Every year millions of dollars in oil well surface rights payments for Crown land are flowing to ranchers, robbing the public of much-needed funds, and the Alberta government is doing nothing about it.
Ranchers pay the provincial government for leases that give them the right to graze their cattle on Crown land. This is a widespread and accepted way to generate revenue from public land and help ranchers run successful businesses.
However under Alberta law, oil and gas companies who want to drill on the same patch of grass negotiate privately with grazing leaseholders and secure the surface rights, rather than with the government who owns the land.
Not a dime of the money ends up in general government revenues to help fund healthcare, education, affordable housing, conservation and other public projects.
One critic who reached out to TheRockies.Life said this wild west system is long overdue for an overhaul.
“I don’t begrudge the small operator who receives the entire surface right compensation from one or two wells on the Crown gazing leases he holds. It’s the guys who hold enormous Crown grazing leases, with hundreds of wells that draw my ire,” said Dave Eaton, a concerned citizen who lives east of Calgary. “I’ve been watching Alberta politics for 60-plus years and I’m just tired of seeing the grift and corruption.”
Eaton said if a private landowner leased his back forty to someone for grazing cattle they’d expect to get most if not all of the compensation from an oil company wanting to drill on their land.
“How is it any different when the public owns the land?” he asked.
Eaton alleges this is happening in a big way under the nose of Premier Danielle Smith in her own riding of Brooks Medicine Hat.
Millions go to “The Prairie One Percenters”
Alberta has 100 million acres of Crown land and 5.2 million acres are covered by anywhere between roughly 5700 and 7400 grazing leases, depending on how they’re counted.
Nobody knows exactly how much money is changing hands between oil and gas companies and Crown grazing lease holders, but it’s been on the minds of critics for years. In 2015 the Alberta Auditor General decided to look into the issue.
The report concluded that “current legislation allows for an unquantified amount of personal financial benefit to some leaseholders over and above the benefits of grazing livestock on public land.”
The Auditor General also unearthed dusty legislation from 1999 that was never proclaimed but would have enabled the province to claim “a portion of the surface access compensation fees from industry operators that are currently paid to leaseholders.”
Ian Urquhart, a political scientist at the University of Alberta, also analyzed the Crown grazing lease system in a 2016 article. He references the Auditor General report showing the provincial government took in $3.8 million in grazing lease revenues in 2013/14 and that private landowners were charging rates 10 times higher than the province for the same rights.
Urquhart criticized the fact that when oil and gas companies come knocking on Crown grazing leaseholders for surface rights, the public is left in the dark – and out of pocket.
“The leaseholder receives the lion’s share of compensation. These negotiations are private; there isn’t a public record of how much compensation actually is paid,” wrote Urquhart, adding that the secrecy makes it hard to get at the numbers.
However the Alberta Land Institute came up with an estimate derived from disputes between leaseholders and oil and gas companies that the Land and Property Rights Tribunal got involved in.
At $1,500 in compensation per well site per year, the University of Alberta-based institute estimated that decade ago leaseholders collectively banked $50 million of oil and gas compensation money. Over the 30-year lifespan of a well, these payments nearly topped $1 billion.
As a comparison, Urquhart looked at what the compensation would have been if Alberta had been using the same lease system as Saskatchewan. According to his findings, grazing leaseholders would have received $5.75 million instead of $50 million in 2013/14, with the difference going to the public purse.
“Is this overall level of compensation fair? Is it fair that none of the compensation goes to the real owners of public land – people like you and me? The millions of dollars collected by the Prairie One Percenters, if not the compensation regime itself, surely bears a critical look from the perspective of fairness,” concluded Urquhart.
Reached by TheRockies.Life, Urquhart said the “Prairie One Percenters” are still winning and the public is losing.
“I haven’t looked at this issue for awhile, but I doubt if anything has changed,” he said.
Taber took this bull by the horns
The Municipal District of Taber owns 82,000 acres, the majority of which is leased out for grazing. Historically, leaseholders were getting $1,500 per year per well. Ten years ago, the municipal council decided that this model wasn’t fair for its citizens.
Starting in 2016, the amount leaseholders got per well was cut to $400 per year, with the rest flowing to the municipality.
Taber currently manages 70 grazing leases. There are 570 wells on MD-owned land. Roughly two-thirds are inactive.
As part of a comprehensive land management plan, this past September Taber council adopted a new grazing lease policy that sees 100 percent of oil and gas compensation going to the municipality.
“These revenues form part of the MD’s broader land and lease income stream, contributing to the municipality’s long-term financial sustainability and helping offset the costs of maintaining and investing in rural infrastructure, road networks, and essential public services,” said Carley Grant, Taber’s communications officer, in a statement sent to TheRockies.Life.
“The MD of Taber’s approach reflects its commitment to equitable, transparent, and sustainable land management. By directing compensation for industrial use of municipally owned, privately deeded lands to the municipality itself – rather than to individual leaseholders – the MD ensures that these revenues benefit the broader ratepayer base.”
Currently oil and gas surface rights compensation generates $1.5 million in revenue annually to Taber.
Dave Eaton believes it’s time the entire province followed Taber’s lead and ditched a model that benefits a few fat cat leaseholders while leaving regular Albertans out of the loop.
“This is an economic travesty. It’s outrageous,” Eaton said. “I think what Taber did was brilliant.”
