation to equity.

b. Standard of Review [54] CNRL submits that the appropriate standard of review is correctness, for the reasons given by Sulyma J. She held in paras.134 to 136 of the Leave Decision that the issue of “construction of pleadings” was of central importance to the legal system as a whole.CNRL argues that the issue raises serious concerns about the fairness of these types of hearings. CNRL cites Boardwalk at para. 20 forthe proposition that

interpretation of s. 295(4) involves broad general questions of pure law including

interpretation of general statutoryprovisions, and the rules of procedural fairness and natural justice. [55] The Municipality submits that the CARB’s decision on this issue was both reasonable and correct - it found as a fact, afterreviewing the complaint form, that the specific issue of equity was not raised. It was also reasonable and correct in its

interpretation ofthe effect of s. 9(1) MRAC in the circumstances. [56] The City submits that the appropriate standard of review is reasonableness, and that the issue is, in fact, one of mixed law andfact. The CARB was interpreting s. 9 MRAC. This involves balancing the rights of the complainant to be heard and the right of themunicipality to know the case to be met. The complaint and rules relating thereto are specific to the assessment review board.

The issuedoes not have an impact on the administration of justice as a whole, nor is it jurisdictional. [57] The CARB similarly submits that the appropriate standard is reasonableness, as the issue relates to a mandatory proceduraldirection contained in the MGA and regulation which the CARB must interpret as a matter of procedure during its hearing and which isunique to it. This falls squarely within the category of questions involving an

interpretation of law by the tribunal of matters of procedureand its own statutory regime which are dealt with on the basis of reasonableness. [58] With due respect to Sulyma J. who held otherwise, I find that reasonableness is the appropriate standard of review to beapplied to this issue, particularly in light of the Supreme Court’s decision in ATA. The CARB was interpreting and applying a provisionin its home legislative regime. This complaint process is specific to assessment reviews and involves consideration of the particularinterests at play in these types of reviews.

Despite the CARB’s reference to jurisdiction, this is not a true jurisdictional question attractingthe correctness standard. I note that Boardwalk pre-dates ATA and its companion decisions, and that despite its comments, the Court ofAppeal applied a reasonableness standard in that case. c. Positions of the Parties [59] CNRL submits that equity is referred to in the complaint and expert report, and notes that in any event s. 293 MGA requiresthe assessor to act in a fair and equitable manner. As well, s. 467(3) prohibits an assessment review board from altering an assessmentthat is fair and equitable.

Further, CNRL argues that case law establishes that taxpayers are entitled to equitable and correct assessmentsand assessors have a well recognized duty to act fairly, citing in particular Strathcona No 20 (County) v Alberta (Assessment AppealBoard) (1995), 1995 ABCA 165 , 165 AR 300, [1995] AJ No 369 at para 8 (CA), Mountain View (County) v Alberta(Municipal Government Board), 2000 ABQB 594 at paras 21 and 22, 272 AR 123, Boardwalk, and Royal Montreal Golf Club vDorval, (QC CS), [1946] 1 DLR 50 (QC CC). [60] CNRL further submits that preventing it from raising equity in these circumstances is inconsistent with the CARB’sadmission of R20 in which the Municipality espouses a new theory, and this creates substantial unfairness to CNRL. [61] The Municipality argues that the CARB’s task in this case boils down to determining “included costs”.

It submits that CNRLmisconstrues the manner in which equity is achieved for regulated property such as machinery and equipment. “Equity” in propertyassessment does not mean general concepts of fairness or not acting in an arbitrary manner. Equity for property assessed at the marketvalue valuation standard means that similar properties are assessed (valued) similarly: s. 467(3). However, equity for property assessedat the regulated valuation standard means that the legislation has been applied correctly to derive the assessment: s. 467(4).

