Main Issues
Leases - is it fair that the lease agreements
that Canadian freehold owners have been asked to execute for
the past century have been drafted by oil company lawyers for
the protection of their clients without input from the freeholders
who own the property which is the subject matter of the lease
agreement?
Royalty rates - is it fair that the royalty
rate payable by oil companies on gas and gas by-products produced
from wells on lands owned by individual freehold owners is,
in most instances, less than half of the royalty rate payable
on Crown lands? (“Royalty Rates”)
Rentals - is it fair that the $1 per acre
per year delay rental or shut-in well payment required to be
paid to a freeholder by an oil company-lessee to maintain a
freehold lease when there is no activity on the lease has not
increased over the last half a century, and has been completely
eliminated in the recently released CAPL 99 lease agreement?
Price - is it fair that oil companies pay
royalties on gas and gas by-products produced from wells on
Alberta Crown lands based on deemed prices determined by the
Alberta Energy Department, whereas some oil companies appear
to be manipulating their gas contracts so as to allocate low
priced gas to freehold owners? (“Gas Contract Manipulation”)
Deductions - is it fair that the deductions
which oil companies are allowed to make from Alberta Crown oil
and gas royalties are determined by provincial regulations,
while deductions from freehold royalties are effectively left
to the discretion of the oil company-lessee? (“Deductions from Freehold Royalties”)
Reporting - is it fair that oil companies
routinely ignore their contractual obligations to account to
and pay royalties to freeholders by a particular time each month?
(“Royalty Reports”)
Continuation - is it fair that Alberta
Crown leases can only be continued beyond their primary term
by the capability of production in paying quantities, while
some oil companies have held freehold leases for speculative
purposes for decades with shut-in wells which are uneconomic
to produce even under today’s high oil and gas prices? (“Shut-in
Wells”)
Deep rights - is it fair that almost 20
years after the Alberta government retroactively amended Crown
leases to reclaim for the Province the rights to oil and gas
below the deepest geological zone proven capable of production
in paying quantities, oil companies having wells capable of
production from shallow zones on freehold lands continue to
hold all geological zones to the center of the earth? (“Deep Rights Reversion”)
Offset
Obligations - Is it fair that in the United States
an oil company-lessee must protect its freehold owner-lessor
from drainage by virtue of the Law of Implied Covenants (a set
of unwritten but enforceable obligations recognized by American
courts), whereas Canadian courts refuse to acknowledge implied
covenants and oil company lawyers have carefully crafted freehold
lease agreements so as to permit drainage in many instances
and, in some circumstances, to allow an oil company-lessee to
actually drain its own freehold owner-lessor without compensation?
(“Offset Obligations”)
Regulatory recourse - is it fair that freehold
owners, who believe they have been deprived of the opportunity
of obtaining their share of the production of oil or gas from
a pool by the actions of their oil company-lessees, have no
recourse to the Alberta regulatory body charged with a duty
to “afford each owner the opportunity of obtaining his share
of the production of oil or gas from any pool” (“The Role of Regulatory Authorities”)?
Judicial recourse - is it fair that freehold
owners, who are denied protection by regulatory authorities
and who enter into contingency fee agreements with oil and gas
experts because they can not afford to protect their property
rights in any other way, are afforded different and inferior
treatment by some judges than individuals or corporations who
can afford to pay technical experts and lawyers on a fee for
service basis? (“The Role of the Courts”)
Split-title royalties - is it fair that
the Canadian Pacific Railway Company and its successors, as
owners of petroleum on the approximately 1 million acres of
split title land in Alberta, have been prescribing and enforcing
petroleum lease agreements for almost 100 years which require
oil company-lessees to pay the petroleum owner a royalty on
hydrocarbons which do not belong to the CPR and its successors,
but to individual freehold owners of natural gas (“The ‘Split Title’ Problem”)
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