How it works
Land Sales
- Details
- Category: How it Works
- Written by Richard Macedo
The Alberta government has collected billions off its public land sales process, which gives producers the right to drill for valuable oil and gas resources.
In 2009, despite being hit hard by a recession, the province still generated over $741 million in sales, which goes to general revenue, after averaging well over $1 billion during the past six years.
HOW DOES IT WORK? The process is fairly straightforward: Crown-owned petroleum and natural gas rights are issued in the form of licences or leases through a competitive bid auction system. Bids are submitted electronically.
The term of a lease is five years in all regions. The term of a licence is two years in the plains region, four in the northern region, and five in the foothills region. At the end of the lease term, a company must prove the land productive for continuation. Before the end of the licence term, a well must be drilled. The depth of the well determines how many sections of land will be continued for an intermediate term of five years.
A piece of land can be sold more than once through the years, depending on the circumstances. In some instances, no work or insufficient work is done to warrant continuation, so the entire agreement may revert to the government. In other cases, only a portion of the rights in an agreement are continued and the non-continued portion reverts to the Crown.
Public offerings or sales of petroleum and natural gas rights are held every two weeks. Notice of the parcels being offered is published on the Department of Energy’s website about eight weeks before the sale.
The top price paid for a single parcel of land so far this year was $21.4 million for a licence parcel. The most money paid for one parcel of petroleum and natural gas rights was $46 million on Jan. 25, 2006.
Companies request land they would like posted and at some point it goes up through the competitive auction system. Producers often use land brokerage firms to submit bids so competitors don’t know where they’re posting and acquiring land. This provides them with anonymity as they assemble a land position in an area they’d like to drill.
The government owns 81 per cent of the province’s mineral rights. The remaining 19 per cent is freehold mineral rights owned by the federal government on behalf of First Nations or in national parks and by individuals and companies. Owners of freehold mineral rights, except the federal government, pay a tax to the Crown based on the production of oil or gas from their holdings. The tax ensures the owners contribute to Alberta’s infrastructure and regulatory costs.
