@nigelb.bsky.social:
The Court of Appeal confirms that you can’t run a bitcoin mining operation on the basis of a surface lease or right of entry order.
Bitcoin Real Property Law by Nigel Bankes, May 26, 2026, Ablawg
Decision Commented On: Flowers v Persist Oil and Gas Inc, 2026 ABCA 172 (CanLII)
PDF Version: Bitcoin Real Property Law
In this decision, Alberta’s Court of Appeal has confirmed Justice Christopher Rickard’s decision of the Court of King’s Bench on this matter. 2025 ABKB 142 (CanLII). Both levels of court concluded that neither a surface lease nor a right of entry order provide the operator with the necessary proprietary authorization to run a bitcoin mining operation on the leased lands using natural gas from a compressor located on the lands and licensed by the Alberta Energy Regulator (AER). I refer readers to my ABlawg post on Justice Rickard’s decision for a more detailed examination of the background as well as two related decisions of Alberta’s Land and Property Rights Tribunal.
The decisions of both levels of court largely turn on the interpretation of the granting clause of the surface lease. That clause provided as follows:
…to be held by the Lessee as tenant…for any and all purposes and uses as may be necessary for the exploration, development and production of oil, gas, related hydrocarbons or substances produced in association therewith, including the right to lay a pipeline or pipelines, construct and operate a sweet natural gas compressor facility, remediation and reclamation. (ABCA at para 32).
While the appellant, Persist, sought to argue that “bitcoin mining is necessary … to avoid shutting in natural gas production when natural gas prices are low” and that “by extracting natural gas, developing it into electricity to power data processors, and producing bitcoin for value, it is acting within the purpose of the surface rights lease” (at paras 33 and 35), the Court of Appeal was not convinced that the trial judge had erred in rejecting these arguments:
The chambers judge was mindful of the appellant’s arguments. He did not err in interpreting the words of the surface rights lease in their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the lease. Given that bitcoin mining only began in 2009, it cannot be inferred that the wording of the lease, which dates back to 1999, was intended to contemplate the use proposed by the appellant. The lease language is certainly broad enough to encompass changes in the industry, such as novel enhanced hydrocarbon recovery techniques or new technology for the separation or compression of gas. But it is limited to purposes necessary for the exploration, development and production of hydrocarbons or substances produced in association therewith. The bitcoin mining operation is not an industry improvement or a modification to processes or equipment that is necessary for the exploration, development and production of hydrocarbons. (ABCA at para 36)
And even if Persist could claim to be in occupation of the lands in the later period under the terms of a right of entry order rather than under the terms of a surface lease (a matter I discuss in more detail in my earlier post), the Court seems to have been of the view that Persist could still not claim to be engaged in an authorized activity:
The Right of Entry order simply granted the appellant the right to access and operate the compressor station. The Land and Property Rights Tribunal expressly stated it had no jurisdiction to address the bitcoin mining issue. Its order cannot be interpreted as a tacit approval of the bitcoin mining activity as being “incidental” to operating the compressor station. The operations are distinct undertakings, differing in purpose and character. (ABCA at para 37)
Neither could the appellant claim any support for its position on the basis of the AER authorization that it held for the compressor, or the authorization that it had (belatedly) acquired from the Alberta Utilities Commission for the generating units that it had brought on to the land. These authorizations and associated regulatory guidance were not relevant to the interpretation of the lease, and, in my view, dealt with regulatory matters rather than matters of proprietary entitlement.
Finally, the Court agreed that this was an appropriate case for a permanent injunction.
Conclusion
This decision may have involved a novel point of law but at the end of the day it is simply a lease interpretation decision. Parties to a surface lease are free to provide an operator with a broader set of rights than the rights associated with exploring for, extracting and processing hydrocarbons, but unless and until they do so, an operator has no proprietary authority to engage in generating electricity for data processing activities that have no connection with hydrocarbon producing activities. Furthermore, since a right of entry order is necessarily limited by the governing legislation (the Surface Rights Act, RSA 2000, c S-24) it must follow, as I argued in my post on Justice Rickard’s decision, that neither could such an order authorize bitcoin mining activities.
This post may be cited as: Nigel Bankes, “Bitcoin Real Property Law” (26 May 2026), online: ABlawg, http://ablawg.ca/wp-content/uploads/2026/05/Blog_NB_BitcoinProperty.pdf
Alberta CA confirms bitcoin mining operation breached hydrocarbon surface rights lease, Ruling says lease wording from 1999 didn’t cover bitcoin mining, which began in 2009 by Bernise Carolino, May 26, 2026, Canadian Lawyer Magazine
The Alberta Court of Appeal has affirmed a chambers judge’s determination that a lessee’s operation of a bitcoin mine on the lessor’s premises constituted a breach of a surface rights lease originally executed on Nov. 12, 1999.
Flowers v Persist Oil and Gas Inc, 2026 ABCA 172, revolved around the lease, which granted the operator access to a road and a gas compressor site for the purposes and uses necessary to explore, develop, and produce hydrocarbons.
In 2018, the appellant acquired the lease, which expired in November 2019. While attempts to renew the lease failed, it remained operable because s. 144 of Alberta’s Environmental Protection and Enhancement Act, 2000, prevented the surface rights lease’s termination until the issuance of a reclamation certificate.
Under an Alberta Energy Regulator license, the appellant used the land to operate a natural gas compressor station that separated, compressed, and processed natural gas produced and processed in off-site wells.
In April 2021, the appellant brought two one-megawatt natural gas generators, computer equipment, shipping containers, and other structures onto the land.
To earn revenue at times of low natural gas market prices, the appellant started using the natural gas flowing through the compressor station to run a bitcoin mining operation.
