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What are Alberta’s ‘contractual’ obligations to coal companies?

The Government of Alberta says it has an obligation to some coal companies to allow open-pit mining, but these "contractual relationships" aren't quite formal contracts.
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The Vista coal mine near Hinton, Alberta.

The Government of Alberta says it has an obligation to some coal companies to allow open-pit mining despite the practice being banned under the province's new coal policy, but these "contractual relationships" aren't quite formal contracts.

When Energy and Minerals Minister Brian Jean announced details of the province’s coal industry “modernization” initiative on Dec. 20, he defended the government’s decision to exempt certain “advanced” projects from the prohibition on open-pit mining.

“I said no new open-pit mines, so I’m not disingenuous. There are certain contractual relationships we have to continue to honour,” Jean said.

There are currently four coal mining projects the province considers advanced: Northback Holdings’ Grassy Mountain coal project, the Tent Mountain Mine, the Vista Mine, and Maxim Power’s Mine 14 near Grande Cache.

Jean did not expand on the nature of these relationships during the press conference, causing some to question what contracts exist between the province and coal companies that makes enforcement of the open-pit mining ban impracticable.

“It’s about two or three different things, none of which is sort of a formal contract,” a spokesperson for Energy and Minerals explained.

“One of them is that Northback is a freehold owner of mineral lands. There's a contractual obligation between the government and them on the fact that they have rights to the freehold that they hold.”

The second part of the obligation comes from a legal concept called promissory estoppel, “which means that when somebody with the authority makes you a promise, you're allowed to rely on it. And if they break the promise, you're allowed to get compensation.”

This promise, according to the ministry, was made in a Ministerial Order issued in 2022, which paused coal mining and exploration in the eastern slopes area of the Rockies but exempts projects with active approval status or advanced projects, defined as “coal projects where applicants have submitted a project summary to the Alberta Energy Regulator (AER) to determine whether an environmental impact assessment is required.”

“The government has in effect made a promise that they relied on for their applications. And if we were to cancel it, we would owe them pretty significant compensation,” the ministry said.

Furthermore, because Northback and others have already started legal application processes, and “we can’t shift the rules on them in the process. The reason existing coal mines and advanced coal projects were exempted from (Alberta’s new coal policy) was because, in effect, if we were to switch the rules on them mid policy, they would be entitled to sue for compensation.”

Grassy Mountain's advanced status being appealed

The original proposal for the Grassy Mountain project in the Crowsnest Pass region of southwestern Alberta, made by Benga Mining Ltd., was rejected by a joint federal-provincial review panel as not being in the public interest and likely to cause adverse environmental effects.

But in 2023, the Australian company behind the project, now operating as Northback Holdings, returned with new applications for exploratory drilling and water diversion on the same site.

Minister Jean, in a November 2023 letter to the AER, suggested that because the previous Grassy Mountain project had come before regulators, it should be considered advanced, and the applications accepted.

AER’s decision on Nortback’s applications is being challenged by the Municipal District of Ranchland in the Alberta Court of Appeal. The municipality contends that once an application for exploration or development is rejected, the project ceases to exist, and a new application involving the same land should be treated as a new project.

In a ruling release in August, a justice from Alberta’s top court said that the regulator may have relied too much on Jean’s letter in its decision to accept Nortback’s applications and “appears to offer no independent analysis” of whether Grassy Mountain met the definition of an advanced project.

"I find that a serious, arguable issue is established," Justice Kevin Feth wrote.

What is the cost of compensation for freehold coal rights?

Katie Morrison, executive director of the Canadian Parks and Wilderness Society Southern Alberta Chapter, said that while part of the Grassy Mountain area is under freehold, “this is not a complete roadblock.”

Alberta’s 1976 Coal Policy states that where freehold coal rights are affected by exploration or development restrictions imposed by the land classification direction of the policy, the government is prepared to purchase those rights “at a fair value.”

A similar statement could be written into any new policy, Morrison said.

“And while that could mean some compensation is due to the company, I wouldn’t necessarily agree that it would be significant, given that the company previously failed to get approval for a project on those lands based on the panel finding that the significant risks outweighed the minimal benefits of the project,” Morrison said,

“If we were willing to take that route in 1976, we can certainly do that again. The cost of compensation likely pales in comparison to the huge costs of the project to our lands, waters, sustainable economies, and communities and the potential long-term liabilities of water treatment and reclamation that would fall to Albertans in the future.”

Morrison also called the argument of promissory estoppel “nonsense.” While Benga's Grassy Mountain proposal met the province's definition of an advanced project, this application has already been denied “and so Northback as its successor cannot claim to have an advanced coal project.”

“I have yet to hear a coherent answer on how a formally closed application can be considered ‘active.’ If the Minister of government made some other promise to Northback, they should be transparent on what that was.  No project can be guaranteed an approval and if the government promised something to Northback, we need to know what that was,” Morrison said.

David Thomas, communications coordinator for Crowsnest Headwaters, a group dedicated to protecting and restoring the Crowsnest River Watershed, also questioned the ministry's rationale for allowing certain open-pit coal projects to proceed.

"It’s a load of codswallop. There is no way the government was required to declare Grassy Mountain to be an advanced project,” Thomas said.

“The government’s own website still classifies it even today as a ‘Cancelled’ project. What they are trying say is there is no way to bring a rejected project to an end. Albertans should be insulted that Brian Jean and Danielle Smith think they are stupid enough to swallow this.

"The UCP politicians made a terrible mistake by dropping the Peter Lougheed coal policy to allow these Australian speculators free run of the Rockies. If the foreigner coal grubbers want to sue, they should sue Jason Kenny and [former Energy Minister] Sonya Savage, not the taxpayers."


Brett McKay, Local Journalism Initiative Reporter

About the Author: Brett McKay, Local Journalism Initiative Reporter

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