This EnerFAQs explains the role of the Alberta Energy Regulator (AER) in landowner-company agreements, commitments, and conditions in energy and resource developments. The EnerFAQ Proposed Oil and Gas Development: A Landowner’s Guide should be read with this document.
Each year in Alberta, private landowners enter into agreements with energy and mineral resource development companies that allow for the construction and operation of projects on their lands. In most cases, landowner-company agreements are clear, and each party understands its rights and responsibilities. Occasionally, misunderstandings arise about these private agreements, and the parties seek the AER’s assistance in resolving their concerns through the AER’s Alternative Dispute Resolution (ADR) program.
Questions:
How are agreements between landowners and companies negotiated?
Landowner-company agreements arise in a variety of circumstances. They are negotiated between the landowner and the energy or mineral resource development company. Sometimes the AER will assist the parties in resolving their concerns through its ADR program. This program includes independent, third-party mediation to assist parties in resolving their concerns.
Negotiated agreements reflect commitments made by both the company and the landowner.
What is a commitment?
A commitment is a verbal or written promise by an energy or mineral resource development company to a landowner. A commitment relates to activities or operations not strictly required by the AER’s guidelines or regulations. For example, a company may commit to painting its compressor to blend in with the surroundings.
Does the AER enforce commitments?
Although the AER encourages parties to reach agreements to resolve outstanding issues and concerns, commitments are private arrangements between parties. The AER cannot enforce commitments between a landowner and a company not included in a written agreement.
The Responsible Energy Development Act contains provisions that allow landowners to register their private surface agreements (PSA) with the AER’s PSA registry. If a landowner feels that a company is not meeting a term or condition of a registered agreement, they may ask the AER to determine whether they are or not. If the AER determines a company has failed to comply with a term or condition of a PSA, it may issue an order to comply. Please see EnerFAQ How to Register a Private Surface Agreement to learn more.
What is the requirement?
A requirement is a legal obligation. Requirements are found in legislation, common law, and all sorts of regulatory documents issued by the AER (i.e., directives, orders, approvals, etc.). The word “must” indicates a requirement in AER acts, regulations, rules, directives, and other regulatory documents. A company must adhere to all applicable requirements or be subject to enforcement action by the AER.
What is a condition?
A condition is an AER requirement included in a licence, approval, or permit that adds to or expands on existing AER guidelines or requirements. A hearing panel may also impose conditions as noted in their decision report.
An example of a condition is requiring an operator of a pipeline on private property to mark the pipeline locations at each existing fence line and provide the landowner with an accurate drawing showing all pipeline rights-of-way on the property and the pipeline location within the rights-of-way.
Because conditions typically form part of an AER approval and are an extension of the powers granted to the AER by government acts and regulations, the AER has the authority to enforce a breach of a condition. A company must comply with conditions or be in breach of its licence, approval, or permit and subject to enforcement action by the AER.
Why does the AER list conditions in some of its decision reports?
The AER lists additional conditions in decision reports to ensure that the decision and the reason it was made are clear. If the AER decides to attach conditions to a licence, approval, or permit, the decision report will explain the circumstances that led the hearing panel to include these conditions. Similarly, if the commitments made by a party have influenced the AER’s decision, it will record these commitments in the decision report.
How does the AER follow up on conditions that result from a hearing?
A company is responsible for complying with the conditions. The AER will develop an action plan to monitor compliance with the additional conditions attached to a licence, approval, or permit within the prescribed timeframes. Any supporting documentation submitted to or gathered by the AER as the result of a condition is available through the AER Information Distribution Services Section.
Should agreements that include commitments between a company and a landowner be written down?
Yes. Parties should carefully document all commitments and ensure each party receives a signed written copy of all commitments made. Each party may rely on the written agreement for reference in a disagreement.
How much detail should be included in an agreement?
Commitments should be written so that each party clearly understands what rights and obligations the commitment creates. When drafting commitments, it is essential to accurately reflect each party’s expectations and avoid vague or confusing language.
