Q: I have land in both Saskatchewan and Alberta that I am renting out. I have been approached informally by an oil company that wishes to drill on the land. I am wondering what my rights are and what kind of agreement is feasible. I have been told that some oil companies provide lifetime free gas to the farmer’s buildings should the farmer so desire. Is this correct?
A: I am assuming that you don’t own the mineral rights. In a few cases, primarily land that was homesteaded before 1887, landowners were granted mineral rights. In those cases you would not only negotiate for the company to enter your land (a surface rights lease) but would also negotiate a leasing agreement that gave you a percentage payment for oil produced.
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Mineral rights can also be sold. If you are dealing with an interprovincial pipeline, then federal law applies, rather than provincial. In the next two columns, I will deal with the situation where an oil company seeks a surface lease to put a well or other installation on your land and the right to access it.
First, you should learn as much as you can about leasing and compensation for surface rights. The oil company negotiators work full time negotiating rights so are likely to have developed plenty of expertise in the area. Most oil companies will have a legal department or lawyers on call who have prepared the contract documents used by the company landsmen. Hence, farmer-oil company negotiations are not always equal-sided. You might want to hire a lawyer or consultant.
I suggest you talk to other landowners in the area. In many oil producing areas there are surface rights organizations that will give you some sense of the compensation and other terms offered in your area. Albertans can contact the Alberta Farmer’s Advocate, 305 – 7000 113 St. Edmonton, T6H 5T6; tel 780-427-2433 or toll-free 310-0000.
In Saskatchewan, the Centre for the Study of Agriculture, Law and the Environment offers a free publication entitled Negotiating Surface Rights. Write to University of Saskatchewan, College of Agriculture, 51 Campus Drive, Saskatoon, S7N 5A8, or phone 306-966-8893 or e-mail: csale.ag@usask.ca. This publication is also available from provincial rural service centres.
I highly recommend the book When the Oilpatch Comes to your Backyard, published by the Pembina Institute, Box 7558, Drayton Valley, Alta., T7A 1S7 or 800-884-3515. It retails for $39.59 (including shipping + GST).
While it focuses on Alberta legislation, the factors to be considered when negotiating surface rights are applicable elsewhere.
A landowner cannot refuse entry. In Alberta, the Energy and Utilities Board grants approval for drilling, after which a company negotiates with the landowner to determine compensation and, if negotiations are unsuccessful, the company can ask the Surface Rights Compensation Board to determine compensation.
In Saskatchewan, the Surface Rights Arbitration Board also hears disputes about access. Decisions from the boards are available to the public. In Saskatchewan contact it at Box 1597, Kindersley, Sask., S0L 1S0 306-463-5447; in Alberta at 18th floor, 10020 – 101A Ave, Edmonton T5J 3G2; 780-427-2444 or 310-0000.
If a lease agreement is offered to you, ask for time to study and review it.
