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FHOA's CONCERNS

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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