POP: Annual Rental on Pipelines

POP: Yes
Res #: POP 3-14M
Number: 3
Year: 2014
Midterm: Yes
Expired: Yes
Responses Received: No
Departments: Saskatchewan Ministry of Economy

WHEREAS land owners are paid an annual rental for oil wells and service leases it should be appropriate to be paid an annual rental for pipelines; and

WHEREAS land owners have to farm around oil wells and services leases, they also have restrictions in regards to the pipelines because of this;

BE IT RESOLVED that SARM lobby to have Oil Companies pay land owners an annual rental on pipelines.

Response from the Honorable Bill Boyd, Minister of the Economy

In Saskatchewan as in other Canadian jurisdictions, it is not common for oil and gas companies to pay annual rentals for a pipeline right of way.  As noted in the resolution, this form of compensation is paid for well sites and facilities where there is a demonstrated annual loss of use associated with surface activities. Annual compensation is also paid for the adverse effects of a well site or facility on farming operations on surrounding lands.

In the case of a pipeline, compensation is paid to the land owner at the time of the initial construction for the value of land containing the right of way and the temporary loss of use of the land while the right of way is being reclaimed to its former state.  While the Government of Saskatchewan recognizes that landowners would like an ongoing payment in the form of an annual rental,the practice to date has been for operators to only provide compensation for loss of use during the reclamation period. After the land is reclaimed,the right of way can be farmed by the land owner without  an adverse effect on the surrounding lands.

In lobbying oil and gas companies to pay annual compensation, it will be important for SARM to identify what additional compensation is owed to the landowner beyond what is already paid at the time of the original installation of the pipeline.  It will be difficult  to argue for annual rentals where there is no long-term loss of use stemming from the placement of the pipeline on the land.  It will also be challenging to argue that additional compensation is owed for the restrictions imposed on landowners  from the presence of a pipeline on their property. Compensation for this restriction  is generally paid as part of the single lump-sum payment made by the oil company to the landowner  for the value of the land used for the pipeline right of way.

The issues surrounding landowner compensation are complex and challenging. The Government of Saskatchewan believes that there is merit for SARM to have discussions with the oil and gas industry on this important topic.