Canada: Coalbed Methane - Split Title

Last Updated: May 2 2006

Article by Jason Husack, ©2006 Blake, Cassels & Graydon LLP

This article was originally published in Blakes Bulletin on Energy - Oil & Gas, March 2006

Alberta’s CBM Activity

Conventional gas reserves are expected to decline in North America over the next decade. The Alberta Government and the oil industry are showing an increasing interest in exploiting the estimated 263 billion cubic feet of coalbed methane (CBM) reserves in Alberta. This interest will only increase as conventional gas reserves decline and demand and prices increase. However, as commercial feasibility of CBM projects is being established, there is a growing concern over the uncertainty surrounding the ownership rights in and to CBM in the context of split-title. Split-title arises where one party is a holder of fee simple coal rights and the other party holds the fee simple rights to all other mines and minerals (title to the coal and gas are owned by separate parties), and both parties are claiming ownership of the CBM. The urgency to resolve this issue will likely intensify as companies confronted with split-title issues must make decisions regarding offset obligations and instances where parcels of land are being drained by adjoining lands where there is certainty of mineral ownership.

According to the Alberta Energy and Utilities Board (EUB), as at December 31, 2004, there were a total of 3,575 CBM wells in Alberta of which only 1,735 had produced or were producing. Approximately 2,506 new CBM wells (which accounts for 70 per cent of the total CBM wells) were added in 2004, which reflects the accelerated growth and interest in the development of CBM as a viable resource. The Horseshoe Canyon and Belly River coals account for over 90 per cent of Alberta’s CBM wells and about seven per cent are completed in Mannville coals. The remainder of CBM wells are completed in Ardley and Kootenay coals which are being tested further. The Horseshoe Canyon/Belly River continues to be the main CBM target but the Mannville continues to be actively tested to evaluate production.

Provincial Tenure of CBM

On August 26, 1991, the EUB issued Informational Letter 91-11 stating that CBM is considered "to be a form of natural gas." The Alberta Government administers CBM in the same manner as conventional gas in the province (e.g., royalty, tenure, EUB drilling, production, and operational rules and regulations). The Mines and Minerals Act (the Act), recently amended to provide that a coal lease does not grant any rights to any natural gas, including CBM, unless the Minister, on the recommendation of the EUB deems it necessary to do so for safety or conservation reasons, may authorize the lessee of a coal lease to recover natural gas, including CBM, contained in a coal seam in the location of the coal lease. We also see this approach further recognized in the Petroleum and Natural Gas Tenure Regulation, whereby an agreement granting rights to petroleum or natural gas or both does not grant the right to CBM in a coal seam unless the Minister has authorized the lessee of a coal lease to recover under s. 67(2) of the Act.

Although the Act recognizes the distinction between natural gas and coal, it does not go far enough to resolve the issue. The Act failed to provide a definition of CBM and it was only made applicable to Crown Lands and not freehold. Interestingly, the Act was not made retroactive (as in B.C.). It is therefore conceivable (and likely) that existing Crown lease holders would argue that the law does not apply to them.

Alberta is not the only province taking action to reduce uncertainty regarding the ownership of CBM. In Nova Scotia, the Petroleum Resources Act (PRA) recognizes coal gas as a distinct substance and has included coal gas in its definition of "petroleum", which states "coal gas, existing in its natural condition in strata". The PRA also requires a specific coal gas agreement before one can explore, develop or produce CBM.

In B.C., the government resolved the split-title issues by enacting the CoalBed Gas Act on April 10, 2003, which confirmed that CBM is natural gas and therefore owned by the holder of the natural gas rights. This law was retroactive and applied to both Crown and freehold lands. A likely driving force behind such a determination was to encourage the development of the significant CBM reserves located in the province.

It is unlikely that the Alberta Government will take similar action but there is precedent in Alberta whereby legislation was passed which materially altered the rights of sub-surface owners. In 1951, the Alberta Government enacted the Sand and Gravel Act (SGA) in response to the Alberta Supreme Court’s decision in Western Minerals v. Gaumont (Western). The Court had previously held that sand and gravel was included in the definition of "mineral" and therefore owned by the sub-surface rights owner who had title to "all mines, minerals and valuable stone". The SGA altered the law by declaring that the owner of surface title was "deemed at all times to have been the owner of and entitled to all sand and gravel on the surface of the land." The SGA also stated that sand and gravel was "not deemed to be a mine, mineral or valuable stone but shall be deemed to be and to have been a part of the surface of land and to belong to the owner thereof" and "Notwithstanding any patent, title, grant, deed, notification, conveyance, lease, license, agreement, disposition or other document heretofore or hereafter issued or made that contains or reserves mines, minerals or valuable stone, the owner" of such grant shall not be entitled to the sand and gravel. Western was ultimately appealed to the Supreme Court of Canada where the Court determined that the province was acting within its jurisdiction when it enacted the SGA.


Unfortunately, the current legislation and policies do not assist split-title situations on freehold lands. At the moment, the courts have not directly addressed the split-title issue regarding ownership of methane from coal seams, but the following cases do provide some guidance in how courts may resolve this issue.

In Borys v. Canadian Pacific Railway and Imperial Oil Ltd., the 1906 land transfer from CPR to Borys reserved unto the CPR "all coal, petroleum and valuable stone which may be found to exist within, upon or under the said land". The Plaintiff sought a declaration that he owned all of the natural gas in the said lands. The trial judge ruled in favour of the Plaintiff, but upon appeal the Court held that "all the petroleum reserved, including all hydrocarbons in solution or contained in the liquid in the ground, is the property of the defendants who are entitled to do as they like with it, subject, of course, to the observance of all relevant statutory provisions and regulations. All gas not included in the reservation of petroleum as indicated in the property of the plaintiff."

In Anderson v. Amoco Canada Oil and Gas, the Supreme Court of Canada effectively reaffirmed the Borys decision by upholding the decision of the Alberta Court of Appeal. Major J., on behalf of the Court, held that the determination of whether a substance is petroleum or not depends on the status of the substance (either gaseous or liquid) in the reservoir as at the date of the reservation. Subsequent changes in the phase of the substances are irrelevant in determining ownership. Therefore, the owner of petroleum is entitled to all hydrocarbons that were in liquid phase at initial reservoir conditions, regardless of the phase they are in when recovered and the non-petroleum owner is entitled to all hydrocarbons that were in gas phase at initial reservoir conditions, regardless of the phase they are in at time of recovery.


Given the current state of uncertainty, it is prudent that companies contemplating CBM development on split-title freehold lands attempt to negotiate an agreement between the different title holders to yield some certainty for both parties before proceeding with projects. Several Alberta companies have already negotiated revenue sharing agreements on coal and gas. Ultimately the legislature or the courts will resolve this issue to allow for the development of such a potentially significant untapped resource.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
27 Oct 2016, Seminar, Toronto, Canada

Please join members of the Blakes Commercial Real Estate group as they discuss five key provisions of a commercial real estate purchase agreement that are often the subject of much negotiation but are sometimes misunderstood.

1 Nov 2016, Seminar, Toronto, Canada

What is the emotional culture of your organization?

Every organization and workplace has an emotional culture that can have an impact on everything from employee performance to customer or client satisfaction.

3 Nov 2016, Seminar, Toronto, Canada

Join leading lawyers from the Blakes Pensions, Benefits & Executive Compensation group as they discuss recent updates and legal developments in pension and employee benefits law as well as strategies to identify and minimize common risks.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.