WARNING: Read Before Signing
Posted on November 30, 2021
What smart landowners need to think about before signing a company's offer
By Stephanie Fradette
There is a pipeline project being proposed across your land. You’re a smart landowner and an engaged citizen. You want to see development happen. You know you can deal with a pipeline on your land. The landman tells you he’ll write down any concerns you have. You don’t want to stand in the way of progress. You don’t want your neighbours to talk trash about you. The money seems fine to you. You should sign, right?
We’re going to take a comparative look at Saskatchewan’s recent Surface Rights Board of Arbitration order for immediate right-of-entry (RoE) and the offer that was presented to the landowner by the energy company. This was not a landowner trying to stand in the way of a project. It was a landowner who knew the agreement was not written in their favour.
“We do not want to give the impression that the board order was good. It was unjust and deficient in many ways.”
For simplicity, we’ll refer to the landowner as “Wendy” and the energy company as “Pipe Inc.” It is boring and complicated to take a deep dive into the Surface Rights Act (SRA), the board order and the offer, so we’ll look at a few highlights.
We do not want to give the impression that the board order was good. It was unjust and deficient in many ways. But, it was head and shoulders above the offer Pipe Inc. offered Wendy. The offer was a perpetual (forever) right-of-way (RoW) across an entire quarter section for a one-time payment of $1,875/acre. For that single compensation, Wendy would be agreeing to:
- More than one pipeline
- Having to obtain written consent from Pipe Inc. to use the RoW
- Indemnifying Pipe Inc. from paying damages that Pipe Inc. could incur from Wendy using the RoW
- Installation of above-ground structures
- Never hindering or interrupting any activity on the RoW by Pipe Inc.
- Accepting that a letter of intent from Pipe Inc. to remedy any default is, in and of itself, a remedy
- Future abandonment in place
“If Pipe Inc. could have gotten her to sign its offer, it could have increased its rights and further limited its responsibilities.”
➥Money. During discussions, Pipe Inc. admitted to Wendy there was no financial incentive for her to sign when compared to forcing a board order. This was true. In fact, by forcing the order, Wendy would be compensated for her time and for any legal or consulting fees she acquired. Pipe Inc. refused to pay for legal fees during negotiations. A landowner along an alternate route had his lawyer look at the offer. He will not be reimbursed for that cost.
➥Number of pipelines. The board order limited the order to construction of one line. The offer did not. It contains repeated references to “pipelines.”
➥Written consent. The board order said Wendy shall have unrestricted access across the service line for all recreational vehicles or agricultural machinery. The offer says Wendy “shall not use the RoW for any purpose which might either interfere with the rights granted herein to ‘Pipe Inc.’ or which might incur a liability for damages payable by ‘Pipe Inc.’ without the prior written consent of ‘Pipe Inc.’”
➥Indemnity clauses. Still exists in the board order. Confusing in both.
➥Above-ground structures. The board order states above-ground structures cannot be installed. The offer says Pipe Inc. can install them.
➥Abandonment. Not addressed in the board order. Would fall onto the act, which has a process for a pipeline’s end of life. In the offer, Wendy would be agreeing to abandonment in place and reclamation being completed however is “practicable” to do so and at the discretion of Pipe Inc. ➥Cleaning. The board order says the construction equipment will be cleaned to prevent introduction of weeds or soil contamination. The offer does not provide Wendy anything.
➥Weed control. The board order says Pipe Inc. is responsible for weed control. The offer does not address this.
➥Soil management. Both the offer and board order are weak. But, the board order clearly states that soil horizons need to be separated and replaced in the same order.
Clearly, the offer presented to Wendy was designed to improve Pipe Inc.’s position, not Wendy’s. It was an offloading of responsibility and liability from Pipe Inc. onto Wendy. Without her signature, Pipe Inc. still easily managed to access her property by way of a RoE order. But if Pipe Inc. could have gotten her to sign its offer, it could have increased its rights and further limited its responsibilities. Wendy knew this, so she didn’t sign. But every other landowner did.
Would you sign?
Stephanie Fradette is a CAEPLA director. She owns and operates a family ranch with her husband and three daughters in southern Saskatchewan. They have oil wells, battery sites, injection wells, abandoned wells, lease roads, flow lines and pipelines on their property. They have had good and bad experiences with various companies and regulators and have learned the most through their bad experiences.
Published in PIPELINE OBSERVER Summer 2021