.ISSN 0542--5412 Legislative Assembly of Manitoba STANDING COMMITTEE on LAW AMENDMENTS 31-32 Elizabeth 11 Chairman P. Eyler Constituency of River East VOl. XXXI No. 1 - 10:00 a.m., THURSDAY, 7 APRIL, 1983. PrinlfKI by ,. Office of the a.-.s PrinlfK. ProlllnCe of --

MANITOBA LEGISLATIVE ASSEMBLY Thirty-Second Legislature Members, Constituencies and Political Affiliation Name ADAM, Hon. A.R. (Pete) ANSTETT, Andy ASHTON, Sieve BANMAN, Robert (Bob) SLAKE, David R. (Dave) BROWN, Arnold BUCKLASCHUK, John M. CARROLL, Q.C., Henry N. CORRIN, Brian COWAN, Hon. Jay DESJARDINS, Hon. Laurent DODICK, Doreen DOERN, Russell DOLIN, Mary Beth DOWNEV, James E. DRIEDGER, Albert ENNS, Harry EVANS, Hon. Leonard S. EYLER,Phil FILMON, Gary FOX, Peter GOURLAV, D.M. (Doug) GRAHAM, Harry HAMMOND, Gerrie HARAPIAK, Harry M. HARPER, Elijah HEMPHILL, Hon. Maureen HYDE, Lloyd JOHNSTON, J.

Frank KOSTYRA, Hon. Eugene KOVNATS, Abe LECUYER, Gerard LYON, Q.C., Hon. Sterling MACKLING, Q.C., Hon. AI MALINOWSKI, Donald M. MANNESS, Clayton McKENZIE, J. Wally MERCIER, Q.C., G.W.J. (Gerry) NORDMAN, Rurik (Ric) OLESON, Charlotte ORCHARD, Donald PAWLEV, Q.C., Hon. Howard R. PARASIUK, Hon. Wilson PENNER, Q.C., Hon. Roland PHILLIPS, Myrna A. PLOHMAN, John RANSOM, A. Brian SANTOS, Conrad SCHROEDER, Hon. Vie SCOTT, Don SHERMAN, L.R. (Bud) SMITH, Hon. Muriel STEEN, Warren STORIE, Jerry T. URUSKI, Hon. Bill USKIW, Hon. Samuel WALDING, Hon. D. James Constituency Ste.

Rose Springfield Thompson La Verendrye Minnedosa Rhineland Gimli Brandon West Ellice Churchill St. Bon iface Aiel Elmwood Kildonan Arthur Emerson Lakeside Brandon East River East Tuxedo Concordia Swan River Virden Kirkfield Park The Pas Rupertsland Logan Portage la Prairie Sturgeon Creek Seven Oaks Niakwa Radisson Charleswood St. James St. Johns Morris Roblin-Russell St. Norbert Assiniboia Gladstone Pembina Selkirk Tn3nscona Fort Rouge Wolseley Dauphin Turtle Mountain Burrows Rossmere lnkster Fort Garry Os borne River Heights Flin Flon lnterlake Lac du Bonnet St.

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LEGISLATIVE ASSEMBLY OF MANITOBA THE STANDING COMMITTEE ON LAW AMENDMENTS Thursday, 7 April, 1983 TIME - 10:00 a.m. LOCATION - WI NNIPEG CHAIRMAN - R Eyler, River East ATTENDANCE - QUORUM - 10 Members of the Committee present: Hon. L. Evans, Hon. M. Hemphill, Hon. E. Kostyra, Hon. A. Mackling, Hon. W. Parasiuk, Hon. R. Penner and Hon. J. Storie. Mr. Ashton, Mrs. Dodick, Messrs. Downey, Driedger, Eyler, Filmon, Gr aham; Mr s. Hammond; Messrs. Lecuyer and Nordman; Mrs. Oleson, Ms. Phillips; Messrs. Santos and Steen. WITNESSES: Messrs. M.L . Henkelman and R. K. Howard, Canadian Association of Petroleum Land men. Mr.

Larry Vanbeselaere, Private Citizen. Messrs. Bob And rew, R. Kohaly, A. Turbak, Manitoba Surface Rights Association. WR ITTEN BRIEFS SUBMITTED AND INCLUDED IN THIS TRANSCRIPT: Canadian Association of Petroleum Landmen; Manitoba Surface Rights Association; Agricul tural Prod ucers from Waskada, Manitoba. MATTERS UNDER DISCUSSION: Bill No. 5 - The Surface Rights Act;

Loi sur les droits de surface. MR. CHAIRMAN: We will be considering today primarily Bill No. 5, The Surface Rights Act. I understand there are a number of delegations who have come from out of town, so I imagine it is the will of the committee that we listen to the out-of-town delegations first. (Agreed) Is there any concern about the order of the delegations as printed on the paper? Mr. Penner. HON. R. PENNER: I think we should go along with your first suggestion, that is hear the persons who are from out of town first.

There are a couple of people from Winnipeg who can, I think should drop to the bottom of the list. MR. CHAIRMAN: Is that agreed? (Agreed) The first delegation on the list is Mr. Merv Henkelman, Mr. John Kanderka and Mr. Bob Howard. Would the delegation like to approach the podium at the end of the table? MR. M. HENKELMAN: Mr. Chairman, did you want us all to approach the podium or just one at at time. 1 MR. CHAIRMAN: According to my list there is one delegation with three people. Are you speaking on behalf of the entire delegation or are there three separate presentations? MR. M.

HENKELMAN: Two of us will speak on behalf of the group. MR. CHAIRMAN: All right, and you're Mr. Henkelman? Do you have a written copy of your presentation? MR. M. HENKELMAN: I believe the written copy of our presentation was delivered to each of the members of the committee by delivery last week or early this week. Did everybody receive their copy? MR. CHAIRMAN: Okay, would you like to proceed then? MR. M. HENKELMAN: Thank you. Mr. Chairman, honourable members and ladles and gentlemen. My name is Merv Henkelman.

I am Assistant Chairman of the Surface Rights Committee of the Canadian Association of Petroleum Landmen. I am also a Landman with Canadian Land masters Resource Services Ltd. Our purpose in attending today is to put forth ideas of our membership and express the needs of our industry in relation to the proposals of Bill No. 5. Our committee members here today are Bob Howard of Roxy Petroleum. I would like you to stand, Bob, and John Kanderka, with Voyageur Petroleums.

As you are aware there are two other trade associations in our industry , one being the Independent Petroleum Association and also the Canadian Petroleum Association. The association works in concert with the appropriate committees of the Canadian Petroleum Association and the Canadian Association of Petroleum Landmen in consideration of matters as they relate to surface rights activity in all the western provinces.

This is what IPAC is saying, and I think you have a copy of their brief, "To this end we can endorse the report of the Canadian Association of Petroleum Landmen with respect to Bill 5, The Surface Rights Act. But in doing so, we would offer the following specific comments and recom menda tions on certain portions either to reinforce, expand, or clarif y the points made by the Canadian Association of Petroleum Landmen." I just read that little text out of the

preamble of their letter brief that I believe they sent in to all of the members of this committee. We have worked as a joint committee not only on Bill 5, but we have on many things in the past, and we have a high profile in surface rights in Alberta as well. We've been working in concert for a long time. The Canadian Association of Petroleum Landmen represent more than 950 professional men and women employed within the petroleum industry in Canada with prim ary functions and responsibi lities lying in the

Thursday, 7 April, 1983 following areas. Exploration is one. As an integral part of the expl oration team comprising geolo gis ts, geophysicists, and engin eers. the land man plays a vital role in the formulation of exploration and development strategies right from the outset of an exploration concept through to the placing of successful wells onstream and the administration of all associated land matters thereafter. With respect to the next point (

b) Negotiations, the landman is the key landowner company, government company, and company-company contact within the petroleum industry and is responsible for the negotiation of all industry-related agreements, including farm-ins, farm-outs, options, leases, surface rights, etc. The land man is also responsibl e for the preparat ion,

interpretation, and admin istration of all industry agreements so negotiated. The next point would be administration. The landman is responsible for all land administration including leases. rentals, groupings, transfers. assignments, innovation agreements, etc. Another major point is public relations. In his capacity as the outside company contact, the landman has much of the responsibility for his company's public relations activities. lt is quite evident from the above that our association is very concerned with the implementation in the form that The Surface Rights Act will take, for our mem bers will have the greatest input and responsibility relative to

interpretation, implementation, and gen�ral understanding of the program within the industry. At this point I'd like to tell you, and I hate belabouring this point, but I'd like to tell you what a landman is. Now, this is very simple. A landman: Firstly, he's a person who negotiates for interest in land on behalf of an employer; as an agent on behalf of another person; or on his own behalf. He also, is a person who offers advice, for a fee, to a landowner for what I've just told you.

Although we recognize that as in any situation, whether it be farming, politics or the petroleum industry, as new people are brought into the particular field, a certain degree of training is required in order to improve the knowledge, efficiency and effectiveness of each individual, in whatever field of endeavour it might be.

Our association and its members, specializing in surface rights acquisition, have a wealth of experience in negotiation and acquisition of surface rights and in a knowledge of government regulations associated with surface rights acquisition and are extremely well versed in virtually every kind of fa rming opera tion. The kno wledge of the surface landman has been demonstrated statistically by the fact that a very low percentage of cases are submitted to the Surface Rights or the Mining Board area.

The majority of the surface agreements are negotiated and consummated between the surface landman and the landowner without ill-will or malice on behalf of either party. I'd just like to speak a little bit about land and ownership. Ownership of land, that is farmland, does not mean that a farmer has complete control of his property and can do with it what he wishes, even if his actions do not infringe on the rights and privileges of others. Governments, through special Acts, permit others to acquire title to. or use of, all or part of your land.

These Acts are based on the assumption that the 2 acquiring or use of your land is in the interest of the general public. Acquiring of use of your land may be achi eved by, No. I, satisfactory negotiati on, expropriation - and that's a procedure whereby governments, federal, provincial or muni cipal and companies may acquire land in part or in total even if you do not wish to sell - Right of Entry, an order which grants other parties the right to enter and to use your land without your permission.

The legislation, for the purposes referred to the above, is also designed to protect the landowner and to assure that he receives fair compensation for the property acquired or used in fair compensation for damages and inconveniences. The following is one of the major points that we would like to discuss and that we promote at all times. The topic is harmony. This

section - you might refer to your brief in front of you - is on Page 2. We wish to congratulate your government for introduction of Bill 5 at a time when surface rights activity is increasing. Commencing with the Commission of Inq uiry into Surface Rights in Manitoba, as well as your dialogue with the agricultural community and our industry in creating an environment for co-operative legislation in Manitoba today, we recognize it is necessary to promote harmony between the industries of agriculture and petroleum.

We attribute a lack of harmony in surface rights today to the period of relative ina ctivity in Mani toba experienced in the 1970's compared to certain other areas of Canada. The past three years though in Manitoba, and I can attest to this because I have been involved in it, has produced a flurry of exploration and development drilling activity. Given some consistency in lessors' royalty rates, there is optimism in our industry that this trend will provide long-term growth. I am going to digress here for a minutes. I talked to a lot of companies.

We have a lot of clients in Manitoba, and this is the first time in the history of my being a land man that Manitoba has been an interesting subject on the streets of Calgary. Everybody is excited about it and it will be a continuing stabilized exploration and development program. In all the years that I have been in the land business, !'haven't seen this. it's been very cyclical and I think you should be excited about it. So let's protect both the interests of the landowners and the interests of the industry and keep it going.

