Bateman v Alberta (Surface Rights Board): Court Rules Alberta Landowners Must Be Paid Surface Lease Arrears
posted in: Surface Rights
Alberta is where agriculture intersects with the energy sector. As a result, farmers face the challenge of managing leases with oil companies and ensuring they are paid under those leases. In recent years, Alberta’s farmers have increasingly struggled with securing timely lease payments, a situation exacerbated by the resource roller coaster and insolvencies in the energy sector.
Against this backdrop, the Court has issued the decision of Bateman v Alberta (Surface Rights Board), which affirms the rights of unpaid landowners who bring Section 36 applications (named for Section 36 of the Surface Rights Act). These applications allow landowners to collect on the surface lease rental arrears owed to them by oil and gas companies, whether they are currently operating or not. Since 2020, the approach of the Land and Property Rights Tribunal (LPRT) to Section 36 Applications has been inconsistent, leading to landowners receiving less than the full compensation due to them per the lease agreement.
In Bateman, the landowner had originally applied to recover unpaid rent due on a surface lease for the years 2015 and 2016 totaling $13,500. While there was infrastructure on the surface lease, the landowner partially farmed through the site. The LPRT reduced the rent owing to the Landowner by 50%, awarding $6,750 to the landowner. The landowner sought a reconsideration of the decision by the LPRT, which was also denied. As a result, the landowner applied to the Court of King’s Bench for judicial review of the LPRT decision.
The Decision’s Effect on Section 36 Applications
Since the downturn in 2020, the LPRT’s interpretation and application of Section 36 in the context of unpaid lease payments have been fraught with inconsistencies and subjective judgments. This has led to landowners receiving less than the full compensation due per the lease agreement.
A prominent issue in Bateman was determining whether the LPRT can arbitrarily reduce annual rent owing to a landowner who has brought a Section 36 application. Even when a lease site is being partially farmed over, Justice Carruthers held that contractually agreed compensation should be based on the entire leased area:
… as long as the operator or the Orphan Well Association has the right to enter the lease site when they wish, any crops the owner may have planted on the lease site are potentially at risk. Therefore, cultivation of the lease site is not a factor when setting compensation under section 27 of the Act, as there is no guarantee the landowner will get to harvest the crop. It is therefore unreasonable to then use the existence of a crop on the lease site as the basis to reduce the amount payable under section 36.
Justice Carruthers went on to limit the authority of the LPRT to refuse full payment of rental arrears in the context of a Section 36 application to limited situations:
The case law supports the discretion to direct partial payment by the Minister in circumstances that would give rise to an absurdity, an unjustified payment, or an unjust enrichment. Refusal to allow access for reclamation or excessive delay in seeking compensation are two examples of situations that warrant a reduction in compensation.
The Court’s decision in Bateman to overturn the Board’s halving of Mr. Bateman’s rent reinforces a landowner’s right to full payment of lease arrears. That right can only be interrupted if the payment would give rise to an absurdity, an unjustified payment, or an unjust enrichment.
What the Bateman Decision Means for Alberta’s Farmers
For Alberta’s farmers, the Bateman decision could mean a more predictable and fair process when seeking the surface lease arrears owed to them. Bateman signals a move towards a more literal and objective interpretation of the Surface Rights Act. This shift is a significant step in ensuring that the rights and livelihoods of landowners are adequately protected in the face of industrial use of their land.
How KMSC Can Help You Collect Your Surface Rent Arrears
If you require assistance in collecting your surface rent arrears, contact the Surface Rights Teams at KMSC Law today. Our Surface Rights Team has significant experience in bringing Section 36 applications before the LPRT and obtaining compensation for farmers, even if the lease site operator is bankrupt or defunct. If you have surface leases on your land, our team can also assist in negotiating increases for your lease rent.
Kristian Toivonen was also an author on this blog.
 Bateman v Alberta (Surface Rights Board), 2023 ABKB 640. https://canlii.ca/t/k146f, retrieved on 2024-01-15