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One of the first things which the Freehold Owners Association did upon formation in 1999 was to research the Alberta Limitations Act (the “Act”) which came into effect on March 1, 1999.

In April of 1999, the Freehold Owners Association (“FHOA”) wrote to then Justice Minister Jon Havelock, Q.C., expressing our concern with the impact of the Act’s 10-year ultimate bar on the property rights of the estimated 50,000 individuals who then owned freehold mineral rights in Alberta. The Act introduced an ‘ultimate period’ which effectively barred legal actions based on causes of action which arose more than 10 years prior to the legal action being filed, irrespective of when the claimant discovered the cause of action. FHOA was particularly concerned because most freeholders do not understand complex oil and gas industry operations and rely on their oil and gas industry lessees in respect of matters such as royalty payments. We asserted that the Act actually provided an incentive for unscrupulous energy company-lessees to breach their obligations to their freehold owner-lessors in complex situations where the lessors would be unlikely to discover the breach within the 10-year period (see “Correspondence”, “FHOA – AB Justice Apr 1999”).

We also pointed out that the 1989 Report of the Alberta Law Reform Institute upon which the Limitation Act was based had clearly stated that “a 10-year period is too short and would operate unfairly against claimants” (Alberta Law Reform Institute Report # 55, p. 35 http://www.law.ualberta.ca/alri/docs/fr055.pdf).

On June 2, 1999, then Justice Minister Dave Hancock, Q.C. responded to our letter of concern (see “Correspondence”, “AB Justice – FHOA June 1999”). In the third last paragraph of the Minister’s letter he stated:

… unlike prior law, in situations where there is a continuing breach of a duty by a defendant over the course of time, the new Act, by virtue of section 3(3)(a), only starts the 10 year period when the breaches terminate.”

In 2004, a legal action in which there had been a continuing breach of duty to pay royalties by a defendant over a period of time greater than 10 years came before the Alberta Courts. In Meek Estate v. San Juan Resources Inc., Mr. Justice LoVecchio of the Court of Queen’s Bench interpreted section 3(3)(a) of the Limitations Act in the manner in which Justice Minister Hancock asserted the Limitation Act was intended to be interpreted and required the defendant energy company to account for all past unpaid royalties (Meek Estate v. San Juan Resources Inc, [2005] A.J. No. 13). However Justice LoVecchio’s ruling was appealed, and Madam Justice Hunt for the unanimous Court of Appeal of Alberta assessed the purposes behind the Act and came to the conclusion that each non-payment of royalties gave rise to a separate claim thereby limiting the Meek Estate’s claim to 10 years prior to the commencement of their action (Meek (Trustee of) v. San Juan Resources Inc., Alta. Q.B. [2005] par. 35 – 49.). 
In his June 1999 letter, Minister Hancock had also expressed his confidence that members of the Assembly would be willing to re-address this issue should the balance of interests of all prospective parties to an action tip one way or another. Madam Justice Hunt’s ruling flew directly in the face of Justice Minister Hancock’s advice to us with respect to the effect and purpose of section 3(3)(a) of the Act and clearly tipped the balance of interests against potential freehold owners who had been deprived of their rightful share of royalties.

Upon becoming aware of situations in which industry operators who had have failed to pay proper royalties to freehold owners were hiding behind the Appeal Court decision in Meek Estate to minimize their obligations, FHOA wrote to then Justice Minister Ron Stevens (see "Correspondence”, “FHOA – AB Justice Aug 2007”) with copies to Minister Hancock (see "Correspondence”, “FHOA – Hancock Aug 2007”) and Premier Stelmach. We included a copy of the June, 1999 letter from Minister Hancock and asked Justice Minister Stevens if, in light of the apparent error by the Court of Appeal in interpreting the purposes behind the Act, whether the Alberta Government would bring forward legislation to amend the Act to restore some semblance of balance between the rights of individuals who own freehold mineral rights and the energy companies who lease these rights.

By letter dated September 18, 2007, Minister Stevens advised that Alberta Justice would review the Appeal Court decision in Meek Estate including its potential impact (see “Correspondence”, “AB Justice – FHOA Sept 2007”). FHOA then wrote to the Minister thanking him for his advice and asking when we might expect to be made aware of the results of the promised review Stevens (see "Correspondence”, “FHOA – AB Justice Oct 2007”). The Minister advised by letter dated November 5, 2007 that the review would be used to assist the Government in determining the issues including possible legislative amendments but did not provide any information as to when the results of the review might be made available (see “Correspondence”, “AB Justice – FHOA Nov 2007”).

Minister Stevens was appointed as a Court of Queen’s Bench judge in 2008 and was replaced as Minister of Justice by now Premier Alison Redford. FHOA’s e-mails to Minister Redford’s office seeking advice on the results of the review promised by former Justice Minister Stevens went unanswered. In 2009, the current Justice Minister, Jonathon Denis Q.C., was appointed as Parliamentary Assistant to the Energy Minister. FHOA met with Mr. Denis as part of the association’s ongoing attempts to make Alberta Energy aware of the problems faced by individual freehold owners in Alberta and seek the Department’s support in resolving these problems. We raised the issue of the results of the review promised by former Justice Minister Stevens with Mr. Denis (see “Correspondence”, “FHOA – Denis Nov 2009”, Slides 35-39). Mr. Denis appeared familiar with the issue and verbally advised that there was no likelihood that any changes to the Act to address FHOA’s concerns would be forthcoming.

A freehold mineral lease is a profit `a prendre and according to the Report of the Alberta Law Reform Institute upon which the Act was based:

compliance with a duty based on an easement, a profit a prendre, a utility interest, or a restrictive covenant attached to and running with land – the ultimate period would not apply because the rights described are continuous such that breach of the duty to comply would give the complainant a continuous succession of claims;” (Alberta Law Reform Institute Report # 55, p. 40 http://www.law.ualberta.ca/alri/docs/fr055.pdf).

On September 5, 2012, Premier Redford stated as follows at a press conference in Calgary:

We are bringing forward today a robust policy that will bring greater transparency … it is the only way people will have confidence in democratic institutions ...

At the very least, Ms. Redford’s government should have made public the results of Alberta Justice’s review of the Appeal Court decision in Meek Estate including its potential impact on freeholders as presumably conducted on Ms. Redford’s watch as Justice Minister and promised by Minister Stevens.

In March of 2014, Ms. Redford resigned as Premier of Alberta and Dave Hancock was chosen as interim Premier.  In June of 2014, FHOA wrote to Premier Hancock quoting from his 1999 letter to us and expressing our concern with the fact that the Appeal Court’s ruling in Meek Estate directly contradicted his advice to us with respect to continuing breach (see “Correspondence”, “FHOA – Premier Hancock June 2014”).   In July of 2014, Premier Hancock responded (see  “Correspondence”, “Premier Hancock – FHOA July 2014”).  In his letter, Premier Hancock made no reference whatsoever to his advice to us in 1999 and advised that any amendment to the 10-year ultimate period “would require the support of prospective defendants” (read the oil and gas industry).  

In early September, 2014, Premier Hancock announced that he was resigning his seat in the Legislature after 17 years of service.  His July 16, 2014 letter to FHOA can only be construed as an aberration in an otherwise honourable career.

 

Freehold Petroleum & Natural Gas Owners Association

"Freehold Owners Association"

208, 1235 17th Ave SW, Calgary, AB T2T 0C2 Telephone: 403-245-4438