You have recognized and proposed the two key ingredients we feel are necessary to provide harmony in surface rights. Bill No. 5 proposes two things: A new Surface Rights Act; the formation of a Surface Rights Board; and this is exciting. I'm going to skip over to Page 5 no w, Board Jurisdiction, because we believe this is another major point. If a good Surface Rights Act is to provide a fair and expedient means of arbitration, then the jurisdiction of this Board must be autonomous and free from the departmental influences of agriculture and mining. We commend you on the process for making appointments outlined in

Part 2,

Section 6(1). However, we strongly recommend that the Surface Rights Board report directly to the Department of the Attorney-General as the most impartial body. Anot her key element, Board Mem bership and Qualifications: We feel that the effectiveness of this Board depends greatly upon the selection of its

Thursday, 7 April, 1983 membership. Based on our past experience - and, believe me, we've got a lot of that; especially those that are in the mainstream in Alberta - we wish to set forth the following criteria for membership on the Board. Okay, we really feel that full-time members are required. All members should be full-time members whose primary source of income is derived from this endeavour. Such a membership will provide continuity of arbitration decisions from one district of Manitoba to the next.

These members who will derive their income solely from this source will not suffer conflir.ts of business interests, leaving the members free to consider only the evidence before them. Another key element, Varied backgrounds: To assure proper consideration of each party, the Surface Rights Board should contain a reasonable mix of experience and background amongst its members. Certainly, one member should be chosen for his agricultural understandin g and another for his famil iarity with petroleum operations.

Another good category, Expertise: If experienced individuals with this mix of backgrounds can be hired, some criteria for expertise will be met. lt's our experienc e that membe rship must exhibit highly developed communication skills and the ability to learn a legal process to take place in a hearing. Members must be also able to control the ambitions and moods of the parties in a Surface Rights Hearing and in some case the manoeuvrings of their legal counsel.

Another good point, Neutrality: The process for selecting members of the Board should be based upon qualifications rather than political, social, or other affiliations. Considering the complexity of the time restraints, we proposed the redrafting of the Right of Entry portions of Bill 5. We have suggested a redrafting towards the end of the brief that you have in front on you, if you take a look at that. With an explanation of this process, I'll introduce Bob Howard and he'll take over from here. Thank you very much, Mr. Chairman, and all members. MR. CHAIRMAN: Could you state your name for the record please? MR.

B. HOWARD: Good morning. My name is Bob Howard and I'm here representing both the CAPL and Roxy Petroleum, and John Kanderka, who won't be spea king today, is also with our dele gation and representing both the CAPL and Voyageur Petroleum. I hope you've all done your homework; we've got a pretty important piece of legislation here that's going to affect a large segment of the population and it's going to sit that way for a long time.

I'd like to say off the bat that I think it's a pretty well-written piece, but there are some problems with it, and there are some major problems with it; not very many but there are a couple. One of them, as we see it, is the Right of Entry. I'm going to refer to an address that was intended, at least, for Mr. Parasiuk on the 18 of February. I hope he's had an opportunity to read it since and I think it's worth repeating. The subject of Right of Entry itself is one of the most critical aspects of any surface rights legislation, as it must be infused into any operator's exploratory or 3 development plans.

Without a predictable time frame within which to operate, opportunities for economic growth diminish considerably and are, at times, lost entirely. A predictable time frame is the key. The act of drilling a well involves a great deal of planning in order to justify expenses usually exceeding one-quarter of a million dollars per well. Geophysics must be studied at length and geology must be made reasonably predictable.

Engine ers must be able to provide justifiable economic recovery from all expenses, and contractual landmen must complete often complex negotiations with surrou nding mineral interests. lt's a team effort. A lot of time, a lot of planning goes into this stuff. To set up a comprehensive drilling program is a formidable task and it brings us back to a critical facet of the subject, which is time.

The effect of leaving a nonpredictable time frame in a critical area is extremely disruptive, often with regrettable result, as I can attest to in both Saskatchewan and Manitoba, where we've seen hundreds and hundreds of thousands of dollars flushed right out of communities; no predictable time frame to operate with, a decrease in activity, lost revenue to the operator, the government, and the citizens and a lack of confidence with which to pursue new opportunities. To be able to properly comprehend the aspect of a Right of Entry, we believe an examination of its origins is essential.

When an operator invests the time, energy and capital required to acquire legal rights to explore and then invests that same in choosing an economical place to drill, negotiations begin. The goal of any operator must be to provide ample consideration and equitable comp ensation for these rights. To do otherwise would definitely be contrary to his future interests. With all due respect, the amount of money we're talking about is a drop in the bucket. lt's in no operator's best interest, there's no percentage in it, for an operator to try and save $500 on a landowner.

When an operator is unable to agree at a reasonable agreement which is in the best interests of both parties, it is always for one of three basic reasons - where the well is, any undue hardship that may be caused, or compensation - it's always one of those three. If undue hardship will be created by activity or the location of the activity is onerous, the problem must obviously be addressed prior to somebody going in. Failure to do so could cause irreparable harm. When compensation is the reason for a dispute, no irreparable harm comes from immediate Right of Entry; no irreparable harm.

If all we're talking about is dollars, let's get on with the job. There's a lot more at stake. There exists those who would have people believe that some operators show disregard for landowners' rights and those that say most lando wners are unreasonable. We believe each example is a rarity, the exception rather than the rule. But the purpose of legislation should be in the public's best interest to ensure that neither party's rights suffer undue hardship.

Taking this into consideration, it seems clear that when it is shown that one party's rights will not suffer any undue hardship by allowing the other to exercise those rights, to exercise his own rights, that activity must be allowed to commence and the key is a reasonable and predictable time frame.

Thursday, 7 April, 1983 This would apply to a farmer requiring access to a severed portion of his land for seeding. He has to be allowed, within a reasonable and predictable time frame, and it would also apply to an operator drilling, to preserve a mineral interest that he's invested a lot of time and money in. Our amendments to the bill are composed in order to provide this reasonable and predictable time frame.

The ramifications of leaving loopholes or delays for ulterior motives are far-rea ching and they are dangerous. lt is regrettable that legislation must be specifically designed to eliminate these practices, but it's something like "no deals are made on handshakes anymore." We have got to put the legislation together to eliminate the loopholes which is not in the intent of the bill. The practices do exist.

When, in negotiating an agreement, one party's rights are restricted by time, and the other party's rights are not, that element, time, is a common weapon for a non- restricted party with grossly self-serving interests. To allow this to occur destroys the credibility of an honest agreement and, in our view, is contrary to the public interest. One example occurs when a surface owner also owns the mineral rights and, for the purpose of obtaining a new mineral lease, utilizes any forest alling technique available to him.

Legislation throughout the balance of Western Canada does take precautions against abuse and we urge the Government of Manitoba, and the committee members present today, to consider that very very carefully. Indeterminate time frames for Right of Entry orders - and I cannot stress that enough - must be predictable. We can't go on a flyer; we've got to kn ow. Make the rules; we'll live by them. Allowance of absolutely unnecessary hearings in purely compensatory matters, I can't see you allowing it but it's written into the bill. Automatic assessment of liability for costs; why automatic assessment?

Our comments in the amendments, I think, will point out what sort of a weapon that can turn into. These are all areas that we believe would be subject to abuse. Please consider the suggestions and ideas; we have learned through experience. We trust they will be considered with the same impartiality with which we have attempted to construct them. There is no percentage in it for any operator to try and take deliberate advantage of a landowner.

Objective - fair legislation equal to both parties; let's set up some rules that we can follow, but let's not have the indeterminate and unpredictable aspects that are in this bill. I would also like to say that we feel that there are other problems in the bill. We have made mention to them in our amendments which are contained in the back of our brief - I hope you each have a copy of it. There are extra copies at the front if you don't. We would like you to consider them carefully.

We represent the bulk of industry with this joint committee, and we would also like to make ourselves available at the committee's discretion to discuss, in detail on a clause­ by-clause basis, if necessary, any parts of this bill. But for the sake of brevity, and I know that we all have other topics we want to listen to, I'll close. Thank you for your time. MR. CHAIRMAN: Thank you, Mr. Howard. 4 The second presentation I have on my list is from a Mr. Larry Vanbeselaere. Mr. Graham. MR. H. GRAHAM: Mr.

Chairman, are members of the committee going to be allowed to ask questions of any of the people that present briefs? MR. CHAIRMAN: Certainly. Do you have any questions for the previous speaker? MR. H. GRAHAM: Yes, I would like to ask a few questions. MR. CHAIRMAN: Could Mr. Howard come back? MR. R. HOWARD: Sorry, I ran away too quick on you. MR. CHAIRMAN: Mr. Graham. MR. H. GRAHAM: Thank you, Mr. Chairman. Mr. Howard, I think that the main thrust of your presentation seems to be an element of time.

I would presume that is the time that is required from the point where an application for Right of Entry is made until it is granted. Is that the time frame that you're talking about? MR. CHAIRMAN: Mr. Howard. MR. R. HOWARD: I would say that is one of the time frames that we're referring to and probably, Harry, the most crucial time frame is from the time we apply, and when we can establish that we've got good reasons to apply and we can't get any further, until the time that we're allowed on the land. That is probably the most crucial, but it's not the only one. MR. H.

GRAHAM: What are the other time frames that you are considering? MR. R. HOWARD: The Act makes reference to a waiver and no availability of a waiver and three-day waiting periods and other - let me see, I'm going to have to try and wing it here. J would say, in the process of negotiation, where forestalling techniques are often used, the time frame that the Board that's going to be set up, that time frame that they will recognize is an important time frame. Will they say, you have to make 10 contacts? Will they say, you have to make one?

A lot of this is subject to regulations, I understand, but it's not the only important time frame was the point. As you have determined, and I quite concur, it is the most important one is the aspect of Right of Entry, yes. MR. H. GRAHAM: lt would appear to me, in studying the bill, that there are various areas where there are time frames suggested in the bill for various things, but it does not appear anywhere in the bill, that I can find anyway, where there is a time frame set out from the time a person first applies for Right of Entry to the time when the Board has to deal with that application. MR. R.

HOWARD: That's quite right. MR. H. GRAHAM: lt seems that the Board, in its collective wisdom, could literally sit on it for months if they wanted to.

Thursday, 7 April, 1983 MR. R. HOWARD: That's absolutely right. MR. H. GRAHAM: I think that is a concern probably to everyone. MR. R. HOWARD: I really think that it should be a concern to both sides, not just industry, but farmers as well. If somebody applies in January and they don't know whether or not to seed an area in May, how fair is that? MR. H. GRAHAM: That was the No. 1 concern I had. Thank you. MR. CHAIRMAN: Before we go on, I would like to explain the procedures for the members of the public.

Usually you should wait until you're recognized. lt is not simply a formality, it is also for the benefit of Hansard. The proceedings are being taped and it's only by recognition from the Chair that the transcribers will know who it is that is speaking. Mr. Parasiuk. HON. W. PARASIUK: Mr. Howard, you recognize that this is breaking new ground in Manitoba with a new Act and we don't have a lot of Manitoba experience to go on. The general presentation draws on experience in Alberta and Saskatchewan where the activity has been much greater.

Roughly, what are the number of wells that are drilled each year in Alberta, compared to Manitoba? MR. CHAIRMAN: Mr. Howard. MR. R. HOWARD: If I could just ask someone who might have a better idea as to the multiplication figure HON. W. PARASIUK: We had something in the order of 200 last year in Manitoba. Would you have something in the order of, say, 2,000 maybe? MR. R. HOWARD: That's probably a reas onable estimate. We have a considerably. greater amount of wells drilled there, yes, with a lot more varied land patterns to deal with than here in Manitoba where the drilling is almost exclusively on improved land.

