Subsurface Property Rights

Subsurface Property Rights

When we talk about property rights to land, we usually think about the ownership of the surface of the land. At common law, however, ownership of the surface extends to the airspace above and to the subsurface below. Ownership of land even includes the mines and minerals beneath the land with the exception of gold, silver, and any other resource reserved by the Crown. Any interest held by the landowner may be sold. For example, an owner may choose to retain the surface and subsurface, but sell or lease any or all of the minerals.

A Common Law Framework to Resolve Disputes Over Subsurface Resources

To resolve disputes over title to subsurface resources that arose from the early Canadian Pacific Railway (CPR) land grants, the courts developed common law rules for interpreting the wording in each grant. Consider, for example, a farmer who held the land under a grant in which CPR reserved “coal, petroleum and valuable stone”. Who owns the solution gas and the gas cap: the farmer or CPR? The court answered this question in 1953, in a case called Borys v Canadian Pacific Railway, establishing a four-part approach that is still used today:
  • First, disputes were to be decided by the ordinary (rather than scientific or technical) meaning of the words used at the time of the reservation.
  • Based on the ordinary meaning of “petroleum” and “natural gas” in the CPR reservation, the court concluded that petroleum is liquid and natural gas is gaseous.
  • CPR reserved petroleum in its original subsurface condition. The ordinary meaning of “petroleum” referred to all hydrocarbons that existed in solution or in liquid form in the reservoir and so CPR owned the solution gas. However, “petroleum” did not include the gas cap, which existed in gaseous form in the reservoir. The farmer owned the cap gas.
  • Finally, either the farmer or CPR could extract the resource they owned by ordinary methods—subject to whatever the conservation legislation of the time might require—even if it had a negative impact on the other party’s resource

Early grants from the Dominion to the settlers of what is now Alberta included the mines and minerals. But once the nature and value of the resources underlying Alberta’s fields and forests (especially, coal, oil, and gas) became understood, new grants began to except or reserve some or all of the mineral rights. The same became true for grants of land made by the Hudson’s Bay Company and the Railway companies, who had acquired extensive land holdings from the government. For example, between 1904 and 1912, the Canadian Pacific Railway (CPR) reserved “coal” or “coal and petroleum” or “coal, petroleum and other valuable stone”, before finally reserving all mines and minerals in the transfer of its lands. The unique distribution of mines and minerals rights in Alberta today, reflects these early grants and reservations. Today, the provincial government owns the vast majority (approximately 81 percent) of the mines and minerals in Alberta. Approximately 9% are held by the federal government, mainly in national parks and on Aboriginal lands and military reserves. The remaining 10% of mines and minerals are held under private “freehold” ownership.

Legislation and Subsurface Resources

The provincial legislature has enacted multiple statutes clarifying the rights of ownership and access to subsurface resources. Some examples are:

  • Law of Property Act. Part 7 of the Law of Property Act contains important clarifications to mineral titles. It contains a list of substances deemed, where naturally occurring, to be minerals. It also provides that sand, gravel, clay and marl that may be recovered by surface operations are the property of the surface owner, even if mines, minerals, or precious stone have been reserved from the grant generally.
  • Mines and Minerals Act. The Mines and Minerals Act deals with the management and disposition of rights in mines and minerals owned by the provincial Crown, including petroleum and natural gas leases and royalties. The Act also contains important clarifications of subsurface and freehold mineral rights, including ownership of gold and silver, and recent definitions of coalbed methane and pore space (discussed later in this guide).
  • Surface Rights Act. At common law, the holder of the rights to mines and minerals has a right to access the surface in order to work those interests. This rule has been changed by Alberta legislation many years ago. Now, the Surface Rights Act requires an “operator” (a resource company) to obtain the surface owner’s consent prior to entering the surface. If consent cannot be negotiated, then to avoid the risk of sterilization, the resource company can apply to the Surface Rights Board for a right of entry order, and the Board will determine the compensation payable to the surface owner.

The distribution of subsurface resources in Alberta required the courts to develop a common law framework for resolving disputes over the ownership of mines and minerals. Many such disputes are still resolved by the courts this way, case by case. In addition, the legislature has played an important role in defining and clarifying mineral rights and regulating access to the surface by subsurface resource owners. The property rights of Alberta landowners above and below the surface are defined and redefined by legislation and the rulings of the courts as these continue to evolve.