Koch v Altalink Management Ltd., 2016 ABQB 678

Court of Queen’s Bench of Alberta Citation: Koch v Altalink Management Ltd., 2016 ABQB 678 Date: 20161201 Docket: 151000836 Registry: Red Deer Between: Barry Frederick Koch & Linda Ortis Koch Appellant - and - Altalink Management Ltd. Respondent Corrected judgment: A corrigendum was issued on December 6, 2016; thecorrections have been made to the text and the corrigendum is appended to thisjudgment. _______________________________________________________ Reasons for Decision of the Honourable Mr. Justice K.L. Sisson _______________________________________________________ Introduction [1] This is an appeal by Barry and Linda Koch pursuant to

section 26 of the Surface Rights Act, RSA 2000, c S-24, as against thedecision of the Alberta Surface Rights Board, reported as AltaLink Management Ltd. v. Koch, 2015 ABSRB 476 (the“Decision”), denying them compensation for injurious affection from AltaLink Management Ltd. [2] At the outset of this Appeal, Counsel agreed that the single question to be determined is whether AltaLink should providefurther compensation to Mr. and Mrs.

Koch for incorporeal adverse effect. [3] This appeal deals solely with compensation for loss of value, if any, on the balance of the property owned by Mr. and Mrs.Koch after a strip of their land was taken for a transmission line. [4] More specifically, the loss is not objectively measurable loss such as the increase in the cost of farming by having to workaround transmission towers. The losses being measured in this case are subjective.

They primarily include the visual impact of thetransmission line and its effect on the future use of the land including potential residential development and recreational use. [5] Other elements that could fall into this classification include the impact the line might have on a future sale of the landcaused by perceived issues over high voltage lines or general antipathy against power lines. The size of the structures and their locationis relevant as is the existence of visual buffers. Other sensory elements such as noise could also form part of injurious affectation. Thelist is not closed.

[6] With respect to terminology, in AltaLink Management Ltd. v Soorya Investments Ltd., 2014 ABSRB 222 (“Soorya”), a Panel of the Surface Rights Board said: The Parties and the Panel variously used the terms “injurious affection” and “adverse effect” when referring to aspects of Soorya’srequest. The Panel considers the former to be a subset of the latter.

To avoid confusion, this decision will use the term injurious affectionwhen speaking specifically of the loss of land value on the remaining land claimed by Soorya, and adverse effect when speaking ofadverse effect in general. [7] This Decision will use the same convention. For the most part, the term “injurious affection” refers to the incorporeal lossesto the Appellants’ remaining land. The exception will be when quoting s. 25(1)(

d) of the legislation which uses the term adverse effect. Background [8] After the Surface Rights hearing, two panel members of the Board, Mr. Sibbald, Q.C. and Ms. Clews, the Majority, foundthat no compensation was payable. One member, Mr. Zenko, the Minority, found $125,780.25 was payable. [9] Here, the Appellant landowners purchased some land. Due to extraneous factors, they paid less than it was worth.

A powerline was built by the Respondent operator across the land and all the Panel members found the line caused injurious affection to theremaining land. [10] The landowners say they should be paid the value of the injurious affection to the land. [11] The operator says the landowners are not entitled to payment because doing so would offend the principles of compensation. The landowners have not suffered a loss because the remaining lands are still worth more than the landowners paid for it.

Payingcompensation for the injurious affection would be a windfall to the landowners. [12] The majority of the Panel found the landowners had not established what their economic loss was because the market value ofthe remaining land before and after the ROEs had not been established. [13] The majority summed it up this way: Simply put, the Landowners acquired the Land, when it was probable that a transmission line would be constructed and now own realestate on which a transmission line was in fact constructed.

It has not been established that Landowners’ financial position changed as aresult of a diminished market value of the remaining land following the granting of the ROEs and construction of the permittedtransmission line, in comparison to their situation before the ROEs were issued. [14] The remaining Panel member dissented. He found the line caused injurious affection to the remaining land, focused onimpact the taking had on the remaining land, not the financial position of the landowners, and was able to quantify the loss on theevidence in front of the panel. Facts [15] Many facts are not in dispute.

An Agreed Statement of Facts, entered as Exhibit 2 sets out the background in detail. It isattached as an Appendix to this Decision. [16] In

summary, on December 20, 2012, AltaLink received a permit to construct the Western Alberta Transmission Line, a 500-kilovolt direct-current electric power transmission line from near Edmonton, Alberta to near Calgary, Alberta. The line was planned tocross two parcels of land the Kochs purchased in February 2013. Right of Entry Orders respecting the Kochs’ property were granted tothe Operator on February 20, 2014. [17] The Kochs’ property is located west of Innisfail, Alberta and about ½ mile northeast of Glennifer Lake. The land consists oftwo adjacent parcels.

The north parcel is a portion of the NE ¼-3-36-2-W5M containing 143.70 acres and the south parcel is Lot 1,Block 1, Plan 8222837 containing 85.99 acres. [18] The Red Deer River is the west boundary for about half of the two parcels. The river loops west and then returns to cut offabout 3 acres of the north parcel on the northeast corner. Most of the land, approximately 121 acres, is cultivated. Crops include barley,wheat, peas, and canola. [19] The rest of the land consists of forest on the slopes to the river.

Some of the slopes are very steep. [20] The transmission line on the Kochs’ property consists of multiple wires strung on towers. The easement consists of a strip,slightly more than 55 meters wide running north and south bisecting both parcels. Given the curvature of the river and the lands’configuration, the easement is fairly close to the west boundary of the south parcel. The river curves away to the west and the easementon the north parcel continues due south while the parcel widens with the south end of the easement almost centered on the land at thatpoint.

