Coalbed methane

[cowman]

About a week before Christmas my friendly landman dropped in and told me they are going to drill the three wells on my land that we'd negotiated earlier. I got paid for all three in October. They will drill them before spring breakup.
He wanted to talk pipelines and we'd already done a lot of this and had ironed out a few things already. The lawyer had done his thing.
We had a few sticking points? Because a pipeline is a right of way or easement they pay entry fee of $500/acre and the land cost, in my case $2700/acre. The sticking point on these pipelines we were discussing is I am asking for a "nuisance cost" which they definitely do not want to pay! I've already negotiated a seeding cost and a spraying cost at $150/acre each/ $300 acre in total. No problem there.
I told him of course I need some "nuisance cost" as I will have to move cattle, be limited in hauling feed, and it will limit where I can feed...which will affect my overall farming plan and the spreading of nutrients by the cattle!
Now he is a good boy from a farm and he says he understands where I am coming from but might have some trouble trying to convince the "suits" at the office!
There is another proposed pipeline that we have some major differences on and I think we are headed to the surface rights board on that one! It is a transmission line that has nothing to do with production wells on my land and will cause me major nuisance and adverse affect! I have discussed this line with a consultant out of Three Hills and he thinks I have a very good chance of getting a yearly compensation.

[silverback]

How would you be able to get yearly payments on that transmission line?

[Horse]

I finaly settled on the pipeline on 80 acres that I am selling at 3375/acre they paid me but 1375$ was for damages as they were paying 2000/acre and I got temp work space on all the line not just where they crossed the road and bent around a corner. I will get damages if there are any but this is on worked stuble so probably not.
They say they would have gone to arbitration but were in a hurry to go, If I wasnt selling this land I would have held out for the 3375/acre as a per acre cost instead of letting them off with the damage thing so they can still say they only pay 2000. This land is near Mornvile and this is the real selling price so that made it harder for them to argue with.

[silverback]

Sorry, are you saying that you are selling the land for $3375/acre? or $2000/acre?

How close to Morrinville is that?

I didn't realize things were that high up there too.

[cowman]

Well Horse glad you stood up to them and got some good money out of them!
Silverback: Yearly compensation would be based on adverse effect? The argument is that I will have a caveat on that land as long as even one of the 40 some wells are sending gas through that line? Remember I have zero gas going through this line...it all comes from the south of me?
There are a few guys trying this idea? There was three hearings in early December on just this thing, but I don't know how they went.
It gets complicated but how I've got it set up the company has to deal with me(and pay me for my time, expenses etc.), or face a lengthy process taking possibly years, or go somewhere else? Personally I wish they would go somewhere else! In the end I doubt they will go for a yearly adverse effect as they won't want to set a precedent, but a yearly consulting fee would probably be acceptable! The lawyer told me I might just pull this off but must be prepared to play hardball!

[Horse]

I am selling the land for 3375/acre and they agreed to pay me the same but they put the land down as 2000 and damages at 1375 so I get 3375/acre for the easement.
Thats 7mi west of town I Think this is a kind of new high but there is town water just across the road, I dont have the money in my hot little hand yet but if the deal fails on the 20th of january I have a backup offer for another 40/ acre I wont spend it just yet but there sure seems to be a lot of lookers.

[silverback]

Are you that close to Edmonton or what is driving those prices up there to those levels?

That's pretty good in my opinion.

[farmers_son]

We were watching an old movie on TV a few days ago. The movie was set in Rhwanda or some poor part of Africa. A rich oil baron wanted to put some big project through and to get the support of the locals he drove into town in a jeep and threw bags full of money in the air. Of course the poor locals all ran to grab the money and the project went through.

It seems to me that although the location is different and the color of the natives is mostly white everything else is the same as the Africa analogy. A rich oil baron comes into town and throws money into the air and all the poor locals run out to grab what they can get. Whether the local got $2000 an acre for the pipeline or $3375 an acre it is just paper money thrown into the air, baubles that the poor will gratefully accept and then bow and sc**** before the rich oil lords who then turn around and sell them the oil and gas that came from below the locals very own land. The locals are charged record high prices to buy the oil and gas which they need to survive in the cold harsh climate.

