The owners of valuable rights to underground oil and gas deposits near growing communities could be left with nothing if housing prevents drilling, says a director with the Freehold Owners Association.
Some owners of freehold mineral rights are unaware they have already lost a potential income that can reach into the tens of thousands per year, said David Speirs, a director with the Freehold Owners Association.
Speirs knows of cases where people have discovered they owned potentially valuable mineral rights only after urban sprawl rendered them worthless.
Many mineral rights owners no longer own the surface land above. When that land is sold, mineral rights owners are often not notified or even aware the land was up for sale.
Even if mineral rights owners are aware that the land above is about to be sold to a developer they have little way of ensuring they get fair compensation for losing any opportunity to tap into their underground wealth.
That’s why the association is lobbying the province to set up a board along the lines of the Surface Rights Board to provide some recourse for freehold rights owners to retain some value when their property is overrun by development. That board provides recourse for landowners whose land is expropriated by municipalities.
Speirs said the loss of mineral rights is already an issue in Red Deer because of the city’s intention to annex 7,500 acres of Red Deer County land.
Much of the land is sitting on top of coalbed methane deposits, which could be valuable to those holding the mineral rights. But if development is allowed to go ahead, that land is “sterilized” for resource development.
“(Annexation) is the first step in the process that essentially devalues our mineral rights.”
How the owners of the rights can be compensated for losing that value if the city expands is fuzzy at best.
The city argues annexation only changes the jurisdiction of the land and the municipality has no role in offering compensation. Speirs said the city has said mineral rights owners should be looking to the province for help.
That position is understandable, he said. However, that leaves freehold owners trying to seek compensation from either the owners of the surface land, the developers, or the buyers of homes in a development. The issue would most likely wind up in the courts and involve expensive legal bills.
The issue was among several raised at the Freehold Owners Association’s annual general meeting and information seminar at Crossroads Church at Red Deer Saturday
Alberta’s Energy Resources Conservation Board chairman Dan McFayden was asked if his body would support a subsurface rights board to award compensation to freehold owners.
McFayden said the ERCB was asked to provide technical advice on the City of Red Deer’s annexation request and encouraged the municipality to consult with mineral rights owners. But the board has no way to enforce that and the creation of a subsurface rights board is out of its jurisdiction.
Else Pedersen said a board of that kind “would go a long way to providing a level playing field.”
In Alberta, 81 per cent of mineral rights are owned by the Crown. Most of the rest is owned by oil and gas companies, but four per cent are owned by individuals.