Surface Land Compensation Database
January 1996

This article is a response to Theodore S. Anderson's comments published in the last Newsline. All of the concerns that Ted raised are legitimate issues which must be addressed if the database is to proceed.

The Pilot Project is now in its sixth month and represents a considerable effort by a wide range of land professionals, both consultants and operators. In addition, legal advice has been obtained and the major landowner advocacy groups (eg. Farmer's Advocate, Surface Rights Boards) have been consulted. Much work has been done to insure that the conduct of the database is in the best interests of the landowners, operators and consultants.

I am not a landman but I was surprised by the wide ranging reaction and emotion generated by the Pilot Project. Most land consultants and operators felt it was long overdue and would greatly simplify their research. Some felt there was no need for it as the information was available for 'free' anyway. A small minority felt that it would irrevocably change the land business making agents redundant. My own judgement is that it will change the business very little. In the final analysis, surface rights will still be negotiated by two individuals over a kitchen table. The basis for their agreement will be mutual respect and trust, and the belief that the deal was fair for both parties. The database will not change this critical foundation to surface rights negotiation, but it will make the job of researching 'comparables' easier and cheaper.

Surprisingly, Ted and I agree on several facts but disagree on their implications.

1. Fact: fair and reasonable compensation levels are established in areas and this information is generally available. While it may be the case that some operators and landowners treat the information on a surface lease as strictly private, in fact, it is public to those who are interested and want to take the time and effort to do the research. (To those who are not interested, it doesn't matter whether the information is public or private.) Why wouldn't the industry be interested in reducing the costs of researching an area?

The real issue is not private vs. public but whether a confidence is being betrayed by the operator in providing the data to the database. This has been a concern of many operators from the very beginning. The decision was that the confidentiality of the data is being maintained since neither the operator, the landowner, nor the LSD or Section is made available through the database reports. Unless someone goes to additional research efforts, the identity of the landowner cannot be ascertained. Finally, if a particular lease is very sensitive the operator need not submit it to the database.

2. Fact: having a computerized database to obtain accurate, timely and reliable information makes good business sense. Many consultants maintain their own surface databases. If a database is good for some consultants, why isn't it good for other consultants and operators? Clearly the industry is better off with a single source of information and should spread the costs of developing and maintaining the database over as wide a base as possible.

3. Knowing and sharing compensation information makes good business sense. The purpose of any surface compensation database is to keep agents abreast of prices in areas where they are active. Information is freely available amongst the agents in the consulting firm. Why wouldn't other consultants and operators also want to have access? Why wouldn't the consultants with databases want similarly cheap and reliable access to information in areas where they are not active?

Ted raises several other concerns which have been reviewed by the pilot project members.

1. Access to the data will cause land agents to rely solely on it and ignore the basic components of surface rights compensation.  I am not a landman so I am not familiar with the 'basic components of surface rights compensation'. However, I do know that the heads of compensation are reported from the database and I believe that landmen will continue to act professionally. To me, the only difference between phoning around to obtain this information and getting it from the database is that the database will be easier and more comprehensive. If anything, access to the database will allow the agent more time to thoroughly address the 'basic components of surface rights compensation'.

2. The database will be accessible by landowners and anyone else interested in the information.  The consensus view on this issue is that there is a greater risk in parties agreeing to compensation while being ignorant of prices in an area. Any attempt to restrict access to the information to operators only would be viewed with suspicion by the landowners and could jeopardize relations with the agricultural community. I would be very surprised if any landowner calls me to pay the $75 to do an area search. He can obtain this information with three or four free phone calls and he is more likely to trust his neighbours than me. As far as the 'anyone else' is concerned, they already have access to the information. However, a comprehensive database will prevent 'anyone else' from 'cherry picking' only those deals which suit their purposes.

3. What is a fair price for retrieving this information and using this service?  A fair price is one that allows the database administrator to cover the costs of maintaining the database and to earn a reasonable profit. The Pilot Project has allowed me to obtain an appreciation of the maintenance costs and the potential user base. As a result, a new fee structure is now in place reducing the prices that were proposed in June. Remember, if you are a consultant working for an operator who is a subscriber to database, you will be able to do area searches on the operator's account. This means that the service will be free of charge to most consultants.

4. The majors are concerned that the database is in contravention of the Competition Act.  The CAPP Law Committee has reviewed the database and the actions of those supplying and using the information. The lawyers gave us advice on how to re-structure the reports and we have made changes. A number of majors have had their legal counsel examine the new reports and have concluded there is little risk of investigation under the Competition Act.

5. Companies are reluctant to supply data.  We currently have 65 operating companies who have agreed to provide data. This is a good cross section of large, intermediate and small companies and we believe we will obtain representative coverage across B.C., Alberta and Saskatchewan. I will continue to work to add more companies in order to make the database as comprehensive as possible. Over 90% of the data that we receive comes from consultants who have been instructed by the operators to send it to us. To those who have negotiated the lease, the data form can be filled out in less than a minute and faxed or sent to me at their convenience.

6. The anomalies in prices which the program attempts to identify will simply not be reported.  It is not the purpose of the database to identify 'anomalies'. The purpose is to reduce the cost of researching comparables. However, companies will have less of reason to withhold anomalies because their identities are not revealed in the database. It is more likely that anomalies will be reported in the database than they will readily revealed in a telephone conversation.

Ted closes his article by saying that companies must individually decide whether they will participate or not. In this, I agree with him completely. Some companies believe this is a better way to do business. Some companies do not. Only time will tell.

Bill Marriott