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
Appendices                 Alberta Energy Regulator                 Other Alberta Departments                 Other Resources                 Legal Assistance                 Energy Industry Associations                 Provincial Non-profit Organizations                 Surface Rights and Local Groups                 Responsible Energy Development Act                 AER Oil and Gas Related Legislation                 AER Energy Related Legislation                 Other Provincial Acts                 Documenting Costs                 Glossary of Terms

Determining Compensation

As a landowner who may sign or has signed a surface lease agreement, you should track any time or expense that occurs as a result of having a well, pipeline or facility on your land. You should start logging this as soon as the seismic equipment shows up, and finish when you have a reclamation certificate in hand that you are happy with.

A landowner’s compensation offer for a surface lease considers five main criteria:

• the entry fee (fixed to $500 per acre)
• land value
• general disturbance such as initial nuisance, inconvenience, and noise (for the first year of the lease)
• loss of use of the land
• adverse effect

Although there may be other considerations specific to your situation, these are the criteria outlined in the Surface Rights Act. For more information about compensation, refer to Compensation and Surface Rights Access.

Negotiation expenses

Compensation should be negotiated early in your discussions in order to ensure that you and the company can agree on the reasonable reimbursement for your time. Keep track of all your time and expenses while negotiating with the company including activities like phone calls, researching, dealing with the company’s representatives and surveyors, negotiations, preparing documentation, and reaching out to third parties, lawyers, and government representatives.

If you begin as early as the project conception, you can include your records as evidence toward the reimbursement of your costs. If you provide a reasonable and detailed outline of time and expenses, the company may be persuaded to reimburse you; if they do not, the Surface Rights Board might award your costs. The Surface Rights Board has determined in the past that even if compensation was negotiated outside the Surface Rights Board process, lessors should be granted reasonable costs incurred while negotiating.2

Table 8 provides an example of cost tracking for activities during negotiations that you can adapt for your own use. You should number for each item for ease of reference.

Table 8. Example cost tracker for negotiations

Ref #	Date	Description	Expense	Time
1	05-02-2015	Meeting with land agent to seismic testing,		1 hr
2	06-27-2015	Land agent kitchen table talks, discuss surface lease access		1.5 hr
3	06-28-2015	Research on company, phone call with AER		1 hr
4	06-29-2015	Research on company history, reclamation, enforcement orders Environmental Enforcement Search history through Environmental Law Centre	$75	4 hr
5	06-30-2015	Cost of landowner consultant (preliminary investigation) ($250/hr)	$250 (1 hr)
6	07-05-2015	Land agent kitchen table talks, cont. discuss concerns on well placement		1 hr
7	07-05-2015	Cost of landowner consultant (additional investigation) ($250/hr)	$500 (2 hr)
8	07-02-2015	Printing costs of application and relevant documentation	$25
9	07-15-2015	Land agent kitchen table talks, cont. discuss concerns on flaring		1 hr
10	07-15-2015	Cost of landowner consultant (kitchen table talks, preparation) ($250/hr)	$500 (2 hr)
11	07-27-2015	Cost of landowner consultant (follow up to discussions) ($250/hr)	$375 (1.5 hr)
12	08-07-2015	Travel to and from SRB ADR process ($0.505/km)	$25.25 (50 km)	1 hr
13	08-08-2015	SRB ADR process negotiations		2.5 hr
14	08-09-2015	Surface Lease Agreement signed		1 hr

Adverse effect costs

Adverse effect is calculated at the time of signing for a surface agreement, and should consider probable effects in a future five-year period.

The Farmers’ Advocate Office has a good resource explaining the items that you may typically include in your adverse effect calculation. It captures tangible and intangible impacts as a result of the well, pipeline, or facility. Additionally, you should consider past Surface Rights Board decisions, such as the decision to grant annual compensation for a pipeline agreement for several residents.

Adverse effect could include:

• Extra time to farm around the operation
• Production losses (outside the lease) due to compaction, or extra turning of the combine to navigate around the lease site
• Impact and change for on-farm management decisions
  • Impact to GPS operations
• Adding strain on machinery
• Effort and cost for effective weed control
• Inconvenience to normal field operations
  • Extra care when in the vicinity of the obstruction, extra time
  • Time to supervise and inspect lands
  • Added stress on operator to not hit any structures
• Impact of exposure to non-lethal H2S for landowner, livestock
• General payment for a forced business relationship
• Other items unique to this lease

As these are probable future effects, anticipated costs and expenses may be hard to justify if they are speculative. However, every surface lease can be renegotiated every five years. In order to prove additional adverse effects that were not captured in your first lease agreement, being diligent about documentation can help make you whole in the next surface lease agreement for all costs and time caused by dealing with the lease on your land. The Surface Rights Board may consider a reasonable hourly rate for your time.

Table 9 provides an example of cost tracking for adverse effects that you can adapt for your own use. You should number for each item for ease of reference.

Table 9. Example cost tracker for adverse effects

Ref #	Date	Description	Expense	Time
36	09-04-2015	Fence damaged by truck crews; repaired fence (include photos)	$50 (barbed wire)	0.5 hr
37	09-10-2015	Cattle gate left open; rounded up escaped cattle (include photos)		1 hr
38	09-17-2015	Weekly rounds to check fencing, gate closing		.25 hr
39	09-24-2015	Weekly rounds to check fencing, gate closing		.25 hr
40	09-30-2015	Weekly rounds to check fencing, gate closing		.25 hr
41	10-07-2015	Weekly rounds to check fencing, gate closing		.25 hr
42	10-14-2015	Weekly rounds to check fencing, gate closing		.25 hr
43	10-20-2015	Pump-valve failure - uncontrolled release; moved cattle upwind, closed gates, contacted company and AER		2.5 hrs
44	10-21-2015	Company trucks responding to release caused ruts in field; repaired ruts		4 hrs
45	10-28-2015	Weekly rounds to check fencing, gate closing		.25 hr
65	06-01-2016	Controlled weeds on lands adjacent to lease road - scentless chamomile removal and disposal (include photos)		1.5
66	06-10-2016	Cattle gate left open; rounded up escaped cattle (include photos)		1 hr
67	06-11-2016	Phone call with AER and Company staff re: fencing		.5 hr

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