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Home My WebLink AboutThe Goderich Signal-Star, 1977-02-10, Page 228. 3i? Ml iI • V a 0 from Queen's Park Bg lack Ri It has been quite apparent over the past few weeks that various Oil Companies are -very,much .interested in leasing the oil and natural gas rights from farriers in South- western Ontario. Having been contacted by a number of ., farmers; asking numerous • questiOnS about the leasing of oil and gas rights, I offer the following comments which might be taken into con- sideration before the farmer makes a decision.• The decision to sign or not to sign an oil and gas lease is a purely business con- sideration. It would not be unlike a decision as to whether bor not to invest money in stocks. It is a speculative ' investment. Signing a lease does not in- volve the transfer of money. Instead it is a transfer for a consideration of some of the -- rights of the owner in his title to land. In Southern Ontario, except in extremely special cases, the mineral rights are owned by the surface.. rights 'owner. The same is not true, however, across Canada. In Northern Ontario and in the Western Provinces, most of the mineral rights are still owned by the government. Generally speaking all land obtained from the Crown prior to 1895, had the mineral rights to go with the surface rights, but since 1895 all land has had the mineral rights withdrawn and only the surface rights were given to the individual owners. An oil, gas, or, storage agreethent or lease is an agreement whereby •the landowner leases to another. - individual or a Company, his ownership to the oil, gasg storage reservoir which m4 be under his land. The pur- pose of a storage agreement is to grant rights to a com- pany,. to utilize underground reservoirs for the injection of gas during periods of low demand and withdrawal during 'period of high •demand. No land owner can be forced to sign. an oil or gas lease but in the event of a discovery of oil or gas, near. his property, a -landowner's oil- and gas rights• may be pooled „With .another so as to provide efficient, production of the oil or gtis. .While a landowner cannot be forced into . signing a storage agreement Ontario- law. provides for expropriation of storage rights, should a voluntary settlement not be possible. Compensation in the cases of .expropriation is- set . by the Ontario Energy Board, after all evidence`. is heard from both the landowner and} the Company developing the storage. A - lease , or storage agreement is generally for a . set term of years, normally less .than 20, or if a discovery -' is made or if the lands are used for storage then the lease runs for as long as production is taken or storage is being carried on. The lease signed by landowners is generally registered against the lands in the registry or land titles. office. Should the lessee (person or company taking the: ,lease) wish to surrender the lease at any tithe, he will usually grant a release of his right back to the lessor (landowner). Registration of this surrender automatically clears the title of the original lease. Should the; lessee fail toi:issue such a Odell Huron -Middlesex MPP surrender, the landowner can get the defunct lea a off his title by re ,resentati ns to a p _� judge and -or. the Master. of Titles. One good .way to help ensure a surrendered lease is cleared of title is to .make sure the Iease contains a clause such as: "Lessee upon surrendering all of its interest in the land shall at its own expense register such surrender in a Registry of Land Titles Office for the Registry` or Land Titles Division in which the lands are situa'te." However, this clause is no guarantee if the lessee is not reliable or cannot be found. If a landowner leases his oil and gas rights and later sells his farm then he must un- derstand that the lease goes as an encumbrance with the title and must be assumed by the new owner who in turn is entitled to receive the further rentals and royalties that"the lease earns, unless the mineral rights are reserved to the former owner. ' A question that is often. asked is what payment should a landowner expect for signing a lease. This varies from, time to time and from area to area. In the area of Huron -Middlesex the stan- dard annual payment of $1.00 per acre is paid as an annual holding fee, In addition most companies pay a minimum of $100 per acre per year for all of 'the surface area used in connection with drilling or construction projects. Damage to land is a matter of great concern to farmers. Nearly all