Ruling says lease wording from 1999 didn’t cover bitcoin mining, which began in 2009
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.
