Abbey Resources Corp. Appellant (Applicant) v. Saskatchewan Assessment Management, 2022 SKCA 63

Court of Appeal for Saskatchewan Docket: CACV3834 Citation: Abbey Resources Corp. v Saskatchewan Assessment Management Agency , 2022 SKCA 63 Date: 2022-05-30 Between: Abbey Resources Corp. Appellant (Applicant) And Saskatchewan Assessment Management Agency Respondent (Respondent) Before: Richards C.J.S., Whitmore and Barrington-Foote JJ.A. Disposition: Appeal dismissed Written reasons by: The Honourable Mr. Justice Whitmore In concurrence: The Honourable Chief Justice Richards The Honourable Mr.

Justice Barrington-Foote On appeal from: 2021 SKQB 100 , Swift Current Appeal heard: November 10, 2021 Counsel: Jean-Pierre Jordaan for the Appellant Jeff Grubb, Q.C. and Nathanial Day for the Respondent Whitmore J.A. I.

INTRODUCTION [ 1 ] Abbey Resources Corp. [Abbey] appeals from the decision of a judge of the Court of Queen’s Bench in Chambers dismissing Abbey’s application for judicial review, in which it sought a declaration that the Saskatchewan Assessment Manual [Manual] used by the respondent, Saskatchewan Assessment Management Agency [SAMA], in the assessment of Abbey’s assets, is inconsistent with s. 195(5) of The Municipalities Act , SS 2005, c M-36.1 [ Act ]. Abbey asks this Court to set aside the decision: Abbey Resources Corp. v Saskatchewan Assessment Management Agency , 2021 SKQB 100 .

For the reasons that follow, I would dismiss this appeal. II. BACKGROUND [ 2 ] Abbey purchased over 2,200 gas wells in Saskatchewan in 2016. The purchase was organized such that Abbey paid $10 in total to the two vendors. Due to potential end-of-life liabilities of the wells, each of the vendors provided approximately $800,000 to Abbey. In addition, the Government of Saskatchewan required that the vendors also deposit approximately $27 million on behalf of Abbey as security for these end-of-life costs.

Abbey purchased the wells because it believed that, through its experience and technical knowledge, it could operate them at a profit rather than at the loss at which the vendors were operating them when they were sold in 2016. Indeed, Abbey asserts it was able to operate the wells on a break-even basis, apart from municipal taxation, in its first year. [ 3 ] The wells have differing production capacities and are in various stages in their respective lives.

SAMA records show that in 2019 Abbey had 1,572 active wells, 11 abandoned wells and 724 wells that were considered “shut-in” and no longer producing gas. [ 4 ] SAMA, as the entity responsible for assessing properties in Saskatchewan for municipal taxation purposes, assessed Abbey’s wells for the three years preceding Abbey’s application as follows: 2017 $106,621,000 2018 $98,045,025 2019 $94,487,450 [ 5 ] As stated, Abbey applied to the Court of Queen’s Bench to set aside the assessments on the basis that the Manual was inconsistent with The Municipalities Act , such that equity was not achieved. III.

THE DECISION OF THE COURT OF QUEEN’S BENCH [ 6 ] Abbey argued that the SAMA assessments vastly exceeded the actual value of the gas wells and submitted that the assessments were deficient in that Abbey’s assets are one-time, depleting, non-renewable assets, and the Manual does not treat these assets differently than assets which do not deplete and are renewable. Abbey further submitted that SAMA’s assessments do not reflect any end- of-life costs and do not adequately account for depreciation in its asset valuation.

This, argued Abbey, creates inequity and leads to an improper result as gas producers are treated unfairly compared to other taxpayers in Saskatchewan. [ 7 ] SAMA agreed that it did not apply a fair market value to Abbey’s assets but said that is not the purpose of the assessment. The

following findings of the Chambers judge explain SAMA’s valuation process: [10] SAMA, in response, acknowledges that the Manual does not apply a market or fair value to the types of assets Abbey owns andcorrespondingly pays tax in relation to. The reason this is so, SAMA says, is that there are two distinct valuation standards for propertyappraisals in Saskatchewan: 1) Market Value Standards, which are based on the market value of properties through mass appraisal. This is used for assessingresidential and non-regulated property.

