June 7, 2014

Pipeline Arbitration: What kinds of compensation may a landowner claim?


When a landowner must give up land for a pipeline right-of-way under the National Energy Board Act (RSC 1985, c.N-7), the landowner may, broadly speaking, claim two kinds of compensation: compensation for the land rights taken, and damages for losses the landowner has or likely will suffer from the pipeline company’s operations. (NEBA s.97) But both kinds of claim may involve complications.

Compensation for land rights involves proof of the value of the land taken for the pipeline right-of-way.  Such proof, which both the pipeline company and the landowner may procure, typically depends on assessments by professional valuators. A landowner should not assume, however, that an assessment by a pipeline company represents the full value of the right-of-way it takes. For example, if a pipeline company’s assessment measures the price of a right-of-way based on the value of the landowner’s total property, the assessment may be substantially impacted by many factors, such as the size, location and nature of the “comparable” properties the company’s assessor has selected, and how the assessor has adjusted – or failed to adjust – for differences between the comparable properties and the landowner’s property. Landowners should strongly consider investing in their own valuations.

Damages cover all other losses a landowner may suffer. In theory, landowners are entitled to compensation for all the losses they suffer as a result of the operations of the pipeline company. (NEBA s. 86(2)(c); 98(3) and 97(1)(I)] Compensable losses may include business losses. But mere assertions of loss are not enough. Landowners must be able to prove their losses. For example, assertions of business losses likely require proof of current and historic financial performance. A pipeline company may also dispute that a loss occurred at all, or that an expense was a reasonable result of the pipeline company’s operations.

Bottom line: Landowners should not assume they will recover their losses without being both ready, and demonstrably ready, to prove every aspect of their losses.