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    Tuesday, September 02, 2014

Effective: November 1, 1999
Revised: February 4, 2002
Revised:  October 1, 2008
Reviewed: May 2012
Reviewed: May 2013

Overview of Policy Objectives

The petroleum and gas surface lease policy reflects the Ministry's support for the development of petroleum and gas deposits under agricultural Crown land through a co-operative procedural framework.

The impact of petroleum and gas development on agricultural lessees is recognized through one-time cash payments in the year that a new surface lease is issued or additional wells are drilled on an existing surface lease.  Agricultural lessees receive annual rent reduction in subsequent years for as long as the surface lease is active. 

Protection of the environment and productivity of the land are of paramount importance. Co-operative partnerships with other governmental ministries and agencies are used to safeguard the land.

All those involved with petroleum and gas development on agricultural Crown lands are expected to respect the land and those who make their living from the land.

Eligibility

Individuals, partnerships or corporations whose line of business consists of, or includes, the exploration, development, production, processing or transportation of petroleum and natural gas and their by-products are eligible to apply for a surface lease on agricultural Crown lands.  Applications for a surface lease are available through Lands Branch, Ministry of Agriculture.

Compensation to Agricultural Lessees

On or after April 1, 1997 and before October 1, 2008, the Ministry will make a one-time payment of $200 for each surface lease that is issued on an agricultural lease and a further payment of $200 for the second and each subsequent well drilled on a surface lease.

On or after October 1, 2008, the Ministry will make a one-time payment of $500 for each surface lease that is issued on an agricultural lease and a further payment of $500 for the second and each subsequent well drilled on a surface lease.

On or after April 1, 1997 and before January 1, 2009, the agricultural lessee will receive an annual rental reduction of $100 for each surface lease on the agricultural lease.  For this time period, where there are two or more producing wells, the agricultural lessee will also receive an annual reduction of $100 for the second producing well and each subsequent producing well.  The rental reductions begin in the calendar year following the issuance of the surface lease or the drilling of the second or subsequent wells.

On or after January 1, 2009, the agricultural lessee will receive an annual rental reduction of $200 for each surface lease on the agricultural lease.  For this time period, where there are two or more producing wells, the agricultural lessee will also receive an annual reduction of $200 for the second producing well and each subsequent producing well.  The rental reductions begin in the calendar year following the issuance of the surface lease or the drilling of the second or subsequent wells.

The maximum aggregate annual agricultural lease rental reduction will not exceed 30 per cent of the annual rent otherwise payable for the agricultural lease.

The agricultural lessee remains responsible for the municipal taxes applicable to any land withdrawn from an agricultural lease for a surface lease.

Procedures and Conditions

1. Obtaining a surface lease

Applicants for a surface lease or their agents should provide a completed application including all required permissions at least 10 working days prior to the projected entry date on to the land. Incomplete applications may slow the approval process.  A surface lease or the Ministry's permission must be received prior to the start of any development of the site. 

A surface lease will not be issued unless the reservations and requirements of the various agencies having an interest in the land have been satisfactorily addressed.

If a surface lease is to be located on leased agricultural Crown land, the agricultural lessee is to be contacted prior to the application for a surface lease to discuss proposed sites and to obtain the lessee's consent to access the lease.  If a lessee does not consent to entry onto the leased land, the Ministry will endeavour to mediate the situation to the mutual satisfaction of both parties. However, the Ministry may grant permission to enter after establishing requirements based on the legitimate concerns of the agricultural lessee.

2.     General Conditions

Surface lease documentation will be as prepared by the Ministry.  No other lease documentation will be accepted without the prior consent of the Ministry.

Rentals and other charges relating to the issuance and ongoing operation of a surface lease are to be calculated according to The Provincial Lands Regulations.

Surface leases may be assigned only with the prior approval of the Ministry.

When the surface lease is located on lands protected by The Wildlife Habitat Protection Act, or defined as environmentally sensitive, the Ministry of Environment may stipulate environmental terms and conditions that will be included in the surface lease document.

Before any work is started on a surface lease, a survey and development plan must be provided which details all development activities to be carried out on the leased land.

The Ministry will determine the value of any damage to growing crops on land withdrawn from an agricultural lease if the surface lessee and the agricultural lessee cannot agree.  The value of the damage will be added to the rental and other charges due with the issuance of a surface lease. The Ministry will pay any crop damage so determined to the agricultural lessee.

If temporary work space outside of the area proposed in the surface lease is authorized by the Ministry, the surface lessee must negotiate and pay the agricultural lessee directly for any crop damage arising from the use of the temporary work space.

The surface lessee is to use the lands in an environmentally responsible manner in keeping with the surface lease document and all applicable legislation and regulations.

The surface lessee is responsible for any damages to the facilities and other improvements of the agricultural lessee that arise from the operation of the surface lease by the surface lessee or his or her agents.

Prior to the surrender or abandonment of a surface lease, the surface lessee must provide written confirmation of compliance with The Oil and Gas Conservation Regulations, 1985 and that any pollutants on the site are within acceptable levels.  The surface lessee must also provide and carry out a restoration plan, which will return the surface of the land to its original condition or as near to its original condition as practicable. 

Rent on the surface lease after surrender or abandonment will be at one half the normal rate from the date of provision of;

(i) confirmation of compliance to The Oil and Gas Conservation Regulations, 1985;
(ii) confirmation pollutants are within acceptable levels; and
(iii) a restoration plan satisfactory to the Ministry;

to the date the lands are in a condition satisfactory to the Ministry.

If a surface lease is surrendered within 12 months of issuance, the first year development fees and a prorated portion of the first year's rent will be refunded, if no construction or development has taken place on the site.

The rental related to the access roadway portion of a surface lease may be subject to review and adjustment where circumstances exist that result in the rental for the roadway being higher than might otherwise be applicable. 

Endorsement Requirements

On lands subject to an agreement for sale, the purchaser may grant a surface lease provided that an endorsement from the Ministry is obtained.  The endorsement will specify that all rentals will be sent to the Ministry by the surface lessee and applied on the agreement for sale.  The surface rentals are applied first on any balance of principal and interest outstanding and secondly on the principal not yet due.

This policy reflects The Provincial Lands Amendment Regulations, 2008 (No.2).

Additional information is available by contacting your local Regional Office, listed below:

Northeast (Tisdale)
Regional Office
PO Box 1480
1105-99th St.
Tisdale, SK S0E 1T0
306-878-8813

 

Northwest (North Battleford)
Regional Office
1192 - 102nd St.
North Battleford, SK S9A 1E9
306-446-7449

South (Swift Current)
Regional Office
PO Box 5000
350 Cheadle St.
Swift Current, SK S9H 4G3
306-778-8300



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