The word“equity” has a specific meaning in the context of property assessment, and it is reasonable to assume that the CARB as experts in thevaluation of property would be aware of this. Further, due to the fundamental differences between market value assessment andregulation based assessment, most of CNRL’s cited cases are of limited use. [62] The Municipality refers to Progress Energy, MGB 133/03, [2003] AMGBO No 169

[ 62 ] The Municipality refers to Progress Energy , MGB 133/03, [2003] AMGBO No 169 and GT Group Telecom v Alberta (Municipal Affairs) , MGB 117/04, [2004] AMGBO No 227 in which the MGB held that equity in a regulated assessment regime and equity in a market value regime can have different meanings. If there is an inequity within the legislation itself, it is up to the legislators and not the MGB to correct such inequity.

The role of the MGB on a complaint is to determine whether or not the existing legislation was correctly and fairly applied to the subject property, not to determine if the procedures that must be followed in the MGA , manual or guidelines are themselves fair or equitable.

It held, however, that the MGB does have the authority to decide whether or not the procedures set forth by the legislation are being applied fairly and equitably. [ 63 ] The City refers to Edmonton (City) v Edmonton Composite Assessment Review Board , 2012 ABQB 154 , [2012] AJ No 224 and City of Edmonton v Melcor Developments (April 4, 2012), Edmonton 1103 18120 (QB) as stressing the importance of review of the evidence in determining whether issues on a complaint form are compliant, and therefore what issues have actually been raised. Section 460(7) MGA now requires more detail on complaint forms.

It allows a property owner to check off boxes identifying matters in dispute. The legislation anticipates that the complainant will file evidence first, based on issues and matters in the complaint form. The City submits that a very broad reading of the complaint form appears to be at odds with the legislative amendments requiring more detail in the complaint form, and would be unfair to a municipality. The City expresses concerns about a municipality not knowing the case to be met if issues can be raised after it has already disclosed, and it is barred from later calling evidence on the issue.

Complainants could potentially raise equity as an issue in relation to any of the matters on a complaint form. It would be unfair for municipalities to have to anticipate that equity would always be in issue. [ 64 ] The CARB submits that it is not a court of equity, but rather deals with facts. The issue of equity was raised by CNRL before the CARB in the context of a request for disclosure. It is an issue to be addressed when the CARB deals with the merits. d.

Analysis [ 65 ] In my view, the arguments of the Municipality and the City in support of the CARB ’ s decision at times confound two separate issues: the proper

interpretation of the complaint in this case, and the relevance of the material sought to be adduced by CNRL. [ 66 ] Before considering the CARB’s decision, I would observe that in this particular case, the Municipality’s position on its assessment has been a moving target.

In my view, it lies ill in the mouth of the Municipality to object to CNRL addressing equity in its argument before the CARB given that the Municipality appears to have changed its own assessment strategy mid-stream. [ 67 ] Having said that, the question to be addressed by this Court is whether the CARB reasonably found that CNRL had not raised the issue of equity in its complaint. [ 68 ] In its complaint, CNRL specifically and expressly complained of inequity in the assessment process. It complained of the arbitrariness of a rule of thumb calculation in the context of Alberta ’ s legislative regime.

It complained of arbitrary allocation of a factor developed for municipal budget estimates, allegedly representing a benchmark ratio for assessable costs from total capital expenditure estimates. It complained that the assessor had total disregard for the legislated process and placed into the assessment an arbitrary adjustment factor, without any consultation with CNRL. Further, it complained that the third party report upon which the factor was based was founded on estimates only and proxy calculations.

It asserted that the amended assessment introduced non-assessable costs and non-assessable property into the assessment contrary to, and inequitable with, established cost reporting for industrial facilities. It asserted that to its knowledge, the assessor has not used this rule of thumb method to adjust the assessments of any other industrial facilities. [ 69 ] In my view, a fair and objective reading of the complaint in the circumstances can only lead to the conclusion that the CARB was unreasonable in finding that CNRL had not raised the issue of equity.

