In the case of the oil and gas industry, dozens of societies and associations have been formed to represent the interests of the various sectors of the industry. Some of these groups retain media experts to ensure that the public receives the most advantageous ‘spin’ on issues of importance to their membership. Others retain professional political lobbyists in an attempt to influence decision makers and their bureaucracies. The Canadian Association of Petroleum Producers (“CAPP”), whose members explore for, develop and produce 95% of Canada’s oil and natural gas, has an annual budget of approximately $8 million.

In the year which ended on March 31, 2003, the oil and gas industry contributed more than 7 billion dollars to the Alberta Treasury in the form of Crown lease sales, royalties, etc. This represents more than 30% of the Province’s total revenue from all sources. Clearly, the views of the various sectors of the oil and gas industry should be heard by decision makers.

But should the voices of the oil and gas industry be the only voices heard?

The Alberta Law Reform Institute invariably seeks input from concerned parties when it studies the statute law in Alberta and makes recommendations for changes to the Government of Alberta. The oil and gas industry makes representations to the Law Reform Institute when the interests of the industry may be impacted by the potential legislative changes. 

Who represented freehold owners when the Law Reform Commission studied the Alberta Limitations of Actions Act and recommended that the act be amended to bar legal actions based on an alleged breach of trust or breach of fiduciary duty unless the action was commenced within 15 years of the alleged breach?¹ The rationale - the cost to society of defendants maintaining records and insurance against possible claims allegedly outweighed the benefit to society which might be conferred on a narrow class of possible claimants².

The ‘narrow class of possible claimants’ includes virtually every freehold owner-lessor. Although the nature of the relationship between an oil company-lessee and a freehold owner-lessor under a freehold lease agreement has never been adjudicated in Canada, the oil company-lessee has scope for the exercise of some discretion or power; the oil company-lessee can unilaterally exercise that power or discretion so as to affect the freehold owner-lessor’s legal or practical interests; and the freehold owner-lessor is peculiarly vulnerable to, or at the mercy of, the oil company-lessee holding the discretion or power. These three aspects of the lessee/lessor relationship are the test for the existence of a fiduciary relationship as set forth by the Supreme Court of Canada (see “The Oil Company-Lessee / Freehold Owner-Lessor Relationship”). 

Who represented freehold owners when the Alberta Government introduced draft legislation in which the 15-year ultimate period recommended by the Law Reform Commission was reduced to 10 years?

Clearly no one represented the interests of freehold owners. Under the Limitations Act which became law in Alberta on March 1, 1999, legal actions alleging discreet breaches of trust or breaches of fiduciary duty are effectively barred unless they are commenced within 10 years of the alleged breach. 

Similarly, the Alberta Energy and Utilities Board (the “Board”) typically seeks input from involved ‘stakeholders’ when it considers amending Board policies and procedures. Surely the owners of freehold mineral interests are stakeholders in oil and gas industry regulatory matters. But no one represented the interests of freehold owners when the Board considered, and decided to adopt, changes to its off-target well policy which have resulted in a proliferation of wells draining freehold owners’ lands from just across their fence lines.

And who represented the interests of freehold owners when a Court of Queen’s Bench judge decided that there was no internal ambiguity in lease provisions which called for a ‘gross’ royalty to be paid at the same time as allowing for deductions from that royalty, that consequently evidence of 50 years of industry practice was inadmissable, and that oil company-lessees could henceforth deduct oil gathering, treating and storage costs (see “Understanding Your Lease Agreement - The Acanthus Decision”)? Who represented the interests of freehold owners when this trial court decision was not appealed? 

Freeholders need an association which can research issues of concern to freehold owners; monitor proposed changes in regulations, proposed changes in statute law and legal actions proceeding through the judicial system; and intercede when necessary to speak with a common voice on behalf of freeholders. 

Since inception, the Freehold Owners Association has:

• written to all members of the legislature setting forth FHOA’s concerns with the new Limitations Act. Alberta’s Justice Minister responded to these concerns by advising that members of the Assembly would be willing to re-address the issue if it was found that the 10-year ultimate period did not fairly balance the interests of all prospective parties to a legal action. Minister Handcock also advised that the new act specifically allows for contracts to include ultimate periods longer than 10 years, and suggested that freehold owners consider including such longer terms in their lease agreements;
• set forth FHOA’s concerns with the lack of rules and regulations governing the deductions from freehold gas royalties in a letter to all members of the legislature, and met with several M.L.A.’s to discuss this and other problems which plague freehold owners;
• submitted a brief to the Alberta Law Reform Commission supporting the introduction of class actions lawsuits in Alberta. In December of 2000, the Law Reform Commission recommended that the Alberta Government reform existing statute law and introduce modern class action procedures³;
• unsuccessfully sought access under the Freedom of Information and Protection of Privacy Act to records which may exist in the Alberta Land Titles Office’s setting forth the authority under which the Alberta Registrar of Land Titles omitted certain words from the titles of individual owners of split title lands in Alberta (see “December 29, 2000 Newsletter - The Land Titles Issue”).
• opened a dialogue with the Alberta Energy and Utilities Board in an attempt to have FHOA recognized as a stakeholder to be contacted with respect to any future changes in Board practices and procedures;
• opened a dialogue with the Canadian Association of Petroleum Producers (“CAPP”) in an attempt to address the concerns of freeholders in a cooperative manner;
• researched the law respecting the ownership of hydrocarbons produced from a well on split title lands, and sought and received membership approval to seek leave to intervene at the Supreme Court of Canada in the event that a legal action, which is currently proceeding through the courts to decide this issue, is heard by the Supreme Court (see "1990's - The Ownership Trial”).

Back to Top