Yahoo Finance A regulatory squeeze on the purchase of Alberta land by foreign entities is deterring investment: lawyers
Some bureaucrats in Alberta taking a new approach to old provincial rules aimed at protecting farmland could be deterring foreign investment in certain oil and gas projects, renewable ventures, power plants and data centres, commercial real estate lawyers say.
Under provincial regulations, foreign-controlled companies and private equity are restricted from buying or leasing private land in Alberta outside of cities and towns, but there are a number of key exceptions that have been heavily leaned on by foreign investors looking to strike deals in the province regarding pipelines, manufacturing facilities, power plants and solar projects, among others.
Recently, however, lawyers say the province’s Foreign Ownership of Land Administration (FOLA) office has signalled it is taking a narrower view of the rules, potentially suggesting that foreign investors could purchase land to construct or establish new projects, but would not be permitted to acquire or operate existing facilities without special approval.
Lawyers at Osler, Hoskin & Harcourt LLP said the recent guidance provided to the firm by FOLA suggests that foreign-controlled companies and private equity could be prevented from acquiring existing oil and gas processing facilities and power plants (including gas, wind and solar, etc.) without an order in council from the Alberta provincial cabinet. The timeline for obtaining such an order could range from four months to eight months, Osler said.
“(T)he Alberta government has not yet publicized the policy change, and is instead providing the information on a direct inquiry basis,” Osler lawyers said in an article published this week.
The province acknowledged the concerns raised by the legal community in a statement on Oct. 10, but said the government is interpreting foreign ownership land regulations “as we always have.”
“We have not introduced a more restrictive approach,” said Brandon Aboultaif, press secretary to Service Alberta Minister Dale Nally. “The regulation has always included exemptions for certain situations, and where those exemptions don’t apply, the application will go to cabinet for decision to recommend an order in council.”
Osler and others warn, however, that the current approach is resulting in a chill on property sales and heightened risk to developers and investors in projects located in these rural areas.
“In my view, it is not reasonable for the foreign ownership office to start interpreting legislation this way,” Clark Kassian, a partner and lawyer at Dentons’ real estate group, said. “It essentially guts, in my opinion, the meaning of what these very important exceptions were intended to accomplish, which was to encourage economic activity benefiting Alberta.”
Kassian said FOLA has substantively increased some of the upfront disclosure requirements during the land acquisition process, in some cases requiring “near total disclosure” of the entire ownership structure and the proposed plans and timeline for development on the land in question.
Notably, even companies that are generally considered to be Canadian are feeling the heat of these restrictions since the regulations deem any corporation to be foreign-controlled if less than two-thirds of the corporation’s board of directors are Canadian citizens or permanent residents.
Alberta’s foreign ownership land rules are decades old, but some lawyers say the disclosure hurdles created by the regulations seem to have grown and become even more time-consuming in recent years.
Further frustrating industry is that, in many cases, some of the lands in question have been expressly designated by local counties for industrial development.
“In a lot of cases, we are not talking about farmland. We are talking (about) land in industrial areas where developers have already rezoned the land for industrial development,” Kassian said.
“If the purpose of the legislation was to prevent foreign interests from buying up our farmland (and) our pristine recreational areas, well, are these regulations being interpreted in a way that’s actually furthering that purpose or just frustrating economic development?”
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Aboultaif said the Alberta government continues to welcome foreign investment to the province.
“We know that clarity and certainty is important for making investment decisions, and we are committed to providing industry and potential investors with increased clarity around (Foreign Ownership of Land Regulations),” he said.
• Email: mpotkins@postmedia.com
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