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The Magazine of the Canadian Association of Petroleum Landmen
June 2011
THE NEGOTIATOR
Operators and Fiduciary DutiesWhat the Courts Have Said
What’s Mine is Yours, What’s Yours is Mine… and What’s Ours is Theirs?How Family Decisions of Title Ownership
Impact Freehold Mineral Leasing
How to Deal with Historical IssuesWhen the Past Presents
Challenges to O&G Activity
® ®
2011 CAPL ConferenCe
McMillan’s Calgary office is anchored by Michael Thackray, QC, the man who wrote the book* on oil and gas law in Canada. Take advantage of our local expertise in Calgary’s most important industry—and of our recent combination with Lang Michener to access complete coverage across Canada and beyond. So you can take the lead.
McMillan in CalgaryMichael Thackray, QC
*Oil and Gas, Halsbury’s Laws of Canada
McMillan LLP | Vancouver | Calgary | Toronto | Ottawa | Montréal | Hong Kong
Senior Editorial BoardDirector of Communications
Joan Dornian [ph] 403-531-4713Advertising Editors
Clark Drader [ph] 403-537-1771Marah Graham [ph] 403-386-6465
Coordinating EditorJames Armstrong, P.Land [ph] 403-699-6053
Feature Content EditorMark Innes [ph] 403-818-7561
Regular Content EditorJared Frese [ph] 403-386-5471
Social Content EditorMark Horne [ph] 403-231-5266
Editorial CommitteeMaria Lewis [ph] 403-260-8361Lindsey Lovse [ph] 403-699-6008Trevor Neufeld [ph] 403-863-5759Gary Richardson, PSL ]ph] 403-693-2288Tracey Stock [ph] 403-298-2470Erin Wise [ph] 403-532-3828Elizabeth Zyluk [ph] 403-808-2839
Design and ProductionRachel Hershfield, Folio Publication Design
PrintingMcAra Printing
SubmissionsFor information regarding submission of articles, please contact a member of our Senior Editorial Board.
DisclaimerAll articles printed under an author’s name represent the views of the author; publication neither implies approval of the opinions expressed, nor accuracy of the facts stated.
AdvertisingFor information, please contact Clark Drader (403-537-1771) or Marah Graham (403-386-6465). No endorsement or sponsorship by the Canadian Association of Petroleum Landmen is suggested or implied.
The contents of this publication may not be reproduced either in part or in full without the consent of the publisher.
2011–2012 CAPL Board of DirectorsPresident
James Condon, P.Land [ph] 403-819-2423Vice-President
Margaret Ariss [ph] 403-539-1107Director, Business DevelopmentAlberta & British Columbia
John Covey [ph] 403-232-7323Director, Business DevelopmentSaskatchewan & Alberta Oilsands
Jan McKnight [ph] 403-290-3406Director, Communications
Joan Dornian [ph] 403-531-4713Director, Education
Kevin Egan [ph] 403-298-6194Director, Field Acquisition & Management
Jason Tweten, PSL [ph] 403-528-2558Director, Finance
Nikki Sitch, P.Land, PSL [ph] 403-263-7610Director, Member Services
Robin Thorsen [ph] 403-519-2242Director, Professionalism
Frank Terner, P.Land [ph] 403-691-3056Director, Public Relations
Chris Lamb [ph] 403-532-7447Director, Technology
Robyn Van den Bon, P.Land, PSL [ph] 403-503-5276Secretary/Director, Social
Gloria Boogmans, P.Land [ph] 403-246-4173Past President
Dalton Dalik, P.Land [ph] 403-478-0528 Suite 350, 500 – 5 Avenue S.W. Calgary, Alberta T2P 3L5 [ph] 403-237-6635 [fax] 403-263-1620www.landman.ca
Leanne Desbarats [email protected] Grieve [email protected] Irene Krickhan [email protected] Steers [email protected]
Also in this issue
5 The Gowlings PLM Alumni Charity Golf Classic
22 Junior Landman Classic
25 2011 10k/5k Road Race and Fun Run
25 CAPL 2011 Spring Ball
26 34th Annual Trap Shoot
THE NEGOTIATORThe Magazine of the Canadian Association
of Petroleum Landmen THE NEGOTIATOR
Features June 2011
2 2011 CAPL Conference Cory Stewart
5 The Segregation Protocol is Launched and on its Way
Michelle Radomski
6 How to Deal With Historic Resources Margarita J. de Guzman, M.A.
12 Fiduciary Duties of an Operator Paula Olexiuk, Robbie Armfield & Daina Kvisle
18 What’s Mine is Yours, What’s Yours is Mine… and What’s Ours is Theirs?
Geraldine Hampton, BA, LLB
20 What the Heck are Flow-Through Shares? John W. McClure and Nadia Talakshi
In Every Issue10 Board Briefs
11 Message From the Executive
15 Get Smart
24 Roster Updates
28 CAPL Calendar of Events
28 June Meeting
®
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Québec city in La beLLe Province is the JeweL in canada’s crown and it is where visitors to this historic city wiLL exPerience a truLy uniQue range of Pursuits in a region as distinct as francoPhone cuLture itseLf. Conference delegates and guests will
have access to the best that Québec City has
to offer as there are a dozen featured activities
along with evening events that are assured to be
magnifique.
The majestic Fairmont Le Château Frontenac
towering over the Saint Lawrence River has glori-
ously dominated the skyline for just over a century
and is the hands down winner of the ‘Most
Photographed by Awe-Struck Tourists’ award.
It is also the venue for the Sunday Night Reception
where Conference participants can behold the
vista, listen to a selection of local musical artists,
and enjoy cuisine from the Frontenac’s renowned
kitchen, all while interacting with other CAPL
members and their guests.
Fat Tuesday on a Monday offers Conference
revelers an opportunity to explore the Musée de
la Civilisation while dining on savory Cajun food,
indulging in the local microbrewery beer selec-
tion and dancing the night away to DJ Maude
– Québec’s hottest DJ! Guests will be greeted with
party favours at the door. So, whether you dress in
drag or come as you are, this Mardi Gras party will
be sure to entertain. written by
CORY STEWART
2011 CAPL Conference
The gates to Old Québec
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For those history buffs,
culture vultures, political
junkies, people watchers,
outdoors types, and those of
you who simply just adore
fine food, great wine and a
certain joie de vivre among
friendly, easy-going people
are all in for a huge treat.
Experience the full measure
of Québec culture on Tuesday
where delegates and guests can tour the Île d’Orléans – long
considered as one of the earliest settled places in Nouvelle France
– and dine in a 300-year old family home as one of the many stops.
Closer to the heart of Québec City, take part in an Old City Tour
and explore the Petit Champlain along with the Parc de l’Artillerie.
Or, team up with friends and take part in the Conference version
of the Amazing Race, a truly unique and creative way to journey
through old Québec. Perhaps a few hours with Jean Soulard,
Executive Chef at Le Château Frontenac will provide the culinary
encounter you have always longed to undertake.
Adventure anyone? Enjoy port, chocolate and pancakes
served with maple syrup after kayaking or a daring ride in
a Dragon Boat in the Baie de Beauport. More adventure?
Feel the wind blow through your hair as you cycle along the scenic
Saint Lawrence River or mountain bike atop Mont-Sainte-Anne.
How about canyoning down the 41-metre Jean-Larose waterfall?
Test your swing as you golf at Le Grand Vallon golf course in
Mont-Sainte-Anne – don’t worry, the bus doesn’t leave until 9:00.
Also at Mont-Sainte-Anne, enjoy a panoramic hike along the
summit and complete the trip with the Big Tyrolienne – 180
meters of full adrenaline! If all of this seems like a lot, it could be
that a few hours at a local microbrewery or two will help put the
Québec way of life into perspective. Whatever the choice, it is sure
to be an adventurous, exhilarating journey.
Rue Saint-Louis at night, Old Québec
Quartier Petit Champlain
Martello Tour on the Plains of Abraham
Sidewalk café, quartier Petit Champlain
1250, 396 – 11th Ave S.W. T2R 0C5
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This year’s Conference closes in chic fashion as participants
are welcomed back to the Le Château Frontenac for a Champagne
reception. When the doors to the Salle de Bal open, delegates and
guests will feast on a banquet and experience an exclusive Ariel
Ballet performance fit for the kings of old.
On behalf of the dedicated and creative Activities and Events
Committee, we want invite you to join us in Québec City in
September! m
the activities committee members are as follows:
tim Louie daylight energy
connie deciancio Mosaic energy
sara olineck arc resources
Kellie d’hondt crescent Point energy
brittney ramsay britt Land
wayne ellis naL
Jennifer benko cnrL
craig thomas bellamont
garth buchholz encana
brad Johnston galleon energy
Michael galvin delphi energy
byron bergen standard Land
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Visit us at www.edwardsland.ca to find out what we can do for you
Bright Future.Strong Foundation.
The Segregation Protocol is Launched and on its Wayit has been a Long and winding road on this Journey that started in 1995 for the caPLa segregation coMMittee, and we are very glad
to have finally arrived with the Segregation Protocol in hand.
After all these years of consultation, drafts and edits, it may still
not be perfect, but we are confident the Segregation Protocol now
provides Industry with a practical and effective code of conduct,
made up of set rules, suggested procedures and general guide-
lines, to be adopted and consistently followed and enforced when
administering land records and serving Notices of Assignment.
