The B.C. government is trampling on landowners' rights with a law aimed at promoting coalbed methane development in the province, some property owners and an environmental law group say.
But the Energy and Mines ministry, along with a spokesman for Canada's fledgling coalbed methane (CBM) industry, defend the legislation and say it simply clarifies the rules for CBM development.
At the heart of the dispute is the issue of so-called freehold rights to coal versus coalbed methane gas beneath private property.
The issue is contentious in B.C. and, because it is still unresolved in Alberta, threatens to impede or stall development of CBM in both provinces.
"It's not an insignificant problem. But it's not going to stop development," says Mike Gatens, chair of the Canadian Society for Unconventional Gas, which represents the country's CBM industry.
"I think in British Columbia what (the government) has done is brought clarity. But there are a few unhappy parties.”
Among them are Brad and June Hope, who run a 500-acre ranch near Princeton, B.C.
The Hopes acquired ownership or the freehold right, through a 1903 title to their land, to the coal beneath their property.
In granting the title at the time, the province reserved the right to the minerals below the surface, but not to the natural gas.
Brad Hope says the couple didn't give a thought to the coalbed methane gas trapped within the coal seams until they discovered that the provincial government had sold the CBM rights to a consortium of oil and gas companies.
The couple, backed by a legal opinion from the West Coast Environmental Law (WCEL) group, says the government then brought in a new law that retroactively deprived the Hopes and up to 600 other "freeholders" who own the coal on their property of the ownership of the coalbed methane entrapped within that coal.
B.C.'s Coalbed Gas Act, enacted in 2003, states that natural gas is and always has been a mineral, and therefore the natural gas owner - in most cases the province which owns the subsurface mineral rights - owns the CBM rights and can auction them off.
"Essentially what (the government) has done by passing the Coalbed Gas Act is to declare that those coalbed methane rights belong to the government. They've declared it retroactively," says Susan Rutherford, a lawyer at WCEL.
The law also stipulates that landowners who own the coal rights aren't owed any compensation because they never owned the CBM rights in the first place, nor can they legally challenge the legislation.
The government "actually auctioned off the (gas) rights to our property in 2002, before the legislation came out in 2003," Hope said.
"They then came out with the legislation saying: 'Oh, by the way, we own the gas rights.' " But Tamara Little, a spokesperson for B.C. Energy and Mines, says all the Coalbed Gas Act did was affirm the government's long-standing position that gas found within coal seams is natural gas, and is therefore owned by the owner of natural gas - the provincial Crown.
"It didn't change anything in terms of the landowners' rights. It brought some clarification in terms of exactly what the rules were (for CBM development)," Little says.
Industry spokesman Gatens, who's also chairman and CEO of MGV Energy Ltd., a Calgary-based CBM developer, says the B.C. government extensively publicized the 2003 law prior to enacting it.
"You can argue about how well that was made clear to people and how well people pay attention to the paperwork they got," he says. "But it was very public . . . you've got to pay attention.”
B.C. Energy and Mines held information meetings in the spring of 2003 in Vancouver and Calgary to inform people that the law was coming, according to an e-mail that a senior Energy and Mines official sent to Brad and June Hope in August this year.
Notice of the meetings was sent to landowners who held more than 1,500 hectares of freehold coal, said the e-mail from Barbara Thomson, the ministry's manager of corporate policy, planning and legislation.
But the Hopes, whom Thomson estimates are among 500 to 600 landowners with freehold coal rights in B.C., hold less than 1,500 hectares of coal rights.
Brad Hope says the couple never received any notification either that the law was coming or that the CBM rights beneath their property had been sold in November, 2002 - almost half a year before the government brought in the new legislation in April, 2003.
"There's no compensation, no acknowledgement (by the government) that they've even taken anything away," says WCEL lawyer Rutherford.
Gatens, however, argues that prior to enacting the law, the B.C. government also gave everyone who owned freehold coal the opportunity to bid on the coalbed methane rights beneath their property.
"The private landowners are the same as the big coal companies. They had the same opportunity," Gatens says.
But Rutherford says that was certainly not the case with the Hopes, where the CBM rights were sold without their knowledge nearly six months before the new law came in.
To add insult to injury, she adds, the government then gave big coal-owning companies in the province the exclusive right to apply for the CBM rights associated with their coal properties.
The government signed exclusivity agreements in May this year with four companies that together hold about 70 per cent of the total freehold coal rights in the province. Each company holds between 11,000 and 25,000 hectares.
The firms are Weldwood of Canada Ltd., Quinsam Coal Ltd., Elk Valley Coal Partnership and Tembec Industries Inc.
B.C. Energy and Mines manager Thomson, in her e-mail to the Hopes in August, said the four companies were given the exclusive right in May to apply to develop petroleum and natural gas within their coal lands for a five-year period, ending Dec. 31, 2008.
The ministry granted exclusivity to the big coal owners because CBM requires large contiguous blocks of land to be successfully developed, Thomson wrote. "A policy decision was made to improve the potential for success of the industry by providing these coal owners with an incentive to have the industry on their lands.”
But Rutherford of the WCEL notes that the government didn't offer small landowners the first right to bid on the CBM entrapped within the coal deposits they own.
Had landowners been given a similar deal on exclusivity, "some small landowners would no doubt buy the rights and stop coalbed methane development," Rutherford says.
However, Thomson says in her e-mail to the Hopes in August that Energy and Mines' petroleum land branch had only begun a project to notify landowners whenever the government planned to auction the subsurface rights to their property. The branch hoped to have the notification program up and running "sometime in 2005," Thomson wrote.
Given the 2003 law, the Hopes say they've had no choice but to allow the oil and gas company that knocked on their door in 2002 to do seismic exploration for CBM on their ranch, which is mostly rolling hills of grasslands. Drilling has started a few kilometres away, Brad Hope says. "We not only feel like we've been had, but now we also have to live with the negative impacts of drilling right on our property.”
"Coalbed methane is not a pretty industry," Hope adds. "But this government seems hell-bent on forcing it down our throats.”
(Mark Lowey can be reached at mark@businessedge.ca)
