Altius Minerals : Decision of the Master - Alberta Queen's Bench

Court of Queen's Bench of Alberta

Citation: Altius Royalty Corporation v Alberta, 2021 ABQB 3

	Date:
	Docket: 1801 16746
	Registry: Calgary
Between:	FILED
Altius Royalty Corporation,	Jan 04, 2021
Genesee Royalty Limited Partnership	by Email
and Genesee Royalty GP Inc.
	Plaintiffs
- and -

Her Majesty the Queen in Right of Alberta

and Attorney General of Canada

Defendants

_______________________________________________________

Memorandum of Decision

of

J.R. Farrington, Master in Chambers

_______________________________________________________

The Applications

1. These are applications by Canada and Alberta to either strike or summarily dismiss the action pursuant to either Rule 3.68 or Rules 7.3 of the Alberta Rules of Court. The plaintiffs Altius Royalty Corporation, Genesee Royalty Limited Partnership and Genesee Royalty GP Inc. oppose the applications. They also made a cross application to allow amendments to their statement of claim. While that application would normally be heard first, given the nature of the amendments sought, the time available for argument, and the fact that one of the reasons for opposition to the amendments was the oft cited "hopeless" argument, I decided that it would be best to hear the submissions on the striking and dismissal applications first in order to avoid as much overlap as possible. During the course of hearing the amendment application, I concluded

Page: 2

without hearing final reply submissions for the plaintiff that the amendments were appropriate and I allowed all of them. I did not rule on costs of the amendment application. It withdrew two causes of action and clarified others so there is some substance to the costs debate. Costs of the amendment application may be finalized at the same time as costs of these applications.

The Facts

1. The plaintiffs allege that actions of Canada and Alberta amounted to a constructive expropriation or "taking" of its royalty interest in a coal mining facility situated next to the Genesee Power Plant in the Edmonton region.
2. In 2012, the federal government of the time adopted the Reduction of Carbon Dioxide Emissions from Coal-FiredGeneration of Electricity Regulations, SOR/2012-167. Section 3(1) of the regulation provided:

3 (1) A responsible person for a new unit or an old unit must not, on average, emit with an intensity of more than 420 tonnes CO2 emissions from the combustion of fossil fuels in the unit for each GWh of electricity produced by the unit during a calendar year.

1. The Genesee Power Plant generating units were neither "new units" or "old units" within the meaning of the regulation, meaning they were not bound by the new standard.
2. In 2014, by way of a corporate arrangement, the plaintiffs were involved in a series of transactions with other entities which also included the coal royalty which forms the basis for this dispute. The plaintiffs, and more specifically Genesee Royalty Limited Partnership, hold a 9% royalty in the coal used from the mine by the plant. The other plaintiffs hold interests in the royalty holding entity.
3. The mine supplies all of its geothermal coal to the plant alone. It does not supply geothermal coal to anyone else. There is a dedication agreement to that effect.
4. The briefs describe the mine as a joint venture between Capital Power LP and Prairie Mines Royalty ULC. Prairie Mines is a subsidiary of Westmoreland Mining Holdings LLC of Colorado, USA. The plaintiffs hold their royalty through Genesee Royalty Limited Partnership. The briefs are not entirely clear on the point, but during argument I was advised that the plant was owned and operated by Capital Power LP alone.
5. The plaintiffs collectively paid $460 million for the royalty interest. No doubt there were other ways in which an investor could invest funds in the project, but the method chosen was a royalty interest in the coal. Presumably there were reasons for structuring the investment in that fashion, but they are not in evidence, and I make no further comments on that aspect and I do not speculate.
6. The Genesee Power Plant consists of three different units. They were commissioned in 1989, 1994 and 2005. Under the 2012 regulatory regime they would be deemed to end their useful life in 2039, 2044 and 2055 respectively. An underlying premise of the action advanced on behalf of the plaintiffs is that because the 2012 regulation permitted those plants to operate from an emissions perspective for 50 years from their commissioning dates, a reduction in that ability entitles them to compensation.
7. Concurrently with the complex corporate arrangement, the plaintiffs' effective parent Altius Minerals Corporation released financial disclosure documentation for its investors.

