Executive Summary: Key Legal and Evidentiary Issues

• The Bitcoin mining operation was ruled not to be a permitted use under the surface lease, amounting to a breach of contract by Persist.

• Statutory provisions under environmental law kept the expired lease legally operable, invalidating Flowers’ claim of trespass.

• Persist lacked necessary municipal permits, and the operation was found noncompliant with Rocky View County’s Land Use Bylaw.

• Flowers’ claim of nuisance due to operational noise was dismissed due to insufficient objective evidence.

• Disgorgement was denied; instead, Flowers was found entitled to negotiating damages for the lease breach.

• A permanent injunction was granted, compelling Persist to remove all Bitcoin mining equipment from the leased land.

Facts of the case

Roy Flowers is the owner of land in Alberta subject to a 1999 surface lease originally executed between Olympia Energy Inc. (lessee) and Douglas Milton Chapman (lessor). Flowers became the successor to the lessor’s interest in 2012, while Persist Oil and Gas Inc. succeeded the lessee. The lease covered a 3.14-acre compressor site and access road, permitting uses necessary for the exploration, development, and production of oil and gas.

The lease expired in 2019 after one 10-year renewal, and renewal negotiations failed. Nonetheless, Persist continued to pay and Flowers accepted annual lease payments of $12,150 for 2019 to 2021. In 2021, Persist installed Bitcoin mining infrastructure—gas generators, computers, and related equipment—on the site, leveraging natural gas to power the operation when market conditions were favorable.

Flowers objected to this new use as outside the scope of the lease. He issued written demands in August and October 2021 for Persist to cease operations and remove the equipment. Persist refused, asserting that the operation was lawful. Flowers brought legal proceedings seeking a permanent injunction, while Persist counter-applied for summary dismissal. The matter was delayed pending rulings from the Alberta Land and Property Rights Tribunal (LPRT).

In 2023, the LPRT granted Persist a Right of Entry Order limited to compressor-related activities. The Tribunal declined to address the Bitcoin mining operation, citing jurisdictional limits. In a separate compensation review, the LPRT confirmed $12,150 remained the appropriate annual amount under the lease, as the absence of a reclamation certificate under section 144 of the Environmental Protection and Enhancement Act meant the lease could not yet be terminated.

In early 2025, Rocky View County notified Flowers that Persist’s mining operation lacked a development permit and violated local zoning. A Bylaw Compliance Notice was issued, threatening enforcement action if the operation was not brought into compliance.

Court’s analysis and outcome

Lease validity and right to possession

The Court held that despite the lease's expiry in 2019, section 144 of the Environmental Protection and Enhancement Act preserved its legal effect until reclamation was complete and a certificate issued. Since no such certificate had been granted, the lease remained valid. Additionally, the LPRT’s Right of Entry Order legally authorized Persist’s ongoing access to the site. Flowers' request for a declaration that the lease had expired was therefore dismissed.

Permitted use under the lease

The key dispute was whether Bitcoin mining was a permitted activity under the lease, which allowed “any and all purposes… necessary for the exploration, development and production of oil, gas…”. The Court, applying a literal interpretation and the doctrine of ejusdem generis, concluded that Bitcoin mining was not within the genus of permitted activities related to oil and gas. The Court compared it unfavorably to other unrelated operations, such as cannabis cultivation, to illustrate its incompatibility.

Persist’s claim that Flowers waived his objection by continuing to accept rental payments was rejected. The Court emphasized Flowers’ repeated objections and found no implied acceptance of the mining operation.

Regulatory compliance and municipal approvals

Persist admitted it had not obtained permits for the Bitcoin mining operation from the Alberta Utilities Commission or Rocky View County. The County deemed the operation noncompliant and required either zoning changes or development permits to legalize it. Flowers declined to seek such approvals and faced the risk of municipal enforcement. The Court acknowledged that Flowers faced legal and financial jeopardy from a situation not of his own making.

Trespass and nuisance claims

Flowers argued that Persist’s continued occupation and unapproved use constituted trespass. The Court disagreed, noting that Persist was in lawful possession under the continued lease and Right of Entry Order. It further held that bringing unapproved equipment onto leased premises constituted a lease breach, not trespass.

On the nuisance claim, Flowers presented personal testimony and app-based noise measurements. However, the Court found this evidence insufficient. In contrast, Persist provided a professional Noise Impact Assessment, which concluded that the mining and compressor station operations complied with Alberta noise standards. Given the rural context and existing industrial noise, the Court ruled there was no actionable nuisance.

Injunction and equitable relief

The Court applied the two-part test for a permanent injunction: (1) a proven legal right and (2) appropriateness of the remedy. Since the mining operation breached the lease and caused Flowers regulatory exposure, the Court granted a permanent injunction, ordering the removal of all mining-related equipment.

Persist argued that damages would suffice and that stopping the mining operation would harm its profitability. The Court rejected this, holding that breach of lease terms could not be justified by business convenience or financial gain.

Disgorgement and damages

Flowers also sought disgorgement of Persist’s profits from the mining operation. The Court, referencing Atlantic Lottery Corp. Inc. v. Babstock, found disgorgement inappropriate in the absence of exceptional circumstances. It ruled that damages were an adequate remedy and that Flowers was entitled instead to negotiating damages—an amount representing the fee he might have reasonably demanded for permitting the mining activity.

The actual amount of such damages was not determined at the hearing. Unless agreed upon by the parties, Flowers must proceed to trial to establish this amount.

Persist’s counter-application for summary dismissal was denied. The Court found the issues suitable for summary determination, except on the unresolved question of damages.

Conclusion

The Court granted Flowers a permanent injunction requiring the immediate removal of Persist’s Bitcoin mining operation and related equipment. His claims for trespass, nuisance, and disgorgement were dismissed. Persist’s application for summary dismissal was also dismissed. Flowers retains the right to pursue negotiating damages at trial for the period the lease was breached. If damages are not agreed upon, the issue will proceed to trial.