Alternative models of compensation on Alberta’s crown grazing lease lands

Overview

Over 6.3 million acres (3.9 per cent of the province) of publicly owned Crown agricultural lands in Alberta are leased to individuals or corporations for livestock grazing. Historically, grazing lease holders in Alberta have received compensation from oil and gas exploration when development is undertaken on lands that they lease. Compensation to leaseholders is generally determined through privately negotiated agreements and this information is not publicly available. Recently, one jurisdiction in Alberta adopted a mechanism similar to the approach used in Saskatchewan for the treatment of compensation revenue from oil and gas disturbance on public grazing land that limits the amount of compensation that leaseholders can receive.

This paper provides a review of the current policy for public lands grazing leases in Alberta, and compares it with the approaches used in the Province of Saskatchewan and Municipal District of Taber. We examine the implications of the alternative approaches and provide a description of the number of wellsites on grazing leases and an estimate of the size and distribution of compensation funds transferred from oil and gas operators under the various policy approaches.

While this paper provides detailed information on some aspects of this issue, the Government of Alberta would have to determine whether or not the magnitude of the revenue involved would be worthwhile to invest in other programs, given the challenges that could be associated with legislative or regulatory change, transactions costs, transition costs, and impacts on a sector that has faced economic shocks over the past two decades. The government may also have to factor in the impact any changes in compensation payments would have on the regional agricultural sector and potentially, provision of ecosystem goods and services.

Given the differences between approaches to compensation, clear and independent information regarding the legislative and policy objectives around compensation - and the potential consequences of policy change - should be useful in informing discussions around this issue.