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The most important matters to be considered when a company
approaches a landowner to install a wellsite, pipeline or powerline, are the
location of the facility, the amount of compensation and the form of the
agreement:
1. LOCATION OF THE FACILITY:
Many landowners believe they have no alternative but to accept
the location proposed by the Company. If, however, there are reasonable grounds
for opposing the location in Alberta, an objection may be made to the Energy
Utilities Board. If the matter is not resolved, the Energy Utilities Board may
hold a hearing to decide the issue (as long as the objection is not frivolous).
Usually, the Board staff will encourage the parties to meet informally before
the hearing in the hope that they will resolve the dispute voluntarily. The
Board also has a mediation process it may employ to attempt to resolve the
dispute without a hearing.
In British Columbia, the Oil and Gas Commission (the equivalent
of Alberta's Energy Utilities Board) has had a policy of requiring the Mediation
Arbitration Board (MAB) to issue a right of entry order before it (the OGC)
would give consideration to an objection. However in a recent case regarding a
coalbed methane well, the MAB ruled that the OGC should deal with the matter
first: Peace River Corporation v. 61035 B.C. Ltd.
(Mediation Arbitration Board order 367M).
It is important to raise valid objections to location before
entering into negotiations regarding the amount of compensation. Otherwise, the
very fact that the landowner is discussing compensation will indicate that the
location is acceptable.
If a pipeline comes under federal jurisdiction (e.g. the recent
Alliance project), objections to routing are not filed with the National Energy
Board until after the permit for the overall project has been issued. The NEB
will then hold a "detailed routing" hearing. The detailed routing hearing deals
with methods of construction as well as routing.
2. COMPENSATION:
Land agents employed by the operators to negotiate compensation
continue to use the "four heads" approach, by placing a number under each of
four categories:
1. Land Value;
2. Loss of Use;
3. Adverse Effect;
4.
General Disturbance.
The numbers are then added for a total offer. The land agents suggest that this is indeed required by Section
25(1) of the Alberta Surface Rights Act, which reads as follows:
The Board, in determining the amount of compensation payable
may consider
(a) the amount the land granted to the operator might be
expected to realize if sold in the open market by a willing seller to a willing
buyer on the date the right of entry order was made,
(b) the per acre value, on the date the right of entry order
was made, of the titled unit in which the land granted to the operator located,
based on the highest approved use of the land,
(c) the loss of use by the owner or occupant of the area
granted to the operator,
(d) the adverse effect of the area granted to the operator on
the remaining land of the owner or occupant and the nuisance, inconvenience and
noise that might be caused by or arise from or in connection with the operations
of the operator,
(e) the damage to the land in the area granted to the operator
that might be caused by the operations of the operator, and
(f) any other factors that the Board considers proper under the
circumstances.
I have long argued that the Act requires numerous factors
to be considered. Many of these factors, such as "nuisance", "general
disturbance" or "adverse effect" are difficult to assess; therefore, the best
one can do is to consider all the relevant factors and arrive at an
all-inclusive or "global" assessment (see Carter, Compensation for
Surface Rights in Alberta (1985) 23 Alberta Law Review
435).
My experience has also shown that the best way
to determine the proper level of compensation is to look at agreements between
landowners and operators in comparable situations. The case of
Livingston v. Siebens Oil & Gas Ltd.
[1978] EXLAW 20
(Alta. C.A.) is the classic authority for the proposition (para. 11): "no matter how
expert outsiders are ... the oil companies and landowners have the better judgment
as to what compensation should be paid in their own interests."
Comparable agreements provide evidence of the value of surface
rights taking into account all the factors specifically listed in section 25 of
the Act as well as those not listed.
There were many cases in the 1980's, especially in the Grande
Prairie area, which relied upon comparable agreements as evidence of the value
of the owner's surface rights considering all the factors together,
e.g:
Petryshen v. Nova, An Alberta Corporation
[1982] EXLAW 40 (Alta. Q.B.)
[1982] EXLAW 41 (Alta. C.A.)
Nova, An Alberta Corporation v. Bain
[1984] EXLAW 22 (Alta. Q.B.)
[1985] EXLAW 17 (Alta. C.A.)
Anderson Exploration Ltd. v. Dion
Unreported
10 February 1984, Alta. Q.B., Judicial District of Peace River,
Action No. 8309-0968 at p. 5
Markovich Bros. Farming Co. Ltd. v.
PanCanadian Petroleum Ltd.
(1984), 30 Alta. L.R. (2d) 211, 31 L.C.R. 152
(Alta. Q.B.)
(leave to appeal denied by the Alberta Court of Appeal)
Dome Petroleum Ltd. v. Richards
(1985), 34 L.C.R. 1 (Alta. Q.B.)
Perhaps because of these Grande Prairie cases, the use of
comparable agreements has also been called the global approach but these are two
different concepts (see the Carter article at p. 448 and also Barton,
Controversy in Surface Rights Compensation (1985) 24
Alberta Law Review 34 at p. 36).
It is important not to concentrate on individual heads, e.g.
the land, because you may overlook the real issue, of what the taking is for. A
wellsite is not the same as a pipeline, a powerline or a strip mine - all of
which are covered by the Surface Rights Act.