HON. W. PARASIUK: That's one of the reasons why we may not go with full-time Board members in the first instance, because we may just not have enough work for full-time Board members. At the same time, we want to give a wee bit of latitude. In the first instance, a Board may in fact be swamped with a backlog of cases that it has to deal with. If we did have a very determined time frame at least for this first year, the Board, despite all its best efforts, might not be able to accomplish what is spelled out in the Act.

I have said it in the debate on second reading that it is our intent to be evolutionary with the bill. That is, to bring in legislation that is breaking new ground; to bring in a set of procedures, to watch these, to monitor them closely in consultation with both industries; and to make the appropriate modifications legislatively or through regulation on an ongoing basis really in the light of actual experience. 5 So I can appreciate the comments that you have made. I was just trying to establish a bit of a context. MR. R.

HOWARD: I would concur with your comments that there probably will be a backlog with which to deal initially. However, I would also suggest that this particular bill grants the Board so much power and so assesses them or, rather, charges them with so many duties that they're not going to have any problem filling their days for years and years to come as I view it. Activity in Manitoba, as it is viewed in our province, is not going to decrease. We also have fears that part-time members may indeed have conflicts with which their own consciences are going to have problems and that sort of thing.

If that initial backlog has to be dealt with more expediently, perhaps the government would consider a full-time Board with additional part-time members for the period of the backlog. MR. CHAIRMAN: Mr. Downey. MR. J. DOWNEY: Mr. Chairman, I would like to ask Mr. Howard a couple of questions specifically dealing with, first of all, the Board appointments and some of the current difficulties between some of the farm community and the oil industry in the southwest. I would ask Mr. Howard through you, Mr.

Chairman, if it would probably be in the best interests of the farm community if the surface rights people - and I note the previous speak er, Mr. Henkelman, suggested they be non­ political and non-bias - that if a recommendation were to come from the Sur face Rights Association of individuals that they would like to sit on the Board, would that be acceptable to the land people who are presenting the brief? Would that be a pretty good start, in your feelings, to start resolving some of the current problems? MR. R.

HOWARD: I think it would be a good start in opening dialogue, but I am certainly not going to suggest that industry would be prepared to blindly accept the recommendations of a group with which they've had some difficulty in the past. I do believe that both sides on the issue should have input into the matter and, failing that, we've both got to hope and pray that the government will be objective and fair in its allocation of Board members. MR. J. DOWNEY: Mr. Chairman, as well, ·then, to Mr. Howard.

He would probably be prepared to recommend the name, if the Petroleum Landowners Association, or whatever the proper title is, were asked to put names forward, would be prepared to present them and expect that they be put on the Board as well? MR. R. HOWARD: If called upon to do so by the committee, we'd be happy to provide our suggestions. MR. J. DOWNEY: Further, Mr. Chairman, to Mr.

Howard, I think the Right of Entry is as well a pretty major concern to the farm community, and to fully appreciate the effect that an oil industry has moving into pretty much what has been a traditionally farming community, an area which most farmers have derived their

Thursday, 7 April, 1983 livelihoods and are in most cases pretty proud people, proud of the property, proud of their farming operations - most of them have a cropping pattern that has been pretty much the basis for which they've made their livelihood - setting aside the fact that whether they have or whether they have not got oil rights, I think is not the issue here. it's just a matter of the same kind of example or comparison that I could draw, Mr.

Chairman, which would be an individual who had a nice acreage near the city or had a nice big front lawn and someone was going to move in and disrupt their current way of life and their current scenery, whether it be just the overall impact of a new industry, that it does have a fairly major emotional and in some cases undesirable effect on those individuals.

Has the Land Association been involved in any study or work or keeping pace with the work that is being done in Alberta on the directional drilling program and, if they have not, would they be prepared to look at through negotiation and Board work the possibility of using that as an alternative as to moving directly on to some of these farms that is going to disrupt that present way of life? MR. R.

HOWARD: I can only say that in terms of the joint industry effort, which is CPA, CAPL and IPACT, I am not aware of directional drilling studies under way under a joint effort, but I can say that on behalf of Roxy and other companies that I am aware of, we've addressed the issue as soon as it was brought to our attention. We're in-house in my own company, just completing a study now on that very topic. Directional drilling, in theory. sounds very nice - you know - you sit in one place, you drill from one surface location into formations that normally would require 8 or 10 or 12 holes; it's good in theory.

Unfortunately, it's been proven in practice that the cost element is something in the area of five times greater than drilling a regular hole. There is an extreme lack of expertise in the oil industry, not with regard to drilling the well itself - the only problems in drilling the well itself generally are associated in the first couple hundred feet with gravel - but in completing and producing the well. The bottom hole apparatus, pumps, and what not, the problems facing engineering in that regard have not been solved and they are considerable.

I think it's unreasonable at this time to impose upon any operator that sort of risk element not only in terms of capital outlay, but in terms of chances of production for the sake of aesthetics or two or three less drilling locations. MR. J. DOWNEV: I don't want to delay the particular thing. What I'm saying, Mr.

Chairman, is asking the individual who is presenting the brief, if there was no alternative in specific situations where this was the other option that the Board gave the individuals, is he saying that it would stop the industry from proceeding or, in fact, it would be looked at a lot more carefully before they proceeded? MR. R. HOWARD: What I would say is if the reasons for that necessity for directional drill were such that any particular company felt that the rewards were worth the additional ·risk we would certainly look at directional drilling.

For ins tance, spacing in under a lake or 6 something that we couldn't get at with an offshore rig in the middle of Manitoba. We'd have to drill from the shore, that we'd have to look at. But the rewards would have to be there and they'd have to be pretty evident. lt would have to be almost a certainty to have significant rewards in order to substantiate the considerably higher capital investment and risk. MR. J. DOWNEV: Mr.

Chairman, I would suggest that the rewards could be on both sides, a reward for the landowner to not have the kind of inconvenience and the difficulties that the current type of well drilling and programs of development could create for the farm community and, as well, I am a believer in changing technology and the ability for engineers as well as for farmers to develop new technology to develop new processes. I would, therefore, ask through you, Mr.

Chairman, to the individual if, in fact, he and his association would be prepared to work along with, hopefully, the newly appointed Surface Rights Board to develop as much information from other jurisdictions as possible, so that, in fact, it would be an alternative for those individuals who can make a substantial case to the Board and, in fact, would be an alternative that could be worked on, not necessarily immediately but in the longer term. I would ask the member if that would not be a proper direction to proceed to. MR. R.

HOWARD: I think I can speak for all of industry in saying that we would extend every co-operation as long as we' re no t dealing with any confidential information, in terms of reserves, that is required in order to promote the idea of directional drilling. But agai n, onl y to reiterate that there are significant theoretical difficulties with the idea over and above the practical difficulties. MR. CHAIRMAN: Mr. Graham. MR. H. GRAHAM: Thank you, Mr. Chairman, and I would like to ask Mr. Howard probably one or two further questions with respect to the time frame on Right of Entry.

Your association has no difficulty with a suggestion, perhaps, that where there is any dispute in Right of Entry you have no difficulty with paying money into the Board immediately and having that adjudicated at a later date, is that ... ? MR. R. HOWARD: None, whatsoever, that's a common practice both in Alberta and Saskatchewan as well. MR. H. GRAHAM: The second question is, you don't have the same concern about time frame when it comes to compensation. Once it goes to adjudication for the proper compensation if the Board takes several months to decide the compensation that is not a concern of yours is it? MR.

R. HOWARD: I wouldn't agree that it isn't a concern of ours. We'd like to see all issues dealt with as quickly as possible and basically the public is an important factor in any of our operations and if they're happy then we're happy. MR. H. GRAHAM: Thank you. •

Thursday, 7 April, 1983 MR. CHAIRMAN: Are there any further questions for Mr. Howard? Seeing none, I'd like to thank you on behalf of the Committee for your presentation today. MR. R. HOWARD: Thank you for the experience. MR. CHAIRMAN: Mr. Vanbeselaere. MR. L. VANBESELAERE: I'm Larry Vanbeselaere, I'm a farmer from the Waskada area and I've got one well on my property and I've dealt with Mr. Bob Howard through Roxy Petroleum and Canadian Landmasters.

They acted as the landmen for Roxy Petroleum and couldn't come to any agreement with them and then went on to accept a Board order from Mr. lan Haugh who is presently working with the Mines Board. I think the Act, I haven't really looked at it too fully but, in looking through it briefly, I think it's very good. I think the power of the Board is quite high, I think you want to remember that the Act is designed to protect the landowner or the farmer, it's not designed to protect the petroleum industry, that's why you're having the surface legislation, to protect the farmer and not the oil industry.

The oil industry is quite capable of protecting themselves, I think, they have a lot of knowledgeable people who are experienced in dealing with the type of situation in negotiating with farmers and are quite capable of looking after themselves. I think the Right of Entry is quite important as has been brought out previously. What seems to happen when the landman comes around to deal with you is that you get a contract for a term of 25 years which is renegotiable for another 25 year period which means that it lasts forever and you're given a sum of money that you're supposed to accept.

If you don't agree to these terms the only alternative is that they will go to the Board and get a Right of Entry which takes away your negotiating power. So really as the Board now stands, and I don't know how the Board will operate in the future, it's actually used against the landowner to intimidate him to sign a contract and accept the sum of money that they're being offered. I think also that the surface legislation should be presented before an agricultural committee.

I don't know whether it's going to be or not but I think there's a lot of things with the environment and the spills and the rooting up of the soil and everything else that an agriculture committee should look at also, besides just the legal aspects of it. I've got a few points here but I think I've gone through most of them. I di dn't really prepare anything in particular I'd appreciate if I could have some questions from you people, that may be on your mind. Thank you. MR. CHAIRMAN: Are there any questions for Mr. Vanbesalaere? Mr. Parasiuk. HON. W. PARASIUK: Yes, Mr.

Vanbesalaere, the name Law Amendments Committee might throw you. it's a committee where legislation is referred to after second read ing. lt could be referred to an agricultural committee, it could be referred to another committee. We referred it to Law Amendments Committee but 7 everyone is welcome to make representation on every aspect of the bill that they would like to. So if you had wanted to make comments about spills or environment or anything like that you could feel free to do so.

We aren't restricting the discussion in this committee's review just to legal points, in fact, we are here to hear the public's comments on all aspects. MR. L. VANBESELAERE: So there are agricultural people on the committee now that understand the agricultural aspects of the bill. HON. W. PARASIUK: Mr. Vanbeselaere, there are a number of active farmers and a number of former farmers on this committee. MR. L. VANBESELAERE: Well, that's encouraging anyway.

I think that's very important because you'd have to be aware that the Act as setup, at least in my feeling, to protect the farmer and that should be the main thrust of the Act, not to protect the oil industry and the oil industry, it seems to me, is trying to slant it as though they are the ones that want to be protected. Why not call it a Petroleum Protection Act then, if that's what it's supposed to be? MR. CHAIRMAN: Mr. Downey. MR. J. DOWNEY: Mr. Chairman, to Mr. Vanbeselaere, through you, the opening comments that he made that it was basically good legislation, I would like Mr.

