22nd September 2017

16 Reasons Why a Right-of-Entry Order is Better than a Surface Lease or Easement

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:

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 Unfortunately, this does not assist someone who has signed an agreement that is now out of date.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 provides that the Board may “review, rescind, amend, or replace a decision or Order made by the Board”

The standard form Agreements cannot be terminated without the operator’s consent.

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.

However, when companies obtain signatures on agreements, they may not attach the survey plan until later and landowners may complain that the plan shows a different location than they thought they had agreed to.

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.

Under a right of entry order, the arbitrator (the Board) is already appointed.

e.g. that no distinction be made between permanent right of way and workspace on pipelines.

Locating old private agreements can sometimes be difficult, for example, when the land is being sold.

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.

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.

An Order from the Surface Rights Board, however, can be filed directly as a Judgment with the court.

I have had companies refuse to pay interest on overdue rent by using this clause to argue they were not actually in default. They would not make this argument with an order from the board.

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 application to the surface rights board.

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 land agent no longer has any such threat.

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Written by Darryl Carter