In a formal written demand dated Aug. 30, 2021, the respondent asked the appellant to stop operating the bitcoin mine and to remove the equipment from the land. The appellant refused.
In September 2021, the appellant brought another one-megawatt generator and other equipment onto the land. The appellant linked two generators to approximately 780 data processors in on-site shipping containers and operated them intermittently at 70 percent maximum capacity.
On Oct. 25, 2021, the respondent made another demand seeking the same things as in the previous demand. Again, the appellant refused.
In a statement of claim dated Nov. 24, 2021, the respondent alleged that the bitcoin mining operation breached the lease and constituted a trespass and a nuisance.
The respondent requested a permanent injunction. The respondent also asked for a disgorgement order over the appellant’s benefits from the bitcoin mining operation or alternatively $125,000.
On Mar. 10, 2025, Justice C.A. Rickards of the Alberta Court of King’s Bench granted the respondent summary judgment and a permanent injunction preventing the appellant from operating the bitcoin mine on the land. The appellant challenged this judgment.
Injunction upheld
The Court of Appeal of Alberta dismissed the appeal. The appeal court ruled that the chambers judge committed no reviewable error in determining that the surface rights lease’s permitted purposes or uses did not cover the bitcoin mining operation or in granting the permanent injunction.
First, the appeal court saw no error in the judge’s interpretation of the lease language in its ordinary and grammatical meaning, consistently with the surrounding circumstances known to the parties during the lease formation.
The appeal court recognized that the lease wording was broad enough to cover industry changes, including new enhanced hydrocarbon recovery techniques or gas separation or compression technologies.
However, given that bitcoin mining only began in 2009, the appeal court could not infer that the lease language dating back to 1999 contemplated the appellant’s proposed use.
The appeal court clarified that the lease wording was limited to the purposes necessary for exploring, developing, and producing hydrocarbons or substances produced in association therewith.
The appeal court did not consider the bitcoin mining operation an industry improvement or a process or equipment modification necessary for exploring, developing, and producing hydrocarbons.
Second, the appeal court deferred to the judge’s finding that a permanent injunction was appropriate in the circumstances. The appeal court ruled that the judge properly identified and applied the test for a permanent injunction.
The appeal court held that the judge reasonably considered that the appellant might continue and expand the bitcoin mining operation, as it had done in the past, and that the respondent risked facing proceedings brought by Rocky View County.
The appeal court concluded that the permanent injunction simply ensured that the appellant would comply with the lease terms.
Calgary oil and gas company loses appeal over illegal Bitcoin mining site by Michael Franklin, May 25, 2026, CTV News
A Calgary company that used a surface rights lease to run an illegal Bitcoin mining operation has lost its fight in the Alberta Court of Appeal.
Persist Oil and Gas Inc. operated a gas-processing site in Rocky View County and used natural gas flowing through the processing station to power computer equipment stationed there.
On March 10, 2025, Persist was ordered to remove all of its equipment from the land, owned by Roy Flowers.
In an appeal heard on May 12, the company said the judge misinterpreted the surface rights lease, did not properly consider that Bitcoin mining was allowed, misapplied the test for a permanent injunction and failed to consider relevant evidence in the case.
The Alberta Court of Appeal dismissed Persist’s claims, saying that the chambers judge “was mindful of the appellant’s arguments” and did not err in any interpretation.
“The lease language is certainly broad enough to encompass changes in the industry, such as novel enhanced hydrocarbon recovery techniques or new technology for the separation or compression of gas. But it is limited to purposes necessary for the exploration, development and production of hydrocarbons or substances produced in association therewith,” the appeal court wrote.
“The Bitcoin mining operation is not an industry improvement or a modification to processes or equipment that is necessary for the exploration, development and production of hydrocarbons.”
Persist also argued that the Alberta Utilities Commission (AUC) approval of the lease gave it the right to use generated electricity at the site for heaters, charging laptops and phones and run refrigeration.
“The AUC approval does not authorize the appellant to use the electricity generated on the leased premises for any and all purposes, nor to breach a term of the lease,” the appeal court wrote.
On the matter of the permanent injunction, the appeal court said it was put in place to ensure Persist stuck to the terms of the lease.
“The chambers judge reasonably considered that the appellant might continue the bitcoin mining operation and expand it, as it had done in the past, and that the respondent ran the risk of proceedings by the county.”
The court also found counsel was unable to prove that the Alberta Energy Regulator oversees Bitcoin operations that consume produced gas.
No bounds to operations, judge said
According to court documents, Persist acquired the lease on Flowers’ land in 2018. The lease provided it with road access to a gas compressor site “for the exploration, development and production of hydrocarbons.”
In April 2021, Persist installed two one-megawatt gas generators, computers and other equipment designed for the purpose of mining bitcoin.
This was done when gas prices were low enough for the Bitcoin mining operation to be more profitable.
Flowers, who had been paid $12,150 per year for the lease, objected to the operation, but Persist ignored his complaints and installed more natural gas generators to expand the bitcoin mining operation.
Persist was ordered to stop because Bitcoin mining was not a permissible use under the lease and, if allowed, could open the door to many other things.
“Persist could have brought a cannabis growing operation (assuming that the cannabis growing operation is as legal as the Bitcoin mining operation would be) onto the leased premises and that would be a permissible use as it would involve Persist using its natural gas to produce the electricity to run the cannabis grow operation and make profits therefrom and to continue producing natural gas when natural gas prices were low or there were other impediments to its production,” Justice C.A. Rickards wrote.
Persist’s lease expired in 2019 and all attempts to renew it have been unsuccessful; however, Alberta’s Environmental Protection and Enhancement Act prevented the termination of the lease until a reclamation certificate is issued.
The appeal court said no such certificate was issued by the Alberta Energy Regulator, so the lease remains operable.
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