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Lease Negotiations

 After Leasing



What can FHOA do for me?

FHOA can:

  • help you to understand the terms and conditions in CAPL (Canadian Association of Petroleum Landmen) leases - the lease agreements most commonly used by land agents in leasing freehold mineral rights in Canada (see Understanding Freehold Leases);
  • for a modest fee, provide you with a copy of a freehold lease drafted by FHOA which balances the rights of the energy company and the freehold owners more fairly than CAPL leases (see “Freehold Friendly (FHOA) Lease);
  • help you to understand ‘offset obligations’ and what you can do to protect your mineral rights from drainage (see “Offset Obligations”);
  • help you to understand oil and gas regulations and how these regulations impact your property rights (see “The Role of Regulatory Authorities”);
  • help you to understand pooling agreements (see “Pooling Agreements”), unitization agreements (see "Unit Agreements") and gross royalty trust agreements (see “Gross Royalty Trust Agreements”) which may be binding on your mineral rights;
  • for a modest fee, provide you with technical information about wells, production and Crown lease sales in the vicinity of your mineral rights to help you assess offers to lease and whether your lessee is abiding by the terms of your lease agreement (see "Technical Service Request" & "Estate Planning for Freeholders");
  • provide you with names of experienced industry professionals  who can  assist you in lease negotiations,  lease enforcement or other matters impacting your mineral rights;
  • research issues of concern to the freehold owner community (see "FHOA Research"; and
  • represent your interests and the interests of other freeholders in submissions to governments, industry regulators and the courts (see “FHOA as Your Common Voice”).

How do I contact FHOA?

FHOA can be contacted by phone during normal business hours (403 245-4438), by fax (403 245-4420) or by using our contact us form.

Why should I join FHOA?

See “Why Join FHOA”.

What does it cost to belong to FHOA?

FHOA’s board of directors sets the Association’s membership fees. Annual membership fees are currently seventy-five dollars ($75.00). A two-year membership is also available for one hundred and forty dollars ($140.00).

How do I join FHOA?

See “Join FHOA”.

What can I do to support FHOA and its goals?

Become a member.  Get involved.  If you have particular skills or training which could help FHOA attain its goals, let us know.  FHOA always needs volunteers to assist with seminars and to help with phone outs before seminars.  If you have time constraints, make a financial donation to assist us in paying for judicial and regulatory hearings.  Donations from Alberta residents are particularly helpful as the Alberta Government’s Community Spirit Program provides matching grants for donations by Albertans to not for profit organizations such as FHOA.

Spread the word.  The more members that FHOA has, the greater our potential influence.  Many freeholders who could use our help, particularly those who do not use the internet, remain unaware of FHOA’s existence.


The Government will get my mineral rights when I die.

Your mineral rights will only revert to the Crown (the Government) if you die intestate (without a will) and you have no surviving blood relatives. In Alberta, if the freehold mineral tax levied against production from your mineral rights is not paid (see "Taxation of Freehold Minerals"), your mineral rights may also revert to the Crown. In addition, untraceable mineral owners may lose their mineral rights.

I can't sell my mineral rights.

Mineral rights are real property and they may be bought or sold for monetary consideration, gifted, or exchanged just like other real property. However, the tax treatment of a disposal of mineral rights differs from other real property (see "Taxation of Freehold Minerals"). Although there is currently no active market for the sale of mineral rights, FHOA members may list their mineral rights for lease or sale on the FHOA's website (see "Mineral Rights Available for Lease or Sale"). It is generally difficult to get fair value for an outright sale of mineral rights and FHOA recommends that freeholders lease rather than sell their mineral rights. There may be legitimate reasons for selling your mineral rights to a family member who you know and trust, but exercise great caution if approached to sell by someone involved in the oil and gas industry. Typically, that party knows more about the potential value of your mineral rights than you do.

I have to lease my mineral rights if a land agent approaches me.

Some land agents may lead you to believe that you are under some obligation to enter into a lease agreement once the agent has approached you. However the mineral rights belong to you and although there may be advantages to you in leasing, you are under no obligation whatsoever to lease to a land agent that has approached you or to any other land agent or company.

If one of the freehold owners in my section accepts an offer from a land agent, I must accept the same offer.

Some land agents may suggest that once the agent has negotiated a lease with one of the freehold owners in your section, the land agent must treat all other freehold owners in the section equally and you must accept the same terms. Ignore this argument and negotiate your best deal. If the land agent is really concerned with fair treatment, there is no reason he cannot offer the better terms and conditions you may negotiate to others in the section who have already leased.

In situations where separate titles to the same parcel of mineral rights are held by a number of family members or a number of family members share title, a common strategy used by land agents is to identify the least informed or most financially disadvantaged family member, enter into a lease agreement with that individual, and then rely on family dynamics to pressure other family members to sign on identical terms - i.e. poor Aunt Matilda won't get the lease signing bonus money she needs for her hip replacement unless you stop making unreasonable demands and agree to the same terms she has accepted. The difficulty in extricating oneself from such situations illustrates why proper estate planning for mineral rights is so important for entire families (see "Estate Planning for Freeholders").