The strip takes up 22.28 acres. [21] The diagrams at pages 23 and 24 of Serecon’s Appraisal Report show where the towers were to be located. I note thatevidence was led indicating the plan of survey on which this plan was developed is quite inaccurate as the river has changed coursesubstantially since the Plan was surveyed. [22] In any event, a double monopole transmission tower is located approximately 1/3 of the way from the north border of the

north parcel at the top of an escarpment. This structure exhibits latticework. Following the line south, there is a triple monopole towerand then a single monopole structure. The structures are quite large. [23] In the course of time, the parties agreed on compensation, or agreed to wait for another day on elements such as constructiondamages and costs. The element of injurious affection, was the issue at the Surface Rights Board Hearing and again at this appeal.

Standard of Review [24] Section 26(6) of the Surface Rights Act states: “An appeal to the Court shall be in the form of a new hearing.” [25] The Parties agree that, notwithstanding the statutory mandate in s. 26(6) of the Surface Rights Act that an appeal shall be inthe form of a new hearing, the appropriate standard of review is reasonableness. (Imperial Oil Resources Ltd. v. 826167 Alberta Inc.,2007 ABCA 131)(“Imperial Oil”). [26] In Imperial Oil, the Court of Appeal stated at paragraph 18 that although the Surface Rights Act directs a new hearing, whichmay include fresh evidence, deference to the expertise of the Board is owed. [27] Depending on the nature and weight of the fresh evidence adduced, the evidentiary record may be broadened and the appealmay proceed more by way of a fresh hearing than a simple appeal (Imperial Oil, at para 20). [28] More recently, in Terasen Pipelines (Corridor) Inc. v R&M Schroter Enterprises Ltd., 2013 ABQB 482 (“Terasen”), Ross Jreviewed the applicable principles and referred to Imperial Oil. [29] In

summary, here is what she had to say: • Section 26(6) of the Surface Rights Act indicates that an appeal to this court is in the form of a “new hearing.” • In Lamb v. Canadian Reserve Oil & Gas Ltd., (1976) (SCC), [1977] 1 SCR 517, the Supreme Court held that anappeal to a justice involves the hearing of evidence, including fresh evidence. However, in doing so, the judge should have some regardfor the opinion of the Board (cited in Terasen, at para 52). • The application of the reasonableness standard involves an assessment of both the reasons and outcomes of the decision.

Areviewing court must look for “the existence of justification, transparency, and intelligibility “within the decision” and “whether thedecision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law” (Terasen, at para 53,citing Dunsmuir v New Brunswick, 2008 SCC 9 at para 47, see also, Edmonton (City) v Edmonton (Capilano) Shopping Centres Ltd.,2016 SCC 47 (November 4, 2016) at para 36). • The reasons for the Board’s decision “must be read together within the outcome and serve the purpose of showing whether theresult falls within a range of possible outcomes” (Terasen, at para 54, citing N.L.N.U. v.

Newfoundland & Labrador (Treasury Board),2011 SCC 62, at para 14). • New evidence which contradicts or undermines the evidence heard by the Board can cast doubt on the reasonableness of theBoard’s decision (Imperial Oil, at paras 15 and 20, cited in Terasen at paras 55-56). [30] At this Appeal, the parties are both content to provide fresh evidence with the caution that the Court must carefully considerwhat weight to ascribe to it. [31] Turning now to the issues. Was the Decision of the Board Reasonable? [32] This Court agrees with the Applicant’s

summary that: The Majority noted that all the appraisers at the Compensation Hearing agreed that WATL did reduce the market value of the Lands inlight of the Lands’ potential future recreational or residential use.

The Majority even determined it was “naïve” to suggest that the valueof the Lands before the Effective Date was likely not negatively influenced by WATL’s approval, a finding which the Landownerssubmit satisfies the remoteness requirement (namely, there is a causal connection between the decrease in value and the taking).Nonetheless, the Majority determined that the Landowners were not entitled to compensation for injurious affection because it was notclear what the difference in value was, if any, between (1) the value of the remaining Lands when the Landowners obtained ownership inMarch 2013 but before the Effective Date and (2) the value of the remaining Lands after the Effective Date. [33] The Majority found it was probable that the Lands value declined as a result of the Transmission Line. [34] This was because of the “potential future recreational or possibly residential use” for the Lands. [35] There is a lot of support for this finding.

In fact, there is the potential to construct up to four residences upon the lands. [36] Dwellings can still be built; however, the aesthetic appeal of the homes, and their consequential value, is adversely impactedby the transmission line structures. More so because the line was not situated on the boundary of the lands. This location doubles thebuilding setbacks to each side of the line and brings the structures and lines closer to the river escarpment where the nicest building sitesare located. This reduces the value of the lands.

[37] In large part, the Majority dismissed the claim for compensation for injurious affection because it found that: It has not been established that Landowners’ financial position changed as a result of a diminished market value of the remaining landfollowing the granting of the ROEs and construction of the permitted transmission line, in comparison to their situation before the ROEswere issued. [38] The Majority went on to say: It is important to note that the Landowners’ situation is clearly distinguishable from that of a landowner who has ownership before atransmission line plan proceeds to the stage at which it is likely to have an influence on the market value. [39] The Majority considered the measurement of damages should be the difference between the Appellants’ financial position inrelation to the land “before and after the ROEs”. [40] The Majority said “the question is did the Landowners suffer an ‘economic loss’ as a result of not being in the same ‘positionfinancially’ after the ROEs.” [41] In part, the Board relies on a quote from Expropriation in Canada - A Practitioner’s Guide (Aurora, ON: Canada Law Book,1988) by Mr.

Kenneth Boyd, the original Chairman of the Alberta Land Compensation Board, at page 27: On the one hand, the owner should not receive a windfall or unjust enrichment as a result of the taking. On the other hand, the ownershould not be required to shoulder an economic loss for the general public benefit which is achieved as a result of the taking. Emphasismust be placed upon the word ’economic’ in weighing the purpose of compensation. [42] This quote is from the first paragraph of the

section titled “The Purpose of Compensation”. The paragraph starts with: The primary purpose of compensation is to place the owner whose land has been taken in the same position financially as he was prior tothe taking. [43] The Majority concluded that the Applicants had not established that their financial position had changed between the timethey acquired the Lands and when the right-of-entry orders were issued “as a result of a diminished market value”.

