Surface rights act protects landowners from oil lease laggards

By Tim Kalinowski, Staff Writer

Farmers in Alberta are likely better off than those in neighbouring provinces, says Jeana Les, a communication specialist with the Farmers’ Advocate Office, when it comes to oil companies reneging on their leases or abandoning wells due to bankruptcy proceedings as the current oil price crisis continues to bite hard in Alberta’s energy sector.

“There are farmers here not being paid for their land rentals, and we have seen an increase in that,” says Les. “However, there is recourse that exists in Alberta that’s not available in other provinces. If I understand correctly, in Saskatchewan it is a civil claim. And it’s the same in BC. In Alberta, if you are not paid for your annual rental, you can go to the Surface Rights Board and make an application under Section 36 of the “Surface Rights Act. By doing that, your annual rental can be paid through general revenue until the reclamation is complete.”

Les says the Surface Rights Board has thus far been firmly on the side of farmers when it comes to making oil companies pay what they owe.

“What the Surface Rights Board is going to do is when they receive an application under Section 36, they are first going to go to the company and say you should be paying this. If the company is insolvent, obviously that won’t go anywhere. But if the company is choosing not to pay for any other reason, that can be looked at by the Surface Rights Board. In the case where the company is insolvent, there is a process the company would go through where the reclamation would be done by the Orphan Well Association, or by one of the other working interest parties for that site.”

Les says even with strong protections in place in Alberta through the Surface Rights Board, some oil companies have been trying to do work arounds with individual farmers. She cautions farmers may be giving up their rights needlessly by making such agreements.

“Rental reduction agreements are something I would strongly caution against,” she says. “The Surface Rights Board is going to say to the company you need to pay your annual rental. They are not going to say you can pay some now or pay later. But a lot of companies outside of that process are going to landowners and saying times are tough, and we are either going to reduce your rental or pay part of your rental. As the Farmers’ Advocate, we are saying you don’t need to accept that.”

Under the law farmers do not need to put up with these kinds of ultimatums. Les explains further.

“One thing we want to stress to landowners is there are ways on the five year anniversary date (of your well lease) to open up a negotiation for both the company and the landowner to look at that annual rental. But a big caution on that is it needs to be on the five year anniversary date, and it has to be a two way negotiation. It can’t just be that the landowner is being told what the land rental is going to be.”

According to Les, while it is true farmers could voluntarily agree to reduce their rent to help a struggling oil company out, she does not understand what the farmers get out of making such deals.

“The annual compensation you are receiving as a landowner is based on your impact you experience as a landowner. It is not based on the price of oil. Under the Surface Rights Act you are compensated on an annual basis for your loss of use, and your adverse affects. If your loss of use or adverse affects haven’t changed, then you don’t have to put up with a reduction,” she says.

Les encourages anyone interested in knowing more about their rights to visit the Farmers’ Advocate Office’s website or call to speak with a representative. Les says as long as the price of oil remains low, Alberta will see more energy companies failing to live up to their obligations, and more farmers turning the Surface Rights Board for proper recourse.

“If you look on the Surface Rights Board website, you will see the number of applications under Section 36 in the first six months of this year has been more than it was in the entire year previously. The statistics definitely point to the effect of the current downward spiral in the price of oil. And there are probably more landowners out there that haven’t applied either because they don’t know about (this option), or haven’t gotten around to it yet.”