surface leases

[cowman]

Recently I have been dealing with a company for a coal bed surface lease. Never talk money with these guys until you iron out your concerns!
Anyway they wanted to do this deal where they basically have no lease...just a well head and a goat trail in? Which sounds good, right? Unfortunately when it gets wet they have a tendency to drive where ever it suits their purpose! As well as every Tom, Dick and Harry can drive all over your place!
So my first request was they fence the lease and roadway in. My second request was I do the fencing, prior to the rig moving in and maintain it...all for a price! The third request was I control the vegetation and weed control...at a set price adjusted to inflation every year. The fourth request was one hole on this lease or further compensation. All these requests are very valid and it is doubtful they could win at an arbitration hearng.
The landman tried to steer the conversation to money for the actual lease and how maybe he could give me a few extra bucks to forget about these conditions...but I wasn't going there! Once they get you to discuss money you are hooped with the arbitration board!
He said he'd have to get back to me! Hopefully I ran him off.

[cakadu]

Like you've said many times before cowman, they'll eventually get what they want.

I'll be curious to hear from you as to how it has turned out so please keep us posted. There may be some valuable things for any of us to know when approached to negotiate these leases.

[cowman]

Linda: Without a doubt they will, but like you said with the power line, the trick is to get the best deal with the best possible conditions.
I have no doubt I'll get most of my requests met. Ran them past the lawyer and he thinks no arbitration board is going to turn them down. The one hole to a site is going to be the sticker but there is precedence for it. Areas west of Edmonton are getting full compensation for every hole drilled from one site...works out to $10K rent per year on one site! They have achieved this because they have a strong surface rights group that stood up to the companies!
Our own surface rights group is just getting going and has fairly good support. Called the Pine Lake Action Group and some very good people involved including Don Bester, a consultant, director on the Butte Action Group, and a member of the group that makes recommendations to the government on surface rights.
I actually get quite a few phone calls from farmers who need some advice. I always advise them to get out and join the surface rights group but it is amazing how many don't want to make the effort to do something to educate themselves or maybe they are too cheap to pay the $50 join up fee? It is kind of funny in a way. These guys think they aren't going to get screwed by the oil company and the landman is their friend! What can you say?

[cowman]

The proposed power line is supposed to go right in front of my son's house. He bought the land and built there because of the mountain view. He is fighting it as best he can, as are many other individuals and groups across the province. There is no doubt it will devalue land wherever it is located, so it makes me wonder why it can't go out in the green zone where there aren't any people.

[silverback]

Cowman, can you expand any further on the multiple well per site payment? They have been drilling them around here but only pay around half of full value for the second hole. Anyone to talk to about this would be appreciated. Thanks.

[cowman]

silverback: Will try to check out my source on this. It was from a representative of a surface rights group west of Edmonton. He gave us this info at our surface rights group meeting.

[cowman]

The Warburg Surface Rights group has been very active for years.

[dsinclair]

We have been following the development of the CBM and sour oil drilling in a variety of areas and are very concerned about the descrepancies in 'offerings and payments' made to land owners.
There was an article about a fellow in the Western Producer a while ago. He worked and negotiated with an oil company about drilling on his land. It was interesting because they met his demands- liners on the ground to prevent contamination, etc.You might be able to gert some information there.
Norma LaFonte from Wheatland Conunty, not sure what town though, is a land man who works for the farmer in such negotiations as yours, cowman. She is a licensed landman and really knows her stuff. She would be the gal to talk to!

[dsinclair]

Thanks dsinclair for the information. In many cases landowners don't have access to specialists in negotiating leases and are no match for the oil company landmen.

[cakadu]

We got the a write-up just before Christmas from AltaLink. Their "experts" say there will be no devaluing of agricultural land, no one will shy away from buying land that has a high voltage power line on it and there will basically be no loss of use to the landowner. I for one would like to see these studies that show that there won't be any significant loss to the landowner. I would also like to see the studies that say that there won't be any harmful effects to either humans or animals from the electomagnetic output.

I hope a lot of people got their comments in on the Terms of Reference for the EIA. We're supposed to see the final product before it goes out for tender. We're also supposed to get the results of the EIA before (and I stress before) the hearings start.

Emrald - does your son get affected no matter which proposed route the line takes or just if it goes one way over the other?

I believe Norma spoke on Agri-talk with Jim Fisher in the fall and she (or whomever it actually was) gave some very good pointers as to what to look out for and how to negotiate. (I note that the show is no longer on at noon, at least in the format I was used to hearing it in, - did Jim retire?)

It would seem that cowman's advice to not talk price until everything the landowner wants is settled is the more prudent way to go.

Sad fact of the matter is, that once the EUB makes it's ruling, it is pretty much a done deal. Esthetics are not an important part of the equation and for those that bought their land because of vistas and views, well it just don't matter much when it comes to big dollars being made.

Still, one has to fight the good fight.

[farmers_son]

Cowman’s advice is on the mark for the most part. Surface Rights Groups are able to move the oil industry forward on issues such as rentals and even one hole per payment while an individual would be hard pressed to achieve the same results alone.

