Altius Royalty Corporation v Alberta, 2021 ABQB 3

Preliminary Issue: Is the action premature?

The defendants argued that the Plaintiffs’ lawsuit was premature as it was impossible to know what the state of affairs would be like in 2030, whether the law will change before then, or what emissions technology will then exist. Alternatively, the Government of Alberta argued that the action was barred by the Limitations Act, RSA 2000. 

In dealing with this argument, the Court distinguished this case from another case from 2019 called British Columbia (Attorney General) v Alberta (Attorney General) that related to proposed legislation for restricting oil and gas exports to British Columbia. In that 2019 case the Court decided a constitutional challenge to legislation that was not in force yet was premature. In this case, the issue relates to regulations that are already in force based on facts that have occurred—i.e. present rights were affected. Accordingly, the Court dismissed the argument that this lawsuit was premature. 

Main Issues: 

A) Did the actions of the Government of Canada and the Government of Alberta amount to taking and constructive expropriation? 

The Government of Canada and the Government of Alberta argued that the facts of this case did not meet the requirements established by the case law for a “taking”. The Court examined the relevant case law. 

In Canadian Pacific Railway Co. v Vancouver (City), a case from 2006, the Supreme Court of Canada established that for a situation to be considered a taking that warrants compensation, two requirements must be met. There must be: (1) an acquisition of a beneficial interest in the property or flowing from it; and (2) removal of all reasonable uses of the property. For the first part of the test, there does not need to be a forced transfer of property; an acquisition of the beneficial interest related to the property is enough. The Supreme Court of Canada held that there was no taking as the zoning bylaw did not pass the test, it merely prohibited CPR from exploiting the lands to their full commercial potential and limited development. 

The Court of Queen’s Bench of Alberta also examined a case from 1985 called R v Tener, in which the Supreme Court of Canada addressed expropriation law in context to similar facts to this case. In Tener, a mineral claim holder in British Columbia was negatively affected by a change in government policy in relation to a provincial park that was created over their mineral rights claims. The provincial government eventually made it clear that they would not consider providing permits for surface rights in the park so the mineral rights could not be exploited. The Court in Tener held that while there had not been any regulation reducing the value of the minerals or affecting the respondents’ opportunity to remove them, there was nevertheless a taking as the Park Act essentially allowed the Crown to recover part of the rights granted to the respondents in 1937. This conclusion was deemed to be consistent with the Supreme Court of Canada’s 1978 decision in Manitoba Fisheries Ltd. v The Queen. In Manitoba Fisheries, the establishment of a Crown corporation ended up putting Manitoba Fisheries out of business. Even though the company still had their assets, the Crown had deprived them of their goodwill which made the assets virtually useless. Therefore, the company was entitled to compensation. Similarly, in Tener, the respondents were left with minerals that were less profitable.  

In short, the case law establishes that whether or not there has been a taking depends on the facts. When the Crown effectively acquires an owner’s business to its own benefit, there is a taking (such as in Manitoba Fisheries). When a municipality does not take the title to the land and just limits its possible uses, there is no taking (like in CPR). When the Crown effectively prevents the development of minerals, there may be a taking even if the rights to the minerals have not been expropriated for the purpose of Crown development (like in Tener). 

The Alberta Court of Queen’s Bench analogized this case to Tener: the coal itself was not taken, but the ability to develop and exploit the coal was arguably taken, which made the coal useless. 

The main point of contention between the parties was the target and effect of the regulation. The federal and provincial government argued that the target of the regulations is the coal-fired power plant that produces emissions, not the coal supplier; any losses suffered by the coal supplier are incidental and therefore do not justify a cause of action. Moreover, the governments said that the royalty was not affected by any closing of the plant. The Plaintiffs argued that the affected coal interests had been taken as they had been effectively sterilized. 

The Court distinguished this case from Tener and Manitoba Fisheries. The Court reasoned that the royalty acquired by the Plaintiffs in 2014 was always susceptible to being affected by new emissions regulations and that the Plaintiffs were trying to bind subsequent governments to a former government’s regulatory scheme. In essence, they were trying to make the governments guarantors of their business transactions and assure them the opportunity to provide 50 years of coal supply. The Court pointed out that the underlying agreements in support of their transactions never made any such guarantees. 

The Court agreed with the Plaintiffs’ assertion that the second part of the taking test was met as there was a financial benefit to the government. However, the Court concluded that the first branch of the test was not met because the governments did not get any beneficial interest in the coal or royalty interest. Therefore, the Court decided that there was no reasonable cause of action for the Plaintiffs to pursue at trial. 

The Court also cited other cases on expropriation law that pointed out the need for expropriation claims to be considered in light of the fact that in modern Canada, extensive regulation of land use is the norm and private property owners are not immune from regulation. Accordingly, not every interference with property ownership is comparable to de facto expropriation. Sometimes, the interests of owners have to be sacrificed for the greater public interest. 

Additionally, the Court pointed out that the Plaintiffs knew emissions regulation was a part of the industry when they entered into the transactions in question. Changes to emissions regulations should not come as a surprise. Canada merely exercised its regulatory powers. Finally, the Court noted the absurdity of requiring a regulator that is trying to regulate environmental hazards in good faith to pay the creator of those hazards in order to get them to stop polluting. 

B) Final Issue: Did the Government of Alberta induce a breach of contract? 

The Plaintiffs also argued that the Government of Alberta induced a breach of contract by entering into an agreement with the Genesee Power Plant operator to cease coal-fired emissions. The Court dismissed this argument because the royalty arrangement did not guarantee that the mine could supply coal for 50 years and there was no evidence that the Government of Alberta induced a breach of contract. The Court held that the Government of Alberta has a right to decide whether it is appropriate to compensate the plant owner and employees affected by the changes.