Conventional oil and gas production involves a producer getting access to oil and gas that is trapped underground by drilling and establishing a well-site that is located aboveground. While the resource is located under the surface, the activity to gain access to the resource occurs on the surface.
In Saskatchewan, the ownership of underground mineral commodities can be separated from the ownership of surface land. As such, a producer with ownership of oil and gas rights is required to acquire the rights to use surface land in order to establish a well-site for oil and gas production. Without acquiring the rights to use the surface land, the oil and gas would be inaccessible and remain trapped beneath the surface.
Governments have recognized that it is in the public's interest to see to it that the development of oil and gas production is not unduly restricted on account of surface rights owners refusing to grant oil and gas producers access to surface land. In Saskatchewan, The Surface Rights Acquisition and Compensation Act was enacted to provide a legislative framework that allows producers to acquire rights to use surface land for oil and gas production, while providing landowners with compensation from the producers for the use of their land. This framework addresses situations in which a producer with oil and gas rights is unable to come to an agreement for the lease of surface land with the landowner, by empowering the Surface Rights Board with the ability to impose a surface lease on the landowner.
This framework may create unfairness, as surface leases that permit producers to drill and establish well-sites on land may be imposed by the government without the consent or agreement of the land owner. Producers may become insolvent and fail to make the contractual payments required under these surface leases. This can leave land owners with little recourse for missed rental payments, beyond going to civil court to obtain relief in the form of a judgment – a process that can be time-consuming and expensive. Further, if an oil and gas producer folds up or becomes bankrupt, and there are no assets that can be used for judgment enforcement, there is likely little chance that a land owner will be successful in obtaining monetary compensation for missed rental payments under a surface lease (even if they are successful in obtaining a judgment in their favour).
In Alberta, the Provincial government recognized the unfairness inherent in a surface rights system where the land owner bears the risk of missed rental payments and implemented a system where surface rights owners can obtain compensation from the government for missed rental payments from producers. Under the Alberta framework, the Alberta Surface Rights Board can direct the Alberta government to pay a land owner that has not be paid rental money by a producer under a surface lease.
In Saskatchewan, there is no comparable authority for the Surface Rights Board to direct that the Saskatchewan government compensate a landowner that has not be paid under a surface lease. As a result, in Saskatchewan, the landowner bears all the risk for non-payment of oil and gas surface leases. Because the Province of Saskatchewan receives great financial benefit from the production of oil and gas in the province, it only makes sense that the Surface Rights Acquisition and Compensation Act be modernized to alleviate the unfairness of a system where a government-imposed surface lease can leave a landowner holding the bag when rent from a delinquent producer goes unpaid.
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