Farmers do try and negotiate with the landman on their own. Many believe it is found money and ignore the very real long term problems associated with that well or pipeline. And lets face it, money is scarce right now on farms throughout the province and most are in no position to argue. A sad comment really when the provinces two major primary industries are at such opposite ends of the economic spectrum.

I do not think Cowman would be successful going before the Surface Rights Board looking for an order that would see him build the fence and get paid for upkeep. Ditto for controlling the vegetation and weed control. We have a neighbour who custom fences for the oil industry and the last two wells on his place were fenced and he got paid to do the job. But that was achieved through negotiation. The Surface Rights Board would only hear matters regarding compensation and although their order does include a few restrictions on the company but I have never known the Board to alter those conditions on a lease by lease basis. The SRB would never put itself in a position of telling a company how to operate its wells and who its contractors had to be.

There are a handful of land agents who do work for the farmer. The Farmers Advocate may be able to give a name. And some farmers have had enough wells on their property that they are knowledgeable regarding surface rights themselves. But I would say that it is impossible to get up to speed on all one needs to know about wells and pipelines if it is the first time you have been approached by the oil industry. Assistance from a Surface Rights Group or a competent lawyer would be very useful and result in the farmer being more content with the deal struck than if they attempted it on their own.

Regarding the word arbitration. Farmers should know that the Surface Lease they sign probably contains an arbitration clause. That should not be confused for the Surface Rights Board. The Surface Lease or easement arbitration clause refers to a dispute settlement procedure that involves the company picking a person, the farmer picking a person and those two picking a person and the three of them settle the dispute out of court. While in theory this can be a useful way to settle disputes the farmer needs to be aware that if the company wants to play rough they can. The company could hire a very high priced lawyer to be their representative in the arbitration process and no matter who the farmer has as his representative the company lawyer would insist on the third person being a retired judge. The company could make the arbitration process as expensive as possible with a possible outcome that the farmer may have to stand the cost of the arbitration. What the arbitration clause does achieve is ensure that disputes stay out of public court but it also means the farmer does not have the ability to use Small Claims court to get money owed. Bottom line the arbitration clause only works if the two parties want it to and if there is that much good will between the farmer and the company they could probably settle their dispute on their own. Otherwise arbitration can be more expensive than court with no option to appeal.

The only way to have the Surface Rights Board settle future disputes is not sign a lease or easement rather insist on the company acquiring what is known as a Consent Compensation Order from the Surface Rights Board. In these cases the farmer and company agree on the compensation and the Surface Rights Board issues a Right of Entry Order and a Compensation Order without a hearing. The farmer never has to sign anything.

[farmers_son]

Linda, many tax assessors will tell you that a power line, hog barn etc. will NOT devalue farm land but the kicker is what it does to the value of the house and three acre site where you reside.
My son has a seven acre parcel and house worth in the neighbourhood of $450,000 and the power line is scheduled to go on the property immediately west of his acreage, which will be in full view of his windows where at this point he has a beautiful mountain view. He will only be affected by the one proposed route. His comments to the people that contacted him was to put the line out in crown land so as not to adversly affect any residential land.
I do know that the Surface Rights Board is expecting to hold numerous hearings on the propsed power line, and that is going to be a challenge since they are so backlogged at this point in time that it takes around six to eight months to get in front of a hearing panel. Apparently they are in a reorganization mode at this time and have just hired a new chairman.

[silverback]

I know these guys will argue high and low that there is no devaluation, but they never want to talk about future development or subdivision potential. It sure looks like they are trying to ram as much in as fast as possible to get ahead of the development. What are the setback distances from these lines?? How close could you build a house? Surely that affects the value of the land.

[cakadu]

As far as I know silverback, the setback they are asking for in the case of this new Genesse to Lochend line is a 60 meter right of way. It is a 500 kV line so that must be the reason for the greater setback. I believe you've hit the nail on the head - there is no devaluing so long as the current owner holds the title to the land. Try and sell it or have it developed in the future and that is where the problems arise.

For us, a 60 meter setback, with nothing higher than 3.5 meters underneath of it, will ruin the natural area that we have on the east end of our quarter. It is one of, if not the only, wildlife corrirdor between two rivers in this area and it is a conduit for all 160 miles of drainage ditch that is dug out here every year. We have the added worry that with all this water run off that has been occuring since 1912, that we are in dire need of water and recharge out here, the flooding of 2005 notwithstanding.

Other major concerns are storm water management, erosion potential and the value of natural capital.

Emrald, others have suggested it go out further east - so it can tie into Sheerness etc. and have it impact far less people and development. The big thing is that they know that no matter where they put it, there will be opposition.

A point of clarification f_s, quite often arbitrators are lawyers and/or retired judges but not all are. Anyone can take training to be an aribitrator or mediator/negotiator through various Alternative Dispute Resolution training facilities. Here in Alberta it is the Alberta Arbitration and Mediation Society. You are quite right about going the arbitration route. You have to be willing to abide by the ruling given by the arbitrating panel - that decision is final and binding with no recourse.

[silverback]

I know these guys will argue high and low that there is no devaluation, but they never want to talk about future development or subdivision potential. It sure looks like they are trying to ram as much in as fast as possible to get ahead of the development. What are the setback distances from these lines?? How close could you build a house? Surely that affects the value of the land.