It does not apply to any of Abbey’s property, all of which is regulated, as set out in this application. 2) Regulated Property Assessment Standards which is aimed at ensuring consistency across comparable properties. This is the methodwhich applies to the property that is within the ambit of the application here. Gas wells are referred to as resource production equipment[RPE] in relation to this form of assessment. It is the RPE which drives the assessments Abbey takes issue with here. [11] SAMA uses, and must use, mass appraisal techniques for such assessments.

Mass appraisal is the preparation of assessments for agroup of properties as of a base date using standard appraisal methods applying common data and allowing for statistical testing.

SAMAemploys a technical standards and policy division to establish the standards applicable to various properties in Saskatchewan. [12] When the Manual is complete the government considers it on recommendation from SAMA, and if it is acceptable, a Minister’sOrder is enacted which grants the Manual the force of law in Saskatchewan. [13] SAMA also has an Assessment Services Division which conducts valuations on behalf of the 760 Saskatchewan municipalitiesrelying on SAMA for this service.

The valuation conducted by SAMA addresses some 1,036,000 properties in the province ofSaskatchewan. [14] The Manual is updated every four years based on research and stakeholder consultations to determine rates which reflect a new“base date” level of value.

That base date value is then relied upon throughout that emanation of the Manual’s particular period of use.Therefore, by way of examples, the 2015 Base Year Manual would be in use from 2017 through 2020 and the 2019 Base Year Manualwill be in use from 2021 through 2024. [15] As noted, SAMA’s approach to the assessment approach utilized in the Manual for the type of properties at issue in thisapplication is based on the RPE. SAMA receives information from the Ministry of Environment regarding what RPE is used at each gassite and places some reliance on that information.

This is site specific information. [16] SAMA also utilizes a computer-based model for valuing the RPE typically required to operate an oil or gas well. This is a form ofstandardization and not site specific. The information which the computer-based model relies on is provided to SAMA by producers ofgas. Much of this data is provided indirectly but some of the information is checked via field inspections to validate the extrapolationsultimately relied upon by SAMA. [17] Once the information is gathered by SAMA it determines a replacement cost of the existing well site property as if the RPE werenew.

This includes labour, freight and taxes which a producer would need to expend if replacing the equipment. The Manual lists severalhundred individual RPE items and thereby covers a wide range of uses. This also therefore indicates a unique price and unique installationcosts at each well. [18] With regard to depreciation, the Manual uses a lifetime depreciation model which caps depreciation at 40%.

Reduction of thevalue of the property at issue may result further via three additional methods: 1) Application of a Downtime Allowance, which provides for an additional 10% to be deducted from the replacement cost so as to allowfor loss experienced through underutilization of the RPE in a given year; 2) A Production Adjustment Factor [PAF] which can provide a further 25% reduction to wells which fall below a certain threshold ofproduction and are considered “low producers”; and 3) A Nominal Value Assessment which further lowers the assessed value and is applied if the well is active for less than 30 days per year(see s. 199(6) of The Municipalities Act). [19] In order to determine assessable value, the system SAMA has identified within the Manual begins with a replacement cost for theequipment if installed new, applies up to a 40% depreciation (maximum) factor, considers any downtime allowance where applicable,applies a PAF on any qualifying wells or alternately applies a nominal rate due to lack of use.

Finally, upon abandonment of the well,which occurs when it is no longer expected to produce oil or gas and is recorded by the Ministry of Energy and Resources as abandoned, itis given an assessed value of $0. [20] Each manual is created with input from the gas industry including the Canadian Association of Petroleum Producers, theExplorer’s and Producer’s Association of Canada, and Husky Energy.

SAMA also retains an industry consultant, Gap Energy ConsultingLtd., for their item by item equipment costing expertise when preparing the Manual. [8] The Chambers judge observed that the issue at play was whether equity had been achieved in the assessment process. Hereferred to Regina (City) v Laing Property Corp. (1994), (SK CA), 128 Sask R 29 (CA) [Laing], and concluded thatassessed value is not synonymous with fair market value. [9] The Chambers judge found that the legislation defines “equity” and that equity is achieved by applying the regulated propertyassessment valuation standard uniformly and fairly.

