Re: "Stop taking land agents at their word,” July 5, 2016 commentary by Frank Dabbs.
Once again, you have brought misleading and completely erroneous information to our community on the oil and gas sector, specifically the Redwater ruling, the role of surface land agents and the rights of landowners and lease agreement holders.
As per the Redwater ruling, you wrote: “Justice Wittmann said in effect that a receiver cannot cherry pick the good wells in a bankrupt company's portfolio of assets but must deal with the bad wells too.”
The opposite would be true of this ruling. Justice Wittmann used the federal Bankruptcy and Insolvency Act law to override provincial regulations to rule that money from the sale of Redwater's assets should go to the company's creditors rather than be used to pay for the reclamation of non-producing wells. Wittmann, in fact, set precedent on cherry picking the good wells and tossing the bad ones to the orphanage of public funding.
There are dozens of assessments on this ruling and perhaps you should read some of them.
You then claim the AER “piled on by doubling something called the liability management ratio (LMR) for the companies it regulates – in other words it raised the threshold of fiscal strength to pay well abandonment costs.”
The LMR was raised from 1.0 to 2.0, but only for when a company wants to sell or buy assets and is merely a token insurance policy to ensure companies have two times the assets as they do liabilities. Not a penny is actually directed towards paying future abandonment costs. To further, in response to many “angry calls” by companies, the AER has recently stated they will review each asset sale on a case- by-case basis going forward. Additionally, the AER is appealing the Redwater ruling.
Then your narrative switches gears to somehow claim that “surface landowners can reduce the orphaning of wells.”
May I ask how? How can a landowner prevent a formation from declining, or stop a company becoming insolvent? Surface landowners have no say in how a well site is operated, deemed inactive, suspended, or abandoned. They actually have no say in how a well site is reclaimed or remediated either.
Surface landowners also have no right to deny access to a company well site for which they have a lease agreement, nor can they enforce such a provision, as you suggest. Have you forgotten about the ultimate legislation in Alberta? Right of entry. Landowners have no rights, with or without a lease agreement. Even in the presence of a lease agreement, in the event of a breach of contract, under REDA, the AER will not intervene, and the matter must go before the courts. And the Surface Rights Board is not the place to get your past due lease payments sorted out. Do review the Lemke decision.
Additionally, one cannot lay blame on the land agent. Although many have unsavoury tactics and poor ethics, they are merely contracted by, and a salesperson for, the company. The lease agreements and promises they bring to the tables of residents and farmers across Alberta are the legal obligation of the company, simple as that.
Finally, you do not need an early warning system for well orphaning in Alberta. They all will be orphaned one day, joining the some 140,000-plus already awaiting abandonment. Some wells will be neglected far sooner than others, such as fracked gas and oil wells in high decline areas, such as the Harmattan basin of our community. If a land agent is telling you that they will get rich and have a producing well for decades, that is rubbish. Numerous well sites only drilled in 2010 onwards are already suspended in our township for lack of production. The landowner is then left with a terrible liability that may never get remediated or resolved. The recent Redwater ruling has only furthered the burden on the public and surface landowners.
I would expect that you will take the responsible measure to gather the accurate regulatory and legal information relating to the issues you have commented upon, then find the time to correct your narrative, so the people of our community are provided with facts, not fiction.
Diana Daunheimer
Didsbury area
