Annual Surface Lease Rent and the Surface Rights Act
We are seeing a disturbing trend by many oil and gas companies to ignore sections in the Surface Rights Act related to annual surface lease rent.
Under Section 27 (4) it clearly states the operator (the Oil company) shall inform the lessor (that’s you) within 30 days after the fourth anniversary of the original lease signing, of your right to have a review of that compensation and the right to renegotiate if you so desire.
Unfortunately many companies do not send out this notice. The reason is very simple……there is absolutely no penalty or consequences if they don’t! By ignoring a clearly stated requirement of the Surface Rights Act these companies can save millions……..money that is rightfully yours!
Upon contacting the Farmers Advocate Office to try to see if anything could be done about this, we found that the individual is basically on his/her own……….the FAO will not try to force the companies to comply, will not lobby the government to enforce the rules, will not make any extra effort to inform farmers and ranchers of their rights!
Kind of makes you wonder who they are really advocating for?
There is a solution: Under the Surface Rights Act there is another clause Section 27 (15) that says YOU can request a review of annual rent 30 days after the fourth anniversary. This is not limited to that time frame…..the generally accepted practice is a request for an annual review can be done up to two years after the five year anniversary. The company must respond or you can request a compensation hearing at the Alberta Surface Rights Board.
*We are also noting companies are sending out notices saying “We have reviewed your annual compensation and have found no increase is justified at this time”.
If you get this kind of notice (or one offering a smaller increase than what you think is fair) it is up to you to respond with a request to negotiate the annual rent.
The letter doesn't have to be complicated. Simply:
Company name Your name
Addresss Address
Date phone #/fax#/email address
Dear Sirs
This is to notify you that I __________ wish to renegotiate the annual compensation on -legal land description (found on the lease entrance) in accordance with Section 27(15) of the Alberta Surface Rights Act.
Thank you.
Yours truly
John Doe
cc FAO/my MLA
*It is advisable to ALWAYS correspond with the company with registered mail. Far too many letters to oil and gas companies tend to get “lost” in the mail!
Recently we have also seen company land men pleading poverty due to low natural gas prices. They will tell you they just can’t afford to give you an increase!
While it is true natural gas prices are low, this has nothing to do with you? You are leasing the surface, not the oil or gas……if they need a reduction in costs they should go see the owner of the oil and gas……or perhaps the municipality who is getting considerably more a year than you are, through the linear tax and the machinery tax!
So what is a fair price?
Annual rent is determined by two factors:
-Adverse Affect (basically the cost of farming around the lease, nuisance, lack of being to enjoy your property)
-Loss of use- the loss of income from production.
The company would like to pay you as little as possible…..you would like to get paid as much as possible!
Different areas have different “going rates” due to location, soil type, specialty crops, production records, etc. and it is difficult to come up with a “one size fits all”……..however having said that…….most companies have an established “pattern of dealing” for a given area that they will offer……after trying first to convince you to sign at a lower price! This “pattern” itself is usually a low ball figure and is not a real reflection of what is fair.
I will give you a general “pattern” offer for a 3 acre lease in the Red Deer area:
Adverse affect- $2200-$2300
Loss of use- Crop land and cultivated hay $450/acre and pasture land $350/acre
*I do not advise anyone to take, or leave these prices. This is your decision and you must decide what is best for you!
Personally I would ask for $2600 for adverse affect and $525 for crop, hay and pasture land! With increased costs in fuel, fertilizer, spray, labour, and machinery the adverse affect portion is not out of line at $2600? With the prices of barley, wheat, canola and peas……..$525 loss of use might be the bargain of the year!
I think most of us realize it is our own personal responsibility to manage our resources to the best of our ability? The government, the oil company, the neighbours, the Farmers Advocate office won’t take care of you? The government and the oil companies are quite happy to pay you as little as they possibly can!
The only one who will fight for you……is YOU!