The Segregation Committee was first headed up by Lynn
Gregory in 1995, along with myself, Shelly Wilson, Rebecca Nowell,
Mari-Anna McCargar and George Green; amongst others that
joined in from time to time to provide their invaluable exper-
tise, such as Jim McLean, Jay Park, Jonathan Chapman and Ted
Weryshko, just to name a few. Although this initial group was
disbanded a few short years later, when the project fell into a
hiatus awaiting the latest CAPL Operating Procedure, a huge debt
of appreciation is also owed to these other individuals who were
instrumental in the early development of the concepts for the
segregation protocol as it pretty much still looks today.
I also have to thank Paul Negenman, who unwittingly got
himself engaged in this issue through an article he wrote for
The Negotiator about a year ago, which re-ignited the ongoing
debate in Industry over “which third parties to an agreement
should be named in a Notice of Assignment”. This article and the
flurry of comments and contradictions that followed really helped
give our segregation project the kick start needed to get it off the
ground again. The motivation and momentum to bring it to a first
place finish was then unstoppable with Paul’s further assistance,
along with Lynn Gregory and Jim McLean.
We’re not quite at the end of the road yet, but from this
vantage point, we’re now looking forward to the day when the
industry has fully embraced the Segregation Protocol. We believe
that it is no longer really a question of will it work, but how
quickly will it take hold. We have already seen a significant shift
in industry opinion toward positive support and acceptance of the
business practices and principles prescribed by the Segregation
Protocol. It is up to everyone in industry now to take ownership
of this project and ensure its success by working in cooperation
with your peer group to expedite and smooth the integration of
the Segregation Protocol into everyday business practices.
The final draft of the Segregation Protocol package will
be available on the CAPLA and CAPL website on June 1, 2011.
Endorsement has been received from both the Board of Directors
of CAPLA and CAPL, and everyone in industry is encouraged now
to immediately start living by this code of conduct when serving
and receiving Notices of Assignment. m
Michelle Radomski
Chairman, CAPLA Segregation Committee
The Gowlings PLM Alumni Charity Golf Classic
we are Just weeKs away froM the Most antici-Pated industry goLf event of the year. If you
weren’t lucky enough to make the cut and be one of the first
144 golfers registered, a waiting list has been started. Please
send in the registration form which can be found in this issue of
The Negotiator. The registration form can also be downloaded from
www.landman.ca.
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whiLe archaeoLogy is cooL to the generaL PubLic, it has coMe to be an unfriendLy visitor for oiL and gas and utiLities coMPanies. This was
especially the case during the recent oil and gas
boom, when intense exploration led to strict dead-
lines, which were sometimes impeded by historic
resources. Neglecting to plan ahead for historic
resources may cost extra dollars to the tune of
$15k to $30k per day due to inactive/moving rigs
plus other consequences of delay, such as having
a big archaeology dig on your hands. Spending a
little to save a lot will be beneficial in the long run.
the factsAccording to John Brandon, Head of the Land
Use Planning Section of the Historic Resources
Management Branch of Alberta Culture and
Community Spirit (ACCS), from March 1, 2010 to
March 1, 2011, a total of 9,571 conventional oil and
gas wells were licensed by the Energy Resources
Conservation Board (ERCB). Of this, 10.1%
(965 projects) affected lands on the Listing of
Historical Resources (the Listing), requiring review
by ACCS. The number of projects requiring the
completion of an Historic Resources Impact
Assessment (HRIA) was 57 (5.9 percent of the
total number of projects reviewed). This equates
to only 0.06% of all conventional ERCB licensed
oil and gas developments during this time period.
These 57 projects, however, necessitated increased
costs from conducting an HRIA, as well as wait
times of six to eight weeks or more, depending on
the extent of the project, the type of HRIA (archae-
ology, palaeontology, Aboriginal consultation), and
the number of all projects submitted to ACCS
for review. Backlogs inevitably occur during peak
intake periods.
How to Deal With Historic Resources
written by
MARGARITA J. DE
GuzMAN, M.A.PrinciPaL archaeoLogist, circLe crM grouP inc.403.891.5617Marg@circLeconsuLting.cawww.circLeconsuLting.cawww.thecircLebLog.ca
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total ercb licensed wells (March 2010–March 2011): 9,571
those affecting lands on the Listing: 965
those requiring an hria: 57
Potential delay of an hria: 6, 8, 10 weeks +
Potential delay of accidental discovery 10, 12, 20 weeks +
Potential costs of unplanned historic resources $1,000s, $10,000s +
why are historic resources important?The majority of historic resources in Alberta come in the form of
buried stone circles (or teepee rings, as they are better known) or
artifacts, such as stone tools (arrowheads, spearheads, etc.), lithic
debitage (the waste from making stone tools) and fire-broken
rock (rocks distinctly fractured through heat, as in boiling pits or
hearths). (Other historic resource categories include palaeontol-
ogy, relating to dinosaurs, and Aboriginal consultation, relating to
traditional use.) Many of these can be identified by the untrained
eye, while others require closer inspection by a professional.
Regardless, these will often incite the comment, “but those are
just a bunch of rocks.” True, but those rocks may have been used by
people 250 to 10,000 years ago; a bit older than your grandmother’s
china (which, by the way, may also be a historic resource).
The reality is that archaeology and heritage in Alberta is quite
simple, especially when compared to archaeology elsewhere in
the world. However, its simplicity does not take away from its
significance. Each buried feature or artifact found during an HRIA
speaks of the presence of an archaeology site, which tells a tale
of past occupation that can extend back thousands of years. If we
were to compare our heritage to other places in the world, it would
seem quite limited and sparse. In places like Europe, where civi-
lization has spanned centuries or millennia, artifacts are found
almost everywhere. In Alberta, however, archaeology is discovered
in only certain parts of the province, and much of it has been
destroyed by cultivation, infrastructure and other developments,
including oil and gas. Its rarity is what lends to its significance.
In addition to preserving a cultural heritage that has many miss-
ing pieces, protecting historic resources is important simply
because there isn’t that much of it. If you help preserve it, you, too,
can be part of that history.
be awareThe best way to make your job easier, when it comes to historic
resources, is to know where there is potential for the presence of
buried, intact cultural material. A basic guideline would be to ask,
“Would I camp here?” Chances are, if you enjoy the view, have
access to water, and have a flat place to pitch a tent, you’re not
alone in your thoughts. And if you’re standing in native prairie, the
probability that remnants of a prehistoric campsite have survived
are quite high. If your development occurs in lands that fill these
criteria, it might be best to check if you will need an HRIA.
Likely places for intact evidence of prehistoric campsites will have a combination of:
native prairie
Proximity to water
topographic features
Lands adjacent to major river valleys, such as the Bow, North
Saskatchewan, Athabasca, Red Deer and Milk Rivers, to name a
few, as well as lands with considerable topography, such as the
Cypress Hills or Dinosaur Provincial Park, will have high potential
for significant historic resources. These areas were important
to prehistoric peoples. River valleys were particularly useful as
travel corridors given the accessibility to water and wildlife.
Archaeological remains are often intact given the inherently
deeper soil deposition.
Plan aheadAccording to the Alberta Historical Resources Act (HRA), any
discovery of historic resources must be reported to the Minister
of ACCS. Since it is not in anyone’s best interest to wait for a
chance discovery and endure significant delays caused by miti-
gation, ACCS provides the bi-annual Listing of Historic Resources
(the Listing) that provides a list of lands with possible historic
resource concerns. Many are aware of this tool, and often learn
about these lands in relation to their developments through
Conservation Search Reports and other historical land searches.
This is the best tool for planning ahead for potential historic
resource issues, being based not only on the criteria set out
above, but also on the location and extent of known historic
resource sites.
Lands on the Listing will have one or more of the follow-ing historic resource value (hrv) notations relating to resources that are archaeological (a), palaeontological (p), of the historic period (h), cultural (c), geological (gl) or natural (n).
hrv 1: world heritage sites and lands owned by accs for
protection and promotion
hrv 2: designated under the act as a Municipal or registered
historic resource
hrv 3: contains a significant historic resource that will likely
require avoidance
hrv 4: contains a historic resource that may require avoidance
hrv 5: believed to contain a historic resource
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Alberta Historical Resources Act clearance is required for the following:• Small-scale oil and gas developments (less than approximately
25 acres) within lands on the Listing.
• Freehold lands on the Listing in accordance with energy resources
conservation board (ercb) directive 056.
• Crown lands in the Listing as part of an alberta sustainable resource
development (asrd) environmental field report (efr).
• Oil sands developments within lands on the Listing with an hrv
of 1, 2, 3 or 4.
• All projects that require the completion of an Environmental Impact
assessment (eia) or approval from the national energy board (neb).
• All Class I pipelines.
• Non-class I pipelines that are in lands on the Listing.
