Federal Court of Appeal Decisions

Date: 20030227

Docket: A-521-02

Neutral citation: 2003 FCA 104

CORAM:        ROTHSTEIN J.A.

EVANS J.A.

MALONE J.A.

BETWEEN:

             TERRY BALISKY, MARCIA BALISKY, BEV COLLIN HOLDINGS LTD.,

                   BYRON BUE, RAYMOND BUE, PETER EGGERS, LEVKE EGGERS,

                BRYAN ELLINGSON, CHARLES EVASKEVICH, NORA EVASKEVICH,

             BRIAN FAST, TERESA FAST, DOUG GABERT, RAYMOND GILKYSON,

    VICKI GILKYSON, JAMES GLASMAN, ELAINE GLASMAN, STIRLING HANSON,

    LAURA HANSON, ROGER JONES, FERN JONES, DON LILAND, LINDA LILAND,

                   MARIO MAROUELLI, JAMIE MAROUELLI, DONALD MEADOR,

             MONA MIDDLETON, GLEN HAUGHIAN, BRIAN MOE, JANICE MOE,

                    RANDY MOE, KRIS MOE, FRANKLIN MOLLER, LLOYD OLLEY,

         KATHERINE OLLEY, DON PEDERSEN, KANE PIPER, ROBERT RICHARDS,

                       ADA RICHARDS, CORNIE SCHMIDT, PRISCILLA SCHMIDT,

                     ALBERT SLATER, KEN SLATER, DALE SMITH, GWEN SMITH,

                  GORDON STRATE, FRANK THEDERAHN, IRMA THEDERAHN and

                                                                         ED WELSH

                                                                                                                                                     Appellants

                                                                              - and -

                              THE HONOURABLE RALPH GOODALE, MINISTER OF

                          NATURAL RESOURCES AND ALLIANCE PIPELINE LTD.

                                                                                                                                               Respondents

                                Heard at Edmonton, Alberta, on Monday, on February 3, 2003.

                                 Judgment delivered at Ottawa, Ontario, on February 27, 2003.

REASONS FOR JUDGMENT BY:                                                                              ROTHSTEIN J.A.

CONCURRED IN BY:                                                                                                            EVANS J.A.

                                                                                                                                              MALONE J.A.

Date: 20030227

Docket: A-521-02

Neutral citation: 2003 FCA 104

CORAM:        ROTHSTEIN J.A.

EVANS J.A.

MALONE J.A.

BETWEEN:

             TERRY BALISKY, MARCIA BALISKY, BEV COLLIN HOLDINGS LTD.,

                   BYRON BUE, RAYMOND BUE, PETER EGGERS, LEVKE EGGERS,

                BRYAN ELLINGSON, CHARLES EVASKEVICH, NORA EVASKEVICH,

             BRIAN FAST, TERESA FAST, DOUG GABERT, RAYMOND GILKYSON,

    VICKI GILKYSON, JAMES GLASMAN, ELAINE GLASMAN, STIRLING HANSON,

    LAURA HANSON, ROGER JONES, FERN JONES, DON LILAND, LINDA LILAND,

                   MARIO MAROUELLI, JAMIE MAROUELLI, DONALD MEADOR,

             MONA MIDDLETON, GLEN HAUGHIAN, BRIAN MOE, JANICE MOE,

                    RANDY MOE, KRIS MOE, FRANKLIN MOLLER, LLOYD OLLEY,

         KATHERINE OLLEY, DON PEDERSEN, KANE PIPER, ROBERT RICHARDS,

                       ADA RICHARDS, CORNIE SCHMIDT, PRISCILLA SCHMIDT,

                     ALBERT SLATER, KEN SLATER, DALE SMITH, GWEN SMITH,

                  GORDON STRATE, FRANK THEDERAHN, IRMA THEDERAHN and

                                                                         ED WELSH

                                                                                                                                                     Appellants

                                                                              - and -

                              THE HONOURABLE RALPH GOODALE, MINISTER OF

                          NATURAL RESOURCES AND ALLIANCE PIPELINE LTD.

                                                                                                                                               Respondents

                                                        REASONS FOR JUDGMENT

ROTHSTEIN J.A.

