Surface Lease

[CowsRus]

I have the "good fortune" of having an oilwell coming onto my property. We were all excited about this until the land agent came and we saw what was being offered. Does anyone know where I can obtain current information about the value of surface leases in this day and age. We have never had a well before.

What a shame, with all that we have to deal with these days, and then we have to deal with an old, shrewd and somewhat dishonest land agent on top of that. With the value of oil products going through the roof, it seems a little unfair that an oil company would offer less that what I thought was being offered 12 or 15 years ago. This (the oilwell)certainly
hasn't brought any happiness into our lives and it looks like it will bring very little money.

[kato]

If oil guys are anything like gravel guys, do your research before you do anything else. We've been dealing on and off with gravel companies over the past few years. What an eye opener that is!

The more knowledgeable you are, the better. It has kept us from being shafted more than once.

[hgb]

Try to prove everything you want on paper 1- title searches to establish local land values 2- Use crop insurance records to prove yeilds 3- sales receipts to establish values ( your allowed to use the highest values received in the last 3 or maybe it was 5 years)
On a land mans first visit they are supposed to present the owner with booklet about negotiating a lease and if you can put together some numbers with established values from the above ideas they don't argue the point. As this is the way the arbritration board looks at the situation if it comes to that.
After establishing the lease value thru Land value, loss of production, and adverse effects comes the tough part trying to spring them for the little extra. I have seen leases with this extra written in on the bottom, but never gotten to far with it.(A land man will swear that this signing bonus doesn't happen any more, Patience in trying to wait him out is probably ones best bet here.)

[rsomer]

If you are in Alberta, try the Farmers Advocate in Edmonton, 780-427-2433. Also Surface Rights Board at 780-427-2444 who can provide information on board awards in your area for a small charge or direct you to libraries where the information can be viewed for free. The farmers advocate may also be able to direct you to a surface rights group in your area. Try and learn as much as you can but sign nothing until you are satisfied.

If you have concerns about the conduct of a land agent contact Gerald Kress, Deputy Registrar of Land Agents at (780) 415-4619. The land agent is a professional negotiator who is working for the company, it is up to you to look after your interests.

Concerns about location of the well and non money issues are best directed to the Energy Utilities Board at 403-297-8311.

All the above numbers can be reached toll free by first dialing 310-0000.

Hope this helps.

[cowman]

Cowsrus: For every area there is the "deal". In my area that works out about $15,000 per lease(first years rent included). Rent is about $3,000/year. This is just how it is. Now if your lease is over 4 acres maybe you can get a bit more.
Talk to the neighbors! One of the things that really bugs me is how secretive farmers can be! Big businessmen?...landmen love it! Phone up somebody(as many people in the area that have had wells) and ask them what they got! You need to know what other guys are getting!
Land men are not necessarily crooked...just doing their job! Which is to get the best deal they can for their client(the oil company). Look at it from that perspective!
And really lets face it they pay one hell of a lot more than barley or cows!
If you really don't want it?, make it difficult for them. Insist that they change the survey 10 times, threaten the landman with violence, say you'll take it to arbritation! They'll get the message that you don't want to deal with them and move over to your more co-operative neighbors place and deal with him(and directional drill under your land)! And if they insist your place is it and you take them to arbritration: make no mistake you will lose!!! I have never seen one where the farmer won(I assume your in Alta.)!!!
If you think you are really getting screwed go see an oil lawyer! Mostly they are used for mineral rights and I don't know if it makes sense for surface rights. Never hurts to ask I guess and they don't charge you to say forget it. I do know from personal experience that a GOOD oil lawyer can save you thousands of dollars!
Realize you are a little one time guy dealing with professional people. Sometimes a good and willing attitude can reap a lot of benefits! Oil companies know who are their friends in the country and who they should avoid! Believe me, I've seen the blacklist maps!
I could go on and on. I've seen so much of this garbage! Please get on the phone! Talk to the local yokels! Educate yourself!!!
p.s.- The farmers advocate is a complete joke. Don't waste your time!

[cowman]

Sorry to carry on but wanted to add one moe thing. When the well is drilled and it comes up a duster don't be too eager to sign off! They may have it looking like a garden but don't sign anything!
They will offer you a little "incentative", say $2,000....don't do it!!!
It takes 3-5 years for them to get approval from the government if you refuse to sign off...3 years= $9000 rent! 5 years= $15,000 rent!!!
On top of that if there is ever a problem environmentally, guesswho's holding the bag? If you didn't sign then it is the government, if you signed then get ready for a whole lot of fun!!!

[rsomer]

cowman: I agree with some of your advice but disagree with some too.

you said "Talk to the neighbours", yes! A good lawyer can help but how do you know which are good? This is the kind of thing the Farmers Advocate or surface rights group can help with. The Farmers Advocates I dealt with are very dedicated.

You said "Don’t be eager to sign off", absolutely right.