Vanbeselaere's response to the placement of individuals or the appointments to the Board, and how important he feels to make sure that agricultur e is truly represented and particular people, who come from experience with the Surface Rights Association, who have been doing a lot of work not only on the current difficulties that the landowners have had with the current developments that have taken place, but some of the previous problems that have been brought to the attention of the public through the Nugent Report, the salt-water spills and the past difficulties that the oil ind ustry has developed.

The experience of those individuals, I'd like Mr. Vanbeselaere to point out one or two of the reasons why he feels that agricultural people do have to be on there, whether it be increases in land costs versus the updating of the compensation that they're getting and the discrepancy there. Maybe he would like to address that particular issue. MR. L. VANBESELAERE: I think the idea that it is

an Act to protect agricultural people, it would only stand to reason that there should be agricultural people on the Board. That's the whole idea of the Act. As far as the compensation, I think if the farmer and the oil company was allo wed to negotiate unhampered, with just the natural course of negotiation the farmer and the oil company would be happy. But the oil company does not really want to do that.

They want to say here's the contract and here's the amount of money we want to pay and if you don't co-operate, we want to get on there and drill right now; and if you don't agree to this, we want to use The Surface Rights Act to expedite that and to get what we want and to go on your property. Also, if The Surface Rights Act or the government does

Thursday, 7 April, 1983 not go along with this idea, then we will pull out of Manitoba and we won't drill any more, which I think is blackmail. That's what it boils down to. MR. J. DOWNEY: I guess the specific question would be easier to be answered if I were to ask the question of the individual, if the current Mining Board is in this farmer's

interpretation - and the current Mining Board I believe is made up totally of government employees and has been for many many years - what the witness is telling us, or the farmer is telling us is that is not a situation which is desirable and would like to feel the support of government by making sure there is a pretty strong representation from the farm community, that the current make-up of the Board is not satisfactory, and to date the judgments that have been made and the decisions that have been made have not been in the best interests of the farm community. MR. L.

VANBESELAERE: From what I've been told by landmen, and maybe it's kind of an outspoken statement, but what they say is that the government is on our side. If the people do not give the right of entries and co-operate with us, we will stop drilling, the government will stop getting money and so we'll just move out. So actually not only are they blackmailing the farmer, they're also blackmailing your government, because either they get their way or they're moving out.

If you read what they're telling you, that's basically what's involved, and as a landowner you kind of feel that you're stuck in the middle somewhere and really don't count for much of anything. MR. J. DOWNEY: Thank you. MR. CHAIRMAN: Mr. Storie. HON. J. STORIE: Mr. Vanbeselaere, I wanted to just comment.

The Canadian Association of Petroleum Landmen indicated in their brief, that they would like some amendments to the Act to ensure that there is no standardized agreement between an oil company and the farmers, indicating that they wanted some flexibility, implying that they wanted the landowner and the company to be able to negotiate without confines of an agreement. What is your view on that? MR. CHAIRMAN: Mr. Vanbeselaere. MR. L.

VANBESELAERE: I'm not in agreement with that at all because what happens is that the land people are highly qualified, highly skilled and they find older people, maybe 60 years old, a widow or an older person, they find people that are not trained in negotiating. I'd like to say they use the "M IC" technique. They use manipu lation, intimidation and coercion to intimidate these people to sign, and if there's a standard contract, they won't be able to do that, and because they have the upper hand and they have the skill in this area, it's against their interests to have a standard contract.

I think, where it states in the Act, that all contracts or agreements will come into the Board and be recorded and looked at is a very good one so at least you know what's going on. I have looked into the industry in trying to find what there should be in an agreement or what 8 is standard and you can't find any record of it. lt's all kept hush hush, so when you're negotiating with these people, there's no way to go to find out what the basics are or the parameters are that you should be working in. HON. G.

STORIE: You're not concerned then that, as they sugg est, that standard ization will limi t the individua l's rights to freely market access to his property. MR. L. VANBESELAERE: I believe in the free negotiating. If someone wants to give up their rights and sign something that's going to last for 25 years renewable and their children and their children are going to have to abide by it, and they're satisfied with taking $3,000 at maybe $1 ,000 a year, giving up their rights, then I suppose they should be allowed to do that.

But if there's going to be a surface legislation and there's going to be some controls put on it, then I think there should be something done both ways. If the idea of the Act is to protect the landowner, then you have to protect them in that agreement and I'm completely against the idea of these agreements lasting forever. Who wants to sign something that goes on forever and that you have to abide with, your children have to abide with and their children?

Mind you, the oil companies say, "If we have a producing well there, we want to protect our interests," but then I say, specify what is a producing well and how many barrels of oil are they taking. Are they just sitting on the hole or are they producing or what, and also, that the remuneration should be adjusted every year, automatically. Maybe carrying this a little further, I feel that a percentage of the royalty is fair.

Now I know the oil industry does not agree with that at all but, the way I look at it, if we have to give up a percentage of our farm land, then they should have to give up a percentage of their minerals. This is not like when a government comes in to build a road where it's for the public benefit of everyone. The oil industry works for high profit and they work for themselves, so the remuneration should be equitable both ways. If there's no money - go ahead. MR. CHAIRMAN: Mr. Storie. HON. J.

STORIE: Just one further question, the brief that was presented by indus try made some recommendations with respect to the kind of people they would like to see on the Board. Would you have any feelings about the kind of people that should be represented on the Board, what their background should be like, what kind of experience they should be drawing on? MR. L. VANBESELAERE: As I mentioned to Mr. Downey, I think they should be definitely agricultural people.

I think they should be agricultural people who have some experience in the oil industry because if you talk to a farmer or an agricultural person who hasn't had experience in dealing with petroleum people, they get an entirely different idea. They think that - well, up until a year ago, I thought if you had an oil well on your property that you were set, that you were a rich man, but you get a rude awakening. They tell you right

Thursday, 7 April, 1983 off the bat. They say, we want to go on your property and we're not going to pay you one nickel more than we absolutely have to. We're going to do it whether you like or not, and then they go through all the motions and you're stuck with it. MR. CHAIRMAN: Mr. Graham. MR. H. GRAHAM: Thank you, Mr. Chairman. To Mr. Vanbeselaere, first of all, I don't think maybe we should be getting involved in the difference between - the actual oil production, I think, is a secondary issue.

I say to you, if you think that the oilmen or the landmen are tough when it comes to compensation for the oil, wait until the government gets finished with you on taxation. But that's another issue. We are dealing here only with surface rights. I can tell you that I am a farmer and several members of this committee are farmers, but the entire committee is here charged with the responsibility to look at

an Act that is before us, a bill that is before us, to make suggestions for change that would improve what has already been drafted and, in essence, to hopefully bring forward a piece of legislation that suits the needs of all the people concerned. lt has to be reasonably fair to the farmer; it has to be reasonably fair to the oil people, because the industry must be able to operate or else the farmer gets no compensation at all. What the compensation is, what the objections are of the farmer, are things that this Surface Rights Board will be dealing with.

We had the landmen say earlier, I think - I'll refer to it - that there were basically three concerns on the Right of Entry. One was what it would do to the operation of the farmer, the disruption that would occur to his business, or the compensation. Of those three fields that they suggested, in your opinion, which is the most important or are they all very important? MR. L. VANBESELAERE: To be truthful, I don't know where the question - I was picking out all the other questions that you could ask and then, at the very last, you say, this is the one I want. I was thinking all the time .. MR. H.

GRAHAM: You don't have to answer any question, if it's ... MR. L. VANBESELAERE: I'll answer the one I had first. The first one you asked was the one on splitting out the royalty payment and not using it as a means of compensation which is a thing that's been kind of around, and I think the oil company has been promoting this idea, but it's not all completely kosher. lt is not all true. Because, in North Dakota right now, there is a bill being presented that would give the landowner 1 percent. I don't think that's enough.

There have been numerous bills presented over the years in North Dakota that would give the landowner a percentage. Also, there are some oil companies, not Roxy Petroleum that I know of, that do give out a percentage of the oil rights for surface rights, usually around 2 percent or 2.5 percent, so it's not unheard of. If you were in the industry and familiar with that, I think you could find that and find these agreements where this percentage has been 9 given out for surface rights. Now that's the one, but go ahead. If you would repeat the last portion there, I would answer that. MR. H.

GRAHAM: No, I would like to go back and deal with the one that you are putting forward that would bas:cally tie compensation for the mineral rights to the surface rights. You are the first one that I have heard of that has put forward that real suggestion. Most of the people I have talked to in surface rights who have concerns about surface rights, are very careful to say, they are concerned only with the surface activities. The mineral activities are a separate and distinct field. But perhaps you have a different view on this. MR. L.

VANBESELAERE: I have a different view, and I know that's prevalent among lawyers and other people. I think it could be that it gets into the Charter of Rights. As I understand now, there is really no Charter of Rights guaranteeing landowners anything, really. If that Charter was there, I think you could very easily say, well, you know, they're taking away a portion of my property, then I'm entitled to something from theirs and I don't know why it was never put in. When Mr. Trudeau brought in the new Constitution, I think that property rights should have been included and I think that would have helped.

As well as Indian rights and everything else, I think the property owner . . . I think there's quite a difference there between expropriating or taking over land for the public benefit of the whole population, rather than someone that's coming in to make a good profit, to make a lot of money at someone else's expense. I mean, there are nume rous things. There is the ecolog ical, the environmental and the psychological impact. Yet, when they talk about compensation, they say, well, what are the dollars? Or when an oil company drives across the field and they say, you're trespassing, is there no legal thing?

They say, no. How wide was the track and how much crop did we run down? But if you broke into your local grocery store and took a loaf of bread, you could be charged, but not so an oil company. I mean, even if they go on your property and destroy what you are using to make your livelihood, all they are required to do is pay for that particular amount of crop that they destroyed - nothing to do with trespassing on your property or anything like that. Maybe I've gone a little too far. MR. H. GRAHAM: No, I don't think you have at all. Well, Mr.

Chairman, I don't think we want to get into the issue of why the property rights were not entrenched in the Charter. I think we're getting into a political field here and there are wide differences of opinion sitting right at this table on that par ticular matter. Mr. Chairman, we won't get into that at this time. The other thing that does interest me is where you have stated they can go into your field and just pay you for the compensation for whatever they tramp down. I was under the impression that in a lease, the area of their activity was pretty well identified and they were confined to that particular area.

What you're telling me is not the case, am I correct in that? MR. L. VANBESELAERE: Really there's two areas there. There is the particular area that is leased that

Thursday, 7 April, 1983 is sup posed to be marked but, in essence, usually is not. There's a marker placed under the soil at one point as a reference point and in most cases that I'm familiar with, the exact area or the boundaries of the site are not marked or if they are initially, they may have a fir stake that's placed on each corner but that usually gets destroyed or moved or stolen.

That is another problem, that you do not know where the boundaries of the site are, to know whether they have trespassed but, in essence, that really doesn't make that much difference because they really don't seem to consider where the boundaries really are. If they want to drive out on your property and it's more convenient for them they usually do because they know that all they're going to be liable for is the damages done.

In the Board order that I was served with it did say that, if you wish, you could have a fence put around . -- the boundaries of the site so-you would know when .. they went off the site and I did write Mr. Haugh and told him that I would like to have this fence. I specified that I wanted a security fence so that if children or any animals or anything came by and happened to fall in the pit they wouldn't be harmed. That was last fall or even in the middle of summer and I haven't had any action on that so far. I think that was a legitimate request. MR. H. GRAHAM: Mr.

