Alberta Landowners Guide, Surface Rights Board and Surface Agreements
 3rd edition | |
| Authors: | Duncan Kenyon, Nikki Way, Andrew Read, Barend Dronkers, Benjamin Israel, Binnu Jeyakumar, Nina Lothian |
|---|---|
| Publisher: | Pembina Institute |
| Publish Date: | October 2016 |
| PDF Download: | [Landowners' Guide] [Landowners' Primer] |
| Initiation Phase | |
| Exploration Phase | |
| Development Phase | |
| Pipelines and Other Infrastructure | |
| Environmental Impacts | |
| Abandonment and Reclamation | |
| Compensation, Rights, and Hearings Compensation for Wells, Facilities and Pipelines Surface Rights Board and Surface Agreements Before a Hearing Filing a Statement of Concern Post Hearing and Regulatory Appeals Surface Rights Board and National Energy Board Hearings | |
| Appendices | |
The Role of the Surface Rights Board
The Surface Rights Board can be involved in determining the compensation for a well, pipeline or facility through a right-of-entry order and the subsequent compensation hearing (see The compensation hearing process).[1] Cost awards for time and incurred expenses are also granted by the Surface Rights Board, with an example cost tracking sheet provided in Appendix D.
Right-of-entry orders when landowner and company cannot agree
If you, as the landowner, and the company cannot agree on compensation for right of entry, the company can take their case to the Surface Rights Board after the company has an approval for their project from the AER. Additionally, in some cases an operator and a landowner may agree, but an occupant does not give consent to the operator. In these instances, the board must grant the company a right-of-entry order if the AER has approved the project. If you do need to go before the Surface Right Board because you are unable to reach agreement, be sure to keep both a log of the time spent in negotiations and a journal of events. You may be compensated for reasonable expenses related to negotiations with the proponent company.
When the company receives a right-of-entry order from the Surface Rights Board, the
operator must first pay the entry fee and 80% of the last written offer (which may not be
the last best offer). The SRB will then facilitate a dispute resolution conference or
determine the amount of compensation payable through a compensation hearing
(see Regulatory Appeals for AER Decisions Made Without a Hearing).
The Surface Rights Board also deals with issues relating to right of entry onto
agricultural leases on public land for seismic operations (see Overview of Geophysical Exploration)
Right-of-entry orders when landowner and company agree
Sometimes you will be close to reaching an agreement with a company over their access to your land and the appropriate compensation, but still want to involve the Surface Rights Board by requesting that a company obtains a right of-entry-order.
Some people choose this option as they consider that a right-of-entry order by the SRB
protects their rights better than signing a private surface lease agreement or easement
form prepared by the company.[2] This has mostly fallen out of practice, as there may be
additional protection from registering your private surface agreement with the AER
(see Private Surface Agreements Registry below).
There are many reasons for this preference, including the fact that a right-of-entry
order can be reviewed at any time and updated if conditions change. If the board has
placed conditions in the order to protect you as the landowner (e.g., with respect to soil
conservation or other environmental protections) and the company fails to comply, you
can take the issue to the board, instead of having to go to court. In the case of pipelines,
a right-of-entry order enables a landowner to go to the board with a claim for
compensation for any damage that occurs during construction. (Note: This is different
from the compensation agreed to in advance for right of entry.)
If you request that a company takes out a right-of-entry order and are then able to
subsequently agree with the company on compensation without the board having to set
the rate, you can choose to have the agreement formalized through a Board
Compensation Order (see The compensation hearing process).[3] These compensation orders can only be applied
for once a right-of-entry order is in place, and thus, are not applicable to private surface
leases.
In the event that a right-of entry order has been issued, but you and the company wish
to enter a private surface lease agreement instead, the company can rescind the right-
of-entry order by making a request to the board.
Recovery of rentals when company fails to pay
If a company fails to pay the money required by a right-of-entry order or compensation order, you should contact the company to request payment. If the company has not paid within 30 days after the due date, you should apply to the Surface Rights Board. The board will ask you to provide the name of the company, proof of the lease, and the date that rent was last paid. The board will prepare and require you to complete a statutory declaration stating, among other things, the name of the company, the amount of rent due, and the due date. The board will verify the information and, if correct, notify the company that it must pay (where the company can be traced). If the company fails to pay, the board may suspend or terminate the company’s right of access under the surface lease or right-of-entry order.[4] After the right of access is terminated, the board can then make arrangements for you to receive payment for the lease from the Ministry of Environment and Parks via the General Revenue Fund (as provided for in the Surface Rights Act, section 36(6)). The Surface Rights Board will also contact the AER and ask them to deal with the well under their enforcement program (if the company is active) or the Orphan Well Association (for wells where no owner can be traced). You should continue to receive payment for the lease from the Ministry until the well and its site have been reclaimed, but you must continue to apply each year that a company fails to pay.
Recent SRB decisions have brought to question whether the SRB can make an order
terminating access rights of a bankrupt company, and grant landowner coverage for
lease payments. The SRB’s ability to terminate a bankrupt company’s right to access the
site, and subsequently to reimburse the landowner for unpaid rentals, is a matter of
when the unpaid rentals accrued and when the company was assigned into bankruptcy.
If the unpaid rentals accrued before the company was assigned into bankruptcy (as in
the case of Petroglobe Inc. v Lemke), the SRB is not able to make an order to terminate
the rights to a site. In later decisions, the SRB was able to proceed with terminating the
rights to a site if rentals were due after the company was bankrupt (Portas v PetroGlobe
Inc), which allowed the SRB to direct funds from the General Fund. This is due to the
federal Bankruptcy Insolvency Act, which prevents the SRB from terminating the rights
to a site in response to a company’s declaration of bankruptcy. However, the SRB is still
empowered to do so in response to unpaid rentals. In Rodin v PetroGlobe, rentals were
accrued both before and after the company was received into bankruptcy, so the SRB
was able to terminate its rights in response to unpaid rentals after bankruptcy, and
subsequently the landowner was able to recover rentals from before and after the
company filed for bankruptcy.[5] This issue will be of increasing importance if the
number of companies declaring bankruptcy continues to grow.