That is, they sufferedno economic loss. [44] With respect, that is not how the Surface Rights Act indicates compensation for injurious affection is to be determined. Todetermine compensation for injurious affection, the Act says: 25(1) The Board, in determining the amount of compensation payable, may consider . . . (

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, . . . [45] The Act refers to the adverse effect on “the remaining land”. It does not refer to the adverse effect on the Appellants’financial position. [46] In the first place, general principles of compensation should be interpreted in the light of specific legislative guidance. Herethe topic is impact on land value, not impact on a party’s financial position.

In the second place, Chairman Boyd’s comments on thepurpose of compensation was intended to indicate that the owners of the affected land should be kept as whole as far as it was possiblefor compensation in money to do so. [47] The word ‘economic’ is used to distinguish the harm caused by the “traumatic and unsettling experience to the owner” causedby expropriation which is not quantifiable or compensable. [48] The Majority appears to have focussed on whether the Appellants financial position changed as a result of a diminishedmarket value of the remaining land and not on the “adverse effect” on the “remaining land”. [49] With respect, this finding is unreasonable and cannot be supported by a plain reading of the legislation because the injuriousaffection of the power line on the remaining land remains the same.

That is the measure of damage, not the change in the Owner'sfinancial position. [50] In argument, the Respondents provide a quote from Blue Mountain Energy Ltd v Macarthur, (ASRB),as a fundamental principle of compensation: Compensation is to ensure the Landowner is made whole and is not meant to enrich to a degree that is unfair to the Operator. [51] With reference to the Respondent’s quotation from Cabre Exploration Ltd. v Arndt et al., (1986) (ABKB), 69 A.R. 279, 45 Alta.

L.R. (2d) 137 (ABQB), that the Board “must always remember that its function is to compensate for loss,” itis not unfair for the operator to compensate for injurious affection on the remaining land of the owner (at para 45). [52] The Board’s function is to calculate the quantum of the injurious affection, not allocate the benefits that arise from extraneousmatters such as the timing of the sale of land.

The reasoning of the Board in this regard was an error on law, flawed, and in my view,unreasonable. [53] Moving on, the Majority determined the Appellants had not established the market value of the lands for the period of timethey owned it before the ROEs thus there was insufficient evidence to establish an economic loss.

[ 54 ] The Majority stated: Simply put, the Landowners acquired the Land, when it was probable that a transmission line would be constructed and now own real estate on which a transmission line was in fact constructed.

It has not been established that Landowners’ financial position changed as a result of a diminished market value of the remaining land following the granting of the ROEs and construction of the permitted transmission line, in comparison to their situation before the ROEs were issued. [ 55 ] When parsed, this portion of the majority decision, indicates the transmission line reduced the land's value, but because the Appellants bought the land when they knew the transmission line would be built, their position did not change and the construction did not cause them economic loss. [ 56 ] The injurious affection on the “remaining land of the owner” is not to be measured by economic factors that exist independently of the ROEs or whether the Appellants suffered financial loss or gain.

The measurement is based on the impact the ROEs had on the value of the remaining land of the Owner. [ 57 ] In

summary, the Majority erred by finding that compensation should be made to the Landowner’s for losses occurring between the time they acquired the land and the completion of construction. This is not reasonable as compensation is due for injurious affection. [ 58 ] That loss was the difference between the value of the land on the date the Right of Entry Orders were granted and its lesser value after the construction of the transmission line due to injurious affection. [ 59 ] The fact that the Appellants purchased the land after the Respondent obtained a permit and license to build the line is of no consequence.

The payment for injurious affection is based on the impact on the value of the remaining land, not the impact on the financial position of the owners. [ 60 ] This does not result in a windfall or unjust enrichment to the Appellants because, until the line is removed, it will have a negative impact on the Land's value, which is an economic loss. Valuation Timing [ 61 ]

Section 23 of the Surface Rights Act says: On making a right of entry order, the Board shall, in accordance with its rules, hold proceedings to determine the amount of compensation payable and the persons to whom it is payable. [ 62 ] Section 25(1) says: 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, . . . [ 63 ] The Majority stated that: It is important to note that the Landowners’ situation is clearly distinguishable from that of a landowner who has ownership before a transmission line plan proceeds to the stage at which it is likely to have an influence on the market value. [ 64 ] There is no reason to make this distinction.

The injurious affection is the same. [ 65 ] Again, the Majority said this because they focused on the financial loss to the landowners and not the loss in value of the remaining land and they were suspicious that the negative impact of the transmission line had already been factored into the sale price. [ 66 ] It is unnecessary to go into this in detail, however the shortcomings perceived by the Majority in the evidence provided at the Hearing resulted in Ms. Kraska providing fresh evidence at the Appeal. She testified about the background of the sale to the Landowners.

Under the circumstances, this was a reasonable response by the Landowners. [ 67 ] The Majority was unable to determine what the damages for injurious affection should be because they were not provided with an opinion of the value of the Land after it was known in the market that the transmission line had been, or even was likely to be, approved by the AUC. [ 68 ] This was not necessary. The relevant values are the value of the land just prior to the issuance of the ROEs and the value of the land when the line is built. This information was in evidence.

Minority Decision [ 69 ] I find the Minority decision, logical, compelling and refreshingly precise. The Minority made the appropriate findings of fact and except for two elements, which require closer review, the reasons are more than adequate. [ 70 ] The two elements to look at carefully are first, the determination of market value at the two relevant times and second, the 15% factor used for the value of loss.

