Edmonton

Non-payment of land leases on track to set new record

It used to be landowners could count on regular cheques from companies leasing sites on their land for oil and gas operations. But with the drop in the price of oil and downturn in the economy, in some cases, the cheques have stopped coming.

'It's almost four times our normal average,' says chair of Alberta Surface Rights Board

Payments can run anywhere from $500 to $5,000, depending on the age of the well, the location and the arrangement made with the landowner. (CBC News)

It used to be that landowners could count on regular cheques from companies that leased well-sites on their land.

But with the drop in the price of oil and downturn in the economy, many of those cheques aren't coming in, and taxpayers will have to make the payments instead.

The Alberta Surface Rights Board takes applications from landowners who haven't been paid their annual surface rights lease cheques. Those cheques can run anywhere from $500 to $5,000, depending on the age of the well, the location and the arrangement made between the company and landowner.

So far, 2016 is on track to set a new record for the number of application, said board chair Gerald Hawranik. 

"It's almost four times our normal average," said Hawranik, who attributes the spike in claims to companies struggling in an unsteady economy.
Gerald Hawranik predicts the Alberta government will pay out more than $3 million in compensation to landowners.

"It's all over Alberta. And I think it's really a function of oil prices. And it's creating some financial difficulties, and we're seeing it on our end."

As of August 3, 2016, there were 780 applications opened by landowners who weren't being paid by the company leasing their land. Another 400 applications were in a backlog waiting to be processed.  

Hawranik said at that rate, the potential exists for the provincial government to be on the hook for record payouts in compensation.

"At the beginning of 2016, I was predicting 1,600 to 2,000 applications," he said. "I think we're going to exceed that, substantially. And we were predicting about a $3 million recommendation (compensation), and I think we're going to exceed that substantially as well."

"It's all a function of the ability of operators, oil companies, to make those payments. And as we know, the oil prices are not very high at this point and they're not projected to increase substantially over the next year or two.

"Sometimes they're completely out of business, sometimes their corporation has been dissolved, sometimes they're in receivership, bankruptcy, or sometimes they just refuse to pay."

The surface rights board is a tribunal that mediates disputes between landowners and companies that want access to private land for resource operations such as oil and gas, coal deposits or pipelines.

If operators can't or won't pay, landowners make an application to the surface rights board. The landowner is eventually paid by the provincial government.

Hawranik said in the past, small operators were the ones who stopped paying. But now they are seeing mid-sized companies stepping away.

Peter Dobbie, the Alberta's farmer's advocate, said his office is aware of up to 1,000 landowners who have been contacted by companies that say they can't pay or want to try to renegotiate terms of their contracts.

 

now