Despite not being paid for over a year, John Bocock isn’t “pressing the panic button yet.”
Bocock owns a farm in Sturgeon County. On it sits an inactive well. The last payment was received June 2015.
Despite the ever-increasing number of claims being filed by landowners against oil and gas companies who have defaulted on their lease payments, Bocock remains confident the cheques will resume.
Ownership of the well located on his property changed hands within the past year, he explained, and when he recently called the new owners with concerns about weed maintenance on the well site, the company responded within a few days.
“They’re cleaning up their weeds at least,” he said, “so hopefully, we’ll get paid for our lease.”
The Surface Rights Board (SRB) for Alberta, a tribunal that assists landowners and operators resolve disputes about surface access and compensation on private land, is expecting higher than average number of applications.
From 2004 to 2014, SRB would receive about 360 applications against resource companies failing to pay lease payments to landowners. This resulted in an average of $550,000 recommended to be paid by the Government of Alberta in the oil and gas companies’ stead.
SRB chair Gerald Hawranik said he there was a “noticeable change” in 2015, when the price of oil worsened. The average amount of application was doubled to 764 for the year, resulting in recommended payment of 1.7 million
As of July 31, 2016, SRB is on track to double yet again. In first seven months SRB opened 781 applications. Another 400 were received and were waiting to be opened. Hawranik estimates that the applications will cost the provincial government between $3.5 and $4 million.
But local property owners say as far as they’re concerned receiving lease payments from oil and gas companies isn’t an issue.
David Pasay, spokesperson for the Redwater Surface Rights Group, said he hasn’t heard of any case in the Redwater area where companies haven’t been able to pay their lease rentals. He has however heard stories of companies walking away from sites without payment at larger Alberta Surface Rights Federation meetings.
Pasay owns land in the Egremont area, just north of Redwater. He has one active and two inactive wells on his site. Both non-producing wells are in the process of being reclaimed and lease payments have been received since they were shut down a decade ago.
“Imperial Oil has been very cooperative with me. I have very little negative to say about how it’s conducted itself on my property,” said Pasay.
Pasay said the problem lies with small companies, which aren’t abundant in the area. The majority of the Redwater field is owned by either Imperial Oil or Arc Resources.
“With the drop in prices, these smaller companies – probably very heavily leveraged – found themselves in financial difficulty. They could not meet their payments,” said Pasay.
But the sluggish economy is starting to affect medium-sized resource companies too said Hawranik. For the first time SRB saw a medium-sized operator, Lexin Resources Ltd., default on a number of its wells. So far more than 400 applications have been filed against this company alone.
“That’s a new one for us. We haven’t seen mid-sized companies get into grief before,” said Hawranik.
Municipalities have also reported hits to tax revenues with companies simply walking away from their operations.
Earlier this month, Alberta Association of Municipal Districts and Counties (AAMDC) president Al Kemmere reported that municipalities were out hundreds of thousands of dollars in missed payments.
But again, the problem doesn’t seem to be affecting Sturgeon County and neighbouring municipalities in the same way.
Sturgeon County Mayor Tom Flynn told the Gazette that he too was not pressing any panic buttons.
“We have between 30 to 35 accounts that aren’t fully paid,” he said. “Some of those are on payment plans, so I wouldn’t put too much into that. Actually 35 is about normal for us at this time, so we’re not seeing anything much different than in previous years.”
Sturgeon County is home to multiple oil and gas operations and is located in the Alberta Industrial Heartland.
The municipalities of Redwater, Gibbons and Legal also had no problems to report.
Alexander First Nation and Bon Accord did not respond to requests as of press time.