(See http://culture.alberta.ca/heritage/resourcemanagement/landuseplanning/default.aspx)
Often, HRA clearance can be attained through a simple applica-
tion combined with sound reasoning as to the limited probability
of encountering intact cultural material. When in doubt, contact
a professional archaeologist qualified to hold an Archaeological
Research Permit in Alberta. Understand, however, that even
simple HRA clearance applications can take a few days minimum
and there is always a chance that your application will be returned
with a Schedule stating that further assessment is required.
understand the ProcessIf your development is on lands within the Listing and it meets
the criteria previously addressed (native prairie, proximity to
water, topographic features), the requirements of an HRIA are
highly likely. In this case, HRA clearance could take up to 10
weeks or more, depending on the situation. An official permit
must first be attained to conduct the HRIA, then the fieldwork
needs to be conducted and a final report with an application for
clearance submitted.
The official position of ACCS is to allow up to ten days to
receive a permit, though they do suggest this to be a conserva-
tive estimate. The fieldwork itself, as well the writing of the final
report, can vary greatly, depending on the extent of the project
and the identified historic resources. Furthermore, if historic
resources are encountered, the development may need to be
moved or the resources mitigated. Upon submission of the final or
interim report and the application for HRA clearance, it is further
advised that actual clearance could take eight to ten weeks. These
are also conservative estimates, based on personal experience, but
again are dependent on the situation. The bottom line is that both
timing and cost will increasingly become a significant factor in the
planning process. Your best bet is to plan well ahead.
Unfortunately, there are those rare occasions when a company
plans well ahead, but historic resources can still become an issue.
In those times, consult an historic resource service provider that is
both efficient and effective and that will act on your behalf in find-
ing the best solution to your concerns. ACCS can and will expedite
project reviews in an emergency, but they stress that this should
not be invoked lightly or often.
conclusionSo where does that leave you? Although historic resources as an
impediment to development are rare, even a single occurrence
will cause great frustration and headache. ACCS is always striving
to reduce turn-around times through technological innovations,
such as the Online Permitting and Clearance System (OPaC), and
procedural modifications. However, when these events are not
factored into the planning process, each day will feel like a month
or even a year. Early engagement is key. Consult the Listing, be aware
of each development’s surroundings and if there is any doubt
consult a professional archaeologist. m
This article may be freely reprinted or distributed in
its entirety in any e-zine, newsletter, blog or website.
The author’s name and website links must remain
intact and be included with every reproduction.
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Serving the following Industries:Oil and Gas, Pipelines, Electric Power Transmission, Wind Energy,
Telecommunications, Transportation and Utilities
✦ Crown Land Sales – Planning, Posting and Confidential Name Use
✦ Land Assembly and Leasing of Freehold Minerals
✦ Seismic Permitting
✦ Surface Rights Acquisition, Administration and Management
✦ Public and Stakeholder Consultation, Project Compliance Reviews and Audits
✦ Real Property Purchases
✦ Forestry Liaison, Crown Surface Land Use and Project Planning Services
✦ Oil Sands Exploration (OSE) Programs and Caribou Protection Plans (CPPs)
✦ First Nations Consultation
✦ Landscape Analysis Tool (LAT) Planning and Reports
✦ Completion of Enhanced Approval Process
✦ Pipeline Construction – Landowner Liaison Field Services
✦ Rental Reviews, Damage Assessments and Settlements
✦ Preparation for and Representation at Surface Rights Board Hearings
✦ In-House Staff Placement
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Since 1999, in the regulatory consultation and land business, our team’s contributions have been integral in helping our clients get...
Your One Land ShopSTOP
DUST UP 2011June 294:30PM
THe WeSTThe CAPL is pleased to announce that DUST UP 2011 a networking
evening will be held at The WeST on Wednesday, June 29, 2011.
Weather permitting we shall have exclusive use of the patio as well as the
plus 30 level of the restaurant.
Tickets are $25 + GST and are available at the CAPL office or on the
CAPL website. Tickets are also available to all industry professionals outside
of the CAPL membership.
for further details please contact robb Craige (403) 862-8444 or email [email protected]
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Board Briefsthe key discussion items at the
caPL board of directors’ Meeting
held May 3, 2011 at the caPL
office were as follows:
In Attendance Absent Guest
M. Ariss C. Lamb J. Covey Chris Bartole
G. Boogmans N. Sitch J. McKnight Christopher Ellis
J. Condon F. Terner Denise Grieve
D. Dalik R. Thorsen
J. Dornian J. Tweten
K. Egan R. Van den Bon
• Jim Condon, CAPL President, introduced the Board of Directors
for the 2011 – 2012 term:
Jim Condon, P.Land President
Margaret Ariss Vice President
Nikki Sitch, P.Land, PSL Director of Finance
Gloria Boogmans, P.Land Secretary and Director of Social
John Covey Director of Business Development, Alberta
and British Columbia
Jan McKnight Director of Business Development,
Saskatchewan and Alberta Oilsands
Joan Dornian Director of Communications
Kevin Egan Director of Education
Jason Tweten, PSL Director of Field Management
Robin Thorsen Director of Member Services
Frank Terner, P.Land Director of Professionalism
Chris Lamb Director of Public Relations
Robyn Van den Bon, P.Land, PSL Director of Technology
Dalton Dalik, P.Land Immediate Past President
• Guest Chris Bartole, Chairman of the 2011 Conference,
provided an update on the Conference that will be held in
Quebec City from September 25 to 28. The program and educa-
tional courses have been finalized and on-line registration is
set to begin in May. The Conference Committee is targeting a
breakeven budget.
• Guest Christopher Ellis provided the Board with information on
a networking fundraiser event that is planned for September 15,
2011. Proceeds from the event will go to the Parkinson’s Society
of Alberta. The Board agreed to endorse the fundraiser as a CAPL
social event.
• Nikki Sitch, Director of Finance, provided a Treasurer’s Report as
at April 30, 2011 showing CAPL investments totalling $605,563.58
Canadian and $30,771.90 U.S. along with a cash balance of
$253,094.95 Canadian and $3,274.04 U.S. The CAPL Scholarship
Fund has a balance of $235,638.58. There were no transfers
made since the last report.
• Robin Thorsen, Director of Member Services, presented one
Student, three Associate and four Active membership applica-
tions to the Board of Directors, which were approved.
• Nikki Sitch advised that Tyler Thorburn, PSL recently wrote and
passed the Professionalism examination.
• Jim Condon reminded Directors of the following:
• The next Board of Directors’ Meeting will be held Tuesday,
June 7, 2011 at the CAPL office.
• The next General Meeting will be Merit Awards at the Westin
Hotel on May 11, 2011.
• A Planning Session will be held for the Board of Directors on
Saturday, May 14, 2011 at the CAPL office. m
Gloria Boogmans, P.Land
Secretary/Director, Social
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Message From the Executive
another 12 Month Period ends and another board is eLected and a new President is aPPointed. Oh, how hum drum.
Who is this new President anyways?
Never heard of him. What does he stand
for? Don’t know. So what is he going to
do for us? Well, what did the last guy do?
To clarify, this latest guy, despite his quirks, is a guy most like
any other. After about 26 years in the Industry, he figured he owed
his Association. The CAPL educated him, entertained him and
provided him a professional network. About time he provided a
return on all that. So what began as a 2 year payback is now 4
years and eventually will be 6 years. A bit more than he expected,
but to quote a few football coaches, despite the devil being in the
details, which suggests that planning is important, more often the
mantra is “read and react”, “read and react”, that is how the game
of life is played.
No regrets, none what so ever. I get to sit between the two
Robins/Robyns at the head table, participating in energetic conver-
sation. Also get to hear Frank pontificate, Jason strategize and John
check out his friends in the gathered crowd. I have also heard
some of the wisdom of Cindy, Rob, Ken and Dalton amongst many
others. But park your egos everyone, as despite all that and more,
everyone knows that the office runs the show, Denise, Karin, Irene
and now Leanne, pretty much like orchestra conductors guiding
the philharmonic.
So who is in the orchestra pit. Well, once you get past the
Board members and the office staff, it is the volunteers. Wow, has
the CAPL got volunteers! Like no other professional organization.
Maybe something like another great show, the Calgary Stampede.
Volunteers are the life blood of any “not-for-profit” organization.
They provide the ideas, energy and commitment required to have
meaningful programs. While the retention of volunteers provides
planning and continuity, new volunteers offer new energy and
ideas. I encourage you all to consider offering your skills, time and
energy. Not to be repetitive, but instead in an effort to reinforce a
point, volunteers are critical to the survival and advancement of
the CAPL. A trend has clearly been established, that of our younger
members stepping up. That is terrific, but we should consider all
roles, including joining the Board.
Another area of interest for me, that at one time, was in the
forefront, had lost some momentum a few years ago, but has now
slowly gained interest, is professionalism. Yes, we have the PSL®
and P.Land® designations which are continually being nurtured.
On the other hand, I question whether the membership has fully
embraced the ideal of professional standing. I believe that there
is a significant opportunity here to ensure that Land profession-
als stand as equal members of the management teams to which
we are key contributors. We must remember though, that this is
an earned right, not one which we can simply claim or expect.
While equal and acknowledged professional standing might be
worthy of pursuit, we have to manage expectations, so as to be
sure that our goals are reasonable and have appropriate time
frames for attainment. Standing as peers with our work mates
should be important to us all. We all want an appropriate voice so
as to ensure success in our endeavours.
