CAPP Examines Feasibility of a Surface Land Compensation Database
September 1995

By John Boone and Bill Marriott

For many years landmen have discussed the idea of a central depository for information on surface compensation. Although there has been widespread agreement on the benefits of accessing such a database as well as general support for the concept, previous initiatives failed to get off the ground. The current CAPP initiative is enjoying much more success. A sub-committee of the CAPP Surface Land Committee, consisting of John Boone, John Winton and Bill Marriott are currently running a three month (Jul - Sept) pilot project. There are currently 15 active participants in the pilot and over 25 companies are currently submitting data.

The purpose of the surface land compensation database is to provide public access to a comprehensive and reliable source of information on the compensation paid for surface access for well sites and easements in Alberta, British Columbia and Saskatchewan. The service would be comparable to the "MLS" Multiple Listing Service for residential real estate. The intention is to capture virtually all surface transactions (including Rent Reviews, Board Orders and Consent of Occupant) by having operators provide the data weekly to the database administrator or having operators instruct their land consultants to provide the data.

There is widespread belief that the service will expedite the negotiation of surface leases thus reducing the administrative costs of operators and land consultants. Further, more information in the marketplace will increase the efficiency of the market and lead to more competitive pricing. Operators and land consultants have expressed five areas where the service would directly benefit them:

as a bench mark for prices in the areas where they are active,
as a comprehensive information source when moving into a new area,
as a starting point for the preparation of evidence for the Surface Rights Board,
as an information base for rent reviews,
as a background information source prior to direct negotiations.

To date, the major accomplishments of the pilot are the creation of the input form, the design of report formats, communication with the majority of the active drillers, and, communication with the land consultants.

A series of luncheons over June and July has allowed pilot project members to meet with over 80 producing companies who account for 85% of all drilling. Response to the project has been consistently favourable. An informal survey of these producers indicates that the virtually all of them will provide data to the database.

Nearly 30 land consultants attended a luncheon at the end of June to review the project. These companies will likely be one the primary users of the information in the database to assist in negotiations in the field. Their feedback on the functioning of the database and the structure of the reports has been incorporated.

At the present time, the database service is envisaged as a private 'for profit', 'user pay' service. Other options have been considered including: (1) a subsidized service administered by an association (eg. CAPP or CAPL), and (2) a cost recovery 'prorata' billing of the membership of data contributors. The current judgement is that the service will be most responsive to the needs of the users if the users can make buying decisions based on the costs and benefits of having the information. Further, it is felt that the integrity of the database (ie accuracy and comprehensiveness) will be best ensured by having the database administrator subject to the disciplines of the market.

If the pilot is successful the service will 'go live' in October and the first reports would be available in early November. The current view is that the database service will be available for purchase as an annual subscription which would include the monthly, quarterly, mid year, and annual summary reports and reduced usage fees for detailed area reports. The detailed area reports would be available without subscription for a fixed usage fee higher than for subscribers.

The summary report is intended as a management tool for oil and gas operators which would contain all of the transactions that took place for the relevant time period (month, quarter etc.). This report is designed for quickly and easily monitoring at a high level and providing information for ongoing rent reviews. Consequently, it would not provide all the detail that is available on the database. The report would have two parts: the first would summarize only those townships where an operator is active. This will give immediate comparables to other companies in the area and thus provide ongoing bench marking for surface access costs. The second part would be a comprehensive listing of all the transactions sorted and grouped by township.

The detailed area report is intended as a field tool and thus would provide more detail relevant to negotiating compensation or appearing before the Surface Rights Board. For a search request for a specific location (eg SEC 20 TWP 30 RNG 18 W4M) this report would include detail on all the leases on the database in an appropriate radius around the location in question. An alternate search request would be for a specific area (eg 1 township, 4 townships, 9 townships, etc.) Both of these searches would provide comprehensive reports of all of the details.