Introduction
The Farmers’ Advocate Office (FAO) is a resource for rural Albertans who are negotiating with energy companies. We provide information on legislation and policy, and advise on your rights, responsibilities, negotiations and requests for compensation. The FAO tracks the common issues raised by landowners and generates advisories, publications and other resources specific to areas of concern.
Whether your concerns are regarding new energy developments or payments on existing developments, our staff can assist with negotiations, dispute resolution, process advocacy through the Land and Property Rights Tribunal or finding information related to your issue.
The role of the FAO is to work with industry, regulators and government to ensure that landowner concerns are addressed through dispute resolution support, Land and Property Rights Tribunal processes and other avenues.
Compensation payments
The negotiation of an agreement for compensation on surfaces leases with an energy company can be a daunting process. Some important considerations when involved in negotiations include:
- Under the Surface Rights Act, a landowner has the right to compensation for loss of use and adverse effect on the specified land.
- Landowners should ensure that they are satisfied with the terms of the agreement before signing.
- Agents are accountable to the Standard of Conduct under the Land Agents Licensing Act, which requires them to act in a manner that is professional and above reproach.
- The legislation also provides for some controls on the negotiation process to ensure a landowner is treated fairly and has adequate time to review the proposal.
- If a landowner feels they have been treated unfairly by a land agent, they can file a complaint with the Registrar of Land Agents.
- A review of the rate of compensation on the 5-year anniversary of the contract is also legislated under the Surface Rights Act. Parties should enter into negotiations in good faith.
Non-payment of compensation
Due to bankruptcy, insolvency or financial hardship, energy companies may not be making payments to landowners or may be distributing notices of unilateral rent reductions. Landowners should be aware that:
- A company is insolvent if it cannot cover its expenses. Insolvency does not mean that the company has entered a formal bankruptcy or receivership process.
- When a company is in receivership, it means that assets that were once put up as collateral to secure a particular debt are being sold in order to satisfy the creditor.
- If a company is in bankruptcy, assets are being sold and the money is being pooled to repay as many creditors as possible.
- When a company is under creditor protection, it means they are trying to restructure in order to continue operating, which usually means negotiations with its creditors and shareholders.
Considering the shifts occurring within energy industry in Alberta, the FAO strongly encourages landowners to practice extra caution with transactions relating to their surface lease(s) at this time. For more information, see our publications on this topic:
- The Language of Insolvency
- Unpaid Annual Rental on Oil and Gas Leases: Section 36 Surface Rights Act
- Liability Management Rating and Landowners
- Letter template for landowners: Rental Reduction and Default Clause
- Letter template for landowners: Rental Reductions, Anniversary Date and Good Faith Negotiations
Working interest participants
Under provincial legislation, other companies with a beneficial or legally undivided share in the licence are referred to as Working Interest Participants (WIPs). The Alberta Energy Regulator (AER) can look to the WIPs to lead on the abandonment or reclamation if the primary licensee became insolvent. The WIP would be responsible for the costs proportionate to their share of the reclamation costs and the remainder may be covered by the Orphan Well Association (OWA).
Land and Property Rights Tribunal
The Surface Rights Act provides the framework for the Land and Property Rights Tribunal and associated applications for Recovery of Rentals and Damages. The Land and Property Rights Tribunal (LPRT) is the quasi-judicial tribunal that oversees and administers decisions on matters related to surface rights. These include right of entry orders, applications for the recovery of compensation, rate of compensation reviews and applications related to off-site damages to land, livestock and personal property.
Costs incurred for LPRT processes may be recovered. The tribunal has the power to require the industry operator to cover these costs; however, a cost award is not a simple reimbursement. When reviewing an application for recovery of costs, the LPRT may consider a variety of factors in making decisions including the:
- reasons for incurring costs
- complexity of the proceeding
- contribution of the representatives retained
- conduct of a party in the proceeding
- degree of success in the outcome of a process
- reasonableness of any costs incurred
- whether a party has unreasonably delayed or lengthened a proceeding
These considerations may result in a smaller cost award than requested. If you are seeking professional assistance with an LPRT appeal, you should consider the possibility of a reduced costs award when negotiating your arrangements with agents or lawyers. It is important to understand the contract fully and keep in mind that costs not covered by the LPRT award may come out of your pocket.
Contact
Connect with the FAO:
Hours: 8:15 am to 4:30 pm (open Monday to Friday, closed statutory holidays)
Toll free: 310-FARM (3276) (in Alberta)
Phone: 403-742-7901 (outside Alberta)
Email: [email protected] or Ask us a question online
View all FAO contact information
Mailing address:
J.G. O'Donoghue Building
7000 113 Street
Edmonton, Alberta T6H 5T6