That is, the standard is to be applied consistently across all like properties. Further, hefound that no evidence had been submitted that the Manual had been applied inconsistently or unevenly to Abbey’s assets. [10] The Chambers judge concluded that the Manual is not inconsistent with s. 195(5) of The Municipalities Act and dismissed theapplication.

[ 11 ] From this decision, Abbey appeals. IV.

JURISDICTION AND STANDARD OF REVIEW [ 12 ] The Court of Appeal Act, 2000 , SS 2000, c C-42.1 , s 7(2), provides the Court with jurisdiction to hear and determine this appeal. [ 13 ] In Double Diamond Ranch Ltd. v Saskatchewan Assessment Management Agency , 2002 SKCA 62 , 219 Sask R 230 [ Double Diamond ], an appeal of a decision made on an application for judicial review of a decision of SAMA of a similar nature to that before us, this Court said the following in relation to the applicable standard of review: [12] The Ranchers [the appellants] applied by way of judicial review pursuant to s. 16(1) of The Municipal Board Act [SS 1988-89, c M-23.2 ] for a determination that certain provisions of the Manual pertaining to the assessment of land held under Crown leases were inconsistent with ss. 284 and 286(2) of the R.M.

Act [ The Rural Municipality Act, 1989 , SS 1989-90, c R-26.1 ]. [13] The Ranchers sought no specific remedy and the chambers judge ruled that the parties could apply for an appropriate remedy in the future. [ 14 ] The Court must decide what the appropriate standard of judicial review is in the circumstances. The Ranchers have not applied to set aside a decision of the Assessment Appeals Committee of the Saskatchewan Municipal Board. They contend simply that certain provisions of the Manual are of no force and effect because SAMA exceeded its jurisdiction and violated the provisions of the R.M.

Act when preparing the Manual. The issue is not jurisdiction in the broad sense – all parties agree that SAMA has the legislated competence and authority to prepare the Manual for the purpose of valuing property – but it is whether in drafting the Manual, SAMA, the delegated authority, exceeded its jurisdiction or lost jurisdiction by creating a Manual which fails to take into account relevant statutory provisions.

Section 12 of The Saskatchewan Assessment Management Act confers on SAMA broad discretionary powers to prepare and establish the assessment manual required for the valuation of property that in the opinion of the agency (SAMA) are required. [ 15 ] In Amoco Canada Petroleum Co. v. Saskatchewan Assessment Management Agency [2000 SKCA 91 , 199 Sask R. 111] this Court dealt with the judicial review of an order issued by SAMA pursuant to s. 12(3) of The Assessment Management Agency Act [SS 1986, c A- 28.1 ] which defined “pipeline”.

There the applicants contended that SAMA exceeded its jurisdiction in making the order and requested an order quashing the relevant portions of the Manual. That is essentially the situation here. The Ranchers contend that SAMA exceeded its jurisdiction by making orders which are inconsistent with the R.M. Act .

Section 16.1 requires the Court to apply the principles of statutory

interpretation to determine whether SAMA created a Manual or made orders which are inconsistent with The Rural Municipality Act, 1989 . We are not dealing with the exercise of an adjudicative function. [ 16 ] In Cadillac Fairview [ Corp. v Saskatoon (City) , 2000 SKCA 84 at para 26 , 1999 Sask R 72] this Court found that the standard of judicial review applicable to the Assessment Appeals Committee on a question of law to be correctness. No less standard should be applicable to SAMA. (Footnotes omitted) [14] Thus, the standard of review is correctness.

Through this lens, the function of this Court is to determine whether the Chambers judge identified the correct test and whether he applied it correctly. V. ISSUES [15] The sole issue raised by Abbey is whether the Manual is inconsistent with s. 195(5) of The Municipalities Act , which provides that “[t]he dominant and controlling factor in the assessment of property is equity”. VI.

