22nd September 2017

How Comparable Surface Rights Agreements Help to Determine the Proper Level of Compensation

Before I start to explain how comparable agreements can help to determine the proper level of compensation a landowner is entitled to, landowners should be aware of Section 25 (1) of the Surface Rights Act.

“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 “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 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 Siebens Oil & Gas Ltd. vs. Livingston(1978) 15 L.C.R. 32 is the classic authority for the proposition (page 37): “no matter how expert outsiders are, the oil companies and landowner 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(1983) 23 Alta. L.R. (2d) 193, 27 L.C.R. 276;
  • Nova, An Alberta Corporation v. Bain(1984) 33 Alta. L.R. (2D) 187, 31 L.C.R. 47;
  • Markovich Bros. Farming Co. Ltd. v. PanCanadian Petroleum Ltd.(1984) 30 Alta. L.R. (2d) 211 (leave to appeal denied by the Alberta Court of Appeal).
  • Dome Petroleum Ltd. v. Richards et al. and 11 other appeals(1986) 34 Alta. L.C.R. 1
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Written by Darryl Carter