Farmers fume as frustration mounts over oil companies’ unpaid leases, rural taxes despite surging crude prices

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Hannah Konschuh, a grain farmer rising wheat, canola, barley and yellow peas in Alberta’s Wheatland County, has been combating with oil and gasoline firms that both haven’t paid or are aggressively attempting to cut back their leases for the wells that dot her land.

She’s not alone. Additional south towards Drugs Hat, Ron Huvenaars, a farmer rising barley, wheat and quinoa, and who can also be president of the Alberta Floor Rights Federation, says he’s been serving to a rising variety of Alberta farmers cope with power firms trying to reduce prices by withholding funds to farmers.

To the north, Ponoka County Reeve and president of the Rural Municipalities Affiliation Paul McLauchlin is combating with power firms for $245 million in unpaid municipal taxes by way of the tip of 2020 to rural counties and municipalities throughout the province. That quantity ballooned 42 per cent from 2019 when unpaid taxes have been at $173 million, and is up 203 per cent from $81-million in unpaid taxes in 2018.

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“Persons are supportive of the oil and gasoline business, however whenever you get to the dialog round cost of taxes, they don’t consider that residents ought to be answerable for the cost of taxes by the oil and gasoline business,” McLauchlin stated. “You shouldn’t be in a position to function within the province of Alberta for those who haven’t paid your taxes. To me, it’s an ESG (surroundings, social and governance) dialog.”

In Alberta, when an oil and gasoline firm doesn’t pay a farmer or rancher their lease cost, the landowner can file a declare below part 36 of the province’s Floor Rights Board to receives a commission. Finally, if the corporate goes bankrupt or lacks the power to pay, the Alberta authorities has an obligation to maintain the farmers and ranchers entire and the taxpayer finally ends up paying instead of the oil and gasoline firm.

You shouldn’t be in a position to function within the province of Alberta for those who haven’t paid your taxes

Paul McLauchlin

Throughout the province, farmers and rural municipalities have been locked in more and more fractious disputes with oil and gasoline firms headquartered in Calgary over non-payment of their lease or tax obligations. A majority of these disputes will not be new to Alberta, however they’ve turn out to be more and more widespread in the course of the extended downturn within the power business within the province starting in 2014. When commodity costs collapsed in the course of the first wave of the COVID-19 pandemic final yr, the variety of disputes climbed additional.

Now, as commodity costs have risen as soon as once more with the worldwide financial system reopening and the pandemic starting to wane, farmers and rural municipalities are out of endurance with oil and gasoline firms that aren’t paying their payments.

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The West Texas Intermediate oil value is buying and selling close to US$70 per barrel and AECO pure gasoline value in Alberta is persistently buying and selling above $2.60 per thousand cubic ft. Nonetheless, power firms in Wheatland County, simply east of Calgary, are asking Konschuh and different farmers to simply accept a 60 per cent discount on their lease funds.

“We all know that costs on the power aspect of issues will not be as depressed as they have been, and so they haven’t come again at us and stated, ‘Issues are higher, let’s elevate your compensation,’” Konschuh stated. She and different farmers within the county have banded collectively within the Wheatland and Space Floor Rights Society (WAASRS) in an effort to push again in opposition to what they think about to be aggressive actions by power firms, andelevate the difficulty with the provincial authorities.

Farmers are additionally lacking out on the increase in their very own sector. Costs of various crops are at an elevated stage, however the land is being occupied by oil and gasoline wells leading to a showdown over rising commodity costs within the province and a battle over essentially the most financial use of farmland.

These improved commodity costs for farmers should be accounted for in landowner compensation, too, Konschuh stated.

“We’re seeing improved commodity costs on the farming aspect and that’s throughout all commodities — wheat, canola, barley, peas,” she stated.

Farm Credit score Canada information exhibits canola costs have skyrocketed from slightly below $500 per tonne for many of 2016 by way of 2020 to $904.40 per tonne at the start of June. Wheat and corn are additionally fetching multi-year highs of $687.75 per tonne and $682.75 per tonne, respectively.

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As agricultural commodity costs rise, so too will the payments for unpaid leases.

Between 2014 and 2018, the quantity of funds withdrawn from normal authorities income to pay landowners has soared 1,081 per cent from $540,000 to $6.4 million, in line with a Could research from the College of Calgary College of Public Coverage.

“The province owes landowners respect for his or her property rights and well timed, truthful entry to recourse and compensation,” the report’s authors Victoria Goodday and Braeden Larson wrote. “In any other case, Alberta landowners will proceed to be unfairly burdened with monetary and different prices that have an effect on not solely their capability to earn a dwelling from their land but in addition injury their belief in business and authorities.”

Final yr, the variety of functions below part 36 of the province’s Floor Rights Board, which is utilized by farmers to demand cost from mineral rights holders comparable to oil and gasoline firms, rose 19 per cent to 4,361 functions for cost. That determine can also be up 125 per cent up to now 4 years, from 1,934 part functions in 2017.

The Alberta authorities says it’s attempting to cut back the timeline for processing Part 36 functions by way of further staffing, new digital portals for submitting functions and streamlined processes.

“Alberta’s authorities is dedicated to supporting landowners and making certain they’re compensated for the oil and gasoline actions on their land,” Paul Hamnett, press secretary to Alberta Setting and Parks Minister Jason Nixon, stated in an electronic mail.

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Farmers and ranchers proceed to be pissed off.

Ken Sauve, a farmer in Wheatland County and member of WAASRS, filed one SRB utility after Ember Assets Inc. tried to pay 45 per cent of their lease obligations final June. His listening to on the SRB is just not scheduled till subsequent January.