Alberta Surface Rights Group
--------------------------------------------------------------------------------
We are seeing a disturbing trend by many oil and gas companies to ignore sections in the Surface Rights Act related to annual surface lease rent.
Under Section 27 (4) it clearly states the operator (the Oil company) shall inform the lessor (that’s you) within 30 days after the fourth anniversary of the original lease signing, of your right to have a review of that compensation and the right to renegotiate if you so desire.
Unfortunately many companies do not send out this notice. The reason is very simple……there is absolutely no penalty or consequences if they don’t! By ignoring a clearly stated requirement of the Surface Rights Act these companies can save millions……..money that is rightfully yours!
Upon contacting the Farmers Advocate Office to try to see if anything could be done about this, we found that the individual is basically on his/her own……….the FAO will not try to force the companies to comply, will not lobby the government to enforce the rules, will not make any extra effort to inform farmers and ranchers of their rights!
Kind of makes you wonder who they are really advocating for?
There is a solution: Under the Surface Rights Act there is another clause Section 27 (15) that says YOU can request a review of annual rent 30 days after the fourth anniversary. This is not limited to that time frame…..the generally accepted practice is a request for an annual review can be done up to two years after the five year anniversary. The company must respond or you can request a compensation hearing at the Alberta Surface Rights Board.
*We are also noting companies are sending out notices saying “We have reviewed your annual compensation and have found no increase is justified at this time”.
If you get this kind of notice (or one offering a smaller increase than what you think is fair) it is up to you to respond with a request to negotiate the annual rent.
The letter doesn't have to be complicated. Simply:
Company name Your name
Addresss Address
Date phone #/fax#/email address
Dear Sirs
This is to notify you that I __________ wish to renegotiate the annual compensation on -legal land description (found on the lease entrance) in accordance with Section 27(15) of the Alberta Surface Rights Act.
Thank you.
Yours truly
John Doe
cc FAO/my MLA
*It is advisable to ALWAYS correspond with the company with registered mail. Far too many letters to oil and gas companies tend to get “lost” in the mail!
Recently we have also seen company land men pleading poverty due to low natural gas prices. They will tell you they just can’t afford to give you an increase!
While it is true natural gas prices are low, this has nothing to do with you? You are leasing the surface, not the oil or gas……if they need a reduction in costs they should go see the owner of the oil and gas……or perhaps the municipality who is getting considerably more a year than you are, through the linear tax and the machinery tax!
So what is a fair price?
Annual rent is determined by two factors:
-Adverse Affect (basically the cost of farming around the lease, nuisance, lack of being to enjoy your property)
-Loss of use- the loss of income from production.
The company would like to pay you as little as possible…..you would like to get paid as much as possible!
Different areas have different “going rates” due to location, soil type, specialty crops, production records, etc. and it is difficult to come up with a “one size fits all”……..however having said that…….most companies have an established “pattern of dealing” for a given area that they will offer……after trying first to convince you to sign at a lower price! This “pattern” itself is usually a low ball figure and is not a real reflection of what is fair.
I will give you a general “pattern” offer for a 3 acre lease in the Red Deer area:
Adverse affect- $2200-$2300
Loss of use- Crop land and cultivated hay $450/acre and pasture land $350/acre
*I do not advise anyone to take, or leave these prices. This is your decision and you must decide what is best for you!
Personally I would ask for $2600 for adverse affect and $525 for crop, hay and pasture land! With increased costs in fuel, fertilizer, spray, labour, and machinery the adverse affect portion is not out of line at $2600? With the prices of barley, wheat, canola and peas……..$525 loss of use might be the bargain of the year!
I think most of us realize it is our own personal responsibility to manage our resources to the best of our ability? The government, the oil company, the neighbours, the Farmers Advocate office won’t take care of you? The government and the oil companies are quite happy to pay you as little as they possibly can!
The only one who will fight for you……is YOU!
Alberta Surface Rights Group
--------------------------------------------------------------------------------
Comment