[71] If these figures are reasonable, then that is the end of it. There is no need to go on to consider the fresh evidence provided onvalue. [72] This is not to say that the evidence was not necessary. It was necessitated because of the Majority's indication that theevidence at the Board Hearing was not sufficient to determine the land value during the time the landowners owned the land before theROEs. [73] Further, in the event the Minority’s decision was not reasonable, the information would be needed.

Quantum of Injurious Action [74] This is not a case where a taking for public purposes reduces the value of existing homes. In this case, the value reduction ison the potential, first that homes would be built and second that the maximum number of residences allowed would be built. Theproperty is 50 kilometers away from a major population centre, (which is still within commuting distance) is bounded by the river andlies close to Glennifer Lake, a major recreational area.

There is potential that there would be full build out. [75] The Appellants testified that, but for the transmission line they would have built their residence on the lands and there was anindication that other family members were considering the same; however they did not say they planned to build, subdivide, sell andbuild again so that each potential parcel would have been utilized.

The result is that there is uncertainty involved and thus compensationshould reflect this. [76] The Minority found the evidence establishes that the market value of the land as $933,000.00 at the date of Right of EntryOrders and the market value of the remaining lands decreased by 15 percent ($125,780.25) as a result of the transmission line and rightof entry orders. [77] The first question is whether $933,000 established by the Minority as the market value of the land reasonable? [78] It is. [79] As indicated earlier, at the Hearing, it was common ground by all the panellists, that the land was worth somewhere between$902,527.50 and $933,000.00 on the date the ROEs were granted.

The minority used a figure within the range and there is no reason todisturb this finding notwithstanding the fresh evidence. Quantum of Injurious Affection Expressed as a Percentage [80] The next question is whether the 15% figure used by the Minority as the estimate of the decrease in value to the remainder ofthe land reasonable? [81] The total comment on this is: In my opinion, the market value of the remaining lands decreased by 15 percent ($125,780.25) as a result of the transmission line andright of entry orders. [82] Mr.

Zenko has been involved with other applications where the topic has been injurious affection. Two brought to the Court’sattention were Soorya, above, and AltaLink Management Ltd. v Royal West Property Corp., Investments Ltd., 2014 ASRB 221, both from 2014. Both decisions awarded a percentage amount for diminishment of market value (5% in both cases), butneither decision provides any insight why the 5% figure was chosen. [83] The information in front of the Board included Mr. Gettel’s January 2015 Compensation Analysis (Exhibit12) whichconcluded there was a 25% loss in value.

This report referred to Montana Alberta Tie Ltd. v KERCP Farms, 2014 ASRB 474 (“KERCP Farms”), which appears to be a similar property to that owned by the Kochs. In that case, Mr. Gettel’s Firm calculated theloss as 14.28%. This is close to 15%. [84] A review of Mr. Simpson’s Appraisal dated September 2014, (Exhibit 7) and Mr.

French’s Appraisal (Exhibit 13) did notdisclose anything to support the 15% figure chosen by the Minority. [85] In result, the 15% figure is unexplained. [86] The Law of Expropriation and Compensation in Canada referred to in argument, starting at page 358, states: The summation or aggregate method of determining compensation usually involves the use of the “before and after” method in order todetermine compensation for any severance or injurious affection damage to the remaining land.

However, in some cases “theassessment of damages for injurious affection must always be largely as a matter of conjecture because future losses are speculative”. [87] The text refers to the Supreme Court of Canada case of Drew v R., (SCC), [1961] SCR 614, where theSupreme Court of Canada suggested that a percentage of market value may be added to compensation, otherwise determined, to take careof factors, such as damage by severance and injurious affection, which are not easily accessible. [88] It appears from a review of the texts, where possible, the most accurate method of assessing injurious affectation is by thebefore and after method.

The caution is that this method does not take into account the benefits that the right of way may provide to thelandowner.

[ 89 ] Here there are no benefits, therefore this is inconsequential. In some cases cash flow from the annual structure payments are perceived as a benefit to potential purchasers. But here, the damage is to residential and recreational potential. The benefit of annual payments do not reflect this. [ 90 ] Turning to the problem, the Minority’s use of a 15% factor may have been correct; however, it is not apparent why other than it is close to the amount awarded in the KERCP Farms case.

This does not make the Minority’s finding unreasonable, just unsupported and further investigation is required. [ 91 ] The Respondent argues the Minority decision is not reasonable. This is because the Minority did not consider the principles of compensation and their role in making the landowner whole. The Minority decision results in a windfall to the landowners, which is contrary to the principles of compensation.

As already indicated, this Court respectfully disagrees with this position. [ 92 ] The Respondent does not comment on the Minority finding that the value of the loss should be calculated as 15% of the land value at the date of the ROE Orders but does take issue with the Appellants proposal which was 25% at the Hearing and 30% at the Appeal. [ 93 ] The Respondent provided fresh evidence in support of a $25,000 to $50,000 award based on a 5-10% decrease in the potential value of acreages that could potentially be subdivided out of the lands.

This is grounded on finding that a typical acreage site in the area is worth $250,000. [ 94 ] As an aside, there is the potential for four residential building sites on the two parcels of land. The Serecon Market Value letter marked as Exhibit 9 indicated that only two building sites were available. This misconception was corrected in testimony.

It remains unexplained if Lot 1, Block 1, Plan 822-2837 is itself the result of a previous subdivision (thus the first parcel is already taken out) or merely a descriptor of a parcel that has been severed by the river. [ 95 ] The Appellants do not agree with the amount of compensation for injurious affection awarded by the Minority, approve of the other findings; however, do not indicate what is unreasonable about this decision. [ 96 ] The Appellants have fresh evidence about the market value of the land as at the date of the ROE Orders and there is fresh evidence to support the landowner's claim at the Hearing that the percentage impact for injurious affection should be 30%. [ 97 ] The Respondent submits that the landowners are not entitled to compensation for injurious affection but if the Court finds otherwise (as it does) then “the only impact on value is the possible decrease in value of the acreages that may be subdivided out of the Lands.” [ 98 ] The calculations for this were contained in Exhibit 8, Mr.