What we should have learned about this new guy taking the
role of President for your association, is that, despite his quirks,
he is your servant and has accepted the duty of doing the best job
possible for you. Now, to paraphrase from a famous politician about
50 years ago, think about what you can do for your association. m
Jim Condon, P.Land
CAPL President
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Fiduciary Duties of an Operatora nuMber of canadian court cases have suggested that a fiduciary reLationshiP May arise in the context of the oPerator/non-oPerator reLationshiP. As a result, operators have
become increasingly cognizant of the possibility that fiduciary
obligations may arise and have sought to limit such obligations.
In contrast, non-operators continue to be concerned with ensur-
ing that the operator will be acting in their best interests and
will be liable should it fail to do so. While earlier versions of the
CAPL Operating Procedure have not been particularly proscrip-
tive on the issue of fiduciary duties, the approach taken in the
2007 CAPL Operating Procedure is an attempt to balance these
competing interests by clearly identifying where an operator
will have fiduciary obligations while at the same time limiting
the instances in which a fiduciary duty will arise. However, by
leaving open the door for the imposition of additional fiduciary
duties on an ad hoc basis, the approach taken in the 2007 CAPL
Operating Procedure may not provide operators with much
certainty after all.
the Law of fiduciary dutiesIn certain situations, Canadian courts will impose obligations on
parties found to be in a fiduciary relationship. The concept of a
fiduciary duty imports a standard of commercial morality into the
relationship between the parties and is “a duty to act for someone
else’s benefit, while subordinating one’s personal interests to that
of the other person. It is the highest standard of duty implied
by law (e.g., trustee, guardian)”.1 Where a fiduciary relationship
is found to exist, the fiduciary has a duty of utmost good faith
towards the beneficiary and requires that the fiduciary act with a
heightened sense of loyalty and fidelity and in the best interests
of the beneficiary.
In Canada, the leading decision on the issue of fiduciary duties
is Lac Minerals v. International Corona Resources Ltd.2 In that case,
the Supreme Court of Canada held that there are essentially two
categories of fiduciary relationships:
1. institutional fiduciary relationships, i.e. relationships which
are always presumed to carry with them fiduciary obligations,
such as trustee-beneficiary, principal-agent, solicitor-client and
director-corporation; and
2. fact-based or ad hoc fiduciary relationships, i.e. relationships
which, as a matter of policy and law, ought to be subject to the
rules which govern fiduciaries, recognizing that the categories
of fiduciaries are not closed.
The Supreme Court of Canada confirmed the reluctance by the
courts to find a fiduciary relationship in the context of an arm’s
length commercial transaction, but recognized that such a rela-
tionship may arise in certain circumstances:
Relationships in which a fiduciary obligation have been
imposed seem to possess three general characteristics:
(1) The fiduciary has scope for the exercise of some discre-
tion or power.
(2) The fiduciary can unilaterally exercise that power or
discretion so as to affect the beneficiary’s legal or prac-
tical interests.
(3) The beneficiary is peculiarly vulnerable to or at the
mercy of the fiduciary holding the discretion or power.3
However, the Court was clear that while these three factors
were indicia of a fiduciary relationship, they were not neces-
sary or conclusive to find such a relationship. In other words,
“[i]t is possible for a fiduciary relationship to be found although
not all of these characteristics are present, nor will the pres-
ence of these ingredients invariably identify the existence of a
fiduciary relationship”.4
13
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fiduciary duties of an operatorThe leading case in Alberta on fiduciary duties in the operator
context is Luscar Ltd. v. Pembina Resources Ltd.5 In that decision, the
Alberta Court of Appeal confirmed that “[t]he relationship between
operators and non-operators under operating agreements has
been held to create certain fiduciary obligations with respect to
the administration and operation of joint lands.”6 However, the
Court found that although there may be fiduciary aspects of the
duties of the operator, not every duty will be a fiduciary one and
“it is important to examine carefully the alleged actions to ensure
that they derive from the loyalty of the relationship, and are truly
fiduciary obligations, as opposed to merely contractual, express or
by implication”.7
In Luscar, one of the key issues was whether the area of mutual
interest (AMI) clause in the joint operating agreement imposed
a fiduciary obligation on Pembina Resources Limited, as opera-
tor. Pembina had made several acquisitions within the AMI area
but had failed to provide notice to the non-operators as required
under the AMI clause, and the non-operators commenced an
action alleging, among other things, breach of contract and breach
of fiduciary duty.
In the result, the Alberta Court of Appeal held that the opera-
tor’s failure to provide notice in accordance with the AMI clause
was not a breach of a fiduciary duty, but rather that such duty
was purely contractual. The Court reasoned that all three parties
were sophisticated parties and that while the operator had an
obligation to notify the other parties once it formed an intention
to acquire lands within the AMI area, “that obligation did not arise
from a power or discretion the other two parties lacked. It arose
from a contractual obligation upon all.”8 The Court also found that
the inclusion of a no partnership clause and entire agreement
clause in the joint operating agreement provided further support
that “the parties never intended fiduciary duties to be superim-
posed on the contractual ones”.9
Notwithstanding the general reluctance of the courts to
impose fiduciary duties in the commercial context, Canadian
courts have applied the Lac Minerals test in a commercial
context in a number of cases and found a fiduciary relationship.
For example, in Erehwon Exploration Ltd. v. Northstar Energy Corp.,10
the Alberta Court of Queen’s Bench held that operators owe fiduciary
duties to non-operators with respect to many of their functions,
including acquisitions within the AMI. In the course of its deci-
sion, the Court suggested that the operator may owe a fiduciary
duty when it is selling gas for the non-operators account pursuant
to Clause 602 of the 1981 CAPL Operating Procedure since in this
situation the operator is acting as agent for the non-operators
and the agency relationship is a classic case of fiduciary duties.11
However, the Court was careful to limit the scope of fiduciary
duties in a contractual context, noting:
While fiduciary obligations can arise in a commercial
setting, the scope of the obligations thus created must
be interpreted in light of the contractual context. If a
fiduciary duty would otherwise arise, and the contractual
language specifically negatives this, in my opinion the
fiduciary duty must give way to the contractual language
the parties have chosen. To follow any other course would
create an unwarranted degree of judicial interference in
commercial relations.12
the evolution of fiduciary duties under the caPL operating ProceduresThere are a number of duties of operator under a CAPL Operating
Procedure which are clearly fiduciary in nature. Probably the
clearest example is where the operator is handling monies of the
non-operators. Clause 507 of the 1990 CAPL Operating Procedure
and Clause 5.07 of the 2007 CAPL Operating Procedure which deal
with the commingling of funds create a fiduciary relationship
through the use of express trust language whereby the operator is
deemed to be a trustee in respect of any funds paid to, received by
or held by it on behalf of a non-operator. The trustee-beneficiary
relationship is a classic relationship where fiduciary obligations
will apply.
However, other than those instances where there are express
references to a trust or agency relationship between operator and
non-operator, the CAPL Operating Procedures, other than the 2007
version, have not been proscriptive on which duties of operator
will be considered fiduciary duties. There is no general exclu-
sion of fiduciary duties in the 1974, 1981 or 1990 CAPL Operating
Procedure, and the starting point is Clause 1501 which provides
that the relationship of the parties is one of tenants in common:
1501 PARTIES TENANTS IN COMMON – The rights, duties,
obligations and liabilities of the parties hereunder shall be
separate and not joint or collective, nor joint and several,
it being the express purpose and intention of the parties
that their interests in the joint lands and in the wells,
equipment, production facilities and property thereon held
for the joint account shall be held as tenants in common,
subject to the modification of the incidents thereof that are
provided in this Operating Procedure. Nothing contained
herein shall be construed as creating a partnership, joint
venture or association of any kind or as imposing upon
any party, any partnership duty, obligation or liability or
liability to any other party.13
In considering Clause 1501 of the 1981 CAPL Operating Procedure,
the Alberta Court of Appeal confirmed, in Bank of Nova Scotia
v. Société Général (Canada),14 that the relationship of the parties as
tenants in common did not negate “the existence of a fiduciary
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14TH
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duty on the part of the Operator toward the Nonoperators.
The section defines the relationship of all participants in venture
inter se; it does not override the fiduciary obligation imposed on
the Operator when one considers the whole of the Agreement.”15
Accordingly, reference must be made to common law principles
and the application of the Lac Minerals test outlined above when
considering whether a particular duty of the operator under the
provisions of the 1974, 1981 and 1990 CAPL Operating Procedures
is a fiduciary one.
The 2007 CAPL Operating Procedure, in contrast, contains
Subclause 1.05A which replaces the prior Clause 1501 and reflects
an attempt to address the state of the Canadian case law on the
issue of fiduciary duties and provide more certainty around what
obligations will give rise to fiduciary duties, without limiting a
court from imposing fiduciary obligations where appropriate.
It contains similar language to that found in Clause 1501, but goes
on to expressly exclude any trust, trust duty or fiduciary relation-
ship other than in three specific cases or where the court may
impose such a duty or relationship at law in or in equity:
… Except as provided for: (i) the commingling of funds
in Clause 5.07; (ii) the distribution of proceeds of sale in
Clause 6.06; and (iii) the obligation to maintain infor-
mation confidential in Article 18.00, the Parties also
confirm their intention that there is not any trust, trust
duty or fiduciary relationship between them under this
Agreement, provided that:
(a) the Parties recognize that this Subclause might not
prevent such a trust, trust duty or fiduciary relationship
being imposed at law or in equity...
