The Alberta auditor general says some grazing leaseholders are deriving more benefits from the land than just grass and water for their livestock.
A report released July 6 said the province receives about $4 million a year in rent on public land but some leaseholders gain far more if energy companies pay them for access to the land.
“No Albertan should derive personal benefits from Alberta public assets beyond uses the assets are intended to provide,” said the report.
The auditor general said the department of environment and parks does not know how many grazing leases have oil, gas or other industrial sites on them or how much money lessees receive.
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The office calculated that the province could be out $25 million from surface access fees.
However, the Alberta Grazing Leaseholders Association disputes the report’s findings.
“The auditor general did not understand how leases work,” said Stavely rancher Larry Sears, president of the leaseholders association.
Last year, the leaseholders association, the Western Stock Growers Association, the Alberta Beef Producers and the Northern Alberta Grazing Leaseholders Association came up with a new grazing lease agreement. However, it stalled when some stakeholders did not agree with the final proposal.
When an oil and gas company enters a lease, the lessee is entitled to compensation for loss of use, inconvenience and disruption of the operation. The government also receives a share of the compensation, said Sears.
In 1999, Bill 31 changed that provision so as the landowner, the province would receive the payments. The bill passed but was never proclaimed.
The auditor general said if it had, grazing policy would be similar to Saskatchewan and British Columbia.
The report also criticized leaseholders for using the land as collateral for bank loans. Leaseholders can sell or transfer a lease and they keep the entire amount for which the lease is sold.
By law, mortgages and the sale of grazing leases are private matters so it is difficult to find information on the exact value of owning a lease. The price of a grazing lease varies significantly throughout the province because of variables such as location, size and grazing animal unit months.
“The Canada Revenue Agency has deemed grazing leases as real property for years and has allowed them to be used as such and they are able to depreciate the capital costs of acquiring a grazing lease over the life of the lease,” Sears said.
“When the government starts to mess with these policies and regulations, it makes the banks very nervous. It is one of the reasons we have had a big debate over how we are treated.”
Environment minister Shannon Phillips said the issues raised in the report are significant.
“Moving forward, we will be working with the department to explore all options to ensure these leases on the public land are being managed in the public interest,” she said in an email.
There are 5,700 grazing leases on more than five million acres of public land.
The auditor general recommended several follow-up measures for the province:
- It should determine if grazing livestock is the best use of public land as required by the Public Lands Act.
- It should define its environmental, social and economic goals and objectives for grazing leases.
- It should lay out relevant performance measures and use them to assess whether grazing leases achieve the expected objectives and benefits.
The report pointed out that while private land often rents for more than government land, the government land lessees have fewer rights.