Ember Assets president and CEO Doug Dafoe stated his firm has paid all of its municipal taxes and has made a suggestion of cost to each landowner that has an Ember pure gasoline nicely on their land. He stated the vast majority of farmers to this point, over 1,800 particular person landowners, have agreed to a hire discount and Ember is making funds at a brand new, decrease fee.

The decrease fee, he stated, is acceptable as a result of Ember is utilizing a smaller space of the land now than when the wells have been drilled. He acknowledges that crop costs have risen too, however that he expects Ember will scale back its total leasing prices as a result of rising crop costs are offset by the corporate want to shrink the floor space it leases from farmers.

“The place the worth of the crop has gone up, that’s fantastic as a result of that worth of the crop going up is small in comparison with paying on three acres versus one acre,” Dafoe stated, including that lease funds are the corporate’s single largest working value. “It definitely gained’t make the lease worth go up or the rental cost go up. It could mitigate what the discount is.”

The corporate created an internet site final yr directed at landowners, which exhibits Ember is endeavor a five-year evaluation of its leasing prices. The location describes how the corporate plans to launch its personal functions for hire reductions to the SRB if farmers don’t settle for their presents of lowered cost and likewise raises the spectre of orphaning its oil and gasoline wells. “In the long run, we could not be capable of proceed working. In that occasion, our leases — like these of opponents who’ve turn out to be bancrupt — could be given over tp the Orphan Properly Affiliation.”

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Dafoe stated Ember is just not in peril of going bankrupt and, with bettering pure gasoline costs, is repairing its steadiness sheet. He stated the corporate has accessed $20 million in federal funding to scrub up inactive wells within the space this yr and is matching that funding with its personal spending.

Ember is capitalized by Toronto-based Brookfield Capital Companions, a unit of of Brookfield Asset Administration, which has a market capitalization of $91.3 billion.

Nonetheless, farmers and ranchers discover it irritating when oil and gasoline firms attempt to reduce prices when it’s time to pay farmers, then pay big authorized charges when the issues are dropped at the SRB or finally to court docket, stated Spencer Hilton, one other WAASRS farmer who grows wheat, barley and hops which are used at his household’s Origin Brewing enterprise in Strathmore, Alta.

“They’re sparing no expense,” Hilton stated, with regards to authorized charges, which he stated could possibly be averted if higher relations with landowners have been fostered.

Whereas they word it’s not each oil and gasoline firm, the WAASRS farmers estimate that in Wheatland County, instantly east of Calgary, there are roughly 8 firms which are at the moment not paying their lease obligations, or aggressively attempting to chop their funds to farmers.

“Whereas it’s unlucky a small variety of firms have deferred or chosen to not pay their property taxes, the overwhelming majority of oil and pure gasoline firms proceed to pay their share, together with floor rights leases,” stated Jay Averill, spokesperson for oil and gasoline business group the Canadian Affiliation of Petroleum Producers. “CAPP is constant to work with municipalities and the Alberta authorities to search out options that can encourage funding and generate elevated revenues for municipalities together with jobs in these rural areas.”

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The state of affairs is a black mark on how the oil and gasoline business markets itself to buyers, trying to put money into firms with upstanding environmental, social and governance (ESG) information, stated Keith Wilson of the Wilson Regulation Workplace, a lawyer who represents landowners with complaints in opposition to power firms.

“It’s undermining the business’s and authorities’s narrative that we’ve got essentially the most socially and environmentally accountable produced oil and gasoline — and we don’t. They’re not cleansing up their messes and the regulator isn’t making them clear up. They’re not paying their taxes for the wear and tear and tear on municipal infrastructure; they’re shifting that burden onto farmers and municipal communities.”

It’s undermining the business’s and authorities’s narrative that we’ve got essentially the most socially and environmentally accountable produced oil and gasoline — and we do not

Keith Wilson

Wilson stated the Alberta Power Regulator ought to start issuing closure orders, which it has the facility to do, when farmers aren’t being paid for his or her leases.

The AER didn’t present remark by the point Monetary Put up went to press on what actions it’s taking to drive non-compliant oil and gasoline firms to make their floor lease funds or their municipal taxes. The regulator issued a brand new directive final yr that claims any oil or gasoline firm that’s behind on its municipal taxes can be deemed the next environmental danger, which impacts the corporate’s legal responsibility ratio and, because of this, its capability to get new nicely licences and its capability to purchase or promote wells.

With few regulatory instruments at their disposal and a backlogged Floor Rights Board dispute decision system, some farmers are taking issues into their very own palms.

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In some instances, Alberta Floor Rights Federation president Huvenaars stated he is aware of that some farmers are protesting the state of affairs by leaving tractors and farm gear straight on entry roads for oil and gasoline wells and claiming the gear has damaged down on these roads. Huvenaars advises farmers and ranchers to not attempt these aggressive ways as a result of it would have an effect on their capability to finally argue their instances in court docket.

In Ponoka County, Reeve McLauchlin stated that final yr, he wrote off $4.3 million in unpaid taxes from power firms that went bankrupt. This yr, he’s taking a look at a $1.9 million shortfall in his county’s annual price range on account of unpaid taxes.

Paradoxically, he stated, Ponoka County had deliberate to spend $1.9 million on two bridges within the county which are primarily utilized by power firms accessing their oil and gasoline wells.

“The AER’s modifications are a pleasant nudge in direction of fixing that, however we positively don’t have something greater than annoying cellphone calls and attempting to work as finest we will to have firms honour their obligations,” he stated.

Monetary Put up

• E-mail: gmorgan@nationalpost.com | Twitter: geoffreymorgan

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