Simpson’s rebuttal to Mr. Gettel’s January, 2015 Compensation Report. [ 99 ] Mr. Simpson submits that the estimated potential injurious affection to the lands is somewhere between $25,000.00 to $50,000.00. In coming to this conclusion, Mr. Simpson fairly states that his Report addresses the impact of transmission lines on country residential acreages but does not address the impact of loss of river frontage. [ 100 ] Mr.

Simpson’s report restricts the potential to two acreages. [ 101 ] In fact, there is potential for four acreages. [ 102 ] In result, this information should be looked as estimating potential injurious affectation somewhere between $50,000 and $100,000. In addition, there should be additional compensation for loss of “desirable” building sites. It will be noted later that this evidence supports the reasonableness of the Minority’s findings.

Compensation Analysis [ 103 ] The parties expended considerable energy, and rightly expect comment, on the matters raised during the hearing and it would be prudent to review the situation as the parties presented the issues. [ 104 ] Focusing on calculating compensation for injurious affection, all the appraisers used the before and after method and then applied percentage values to determine loss. [ 105 ] The difference was that the Appellant’s expert applied a percentage loss to the entirety of the remaining lands while the Respondent’s experts estimated the power line’s effect on potential building sites not to the remaining lands as a whole. [ 106 ] In addition, the parties had numerous criticisms of the methodology used by the other.

Highest and Best Use [ 107 ] The Appellant states the highest and best use of the property has changed as it is no longer desirable for residential or recreational use. [ 108 ] The Respondent says the use has not changed; there are still sites with potential for residential development and recreational applications remain.

[109] Mr. Gettel, in part, based his opinion on comments made by the Appellant’s that they were no longer interested in buildingresidences on the land. This is not to say that other future owners would have the same opinion as was admitted in the Appellant'srebuttal argument. [110] The Court finds that there continues to be potential for residential use; however, the transmission line has an adverse impact onthe value of these uses, more so because the line is located within the property boundaries. [111] The Court generally agrees with Mr.

Simpson that the transmission line has little impact on general recreational use of the lands,although it would have less impact had it been located on the land's boundary. [112] The Kochs’ situation is very similar to that discussed in KERCP Farms, a case where a transmission line (MATL) bisected twoquarters with views towards the Old Man River valley.

This land was approximately five miles from Lethbridge which distinguishes itfrom the Koch lands, although the latter is in close proximity to a recreational lake. [113] In KERCP Farms, the Board said: After considering all of the evidence and arguments, the Panel concludes that the effect of the transmission line was to effectivelychange the highest and best use of the NW 13 and the NE 13 to pasture land. . . .

There may still be building sites available, but thePanel is not persuaded that a prospective buyer would pay a premium over pasture value for the land post-MATL. [114] The Board had evidence as to what the land’s pasture value was and what premium a prospective buyer would pay over pasturevalue for the overall potential as a building site with a view of the valley and the recreational attributes of the Oldman River. [115] As an aside, Mr. Simpson and Mr. Gettel gave conflicting evidence over the prospect of a view of the Red Deer River frompotential building sites. Mr.

Simpson, speaking as one who personally visited the Land indicated that there was no or little view fromthe escarpment. Mr. French, in Exhibit 13, speaks of panoramic vistas. Other evidence indicates a two-story house and some brushingwould provide aesthetic value. The Court finds it likely that residences with a view could have been constructed on the Lands. Market Value [116] At the Appeal, the landowners’ claimed compensation of $280,003 for injurious affection to the remaining lands. [117] This was based on Mr. Gettel’s May, 2016 Compensation Analysis that estimated a range of values for the land.

At thecompletion of the analysis, the total 207.41 acres was estimated to be worth an average of $4,500 an acre ($933,345 total) and theinjurious affection had a 30% impact on the total value. [118] As already discussed, the Respondent denies the transmission line caused the landowner’s any loss; however, anticipating anadverse ruling, provided argument on what the loss should be. [119] Mr.

Simpson’s rebuttal report of January 27, 2015, (Exhibit 8) indicated injurious affection would range between $25,000 and$50,000. [120] As noted, there are problems with some assumptions underlying this estimate, for example, the number of potential residences. A major distinction between Mr. Simpson and Mr. Gette’'s approach, is that Mr.

Simpson based his opinion on the premise that onlybuilding sites on the land were adversely affected, not the whole area. [121] With respect, this approach does not reflect the reality that the reduction in desirable and available building sites affects the landvalue as a whole. [122] There are flaws in Mr. Simpson’s approach and Mr. Gettel’s is preferable. Again this was anticipated by the Respondent. TheRespondent’s fallback position is: Alternatively, should the Court favour Mr.

Gettel’s approach to calculating injurious affection, AltaLink submits that the reports thatwere before the Panel should be relied on, as opposed to Mr. Gettel’s report at Exhibit 1 Tab A, and the amount of $210,306 be themaximum that the Landowner should be awarded. [123] The Respondent says that Mr. Gettel’s new evidence is an attempt to obtain better evidence on the Appeal. The $210,306estimate of injurious affection that Mr. Gettel defended at the Surface Rights Hearing should be the maximum award possible. TheCompensation Analysis of May 2016, (Exhibit 1; Tab

A) should be ignored and the evidence at the Surface Rights Board Hearing(Exhibit 13, Mr. French's evidence) should be used. [124] In rebuttal argument, the Appellants’ state at paragraphs 14 and 15 that: AltaLink has suggested at paragraph 22 of its Reply Argument that the new evidence that was presented on appeal should be“approached with caution” and “given little weight”.

