Executive Summary: Key Legal and Evidentiary Issues

• The central dispute concerns whether a bitcoin mining operation fell within the permitted purposes of a surface rights lease limited to hydrocarbon exploration, development, and production.
• Contractual interpretation principles — including plain and ordinary meaning and the ejusdem generis rule — were applied to determine the scope of the lease.
• Persist Oil and Gas Inc. argued that generating electricity from natural gas to power bitcoin mining was necessary to sustain hydrocarbon production during low-price periods.
• Regulatory approvals from the Alberta Energy Regulator and the Alberta Utilities Commission did not authorize uses beyond the lease's stated hydrocarbon purposes.
• The Right of Entry order granted by the Land and Property Rights Tribunal was found to have no bearing on whether bitcoin mining was permitted under the lease.
• Granting a permanent injunction was held appropriate because damages alone were inadequate and the respondent faced risk of municipal enforcement proceedings.

Facts of the case

Roy Flowers is the owner of land subject to a surface rights lease originally executed on November 12, 1999. The lease granted the operator access to a road and a gas compressor site for purposes and uses necessary for the exploration, development, and production of hydrocarbons. The lease ran for an initial 10-year term and was automatically renewed for a further 10 years until November 12, 2019, with no further automatic renewal provision. Persist Oil and Gas Inc. acquired the lease in 2018. Although the lease expired in November 2019, it remained operable because no reclamation certificate had been issued by the Alberta Energy Regulator, as required under s. 144 of the Environmental Protection and Enhancement Act, RSA 2000, c E-12, before a surface rights lease may be terminated.

Persist operated a natural gas compressor station on the land under an Alberta Energy Regulator licence. In April 2021, it brought two 1-megawatt natural gas generators, computer equipment, shipping containers, and other structures onto the land, and began using natural gas flowing through the compressor station to run a bitcoin mining operation during periods of low natural gas market prices. In September 2021, an additional 1-megawatt generator and further equipment were brought on site, with two generators connected to approximately 780 data processors housed in shipping containers and operated intermittently at up to 70% of capacity.

Flowers issued a formal written demand on August 30, 2021, requiring Persist to cease the bitcoin mining operation and remove its equipment. A second demand followed on October 25, 2021. Persist refused both demands. Flowers filed a statement of claim on November 24, 2021, seeking a declaration that the bitcoin mining operation breached the lease and constituted trespass and nuisance, a permanent injunction, and either disgorgement of benefits gained from the operation or $125,000 in the alternative. Around January 23, 2025, Flowers approached Rocky View County regarding the mining activity. On February 5, 2025, the County issued a formal notice that the operation was not in compliance with the County's land use bylaw — the land being zoned Agricultural, General District — and that Persist lacked the requisite municipal development permit. A bylaw compliance notice followed on February 7, 2025, requiring the operation to be brought into compliance or ceased by March 13, 2025.

Policy terms and contractual clauses at issue

The surface rights lease granted Persist the right to hold the land "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." This language was at the centre of the dispute. Persist argued that generating electricity from natural gas fell within this wording and that it could use that electricity as it saw fit — including for bitcoin mining — to encourage continued hydrocarbon production during low-price periods. Flowers maintained that bitcoin mining was plainly outside the lease's permitted purposes.

Court's reasoning and analysis

The chambers judge, whose decision was upheld on appeal, applied the principle that contractual words must be understood according to their plain and ordinary meaning unless doing so would produce contractual absurdity, and applied the ejusdem generis rule — that general words following specific ones must be confined to the same class as the specific words. On those principles, he concluded that bitcoin mining was not within the scope of the lease language, nor was it in the same category as operations producing oil, gas, related hydrocarbons, or substances produced in association therewith.

The Court of Appeal agreed. It observed that since bitcoin mining only commenced in 2009, the 1999 lease could not have been intended to contemplate it. While the lease was broad enough to encompass novel hydrocarbon recovery techniques or new gas processing technology, it remained limited to purposes necessary for the exploration, development, and production of hydrocarbons. Bitcoin mining was neither an industry improvement nor a modification necessary for those purposes.

The Court rejected each of Persist's additional arguments. The Right of Entry order issued by the Land and Property Rights Tribunal on April 26, 2023 — which granted Persist access for or incidental to the operation of the compressor station — had no bearing on the lease interpretation question; the Tribunal had expressly stated it lacked jurisdiction over the bitcoin mining dispute, and its order could not be read as tacit approval of mining as an activity "incidental" to operating the compressor station. Alberta Energy Regulator Directive 007 and Directive 017, cited by Persist, made no reference to bitcoin mining or cryptocurrency, and counsel could point to nothing in those instruments suggesting the regulator viewed bitcoin mining as necessary for hydrocarbon production. The AER Bulletin 2022-12 confirmed that cryptocurrency mining operations which consume gas are classified as a "consumer," which did not assist Persist's position. The Alberta Utilities Commission's approval of Persist's checklist application to construct and operate a 2.295-megawatt natural gas-fired power plant did not authorize the use of generated electricity for any and all purposes, nor did it authorize a breach of the lease.

On the question of remedy, the Court upheld the permanent injunction. The chambers judge had correctly identified and applied the applicable test: Flowers had established his legal rights, damages were inadequate because the breach would continue at Persist's discretion requiring repeated returns to court, Persist had already expanded the operation in the past, and Flowers faced the real risk of enforcement proceedings by Rocky View County if the mining continued.

Ruling and overall outcome

The Court of Appeal dismissed Persist's appeal in its entirety, affirming the chambers judge's grant of summary judgment and permanent injunction in favour of Roy Flowers. The injunction prohibits Persist from operating the bitcoin mine and requires it to remove associated chattels and fixtures not otherwise used in permitted operations under the surface rights lease and the Right of Entry order. The claims in trespass, nuisance, and disgorgement were dismissed at first instance and were not revived on appeal. No specific monetary award was ordered; the relief granted was injunctive in nature.