August 27, 2014

Pipeline Arbitration: Injurious Affection – Is there impact on the value of the remaining property surrounding the pipeline?


With several inter-provincial pipeline projects proposed in British Columbia and in Canada, landowners may soon be seeking compensation for pipeline rights-of-way through their properties. Landowners have a right to compensation for the adverse effect on remaining lands following a partial taking for a pipeline. This concept is commonly referred to as the loss of value to the remainder, or injurious affection.

Injurious affection stems from the permanent loss of use, utility or enjoyment of the remainder of the property, due to the taking and the intended use of that taking.

For federally regulated pipelines, compensation for injurious affection is statutorily available under subsection 97(d) of the National Energy Board Act, RSC 1985, c N-7,which provides that in assessing compensation for a taking, a pipeline Arbitration Committee shall consider, “the adverse effect of the taking of the lands by the company on the remaining lands of an owner.”

Despite the statutory availability of compensation for injurious affection, pipeline companies will be quick to say that pipelines do not have a measurably negative influence on property values. The pipeline companies will argue that a corridor taking, such as a highway or telecommunication line can have an effect on a remainder, but because pipelines are buried, there is no impact to the value of the remainder of the property. There is, however, no basis for this assertion.

How can a pipeline impact the remaining lands?

A pipeline right of way can have several significant impacts on the use, utility and enjoyment of the remainder of a property.

Loss of privacy

To illustrate by example, if a pipeline company cleared ground cover that included mature trees for the purposes of installing a pipeline, and as a result, the property loses natural screening and privacy, it is reasonable to conclude that this would impact the value of the remainder. The area of taking will in all likelihood remain cleared for future maintenance and for the protection of the underlying pipeline. As a result, the property owner is left with permanent a bald patch of land where there was once natural tree screening.

The right to compensation for the loss of privacy due to removal of trees has been recognized by the courts: Konno v Harrison-Jones, 2010 BCSC 1034, Campbell v Anderson, [1991] OJ No 1191 (GD), Kates v Hall (1991), 53 BCLR (2d) 322 (BCCA).

Trespass and nuisance

In another example, a pipeline company obtains a right of way very close to a residential property’s improvements. As a result of the taking, the company’s contractors are a regular presence on the right of way for the purposes of maintaining the pipeline, and the property owners experience an increase in littering, motorized nuisance, and trespass outside the pipeline right of way. This can result in a substantial negative impact to the use and enjoyment of the remainder of the property, and is compensable.

Which property would you choose?

Ultimately, loss of privacy, amenities, and increased trespass all are potential impacts to the remainder of a residential property following a taking for a pipeline right of way. What’s more, pipelines, and the diluted bitumen product they transport, carry a significant, and arguably increasing, stigma respecting the safety of their operations and the safety of the product shipped. Bearing that in mind, it may be helpful to consider the following example of the impact to the value of the remainder of a residential property following a taking: Properties A and B are identical in every respect, however, Property A has a diluted bitumen pipeline right of way. All other things being equal, would you pay the same amount for Property A that you would pay for Property B?