It should be noted that this Honourable Court already rejected AltaLink’s submission that new evidence be approached with caution atthe conclusion of AltaLink’s application during the appeal. . . [125] This Court will not put any weight on the Appellant’s submissions as to arguments made at the cost hearing in front of theSurface Rights Board (AltaLink Management Ltd. v Koch, 2016 ABSRB 372 ) as the Respondent is unable to reply. [126] However, Mr. Gettel’s May 2016, Compensation Analysis will be considered at this Appeal because having found the Majority

Decision unreasonable and not being able to discern the reason underlying an essential aspect of the Minority Decision, further investigation is needed, either to determine the reasonableness of the Minority’s decision and, if it is not reasonable, determine quantum of compensation. [ 127 ] This Court agrees with the points made by the Appellants at paragraph 21 of the Rebuttal Argument respecting the need for Mr. Gettel’s evidence at this appeal. [ 128 ] In addition, Mr.

French repeatedly indicated that his estimates did not consider loss in value due to development restrictions that might be caused by the proposed transmission line. Mr. French’s report preceded line construction. [ 129 ] Finally, there are elements in Mr. Gettel’s assessment, specifically the Heartland Study, that were not available to him at the time of the Surface Rights Hearing, which shed more light on the situation. [ 130 ] A handicap this court would face, if restricted to considering Mr. Simpson’s Report (Exhibit 7), Mr. French’s Report (Exhibit 13) and Mr.

Gettel’s earlier report (Exhibit 12), is that the record for this appeal does not contain the testimony or argument made in front of the Surface Right Board.

On the other hand, there is good information on the more recent material (Exhibit 1; Tab A and Exhibits 8, 9 and 10). [ 131 ] Both parties established a record during the Appeal and provided detailed argument on the exhibits with the result that the Court obtained an understanding of the various reports, the appraiser's opinions and the studies informing the opinions. [ 132 ] Of course, there are other elements that make the exercise incapable of being exact. For example, the foundation for valuation is the area of the remaining lands, which was set out in the Agreed Statement of Facts.

In reality, the actual area is unknown. As indicated earlier, anticipating what will happen in the future is speculative and add uncertainty. Further, appraisals are estimates based on numerous choices made by the expert, and in this case, the estimates of a percentage value for the negative impact the power line has on the lands adds further complexity. Area of Land [ 133 ] It is a good thing that the parties agree that the two parcels total 229.69 acres.

This is unlikely to be correct as it was derived from the titles for the parcels which are described as being more or less. [ 134 ] Further it is apparent from the plans used by the Respondent to depict where the right of way would be sited and the aerial photographs also in evidence, that the Red Deer River has moved substantially, which would affect the area of NE 3. [ 135 ] Additionally, the SE 3 is registered by a Plan number indicating that the Plan Survey was completed in 1982.

The stated acreage of the land would not be affected, but the actual area could well be. [ 136 ] Finally, there is approximately 3 acres of the NE 3 on the other side of the river. It appears no consideration of how this piece would be affected was made by the parties. [ 137 ] These comments support two points. [ 138 ] The first is that the calculation of market value and injurious affection requires knowing the area of the land remaining and affected. This factor was not dealt with precisely.

However, this is both appropriate and forgivable due to the subjective nature of the exercise as a whole. [ 139 ] For the same reason, there would be no useful reason to separately value each parcel of land, even though it appears the NE 3, which is the larger parcel, is of less value due to tree cover and access issues. [ 140 ] The second point is that the injurious affection is to be determined on the remaining land which totals 207.41 acres more or less. This area does not include the workspace because the Respondent already paid $4,000 per acre, the agreed on compensation for workspace.

Adding it back into the remaining lands would be unfair. The Appraisals [ 141 ] Both appraisers, Mr. Simpson and Mr. Gettel, by their credentials and experience are well qualified to present their opinions. [ 142 ] Mr. Simpson determined the land pre-ROE was worth $3,930 per acre, Mr.

Gettel, $4,500. [ 143 ] There are many submissions on the propriety of adjustments made by the appraisers. [ 144 ] For example, the Respondent is correct that a recent sale price for the “Kure” land immediately to the north of the subject lands, also bounded in part by the Red Deer River, should have considerable influence on the valuation of the Lands. On the other hand, this Court finds that it is more likely than not that the sale price for the Kure property was reached in 2010. [ 145 ] Appraising land value is as much art, based on experience, as it is science, based on training and education.

It is never exact. Using the average of the two values would be a reasonable resolution of the issue of pre-ROE value. This takes advantage of both expert opinions and the totality of the information used by both appraisers. [ 146 ] This value is $4,215 per acre which results in the Remaining Lands being worth $874,233 for the purpose of checking the

reasonableness of the Minority Decision and, if necessary, recalculating the loss. Compensation for Injurious Affection [ 147 ] The Appellants submit that the impact of the transmission line has reduced the value of the remaining lands by 30% based on the Decision. [ 148 ] Originally, in January 2015, Mr. Gettel had determined injurious affection would be within the range of 20% to 30% and settled on the midpoint.

In February 2015, he completed the Heartland Study and in light of his findings there, he now considers a 30% figure realistic. [ 149 ] The Respondent disagrees that the transmission line would have this level of negative impact noting that neither the Surface Rights Board nor the Court of Queen’s Bench has approved this level of injurious affection. [ 150 ] Mr. Simpson estimates that injurious affection would be within the range of 5% to 10% limited to the area of two hypothetical acreages worth $250,000 each. This range was derived from a Country Residential Impact Study prepared by Mr.

Simpson’s Firm, which found a 3 to 5% impact on non-riverfront acreages. [ 151 ] Mr. Gettel’s opinion is largely founded on the Parkland County Case Study and the Heartland Transmission Project Case Study. The study’s

summary indicates a negative impact ranging between 31% and 45%. [ 152 ] The Parkland County Case Study looked at the impact a transmission line has on one-acre lots within rural multi-lot developments.

