| | Compensation Explanation
The energy company’s compensation offer considers the following aspects outlined below. Recognize surface compensation is site specific and reflects the unique nature of each project.
.
| 1. | Entry Fee: The entry fee is equal to $500 per acre of land granted to the company, to a maximum of $5,000. For example, if the company needs a 4.25-acre site, the entry fee would be: 4.25 acres x $500 = $2,125. The $5,000 maximum applies when the area is 10 acres or larger. If the area is less than one acre, then the fee is that fraction of one acre x $500. The minimum entry fee is $250, paid when the area is half an acre or less. The entry fee is a fixed payment. All other payments are negotiated.
More information can be found at the Surface Rights Board website. |
| 2. | Land Value: Usually the value of the land leased to the company is determined by the price expected if the land were sold on the open market by a willing seller to a willing buyer at the time when the lease was prepared or the Right-of-Entry Order issued. The value is also based on the highest approved use (agricultural, industrial, and residential) for the land. The value per acre for the well site is determined by dividing the value of the titled unit by the number of acres required.
More information can be found on land values at Roping the Web. |
| 3. | General Disturbance (Initial Nuisance, Inconvenience and Noise): This payment is for nuisance during the first year of the lease. For example, in the first year you will likely have to spend time dealing with the company's representatives and surveyors, preparing documentation, negotiating with the company and/or seeking advice from government agencies or lawyers. There may also be noise and inconvenience related to construction. The company should pay reasonable compensation to you for nuisance. Keep a record of all time spent, phone calls made and expenses incurred. |
| 4. | Loss of Use of the Land: The company pays an annual compensation for your loss of the normal use of the well site area during the well site's life. The amount should approximate the value of the gross annual production reasonably expected from the area. To calculate the amount, you can use the greater of yield and price averages from the past five years, or today's street price. For example, assuming canola production at 35 bushels per acre on a well site and access road occupying four acres, the loss would be 4 x 35 = 140 bushels. At $8.50 per bushel, the total annual loss would be $1,190. Because you are asked to agree on losses for the next five years (see "Five-year Review" below), consideration should be given to future prices.
More information can be found on land values at Roping the Web. |
| 5. | Adverse Effect: This payment is related to your inconvenience, nuisance and extra costs on the rest of the quarter section where the well site is located. For instance, farming around the well site may require constantly turning corners, which can cause overlaps, extra strain on machinery, soil compaction, loss of seed and grain, and extra field and labor costs. Other factors related to adverse effect can be noise, dust, odor, additional traffic on the land, and proximity to a residence or farm site. |
| 6. | Other Relevant Factors: If there are other considerations specific to your situation, include them when negotiating compensation. This might consist of signing bonuses, material and assets left at the end of constructions or other non-cash transactions.
The type of land (examples are bush, cultivated, pasture) and location (boundary, inside, home quarter) will have an effect on the total compensation package |
Canadian Association of Petroleum Landmen follow a strict interpretation of the Surface Rights Act in Alberta. They generally make an offer with the underlying premise that if the negotiations fail with the land owner; their offer must address the compensation categories used by the Surface Rights Board.
Determining Compensation
25(1) 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 is 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.
|
|