For example, consider a simple commitment that states, “the company agrees to construct a fence around its well site.” Because of how the commitment is worded, each party could interpret it differently. The company may interpret this commitment to mean it must immediately construct a wooden fence around the wellhead after it has completed all necessary testing and the associated pipeline is tied in. However, the landowner may expect a chain-link fence to be erected around the entire lease site immediately after the well is drilled.
Commitments should be carefully drafted to ensure they reflect each party’s expectations. In the preceding example, the commitment should describe the type of fence, the size, and the timing of its construction. Including details in an agreement builds awareness between the parties of what is expected of each other, significantly reducing potential conflict.
What information should generally be included in an agreement?
An agreement should
- clearly identify which parties will be bound by it,
- clearly identify the related project, well, or facility,
- specifically address what will happen if the company sells or transfers the facility to another party,
- be very specific and clearly identify all expectations (parties should avoid ambiguous
- commitments that may lead to a misunderstanding),
- discuss how disputes about commitments will be resolved (see expanded discussion below),
- identify specific consequences and the exact steps that will be taken if a commitment is not met
- by one of the parties, and
- be dated and signed by each party.
What happens when parties have a dispute over a commitment?
The best way to avoid disputes is to ensure that the original agreement is clearly worded and effectively addresses each party’s expectations.
The agreement should include a company contact whom the landowner can contact if there is a dispute and state what steps the parties will take to resolve the dispute. The company contact should have the authority necessary to make decisions on implementing the agreement.
One option for resolving disputes about commitments involves using a third-party mediator through the ADR process or an AER staff facilitator. Also, landowners can register their agreements with the AER’s private surface agreement registry. See EnerFAQ How to Register a Private Surface Agreement for more information.
Is compensation available to landowners for time spent negotiating agreements?
The AER has no authority to require a company to compensate a landowner for their efforts in negotiating an agreement. However, a company may agree to compensate the landowner as part of the agreement.
The AER has the authority to require that a company pay a party’s costs if an application is considered at a hearing. The AER’s usual practice (there are exceptions) is to acknowledge only those costs incurred after the AER has issued a notice of hearing. It is the AER’s position that until a notice of hearing has been issued, there is no certainty that a hearing will be held. In many cases, interactions concerning compensation between a hearing participant and a company occurring before the notice of hearing are outside of the AER’s jurisdiction. However, the AER recognizes that sometimes it is necessary for participants to incur costs before the notice of hearing and such costs may be reasonable, necessary, and related to the participation in question. For information on costs, see Directive 031: REDA Energy Cost Claims.
What is alternative dispute resolution?
The AER’s ADR program was developed in response to requests from the public and industry to be more directly involved and to have more control in resolving disputes on wells, pipelines, production facilities, and other facilities regulated by the AER. The three main components of the AER’s ADR program are AER staff mediation, third-party assistance from ADR professional service providers and ADR by hearing commissioners. While it may not be the answer to every dispute, ADR has often been successful in reducing the number of issues needing to be addressed and, in some cases, eliminating the need for a formal hearing.
For more information, see the ADR page.
Additional Information
For more information on the AER and its processes or if you wish to speak to your local field centre or have questions about energy resource development in Alberta, contact the AER’s Customer Contact Centre: Monday to Friday (8:00 a.m. to 4:30 p.m.) at 1-855-297-8311 (toll free).
This document is part of the EnerFAQs series, which explains the AER’s regulations and processes relating to specific energy issues. Please visit www.aer.ca to read more of the EnerFAQs series.
Each year the AER collects, compiles, and publishes a large amount of technical data and information about Alberta’s energy development and resources for use by industry and the public. This includes raw data, statistics, hearing materials, and information on regulations, policies, and decisions.
Publications may be downloaded free of charge from the AER website or made available through the Products and Services Catalogue by contacting Data & Information Services (email: InformationRequest@aer.ca).
The following agency provides supplementary information, assists in the resolution of disputes on matters relating to the farming community, and provides information on farming community matters:
The Farmers’ Advocate Office
305, 7000 – 113 Street
Edmonton, Alberta T6H 5T6
Phone: 310-FARM (3276)
Fax: 780-427-3913
Website: https://www.alberta.ca/farmers-advocate-office
