Farmers warned about attempts to lower well compensation payments

Three Alberta energy companies are seeking lease payment reductions from landowners or have unilaterally reduced paid amounts and the Alberta Farmers’ Advocate Office has issued warnings to farmers and ranchers about these attempts.

Ember Resources Inc., AlphaBow Energy Ltd. And Lynx Energy ULC are reviewing their annual compensation payments to landowners and seeking reductions in the amounts, the FAO said.

“It is important for landowners to know that energy companies cannot unilaterally reduce annual wellsite compensation payments,” it said in its advisory. “No change to surface lease payments may be made without first undertaking good faith negotiations to reach agreement with landowners and, failing agreement, obtaining an order ‘fixing, confirming or varying the rate of compensation payable’ from the Surface Rights Board.”

Many landowners have been aware of attempts to reduce lease payments for months. The drastic downturn in oil and gas rates have put many energy companies into financial difficulty and some have gone into receivership or bankruptcy. Those remaining are seeking options to reduce costs.

The FAO said the review process under the SRB requires energy operators to give notice to landowners of plans to review lease payment

amounts within certain time limits and if good faith negotiations fail to produce an agreed rate of compensation, either party can apply to the SRB for a hearing to set a new rate.

“In the view of the FAO, the information sent to landowners by the various operators does not meet the statutory requirement of good faith negotiations,” it said in the advisory.

Some landowners have received and cashed cheques from energy companies for amounts less than the previously agreed lease payments. The FAO said cashing such a cheque does not necessarily imply acceptance of the amount.

However, the landowner must still inform the energy company that he or she does not accept the new rate and wants to either negotiate a different amount through an SRB application or maintain the previously agreed amount.

Lease payments from energy companies to landowners are designed to address adverse effects on land, inconvenience created by the surface disturbance and loss of use. Landowners cannot legally refuse energy companies the right to oil and gas extraction, though they can demand that a right of entry order be issued before allowing access.

The FAO has template letters for landowners who wish to challenge energy companies that are not paying the full compensation owed. They can be found at:

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