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1. In a prospectus that was concurrent with the transaction it said at page 30:

The Canadian federal government is not committed to legally binding targets for the reduction of greenhouse gas emissions ("GHG"), however, it has voluntarily proposed to reduce Canada's GHG by 17% below 2005 levels by 2020 as part of the Copenhagen Accord. Part of this reduction will be achieved through the implementation of regulations that would require significant reductions of GHG emissions by certain of Canada's largest industrial sectors. The regulations that the federal government has issued for the electricity sector will require, among other things, that new and certain refurbished coal-fired plants, commissioned after July 2015, achieve an annual emissions intensity performance standard of 420 tonnes of CO2 per GWh. The result of the regulations is expected to cause existing power plants to close down as, in the current environment, meeting the new regulations will be challenging.

1. In subsequent financial reporting it stated: Risk Factors and Key Success Factors

An investment in securities of the Corporation involves a significant degree of risk that should be considered prior to making an investment decision. In addition to discussions of key success factors and business issues elsewhere in this MD&A, the investor should consider the following risk factors:

…

Government Regulations

The Corporation's operations are subject to extensive governmental regulation s with respect to such matters as environmental protection, health, safety and labour; mining law reform; restrictions on production or export, price controls and tax increases; aboriginal land claims; and expropriation of property in the jurisdictions in which it operates. Compliance with these and other laws and regulations may require the Corporation to make significant capital outlays which may slow its growth by diverting its financial resources. The enactment of new adverse regulations or regulatory requirements or more stringent enforcement of current regulations or regulatory requirements may increase costs, which could have an adverse effect on the Corporation. The Corporation cannot give assurances that it will be able to adapt to these regulatory developments on a timely or cost-effectivebasis.Violations of these regulations and regulatory requirements could lead to substantial fines, penalties or other sanctions.

(Emphasis added)

1. In 2016, and with the Paris Agreement on climate change newly signed, a new federal government gave notice that it intended to pass further regulations pertaining to coal-fired emissions regulation.
2. The new regulation came into force in 2018 (SOR/2018-263). Most significantly, the new regulatory scheme also affected existing plants such as the Genesee Power Plant and it required that they meet the new emissions standard by December 31, 2029. The regulation and its predecessor are both directed specifically at the coal-fired plants that create the emissions, rather than coal suppliers themselves. The effects upon coal suppliers are collateral.

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1. Based upon the previous regulation, the plaintiffs had counted upon their royalty stream being available to 2039, 2044 and 2055 in relation to three Genesee Power Plant units (or at least they hoped that would be the case).
2. The plaintiffs allege that the new regulation amounts to a constructive expropriation or

"taking" of its royalty interest after 2030 by Canada. They also allege that Alberta engaged in conduct, such as entering into an "off coal agreement" with compensation to Capital Power LP effectively ending the coal fired operation of the Genesee Power Plant after 2030.

1. For the purposes of these applications, the parties agreed that Canada and Alberta would not argue that there are other uses for the coal after 2030. While that was the agreement made, the defendants' arguments drifted into suggesting that there were other uses for the coal after 2030. That created issues during the course of argument. My decision on the applications in the end, however, does not turn on that aspect.

Summary Judgment Law

1. I start by saying that I do not think that it would be appropriate to deal with these applications in a Rule 3.68 striking context. They are very fact driven and hundreds of pages of evidence were introduced and relied upon by all of the parties. The amendment application was found not to be hopeless. If the applications are to succeed, they will need to do so on a summary judgment basis.
2. The applications do not turn on any issues between the parties with respect to the law pertaining to summary judgement. I will not discuss the law in detail here other than to emphasize that the Weir-JonesTechnical Services Incorporated v Purolator Courier Ltd, 2019 ABCA 49 test originating from the culture shift in Hryniak v. Mauldin, 2014 SCC 7 is the applicable test and approach. Summary dispositions are encouraged if appropriate, but only if the record is sufficient to make a fair and just disposition.
3. I would also refer to Hannam v Medicine Hat School District No. 76, 2020 ABCA 343 which is a more recent decision of our Court of Appeal encouraging the use of summary procedures where appropriate.

Is the action premature?

1. One of the points over which there was much argument was whether this action ought to be dismissed on the basis that it is premature. Canada and Alberta argue that no one knows what the state of affairs will be in 2030, or if the law will change once again before then, or what emissions technology will then exist, and therefore they assert that the action is premature. Ironically, Alberta also pleaded in its statement of defence that the action is statute barred by the Limitations Act, RSA 2000, c L-12 so the combination of being both premature, and time- barred, seems unusual, but presumably I can take the pleadings as alternative ones.
2. One of the amendments sought by the plaintiff (and granted by me) included a provision
   that:
   44. The Plaintiffs claim against the Defendants, jointly and severally:
3. 1. a declaration that the Defendants have caused or will cause a constructive taking of Genesee LP's royalty interest in the subject coal, without compensation;