INTRODUCTION

[1]                 Under Part V of the National Energy Board Act, R.S.C. 1985, c. 7, when a company having the authority to construct and operate a pipeline takes land for the use of the pipeline and compensation is not agreed upon with a person whose land is taken, either party may serve a notice of arbitration on the Minister of Natural Resources. The Minister shall then refer the matter to an arbitration committee for the purpose of the determination of compensation. However, if a matter referred to in the notice of arbitration is not one to which the arbitration proceedings under the Act apply, the Minister shall not refer that matter to arbitration.

[2]                 The issue in this appeal is whether the Minister must refer to an arbitration committee claims for compensation for alleged damages involving what is termed the "controlled area" adjacent to the right-of-way of the pipeline.

[3]                 The Minister determined that such claims by the applicants in this case did not fit within the arbitration scheme under Part V of the Act. He, therefore, refused to refer these claims to an arbitration committee. The appellants' application for judicial review to the Federal Court Trial Division was dismissed. This is an appeal from that dismissal.

FACTS

[4]                 The facts are not in dispute and I paraphrase them from the decision of the judicial review Judge. Alliance Pipeline Ltd. (Alliance) and its U.S. affiliate own and operate a natural gas pipeline extending from the northeast region of British Columbia to a point near Chicago, Illinois (the pipeline). In 1998, Alliance obtained approval from the National Energy Board and the Governor in Council to construct and operate the Canadian portion of the pipeline.

[5]                 Most of the land required for the right-of-way of the pipeline was acquired by agreement. In those cases in which agreement could not be reached, Alliance applied for and was granted right of entry orders by the National Energy Board pursuant to section 104 of the Act.

[6]                 Pursuant to section 90 of the Act, each of the appellants served a notice of arbitration upon the Minister which requested, among other things, compensation for the lands within the controlled area.

[7]                 The Minister, by letter dated January 10, 2001, advised the parties that arbitration committees would be appointed under the Act to consider the matters contained in the notices of arbitration, except those relating to compensation for the controlled area because he was not satisfied that they fell within the arbitration procedures under Part V of the Act.

[8]                 By Order dated September 13, 2001, the application for judicial review of the Minister's decision was dismissed.

ANALYSIS

Standard of Review

[9]                 The parties are agreed that the standard of review of the Minister's decision is correctness. The issue involves the interpretation of Part V of the Act. The Act contains no privative clause and the determination of what matters may be referred to an arbitration committee will have precedential importance. I agree with the parties that the standard of review is correctness.

The Controlled Area

[10]            At issue is whether an arbitration committee appointed under Part V of the Act may deal with compensation for alleged damage involving the controlled area described in subsection 112(1) of the Act. Subsection 112(1) provides:

[11]            The thirty metres referred to in subsection 112(1) is a thirty metre strip adjacent to either side of a pipeline right-of-way. These thirty metre strips are commonly referred to as the controlled area. The controlled area is not land taken for the pipeline right-of-way which is usually a strip about eighteen metres wide. The controlled area remains in the ownership of the person or persons who owned it before the pipeline right-of-way was taken.

[12]            The portion of subsection 112(1) relevant to this appeal provides that these landowners shall not excavate using power-operated equipment or explosives in the controlled area without first obtaining approval from the Board.

[13]            The type of activity that the appellants say is limited by subsection 112(1) includes their use of power-operated equipment to dig drainage ditches, foundations for a building, or dugouts for water for animals. They say that they are entitled to refer to an arbitration committee claims claims for compensation for damages arising out from limits imposed by subsection 112(1).

Judgments Below

[14]            The judicial review Judge was of the opinion that compensation for the controlled area was not a matter that could be referred to an arbitration committee. She relied upon section 84 which sets out the restrictions on the matters that may be covered by negotiation and arbitration procedures in Part V. Section 84 reads:

84. The provisions of this Part that provide negotiation and arbitration procedures to determine compensation matters apply in respect of all damage caused by the pipeline of a company or anything carried by the pipeline but do not apply to (a) claims against a company arising out of activities of the company unless those activities are directly related to(i) the acquisition of lands for a pipeline, (ii) the construction of the pipeline, or (iii) the inspection, maintenance or repair of the pipeline; (b) claims against a company for loss of life or injury to the person; or (c) awards of compensation or agreements respecting compensation made or entered into prior to March 1, 1983.