This study is less applicable to the Appellants’ situation than the Heartland study due to the discrepancies in lot sizes, locations and use; however, the findings that the primary negative effect of a power line is visual in nature and distance reduces impact appear correct. [ 153 ] Turning to the Heartland Transmission Project Case Study, this is a good idea with the potential to determine what the construction of a 500kv transmission line does to property values in a rural residential/agricultural area.

Half of the properties analyzed in this study had residences and half were quite a bit larger in area than those covered in the Parkland Report ranging in size from 2½ to 78 acres. The larger parcels are closer in size to the Koch lands. There are major distinctions as well including close proximity to an urban area and the river frontage feature. [ 154 ] The Study’s conclusion was a negative impact of 34% to 38% and suggested using 30% for the factor. [ 155 ] The current flaw with the Heartland Study was disclosed by the Respondent who is intimately familiar with the properties that it purchased.

The evidence shows that in some cases, the pre-transmission line acquisition price was inflated and re-sale prices were reduced by factors other than market value. As a result, the study's conclusion about negative impact is likely overstated. [ 156 ] Another problem with applying the Parkland Study to the Kochs’ situation is that half of the Heartland properties have existing residences. Logically, the impact of the power line would have had more effect on these properties than on vacant properties. [ 157 ] In result, this court cannot conclude that applying a 30% factor would be appropriate in this case.

There are too many assumptions and variables in the Kochs’ property situation. Revisiting the Minority Decision [ 158 ] The top end of the range proposed by Mr. Simpson, which is $100,000, when adjusted to account for four potential residences is not far from the amount awarded by Mr. Zenko, considering nothing was attributed to the loss of the most desirable locations. [ 159 ] The Minority’s discounting of injurious affection from the 25% proposed by the Landowners is justifiable.

This is because there was and continues to be uncertainty and a degree of speculation about how many building sites would be developed. Between this and the adverse impact on recreational use of the land, which is likely low, it is not easy to calculate what the damage is. [ 160 ] At the Appeal, the Appellants’ provided appraisal evidence that applied a percentage reduction to show the land value had decreased in the amount of $296,804 due to the impact of the transmission line on the land's residential use. [ 161 ] The Respondent suggested Mr.

Gettel’s May 2016 Compensation Analysis contained numerous flaws due to imperfect information, opinions that the Respondent did not agree with and the use of studies that may not reflect the Appellants’ circumstances. Some of the criticisms were valid. [ 162 ] It is trite to say that no compensation analysis is perfect. Choices have to be made, comparables have to be adjusted and the appraiser’s education and experience all come into play. Here we have the usual concerns that have an effect on the validity of an appraiser’s opinion; however the overall impact of these flaws does not appear to be that great.

There is one exception. [ 163 ] Based on the landowner’s comment that they no longer plan to build residences on the land, Mr. Gettel made the assumption that the lands are no longer suitable for residential use. The landowners cannot be faulted for concluding that the areas they wished to build on are no longer desirable (and in some areas, no longer available). Future owners in may not have the same beliefs.

In any event, compensation for injurious affection is not payable on the current landowners belief as to what they have lost; it is payable based on the loss of value to the remaining land. [ 164 ] This Court cannot agree with this assumption, as in fact there are locations suitable for residential construction. These building

sites are obviously less desirable and this is due to the power line but the impact of concluding that the lands are no longer suitable for residential use is substantial and impacts a significant part of Mr. Gettel’s opinion. [ 165 ] When regard is given to other intangibles, the major one being the potential of a full build out of four homes, it would be wrong to discount the value of the land by the full 30% proposed by the Appellants. [ 166 ] The determination of the value of the injurious affectation is not something that can be precisely calculated. However, it is not arbitrary.

The before and after evidence of Mr. Gettel appears generally to be an appropriate starting point. [ 167 ] The evidence that the landowners would have constructed a residence on the lands but for the power line is credible. That three of their children would also construct homes on the lands is not.

It is probable; given the lands consist of two parcels that in the course of time a second residence would be built. [ 168 ] Given the finding that the land is not actually sterilized for residential construction, it is my opinion that impact of the injurious affection to the lands they have retained is only about half of the impact suggested by the Appellants. [ 169 ] Based on the foregoing, the calculations would be: Loss of value: ($874,233 x 30%) $262,270 Deduct 50% due to flawed assumption that the land is sterilized to residential construction: $131,135 Total injurious effect on remaining Lands: $131,135 [ 170 ] In result, Mr.

Zenko’s award of $125,780 appears reasonable and I see no reason to make minor adjustments. Conclusion [ 171 ] Compensation for injurious affection is determined to be $125,780 and is payable as if it were first-year compensation. [ 172 ] The Parties agreed that the compensation set out in paragraphs 18 and 19 of the Agreed Statement of Facts is payable and thus it is so ordered. [ 173 ] Interest shall be payable on compensation payable to the landowners from and including February 20, 2014, at the Bank of Canada rate as at that date.

Costs [ 174 ] Counsel on this Appeal have a great deal of experience in the area of surface rights compensation and should be able to determine the costs for this appeal. In the event the parties are unable to agree on costs, each may provide a brief of 5 pages or less, together with a draft Bill of Costs on December 15, 2016. The Brief and Bill of Costs will be filed and served in the usual course; however, they will also be provided to the Court electronically at rdqb.general@gov.ab.ca by 4:00 p.m. on December 15, 2016. The documents provided will be in Microsoft Word format.

Heard on the 15 th day to the 17 th day of June, 2016. Dated at the City of Red Deer, Alberta this 1 st day of December, 2016. K.L. Sisson J.C.Q.B.A. Appearances: Michael B. Niven, QC & Christy Lee Carscallen LLP for the Appellant

John A. Kosolowski, QC & Fiona Ellington Duncan Craig LLP for the Respondent _______________________________________________________ Corrigendum of the Reasons for Decision of The Honourable Mr. Justice K.L. Sisson _______________________________________________________ Surname of Michael Niven, counsel for Appellant, corrected. Additional counsel for both Appellant and Respondent added. Appendix – Agreed Statement of Facts 1. Barry Koch and Linda Koch (the “ Landowners ”) are the owners of land in the southwest portion of Red Deer County, located at Pt.