Compensation hearing for damages
The Surface Rights Board can also hold a hearing in some cases where you and a company are unable to settle disputes about compensation for damage caused by the company’s operations to land outside of the lease agreement (see The compensation hearing process). Additionally, a claim may be made for damage to livestock or other personal property that occurs on your land, whether or not there is a right-of-entry order or surface lease agreement in place for the particular area. The claim can include the time spent in recovering livestock that have strayed, as a result of the company’s activities.[6] Claims must be brought to the Surface Rights Board within two years and the total amount of the claim must be for less than $25,000.
Rental review process
The Surface Rights Board has the power to increase, decrease or keep annual rent the same. Surface lease agreements can be negotiated every five years, and both the company and the landowner have the ability to file a compensation review (also known as a rental review) with the SRB. The operator is responsible for giving notice for the review to the landowner within 30 days after the anniversary of the fourth year of the right-of-entry order or the surface lease. If an agreement can’t be reached, the party that wishes to have the rental amount changed must apply to the SRB for a compensation review. The request[7] should include
- name and address of the operator and lessor/respondent
- current rate and proposed new rate of compensation
- copy of the surface lease and any other relevant documents
- the effective date of the review of compensation
A compensation review will only consider a change in loss of use, or a change in adverse effect. As a landowner or lessor requesting a compensation review, you must show evidence that there is a change in the loss of use and adverse effect from the last agreement. The SRB will look at the pattern of surface lease dealings of all the wells in the general area that were drilled the same year as the well in question. If the SRB does not see a pattern, it will look at the farm evidence to examine a change. If the operator did not give notice to the landowner for a right of review, the SRB may award interest. Additionally, it may award reasonable costs that a landowner incurs by participating in the SRB proceedings.[8]
Private Surface Agreements Registry
If you are able to reach a private surface agreement with a company without obtaining any board orders from the SRB (right-of-entry order or board compensation order) you are eligible to use the Private Surface Agreements Registry (PSAR) (see Signing the Lease Agreement for registering your private surface agreement, and Responsible Energy Development Act for enforcement).
The AER-monitored PSAR gives landowners another recourse if a company fails to
comply with parts of an agreement. If the operator fails to meet certain terms and
conditions of a registered agreement, you can submit a section 64 request under the
Responsible Energy Development Act (REDA).[9] If the Regulator determines that the
company has not complied with the conditions of the agreement, the Regulator can
order the company to comply. If the allegations have merit, the AER can issue a
compliance order to the company. While the AER itself does not have the jurisdiction to
enforce this order, it does have the ability to follow up with a fine or have the order
enforced by a court judgement should non-compliance continue.[10] The PSAR can lend
further legitimacy to your agreement and give you stronger legal position if you must go
to court to address contract breaches.
More information about the PSAR and how to register is available on the AER’s website.[11]
References
- ↑ This material is from the Pembina Institute publication 'Landowners' Guide to Oil and Gas Development, 3rd edition (2016)'
https://www.pembina.org/pub/landowners - ↑ Stringam LLP, “Surface Rights: Form of Agreement,” 2011. https://stringam.ca/16-reasons-right-entry-order-better-surface-lease-easement/. This link has been updated since the 2016 publication; the updated link may no longer contain the original information. Surface rights lawyer Darryl Carter states his reason why he advises clients to request a right-of-entry order.
- ↑ Surface Rights Board, “How to Apply for a Board Compensation Order.” https://surfacerights.alberta.ca/ApplicationTypes.html. This link has been updated since the 2016 publication; the updated link may no longer contain the original information.
- ↑ Surface Rights Act, s 36(5).
- ↑ The Farmers’ Advocate Office provides a good summary of these decisions. Farmers’ Advocate Office, “Clarity on Recent SRB Decisions Regarding Bankruptcy/Receivership.”
http://www1.agric.gov.ab.ca/$Department/deptdocs.nsf/all/ofa15889 - ↑ Surface Rights Act, section 30(1).
- ↑ Surface Rights Board, Information Sheet: Guide to Review of Annual or Other Periodic Compensation (2012).
https://surfacerights.alberta.ca/Portals/0/Documents/Guide_to_Review_of_Annual_Compensation_Aug_2012.pdf. This link has been updated since the 2016 publication; the updated link may no longer contain the original information. - ↑ Information Sheet: Guide to Review of Annual or Other Periodic Compensation.
- ↑ Alberta Energy Regulator, “Private Surface Agreements Registry.”
https://www.aer.ca/protecting-what-matters/giving-albertans-a-voice/private-surface-agreements-registry.html. This link has been updated since the 2016 publication; the updated link may no longer contain the original information. - ↑ Giorilyn Bruno, “Phase 2 of the Implementation of the Alberta Energy Regulator: The Private Surface Agreement Registry,” ABlawg.ca, January 20, 2014. http://ablawg.ca/2014/01/20/phase-2-of-the-implementation-of-the-alberta-energy-regulator-the-private-surface-agreement-registry/
- ↑ AER, EnerFAQs: How to Register a Private Surface Agreement (2015). https://www.aer.ca/documents/enerfaqs/AER_EnerFAQs07_Landowner.pdf. This link has been updated since the 2016 publication; the updated link may no longer contain the original information.
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