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When the Oilpatch

Comes to Your Saskatchewan Backyard:

A Citizen’s Guide to protecting
Your Rights

by
Stefania A. Fortugno,
LL.B., LL.M.

May 2004

Saskatchewan Environmental Society

Box 1372
Saskatoon, Saskatchewan
Canada S7K 3N9
phone: (306) 665-1915
Fax: (306) 665-2128
Email: info@environmentalsociety.ca
Website: www.environmentalsociety.ca

Copyright © 2004 by Saskatchewan Environmental Society

Acknowledgements and Disclaimer

The author would like to thank and acknowledge the persons who have made the
publication of this citizens’ guide possible. The pembina Institute for Appropriate
Development in Alberta generously supported the effort to create a guide for
Saskatchewan citizens based on their own Alberta guide. pembina is known for innovative
and practical ideas – please see their website, www.pembina.org, for other content related
to the energy industry. Ann Coxworth, volunteer program coordinator for the
Saskatchewan Environmental Society, supplied gracious guidance, encouragement and
support for this project. Karin Tate-penna provided excellent editorial and research
assistance. The patience of family and friends permitted the author to complete this work.

The author must also recognize the contribution of those individuals who were asked to
review the draft text, including:

patricia Farnese, Assistant professor University of Saskatchewan, Senior Law Fellow with
Centre for Studies in Agriculture, Law and the Environment (CSALE); Mary Griffiths,
Environmental policy Analyst, pembina Institute for Appropriate Development; Ralph
Leibel, Director of Community planning, Municipal Relations Division, Saskatchewan
Government Relations and Aboriginal Affairs (GRAA); Sharon Mascher, professor of Natural
Resources Law and Environmental Law, University of Saskatchewan; Lorne Veitch, Regional
Manager, South Regional office, Saskatchewan Agriculture, Food and Rural Revitalization;
and Rick Stilling, provincial Manager, Oil and Gas Development, Saskatchewan Environment
(SE).

The following donors provided funding essential to the publication of this work: Centre for
Studies in Agriculture, Law and the Environment (CSALE) at the University of Saskatchewan;
Nexen Canada Inc.; and the Saskatchewan Environmental Society. Their support is deeply
appreciated.

The contents of this guide are the responsibility of the author and do not necessarily reflect the
views and opinions of those who are acknowledged above.

Every effort has been made to ensure the accuracy of the information contained in this guide.
However, the author cannot guarantee the information provided is complete or accurate and
advises that any persons relying on this publication do so at their own risk.

This guide has been developed to provide general guidance on the legal rights of Saskatchewan
citizens living in the oil patch. However, this guide does not provide legal advice and should
not be considered a substitute for legal advice from a lawyer.

i

TABLE OF CONTENTS

Introduction _________________________________________________ 1

Chapter One: Legal Rights of Landowners and Occupants _________ 3

A.
Who owns the Oil and Gas? — Crown versus private ownership of mineral rights
in Saskatchewan _______________________________________________________ 3

1. Mineral Rights______________________________________________________________ 3

a. Royalties and Taxes________________________________________________________ 4

b. Freehold Mineral (petroleum) Rights __________________________________________ 4

2. Surface Rights ______________________________________________________________ 5

a. Negotiating a Surface Rights Lease____________________________________________ 6

(i) Compensation Factors____________________________________________________ 7

(ii) Environmental and Liability Considerations ________________________________ 8

(iii) Surface Rights Lease Checklist __________________________________________ 9

b. proceedings before the Surface Rights Board of Arbitration________________________ 11

(i) Right of Entry/Compensation Orders _______________________________________ 11

(ii) Limited Damage Claims and Environmental Enforcement ______________________ 13

c. Surface Leases and Crown Owned Agricultural Land_____________________________ 14