ANALYSIS [16] Abbey essentially makes the same arguments before this Court that it made before the Chambers judge, namely, that it was treated unfairly because the assessed value of its assets has no relation to market value, and that the Manual does not account for end-of-life costs and reasonable depreciation. Abbey urges this Court to define equity as relating to the market value of its assets. [ 17 ] However, the Legislature has, in s. 195(6) of The Municipalities Act , set out a specific approach to equity: 195

(6) Equity in regulated property assessments is achieved by applying the regulated property assessment valuation standard uniformly and fairly. [ 18 ] Thus, for regulated property assessment, equity is a matter of process, which means that the Manual is to be applied uniformly and fairly as regards similar properties: Imperial Oil Limited v Regina (City) , 2016 SKCA 107 at para 9 , 408 DLR (4th) 46.

This is in contrast to non-regulated property, for which s. 195(7) of The Municipalities Act mandates that equity is achieved when “assessments bear a fair and just proportion to the market value of similar properties”. [ 19 ] Although it describes an assessment regime that has since been updated, Double Diamond is instructive in explaining the relationship between the legislation and the Manual in property assessment: [8] Before examining the issues it would be useful to set out the legislative framework and the role of the Manual in the assessment process.

Section 12(1) of The Assessment Management Agency Act authorizes SAMA to oversee and approve all property assessment in

the Province of Saskatchewan. It does so pursuant to the Manual which establishes the rules for determining assessments. The Manualestablishes a mass appraisal system which establishes fixed, uniform standards pursuant to which acceptable levels of fairness and equitycan be achieved. The purpose of this assessment scheme is to arrive at an assessed value which bears a fair and just proportion to otherassessed values. See Amoco Canada Petroleum Co. v. Assessment Management Agency (Sask.). The objective is to determine value forthe purpose of assessment and taxation and not to determine fair market value.

Regina (City) v. Laing Property Corp. Cameron J.A. inLaing Property described the assessment schemes as: [70] The point is that the assessment scheme contemplates the determination, in accordance with the Manual, of a value for thepurposes of arriving at an assessed value, an assessed value which bears a fair and just proportion to other assessed values. While theManual applies to all such valuations, thus ensuring uniformity in methodology, one might still say (with actual or market value in mind)that this results in artificial values. But does that really matter as long as they are uniformly artificial?

Not really, according to City Savings& Trust Co. and City of Regina, [(1974), (SK CA), 52 DLR (3d) 698 (Sask CA)] for the dominant and controllingfactor, after all, is equity.... [emphasis in original] [9] The Manual has the force of law and is the rule book or code used by assessors to determine fair value. It was described in thisway in [Cadillac Fairview Corp. v Saskatoon (City), 2000 SKCA 84, 199 Sask R 72]: [34] It has already been mentioned that the manual has the force of law. In considering the issues, the content of Document 1.1.1 mustalways be kept in mind.

The object of the process is to arrive at a fair value which is a comparative value, close to market value, arrived atin accordance with the requirements of [The Rural Municipality Act, 1989] and the manual. The method of valuation remains massappraisal, the process of valuing a group of properties using standard methods and allowing for statistical testing. Individual appraisals andactual market value of the property being assessed have no place in the process.

The concept of fair value, as opposed to market value, andthe objects of the assessment process have been discussed extensively in Laing and [Estevan Coal Corp. v Estevan (Rural MunicipalityNo. 5), 2000 SKCA 82, 1999 Sask R 57] and these too, must be kept in mind throughout. [10] Section 284(2) & (3) of the R.M. Act provide that equity is the dominant and controlling factor; and, 2) that the assessment valueis to bear a fair and just proposition to the value of other lands in the municipality. [11] As noted above, SAMA is given considerable discretion and latitude in the preparation of the Manual.

See Amoco. (Footnotes omitted; italicized emphasis in original; underlined emphasis added) [20] Laing, which was also decided under the former regime, helps to explain how the assessment scheme differentiates betweenvaluation and equity: [67] The present scheme is apparently no more concerned with a determination of the “actual value” or “market value” of animprovement than was the former scheme.

