Date: 19971119

Docket: A-584-94

CORAM:      DESJARDINS J.A.

         LÉTOURNEAU J.A.

         CHEVALIER D.J.

BETWEEN:

     ALBERTA ENERGY COMPANY LTD.,

     Appellant,

AND:

     HER MAJESTY THE QUEEN

     Respondent.

Heard at Toronto, Ontario, Wednesday, November 19, 1997

Judgment delivered from the Bench at Toronto, Ontario, Wednesday, November 19, 1997

REASONS FOR JUDGMENT OF THE COURT BY:      LÉTOURNEAU, J.A.

Date: 19971119

Docket: A-584-94

CORAM:      DESJARDINS J.A.

         LÉTOURNEAU J.A.

         CHEVALIER D.J.

BETWEEN:

     ALBERTA ENERGY COMPANY LTD.,

     Appellant,

AND:

     HER MAJESTY THE QUEEN

     Respondent.

     REASONS FOR JUDGMENT

     (Delivered from the Bench at Toronto, Ontario,

     Wednesday, November 19, 1997)

LÉTOURNEAU, J.A.:

[1]      We are in substantial agreement with the reasons and conclusions of the learned Tax Court Judge, except as regards his finding that the Minister could not be compelled to issue rights of the type contemplated in clause 8 of the Farmout agreement which bound the parties.

[2]      It is clear to us from the exchange of correspondence between the Appellant and the Alberta Energy and National Resources Department that the Appellant thought that, by virtue of clause 8 of the said agreement between the two parties, it had the right to acquire oil sands rights if oil sands were encountered in the normal course of developing rights under petroleum and natural gas leases.

[3]      The relevant portion of that letter reads:

Under the terms of the AEC/ENR Letter Agreement, AEC has the right to acquire oil sands rights if oil sands are encountered in the normal course of P & NG development1.

[4]      It is also clear from that correspondence that the Alberta Energy and Natural Resources Department felt that it was bound under the agreement to authorize the acquisition, exploration and development of the oil sands rights. In a letter of July 16, 1980 sent by the Department in response to the Appellant who had asserted its rights to acquire oil sands rights, the Assistant Deputy Minister of the Department stated:

As I read clause 8 of the Letter Agreement, either party may initiate the process of oil sands agreement issuance at any time after AEC encounters crude bitumen. Where AEC applies, the Minister is obliged to respond (though under no time constraint) by written notice with terms and conditions. Alternatively, the Minister may provide the written notice without having first received an initiating application from AEC.

[5]      Finally, the preamble of the Farmout agreement also confirms that the parties to the agreement understood that the Appellant was entitled to acquire the bitumen encountered in the Fisher Creek area covered by the agreement:

WHEREAS pursuant to the Acquisition Agreement, if in the course of developing rights under the petroleum and natural gas leases AEC encounters Crude Bitumen, AEC will be accorded the right in the Air Weapons Range to acquire, explore for, and develop Crude Bitumen under such terms and conditions as Alberta may decide.

[6]      Contrary to what the Appellant contended, what was given to it under the agreement was more than a mere expectancy of acquiring property and also more than a right to negotiate.

[7]      For these reasons, the appeal should be dismissed with costs.

     "Gilles Létourneau"

                                                J.A.

              FEDERAL COURT OF CANADA

     Names of Counsel and Solicitors of Record

DOCKET:                      A-584-95

STYLE OF CAUSE:             ALBERTA ENERGY COMPANY LTD.,

                        - and -

HER MAJESTY THE QUEEN

           

DATE OF HEARING:             NOVEMBER 19, 1997

PLACE OF HEARING:             TORONTO, ONTARIO

REASONS FOR JUDGMENT BY:      LÉTOURNEAU, J.A.

Delivered from the Bench at Toronto, Ontario

on Wednesday, November 19, 1997

APPEARANCES:                  Mr. Kornelis Klevering

                             For the Appellant

                        Ms. Anne-Marie Waters

                             For the Respondent

           

SOLICITORS OF RECORD:          Kornelis Klevering

                        5 MacDonald Street

                        Guelph, Ontario

                        N1H 2Z2

                    

                             For the Appellant

                        George Thomson

                        Deputy Attorney General

                        of Canada

        

                             For the Respondent     

---

FEDERAL COURT OF APPEAL

Date: 19971119

Docket: A-584-94

BETWEEN:

ALBERTA ENERGY COMPANY LTD.

Appellant

-and-

HER MAJESTY THE QUEEN

Respondent

REASONS FOR JUDGMENT

__________________

¹      Letter of July 3, 1980 from the Appellant to the Assistant Deputy Minister of the Department of Energy and Natural Resources.