This Lease Wasn’t Built for Bitcoin: Alberta Court of Appeal Halts Crypto Mining Operation on Natural Gas Processing Site

In Flowers v Persist Oil and Gas Inc,^[1] the Alberta Court of Appeal upheld a permanent injunction granted by the Alberta Court of King’s Bench prohibiting the operation of a Bitcoin mine and requiring the removal of all associated equipment from leased premises. The decision is as an interesting example of how Canadian courts are interpreting permitted use clauses in leases in light of the advent of crypto mining technologies, and the temptation for lessees to engage in crypto mining operations to turn a profit.

Background

This dispute centred around a surface rights lease (the “Lease”) between the respondent landowner, Roy Flowers (“Flowers”), and the appellant operator, Persist Oil and Gas Inc. (“Persist”), originally entered into in November 1999 by their respective predecessors in interest.^[2] The permitted uses clause provided that the Lease was:

[…] 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.[3]

Persist had been operating a natural gas compressor station on the premises. In April 2021, Persist brought two 1-megawatt natural gas generators, computer equipment, and other items onto the premises in order to mine Bitcoin. The mining activities were powered by electricity produced from natural gas from the compressor. Persist used the Bitcoin mining operation to generate revenue during periods when natural gas prices were low compared to the revenues Persist could generate from using the natural gas to produce Bitcoin.

Flowers made two formal written demands to Persist to cease the Bitcoin mining operation and remove the equipment. Persist refused and expanded the operation with three additional generators and other equipment.

On November 24, 2021, Flowers commenced an Action against Persist, seeking a declaration that the Bitcoin mining operation breached the Lease and constituted a trespass and a nuisance. He also sought a permanent injunction requiring Persist to remove its Bitcoin mining operation from the premises, and disgorgement.

Before the Chambers hearing, on April 26, 2023, the Land and Property Rights Tribunal granted Persist a Right of Entry Order limited to activities “for or incidental to the operation of a compressor station”.^[4] In response to an objection by Flowers, the Tribunal held it lacked jurisdiction to address Flowers’ allegation that the Bitcoin mining operation violated the Lease.^[5]

The Chambers Judge’s Decision

The Chambers Judge held that the crypto mining was not permitted under the Lease based on the plain and ordinary meaning of the permitted uses clause; Bitcoin mining is in a different category than an operation producing oil, gas, or related hydrocarbons. The Chambers Judge also noted that interpreting the permitted uses clause as allowing anything that might enable Persist to profit from its natural gas would lead to an absurdity: by that reasoning, Persist could have used its natural gas to produce electricity to power a cannabis growing operation on the premises.^[6]

The Chambers Judge granted a permanent injunction prohibiting Persist from operating the Bitcoin mine and requiring it to remove all associated equipment from the premises.^[7] The Chambers Judge further held that Flowers was entitled to damages based on what he might reasonably have demanded for allowing Persist to operate the crypto mining operation on the premises from April 2021 until the time of removal. Absent agreement of the parties, the issue of quantum of damages would need to proceed to trial given the lack of evidence on that point.^[8] The Chambers Judge declined to award disgorgement, following the approach in Atlantic Lottery Corp Inc v Babstock^[9] and finding that other remedies (damages for the historical breach and an injunction for the ongoing breach) were adequate in the circumstances.

Finally, the Chambers Judge dismissed the claims in trespass and nuisance, finding that Persist had a statutory right to occupy the premises and trespass does not apply when bringing something onto land one legally possesses,^[10] and that Flowers had failed to adduce a third-party noise assessment proving actionable nuisance.^[11]

The Court of Appeal’s Decision

The Alberta Court of Appeal dismissed the appeal, holding that the Chambers Judge did not commit a reviewable error in:

1. finding the Bitcoin mining operation was not a permitted use under the Lease; or
2. granting the injunction.

Crypto Mining Was Not a Permitted Use Under the Lease

The Court of Appeal agreed with the Chambers Judge that the Bitcoin mining operation was not permitted under the Lease.

Persist argued that Bitcoin mining was “necessary” (under the permitted uses clause) for the production of natural gas because it ensured Persist could avoid shutting in natural gas production when market prices were low. Persist further argued that the objective intention of parties to an oil and gas lease is to make a profit, and the mining operation was consistent with that intention.