B.
What is involved in an oil or gas development project? ______________________ 15

1. Oil and Gas Reservoirs ______________________________________________________ 15

2. Seismic Exploration Activities_________________________________________________ 16

a. Consent Requirements _____________________________________________________ 17

b. Setbacks________________________________________________________________ 18
Minimum Distances to Structures in Seismic Explorations ______________________ 19

c. Damage and Compensation _________________________________________________ 19

d. Abandonment and Clean-Up of Shot Holes_____________________________________ 20

e. Refusals by Landowner or Occupant__________________________________________ 20

f. Exploration Access Agreement Checklist ______________________________________ 21

3. Drilling and Operation of Oil and Gas Wells _____________________________________ 23

a. Exploration Drilling_______________________________________________________ 23

b. Blowout preventer ________________________________________________________ 23

c. Development Drilling _____________________________________________________ 24

d. Drilling Equipment and Operations___________________________________________ 24

e. Oil Recovery Methods_____________________________________________________ 25

4. Flaring and Venting ________________________________________________________ 26

a. Sour Gas and Hydrogen Sulphide (H2S) _______________________________________ 26

b. “Sweetening” Sour Gas ____________________________________________________ 28

c. Flaring Operations ________________________________________________________ 28

d. Environmental and Health Effects of Flaring ___________________________________ 29

e. Eliminating or Reducing Flaring _____________________________________________ 30

f. Venting ________________________________________________________________ 31

g. Flaring Setback and Notification Requirements _________________________________ 31

(i) Setbacks _____________________________________________________________ 31

(ii) Flaring Notification Requirements ________________________________________ 32

5. pipelines__________________________________________________________________ 32

a. pipeline Route Selection and Construction _____________________________________ 33

(i) Surveys _____________________________________________________________ 33

(ii) Notification__________________________________________________________ 33

(iii) pipeline Easement Agreements __________________________________________ 34

(iv) Expropriation ________________________________________________________ 34

b. Negotiating an Easement Agreement _________________________________________ 35

(i) Compensation _________________________________________________________ 36

ii

(ii) Arbitration __________________________________________________________ 37

(iii) Environmental Matters _________________________________________________ 38

c. Adjacent Landowners/Occupants ____________________________________________ 39

d. pipeline Easement Negotiation Checklist ______________________________________ 39

6. Batteries and Gas processing plants ___________________________________________ 41

a. Batteries________________________________________________________________ 41

b. Gas processing plants _____________________________________________________ 42

7. Waste Management _________________________________________________________ 42

a. SpIGEC Waste Management Guidelines_______________________________________ 42

b. provincial Regulators _____________________________________________________ 43

c. Waste Disposal Wells _____________________________________________________ 44

d. Drilling Waste Treatment and Disposal________________________________________ 45

(i) Drilling Waste Management plans ________________________________________ 46

(ii) Temporary Storage/Containment of Drilling Fluids ___________________________ 46

e. Land Application: Land Spreading, Land Treatment and Land Farming ______________ 47

8. Abandonment and Restoration of Well Sites _____________________________________ 48

a. Capping or plugging Wells _________________________________________________ 49

(i) Dry Hole Abandonment ________________________________________________ 49

(ii) production Well Abandonment Outside pools _______________________________ 50

(iii) production Well Abandonment Inside pools ________________________________ 50

b. Restoration of Well Sites___________________________________________________ 50

Chapter Two: Emergencies ___________________________________ 52

1. Oil or Gas Well Emergencies _________________________________________________ 52

a. What to Do in the Event of an Oil or Gas Well Emergency ___________________________ 53

b. Responsibilities of Well Operators/Owners in an Emergency _________________________ 53

(i) public Notice Requirements _______________________________________________ 53

(ii) Notice to Government Departments _________________________________________ 53

(iii) Liability for Costs of Clean-up and Harm to persons or property___________________ 54

2. pipeline Emergencies _______________________________________________________ 54

a. Signs of a Gas Leak _________________________________________________________ 54

b. What to Do in the Event of a Natural Gas pipeline Emergency________________________ 55

Chapter Three: Common Law Rights___________________________56

A. Nuisance _____________________________________________________________ 56

1. Vibration, Noise and Fumes as Nuisance _______________________________________ 57

2. Noise as a Nuisance ________________________________________________________ 58

B. Trespass _____________________________________________________________ 59

C. Negligence ___________________________________________________________ 59

D. Rule in Rylands v. Fletcher: Strict Liability for Non-Natural Land Use _________ 60

E. Breach of Contract ____________________________________________________ 62

Chapter Four: Differences between Alberta and Saskatchewan in the
Regulation of the Oil and Gas Industry _________________________ 63