As Madam Justice Trussler stated in Jones v. Bankeno Resources
Ltd. (1987), 37 L.C.R. 221 (Alta. Q.B.) at p. 225:
It would be easy to suggest the legislation needs to be
amended but, in fact, s. 25 requires the flexibility it now has, as opposed to
rigid certainty, because of the various types of takings where it is used to
ascertain compensation. Different factors must be taken into account and there
should be a different result depending if the entry is, for example, for a
wellsite or a pipeline or a transmission line. The impact on the owner of each
of these uses is markedly different.
It is sometimes suggested that you have to have a pattern to
look at other agreements but as Mr. Justice MacLean stated in Lomond
Grazing Association v. PanCanadian Petroleum Ltd. [1985] A.J. No. 922, 63 A.R. 120
(Alta. Q.B.) at para. 26:
It isn't, however, necessary to establish a pattern in order
to have the evidence admissible. The pattern relates only to the weight to be
given the evidence.
and at para. 30:
I am satisfied that in this case two equal competing parties met
on an equal open basis and freely and voluntarily entered into a settlement
unaffected by the power of compulsion and expropriation and unaffected by any
other extraneous factors determined only to reach settlement on the basis of an
amount that represented a fair value for the rights that the operator wished to
take from the owner.
3. FORM OF THE AGREEMENT:
Once an agreement on location and compensation is reached with
the operator, I advise my clients that a right of entry order issued by the
Surface Rights Board protects their rights better than signing a surface lease
or easement form prepared by the Company.
Some of the reasons for giving this advice are as follows:
a) Reviewability. Oil companies and power companies have
standard form agreements which they expect landowners to sign. The wellsite,
pipeline or powerline will affect the landowner for many years; however, it
is impossible to draft an agreement to provide for all contingencies. Too
often landowners who have already signed agreements say "if only I knew what
I know now I would have done things differently."
Industry representatives meet every few years to redraft
standard form agreements and attempt to bring them up-to-date.
Unfortunately, this does not assist someone who has signed an agreement that
is now out of date. A right of entry order issued by the Surface Rights
Board, however, is always open to review. The Surface Rights Act, s. 29, provides
that the Board may "review, rescind, amend or replace a decision or order
made by [the Board]".
b) A right of entry order may be terminated by the Board if
the operator is not using the land. The standard form agreements cannot be
terminated without the operator's consent.
c) The Board may place conditions in the order to protect
the landowner with respect to matters such as soil conservation, drainage
and weed control. A breach of the Board order should entitle the landowner
to seek redress from the Board as opposed to having to go through the
ordinary Courts.
d) A right of entry order must have a survey plan attached.
When companies obtain signatures on agreements; however, they often do not
attach the survey plan until later and landowners often complain that the
plan shows a different location than they thought they had agreed
to.
e) When the annual rental for a well site or power line is
reviewed by the Surface Rights Board a landowner under a right of entry
order is entitled to interest on the amount awarded but a landowner who has
signed an agreement is not.
f) In pipeline cases, the Board will not hold a hearing
regarding damages if there is an arbitration clause in an agreement. The
landowner is therefore faced with costs of private arbitration. Under a
right of entry order; the issue of damages can be reserved allowing the
Board to settle the dispute.
g) The company can stymie arbitration under a private
agreement by refusing to appoint an arbitrator. Under a right of entry
order, the arbitrator (the Board) is already appointed.
h) Landowners may take advantage of favourable rulings by
the Surface Rights Board, e.g. that no distinction be made between permanent
right of way and workspace on pipelines.
i) Right of entry orders are always on file and easily
obtained from the Surface Rights Board. Locating old private agreements can
sometimes be difficult, for example when the land is being sold.
j) Landowners can avoid situations where the Board has
denied jurisdiction because a surface leases has been signed e.g. denying
the right to a rental review for plant sites. If a plant site is covered by
a right of entry order, there could be no such ruling.
k) In the case of Alliance Pipeline Ltd. v.
Seibert [2003] A.J. No. 1436 (Alta. Q.B.), the Court relied upon a clause in the
agreement signed by the landowner to grant an injunction allowing the
pipeline company access to land outside the right of way without paying
compensation. This would not have been possible if there had been a right of
entry order instead of the signed agreement.
l) A right of entry order only permits the company to use
the land for what it requires at the time. It cannot, therefore, come along
later to put in another pipeline, for example, using the same area covered
by the prior order. This is especially important because under a
right of entry order, the Company must pay the entry fee for all the land
which they use a second time.
m) If an operator fails to pay the required compensation,
the landowner would have to sue to recover. A right of entry order, however,
can be filed directly as a judgment with the court.
n) The company cannot say "we have leased this area, we can
do what we want." For example, companies with a surface lease for an access
road will often sub lease the road to a second company for the second
company to access a different wellsite. This would not be possible under a
right of entry order without a separate arbitration to the Surface Rights
Board.
o) The landowner is in a stronger negotiating position by
insisting on a right of entry order rather than a form agreement. It takes
away the threat that land agents have used in the past that if the landowner
does not agree with their proposal the company will "go to arbitration." If
it is the landowner who is asking to "go to arbitration," the company land
agent no longer has any threat.
J. Darryl Carter, Q.C.
Grande Prairie, Alberta
COPYRIGHT
December 2003
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