In fact, the issue of equitable and correct application of the guidelines is at the heart of the complaint. Aside from the express reference to inequity, CNRL specifically raised the issue of whether or not the assessor had used this approach with other facilities, which goes to consistent and equitable application of the guidelines, as required by s. 293(1) (

a) MGA . [ 70 ] The Municipality argues that the task of the CARB is to determine the correct assessment, not to quash bad assessments. Even accepting the Municipality ’ s argument that the CARB enjoys very little leeway in applying the regulations and guidelines in this case, I am not satisfied that the manner and consistency of application of the regulations and guidelines to other taxpayers is irrelevant to the CARB ’ s task. Further, inequitable treatment may be relevant to an assessment of costs under s. 52 and

Schedule 2 MRAC. Therefore, I

find that the CARB unreasonably concluded in this case that it could not hear any evidence on that issue pursuant to s. 9 MRAC. I further find that this error is not a mere defect in form or a technical irregularity, and it is premature to say whether any substantial wrong or miscarriage of justice has occurred, given the fact that this is an appeal of an interlocutory ruling. Therefore, I cancel the decision regarding the application of s. 9 MRAC. [ 71 ] As noted by counsel, this discussion of equity arose in the context of a disclosure application.

It does not automatically follow from my decision on this point that the CARB is bound to accede to CNRL ’ s position in terms of relevance of all of the materials sought to be adduced. [ 72 ] With respect to the parties ’ arguments on relevance, I accept that, generally speaking, fairness and equity are at the core of tax assessments. In the case of machinery and equipment which are highly regulated, this is ensured to some degree by detailed criteria, guidelines and formulae which the assessor is bound to follow. Section 293(1) (

a) MGA also expressly provides, however, that in preparing an assessment, the assessor must apply the valuation and other standards set out in the regulations in a fair and equitable manner.

In my view, there is a difference between the fairness of a particular set of regulations and guidelines, and the fairness in application of those regulations and guidelines. [ 73 ] I recognize, however, that this Court is not in as good a position as the CARB to determine the relevance of the material sought to be adduced by CNRL, nor is the matter of disclosure and relevance of the materials in question squarely before this Court.

The consequence of the Court’s finding that CNRL raised equity in its complaint, therefore, is that the CARB must consider CNRL’s disclosure requests in light of the fact that CNRL has raised equity in its complaint, and having regard to what it determines to be the practical application of the requirement in s. 293(1) (

a) that the assessor apply the regulated standards and procedures in a fair and equitable manner. 3. Did the CARB err in finding that each party bears the onus to prove the included cost amount they believe is correct? a. Background [ 74 ] CNRL took the position before the CARB that there was an onus on the Municipality to establish an error in the original assessment.

CNRL argued that onus and order of disclosure are linked: if the onus is on the Municipality, it should be directed to provided adequate disclosure as to how it arrived at the numbers and which of the lines within the reporting it disputed, and then CNRL could properly challenge it. [ 75 ] The Municipality argued before the CARB that each party has an onus of proving the merits of its request. The Municipality sought an increase in the assessment role beyond the amount of the amended assessment.

The Municipality submitted that if the CARB found the amended assessment was not prepared in accordance with the regulations, it would require a review of the cost rendition and in that event, the onus would be on each side. [ 76 ] The CARB stated that it was clear that neither party was supporting the assessed value as contained on the amended assessment role.

The CARB (CARB 027 at 14) decided that since each party was suggesting a different number for the assessment roll, each party bears an onus, given s. 467(1), to provide sufficient proof for the CARB to decide to make a change to the assessment roll or to decide that no change is required. b. Standard of Review [ 77 ] This issue involves

interpretation of s. 467(1) MGA , the CARB ’ s home statute. As noted by CNRL, the answer may guide the CARB in certain procedural decisions, such as those relating to disclosure. In my view, this issue is similar to the issues above. It is specific to the CARB ’ s administrative regime, especially given the fact that the CARB is not bound by the rules of evidence or any other law applicable to court proceedings. Therefore, the decision is reviewed on the reasonableness standard. c. Positions of the Parties

[78] CNRL argues that the CARB's ruling on onus of proof creates unreasonable and unnecessary confusion. CNRL accepts that asthe appellant, it has the ultimate burden of proof; however, the parties required direction as to the evidentiary onus relating to legality ofthe amended assessment and on equity, and on the Municipality’s right to seek an increase in the assessment.

