Property Rights

[cowman]

Just back from some fun in the sun!
The big problem with this whole grazing lease thing is this:
The fact is if the Alberta government never had a lease holder on the Crown lands...the Alberta taxpayer would be millions of dollars ahead!
Now I understand the concept of property rights...and the courts have ruled Crown leases are real property...but the fact is if the "grazing leases" never had a cow on them the Alberta taxpayer would be way ahead? Defacto we pay people to run cows on the Crown land? That is a fact no one can deny? Horse is right on that one!
However, because the Alberta taxpayer really never sees his "oil money" in a real sense...who cares? Like farmers son says, why not give it to Joe down the road than let the beurocratic spendthrifts blow it? At least Joe will be supporting the local economy?
What should have been happening all along with Crown royalties/surface leases is: the people should have been getting the money...in their pocket...not into "government black holes"!
The "grazing lease holder" is getting one hell of a windfall in surface lease money? I can see "damages" but certainly not land values and entry fees? Would you expect to get the surface rights payment or right of entry payment on private land? Of course you wouldn't!Just won't happen.
So bottom line is: How do Horse and me compete on private land...with guys who are being paid to run cows on Crown land? I'm not sure what the deal is now but back in the early 90's the grazing fees for Alberta were $3 million...while the take from oil/gas activity was $40 plus million! This really is not fair.

[cowman]

I should have said "private rented land".

[coppertop]

Gosh cowman, I am glad to see you are back. I was really worried that something had happened to you, for instance you had fallen off your wallet and done serious injury to yourself !!!!!! LOL !!!

[Horse]

Its a fine day when cowman agrees with me glad to see you back I thought you may have gone to envade Montana to get Willowcreek .LOL

[coppertop]

Horse, he did say he was having fun in the sun, don't know if Montana sun is any warmer than ours this time of year, so likely he was somewhere in the tropics !!!!!

Oh well, we are a hardy lot, toughing it out in the snowbank, reading about all the money Randy made on his sale !!! Likely he will be the next one heading for a beach !!!!!!!

[cowman]

Got away to the South Pacific for a bit...you know how it is...all work and no play makes Jack a dull boy! It was okay, but was pretty well homesick after about 10 days.
Just one other thing about this grazing lease thing: At one time the grazing leases were owned by guys trying to make a living running cattle. Today many of the grazing leases are being bought up by wealthy businessmen for a playground...oh they are raising cattle, but the reality is they are just playing "cowboy"? Or having a great place to take their buddies out hunting, horseback riding, quadding etc.? A classic example of this is the heritage ranches south west of Calgary? They say the road is full every morning from Turner Valley with BMWs and Hummers, on the road to downtown Calgary oil offices!

[coppertop]

cowman, there are still a few people in this area that rely on the grazing leases for pasture but one by one they are getting out of the cowbusiness, and are keeping enough cattle around to stock the grazing lease to avoid losing it.
One person that I know of sells off the entire herd of 35 pair each fall, buys new pairs in the spring and out to the grazing lease they go. Of course the lease rental checks come in every year which is a tidy sum.

[farmers_son]

I guess there are differing opinions out there regarding crown land. However the gist of this thread is that a municipality is selling crown land that was leased to area families for probably generations and is this being done fairly.

To correct my earlier statement that in order for the investment in crown land to equal the investment in deeded land the crown would have had to pay the leasee $2000 just to take the lease, I have reworked the numbers and using the assumptions I outlined the correct number would be $911 per quarter section. That is the money that the leasee would have had to been paid up front to farm that lease versus that person buying deeded land for $8000 per quarter in 1967. I think an argument could be made that the province owes those people who stuck it out in the depressed regions of the province, stayed and made communities and built roads, schools, a rural economy. Just to have some fun with the numbers, if the $911 that arguably should have been paid to the leaseholders to stay and farm that land was invested at 9%, today it would be worth $31,189 per quarter.

The important point is that the lease holder was not getting a sweetheart deal at all and those who wistfully look across the fence at people who depend upon crown leases to make a living are mistaken. Not only was the crown lease an underperforming investment but the leasee only receives about half the surface revenue per well that they would receive if that same well was located on deeded land even though the inconvenience etc. is exactly the same. The grass often is not greener on the other side of the fence.

Tax recovery lands may not be exactly the same as a conventional crown lease but assuming the tax recovery land is real property as cowman points out then these people should have had an equity value in that land because they could have transferred it to someone else for an amount of money. If so, then that equity value they would have had should be recognized and deducted from the price those leaseholders would have to pay for the land if it is sold and they buy it.


The important point is that the lease holder was not getting a sweetheart deal at all and those who wistfully look across the fence at people who depend upon crown leases to make a living are mistaken. Not only was the crown lease an underperforming investment but the leasee only receives about half the surface revenue per well that they would receive if that same well was located on deeded land even though the inconvenience etc. is exactly the same. The grass often is not greener on the other side of the fence.

Tax recovery lands may not be exactly the same as a conventional crown lease but assuming the tax recovery land is real property as cowman points out then these people should have had an equity value in that land because they could have transferred it to someone else for an amount of money. If so, then that equity value they would have had should be recognized and deducted from the price those leaseholders would have to pay for the land if it is sold and they buy it.

[Horse]

Farmers-son lets try some of my figures just off the top of my head. Origanly leases were free and most were $10 per yr mostly bush, land with mabey 50 AUM at $.78/AUM .
Deeded land at $10,000/ at 8% 25yr comes to app $25,000 you have paid, anual cost to service $980 , cost of lease $40 App $940 left owning minus lease, $940 invested at 4% for 25yr is close to $15,000 and you have had the use of lease plus all the lease payments are 100% deductable, I dont think I we can assume just because land is where it is that it will always be on such a positive margin.
I have read many documents that to cut your costs you have to increase your land holdings and the far cheapest way to do that is RENT.

[farmers_son]

The original homesteads were free too but in the south east corner of Alberta people could not make a go of it with free land.

You make an excellent point about increasing your land holdings. The real advantage some of those people had in those areas was not cheap crown leases but the ability to expand. Those that took advantage of that ability to expand did well.

I can follow your figures. I would point out that assuming the person purchasing the land could get a loan with nothing down, he/she could purchase a quarter for $10,000 (using your figures) and at the end of 25 years would have a paid for quarter section of land now worth about $34,000 assuming 5% annual growth. Since the person had no equity in the land to begin with in year 0 and had assets worth $34,000 in year 25 that investment in deeded land earns an infinite return on the original investment.

The person renting the land does not acquire an equity position and using your figures would only realize a 4% before tax return on the money invested in the bank. When you compare an infinite return versus a 4% before tax return you can see why leasing the crown land was not a good investment.

Leasing offers advantages, owning does too. It is my opinion that owning land has been good for those who bought years ago. The survivors of the original generations around Taber who were leasing the land are now being hung out to dry. I doubt very much that if any of us were to find ourselves in their position today that we would be very comfortable. Seven or so municipal councilors will decide if those people get to keep farming or not. That is what is happening at Taber.

And if the land is sold to others who is going to buy it? Not necessarily the people who have been taking care of that land and building the communities for generations.