In my nearly 15 years as a licensed land agent, it’s safe to say we have never seen a business environment quite like this one. When we got started our landowner clients utilized our services to help make sense of the rush of development that was taking place on their property. Now, we are taking on new clients every week who are trying to make sense of reclamation and abandonment activity. And trying to understand what their rights are when energy companies file for receivership and can no longer pay their surface rentals.
It’s an environment many of us never expected or were prepared for, living in a part of the country where oil and gas is part of the fabric of our every day. So when things go bad, it creates a lot of emotion. It creates a lot of rhetoric, and story lines designed to stoke those emotions. Like a story this week where landowners were encouraged to “fight back” by cutting off power and shutting off valves to sites they were no longer being paid for. When we get to that point, it’s time for a re-evaluation.
Is it fair that so many landowners who signed surface leases in good faith are suddenly left dealing with this mess? Absolutely not. Should energy companies be allowed to just unilaterally reduce compensation that was negotiated in good faith by both sides? Again, absolutely not.
Why should landowners only be partners during a downturn, and not when energy prices were at an all time high? Were there prosperity bonuses being paid to landowners during those days? And where in the four heads of compensation (Land Value, General Disturbance, Loss of Use, Adverse Effect) do commodity prices come into play? If so, then it only makes sense that landowners should be able to unilaterally decide to double their rental payments as well.
It’s easy to understand why energy companies obviously need to do everything they can to reduce costs, but the tactics we are seeing from some of them in regards to attempting to reduce landowner rental payments threaten the integrity of the entire industry, and will no doubt damage the landowner-energy company relationship for years to come.
That being said, many of the energy companies in receivership didn’t choose to be there, and didn’t want to do this to the landowners they did business with. They had no choice. The headlines are blaring about $173 million in unpaid municipal taxes, and those are devastating numbers for counties already struggling to deliver essential services to their ratepayers. But let’s not lose sight of the billions of dollars that have been paid in taxes by energy companies over the years, and how those funds contributed to the rural way of life. And yes Alberta landowners are out millions in surface rental payments right now, but there is a system in place for them to recover those monies. Unlike Saskatchewan, who has no rental recovery process, Alberta landowners can apply through the Alberta Surface Rights board to have their rentals recovered. It’s slow, but it works.
It’s easy to say we all should have seen this coming, but the reality is we are in the middle of a downturn that is nearly 10 years old. It’s creating some new realities, but sending out landowners to mess with power boxes or shut in wells that are 10 per cent sour gas is inviting disaster.
This is not the time to ramp up the landowner vs. oil company rhetoric. It will take time, but this will get resolved. And believe me, better times are ahead and energy companies and landowners are going to need each other when those day arrive. Both would be well served to not tear down what has been a very beneficial business relationship over the last several decades.