The Municipality's assessorhad acknowledged that the amended assessment was not prepared in accordance with the regulations governing industrial machinery andequipment assessments, and CNRL argued therefore that the onus was on the Municipality to show that it was authorized to issue theamended assessment pursuant to s. 305 (1) MGA. The Municipality sought to introduce additional "discovery" and a right to seek afurther increase in the assessment. [79] The issue of onus as it relates to the amendment was not addressed by the CARB.

CNRL’s argument is premised on theposition that if the Municipality fails to meet the onus, in whole or in part, of proving the amendment, the original assessment of March1, 2010 is the necessary default for the CARB.

CNRL submits that the CARB should be directed to address the question of whether ornot an increase in the assessment may be ordered in the context of an appeal, and if so, the impact on the question of onus. [80] CNRL recognizes that the general rule is that whoever asserts a proposition bears the burden of proving it, but the commonlaw or statutory provisions may serve to divide burdens: Sopinka J et al, The Law of Evidence in Canada, 2d ed (Toronto: Butterworths,1999) at 57-59, 63.

While a complainant generally has the burden of proving an assessment is incorrect, the allocation of the burden ofproof is not immutable.

In civil cases, there are two broad principles determining when a party bears the burden of proof: 1) the onus ison the party who asserts a proposition, and 2) where the subject matter of an allegation lies particularly within the knowledge of oneparty, that party may be required to prove it: Snell v Farrell, (SCC), [1990] 2 SCR 311 at 321, [1990] SCJ No 73. [81] CNRL also refers to Kramer Ltd v Sherwood (Rural Municipality No 159), 2003 SKCA 121, 241 Sask R 67 at para 26 inwhich it was held that once a taxpayer has established a material error has been made on the part of the assessor, it does not necessarilyfollow that the taxpayer must also prove unfairness or inequity, or what the correct assessment should have been, which may not beproperly within the taxpayer's knowledge.

Similarly, a taxpayer may not bear the burden of proof where the assumptions tendered by theCrown are based on an incorrect

interpretation of relevant statutory provisions or where the taxing authority has had a change of position:Arnold v Canada, 2005 TCC 725, 2005 DTC 1699 at para 42, BBM Canada v Canada (Minister of National Revenue- MNR), 2008TCC 341, 2008 DTC 4129 at para 56.

The assessor in Sommers v City of Edmonton and Scott (1976), (AB KB), 10AR 74, 72 DLR (3d) 370 (SC), aff’d (1978) 1978 ALTASCAD 195 , 10 AR 48, 6 MPLR 267 (SC AD) bore the burden ofshowing an error in the original assessment in order to rely on the provisions of the Municipal Taxation Act as authority to amend anassessment. [82] The Municipality submits that the onus is on both CNRL and the Municipality to prove the correct included cost number,since they both dispute the amount of the amended assessment.

The Municipality points to MGB decisions under the previous legislativeregime in support of its position that the appropriate focus for the CARB is the correct assessment value, and “change” as used in s.467(1) is a neutral word meaning increase or decrease to the assessment: Edmonton (City) v Army & Navy Department Stores Ltd, MGB112/02, [2002] AMGBO No 126, AgPro Grain Management Services Ltd v Lacombe (County), 2006 ABQB 351, 402 AR 199. [83] The City submits that it is well established that the legal burden of proving the case at an assessment hearing rests on thetaxpayer: Calgary (City) v Alberta (Municipal Government Board), 2010 ABQB 719, 504 AR 1, aff’d 2012 ABCA 13, 519 AR 259.The City argues that CNRL has failed to show where the legislation allows the CARB to decide whether an amended assessment wasimproperly issued.

It submits that there are significant differences between judicial review of the decision to issue, or the validity of, theamended assessment and a complaint against the amended assessment, where the CARB’s authority is limited by s. 467 MGA. Whereboth the complainant and municipality argue that an assessment is incorrect, but for different reasons, it only makes sense that theevidential onus would be on each party to prove its position. [84] The City also refers to AgPro as support for its argument that there is nothing barring a municipality from asserting that anextant assessment requires revision.