I have assisted farmers negotiate surface rights with the oil industry for over 20 years and know the SRB is not to be feared by farmers, they are fair. Yes, some companies offer good money and the SRB may award less but other companies are consistently low and the SRB will award more. The SRB very seldom awards less than the company offered the farmer, often it is more. The farmer needs to be able to recognize a good offer when he sees one, some basic research will help him do that. As you say "Talk to the local yokels! Educate yourself!!!"

The $15000 and $3000 you suggested is unattainable in this area unless the well was right beside your house even then it would be very tough to get. Having a well right beside your house may be a bad location and the money may not be worth it. In a case like that it would be reasonable to ask the company to move the well. Reading between the lines, I suspect cowsrsus did not receive such a generous offer.

Sure the oil industry may avoid some very radical people like Weibo Ludwig but directional drilling costs money too. Drilling a well is expensive and the company really decides to drill based on expectations of a producing well, not on which farmer is going to accept $500 less. There is nothing wrong with becoming knowledgeable and doing some negotiating of your own to end up with a fair price.

Note how the oil industry negotiates with the farmer. They focus on the money, a little time is spent on the wording of the document to be signed, very little or no time is spent discussing the location. The farmer needs to realize that the oil company’s priorities are opposite to that. The oil/gas company wants the location and the right to drill on that spot more than anything, after all the company is going to spend lot of money and wants a producing well. They believe that spot is the place that is going to make them rich and have already invested time and money in choosing that particular location on the farmer's land. The documentation is important because the company has to live with the agreement and often the wells are sold to other companies who won’t want to inherit a restrictive document. And lastly and certainly least for the company the money is of little importance. It doesn’t even get a line on the budget. That has been my personal experience in over 20 years working as a land agent myself negotiating countless wells exclusively on the farmers behalf.

"Sometimes a good and willing attitude can reap a lot of benefits!" Yes. But all too often dealing with the oil industry is not a happy experience for the farmer. I have seen farmers hounded by the land agent to such a degree that the farmer and his wife were in tears. No one needs or deserves that kind of treatment. It is hard to keep a good and willing attitude when dealing with a land agent like that. There are good companies out there who deal fair with the farmer but some are not and the farmer doesn’t get to choose which one comes knocking at his door.

[CowsRus]

Thanks for your help. The landman that I am dealing with is Keith Mclean from Township Land Company. He is representing a new oil exploration company that just started up in June of this year. We were offered $5000 for a 5 acre site and 1750 per year. I did not what was reasonable and I mentioned that I thought 1750 was low yearly compensation for up here. He looked at the survey and said OOPs "I made a mistake. I thought you had five acres and the survey says 4 acres", so he lowered his offer accordingly down to $4100 for 4 acres with 1300 yearly. I talked to the Farmers advocate today and they put me in touch with Darryl Carter. By all reports everyone says that what I have been offered is very very low. This Keith Mclean showed up at my house, and I got to know him a little bit. He is an old time land agent who got his start in the Leduc oil boom and Calmar areas. I think that he has a feeling that farmers are the scum of the earth. I just do not understand why these fellows can not be fair to deal with. I can assure you, that even in difficult times like we are experiencing, for the amount of money they are offering, I wish that I never saw this oil well, and that I did not have to deal with these kind of people.
I probably won't deal with Mr. Mclean. Mr. Carter or someone like him can deal with people like Keith Mclean, and land agents of his sort. Its just too bad that the oil companies cannot be fair to deal with. An oil well coming onto my land could have been good for everyone.
I am finding out that I do not know very much about these issues (surface leases). People are telling me that I need to learn about these things.

I work off the farm as well as raise cattle, and the work I am involved in is very demanding and I am learning new things all of the time.
I do not however, have the time to learn all about the tricks of the trade necessary to deal with an individual who seems to be determined to take advantage of me. I wish I could just tell him to stay away until he wants to make a deal that is fair for both side.
Some people like a fight. I do not.

These land men seem to want to entice the farmer to start dickering over what is a very low amount to start with. This guy went beyond that and started low and then came down from that. The land agents try to draw people down to their level. I kind of thought that an oil well would be worth about $9500 to $10,000 up here. I was maybe wrong. I can tell you that I will not be as envious as I was, when I see a drilling rig move in on my neighbours land.

[les]

Around here we are getting about $2000 per acre.(east central AB )with an annual of between $2500 (5 acre)to $2800 (6 acre)
A good book to get and read is from the pembina institute. Think it is called When The Oil Company Comes To Your Backyard. pembina is a nonprofit outfit so there is a charge for the book but it is well worth it.