Chairman, then your experience is one that has shown that you aren't too happy with the curref)t Mining Board route and you're basically in favour of going to a Surface Rights Board rather than carrying on under the present Mining Act. MR. L. VANBESELAERE: To answer the first question. No, I've had poor relationship and bad experience with the present Board and I think that maybe they are civil servants; they're not farmers; they're not familiar with the area or what's involved.

A number of people out there have asked them to come out and see what's going on and as far ·as I know none of them showed up. 1 think they're giving out the Rights of Entry much too quickly. In my case the initial Right of Entry was applied for in the spring before seeding, and I was assured that there wouldn't be any action done until I was finished putting in the crop. Well, I had about two more days left and I was phoned on a Friday that they were going to give the Right of Entry. I asked, well, how soon? Very soon, I was told.

Actually, Bob Howard, in particular had been phoning every other day for a solid month requesting this Right of Entry. Being Friday evening, I couldn't do anything about it but on Monday morning 1 did phone in to Mr. Parasiuk's office and I got one of his assistants and I explained the situation and he said that he would phone Mr. Haugh and find out why this Right of Entry had to be given right away. So I did phone Mr. Haugh that same day and I was informed that he had given the Right of Entry the day before, which was on a Sunday.

What I assumed was that he had already decided to give the Right of Entry on the initial call. I don't think that was done fairly and as a consequence now, one of my neighbours has filed an injunction against the Right of Entry and there hasn't been any word on what the outcome will be yet, but I think it's a very legitimate thing to do. 10 MR. H. GRAHAM: Well, Mr.

Chairman, I think this type of information is very valuable to every member of the committee because we realize how important the oil industry is, but also how important the agricultural industry in the Province of Manitoba. lt's still the number one factor in Manitoba's economy and if we are having difficulties, it's very helpful to this committee to have those difficulties identified. The experience of one person, I'm sure is very valuable to all of us and I thank you very much. MR. L. VANBESELAERE: Thank you for your time. MR. CHAIRMAN: Any further questions?

Seeing none, I'd like to thank you on behalf of the committee for taking the trouble to come here today, Mr. Vanbeselaere. Mr. Downey. _ MR. J. DOWNEY: Yes, I have one point that I'd like to bring to the attention of the committee, if I could, at this particular time. I'll be very brief if I can. lt might be helpful not only to all the committee members but to the media and the public at large.

The Deloraine Collegiate English Class 300 put out a newspaper called "Graduate." They have done a very good story and I just received it this morning and that's why I haven't put it forward earlier when the committee opened. They have put forward an excellent paper explaining a lot of what is happening in the oil industry in the southwest, the full story, some of the buzz words and the activities.

I would recom mend that the committee either make available to the committee members the address or if we have the capability as a committee, there is a cost of $1 to support the collegiate that they be purchased by - (Interjection) - I'm serious - it is a good document and fully informative of what is happening, purchase this for the committee members or for the Legislative Assembly and make it available. lt would help a lot of people who want a little broader understanding of precisely what is happening. lt's probably not the total picture but I think would add to the workings of the committee and I want to compliment the Deloraine students for the work they did, Mr.

Chairman. I would ask for comments on this. HON. W. PARASIUK: I just wanted to point out to Mr. Downey that I did, in fact, get one of those copies. I wrote to the school about three weeks ago; I complimented them on their effort. They, in fact, sent me a copy of that edition about two weeks ago. I'm surprised that you only got it yesterday but I'll certainly look to see if I can make some copies available to other members of the committee if they'd be interested. MR. CHAIRMAN: Order please. The next presentation on my list is from the Ma nitoba Sur face Rights Association.

I understand that there are about eight people who want to speak on behalf of this association. Could you state your name for the record please. MR. B. ANDRE W: My name is Bob And rew. Mr. Chairman, honourable members, ladies and gentlemen. I speak to you today as President of the Manitoba Surface Rights Association, as a landowner

Thursday, 7 April, 1983 in the Virden area, and as a third generation resident of the Virden area. The land which I refer to is influenced very strongly by the petroleum industry. Accompanying me are some eight or nine members of our association, along with a larger contingent of our membership that are keenly interested in this bill and are in the audience today. Subject, naturally, to the approval of the Chairman and your committee, these eight or nine persons that I referred to a moment ago, will address a particular

section of Bill No. 5 during our presentation. These eight or nine persons I refer to are as follows: Adam Turbak, Kirkella; Jim Truan, Waskada: Wallace Gabrielle, Virden; Philip Francis of Virden; Doug Leslie of Virden; Florian Eilers of Virden; Jack Griffith of Waskada; and Don Temple of Waskada. In addition to the foregoing, we have Mr. Rene McNeill of Virden who is representing the Manitoba Surface Rights Association in capacity of solicitor. We also have Mr. Robert Kohaly, Q.C., acting as our technical advisor. We shall be calling on Mr.

Kohaly from time to time on various points discussed regarding this bill. Due to Mr. Kohaly's 30-some-odd years of experience with surface rights matters, surface rights Legislation, and on both these points in the areas of Saskatchewan and Al berta, I would encou rage, Mr. Ch airman, your committee to avail themselves of any information that they may be able to obtain from this gentlemen due to his vast experience in this area.

For the benefit of those persons that are not familiar with the background to these developments, with respect to the Mani toba Surface Rights and the development of Bill No. 5, I would like to do a brief review. Originally in 1977, two or three of the executive present here today, attended in the Virden area, on an individual and private basis with the then Minister of Energy and Mines. A review of the current situation with respect to the physical installations and legal documentation was discussed.

Subsequently those same ind ividuals had a number of private interviews with government in an effort to encou rage the government to put legislation into place as had been in the case in Saskatchewan in 1968 and in Alberta in 1972. In the interval from the time of our private discussions to the formation of the Mani toba Surface Rig hts Assoc iation, some numb er of months, we were encouraged by numerous individuals in the area to continue to proceed with our efforts.

On Janua ry 10, 1980, the Manitoba Su rface Rights Association was formed at the request of some 10 0-plus persons at a general open meeting in Virden. Today, that membership is approximately 260. The executive was instructed to pursue the acquisition of a comprehensive and separate act of legislation pertaining to surface rights as it relates to the two industries, namely agriculture and petroleum. In mid- 1980, the government offered to amend The Min es Act, un der Bill 10 9- 80 en deavou ring to accommoda te the needs of the lando wners. We expressed our appreciation to the government.

However we still felt that it was imperative to have an all­ em;ompassing piece of legislation to deal with the complex situation. As a result, the government set up the Nugent Commission to review this entire matter. Mr. Nugent's report came down in January of 1982, as you are aware. As a result of this report, which we 11 generally accepted, the Mani toba Sur face Rights Associa tion, submi tted a formal response to the government with respect to the Nugent Report.

The Mini ster gave the Manitoba Surface Rights Association a commitment at that time, that legislation would be forthcoming, which in fact has taken place, and for which we are most grateful. Subsequent to Bill 5, the Su rface Rights Act, having been tabled in the Legislature, the Manitoba Surface Rights has filed a written response with the Clerk of Committee. Mr. Chairman, due to a lack of knowledge on my

part in that area, and possibly an error on my part, I did not ask the Clerk whether that document would be duplicated in numbers and circulated. So, I do not know whether your members have it before them or not. lt appears in one or two cases to be the case. Thank you. The Manitoba Surface Rights Association is generally pleased with the bill.

We feel that with the exception of two or thr ee areas of major conc ern to the landowners, this bill, when enacted will be in the best interests of all concerned, bringing a considerable degree of quiet contentment to both the agricultural industry and the petroleum industry, in that area where there is competition by both industries for the same portion of surface area. I suggest to you that the areas of greatest concern are those of firstly, the Board.

This Board must be comprised of persons that can relate to agricultural matters. lt must be a form in which an applicant and the Board mem bers or mem ber are extremely conversant and fluent in the area of agriculture. This approach has been supported by one of our major operators. We will address the matter of appeals at a later point, and in so doing, how it relates to experience gained in other jurisdictions which originally fol lowed the same route as the proposed Bill 5 on appeals.

As we'v e done previou sly, we commend the Department of Energy and Mines for their efforts in establishing this bill and if enacted bringing a high degree of protection in for landowners, where little or no protection has existed to date. However, the rights of the mineral owners have always been protected. We repeat, as we have in the past, that this Act be placed in the Department of Agriculture, as we are dealing with nothing more or less than an agricultural matter. In the Province of Alberta, the Act is dealt with by the Department of Agriculture.

With the Act, under the Department of Agriculture, the landowner would be dealing with people of agricultural backgrounds and people that are conversant in the lando wners profession. The personnel of the Department of Energy and Mines would be left free to deal with matters of a technical nature, peculiar to the petroleum industry which the department fosters, nurtures and supports, to fulfill the energy needs of the province.

To expect these personnel of the Energy and Mines Department to handle both would be asking them in many cases, to become educated and knowledgeable to a large extent in agriculture and in effect, endeavour to wear two hats depending on whether they were dealing with a landowner or an operator. For the petroleum industry to have any hesitation in this regard would be questionable. The agricultural industry has operated without benefit of any effective legislation as it relates to the oil industry for the past 33 years.

Thursday, 7 April, 1983 We have previously referred to Saskatchewan and Alberta Legislation. We do so because of the vast experience of some 15 years of legislation and a vastly greater number of wells over a longer period of time. In closing, we would again extend to the government an invitation to invite people kno wledgeable and with expertise from both indus tries to sit down with government to assist in expediting matters pertaining to this legislation. Thank you, Mr. Chairman. MR. CHAIRMAN: Are there any questions for Mr. An drew? Mr. Parasiuk. HON. W. PARASIUK: Mr.

Andrew, in your presentation, you indicate that in both Saskatchewan and Alberta, the Boards are selected from ind ividuals with agricultural experience. Is it true that in neither instance is this specified in the Act, however? it's the way in which the Boards are appointed; it's a matter of the government making judicious judgments in appointing members to the Board. But it is not specifically called for in the legislation in both Saskatchewan and Alberta, that members must be appointed exclusively from the agricultural community. MR. B. ANDRE W: I'm sorry, Mr. Chairman. I didn't quite catch all the question.

My apologies to Mr. Parasiuk. HON. W. PARASIUK: In your report , in your presentation to us you ind icate that in both Saskatchewan and Alberta, people are selected with agricultural experience, but is that called for in the Act itself or is it a matter of the government exercising judgment in appointing individuals to the Board. MR. B. ANDRE W: fl!lr. Parasiuk, if I might, I would ask Mr. Kohaly to comment on that because he is familiar with that area. I am advised, Mr. Parasiuk, that it's just practice. Thank you. MR. CHAIRMAN: Are there any further questions? Mr. Graham. MR. H. GRAHAM: Mr.

Chairman, I notice you circulated a paper here, your response to the Surface Rights Association. We have not had the opportunity of seeing this until it was put in front of me about five minutes ago. I was hoping that you would go through that response item- by-item, so that mem bers of the committee would have the opportunity - maybe some of them did receive it previously, but I just received mine now. I would suggest that that would probably be a better way to proceed than to just throw it out for blanket questioning. MR. CHAIRMAN: Was it your intention, Mr.

Andrew, that the other people in your delegation would speak on the individual items? MR. B. ANDREW: Mr. Chairman, it was our intention to go through the Act, dealing with items from beginning to end, not each and every one, but in general each

section of the Act, yes. 12 MR. H. GRAHAM: I just asked that the committee be given the opportunity to hear the benefit of their wisdom with that. I would ask them if they would care to proceed in that manner. Is that agreeable with the committee? MR. CHAIRMAN: Any further questions for Mr. Andrew then, before proceeding on a . . . MR. H. GRAHAM: I was wondering if Mr. Andrew would like to do that, or whether he would prefer maybe to have the various members that he had chosen take the items that they were most familiar with. MR. B. ANDRE W: Mr.