The legislator could have restricted the assessor by using “lower” in place of “change” in s. 467(1).The City argues that although changes to the legislation clarify that no change to the roll can be made during the complaint proceedings,they do not affect the ability of a municipality to issue an amended notice under s. 312 MGA. To interpret the legislation as barringamended notices would create many practical difficulties for municipalities. The policy of equity in tax assessments would be thwarted ifa taxpayer became immune to a corrected assessment solely because s/he filed a complaint.

The City expects to argue this issue thismonth in a case where leave was granted on this issue: Edmonton East (Capilano) Shopping Centres Limited (AEC International Inc)v Edmonton (City), 2012 ABQB 445, [2012] AJ No 788.

[ 85 ] The CARB takes the position that in a simple assessment appeal, the complainant bears the ultimate burden of proof, but the evidentiary onus may shift to the respondent if the complainant has led sufficient evidence to establish a prima facie case. This case is more complex since the assessor seeks an increase.

The CARB refers to cases in addition to AgPro under the previous legislation interpreting “ change ” to include an increase or decrease: Louis Dreyfus Canada Ltd v Lacombe (County) , MGB 122/04, [2004] AMGBO No 232, BP Energy Canada v Woodlands (County) , MGB 086/05, [2005] AMGBO No 207, Edmonton (City) v Army & Navy Department Stores Ltd , MGB 112/02, [2002] AMGBO No 126 . d.

Analysis [ 86 ] This issue is of more importance in this case than in a “ garden variety ” property assessment review, given the potential breadth (and cost to the parties) of the assessment review, and the fact that the Municipality has resiled from its extant amended assessment. [ 87 ] The task for this Court is to determine whether it was reasonable for the CARB to decide that the party asserting a fact or position had the onus to prove it. This issue is of great concern to CNRL because of its position that the Municipality cannot seek to increase the amount in the amended assessment.

However, the latter question is not squarely before this Court. [ 88 ] In my view, the CARB ’ s decision that in the circumstances each party bears an onus to provide sufficient proof for the CARB to either make the requested change to the assessment roll or decide that no change is required is within the range of acceptable and defensible solutions. The CARB concedes that the evidential burden may shift where the party makes out a prima facie case. Its decision is generally in keeping with the common law as stated by CNRL. Conclusion [ 89 ] The questions in this matter are answered as follows: 1.

Did the CARB err in finding that the Municipality had complied with CNRL’s s. 299 request? No - its decision was reasonable. 2. Did the CARB err in finding CNRL failed to raise equity as an issue in its Complaint Form and was therefore precluded from raising it in the hearing on the merits? Yes - its decision was unreasonable. 3. Did the CARB err in finding that each party bears the onus to prove the included cost amount they believe is correct?

No - its decision was reasonable. [ 90 ] While these conclusions may not necessarily result in the most streamlined, least expensive approach to the proceedings before the CARB, they do support the purpose of the review as prescribed by the legislation. The conclusions on both the s. 299 and equity issues logically result in the possibility of more fulsome information regarding the Municipality’s and CNRL’s positions on the correct assessment amount flowing from fair and equitable application of the prescribed regulations, standards, procedures and guidelines.

The conclusion on onus supports flexibility on the part of CARB to ensure that as much relevant information as possible is brought before it in an efficient and effective manner.

Costs [ 91 ] In my view the parties have had mixed success. Accordingly I am disinclined to award costs. However if any of the parties feel otherwise, they are at liberty to speak to me within 45 days of this judgment, failing which each party will bear its own costs. Heard on the 23 rd day of January, 2013 and the 24 th day of January, 2013. Dated at the City of Fort McMurray, Alberta this 6 th day of February, 2013. Gerald A. Verville J.C.Q.B.A. Appearances: Gilbert J. Ludwig James B. Laycraft Q.C. Wilson Laycraft for Canadian Natural Resources Limited Carol Zukiwski Cherisse N.

Killick-Dzenick Reynolds Mirth Richards & Farmer LLP for the Respondent, Regional Municipality of Wood Buffalo Gwendolyn Stewart-Palmer Shores Jardine LLP for the Respondent, Wood Buffalo Composite Assessment Review Board Cameron J. Ashmore Tanya Smith City of Edmonton-Law Branch for the Intervenor, the City of Edmonton