While the current legislative provisions differ in some respects, they remain essentially thesame on this point, as is evident on a comparison of the relevant provisions of s. 239 of the present Act and s. 320 of the former statute,dealt with by the court in [City Savings & Trust Co. v Regina (City) (1974), (SK CA), 52 DLR (3d) 698 (Sask CA)].And the Manual is still aimed, it seems, at coming up with a value for the purposes of assessment and taxation, not current market value. [21] In Amoco Canada Petroleum Company Ltd. v Saskatchewan Assessment Management Agency, 2000 SKCA 91, 199 Sask R111, this Court said: [21] … Whether the ultimate assessed values result in artificial, as opposed to actual values is, as stated in Laing Property, irrelevant, aslong as they are applied uniformly because the objective of equity is met if the appellant’s pipeline assessment bears a just proportion tothe value of other similar pipeline assessments. … [22] A similar argument to the one advanced by Abbey was made in Double Diamond when ranchers argued that tenants of Crownpasture paid the same taxes as owners.

The tenants said this was inequitable. This Court’s reasons are instructive: [29] The methodology in the Manual for valuing pasturage under a grazing lease is the use to which the land is put and in so doing ituses the characteristics relevant to pasturing. The Manual is consistent with and follows the instructions in s. 284(6) in determining thevalue of occupancy or interest in the land for the purpose of assessment. That

section provides that the value of the occupancy of Crownland shall be the fair value having regard for the use to which it is put. Under a grazing lease, the use is the pasturing of livestock. TheManual treats fee simple lands and Crown lease lands the same way for assessment purposes.

They are valued by reference to the use thelands will be put. [30] The chamber judge was correct in his finding in paragraph 10 of his judgment that: [10] The conditions and limitations contained in the Crown leases which make the lessee's interest worth less than fee simple interestshave nothing to do with the use to which the lands are put... . Unfortunately, he then went on to find that the value of the land held under Crown lease should be reduced by factors which are notrelevant to the use of the land. In so doing he erred.

The Ranchers adduced no evidence concerning the value of Crown lease pasture landfor the purpose of assessment. Roger Frey, Coordinator with SAMA, described the method of calculating the value of pasture land atparas. 32 to 35 of his affidavit. The value for the purpose of assessment is based on the present use of the land. The value of the land isderived from its ability to feed cattle.

Land burdened with such things as a Crown lease, ES zoning, or The Wildlife Habitat Protection Act[SS 1983-84, c W-13.2] have the same value as land not so burdened because the land is valued for its carrying capacity of cattle. [31] The chambers judge erred in finding that there was an inconsistency between the R.M Act and the Manual.

He mistakenly broughts. 284(4) into the consideration and then applied it to require SAMA to reduce the value of the Ranchers’ lands by using matters that areentirely irrelevant to the use of lands. [32] There is no basis to hold that the Manual is inconsistent with ss. 284(2) or (3) by virtue of the way it treats Crown pasture land for

the purpose of assessment. All pasture land is assessed on the same basis, that is land use.

The appeal is therefore allowed with respect to the answer to questions 2 and 4. (Footnotes omitted; emphasis added) [ 23 ] Notwithstanding the change in the definition of “equity” (achieved by “applying the regulated property assessment valuation standard uniformly and fairly ” (s. 195(6)), the principle remains that regulated property assessment is not concerned with market value but with the uniform and fair application of the standard. [ 24 ] From this it is clear that the Manual is not inconsistent with s. 195(5) of The Municipalities Act .

It is aimed at achieving “equity” in the valuation process as that term is defined in the legislation and the relevant case law. [ 25 ] Further, Abbey introduced no evidence that the Manual was applied inconsistently and does not suggest that the Manual is inconsistent with standard appraisal methodology. [ 26 ] Abbey’s argument must fail; not only on the definition of “equity” as explained, but also on Abbey’s failure to provide any evidence that its properties have been treated unfairly. VII.

CONCLUSION [ 27 ] The Chambers judge made no error in his determination of the judicial review application before him. [ 28 ] Accordingly, the appeal must be dismissed with costs in the usual manner. “Whitmore J.A.” Whitmore J.A. I concur. “Richards C.J.S.” Richards C.J.S. I concur. “Barrington-Foote J.A.” Barrington-Foote J.A.