Chairman, as I mentioned in my address, we have eight or nine members to address certain sections of the Act, the Board abandonment, that type of thing. Now if it is your wish, we can follow that procedure or possibly, in consultation with our people, we could go through the brief that we have submitted depending on what you people so choose. MR. CHAIRMAN: I think that it sounds like what the plans for the delegation are closely parallel the suggestions of Mr. Graham. I think, ultimately, we have to let the presentation methods up to the people who plan to make those presentations. MR. H.

GRAHAM: You go ahead, whatever way you want to do it. MR. B. ANDRE W: Mr. Chairman, if I could beg your indulgence for a moment, then I will consult with our people for a second. Mr. Chairman, we would commence with the bill and I'll just mention briefly under "Definitions" and then into "Purposes" and "Board." We were just going to step through it that way when you have a speaker for each one of those items, if that's acceptable. MR. CHAIRMAN: Fine. MR. B. ANDREW: With regards to

Definitions, I would call on Mr. Kohaly. Thank you. MR. CHAIRMAN: Could you state your name for the record, please? MR. R. KOHALY: My name is Robert Kohaly and I appreciate the opportunity to be here, Mr. Chairman, and Members of the Legislature. I have had previous opportunities in other jurisdictions to appear in front of the committees of this nature, particularly the Saskatchewan legislation in 1968 which is the forerunner of,3pecialized, comprehensive surface legislation in the entire cou ntry.

Alberta followed that in 1972 and Manitoba is following it, by and large, to produce comprehensive legislation this year. There have been relatively few amendments in the original Saskatchewan Act and even less amendments in the Alberta Act, which speaks well for the legislation that you are, by and large, following with the aid and assistance of some additional up-to-date points raised by Mr. Nugent. Mr. Nugent fol lowed the Friesen Commission of Saskatchewan by many years, but did the same kind of a job. He did an excellent job. This

Thursday, 7 April, 1983 Legislature, in presenting Bill No. 5, has done an excellent job. I might say, there are one or two areas, in which I certainly join with my friends in the Land masters Association, would require some changes and I welcome the opportunity to make those in detail to you, and specifically. I think you will assist your owners and assist the oil industry greatly if you would, as a committee, seriously consider these changes.

I must say, having considerable to do with legislation both as a legislator, from which I withdrew with the almost unanimous approval of my constituency many years ago, and as a lawyer attempting to interpret my own legislation and as a lawyer dealing with farmers almost exclusively for 30 years, that these are perplexing problems. There is no easy answer to it. The legislation must, of course, be technical because it must be interpreted by courts who indeed insist on technicalities and lawyers who seem to perpetuate them.

But it is a horrendous problem, ladies and gentlemen, for landowners who, first of all, don't have the legislation in their home. it's not normal reading, any legislation. lt becomes a greater problem when they know little or nothing of the implications that will occur when they become host to an industry that has an entirely different approach to matters and an entirely different attitude towards the use of land. I think Manitoba farmers join all farmers in Western Canada, held in high regard throughout the world, and properly so, as very competent, hard-working dedicated people.

But having said that, they are preoccupied with the quality of their farming and the quality of their land in the hopes that they can pass on even a better way of life, not just a business, if they were in it for a business they would soon get out of it because it is a losing cause. They have no control over any part of their operation. Somebody else sets the price and we've all been reading about that.

Senator Argue has just set the price for their revenue and someone else sets the cost and along comes another industry, very viable, very essential, and says, I want to become a partner with you and I want some of your property. They come with an entirely different approach to the use of land and this is where the disputes occur, right from the very beginning.

They present a four-page, foolscap page, closely printed document which has to scare the best of Philadelphia lawyers, never mind country lawyers which we have in this part of the world where oil is prevalent. it's just a horror story, ladies and gentlemen, to read the document.

I would just love to pass it around, you're the legislators, you produce this type of thing but you'd have a great deal of difficulty finding out what it means, never mind, an elderly farmer and his wife sitting around the kitchen table when the chap just comes in from Calgary, always has to get right back, there is absolutely no time whatsoever to deal with these matters let alone the intricacies of them. They are totally beyond und erstan ding of the average common -sense competent - Mr.

Vanbeselaere, obviously should have impressed you as a very knowledgeable, dedicated, sin.; ere man tackling a subject but he couldn't answer your techn ical questions although he has actual experience with this. We find that the first oil well and the first landman is welcomed. The way it was said before, I'm going to 13 be rich overnight. The second one is when they stop cold in their tracks. They have no w had some experience, they still haven't read the four-page, foolscap page, of legal ni ceties but they know somewhere there is a bad hitch in here from their very experience on the field.

This is where farmers get their experience and their knowledge and their approach, when they actually are working around these installations and live with them. Some of the problems and again, I repeat, that I want my address to you will be specific and will be short. I will be glad to support them, I will tell you where the support evidence is, I have it here, I'm glad to show it to you and read it or present it to you, pass it around. Our approach and the approach of the association was that we should start with Clause 1 and go right through it, that's how we are approaching it, so in the course of time, Mr.

Graham, we will have touched every one of the items that are on the initial response that was sent in sometime ago. The first one that I would like you to look at in your bill, if you will, in

definitions,

Section 1, if you will move down to power line. You have a problem here, ladies and gentlemen, I have a suspicion that the draftsman was following in your Act not only the Saskatchewan-Alberta and the Nugent recommendations and together with those references in The Mines Act, but he was also aware of, as yet, unpu blished amendments to the Saskatchewan Act which is the model Act, the one that people are following - not because Saskatchewan is better but because it was in place first. But they overlooked one

section in your power line definition. There is, indeed, an amendment to provide for compensation for power lines and to bring power poles into a surface right. Yes, there is. But there were two amendments. The definition has to be amended by removing the phrase, "by an operator". or it will have absolutely no meaning. As I would suspect and you would know better, the vast majority of power poles installed in the Province of Manitoba are installed by Hydro as they are by SPC in Saskatchewan and by various people in the Province of Alberta. Now, "by an operator", operator is defined as the oil company in your

definitions and you surely couldn't mean that because the operators never install, in my experience, a power line. They often requisition power lines to Hydro and SPC and the Alberta utility. This one says, "is constructed or is to be constructed by an operator" and there's no way. The remedy is very simple, it's a remedy that is in the Saskatchewan amendments yet unpublished although it is on the Order Paper in Saskatchewan to remove the phrase "by an operator". You have some serious problems in service line. I take note that you include a service line with a flow line and I'm not going to trouble you with technicalities but you will have some. You have a Pipeline Act being

Chapter P70. lt addresses itself, including a definition of a pipeline which is extremely similar to your service line but the results are quite different and

Section 4 of your Bill, which is the conflict

section with other legislation, does not help. You will have to take note and should direct your draftsmen and legislative law clerks, whoever is preparing this to take a good long look at your Pipeline Act,

Chapter P70, especially

Section 16 and you will find that there is a conflict,

Thursday, 7 April, 1983 and you will not be resolving disputes because they will either put the flowline service lines in under The Pipelines Act, which is quite permissible, or they will put it in here and the Board, then, will not have any idea. Their jurisdiction does not include The Pipelines Act. You will have a big problem. I would commend to you that I'm sure that what you are attempting to do and doing it rather successfully is to remove disputes and to minimize misinterpretations and misunderstandings and if you don't take a look at that one you are going to have a lot of trouble.

Service lines, flow lines, gathering lines, not pipelines, that is the major systems, are very prevalent in the industry. There are more prevalent than well sites. So it is not a small matter, it is a very significant matter and you should watch that. Again, my purpose, ladies and gentlemen, is to draw to your attention problems which you will have if you do not address yourself to it and you will simply be faced with amendments in the future. Under Surface Rights you have a modest difficulty with that and the

Section (ii), the right to establish, ins tall, or operate any machiner y equipm ent or apparatus, this is much too wide. lt is a paragraph similar in nature to Saskatchewan's 19 81 amendment so we have had almost two years now experience that Saskatchewan made a mistake in making it so wide. lt should be defined much more narrowly and it should be done by purposes rather than by details.

You have done this very well in the drilling, completion or producing operation, that is really all it requires, leave it to the Board. 1 have with me, if you care to see it, a three-page foolscap close print of all of the installations, equipment and machinery which is installed on well sites for the purpose of either exploring for or drilling. lt is much too long a list; it's just startling how much can go on to an installation. Now you don't see it all on every one, but you do s� all of it, sooner or later, on one installation or another depending upon the technological requirements.

I wish you would take a look at your definition of "well". Remember that "well" appears time after time after time throughout the legislation and qui te appropriately you've defined these words so that they will be - but remember the Board has to use your definition. I don't know why Bill 5 contains a clear statement of principle that this Surface Rights Act shall be a comprehensive, all-embracing Act covering surface rights.

In Sections 4 and 5, you say, if there's a conflict in documents as against these provisions, in one Act against another, except for where The Mines Act is concerned or any other Act that the Lieutenant­ Governor -in-Council designa tes, that this will be comprehensive. Right off the bat, in the most critical one of all, the well site, a well, you immediately revert to The Mines Act. I hope you intend to amend The Mines Act in its definition. Your M 160, 1(40) is exactly what you're talking about here, a well. lt means a well defined in The Mines Act.

The Mines Act defines a well, quite appropriately for The Mines Act, in the widest possible petroleum sense, nothing whatsoever to do with the surface sense in which it should be used. You'll find that if you are going to put all of this, that is, the definition from The Mines 14 Act of a well, in this surface Act, then you have to address yourself to an awful lot more matters of technical nature to cover a well. You see, The Mines Act says that a well is not only for the purpose of drilling, boring and obtaining gas and oil. That's fine, but it goes on then to a second, third and fourth purpose.

I don't need to read this to you, I'm sure, because your legislation is available to you. lt goes on then to talk about the injector systems and the secondary recovery systems, all very intricate and having nothing whatsoever really to do with the surface. lt goes on and deals with disposing of, which is the disposal system, nothing whatsoever to do with the surface other than the original well site is there and all those details, then for storage of gas, which is certainly appropriate in The Mines Act for a well, absolutely. But it has no appropriation here.

The solution, of course, with apologies, is to accept the definition for the purposes of The Surface Act contained in the Saskatchewan Act which is 2(

n) and similar language is in the Alberta Act. I apologize because I have to refer to the Alberta and Saskatchewan Acts but they have been in place for a long time and they have addressed themselves to the problem and they have solved the disputes. There are literally tens of thousands of wells being drilled in these provinces as against a relative modest drilling that there is, and therefore installations, that you have in Manitoba so far. Let us hope you will have more, but if you have more then you want to have this legislation to handle more.

I would strongly recommend that this committee ask your Legislative Counsel to review the definition of well site. The manner in which the association, so as to involve as many of the owners as possible, at approaching this subject has been that we will take turns back and forth. I would be quite happy to answer any questions, Mr. Chairman. I will be sitting down and standing up again dealing with it from page to page all the way through every section. My duty will be to draw to your attention any technical problems and to try to suggest a specific remedy for you.

But the others will be talking in general principles because they have that type of knowledge. They are all farmers. Unfortunately I have never been able to get enough money together as a lawyer to be able to buy a farm so that I would have those privileges. Mr. Chairman, thank you. I am not closing my comments. I am going to try to be of assistance. I will try to be more brief from now on, but I wanted to get started and tell you what my role is in the sum and total of eight or nine people on behalf of the Manitoba Surface Association and I'll try to stay to that role.