84. Les procédures de négociation et d'arbitrage prévues par la présente partie pour le règlement des questions d'indemnité s'appliquent en matière de dommages causés par un pipeline ou ce qu'il transporte, mais ne s'appliquent pas_: a) aux demandes relatives aux activités de la compagnie qui ne sont pas directement rattachées à l'une ou l'autre des opérations suivantes_: (i) acquisition de terrains pour la construction d'un pipeline, (ii) construction de celui-ci, (iii) inspection, entretien ou réparation de celui-ci; b) aux demandes dirigées contre la compagnie pour dommages à la personne ou décès; c) aux décisions et aux accords d'indemnisation intervenus avant le 1er mars 1983.

[15]            At paragraph 19 of her reasons, the judicial review Judge found that paragraph 84(a) restricted the role of an arbitration committee to determining damages that were directly related to either the acquisition of land, or the construction, inspection, maintenance or repair of the pipeline. Because the controlled area is established by reason of subsection 112(1), it was not, in her view, related in any direct manner to the company's acquisition of the pipeline right-of-way itself.

[16]            At paragraphs 23 and 25 of her reasons she stated:

[23] In light of these definitions, the use of the word directly in section 84 of the Act will require the immediate participation of the pipeline company. As pointed out by the respondent Alliance, the "controlled area" established pursuant to section 112 of the Act is not related in any direct manner to the acquisition of the pipeline right-of-way itself. It is a statutory public safety requirement imposed on land owners by Parliament through the Act.

[25] ... In my opinion, the claim for compensation for acquisition of lands by Alliance in relation to the "controlled area" is too remote to satisfy the direct connection prescribed by section 84 of the Act.

[17]            The Minister had come to the same conclusion. In his decision finding that compensation for the controlled area did not fit within the statutory scheme, he stated that he was not satisfied that such compensation was "directly related to the compensation for damages caused by a pipeline company when constructing, maintaining or repairing the pipeline". Although he did not refer to paragraph 84(a) expressly, his reference to "directly related" strongly suggests that he was referring to the wording of that paragraph in coming to his conclusion.

The Statutory Scheme

[18]            With respect, I am unable to agree with the interpretation given to section 84 by the Minister and the judicial review Judge.

[19]            Section 75 provides that a company shall make full compensation for all damage sustained by reason of the exercise by the company of the powers granted to it under the Act. Section 75 provides:

75. A company shall, in the exercise of the powers granted by this Act or a Special Act, do as little damage as possible, and shall make full compensation in the manner provided in this Act and in a Special Act, to all persons interested, for all damage sustained by them by reason of the exercise of those powers.

75. Dans l'exercice des pouvoirs qui lui sont conférés par la présente loi ou une loi spéciale, la compagnie doit veiller à causer le moins de dommages possibles et, selon les modalités prévues à la présente loi et à une loi spéciale, indemniser pleinement tous les intéressés des dommages qu'ils ont subis en raison de l'exercice de ces pouvoirs.

[20]            When a pipeline company and a landowner have not agreed upon compensation for the acquisition of land for a pipeline or for damages suffered by the landowner as a result of the operations of the pipeline company, either party may request the Minister to refer the matter to negotiation and/or arbitration. Subsections 88(1) and 90(1) provide:

[21]            Where the Minister is served with a notice of arbitration, he shall forthwith refer the matter to an arbitration committee. Subsection 91(1) provides:

91. (1) Where the Minister is served with a notice of arbitration under this Part, the Minister shall, (a) if an Arbitration Committee exists to deal with the matter referred to in the notice, forthwith serve the notice on that Committee; or (b) if no Arbitration Committee exists to deal with the matter, forthwith appoint an Arbitration Committee and serve the notice on that Committee.

91. (1) Dès qu'un avis d'arbitrage lui est signifié, le ministre_: a) si un comité d'arbitrage a déjà été constitué pour régler la question mentionnée dans l'avis, signifie à celui-ci l'avis d'arbitrage; b) dans le cas contraire, nomme un comité d'arbitrage et signifie l'avis à celui-ci.

