Farmers' Advocate Office: Advisory - FAO Warns Landowners About Rental Reductions

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 The Farmers’ Advocate Office (FAO) has been contacted by numerous landowners regarding some unusual and disturbing requests made by companies in the oil and gas industry regarding annual rentals. We believe that additional landowners have been impacted by unilateral rent reductions, and we encourage affected landowners to contact the FAO as soon as possible.
Specifically, we have heard reports that:
  • Landowners are being instructed that the annual compensation for their surface leases will be decreased on account of clauses relating to change of use or reclamation/surrender. This is occurring both on the surface lease agreement anniversary date and mid-term.
  • Companies have stopped paying full annual rentals upon beginning (or claiming to begin) the reclamation process.
Landowners should be aware that:
  • The Surface Rights Act supersedes any clause in a negotiated agreement.
  • The amount of compensation paid to a landowner in the annual rental is clearly negotiated at the time of signature.
  • The amount provided for annual rental is based on a landowner’s Adverse Effect and Loss of Use, not the state of the industry. Adverse Effect reflects the alterations made to a landowner’s business practices as well as the time, stress, and inconvenience experienced by a landowner as a result of the presence of a surface disturbance. Loss of Use is provided to compensate a landowner for the inability to use and benefit from a portion of their land on an ongoing basis.
  • A landowner has the right to a 5 year review of the rate of compensation. A company cannot unilaterally decide to reduce the amount of compensation provided to a landowner. Section 27 (6) of the Surface Rights Act entitles landowners to the opportunity to negotiate with industry in good faith.
  • A landowner is under no obligation to accommodate the changing financial circumstances of a company.
  • A landowner has recourse to obtain compensation for unpaid or reduced rentals through the Surface Rights Board (SRB) under section 36 of the Surface Rights Act at any time during the 5 year term.
  • Cashing a cheque of a reduced amount does not necessarily imply acceptance of the amount.
  • Companies are responsible for paying the annual rental on a surface lease until a Reclamation Certificate is issued under section 144 of the Environmental Protection and Enhancement Act. Prior to a company making their application for reclamation to the Alberta Energy Regulator (AER), they must disclose the full application to the landowner and provide 30 days to review. The reclamation process will not be complete without industry consultation being initiated with the landowner.
We recommend that landowners who have been affected by these types of issues contact the FAO. Template letters have been developed to assist landowners asserting their rights to the company. Please contact us directly for template letters. We will continue to work with the affected landowners to formulate next steps.

Please note: this advisory is specific to rent reductions, not fully unpaid rentals. For more information on recovering unpaid rentals through the Surface Rights Board, please click here.

For more information, please contact:

Energy, Utilities, and Policy Specialist
Michele Del Colle

Rural Engagement and Communications Specialist
Jeana Schuurman
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For more information about the content of this document, contact Jeana Schuurman.
This information published to the web on March 15, 2016.
Last Reviewed/Revised on July 24, 2017.