But I would be glad to answer questions if there's anything on this section. MR. CHAIRMAN: Are there any questions for Mr. Kohaly at this time? Mr. Graham. MR. H. GRAHAM: Thank you, Mr. Chairman. So far we're dealing just with

definitions, Mr. Kohaly, and I take a look further on in the Act in

Section 56, and the

section says, "The operator shall remove, preserve and repl ace all topsoil . . . " Could you tell me what topsoil is? Apparently there isn't a definition in here.

Thursday, 7 April, 1983 MR. R. KOHALY: it's not defined by any of the Acts. "Topsoil" means the street language for topsoil and that is simply the top growing portion and I don't think it creates a problem. Topsoil seems to be well understood by both industries as to what it is. Now there is a problem with

Section 56, of course, if you have a producing well. What value is there in having the topsoil piled for 25 years, multiplied by a further 25 years? By that time the weeds have taken over, it's a great problem; the wind has blown it from here to somebody else's quarter-section. This is unique; you're on the cutting edge here and you're trying to establish something new but nobody else has been able to handle this.

On a dry well there's no problem and it's a great idea on a dry well, a marvellous idea, but it doesn't work for 25 years, 50 years, 75 years, and oil wells in Alberta have been in existence for over 50 years. MR. CHAIRMAN: Any further questions? Seeing none, we'll go back to Mr. And rew. MR. B. ANDRE W: Mr. Chairman, if it meets with your approval, I will introduce each one of the speakers as their turn arrives. Our next area that we wish to deal with is "Purposes," and Mr. Adam Turbak will deal with that. MR. A. TURBAK: My name is Mr. Adam Turbak, Mr. Chairman, ladies and gentlemen.

I farm 10 quarters in the Kirkella district. I took the farm over from my father in 1966 and oil wells were drilled there in 1957. There's a tank battery and six wells still producing there.

The purpose of this Act is to spell out in detail the procedure for acquiring and utilizing surface rights; to provide for the payment of equitable compensation for acquisition and utilization of surface rights; to provide for the maintenance and preservation and restoration of surface rights; to provide for the resolution of disputes between operators, occupants and owners arising out of entry, use or restoration of the surface of the land. This is a separate Act dealing strictly with problems arising from the operation of an oil company and the landowners on a surface.

Therefore all reference to The Mines Act should be removed. The drilling, producing and operating of the oil well is looked after by The Mines Act. I feel that an excellent job has been done on putting the Act together and we will support it. lt will work good as long as the Act stays consistent and deals only with the problems that arise from the introduction of the oil industry on agriculture. Thank you. MR. CHAIRMAN: Are there any questions for Mr. Turbak? Seeing none, Mr. And rew. MR. B. ANDRE W: Mr. Chairman, our next item is dealing with the Board under the Act and I would ask Mr.

Kohaly to speak on the item. MR. CHAIRMAN: Mr. Kohaly. MR. R. KOHALY: My jumping up and down will not be as prevalent later on here.

Part 11 of your proposed 15 legislation which deals with the most critical element in the entire bill, and that is, the establishment of the Board. There is such a Board in both Alberta and Saskatchewan; they are known simil arly. Al berta decided to separate many years ago their legislation and to have matters of reclamation, as they call it - we would call it abandonment and restoration, as you do - they decided to have two Boards.

That works very well, it permits having people on the one Board, Reclamation Board, with different qualifications, abilities and approaches to that of Righ ts of Entry and Compensation which really stand by themselves. So it's are the only three areas there are. The Surface Rights Board in Saskatchewan, of course, has abandonment and restoration procedures and they handle it all, doing very well, but it does create some problem in the appointments of people that are competent and capable in the two directions because they really are quite different.

The number of people that you have on the Board are quite realistic. Both Saskatchewan and Alberta have found that it's necessary to have more people than three, I can assure you. I join with those who said earlier that, initially, there will be a lot of work for the Board. That is quite correct, you have an enormous backlog having regard to a modest number of well sites, but the matters have not been addressed since as far back, really, as 1953.

With your enlightened approach, similar in nature to Saskatchewan some years ago, of reviewing all installations so that there wouldn't be two types of citizen in your community; ones who came under the new enlightened legislation and the old ones who had been neglected for so many years. So you will have a very large number for the first, probably, two or three years. You may be able, thereafter, to get along with what you have termed part-time members. They are simply called up when they are needed for various parts of the province.

In Alberta, because of the numerous installations there, many many times more than you have, they have the Board divided, the north half and the south and, in effect, two Boards, it's that busy. But, compared to the number of wells you spud in, 200, as against the number they spud in, somewhere's in an order of 5,000 in recent years - there has been a little drop in the activity and an upgrade in Manitoba, so they're not really comparable this last little while - they need two Boards and they keep both Boards busy.

If you address yourself to these short time frames, and there's some measure of reason to that, then of course you need the members sitting on a regular basis to get them out that quickly. By that quickly, you are certainly talking about 30 to 45 days unless you are going to hold up either or both industries. So you do need the people and you will find that three is a very modest num ber.

You will minimize your problems if you will follow the Minister's presentation in your House, as I read the report, that the Board was intended to be established at Virden which is right in the area, therefore, the travel time for all parties, including Board members, is going to be minimized. Therefore, they should be able to handle more and you would get away with fewer members, even part-time members, because your oil at the moment is concentrated in just the west side of your province and the south portion at that.

Thursday, 7 April, 1983 The question of qualification of the Board members, your

Section 6(2), I'm sure that you recognize that there is a vast difference of opinion between the members of the Sur face Associa tion, the farmers, and the draftsmen of the current bill. I can understand, as a lawyer and sometimes legislator, the attempt to be fair and to create an arbitration Board that would have experts on all sides of the issue. I think what the draftsmen overlooked - and I draw to your attention that the qualifications are not spelled out in any other of the legislations, but there was a request for it.

Following discussions in Saskatchewan, and in Alberta, that paragraph was removed and all parties decided to rely on the good judgment of the Minister making the appoint ments. We are not unmi ndful how appointments are made and there is nothing wrong with the procedures that were suggested by members that the association migh t make some recommendations, not that they would be appointed necessarily, but might be considered.

Certainly if you're going to have qualified people that's where you will find qualified people, in the associ ations, be it Landmasters, operator or farmer industry, are people that know who they are. This is a good approach.

The problem with it is, of course, that if the Surface Rights Board is going to deal only with the question of Right of Entry and compensation and reclamation - and that is what you are dealing with; your purposes say so - then there is no need in any way, shape or form for any expertise of any description from any other industry, except the people whose rights are being dealt with and those rights are only farm rights; they are no one else at all. This sensible approach that you have was tried in both of the other two provinces with disastrous effect.

The disaster was that the owners would not go to the Board at all, being very suspicious of the attitudes that they would receive, and their suspicions were fulfilled when they got there_. They were faced with technical discussions from the representative of the petroleum industry as to, do you understand the need and the crate cost and the rig is just coming over the hill now and you're holding this thing up. You should capitulate and get out of there. So the farmer wouldn't come back.

The farmer would try to tell them about his great problems of getting a 34-foot cultivator through a 20-foot hole that was left between the well site selected and the adjacent slough or the adjacent woodlot, or whatever it was. Of course they said, well, that's your problem, was the answer from the petroleum industry representative on the Board. Well, it's not his problem and he couldn't do anything about it, so they quit going. In Saskatchewan, the situation became so bad that the entire Board was just simply not reappointed, that was all and they had to do away with it. lt just wouldn't work.

Now the operators will go. The only thing the operator wants out of this whole Board is his Right of Entry. Once he's got his Right of Entry, the second point is of no concern to him at all as to when the compensation will be set and/or, if ever, paid. He won't bring a second application and there has never been one brought by an operator in either province, to my knowledge, to establish the compensation. Well, that's quite common sense and understandable. The guy that's got the 16 compensation coming to him is the only man that is going to activate the Board on that subject.

So Saskatchewan experience, followed by Alberta in practice, it works well, settles disputes, is that they shall be people who are familiar with the agricultural industry because that's the only problems that are going to be in front of them. There's no question about your Mines Board which does deal with the technicalities of petroleum, producing and the spacings, the methods and all those things. Yes, they certainly should have petroleum people in. There would be no reason why there should be a farmer on it or a lawyer or anybody else. lt should be technical people because it is a technical subject.

But this has nothing to do with any - you can look from now till kingdom come in this bill and there's nothing in there to deal with the technicalities of the petroleum indu stry, onl y the technicalities of the farming industry. Therefore, it should only be farmers. These points were made by numerous farmers to Mr. Nugent. Again, I commend him for his report. I commend to you to look on his Page 27 under his recommendations 2.02. it's short. This is what he says: "Personnel of the Board.

That the Surface Right Board consists of persons appointed by Lieutenant­ Governor-i n-council selected for their experience in or familiarity with the agricultural industry." Really, the man did a study. He did a good job. He was on the job night and day, and he listened to a lot of people and he went out and looked and he studied this matter and he heard the member say what the problems were. This was his considered decision and I would encourage you for that and the other reasons, to accept Mr. Nugent. One of the briefs that Mr.

Nugent received was from the largest, as I understand it, operator in the area, Chevron, I believe they are represented here. In their brief on this su bject to Mr. Nugent, on Page 7, Independent Board of Arbritration, they addressed themselves to the subject too. The largest operator in your Manitoba field, this is what they said in total. There is no more but this: "Our experience indicates that the major requirement for a Board memb er is knowledge of the farming industry and impartiality." So, you have the surface owners saying to you, agriculturally min ded and knowledgeable people. Period.

You have Nugent saying to you, members shall be those fam ilia r with agricultur e. Period. And impartiality. Finally, Chevron, the largest operator over the years in your province saying, familiarity with agriculture. Period. I would commend to you if you wish to solve your problems, that you will have to address yourself to some changes here.

You're probably better off to follow the example of the other provinces with their longer experience, greater number of wells, simply remove 6(2) and leave it to the tender mercies of the Minister to indeed follow what he has already started, an excellent job here and to establish the qualifications through the appointment and the proof of the pudding will be indeed in the eating and it won't take long to find out. On

Section 6(6), if you establish the Board at Virden, which is common sense and sup ported by the Minister, - (Interjection) - having had a modest experience with legislators, Mr. Chairman, I really shouldn't lead

TABLE #1 AREA OF TIME TO WORK WORKING WIDrH AVE. OPERATING AVE. FIELD HEADLAND HEADLAND TURNING TIME TOTAL TIME FIELD OPERATION OF IMPLEMENT (f

t) SPEED (M .P.H. ) EFFICIENCY % ACRES HRS. MIN. HRS. MINS. HRS. MIN. 1. Cult ivator 40 5-5 So 6. 56 .34 20.4 .62 37.2 .9 6 57 .6 (Diagonal ) 2. Harrow (per pendicular) So 5-5 So 9.0 4 .2 4 14.4 .2 1 12.6 .4 5 27.0 3. Cult ivator 40 5-5 So 6.5 6 .3 4 20.4 .6 2 3'2.2 .9 6 57 .6 (d iagonal ) 4. See ding 40 5-5 So 7.0 S -37 22.2 .4 2 25.2 .7 9 47.4 (per pendicular) 5. Harrow So 5-5 So 9.0 4 .2 4 14.4 .4 1 24.6 .6 5 �9.0 (d iagonal ) 6. Harrow So 5-5 So 9.0 4 .2 4 14.4 .4 1 24.6 .6 5 39.0 (d iagonal) 7. Spraying 70 5 75 7-7 S .2 7 16.2 .2 3 13.S . so 30.0 (p erpendicular) S.