A. Regulatory Oversight Differences ________________________________________ 63

1. Alberta Energy and Utilities Board (EUB) Compared to Saskatchewan Industry and
Resources (SIR) _________________________________________________________ 63

2. Saskatchewan Municipalities more powerful than Alberta Municipalities in Regulating Oil
and Gas Development _____________________________________________________ 65

a. Great Sand Hills: A Case Study _____________________________________________ 65

iii

Chapter Five: Contacts and Other Resources ____________________ 68

A. Government Departments and Boards ____________________________________ 68

1. Saskatchewan Industry and Resources__________________________________________ 68

2. Saskatchewan Environment __________________________________________________ 69

3. Saskatchewan Agriculture, Food and Rural Revitalization__________________________ 71

4. Heritage Resource Branch – Department of Culture, Youth and Recreation____________ 72

5. Saskatchewan Surface Rights Board of Arbitration _______________________________ 73

6. National Energy Board ______________________________________________________ 73

B. Community and Environmental Groups___________________________________ 74

1. Federation of Saskatchewan Surface Rights Association ___________________________ 74

2. Saskatchewan Environmental Society (SES) _____________________________________ 74

3. Saskatchewan Eco-Network (SEN) ____________________________________________ 75

4. pembina Institute for Appropriate Development (pIAD)____________________________ 76

5. Canadian parks and Wilderness Society (CpAWS) ________________________________ 77

C. Industry Organizations_________________________________________________ 78

1. Saskatchewan petroleum Industry/Government Environment Committee (SpIGEC)_____ 78

2. Canadian Association of petroleum producers ___________________________________ 79

3. Small Explorers and producers Association of Canada ____________________________ 79

4. Canadian Association of petroleum Land Administration (CApLA) __________________ 80

D. Lawyers, Expert Witnesses or Technical Assistance _________________________ 80

1. Centre for Studies in Agriculture, Law and the Environment________________________ 80

2. Lawyer Referral Service _____________________________________________________ 81

3. Technical Consultants and Laboratories ________________________________________ 81

Bibliography _______________________________________________ 83

iv

When the Oil patch Comes to your Saskatchewan Backyard:
A Citizens’ Guide to protecting Your Rights

Introduction

A wide green expanse of pastureland dotted only by cattle and horses, an endless prairie sky
untouched by steel monoliths, a quiet and rhythmic existence passed from generation to
generation, until an oil or gas exploration company comes knocking at the door. Many
Saskatchewan farmers, ranchers and other landowners are only too familiar with the disruption
of a pastoral way of life by new industry and development in the oil and gas sector.

Over the last decade Saskatchewan has seen an explosive expansion of the petroleum industry.
Tax and investment incentives offered by the province have encouraged record numbers of
exploration and production ventures. The latest statistics for the year 2002 boast that
Saskatchewan has over 21,400 active oil wells. The province ranks as the second largest
petroleum producer in Canada after Alberta, supplying 21% of all oil production.
Saskatchewan also has over 10,000 natural gas wells, and is ranked as the nation’s third largest
natural gas producer.

In 2001 industry revenues were $5.5 billion from oil, natural gas and their by-products.1 For
the same year royalties, bonuses and fees paid to the province of Saskatchewan by producers
totalled $600 million. For 2002 this amount climbed to $1.0 billion.2 This figure represents
approximately 18% of total provincial revenues. Clearly this economic clout means that the
petroleum industry has a major voice in the province.

What can an individual or family do when faced with a large company that wants to enter their
land and blast dynamite underground to conduct seismic exploration or drill a “wildcat”
exploration well? How can they protect their health and the health of their livestock? How can
they ensure that their land, water and air are not polluted by the development? How can they
obtain fair compensation for the loss of use of land and any ill effects suffered? What are the
rights of neighbours and communities affected by oil and gas projects?