leases provide for payment of damage. The damage clauses in all leases should be closely read, as these clauses often cover the most important part of the lease income. The ideal clause states that the lessee shall compensate the Lesser or other person entitled for any and all damages sustained or expenses in-_. curred by the, Lessor. at any "and -all' times°by reason of the exercise by the Lessee of any rights herein granted and including damages caused by acts or omissions of the employees, agents• and contractors of the lessee and such liability shall continue for the full .term .of the lease.. An acceptable clause states that the Lessee • agrees to compensate the .Lessor for Actual ' damage done by the Lessee to existing crops, timber and improvements on the land so taken. • The Clause tfiat should be avoided is the one ,which states that the Lessee agrees to pay the Lessor for all damages to growing crops and.to leave gates and fences as found. A lease should be signed only with a reputable com- pany and never with an in- dividual whose credentials you do not recognize. A fairly good rule is to say "any dealings with .a reputable firm cannot harm meunduly regardless of what the written contract says but any dealings with a swindler will injure me regardless of how good the contract terms are on paper. Better to deal with the devil you do know than the devil you don't know The landowner should never ' sign a lease with anyone he does not recognize unless he has first checked with his banger or -,checked with his lawyer. or . checked with one of the farm. organizations. It must be borne in :mind that it can cost the landowner money if he signs the, lease with a disreputable `party which does,.. 'not pay the pros lsed rents or royalties and n does not clear title. In this event, it can cost the landowner at leaf $50.00 to get the invalid lease struck off the Registry books. Naturally, the landowner is interested in the royalty that he can, expect to receive. The aeceprted,percentage for oil is 12% percent or one barrel in eight of all crude oil. produced: With gas wells there aretwo methods of determining royalty. The preferred method is the same as that used for oil, a straight 121,4 percent for all gas produced. The second is to pay the landowner si, ch rent -per well, related: to the production capacity of;'each gaswell. The latter'me "d= is not recommended Another concern f .. .s to ex or landowners 1s- ether e r geological locatio.,=,or other surveys coed cited across his land does 1140 4' to the landowner, Thsjn- vestigation by companlest,,;or individuals across land blithe search for oil and gas or storage Is not harmful t{ a landowner providing 7 that compensation is paidOlhe conduct of such surveysin'no way obligates the landowner and • indeed could.,: `;lie nu beneficial to him in asituch as oil, gas or storage nay'ibe discovered under the ,,land and the income froWthe ome on subse uenta 1 earnin powet -downer. Onl yv� surveys are e and ;new '"Inc Therefore, ',sure encouraged slot+ Landowners to insist that clause be- lease, e lease, , Such.. `st put the onusl.oni, pany to pay t i hb i �wsigne,,144$0: ase:' for "the' lar- 'The answer to this question gond ctin is,- "No"", If th per b ten- r"in t e led ' does not �ields.fau.ttd, de g � t ; crteat�ed. ' represen, a good . lessee. ng is to:•be Under .no ,circumstances scour a ?could.. na landowner sign a • v.n �jot, n fir .. � � �ease.with air -unknow m , Y airs grMindividual,:or. sign with a u ten- d di the Company' or individual which iclaltl; e' nyrot a has ' a reputation for unfair. * dealings.` $ ° 4 gilheom.. The answer is "Ves` , if the images„- .to :landowner ,deals exclusively ne g our ng ry p�,rop ty, ::::!:::::::le ith reputable firms which otherwise the f,a'tdowner have a reputation for "goods. could be held responsible for satisfactory.or money any lama es done to his refunded". When leasing with neighbours :land resulting such a .firm :;.the 'landowner from exploration, drilling aril can do; nothing ,but benefit extraction operations because his farm has a new, Having made the forego ng, Income, from rental at least comments I will endeavour to and- if new production should answer the .question.,whether, be .• found and developed he it is desirable for a landowner '.will ;have a substantial new ByM1;;Le Iandown new prod having, a risk and,': with, tx rexxnembe IC SA s ,1�►sha.x c lo, fau +e ep Sp at tltx�ri`al! 8 1i cc! 'Gus ILABLE AT OPEN MON.:THRU LSAT. 9A.M. - 9: 30 P.M. 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