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Split Title Ownership

When the terms of the CPR Charter were announced to parliament in 1880, the leader of the opposition, Sir Wilfred Laurier, asked: “What great calamity has befallen this country that the Government should be compelled to surrender unconditionally to the (CPR) Syndicate”.1 But in 1880, Sir Wilfred Laurier had no comprehension of the true magnitude of this surrender - the 25 million acre land grant provided to the Canadian Pacific Railway Company included all mines and minerals (including subsurface coal, petroleum and natural gas).

One might think that a railway company which was dependent on locomotives fuelled by coal would have considerable interest in subsurface coal rights. Initially, the CPR had no such interest and saw its land grant solely in the context of its railway operations - by selling farm-sized portions of its grant to settlers and encouraging homesteading on the Canadian prairies, the CPR could create traffic on its rail line. CPR land sales started in 18812 and, for almost a quarter of a century, homestead lands were sold to settlers in the same form as the lands had been acquired from the Dominion Government. As a result, settlers acquiring homesteads from the CPR during this period also acquired the rights to all coal, petroleum and natural gas beneath their lands. It was not until approximately 1902 that the CPR began to reserve coal rights for its own account in land sales to settlers. Although oil had been commercially exploited in North American since 1859, it wasn’t until 1906 that the CPR added petroleum to the minerals it was reserving for its own account in land sales to settlers. Finally, in 1912, the railway company began to reserve all mines and minerals and, from that time forward, settlers acquiring homestead lands from the CPR received only surface rights.

The land settlement policies of the Canadian Pacific Railway Company gave rise to two basic types of split title mineral rights:

1. mineral rights in which the current title to coal is held by the successor corporations to the CPR (EnCana Corporation and the Carbon Development Partnership or CDP) and the title to all mines and minerals except coal (including petroleum and natural gas) is held by the successors or assigns of the pioneer settlers; and
2. mineral rights in which the current title to coal and petroleum is held by EnCana and the title to all mines and minerals except coal and petroleum (including natural gas) is held by the successors or assigns of the pioneer settlers (in some cases valuable stone was also reserved by the CPR and is now included in EnCana’s title).

The CPR’s successors have acknowledged that the railway company had little interest in natural gas in the early 1900’s3. According to the Court of Appeal of Alberta, at the time the CPR mistakenly viewed natural gas as a “worthless and noxious substance4.

The CPR's retention of petroleum and its failure to retain natural gas in land sales to settlers during the 1906 - 1912 period, gave rise to the first ‘split title issue’ (see “The Petroleum/Natural Gas Ownership Dispute”). The railway company and its successor corporations have spent the past century attempting to reclaim the natural gas which was mistakenly sold to the pioneer settlers. Their remarkable success raises serious issues concerning the behaviour of certain energy companies and whether government officials and those who are entrusted with enforcing Canadian laws are more interested in covering up the stench of industry misdeeds than fulfilling their obligations.

The CPR’s reservation of coal in land sales which granted settlers the rights to the surface and subsurface minerals, including natural gas, gave rise to the second split title issue – the ownership of natural gas in coal or coal bed methane (CBM) beneath split title lands (see “The CBM Ownership Dispute”). It wasn’t until the early 2000’s, when CBM became an object of commerce in western Canada, that the railway company’s successors advanced their claims to the natural gas in coal. Whereas the petroleum/natural gas ownership dispute played out primarily during a period when individual freehold owners had no organization to represent their interests, FHOA fought a successful battle over a number of years to defeat the claims of EnCana and CDP to CBM.

Because the split title issues encapsulate the difficulties that confront individual owners of freehold mineral rights in Canada and abundantly demonstrate the need for a strong organization to protect the rights of individual freeholders, these matters have been set forth in considerable detail.

 

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End Notes:

1. Canada 1874 – 1896: Arduous Destiny, Waite, P.B, Toronto, McLennan and Stuart, 1988, p. 111
2. Land and Settlement Policies in the Prairie West, in The CPR West, Dempsey H.A., 1984, Douglas & McIntyre, Toronto, p. 174
3. Railways to Resources, The Evolution of PanCanadian Petroleum, Copyright © 1996 by PanCanadian Petroleum Limited, Calgary, Alberta, p. 10
4. Alberta Energy Co. v. Goodwell Petroleum Corp. Ltd. [2003] A.J. No. 1207, Par 34

Freehold Petroleum & Natural Gas Owners Association

"Freehold Owners Association"

1403 12th Street S.W., Calgary, AB, T3C 1B3 Telephone: 403-245-4438