Horse did very well considering the circumstances. Good for you. If you had not taken what the company offered they could have gone to the government (Surface Rights Board) who would have taken your land by force and given it to their generals, the oil companies. The government that would take your land by force is the same government that owns the oil and gas and is the same government that gives the oil and gas to big, often U.S. oil. Big U.S. oil in return keeps the government in power.

Although we might be uncomfortable with the comparison I would ask if there is any difference at all between what goes on in a third world African nation ruled by a corrupt ruler and the way farmers are treated in Alberta when it comes to the mega energy complex and farmers rights to their land.

The province owns 81% of the oil and gas in this province. There are about 40,000 oil wells and 100,000 gas wells being operated in Alberta at any one time. In 2005 Alberta exported $57 billion worth of oil and gas. In 2006 that would have increased but lets consider a ballpark figure and say that the oil and gas taken from beneath our feet is worth $70 billion annually. That works out to about ½ million dollars per well per year. And then lets consider the BS that the landowner has to go through to try and get a fair payment for their surface rights. While the energy companies are making record obscene profits the landowner is having to fight and dig to get what they can from the oil company landman.

The way our province’s landowners are treated by the Alberta government and their generals, the oil companies, is nothing less than an embarrassment to everyone living in this province. Why does the prosperity this province enjoys have to come at the expense of the man and the woman living on the land? If the pipeline were any other industrial project being built on private land that land would be worth 10 to 20 times what the landowner receives. The reason landowners do not get paid a fair price is because the government will take that land by force if required (through the Surface Rights Board) and only require the oil company to pay the landowner 10 cents on the dollar what its true value is, then turn around and give the right of way to their generals, the oil industry. It makes us nothing better than a third world tin pot nation.

[jensend]

well said but you're right; some people will be uncomfortable. it's an indication of how far things have gone as investment becomes more valued than labour. talk of free markets is a joke as we watch market power become more important than productivity or innovation. in the meantime we can continue to swallow the propaganda of our govt.'s about what great custodians of the environment they are. say, where did those rivers go, anyway?

[cowman]

Farmers son: You probably said it fairly well! Thats pretty well how it is!
The first step to empowering yourself is through education? Learn just what you can do? You are still at a disadvantage...but will get the best deal you can under the circumstances!
If possible, join a surface rights group. They sometimes are a little off the wall but you will learn some things and you will get an idea how others are doing in regards to the oil companies?
Actually as of late the Surface Rights board is treating landowners a little better? Some favorful decisions have come down?
The most important tool you have in your arsenal right now is the "discussion agreement"? This is a legal contract that is available through your surface rights group. It basically asks the company to pay you for your time, research, milage, other costs if you agree to talk to them? If they refuse and go to the surface rights board to apply for a right of entry, you file an objection(Surface rights groups will help you) and the board will send the company back because they have not tried to negotiate in good faith!
A lot of companies agree...a lot go across the road to your neighbor! So be very sure in your mind...whether you can afford to have them walk! No company,so far, has challenged this with the surface rights board!
The fact is once you have this legal contract in place you do have some power? You can ask for an environmental study, an archeological study, a financial impact study...all on their nickel! If you really don't want that well/pipeline you can run them around for years! If you are trying to jack some more money out of them you now have a very big hammer!
Believe it or not many oil/gas companies see the present system as not very efficient or sustainable. The important thing for their bottom line is to get that gas/oil flowing and whether they give you a few dollars more is really irrelevent?
A local consultant(Don Bestor) told us at the last Surface rights group meeting that the CEO of Quicksilver told him that they would like to see the province/surface rights board move on pipeline rentals, as it was getting so hard to negotiate pipelines! The average CBM gas well(low producers) produces over a $million dollars a year in net profit...does it really matter if they have to pay $2000/year in annual rent? If the pipeline is held up for 6 months....that would pay for 250 years annual rent!
He told Bestor to take every case to the surface rights board...in fact he suggested they totally swamp the board until the province finally relizes they have to do something!
I think if you review most of the cases going to the surface rights board in the last few years that you will see very clearly that the landowner usually comes out of it with more money than what was offered? And I never found a case where the farmer was awarded costs? Legal costs and his own personal costs?
You will also observe that the pipeline issue of annual rent...while not being awarded...has a very sympathetic hearing from the surface rights board? They basically agree that the landowner should be given annual rent but their hands are tied by the provincial government!