[22]            Subsection 97(1) of the Act confers on an arbitration committee the jurisdiction to determine all compensation matters referred to in a notice of arbitration. In determining compensation matters, the arbitration committee shall consider a number of listed factors where they are applicable, as well as such other factors as it considers proper in the circumstances. Subsection 97(1) provides:

97. (1) An Arbitration Committee shall determine all compensation matters referred to in a notice of arbitration served on it and in doing so shall consider the following factors where applicable: (a) the market value of the lands taken by the company; (b) where annual or periodic payments are being made pursuant to an agreement or an arbitration decision, changes in the market value referred to in paragraph (a) since the agreement or decision or since the last review and adjustment of those payments, as the case may be; (c) the loss of use to the owner of the lands taken by the company; (d) the adverse effect of the taking of the lands by the company on the remaining lands of an owner; (e) the nuisance, inconvenience and noise that may reasonably be expected to be caused by or arise from or in connection with the operations of the company; (f) the damage to lands in the area of the lands taken by the company that might reasonably be expected to be caused by the operations of the company; (g) loss of or damage to livestock or other personal property affected by the operations of the company; (h) any special difficulties in relocation of an owner or his property; and (i) such other factors as the Committee considers proper in the circumstances.

97. (1) Le comité d'arbitrage doit régler les questions d'indemnité mentionnées dans l'avis qui lui a été signifié, et tenir compte, le cas échéant, des éléments suivants_: a) la valeur marchande des terrains pris par la compagnie; b) dans le cas de versements périodiques prévus par contrat ou décision arbitrale, les changements survenus dans la valeur marchande mentionnée à l'alinéa a) depuis la date de ceux-ci ou depuis leurs derniers révision et rajustement, selon le cas; c) la perte, pour leur propriétaire, de la jouissance des terrains pris par la compagnie; d) l'incidence nuisible que la prise des terrains peut avoir sur le reste des terrains du propriétaire; e) les désagréments, la gêne et le bruit qui risquent de résulter directement ou indirectement des activités de la compagnie; f) les dommages que les activités de la compagnie risquent de causer aux terrains de la région; g) les dommages aux biens meubles, notamment au bétail, résultant des activités de la compagnie; h) les difficultés particulières que le déménagement du propriétaire ou de ses biens pourrait entraîner; i) les autres éléments dont il estime devoir tenir compte en l'espèce.

[23]            While the jurisdiction conferred by subsection 97(1) on an arbitration committee to determine compensation matters is broad, it is not unlimited. Subsection 91(2) provides that the Minister shall not refer certain matters to an arbitration committee. Subsection 91(2) provides:

[24]            Section 84 commences by providing that arbitration procedures apply in respect of all damage caused by the pipeline or anything carried by the pipeline. It then provides that the arbitration procedures do not apply to claims against a pipeline company arising out of activities of the company, other than activities directly related to the acquisition of lands or the construction, inspection, maintenance or repair of the pipeline. For ease of reference, I repeat paragraph 84(a):

84. The provisions of this Part that provide negotiation and arbitration procedures to determine compensation matters apply in respect of all damage caused by the pipeline of a company or anything carried by the pipeline but do not apply to (a) claims against a company arising out of activities of the company unless those activities are directly related to (i) the acquisition of lands for a pipeline, (ii) the construction of the pipeline, or (iii) the inspection, maintenance or repair of the pipeline;

84. Les procédures de négociation et d'arbitrage prévues par la présente partie pour le règlement des questions d'indemnité s'appliquent en matière de dommages causés par un pipeline ou ce qu'il transporte, mais ne s'appliquent pas_: a) aux demandes relatives aux activités de la compagnie qui ne sont pas directement rattachées à l'une ou l'autre des opérations suivantes_: (i) acquisition de terrains pour la construction d'un pipeline, (ii) construction de celui-ci, (iii) inspection, entretien ou réparation de celui-ci;

The only question relevant to this appeal is whether paragraph 84(a) precludes an arbitration committee from considering claims for compensation arising from limitations affecting the controlled area pursuant to subsection 112(1).