I can re-negotiate my lease at the end of its primary term.

If the capability of production is established in a well drilled during the primary term of your lease on your mineral rights or on mineral rights which have been pooled or unitized with your mineral rights, you cannot re-negotiate the terms and conditions in your lease agreement. Thousands of Canadian freeholders remain bound by lease agreements negotiated by their grandparents more than half a century ago.

CAPL (Canadian Association of Petroleum Landmen) leases have been approved for my use by a regulatory agency acting on behalf of freeholders.

There are currently three forms of CAPL leases - CAPL 88, CAPL 91, CAPL 99 and as of June, 2012, a fourth form, CAPL 2012, in draft form. CAPL 88, CAPL 91 and CAPL 99 were approved at the time of its issuance (1988, 1991 and 2000) by the Canadian Association of Petroleum Landmen and the Natural Resources Section of the Canadian Bar Association. A number of oil and gas industry associations have also approved CAPL leases. None of these bodies acts on behalf of freehold owners and the vast majority of the members of these bodies directly or indirectly earn their living from the oil and gas industry. The only form of freehold lease approved by an organization acting on behalf of freeholders is the freeholder-friendly FHOA Lease (see "Freehold Friendly (FHOA) Lease").

Some regulatory body monitors my royalty statements to ensure that the price my oil or gas is sold for is reasonable and the deductions taken from my royalties are fair.

No such regulatory body exists. Once you lease your mineral rights to an energy company, both you, as the freehold owner-lessor, and the energy company, as lessee, share a common goal in maximizing the return from your resources. However, there are circumstances where the other business interests of the energy company that has leased your mineral rights may come into conflict with the company's contractual obligations to you - in particular the company's obligation to pay you royalties based on the current market value of the leased substances produced and marketed and to limit the deductions made in making these substances marketable to what is reasonable. No regulatory body exists; therefore it is up to you to monitor your royalties.

Unfortunately, most existing freehold lease agreements do not require the energy company to provide you with comprehensive monthly royalty statements which you can understand. In fact, the statements provided by many energy companies range from non-existent to incomprehensible. Consequently, many freeholders are unable to determine either the prices that their oil and gas is being sold for or the amounts deducted by the energy company that has leased their mineral rights.

The western Canadian oil and gas industry operates on a joint venture basis. In recent years, virtually every form of reporting between energy companies, between energy companies and industry regulators, and between energy companies and government has been standardized. The exception to standardization is freehold royalty reporting. FHOA has asked the energy industry to develop a standard freehold royalty reporting format similar to that provided for in the FHOA lease which could be understood by laymen. Several industry operators have complied with FHOA's request, but leading energy industry associations prefer to 'talk the talk' rather than 'walk the walk'. In most instances, energy companies sell freehold oil and gas at current market value and make fair deductions in making these hydrocarbons market ready. But the lack of comprehensive, understandable royalty reports breeds suspicion and mistrust and continues to 'tar with the same brush' even the most reputable energy companies.

A fraction of the time and money industry associations spend on touchy-feely television ads attempting to address the growing public mistrust of the oil and gas industry in western Canada could address the freehold royalty reporting problem and resolve at least one of the industry's credibility issues.

The terms of a CAPL Lease cannot be changed. The only items that can be negotiated are the primary term of the lease, the bonus payment, the royalty, the cost deduction cap and the shut in well payment.

The mineral rights are your property and if you are considering entering into a CAPL lease, there are a number of issues you should review and consider other than the blanks set forth in the lease agreement. Please refer to "About Leases", "CAPL Leases", “CAPL 91”, “CAPL 91 Addendum”, “CAPL 99”, “CAPL 99 Addendum”. Addendum's available to members only - please log in to view. 

Freehold Mineral tax is paid by the energy company that has leased by mineral rights (the lessee).

A freehold mineral tax based on the value of the production from your mineral rights is charged by each of the Prairie Provinces. Provincial regulations vary as to how this tax is collected and the consequences for non-payment. Although in each of Alberta, Saskatchewan and Manitoba, the energy company-lessee or operator of the well actually pays the tax, freehold lease agreements almost invariably require you to pay your royalty share of this tax and it is industry practice to deduct freehold mineral tax from your royalties (even though CAPL 88 and 91 leases state exactly the opposite) (see "Taxation of Freehold Minerals").

If I don't lease my mineral rights a well cannot be drilled on my mineral rights or on the spacing unit including my mineral rights.

In each of the prairie provinces procedures exist under the oil and gas regulations of the province which allow an energy company to 'force pool' your mineral rights to create a production spacing unit if you refuse to lease after receiving a reasonable offer.

It doesn't matter what I say to the land agent or energy company that approaches me to lease my mineral rights.

It may matter as the land agent or energy company may use what you say in response to an offer to lease in its application for forced pooling.


All responses to ownership questions are provided to members only.


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Lease Negotiations

All responses to lease negotiations questions are provided to members only.


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After Leasing

All responses to after leasing questions are provided to members only.


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Freehold Petroleum & Natural Gas Owners Association

"Freehold Owners Association"

901, 1000 5th Ave SW, Calgary, AB, T4P 4V1 Telephone: 403-245-4438