[farmers_son]

I agree with your comments, but consider this. In Alberta the title to the minerals is separate from the title to the surface however that does not give energy companies the right to construct pipelines. The Pipeline Act gives these for profit energy companies the right to take our privately owned land by force for the construction of pipelines. Supposedly it is in the public good for this to happen.

Now what you say is true regarding annual payments and asking for money upfront for negotiations. And perhaps the Surface Rights Board is throwing a few more baubles our way. But the point is we are still only getting pennies on the dollar for what these rights of way are worth. This is in effect industrial land once it is a right of way yet the landowner only gets paid damages. The Surface Rights Board is effectively giving a gift to the energy companies and it nonsense to suggest that gift is somehow in the public good when you consider the really outrageous profits the energy companies make at least partly on the backs of the men and women who own the land.

I recently had a pipeline cross a quarter section of mine. And while I did a fairly good job of negotiating and effectively raised the price of pipeline right of ways in this area (the company had to go back and pay all the neighbours more money although the neighbours did not help me negotiate) the reality is that I did not get enough money from this pipeline to fill my fuel tanks one time (less than 2000 gallons). The money I received from the pipeline was basically a joke and I had to work very hard to get it.

Yes the men and women farming our land resources are desperate for the money but that does not justify the government through the Surface Rights Board artificially keeping compensation at ridiculously low levels in order to subsidize the energy companies at our direct expense. Instead of $2000 an acre these pipeline right of ways should be worth $20,000 an acre just like other industrial land. And the companies can afford to pay it.

[cowman]

And I do agree with you on that! The price is too low and it should be treasted like industrial land!
I also made one typo above? It should have read "The landowner is always awarded legal and personal costs"?
One of the selling points of Morton was he intended to review the surface rights board and the surface lease/pipeline compensation? Stelmach has said nothing on this but is reviewing the royalty structure...which is a good thing and hopefully will mean a better deal for the owner of the resource...the Alberta citizen!
There recently was a board decision where the board raised the "adverse effect" from $1800/acre to $3500? The company(Conoco-Phillips) is appealing the decision but if it stands every lease holder should gain a substantial increase in their annual rent at their five year review.

[farmers_son]

That SRB award and another one with EOG Resources can be viewed at

Conoco Philips:
http://www.surfacerights.gov.ab.ca/downloads/retrieve.aspx?file=2006.0134.pdf


EOG Resources:
http://www.surfacerights.gov.ab.ca/downloads/retrieve.aspx?file=2006.0133.pdf

I get paid annual rental on four quarters of land involving a total of 5 rights of ways. All are with Nova now called TransCanada. I like the annual rent but the company is always working to reduce the annual payment. The payment was to be 20% of land values but the company cheats on this and if you question their land values you find out that the easement I signed is not worth the paper it is written on except when it comes to the company's rights. Again, Nova/Transcanada gets away with this with the tacit approval of the Province of Alberta who is not on the farmers side when it comes to getting compensated for industry activity on our land.

[cowman]

farmers son: You are preaching to the choir here! I've heard all the stories of how Nova is playing games!
I agree 100% with you that there needs to be some meaningful changes and the landowner needs a better compensation formula! As I said I think Morton was promising that, but we have Ed Stelmach, and hopefully he won't forget where he came from?

[Horse]

Silverback the land is about 12mi/ from StAlbert and the going rate was in the 1600/2000/acre I am not sure why I got this much but I will certanly take it.
There was 2 diferent propertys sold here in the county of Barrhead close to where I live and they Brought. One at about 1080/acre not much buildings and a 900sq ft house the other about 800/acre but the land all needs worked and a lot of time to produce anything seems all the money is coming from south by people in the oil buiz.
My brotherinlaw at ponoka says his niebour sold 7 1/4s there for 3238/acre now that is in the 3.5mill range so how does any of that make sence.