This Guide is designed to help you understand your legal rights and the rights and
responsibilities of oil companies operating in Saskatchewan and in your community. It is a
resource guide that seeks to make it easier for you to negotiate to protect your interests when
dealing with exploration companies and oil and gas producers.

This Guide is modelled on the Guide developed by the pembina Institute in Alberta for
Alberta citizens and has been adapted to the Saskatchewan context. It also points to some key
differences between the laws and regulatory activities in Alberta and Saskatchewan.

1 Canadian Association of petroleum producers (CApp), Industry Facts and Information: Saskatchewan (2001), CApp
website at http://www.capp.ca.
2 CApp, Industry Facts and Information: Saskatchewan (2003), CApp website at http://www.capp.ca.

1

Chapter one of this Guide provides an overview of the legal rights of landowners and
occupants, both legislated and common law, as they correspond to the different phases of an
oil or gas project. It also describes provincial legislation and regulation of the petroleum
industry.3 The four provincial ministries and their areas of responsibility are discussed here and
elsewhere in the Guide. These Departments include Saskatchewan Industry and Resources,
Saskatchewan Environment, Saskatchewan Agriculture Food and Rural Revitalization, and the
Heritage Resource Branch of the Department of Culture, Youth and Recreation.

Chapter two examines what to do in the event of an emergency. Chapter three outlines the
common law rights of persons affected by the oil and gas industry, including adjacent
landowners and others living in the oil patch.

Chapter four highlights some of the key differences between Alberta and Saskatchewan in
regulating the petroleum industry. Chapter five provides a list of contacts and other resources.

3 All Saskatchewan legislation (including regulations) can be viewed on the provincial Queen’s printer website at:
http://www.qp.gov.sk.ca/.

2

Chapter One: Legal Rights of Landowners and Occupants

A.
Who owns the Oil and Gas? — Crown versus private ownership of
mineral rights in Saskatchewan
Many landowners do not realize that the Crown (government of Saskatchewan, or in some
cases the government of Canada) may own the minerals found beneath the surface of their
land. This is the case because at the turn of the 20th Century, when the Dominion of Canada
granted prairie land to homesteaders, it reserved the mineral rights for the Crown. In 1930 the
federal government transferred ownership of mineral resources to the province. However, the
federal Crown retained mineral rights to lands under federal jurisdiction. For example, the
federal government owns the mineral rights in national parks and First Nation reserves.

Currently, the provincial Crown holds approximately 78% of the total oil and gas rights in the
province. private individuals, corporations, First Nations bands and the federal Crown own
the remaining 22%. An oil or gas company normally acquires these mineral rights by leasing.
More rarely mineral rights are purchased through Saskatchewan Industry and Resources
(Crown rights) or from the private owner (freehold rights).

To determine who owns the minerals beneath any land, the title must be checked through the
provincial Land Titles system.

1.
Mineral Rights
The Crown Minerals Act (1985) governs the granting of mineral rights by the province to oil and
gas companies. If preliminary geological studies point to a promising oil or gas field in a
specific area, the company will approach the Mineral Rights Branch of Saskatchewan Industry
and Resources and request that the mineral rights for the land be “posted for disposition” or
made available for lease. The mineral rights are sold by public tender and are called “petroleum
land sales.” These sales take place periodically throughout the year. Although a company may
request that mineral rights be posted, this does not guarantee that the company will be the
successful bidder. Other companies may also bid on the posted mineral rights.

The Crown Minerals Act defines mineral as “any non-viable [non-living] substance formed by the
processes of nature, irrespective of chemical or physical state and both before and after
extraction, but does not include any surface or ground water, agricultural soil or sand or
gravel”. The term “Crown disposition” refers to the rights granted under a Crown lease or any
other instrument under the Act (section 2(1)(b)). These rights include the right to explore or
prospect for any Crown mineral (oil and gas exploration licence), as well as the right to extract
or produce the mineral (Crown lease). Therefore, an oil or gas company will purchase the
mineral rights in the form of exploration licences and production leases.

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