This provision represents a definite improvement to those in
previous CAPL Operating Procedures and provides what appears
to be a balanced approach to addressing the scope of fiduciary
duties of operator. On the one hand, it provides a degree of clar-
ity that is not found in the earlier versions of the CAPL Operating
Procedures, and expresses a clear intention to limit fiduciary obli-
gations to only those situations in which the operator is placed in
a position of trust. On the other hand, the list of fiduciary duties
in Subclause 1.05A is not intended to be exhaustive and does not
preclude a court from imposing fiduciary obligations on an opera-
tor in respect of its other duties.
While this appears to be a balanced approach, it is clearly
more favorable to the non-operator than the operator. It is
certainly beneficial from the perspective of non-operators as it
confirms fiduciary duties in certain obvious cases while leav-
ing open the possibility for additional ad hoc fiduciary duties to
apply in appropriate circumstances. From an operator’s perspec-
tive, however, while it is beneficial in confirming that fiduciary
E L E X C OG R O U P
Elexco Ltd.Tel: 1-800-265-1160Local: (519) 686-0470Fax: (519) 686-9088557 Southdale Road EastSuite 101London, OntarioCanada N6E 1A2Jack Norman, PresidentDale Norman, Land Manager
Elexco Land Services, Inc.
Tel: (716) 372-0788Fax: (716) 372-0515PO Box 383505 W. Henley StreetOlean, New YorkUSA 14760Randall Hansen, CPL, PresidentJack Norman, Vice President
Elexco Land Services, Inc.
Tel: (810) 364-7940Fax: (810) 364-8120PO Box 313106 Huron Blvd., Suite AMarysville, MichiganUSA 48040Randall Hansen, CPL, PresidentPaul Boyce, Land Manager
Mineral and Surface LeasingRight-of-Way Acquisitions
Mineral Ownership/Title CurativeSeismic Permitting
Mapping/GIS ServicesAbstracts of Title
w w w. e l e x c o . c o m
A FULL SERVICE LAND COMPANY SERVING NORTH AMERICA
Elexco Negotiator qrtrpg 4C.qxd 8/28/09 12:24 PM Page 1
15
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Get Smartthe caPL education committee is pleased to present the following courses:
Advanced Surface Rights
June 2, 2011 8:30 a.m. to 4:30 p.m.
This seminar is directed towards members of industry with 5
or more years experience and is intended to summarize and
describe all facets of surface rights within the oil and gas business.
Registrants should consider Introduction to Surface Rights or at
least 5 years of field experience as a prerequisite for this course.
The course will provide a complete overview of surface rights and
will be structured as follows: History, Contrast of Surface Rights
and Mineral Rights, Land Titles, Land Agents, Operators/Lessees,
Documents, Application for Right of Entry, Application for Well
License/Pipeline Permit, Reclamation, and Surrender/Termination
of Interest.
Facilities Overview (PSL®)
June 7, 2011 8:30 a.m. to 4:30 p.m.
A one day seminar for surface land agents will give an overview
of many key aspects of oil and gas field operations, facilities and
practices. Upon completion of the course land agents will have
a basic understanding of the key aspects involved in field opera-
tions. The seminar will cover the following stages in the Life Cycle
of a well including: Exploration Phase, Production Phase, and
Abandonment Phase.
2007 CAPL Operating Procedure
June 8, 2011 8:30 a.m. to 4:30 p.m.
This one day course is an overview of the 2007 CAPL Operating
Procedure focused specifically on the changes between the 1990
and the new documents. It is meant to enable personnel to appreci-
ate substantive differences between the 1990 and 2007 documents.
duties apply in respect of the three specific duties listed in
Subclause 1.05A, it does not preclude the scope of fiduciary
duties of the operator from being extended beyond these duties.
While operators can take comfort in the fact that the Canadian
courts have generally shown reluctance in imposing fiduciary
duties in the context of commercial relationships, the potential
nonetheless remains for the imposition of additional fiduciary
obligations which may be quite onerous and for a potential
increase in liability flowing therefrom which may make the role
of operator rather unattractive. Indeed, by leaving open the door
for ad hoc fiduciary duties to apply, the approach taken in the
2007 CAPL Operating Procedure may not provide operators with
much certainty after all. m
Osler, Hoskin & Harcourt LLP
Paula Olexiuk, Partner
Robbie Armfield, Associate
Daina Kvisle, Associate
notes1. H.C. Black, Black’s Law Dictionary, 6th ed. (St. Paul: West
Publishing Co., 1990) at 625.
2. [1989] 2 S.C.R. 574 (S.C.C.), affirming (1987), 44 D.L.R. (4th)
592 (Ont. C.A.) [Lac Minerals].
3. Lac Minerals, at 599, adopting the reasoning in the dissenting
judgment in Frame v. Smith, [1987] 2 S.C.R. 99 at 136.
4. Ibid. at 598.
5. (1994), 162 A.R. 35 (C.A.) [Luscar].
6. Ibid. at para. 54.
7. Ibid. at para. 58.
8. Ibid. at para. 72.
9. Ibid. at para. 91.
10. (1993), 147 A.R. 1 (Q.B.).
11. Ibid. at para. 141.
12. Ibid. at para. 142.
13. 1990 CAPL Operating Procedure, Clause 1501.
14. 87 A.R. 133 (C.A.).
15. Ibid. at para. 12.
LandRite’s support and development team is dedicated to providing the most comprehensive land management system. Contact us today to learn more about the value LandRite can add to your company.
Ph. 587 952 8000 or 403 237 9170 [email protected] www.divestco.comnew
Quietly delivering value to our clients for over 16 yearsLandRite
…and still growing stronger.
LandGrid.LandRite’s dedicated software team.
2010 7th Avenue Regina, Saskatchewan S4R 1C2 | Office: 306.775.3415, ext. 100 | Cell: 306.536.6256 | Fax: 306.585.7307 | [email protected]
16TH
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ERCB Non-Routine Applications: Mitigating Obstacles (PSL®)
september 06, 2011 8:30 a.m. to 4:30 p.m.
This full day seminar will focus on the internal and external chal-
lenges faced by land professionals in preparing and managing non
routine facility applications arising from Directive 56. An overview
of the non routine facility application life cycle will be presented
in the context of the ERCB.
Resolving Conflict Through Negotiation
september 07, 2011 8:30 a.m. to 4:30 p.m.
This seminar will instruct negotiators of any level of experience
in the skills of interest-based negotiations which is formulated on
the Harvard and Justice Institute of British Columbia Model.
Alberta Crown Lease Continuation
september 08, 2011 8:30 a.m. to 12:00 p.m. or
An overview of the regulations and geological case studies govern-
ing lease continuation will be provided by instructors from the
Alberta Department of Energy.
Oil Sands Tenure New Dateseptember 08, 2011 1:00 p.m. to 3:30 p.m.
The course will focus on gaining an understanding of the current
oil sands tenure regulations and guidelines. Topics to be discussed
will include: public and private sales; rights conveyed by oil
sands agreements; types of oil sands agreements; solution gas
in oil sands; continuation of oil sands leases; minimum level of
evaluation criteria; escalating rentals; development, research and
exploration offsetting costs; bitumen upgrading as it relates to
offsetting costs; lease designations; changing from nonproducing
to producing and vice versa.
Well Spacings and Holdings
september 13, 2011 8:30 a.m. to 4:30 p.m.
Emphasis will be placed on reviewing existing regulations (includ-
ing holdings) and the consequences of variation from normal
spacing units through practical problems. Information resource
sources will be discussed, in addition to the implications of the
Lahee Well Classification System and surface stakeholder consid-
erations. Dispute resolution mechanisms will also be discussed.
Directive 056: ERCB Energy Development Applications Public
Consultation Requirements (PSL®)
september 14, 2011 8:30 a.m. to 4:30 p.m.
This seminar is designed for land agents, land administrators,
operations engineers as well as any other personnel who may be
responsible for ERCB applications or regulatory compliance issues.
Production Agreements
september 20, 2011 8:30 a.m. to 4:30 p.m.
This seminar is designed for industry personnel who require a
good understanding of agreements commonly used in relation to
the production of joint venture oil and gas.
Groundwater: Issues & Impacts for Surface Landmen (PSL®)
september 21, 2011 8:30 a.m. to 12:00 p.m.
The seminar will cover an introduction to groundwater topics,
common landowner concerns and mitigative measures, case-
studies and a description of pre and post well testing directives.
Specific topics will include groundwater concerns relating to
oil and gas operations, coal bed methane production, seismic
surveys, drilling operations, mining, pipeline excavations and
road-cut excavations. m
Registration and course descriptions can be found online:
www.landman.ca. For further information, contact the
CAPL office: 403-237-6635, [email protected].
LandRite’s support and development team is dedicated to providing the most comprehensive land management system. Contact us today to learn more about the value LandRite can add to your company.
Ph. 587 952 8000 or 403 237 9170 [email protected] www.divestco.comnew
Quietly delivering value to our clients for over 16 yearsLandRite
…and still growing stronger.
LandGrid.LandRite’s dedicated software team.
