Encana Corporation v. ARC Resources Ltd., 2013 ABQB 96

Court of Queen ’ s Bench of Alberta Citation: Encana Corporation v. ARC Resources Ltd., 2013 ABQB 96 Date: 20130212 Docket: 0801 14295, 0801 03861, 0601 12766, 0601 12266, 0601 12267, 0601 14382, 0601 12671 Registry: Calgary Between: Docket: 0601 12766 Encana Corporation Plaintiff Defendant by Counterclaim - and - ARC Resources Ltd. Defendant Plaintiff By Counterclaim

Docket : 0601 12266, 0601 12267, 0601 14382 And Between: Encana Corporation Plaintiff - and - Devon Canada Corporation Defendant Docket : 0601 12671 And Between: Encana Corporation Plaintiff Defendants by Counterclaim - and - Quicksilver Resources Canada Inc. Defendant Plaintiffs by Counterclaim Docket : 0801 03861 And Between: Direct Energy Marketing Limited Plaintiff - and - Encana Corporation Defendant Docket : 0801 14295 And Between:

Carbon Development Partnership, Carbon Development Corporation and Encana Corporation Plaintiffs Defendants by Counterclaim - and - ARC Resources Ltd. Defendants Plaintiffs by Counterclaim _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice C.A. Kent _______________________________________________________ [ 1 ] Devon, Quick Silver, Ark and Direct Energy apply for leave to bring a

summary judgment application in their actions. In 2010 the Provincial Government amended the Mines and Minerals Act . S. 10.1 (1) of the Act says: “Coalbed methane is hereby declared to be and at all times to have been natural gas”. It is because of this amendment and a decision of the Court of Appeal in a related action that this application is made. [ 2 ] There are two types of properties at issue in these actions. First, there are properties where Encana leased the natural gas to certain natural gas companies (the lease lands). Second there are properties where Encana sold the fee simple property to others, reserving and excepting coal (the transfer lands). Previously I heard a

summary judgment application respecting the lease lands. The issue was whether the coalbed methane was owned by Encana as title holder to the coal or held by the lessees as part of their natural gas lease. I found that s 10.1 granted the coalbed methane to the natural gas lessees. [ 3 ] Prior to the

summary judgment application on the lease lands I heard an application for leave to bring the

summary judgment application because the parties had filed a certificate of readiness. The transcript of some of that application is relevant to the current application for leave. During the application counsel and I had a discussion about the distinction between the two kinds of ownership set forth above. I asked why there was a difference between the transfer lands and the lease lands. The reason for my question was because the application for leave at that time was only with respect to the leases. Counsel on behalf of Direct Energy said the following: “We don’t think it is, but on a

summary judgement basis, we’re prepared to concede that there’s - - that there’s at least an argument on transfers. The transfers say effectively, we hereby transfer the land except: petroleum and valuable stone. So - - they say the transfer - - the grants of land, while perhaps there’s an argument there. We don’t think there is, but we’re prepared for

summary judgement

purposes where the bar is so low to say that’s an issue that - - that needs to go to trial”. I then further on say: “But you still have to have a trial with all of the experts would you for the transfers? And counsel responded: “That remains to be seen, My Lady, because its not clear that all the experts are going to be called. But, possibly all the experts are still going to be required. But we think that the focus is going to be much much narrower, particularly with respect to the experts, because the transfers are much earlier in time then the leases”. [ 4 ] Counsel for Arc, Quick Silver and Devon adopted those submissions. [ 5 ] I granted leave to allow the applicants to proceed to a

summary judgement application on the lease lands and the result is as indicated above. That result was confirmed by the Court of Appeal. [ 6 ] The Applicants now seek leave to apply for

summary judgement with respect to the transfer lands. They say that the matter is simple in the sense that the Court will only need to look at s 10.1 of the Mines and Minerals Act , the documents transferring the lands and the decision of the Court of Appeal in the previous case to make my decision. As a result pursuant to the foundational rule, Rule 1.2, it is a fair and an economic use of court time to hear the

summary judgement application. If it is successful, they say that a trial which may be as long as 3 weeks will be avoided. [ 7 ] Encana opposes the application on several bases. Encana points out that the relief sought in the

summary judgement application is not simply for a declaration that coalbed methane is contained in the natural gas. In addition to seeking a declaration Devon and Quick Silver seek dismissal of Encana’s claim for trespass and conversion. Further, Encana says that the issues here are different than the issues with respect to the leased properties. The leases leased the natural gas. That is different than whether Encana’s fee simple reservation of coal includes everything in that space which in turn would include the coalbed methane. There is not an express grant of the natural gas.