The Court of Appeal rejected these arguments. Since Bitcoin mining only began in 2009, the Court denied that the permitted uses clause in the Lease, executed in 1999, was intended to capture that use. The Court recognized some breadth in the contractual language to account for changes in the industry, but it was limited under the permitted uses clause to purposes necessary for the exploration, development, and production of oil, gas, or related hydrocarbons.^[12]

In addition, the Court held that the Right of Entry Order had no bearing on whether Bitcoin mining was permitted under the Lease. The Land and Property Rights Tribunal did not decide that the mining operation was “incidental to” the operation of the compressor station, and acknowledged it had no jurisdiction to address the Bitcoin issue.^[13]

The Court also determined that certain Alberta Energy Regulator directives and bulletins Persist relied on did not support its argument that crypto mining was necessary for the production of hydrocarbons, nor did an approval Persist had obtained from the Alberta Utilities Commission authorize Persist to use the electrical power it generated on the leased premises for crypto mining or otherwise breach the Lease.^[14]

A Permanent Injunction Was Appropriate

The Court of Appeal upheld the permanent injunction. The Chambers Judge identified and applied the correct test for a permanent injunction, namely:

1. the claimant must establish its legal rights; and
2. an injunction must be appropriate in the circumstances.^[15]

The Chambers Judge found Flowers had established the mining operation breached the Lease and an injunction was appropriate to prevent continuation or expansion of the mining operation and threatened enforcement action from the County. The Court of Appeal held that that determination was entitled to deference.^[16]

Key Takeaways

This case provides a useful insight on the contractual interpretation of oil and gas leases—and leases more generally—in light of technological advances. The Court of Appeal highlighted that crypto mining is a relatively novel technology that cannot be reasonably considered as having been contemplated in leases executed prior to the advent of cryptocurrencies. While the Alberta Court of Appeal did recognize that new technologies may be permitted under a lease which were not envisioned at the time of formation, whether that is the case or not will depend on the plain, ordinary, and literal meaning of the permitted use provisions in the lease.

Nonetheless, lessors may want to consider explicitly addressing whether crypto mining or similar operations are permitted under the terms of their lease agreements, especially in situations similar to the surface rights lease in this case, where the lessee was generating sufficient power to run such an operation.

We Can Help

Our National Appellate Litigation Group regularly represents appellants and respondents in appellate courts across the country. If you have questions about our appellate practice, please contact Brandon Kain or Adam Goldenberg

^[1] 2026 ABCA 172.

^[2] At the time the dispute arose, the initial term and automatic renewal term of the Lease had expired, but the Lease remained valid and operable under section 144 of the Environmental Protection and Enhancement Act, RSA 2000, c E-12, which prevents the termination of a surface rights lease until a reclamation certificate is issued.

^[3] Flowers v Persist Oil and Gas Inc, 2026 ABCA 172 at para 32.

^[4] Persist Oil and Gas Inc v Flowers, 2023 ABLPRT 236 at para 1. Persist sought the Right of Entry Order because the parties had been unable to renewal terms for the Lease.

^[5] See ibid at para 18.

^[6] See Flowers v Persist Oil and Gas Inc, 2025 ABKB 142 at paras 30–42.

^[7] See ibid at paras 69, 80.

^[8] See ibid at paras 70–79.

^[9] 2020 SCC 19.

^[10] See Flowers v Persist Oil and Gas Inc, 2025 ABKB 142 at paras 47–53.

^[11] See ibid at paras 54–62. By contrast, Persist had provided a third-party noise impact assessment report finding noise levels fell within allowable ranges under Alberta Utilities Commission rules and Alberta Energy Regulator directives.

^[12] See Flowers v Persist Oil and Gas Inc, 2026 ABCA 172 at paras 32–36.

^[13] See ibid at para 37.

^[14] See ibid at paras 38–42.

^[15] See Flowers v Persist Oil and Gas Inc, 2025 ABKB 142 at para 64, citing Liu v Hamptons Golf Course Ltd, 2017 ABCA 303 at para 17.

^[16] See Flowers v Persist Oil and Gas Inc, 2026 ABCA 172 at para 44.