[25]            Under subsection 90(1), all claims for compensation for the acquisition of land or compensation for damages suffered as a result of the operations of the company are referable to negotiation or arbitration. Subsection 91(1) provides that the Minister shall, when served with a notice of arbitration, refer the matter to an arbitration committee. Subsection 97(1) describes the factors to be considered by an arbitration committee. Claims for compensation arising from the effect of subsection 112(1) would be claims that would be referable to an arbitration committee under subsection 90(1) and determinable by an arbitration committee under subsection 97(1). The respondents do not submit otherwise. Their argument is that paragraph 84(a) precludes claims arising from the effect of subsection 112(1) from being referred to an arbitration committee.

Analysis of Statutory Scheme

[26]            I start with the observation that the subject matter of paragraph 84(a) is limited to activities of the company, whereas paragraph 90(1), by reference, incorporates the subjects of the acquisition of land and operations of the company referred to in subsection 88(1). Since paragraph 84(a) refers only to activities of the company, and since it limits what may be referred to an arbitration committee, its scope must be narrower than acquisition of land and operations of the company.

[27]            From the context in which the word activities is used in paragraph 84(a), it seems to me that it refers to actions of employees, subcontractors or others acting on behalf of the pipeline company. Activities directly related to acquisition of land would include surveying. Activities directly related to construction would include the physical transportation of pipes and other materials to the right-of-way and the work necessary to bring the pipeline to a state in which it is ready for operation. Activities directly related to inspection, maintenance and repair of the pipeline would include the work of individuals once the pipeline was ready for use or was already in operation.

[28]            Paragraph 84(a) appears to be directed at negligent or, perhaps, even innocent acts of employees, subcontractors or others acting on behalf of the pipeline company, such as those I have described, that cause damage to an owner of land. Conversely, damages arising from activities of employees, subcontractors or others acting for the company when those activities are not directly related to the aspects of the pipeline referred to in paragraph 84(a) cannot be referred to an arbitration committee. These activities might include activities that cause damage as a result of a highway traffic accident, defamation or wrongful dismissal.

[29]            Neither the excluded nor included activities referred to in paragraph 84(a) have anything to do with the effect of subsection 112(1) on landowners adjacent to a pipeline right-of-way. Claims for compensation arising from subsection 112(1) do not arise from activities of the company as that term is used in paragraph 84(a). They arise by virtue of the presence or existence of the pipeline.

[30]            The operations of the pipeline company will certainly include the activities referred to in paragraph 84(a). However, the ordinary everyday use of the pipeline, beyond construction, maintenance, inspection and repair, also constitutes operations of the pipeline company. Just as paragraph 84(a) cannot be read to exclude from arbitration claims for damages arising from the ordinary operation of the pipeline, it cannot be read to exclude from arbitration claims for compensation arising from the effect of subsection 112(1). If section 84 has any relevance to subsection 112(1), it would be in the opening words, that arbitration applies "... in respect of all damage caused by the pipeline of a company ...".

[31]            For these reasons, I am of the opinion that paragraph 84(a) does not preclude claims for compensation arising from the effect of subsection 112(1) from being referred to an arbitration committee.

[32]            In finding that claims for compensation arising from subsection 112(1) could not be referred to an arbitration committee, the judicial review Judge differentiated between damages arising out of the acquisition of the pipeline right-of-way and damages arising from the public safety requirement imposed by statute. I am unable to accept the validity of this distinction. The acquisition of the pipeline right-of-way is pursuant to a right granted to the pipeline company by statute. Parliament considered it in the public interest that pipeline companies should have such rights, notwithstanding that they involve the compulsory taking of land to which a landowner might not otherwise agree. Nonetheless, there is no suggestion that landowners are not to be compensated for the loss of their land for the right-of-way and for the adverse effect on remaining land because of severance or other reasons. Even though it is the statute that places a limitation on the use of the controlled area by an landowner, and that such limitation is in the public interest, the result may be a loss in value to the landowner. There is no reason why subsection 97(1) should not apply and why a landowner should not be able to have a claim for such loss treated in the same manner as a claim for any other adverse effect to remaining land as a result of the presence of the pipeline.

[33]            As I understand the purpose of the arbitration scheme in Part V, it is, amongst other things, to provide a summary and expeditious procedure for the determination of damages suffered by landowners affected by a pipeline, with the object of keeping them whole. Arbitration committees are considered the appropriate forum for such determinations. I can see no valid reason why a loss arising out of a limitation placed on the controlled area that causes damage to an adjacent landowner should not be compensated for, or why the arbitration procedure should not be available for the determination of such compensation.