[cowman]

Cowsrus: I wasn't trying to be harsh with you. Most farmers only have to deal with this sort of thing a few times in their lives and are behind the eight ball right from the start.
Consider the whole thing as similar to buying a new vehicle or piece of equipment. You go into the dealer and basically you don't have a clue. The car salesman does twenty deals a week. You don't just pay the sticker price, right? You play the game. You get the best deal possible. You still probably get screwed...just not as bad!
Your land agent has been around a long time so he must be doing something right! Most oil companies are fairly sensitive to good public relations. I suspect if you tell him it just won't do he'll up the ante a bit. Might have to let him stew for awhile though! He'll be back! That's just how the game is played!
There are other things you can bring up that just might give him some incentive to up the price. Start talking about how you intend to grow seed grain on this land and how you will require all equipment to be steamed off before entering!Make sure he understands you'll need to have it written right into the lease!
Money is a big issue with oil companies in regard to farmers! Not because they can't afford to give you a few thousand extra(they blow money on all sorts of things like drunken sailors!)but because if they give it to you they have to give it to everyone else! If they are a big player in your area that can mean a lot of money.
I've dealt with a lot of landmen over the years and I've never failed to make a deal. Could I have made more by going to arbitration? I don't think so and quite frankly I have no desire to do that little runaround. I've never run into someone I couldn't deal with. Some were pretty tough but thats okay they are just doing their job. And you need to do yours! Phone up every guy within ten miles around you, tell them your situation, tell them what the offer is and then ask them what they got. You just might find out that is the "deal" for your area! If the going rate is $1000 an acre don't expect to get $1200 because it just won't happen.
Anyway good luck and remember it's all a game and don't let it upset you.

[rsomer]

CowsRus: Daryl Carter has done work for me and people I was assisting and everyone was very satisfied. Dealing with the land agent is not like dealing with a car salesman because if the car salesman is rude, insulting, dishonest, and hassles you then you can leave and take your business elsewhere. You get to choose which car dealership you want to deal with, you don't get to choose which oil company comes knocking on your door. Cowman is right, it really is just a game. From what you have said hiring a lawyer to play the game for you sounds like a good move.

[hgb]

Neighbors and ourselves have had dealings with this landman. Heard the same pitch about new oil company story and rest of the B.S. To make along story short tell him to take a hike.

[CowsRus]

HGB Thanks for the comments regarding Mr. Keith Mclean. There are probably lots of farmers that have had to deal this this man.
I do not want to suggest that all land agents are confrontational and dishonest. But unfortunately some are.
Thanks everyone for your help. I do not feel alone in this matter.

There have been a number of comments like "Remember its just a game"
Its good to remember not to take this too seriously and I will not be letting it upset me or my family. Thank God someone can play the game for me. I do not need to get down to their dickering level, considering the little extra I am going to gain in this deal.
But what a shame that the oil companies approach is so tough, really they take a bullying approach to dealing with farmers, or at least this company is taking that approach with me. I wonder if the world that they operate in on a day to day basis is a world of dishonesty, a world where the strong overtake the weak. I wonder if, to the oil companies, that this is all just a game, and it really doesnt matter how you play the game as long as the end results are favorable to them and exploration carries on, meeting the demands of the consumer.

Regarding government policy. At the present time I do not have the feeling that the provincial government is against the farmers, certainly I do not feel abadoned as a cattle producer with the BSE crisis. (The Alberta Govt. might not have the money to support our industry if not for oil revenue)
However the provincical government seems to support the oil industries position in dealing with farmers. It seems to me that the provincial government tries to create a positive and favorable environment for the oil companies to operate in. Well thats OK.
But why does it have to be at the expense of the farmers.
Certainly the oil companies need to be protected against unreasonable and unfair farmers. And there are some unreasonable farmers around, hard to believe isn't it.
Its unfortunate that the provincial government was forced to set a minimum standard of conduct and fairness for the Oil Companies to follow. Without this minimun standard the Oil Companies would walk all over us. In the give and take of the govt.trying to please the oil companies and be fair to the farmers, I feel that the minimun standard of conduct and fairness set by the govt, and imposed upon oil companies is a little low. I would think that the minimun standard for pricing and conduct at the least is--Would the majority of farmers be sorry if the oil companies took their business elsewhere and went onto the neighbours land. If the majority of farmers would feel a sense of loss, (with the well going on some elses land) then the deal was not too bad.
In this case I would not be sorry to see this outfit goes somewhere else.

[CowsRus]

HGB I went over some of your helpful comments again. You mentioned that the land man is supposed to leave some booklets and handouts. Well Keith Mclean of Township Land did not leave anything but a contract that he expected me to sign right away. This guy is a real chip off the old land agents block. Thanks again for your comments.

[hgb]

I beleive the booklet is called Alberta Landowner's rights negotiating surface leases . In our case dealing with Mclean he should up the same morning another landman was scheduled to arrive, he went right into the same matter, as we going talk with the other landman we were expecting, He demanded we sign, told him no, next the other landman shows up, well we learned alot more about him after that. Steer clear of him as he burnt some neighbors of ours before we met him. Best advice in this link was posted earlier that neighbors should talk with each other over these sort of things.