Section 10.1 of the Mines and Minerals Act does not mention coal. It only talks of natural gas. In the result there needs to be a trial to determine what coal is. [ 8 ] The third basis upon which Encana apposes the application for leave is the representations made by counsel that they were going to go to trial. I have referred to those representations above. Encana sites Zanetti Estate v Roltford Developments Ltd [1985] OJ No. 1014, (OntHC) where the court refused to permit a solicitor to proceed on a basis different then the basis which she had represented she would proceed upon previously.

In Paniccia Estate v Toal [2012] AJ No 31 (ABQB) after noting that lawyers are officers of the court, Shelly J said that the court must be able to rely on counsel for an accurate statement of what the dispute at trial is (para 101). In this case counsel previously said that there would need to be a trial with respect to the transfers. Encana is presumed to have made decisions and conducted itself on the basis of those representations. It may well have been that Encana would have made different decisions, for example whether to proceed to the

summary judgement application with the lease lands only, if Encana had known that the previous representations would be withdrawn. Encana sites R v Ryan, 2013 SCC 3 where the Crown had changed it position between trial and appeal about the applicable law on duress. The Court said that it was entitled to presume that decisions about the conduct of the defence were made on the basis of the Crown’s representations at trial and might have been made differently had the latter position adopted on appeal been know.

[ 9 ] Encana next argues that permitting the Applicants leave would be contrary to Rule 1.2. Encana notes that 1.2 sets out the purpose of the rules as being to provide a means by which claims can be “fairly and justly resolved”. This application is 2 years too late. There has been no change in circumstances since the application for

summary judgement made in the lease lands. For me to now grant leave the applicants must show exceptional circumstances. Encana cites Oilsands Hotel

(1975) Ltd v Alberta, 2002, ABQB 1028 , a case like this where a conditional certificate of readiness had been signed by all parties. There then was an application by one party to split the trial. The Court found that given that a Certificate of Readiness had been signed there needed to be exceptional circumstances to grant leave to split the trial and found that there were no exceptional circumstances in that case. [ 10 ] Finally, Encana argues that the Applicants have not shown that there will be a savings in trial time; they merely allege that. They have not shown that they can establish on a

summary judgement application that coalbed methane was transferred as a result of s 10.1 of the Mines and Minerals Act . Moreover, the Mines and Minerals Act does not address what is contained in the fee simple title in coal. Moreover, there are questions with respect to trespass and conversion that cannot be answered by an

interpretation of s 10.1 of Mines and Minerals Act . [ 11 ] I will grant the applicants leave to bring the application. Assuming without deciding that the applicants do require leave because of the certificate of readiness, even though under the new Rules, leave is not required, I see no reason why the certificate of readiness should stand in the way of the application. If the application is successful, about 3 weeks of trial time will be avoided.

With respect to the argument that the applicants previously represented to this court that a trial would be required, I take them at their word that the decision of the Court of Appeal in the related application changed that strategy. I make no finding on whether that decision is applicable at all or helpful to the applicants. They will make their arguments at the

summary judgment application. I do accept that Encana may have changed its strategy had it known that these applicants would apply for

summary judgment on these lands. Encana may have insisted that all

summary judgments applications be heard at the same time. That argument may have been successful. However, that is not a reason not to allow the

summary judgment application to proceed. Either the applicants make the application about the

interpretation of s. 10.1 at a

summary judgment application or they make it at trial. In either case, they will either win or lose on that argument. Any prejudice that Encana has suffered can be relieved by costs on this application and perhaps on the

summary judgment application. Finally, the submissions about the related claims of trespass and conversion by Encana will stand or fall on the success of the

summary judgment application. In itself, it does not mean that the applicants cannot make their applications. [ 12 ] I will only deal with costs on this application. Notwithstanding the success of the applicants, for the reasons set out above, Encana will have 2 sets of costs of the application, using the tariff for a ½ day special. I award 2 sets because there are 4 applicants and the preparation may have been different for the different applicants. Heard on the 25 th day of January, 2013. Dated at the City of Calgary, Alberta this 11 th day of February, 2013. C.A. Kent J.C.Q.B.A. Appearances: C. Popowich and K. Reiffenstein for Encana Corporation

L. Cusano and E. Dickinson for Devon Canada Corporation S. Fairhurst and Z. Thoms for Quicksilver Resources Canada J. Price for ARC Resources Ltd. P. Linder, Q.C. for for Direct Energy Marketing Limited