18TH
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Joint titLe is one way to Pass ProP-erty to a surviving sPouse, with very LittLe adMinistrative effort or cost. While holding assets in joint title offers
some definite advantages for spouses in most
circumstances, there may be situations where joint
title creates detrimental consequences for spouses.
Joint title may also appear as a convenient way
to hold property between parents and children.
Parents often want to make sure that their property
is safely in the hands of their children before they
die. What better way to secure the family assets,
than to put their children on title? Well, there
definitely needs to be some understanding about
consequences before parents put their children on
title as joint tenants to their property. There are other
options available to ensure a parent’s continued use
and ownership of the property while allowing for the
safe passage of the property to their children.
These issues are even more compounded
for the individual who owns freehold mineral
interests. One of the main problems with passing
freehold mineral title within families is the contin-
ual fractionation of that title. As parents pass title
to their children, the interest becomes smaller and
smaller with each generation. Not only is the title
difficult for the family to administer, it becomes far
less marketable to develop. What company wants
to sign a lease with thirty or more freehold mineral
interest owners? As well, Land Titles requires
probate to transfer the mineral interest and they
may refuse to transfer an interest that is smaller
than 1/20th of the total interest. This is where
planning becomes necessary. First, let’s look at the
principles of how to hold title.
What is joint title?Joint title allows two or more individuals to hold
title as joint tenants. Joint tenants have equal
ownership of the property, and an equal undi-
vided right to dispose of the property. Under this
type of title ownership, if one joint tenant dies
What’s Mine Is Yours, What’s Yours Is Mine… and What’s Ours is Theirs?
written by
GERALDINE HAMPTON,
BA, LLBestate oPtions403-483-2020www.estateoPtions.ca
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the property passes to the surviving joint tenant automatically.
This concept is known as right of survivorship. Joint title can apply
to any asset or property where you have a registered title:
• real property – like your home or freehold mineral interests
• personal property – like your car or bank account
what other kinds of title are there? Another way to hold title is as tenants in common, which allows
two or more individuals to hold title in property without rights of
survivorship. This type of title may be useful if there is an upcoming
divorce and an individual does not want her partner to have auto-
matic rights of survivorship should she die. Survivorship for this type
of title would be governed by the terms of the Will of the individual.
Of course, don’t forget that an individual can always hold title
by himself... sole title! (That is a technical term, by the way).
Is my joint property part of my estate... or outside of my estate?As joint title lets the property pass to the surviving joint tenant
automatically upon death, this property does not form part of
the estate and is not governed by the Will. For this reason, joint
property does not have to go through probate. When planning an
estate, it is important to keep in mind that joint property flows
outside of the Will.
what are the benefits of holding my property in joint title?
WHY IS JOINT TITLE A GOOD IDEA... WHY IS JOINT TITLE NOT A GOOD IDEA...
Spouses can hold matrimonial property with equal rights of survivorship
If an individual transfers property into joint names there may be tax implications: it may trigger capital gains, recapture of depreciation, income attribution rules, or property transfer tax (BC). These implications may apply to transfers to spouses as well as transfers from parents to children. Before making a transfer into joint names, check with a qualified chartered accountant.
Spouses can avoid probate fees and the deceased’s estate can flow “seamlessly” to the surviving spouse – no delays
Loss of control over the property
The joint property is not subject to potential claims available to estate assets. Note, however, that in some circumstances claims against joint assets may be pursued through other means.
The property is now subject to the creditors of the other joint tenant – be that the spouse or the children. In other words, if the child subsequently divorces this joint property may be subject to a matrimonial property suit by a former daughter-in-law.
Joint title on bank accounts may sound convenient, but it can be contentious. When the parent dies, the remaining children may argue about who has ownership of the account... only the child with joint tenancy? What was the parent’s intent? This could be a litigious situation.
The child may pass away before the parent, negat-ing the purpose of the joint tenancy. If other children of the parent are also on joint title, the property would pass to those surviving children. The family of the deceased child would receive nothing.
Keep in mind that spouses and common law partners have addi-
tional rights when it comes to the matrimonial home and other
matrimonial property.
Also keep in mind that there is no estate tax for beneficiaries,
per se, in Alberta. While there may be probate fees, compared to
other provinces the probate fees in Alberta are more cost effective
– and they may be more cost effective than the potential tax costs
of transferring title into joint names. However, this is not the case
for recreational or other real estate holdings. This is where plan-
ning becomes important.
Also keep in mind that an individual will probably want to
avoid having to pay for taxes that result from transfers of property
that occur outside of the estate, with funds that are part of the
estate. Again, it’s all about the planning.
what do the courts say?Two recent cases from the Supreme Court of Canada indicate that
if there are joint assets with anyone except a spouse there is the
potential for a challenge to see if those assets should be made part
of the estate. In both cases a father made investments joint with
one of his daughters. In one case $185,000 was put into joint title
and in the other case $1 million was put into joint title. For one
case the court decided that the daughter could retain the money
and the joint account was treated as a true joint account. In the
other case, the court decided there was a resulting trust – an equi-
table remedy to reverse the funds from the joint account back into
the estate to be divided according to the terms of the Will.
Lawyers have tried to distinguish one case from the other,
but the issue comes down to proving the intent of the deceased.
The point is that joint title between parents and children may
lead to a potential law suit by other beneficiaries under the estate.
what other options are available for the freehold mineral interest owner?Ok, so you have a freehold mineral interest that is already split
between several family members. Let’s look at what options are
available to remedy this fractionated joint title.
THIS OPTION... HAS THESE PROS... AND THESE CONS...
Life Estate and Remainderman Allows for tax planning where land is not producing but may have high value in the future
Deemed disposition occurs when title is transferred
Remainder interest is vulnerable to creditor claims
Only temporary unification of title
Bare Trust Provides limited unification of fractionated title
One person (Trustee) negotiates on behalf of all owners
Deemed disposition may be avoided
Trustee cannot act without direction from beneficial owners
Need further documentation to define trust administration
Beneficiaries can revert ownership of their property at any time
written by
GERALDINE HAMPTON,
BA, LLBestate oPtions403-483-2020www.estateoPtions.ca
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there are very few tax breaKs for canadians but fLow-through shares are a LegitiMate tax sheLter and have been specifically contemplated by the
Income Tax Act (Canada) since 1954.
A flow-through share is an investment vehicle which allows a
“principal-business corporation” to “renounce” its Canadian develop-
ment expenses (“CDE”) and Canadian exploration expenses (“CEE”)
and pass them on or “flow them through” to investors. In high-risk
industries such as oil & gas and mining, start-up corporations may
not be profitable and therefore unable to make use of the expenses
they incur in their business operations. Investors who hold flow-
through shares may use the renounced expenses as deductions
against their own taxable income up to the amount of consideration
paid for the flow-through share. This article will provide a brief over-
view of the flow-through share rules as well as the tax implications
from the perspective of both the investor and the corporation.
flow-through shares definedA share will qualify as a flow-through share if it meets the follow-
ing requirements:
• it is a share of a “principal-business corporation”;
• it is not a “prescribed share”; and,
• it was issued to the investor pursuant to an agreement in writing.
Principal-business corporationA “principal-business corporation” (“PBC”) is a corporation the
principal business of which includes, but is not limited to, the
production, refining or marketing of petroleum, petroleum prod-
ucts or natural gas, exploring or drilling for petroleum or natural
gas and mining or exploring for minerals. A holding corporation
will also qualify as a PBC if all or substantially all of its assets
(generally accepted to be 90% or more) consist of shares or indebt-
edness of one or more related principal business corporations.
Prescribed shareA prescribed share is a share with a number of complex rights
and restrictions including, but not limited to, fixed dividend
entitlements and liquidation entitlements that relate mainly to
the security of the holder’s investment and the right to receive
a return on that investment. Flow-through shares are generally
“regular” common shares. A share that falls within the definition
of “prescribed share” will not qualify as a flow-through share.
agreement in writingThe agreement requires the corporation to utilize the entire flow-
through subscription proceeds to incur CEE or CDE and it must
incur that CEE or CDE within 24 months. The corporation must
renounce in prescribed form and within prescribed time limits.
THIS OPTION... HAS THESE PROS... AND THESE CONS...
Inter-Vivos Trust(A trust created while the free-holder is alive)
Unifies fractionated title
Provides creditor protection
Allows for income splitting
Complex and costly to set up
May be a deemed disposition on creation
Taxed at highest marginal rate
21 year deemed disposition
Corporation + Unanimous Shareholder Agreement
Unifies fractionated title
Allows for ease of lease admin-istration, both negotiation and payment of royalties
Allows for reduced tax conse-quences regarding disposition upon set up of corporation and death of individuals
Prepares interests for more sophisticated estate planning such as an estate freeze with or without a bare trust
High corporate administration: corporate tax return, annual returns, financial statements
Keep in mind that each of these options is complex in nature and
the details of these structures are beyond the scope of this paper.
This table provides a high-level summary of some of the pros and
cons involved with each option only to raise awareness of their
possibilities.
Also keep in mind that there are significant tax implications
with all of the options, which are beyond the scope of this paper. It is
best to consult with a qualified Chartered Accountant and Lawyer
before setting up these structures. Again, it’s all about the planning.