[34]            In coming to this conclusion, I should not be taken as implying that there are damages suffered as a result of limitations on the controlled area generally or in any given case. That is a matter of evidence to be considered by an arbitration committee.

[35]            The respondents argued that subsection 112(1) does not restrict landowners from using power-operated equipment or explosives in a controlled area. They say that subsection 112(1) only requires a landowner to obtain leave from the National Energy Board before any power-operated equipment or explosives are used. They say that obtaining leave is an easy matter and that, if a landowner is denied leave, only at that point can it be shown, without speculation, that there was an adverse effect that would give rise to a claim for compensation.

[36]            The respondents go on to say that, prior to the enactment of subsection 112(1), a pipeline company could, in an appropriate case, obtain an injunction against an adjacent landowner from excavating using power-operated equipment or explosives on land close to a pipeline when this might interfere with the pipeline. They say subsection 112(1) simply provides a scheme whereby the Board, rather than a court, deals with such limitations and that subsection 112(1) does not create a new type of damage that did not exist before.

[37]            However, the appellants say that the requirement to obtain leave of the Board to excavate using power-operated equipment or explosives in the controlled area might diminish the value of the controlled area and/or, perhaps other adjacent land. Potential purchasers may see the requirement that landowners must obtain leave from the Board as a regulatory risk with which they would rather not have to contend. This regulatory risk might, therefore, diminish the value of the owners' land. The appellants say that this is a matter that landowners should be able to bring to an arbitration committee.

[38]            The respondents have no answer to this concern. It may be that, prior to subsection 112(1), a potential limitation on excavating close to a pipeline may have been a factor for consideration in the awarding of compensation in respect of the taking of land for, or the construction and operation of a pipeline. Whether that was the case or not, the current legislation places the onus on the landowner to obtain Board approval before excavating using power-operated equipment or explosives.

[39]            It may be that the reduction in land value resulting from the controlled area is slight or indeed, non-existent. However, as I have said, that is a matter of appraisal or other evidence to be brought before an arbitration committee. I can see no reason, based upon the scheme of Part V, to deny landowners the opportunity to bring such a matter before an arbitration committee.

[40]            For these reasons, I am of the opinion that the Minister was in error when he found that compensation for the controlled area did not fit within the statutory scheme and that the learned judicial review Judge should have granted the appellants' application for judicial review.

CONCLUSION

[41]            I would allow the appeal with costs here and in the Trial Division, quash the decision of the Minister in respect of compensation relating to the controlled area, and direct the Minister to refer to an arbitration committee or committees the matter of compensation relating to the controlled area.

                                                                                  "Marshall Rothstein"     

                                                                                                              J.A.        

"I agree

John M. Evans J.A."

"I agree

B. Malone J.A."

                          FEDERAL COURT OF APPEAL

    NAMES OF COUNSEL AND SOLICITORS OF RECORD

  

DOCKET:                   A-521-02

STYLE OF CAUSE: Terry Balisky et al. v. The Honourable Ralph Goodale,

Minister of Natural Resources and Alliance Pipeline Ltd.

                                                         

PLACE OF HEARING:                                   Edmonton, Alberta

  

DATE OF HEARING:                                     February 03, 2003

  

REASONS FOR JUDGMENT

BY:                              ROTHSTEIN J.A.

CONCURRED IN BY:                                    EVANS, MALONE JJ.A.

  

DATED:                      February 27, 2003         

  

APPEARANCES:

Mr. Darryl Carter                                                 FOR THE APPELLANTS

Mr. Lars Olthafer                                                 FOR THE RESPONDENT

(Alliance Pipeline Ltd)

Mr. Bruce Hughson                                              FOR THE RESPONDENT

(Minister of Natural Resources)

SOLICITORS OF RECORD:

Carter, Lock & Horrigan                                                  FOR THE APPELLANTS

Grande Prairie, Alberta

Fraser Milner Casgrain LLP                                              FOR THE RESPONDENT

Calgary, Alberta                                                   (Alliance Pipeline Ltd)

Morris Rosenberg                                                 FOR THE RESPONDENT

Deputy Attorney General of Canada                   (Minister of Natural Resources)