NE 3-36-2 W5 (the “ NE 3” ) and Plan 8222837, Block 1, Lot 1 (Pt. SE 3-36-2-W5) (the “ SE 3” ) (collectively, the “ Lands” ). The NE 3 is 143.7 acres, and the SE 3 is 85.99 acres. 2. The NE 3 and the SE 3 adjoin, following a parcel of land totalling 229.69 acres. An outline of the Lands in blue is shown at Exhibit "A" to this Agreed Statement of Facts. Approximately 121 of those acres are cultivated and in use for agricultural production. 3.

On December 20, 2012, the Alberta Utilities Commission (“AUC”) granted AltaLink a permit and license to construct, operate and remove a high voltage transmission line which would traverse the Lands. 4. The Landowners purchased the Lands in February 2013 from Amy Esther Parsons, by her appointed guardian and trustee Linda Kraska, pursuant to a Real Estate Purchase & Sale Agreement (the “Agreement”). The Lands were purchased for $511,500.00. 5. Prior to the Landowners’ purchase of the Lands, they were aware of the AUC’s approval for a high voltage transmission line to traverse the Lands. 6.

Prior to the purchase of the Lands, the Landowners had rented the Lands from Ms. Parsons and various members of Ms. Parsons’ family for approximately 27 years. 7. The Lands flank the Red Deer River and are located 1 km northeast of Gleniffer Lake. The adjacency of the Lands to the Red Deer River and proximity to Gleniffer Lake adds to the rural recreational appeal of the Lands beyond their use as a purely agricultural holding. 8. The Lands are located within the Gleniffer Reservoir Shorelands Area Structure Plan.

The Gleniffer Reservoir Shorelands Area Structure Plan has allocated the Lands for continued agricultural use. 9. The Lands are designated as an “Agricultural District” pursuant to the Red Deer County Land Use Bylaw #2006/6. 10. Subdivision for first parcel out of the NE 3 and SE 3 would be supported by Red Deer County if there is a residence on the area to be subdivided. A residence would be allowed on the remainder of both quarter sections.

11. There is no public roadway directly accessing the NE 3. 12.

On February 20, 2014 (the “Effective Date”), the Surface Rights Board (the “Board”) granted two Right-of-Entry Orders to AltaLink Management Ltd. (“AltaLink”) as follows: • Right of Entry Order No. 0201/2014 granted AltaLink right-of-entry over: • o 10.75 acres identified as Right-of-Way in the NE 3 for or incidental to the construction, operation, or removal of a power transmission line; and o 0.24 acres identified as Work Space in the NE 3 for or incidental to the construction and removal of a power transmission line. • Right of Entry Order No. 0202/2014 granted AltaLink right-of-entry over: o 10.81 acres identified as Right-of-Way in the SE 3 for or incidental to the construction, operation or removal of a power transmission line; and • o 0.48 acres identified as Work Space in the SE 3 for or incidental to the construction and removal of a power transmission line. 13.

AltaLink has completed construction of a 500 kV transmission line upon the Lands (the “HVTL”). The HVTL forms part of the Western Alberta Transmission Line Project (“WATL”). 14. The HVTL does not follow the property line of the Lands. Rather, the HVTL runs across the Lands in a northwest to southeast direction. Attached to this Agreed Statement of Facts as Exhibit “B” is an Individual Ownership Plan of Survey showing the HVTL right​of-way and structure locations on the SE 3.

Attached to this Agreed Statement of Facts as Exhibit “C” is an Individual Ownership Plan of Survey showing the HVTL right-of-way and structure location on the NE 3. 15. Three WATL structures are located on the Lands (two on the SE 3 and one on the NE 3) as follows: • Structure 489 (most northerly) is located on the NE 3 and consists of two poles. • Structure 490 (middle structure) is located on the SE 3 and consists of three poles • Structure 491 (most southerly) is located on the SE 3 and consists of a monopole. 16. On February 10 and 11, 2015, a hearing to determine compensation pursuant to

section 23 of the Surface Rights Act was held before the Board. The Board rendered its decision, being Decision No. 2015/0476 (the “Decision”), as well as two Compensation Orders, being Order No. 0645/2015 and Order No. 0646/2015, ordering compensation to be payable by AltaLink (the “Order”). 17. The Landowners are appealing that part of the Decision and Orders relating specifically to their entitlement to compensation for injurious affection and the amount of that compensation for injurious affection, if any. 18.

Prior to the Surface Rights Board hearing, the parties agreed on compensation for the NE 3 as follows: Right of Way: $4,000.00/acre x 10.75 acres = $43,000.00 Workspace: $4,000.00/acre x 0.24 acres = $960.00 Entry fee: $500.00/acre x 10.99 acres = $5,000.00 (max) General disturbance: $1,500.00/structure x 1structure = $1,500.00

Annual Structure Payment: $1,722.00/structure x 1 structure (#489) = $1,722.00 19. Prior to the Surface Rights Board hearing, the parties agreed on compensation for the SE 3 as follows: Right of Way: $5,250.00/acre x 10.81 acres = $56,752.50 Workspace: $5,250.00/acre x 0.48 acres = $2,520.00 Entry fee: $500.00/acre x 11.29 acres = $5,000.00 (max) General disturbance: $1,500.00/structure x 2 structures = $3,000.00 Annual Structure Payment: $1,578.00/structure x 1 structure (#490) = $1,578.00 Annual Structure Payment: $1,236.00/structure x 1 structure (#491) = $1,236.00 20.

The parties continue to acknowledge the agreed to amounts for compensation noted above in paragraphs 18 and l 9 for the purposes of this appeal. [Maps omitted]