As you can see, the above options provide some advantages
for freehold mineral owners. Fractionation of title is reduced or
stopped, tax payable on death and transfer of title prior to death
may be reduced and income splitting opportunities within the
family are available.
To determine which option works best, you need to assess
both the family and the mineral interests. What are the family
dynamics? Are there children? Where do they reside? Where are
the lands? Are the lands producing? What is the valuation of the
lands? Once you have this information gathered you can assess
which option works best for the family involved.
In the right circumstances, joint tenancy is a great way to hold
title in property. For the freehold mineral interest owner, there
may be a better option. It is always best to first consult with a
professional and then put into place an estate plan that works
best within the context of the oil and gas marketplace and also
from a tax and a succession perspective. m
What The Heck Are Flow-Through Shares?
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cde and ceeCDE and CEE generally include any expenses incurred during
drilling or exploration for petroleum, natural gas and minerals in
Canada. As a corporation incurs CDE and CEE, the expenses form
part of the CDE and CEE pools. Each year, 30% of its CDE pool balance
can be deducted by a corporation (or the investor in the case of flow-
through shares) and 100% of its CEE pool balance can be deducted.
While the Act states that expenses cannot be renounced until
they have been incurred, there is an exception to that rule, known
as the one year look back rule, with respect to certain CEE and CDE
expenses. Generally, provided certain conditions are met, this look
back rule allows a corporation to renounce CEE and CDE expenses,
in the year in which the agreement is signed, in favor of the inves-
tor for expenses that the corporation has yet to incur. For example,
provided certain conditions are met, investors can deduct, in 2011,
expenses to be incurred by the corporation in 2012.
The Act provides for a special renunciation in respect
of certain types of CDE incurred by the corporation. The
corporation can renounce the expenses to the shareholder
and the shareholders can recognize the expenses as CEE.
This re-characterization is limited to certain types of CDE
and is only applicable to the first $1million of CDE incurred.
CDE expenses that can be re-characterized generally include
expenses incurred for drilling or converting a well for the
purposes of secondary recovery as well as expenses incurred
in the drilling or recompleting an oil and gas well after the
commencement of production from the well.
tax implicationsUnder the relevant provisions of the Act, the person to whom the
expenses are renounced, rather than the corporation, is deemed
to have incurred those renounced expenses.
An investor’s cost of the flow-through shares is deemed to be nil
for the purposes of the Act. Upon disposition of the flow-through
share, the investor will realize a capital gain which can be offset by
any capital losses realized by the investor. As the disposition of flow-
through shares usually results in a large capital gain to the investor,
investors were choosing to donate their publicly-listed shares to
charities as the donor is not taxed on the capital gain. However, in
the March 2011 budget, the federal government announced that
it would be limiting this exemption. Under the budget proposals
a capital gain arising from the donation of publicly-listed flow-
through shares to charities will be taxed in the hands of the donor
to the extent that the gain is equal to or less than the original cost of
the flow-through share. As a result, a donor of flow-through shares
will now be subject to capital gains tax to the extent the donor has
received tax benefits from previously renounced expenses. m
John W. McClure and Nadia Talakshi
Gowlings
www.progressland.com
1.866.454.4717
celebrating 25 years 1984-2009
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Junior Landman Classic
Location: calgary elks Lodge and golf club
date: august 11th, 2011, sign in at 12:30, shotgun start at 2:00 pm
cost: $165/person, includes 18 holes of golf, power cart, dinner, and prize entry
the Junior LandMan cLassic is an exceL-Lent networKing oPPortunity for university PetroLeuM Land ManageMent (PLM) students, recent graduates, and industry Profession-aLs. This golf tournament is organized by recent University of
Calgary PLM graduates and provides an opportunity for students
to meet industry members, while allowing those in the industry to
familiarize themselves with their future and current peers. Come
join us for an afternoon of golf and fun at a Championship Golf
Course located just minutes outside of downtown. For tournament
inquiries please visit our website at www.JrLandmanClassic.ca
or contact any of our committee members. Sponsorship opportu-
nities are also available; please feel free to contact us, and thank
you for your support. m
brett suchan: [email protected] 403-645-4592
tom cowan: [email protected] 403-969-2397
rob heynen: [email protected] 403-645-5529
Farmouts. Sales. Opportunities.
PNG Exchange is a web-based service for landmen and oil and gas professionals looking to acquire or dispose of properties. PNG Exchange benefits companies by allowing users to customize their property postings, while reaching the maximum number of interested parties in the marketplace. It is the quickest and most cost-effective way for disposing and acquiring parties to connect.
For property details visit www.pngexchange.com or open the PNG Exchange layer in geoSCOUT’s Map Window.
For further details visit our website.
403 462 8057 | [email protected]
www.landsolutions.ca
ENVIRONMENTAL PLANNING by LandSolutions
For ENVIroNMENTAL PLANNING doNE rIGhT, couNT oN ThE ExPErTs.Before, during and after your project, our Environmental Planning team brings attention to the details.
Our new Environmental Planning service was formed to provide extensive environmental planning solutions to our valued clients. We provide or facilitate specialists in biological sciences, wetlands, soil sciences, wildlife and various other environmental sciences, historical resources, traditional resource use studies, as well as mapping and GIS. We also provide support for regulatory permitting.
Please call 1-866-834-0008 to learn more about our services.
Plan for Success...Let the Experts take care of your Environmental Planning needs.
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Roster Updatesnew MembersThe following members were approved by a Motion
on May 3, 2011:
Applicant Current Employer Sponsors
Active
Murray Brown aim Land brad goodfellow
services Ltd. william Lewis
nolan treble, PsL
Michelle Forrest conocoPhillips Linda bigelow
canada dale fox
shaun williams
James Nixon Midlake oil shawn campbell
& gas Limited Jim Lingnau
Joe swift
Kevin Young talisman energy inc. Jeana blumell
Paul cooper, cPL
Jim MacLean
Associate
Stacey Berube renegade sandra buschert, P.Land
Petroleum Ltd. rhonda Martin
Marty scase
Michael Dabbs edwards Land tamara Macdonald
services Ltd. James Mccorquodale
Murray wade, P.Land
Ali Groppmair divestco inc. ryan dallyn
dan dugas
John Lanaras m
on the MoveTodd Andersen Murphy oil company Ltd.
to statoil canada Ltd.
Ruth Bennett, P.Land independent
to canadian natural resources Limited
Michael Bergstrom canada capital energy corporation
to tundra oil and gas Partnership
Cameron Bogle independent
to stikine resources Ltd.
Paul Cooper, CPL Petro uno resources Ltd.
to baytex energy Ltd.
David Elmer arc resources Ltd.
to encana corporation
Randall Faminow spry energy Ltd.
to independent
Kathryn Gagne Petrobakken energy Ltd.
to independent
Jeremy Galeski independent
to direct energy Marketing Limited
Alicia Garay rife resources Ltd.
to conocoPhillips canada
George Hardisty black Pearl energy Ltd.
to 3 Martini ventures, inc.
Darrell Jones edwards Land services Ltd.
to independent
Caroline LaPointe LaPointe consulting Ltd.
to Petrobakken energy Ltd.
Steve Mackenzie hunt oil company of canada, inc.
to independent
Paul Mandry, PSL Pioneer Professional services group
to conocoPhillips canada
Patricia Morrall talisman energy inc.
to independent
John Nichols enerplus group
to taQa north Ltd.
Mike Okrusko, P.Land rife resources Ltd.
to independent
Lori Paskuski nuvista energy Ltd.
to independent
Andrew Quinn cavalier Land Ltd.
to independent
Steve Roth independent
to MsL Land services Ltd.
Jenna Seipert, P.Land Petrobakken energy Ltd.
to independent
Kendra Sorge talisman energy inc.
to independent
David Taylor, P.Land independent
to vesta energy Ltd.
Korby Zimmerman independent
to Pinecrest energy inc. m
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2011 10k/5k Road Race and Fun Run2011 MarKs the eighth year the caPL wiLL ParticiPate in the csPg/cseg road race and fun run. As with last year’s event, both a 10km and a 5km race will
be held. There will be chip timing and on-line registration.
The races will be held Wednesday September 14, 2011 at 6:00 p.m.
Both races head west from the Eau Claire YMCA on the Bow River
pathway system and return to the Eau Claire YMCA. The course is flat
and fast, unless you’re chasing last year’s CAPL Male Champ, Justin
Kangarloo, and then the course could always be a little faster!
After the run, participants, volunteers and guests are invited
to attend a pizza dinner and refreshments. CAPL members receive
a reduced entry fee, a race souvenir such as a T-shirt, dinner,
refreshments and a chance to win one of the many category
awards and draw prizes. The evening is capped off with the
famous “sock toss.” This is one of the best deals in town and is an
excellent opportunity to network with other members of the oil
patch as well as the general public.
The fastest male and female CAPL member will have their
name inscribed on trophies that were donated by Township Land,
Scott Land, Petroland and Standard Land.
Last year’s winners, Kellie D’Hondt & Justin Kangarloo, will
hopefully be back to defend their first place finish in the CAPL
category. You don’t have to be as fast as Kellie or Justin to run
the race, as half of the 10k runners complete the race in a more
civilized time of 50+ minutes and save a little energy for the
remainder of the evening.
