Unpaid surface lease claims spike in Alberta

Alberta’s dispute system that deals with abandoned oil wells has been inundated with applications since the economy tanked, putting an additional layer of pressure on landowners who want their concerns resolved.

Applications to the Surface Rights Board for unpaid surface rentals have more than tripled from about 500 in 2014 to 1,600 in 2017, according to a July 2018 government memo, recently obtained through a Freedom of Information request.

The memo found the monetary value of the claims increased nine-fold, from about $700,000 to more than $6 million.

While the Surface Rights Board has done its best to manage the spike in applications, the memo said it has been challenging for the board to provide surface rights holders with timely responses.

In turn, it at times has been difficult for landowners, many of whom are farmers, to get their cases heard, potentially delaying their compensation as they deal with the wells.

Related story: Redwater ruling hands well clean-up bill to oil sector

“As quick as they say it has been going, it seems like there are a number of applications that aren’t going as quickly as they figure,” said Ron Huvenaars, who farms and is the chair of Action Surface Rights, which helps landowners navigate the issue.

“It seems to be dragging on and they do seem to be working at reducing the amounts that are being paid out, which is concerning on top of that.”

Mike Hartfield, director of operations with the Surface Rights Board, said in an email that while it has experienced operational challenges, it has improved efforts to respond to applications in a timely manner.

“Strengthening the rights of landowners and operators to fair and timely decisions on these matters is very important to us and we’re doing everything we can to build capacity and speed up timelines for processing these applications,” he said, noting the board has tripled its staff, streamlined repeat applications and has met with landowners directly in communities.

However, the oil well issue goes beyond the board.

In August 2018, the Farmers’ Advocate Office sent out a notice warning landowners of oil companies allegedly telling producers they would be reducing annual compensation for surface leases, and that some companies have stopped paying annual compensation upon beginning the reclamation process.

For landowners in such situations, it’s been frustrating to navigate.

“It’s not so much the money, it’s the principle behind it,” said William Habraken, who farms near Vauxhall, Alta., and is also a director with Action Surface Rights.

“Some are not bargaining in good faith, not responding to emails, phone calls or letters. If they are not willing to meet you, then you’re left to the Surface Right Board, which is backlogged. The problem is just perpetuating itself.”

The number of orphan wells, which are abandoned wells with no company legally responsible or financially able to reclaim them, has increased substantially since the oil and gas economy crashed in 2015.

Figures suggest the cost of cleaning them up could reach billions over time. The Orphan Well Association, which is primarily funded by industry, is tasked to do the clean up, but it doesn’t have the funds to do it all.

And if the association or other companies don’t do it, it will be up to landowners to deal with them and pressure will be on government to reclaim them.

“Weeds are the biggest problem. We end up taking care of it because it just becomes a huge source of them,” Huvenaars said of the challenges farmers currently face with the wells, noting some lands are heavily contaminated.

“You lose on that production. Whenever you have something growing, that’s better for the land than nothing.”

To help mitigate the problem, the province has given the Alberta Energy Regulator newer powers to not re-license bad-behaving players.

The regulator can now conduct background checks of applicants seeking a drilling license and deny applicants that have a history of being involved with companies that haven’t paid taxes, owe money to the regulator or haven’t complied with the rules.

As well, the province is looking into whether it should implement time limits on well reclamation. A review of the system has been conducted, and it will now be up to the province to make changes.

Landowners and everyone involved in the energy industry will be keeping a close watch on the Supreme Court of Canada’s Redwater decision.

The decision, expected soon, will determine whether leftover assets from abandoned oil wells should go to bank creditors first rather than for clean-up efforts.

“If the ruling goes that way (in favour of the bank creditors), any sort of contamination will be dumped on the taxpayers,” Habraken said.

“This problem is going to get bigger and, depending on the Redwater decision, it could get a whole lot bigger.”

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