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Class action filed against oil company that said it could not make payments due to COVID-19

Tuesday, December 15, 2020 @ 9:21 AM | By Ian Burns

A pair of Alberta landowners have launched a class action against an energy company which was leasing their land and said it could no longer pay due to the pressures of the COVID-19 pandemic.

The proposed representative plaintiffs in the class, Reinhold and Thyra Kautz, have a surface lease agreement with AlphaBow Energy Ltd. which compensates them for the company’s access to and use of their land. But in a statement of claim filed Nov. 4, the Kautzes say AlphaBow informed them in May it was suspending all surface rental payments due to the severe impact of the pandemic on the oil and gas sector “for the time being” and that it would review all outstanding obligations in six months. The claim says AlphaBow has “refused and/or neglected” the Kautzes’ demands for payment.

Mathew Farrell of Calgary’s Guardian Law Group, who represents the Kautzes, said “a deal’s a deal.” He said also said he believes this is the first class action filed against an energy company in Canada over unpaid leases.

“What we are trying to say is pay up — you owe these people money and you have an obligation to pay it, and since you are not paying it voluntarily we are asking a court to make you pay,” he said. “All we are asking them to do is keep their promises.”

According to Farrell, the Kautzes are owed about $7,500 — but they are not alone. The class has been filled on behalf of all Alberta residents who have not received payment on their surface leases from AlphaBow.

“We think there is about $16.5 million worth of claims out there, and we are estimating the class size in the neighbourhood of 2,000 individuals harmed,” he said. “It looks like a big issue — we have been contacted by a number of individuals that have been treated similarly by AlphaBow, as well as people who have been treated in a similar fashion by other companies.”

Fenner Stewart, University of Calgary associate professor

Fenner Stewart, an associate professor at the University of Calgary, said COVID-19 has created unprecedented issues of compliance with the law, leading to concessions such as relief for residential and commercial rents.

“Sometimes these concessions have merit and sometimes they don’t, but when an actor says COVID-19 creates a justification for accommodation on its contractual obligations it is difficult to know what the ‘right’ thing to do is,” he said. “When you start to pick away at stuff like this it is hard to come up with legal answers anymore, because politics has stepped in to circumvent what the operation of the law would be.”

But Stewart said farmers who have leased their land to oil companies are also in need of accommodation, saying a dispute like the Kautzes have with AlphaBow might be better dealt with a body like the provincial Surface Rights Board, which has been set up to help landowners and companies resolve conflicts about surface access.

“The board has an administrative law tribunal function which allows for more politically mediated outcomes, whereas it is a more aggressive tactic to do a class action,” he said.

Farrell said going to the board was an option but in order to do that each affected individual would have to bring a specific case.

“Our client wants to make sure that AlphaBow is held responsible and believes that a class action is a better method of achieving that aim,” he said.

AlphaBow did not respond to a request for comment. The class has not yet been certified.

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