The race is open to all members of the CSPG, CSEG, CAPL
and the general public. Registration is limited to 200 and in the
past the cap was reached prior to race day. There will be no
race day registration so make sure you register early to avoid
disappointment. Registration is only available on-line and will
soon be available through the CSPG website at http://www.
cspg.org/events/events-social-funrun.cfm. This link will also be
available on the CAPL website. Come and join us September 14th
for this fun event. If you have any questions please contact Dan
Cicero (403-444-5248 [email protected]). m
CAPL 2011 Spring Ballwow, what can we say – this year’s 2011 caPL bLacK & white sPring baLL was one for the booKs. Our evening started off with a Red Carpet Entrance in
the lobby of Hotel Arts, to capture everyone’s beautiful picture
Hollywood-style, while servers walked around with Strawberry and
Chocolate martinis to welcome our guests. We can’t deny that a few
changes were made this year, and we were pleased to see everyone’s
acceptance by the fantastic atmosphere throughout the evening.
Our compliments to Hotel Arts for their amazing establish-
ment and service: our photographer, Kevin, for seizing those
personal moments on film; and our band, Bush League, for allow-
ing our guests to dance until the wee hours of the morning.
Congratulations to all of the Silent Auction winners. Yor gener-
osity helped us raise $4800.00 for Meals on Wheels!
We also want to thank our Committee for becoming event
planners, marketers, promoters, and researchers this year:
Alexandria Little, Alyssa Marsden, Brad Reynolds, Ian Welwood,
Joan Dornian, Mandy Ediger, Robb Craige, Sarah Jane Jackson, and
Sylvia Hryszko.
Thank you to our Sponsors and we hope to see everyone out at
next year’s Spring Ball! m
Mandy Cookson & Donna Brown
2011 CAPL Black & White Spring Ball Co-Chairs
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34th Annual Trap Shootthe 34th annuaL traP shoot wiLL be heLd at the aheia caLgary firearMs centre (near dewinton) on saturday sePteMber 10, 2011. Competition will
start at approximately 09:00 and consist of the usual two 16 yard
events, a slider event, and the final handicap event. We will also
squeeze in a buddy shoot and an Annie Oakley shoot.
Registration fees will remain the same as last year at $106.00
for members, $95.00 for student members, and $117.00 for Guests
(GST included). The registration form and waiver of liability must
be downloaded from the CAPL website. The Trap Shoot Committee
would appreciate receiving your completed registration form,
waiver of liability, and fees as soon as possible. New shooters and
sponsors are always welcome.
The fee includes 100 competition targets (12 gauge shells
provided), beverages, lunch, awards, and the special event shoots.
Award presentations and refreshments will follow the shoot.
Entries are limited to 70, so please pre-register as soon as possible.
The primary purpose of the shoot is to network and have
a safe, enjoyable time while attempting to break as many clay
targets as possible. It’s also great practice if you plan to go bird
hunting this fall.
All skill levels, from beginner to expert, are welcome. Shotguns
are available at the Firearms Centre for use by non-owners for a
nominal fee. m
Hugo Potts 403-508-8965
Jeff Baggs 403-637-2432
Ryan Hall 403-630-8055
LandSolutions LP #200, 601-10 Ave SW Calgary, AB T2R 0B2 1-866-834-0008ALSO SERVING: British Columbia, Manitoba, Ontario, Eastern Canada, and throughout Midwest US.
WESTERN CANADA LAND SALE and DRILLING RIG REVIEW
THE EXPERTS IN LAND ACQUISITIONAND MANAGEMENT SERVICES.
0
100
200
300
400
500
600
700
800
900
Apr 2006 Apr 2007 Apr 2008 Apr 2009 Apr 2010 Apr 2011
D rilling Report for Last 5 Years
Drilling
Down
Total
0%
5%
10%
15%
20%
25%
30%
35%
40%
Apr 2006 Apr 2007 Apr 2008 Apr 2009 Apr 2010 Apr 2011
D rilling Rig Utilization Rate
Utilization Rate
AREA Total Ha Sold Average$ / Ha
BC 9,050 $1,281
AB - Foothills 11,520 $614
AB - Plains 80,018 $335
AB - Northern 155,744 $844
SK 147,966 $735
MB no sale
April 2011
NOTE: Numbers are rounded
$0.00
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
$3,000.00
$3,500.00
$4,000.00
$4,500.00
$5,000.00
$5,500.00
$6,000.00
$6,500.00
Land Sale D ataSeries1 Series2 Series3 Series4
CALGARY EDMONTON LLOYDMINSTER FORT ST. JOHN BONNYVILLE REGINA GRANDE PRAIRIE MEDICINE HAT SYLVAN LAKE
Leading the way as your Trusted Advisors since 1978
WWW.PIONEER-GROUP.CA
• Surface Land Acquisition• Mineral Rights Leasing• Provincial Land Sales• Emergency Response Planning• Public Consultation & Notification• Land Administration• Project Management
Other services include: Environmental, Safety and Vegetation Management
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CAPL Calendar of EventsJune 1 Wednesday Alberta Land Sale 2 Thursday Advanced Surface Rights 6 Monday Saskatchewan Land Sale 7 Tuesday PSL®: Facilities Overview 7 Tuesday Board Meeting 7-11 Tue-Sat Salmon Fishing 8 Wednesday 2007 CAPL Operating Procedure 8-11 Wed-Sat AAPL Conference and General Meeting 15 Wednesday Alberta Land Sale 19 Sunday Father’s Day 22 Wednesday General Meeting Luncheon 22 Wednesday British Columbia Land Sale 29 Wednesday 2011 Dust Up 29 Wednesday Alberta Land Sale m
July 1 Friday Canada Day 8 Friday Calgary Stampede Begins 13 Wednesday Alberta Land Sale 20 Wednesday British Columbia Land Sale 27 Wednesday Alberta Land Sale m
august 1 Monday Heritage Day 8 Monday Saskatchewan Land Sale 10 Wednesday Alberta Land Sale 10 Wednesday Manitoba Land Sale 17 Wednesday British Columbia Land Sale 17-19 Wed-Fri Summer NAPE Expo – Houston 18 Thursday CAPL Golf Tournament 24 Wednesday Alberta Land Sale 30-3 Tue-Sat Salmon Fishing m
september 5 Monday Labour Day 6 Tuesday ERCB Non-routine Applications; Mitigating Obstacles 6 Tuesday Board Meeting 7 Wednesday Resolving Conflict Through Negotiations 7 Wednesday Alberta Land Sale 8 Thursday Alberta Crown Lease Continuations 8 Thursday Oil Sands Tenure (afternoon) 10 Saturday Trap Shoot 13 Tuesday Well Spacings and Holdings 14 Wednesday 10K Road Race 14 Wednesday BC Land Sale 14-15 Wed-Thur PSL®: Directive 56: ERCB Energy Development Application
& Directive 60: Public Consultation Requirements 20 Tuesday Production Agreements 21 Wednesday PSL® Groundwater: Issues & Impact for Surface Landmen 21 Wednesday Alberta Land Sale 22 Thursday Royalty Agreements (morning) 22 Thursday CAPL Royalty Procedure (Version 1, 1993) (afternoon) 25-28 Sun-Wed CAPL Conference 26 Monday General Meeting Conference m
June Meetinggeneral Meetingwednesday, June 22, 2011speaker: Luciano dalla-longa: “what is the future for
natural gas as an alternative fuel source?”
Lunch: 11:30 a.m. to 1:30 p.m.
Location: The Westin Hotel
320 – 4 Avenue S.W.
Cost: No Charge for Members
Guests – $71.40 (includes GST)
All members are required to confirm their attendance by email to
[email protected]. Only guests are obligated to purchase a ticket.
To order guest ticket(s) please list their name and company in your
email. Please confirm your attendance prior to noon on Thursday,
June 16, 2011. m
ihs.com/PETRA-CAPL-1
Build reservoir analyses. Watch your potential soar.IHS PETRA® provides a unique solution to integration, analysis and manipulation of geological, geophysical, petrophysical and engineering information. With easy data loading and a powerful and flexible database, you can both effectively manage projects and quickly visualize results using interactive mapping, cross sections, log plots, cross plots and more—all within a single system. Superior technical support and proven integration of customer enhancements make PETRA the highest-ranked1 geological interpretation tool in the E&P industry for both reliability and accuracy and ease of use. Energy information, refined.
1 Welling & Company Geological & Geophysical Software Study, 2009
Directional Well Module 3D Visualization Module
www.scottland.ca
Here’s how we do it: It comes down to trust, experience, and execution. Clients with projects of all sizes and complexity trust Scott Land & Lease because we offer:• The largest, most experienced team of land professionals in the industry• Guaranteed quality work• Competitive rates
Scott Land & Lease has acquired more freehold minerals, crown leases, wellsites and right of way in Western Canada than any other land company over the past two decades. Contact us to learn more about the value of Scott Land & Lease to you and your company.
Calgary • Edmonton • Lloydminster • Regina • Grande Prairie • Fort St. JohnCalgary (Head Office) 900, 202 – 6 Avenue S.W. Calgary, Alberta T2P 2R9 • Phone: 403- 261-1000 • Toll free: 1-800-661-1618
Scott Land & Lease is The Industry’s Top Land Company