Swathing 24 5-5 So 5.14 .4 5 27.0 .4 2 25.2 .S 7 52.2 (per pendicular) 9. Combining 24 5-5 75 5.14 .4 S 2S.S .4 2 25.2 .9 0 54.0 (Perpendicular) 10. Cultivation 40 5-5 80";6 6.5 6 .34 20.4 .6 2 }7.2 .9 6 57.6 (d iagonal) 11 . Fertilize with 40 .2.:.2_ SO"tfo 6. 56 .34 20.4 .6 2 37.2 .9 6 57 .6 air seeded Average all 50. 73 5-45 79 .0 9 7.14 - -- -- Operatio ns TOTAL TIME 3. 65 219 s .o 300 S.6 5Hrs . 519

FIGURE 1 A PERPENDIUJLAR PATI'ERN OF \UUCING AROOND A WElL SITE AND AN ACU' .SS ROJ\D 7 ,..-- �.-,::y��������-.f.�'<r�� "''"�-c.����--"'·;.· ; . � ;�· �; ··�·��:�·-� . · · .· · · · �. ·. r· -� ·: �-�-:.:- ...:4 ·� � � · ' ( ·· fi ""'•'- �· ·· ........ . , .... -� r.·· I I . - •' .• '"'· .. . L ":\\ -.·-.·�·�· -��_::-:_·, � '•· r., . • ... _. .. �., . ·· ,, )' 400 ' r·· ----1--P' , :1 ' ) '\ _' �� ·-�; S< Well Site lease . •'-': ) � ) (I .. .�� . -, ... . :"�" ·- � (_ �-: _< ' 1 Pll ' •10, .... 1 ...._. � .-.� s-�:� �'-:�-:. �:;j(0 ( . "\<:..: '� I -;; �· �;"':··,:,. ( -r· ·. ·: ...... 1-"'-: . . ....

LEGEND : _., Headland , wide 2 widths of the inpl ement w Wi dth of the irrplement ---+ Pattern of field operat i<n .) Area of Headland (ac res ) = (pe rinE ter of the access road and the well site lease ( ft . ) X width of the hea dland ( ft . ) + correctioo factor* ) ,. A3560 1'iioo to \\brk t he Head land (hours) = (area of he arlland (acres) X 8.2 5) -!-(width of inplarent (ft. ) X speed (m. p.h . ) X field effi ciency X 0. 9 ) (re ductioo in field effie ifmcy of l<Y;t) '1\uning

Titre (hrs. ) While working the land ruJ:joining the le ase : NmtJer of turns = (l ength of the access road (f t. ) +w idth of the well site lease ( ft . ) ) -:- width of the 1.rrplenent in use Distance tra ve lled (mil,_� = number of turns X width of headl and X 2 + 5280 Turning tinE (hrs. ) = distance travell ed (miles ) .;.(working speed (nph ) X 0.5) * correction factor for width of hea dland of lw = 2Yfl. correct ion factor for width of hea dland of 2w = 8Yf2 correction factor for width of headland of 3w = 1� correction factor for width of hea dland of 4w = 32vJ2 correction factor for width of headl and of 5w = 5Qw2 �

\'! -+ FIGURE 2 A DIAOONAL ( 45°) PA'ITERN OF \U'..K INJ AlUJND A WELL SITE AND AN ACCESS ROAD JH :H·IJ l: �'le 11 Site lease ...... ..,.. _-_-.·---- -- 40 ' --- - • :ill ffeadla nrl, widn 2 widt hs of the irrplanent Width of' tb.e irrplerrent in use �at tern of fi eld operat ions Area of Hea dland (a cres ) = (per :Uooter of the access road and the well site lease ( ft . ) x width of the head land ( ft . ) + . correct ion factor*) + 43 ,56 0 T:Uoo to Work the Headland (hrs. ) = (a rea of he adland (ac. ) x 8.2 5) + (width of the irrplanent in use ( ft . ) x working speed (rrph) x field effici ency ratio x 0.9) Turning T:iJoo (hrs. ) while working the land adjoining the lease : Number of Turns = (pe rirreter of the access road and the well site le� �e (f t.) +w idth of the implement in use (f t. } ) + 2 Dista nce travelled (miles) = nurnber of turns x ·w idth of the headland x 1.4 x 2 f 5, 280 Turning Tiire (hr s. ) = dist ance travelled (miles } ( \\Urking speed (rrph ) x 0 .5 ) *corre ction fac tor, see Figure 1 I !\) CJt

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Thursday, 7 April, 1983 like that. I should know better. I am just displaying my lack of memory, but it is being rapidly brought back to my attention as I was in the Legislature during the days of Mr. Tommy Douglas, who was very good at those types of things. Under

Section 6(6), the Board shall meet at the call of the presiding member or at the direction of the Minister. There are two or three places where this occurs, or at the direction of the Minister, this is the only Act that contains that phrasing. I will not object to it because I don't understand at what point he would be involved that the Board wasn't involved, and why the Minister would become involved individually.

I think it's just language that goes in common to maybe the legislators of this province. lt appears in three or four places for which - I see nothing out of experience in either legislation or on the ground that would be of any assistance, but I take note it's there, and that the Minister could somehow or other direct the Board to meet when the Board didn't want to or the parties didn't want it and I don't know what it would be for, but not knowing I better cease and desist any further comment.

I would hope that although this is no t in the Saskatchewan Act and not in Alberta, but in practice, the Board members receive admonition that they should recognize the importance of the food industry in the spring, in the fall, in the calving season, when you can hardly get the attention of any farmer who is worth his salt. We can understand why. lt is extremely critical. We're doing a good job of producing food for an awful lot of people in the world and that's important. So is energy, that's right. There's not much sense in having them warm if they're hungry.

In those three critical seasons, someone should ensure that if you wish it would be useful to have in your legislation, but it has not been put in because it wasn't necessary in the other provinces, that there would be no, other than Right of Entry .matters, there would be no other matters the Board would set down during that period of time. There was a period when this was done and a few people had to learn very rapidly that they just won't show up. You had nobody there. You simply have to adjourn and you are very embarrassed.

So it could be useful if you could find a way, except for the Right of Entry to provide there would be no hearings during the calving, seeding, or harvesting season and we all know what that season is.

Section 6(11 ), Mr. Chairman, would be useful. The principle is great. lt will solve some of the problems that were mentioned and there are times, particularly early in your Board meetings at which you will need extra people, but they should have similar qualifications if you were going to put qualifications in - similar qua lifications to 6(2) or some problem could be anticipated there. That's equally true in 6(12 ). I would like to deal with a delicate one, 7(3). When I pass over these, I have no objections to them.

I think they are good and I might tell you that you are on the leading edge of surface legislation in a number of places. You are not following Alberta and Saskatchewan at all. You are stepping out and you are doing an excellent job of it and you are to be commanded, and I am acquainted with the fact that some of your ideas are now being adopted and talked about by legislators in the other two provinces. 17 You elect to face this question of evidence under oath and you do so in the manner common to legislators and lawyers and courts, th'lt you become preoccupied with the oath. lt gets in the road. lt is done.

As you know, it is not referred to in either of the Saskatchewan or Alberta Acts. This is unique that you put it in there and require it under oath. What is done is that, as soon as you put them under oath, it's not a question of getting truth or lies. lt is putting them under a custom or a feeling. That's really what happens. A liar under oath can be just as much a liar, as a liar not under oath and those of you who practise law and there must be some of you, have often wondered just what value, but it is that, as Mr.

Downey says, sort of a halo that gets over you and it does get the truth out. lt does it, because of custom and feeling and formality and things like that. But you are trying to set up a Board where you are minimizing all of these things, quite properly so, and there is a great repartee that goes back and forth between Board members, operators, owner, and you really don't have evidence given in the same sense as at court in a chronological order.

That's not how it works best, how it works best in Al berta or Saskatchewan or in Manitoba. lt works best when there is simply three, four people around a table and they're exchanging views and, "Yes, Tom, no Bill", and things like that. Very difficult to operate under oath under those circumstances.

What you may, what you certainly can do, the Board is not bound by the technical rules of evidence, which is good, and that's found in Alberta and Saskatchewan, of course, that they do put them under oath when you get a critical diametrically opposite statement of facts, and then the chairman will say, hold it, you're saying that he did this and he says that he didn't do it.

Now I've got to get it down on the transcript and then all this informality stops for a few minutes, and the owner stands up and he gives his statement of fact, and the operator gives a statement of fact that is in contest. it's rather impressive that each of them change their position just slightly under oath and the slightness is just sufficient to coincide it. And now, there isn't a problem. But you would have had a problem.

And I would commend to you, that what you say if you must here, is that the chairman shall have authority when necessary to place any or all witnesses under oath for all or any part of their testimony. If you put them under oath notwithstanding your 7(2) - with the oath come some other rules of law; such as, under oath you can't give an opinion, that's not a statement of fact, it's an opinion, and you can't give opinion evidence according to the self-same rules of oath, unless you are established as an expert and there ares certain expertise rules and regulations.

So when you get the hide you also get the tail and you've got to have something to do with it. You've got a problem here if you continue this. There is nothing wrong with your principle that everybody shall tell the truth and we're all for it and an oath does help, but only if there is a conflict and only on questions of fact. When the owner comes in he has to really talk about opinion, and the opinion of himself, and his father before him, and his neighbour, and everybody else, as to what the problems will be and how they are solved and what the cost is going to be and the compensation.

Thursday, 7 April, 1983 Under oath it would be extremely difficult. You attract lawyers like flies to this kind of a thing - you don't help yourself at all, you create some problems. I commend to you to reconsider that one and to make some changes. it's a delicate one to touch because it looks like you're saying we don't want farmers under oath because they want to tell lies. A farmer isn't nearly as good at lie telling as some other members of the citizenry and certain professions shall not be mentioned by me. Mr. Chairman, if I might refer you on this subject to your

Section 9. There's nothing wrong with the form of your idea. lt is followed by the other two provinces and it says, such information as may be prescribed, you will find the form is really set out on your

Section 23(2) further on. Some care has to be taken here and I draw your attention to Commissioner Nugent's report on the same subject on Page 28,

Section 2.04.02, that the offers and counter-offers ought not to be included in the form of notice. Your current form of notice on 23(2) would permit this. lt certainly doesn't dictate it, but it would permit it. There is a good reason to leave those - if you want most of your settlements to be made in the field, you'd better not have them hampered, by knowing in advance that if I make an offer, it's going to be mentioned to the Board and neither one will make an offer, so the two of them stand mute, all scared stiff of making any effort towards negotiating and regrettably, it just simply results in that.

Nothing happens and nobody will make an offer. · More than 90 percent of all installations are taken without the assistance of the Board in either Saskatchewan or Alberta; therefore, more than 90 percent of them are settled by negotiations and offers are given back and forth. Some of them are ridiculously high and others ridiculously low, but that doesn't startle anybody in our economy, that's what happens in every case. I always ask for the highest price because then I can work down. He always offers the lowest because then he can work up.

This doesn't startle anybody, this is the way we do business in all fields of activity. But if those offers have to go in front of the Board, then the Board has some unnecessary targets and they should not be referred to. Your solution, of course, is to make sure that when your notice is prescribed by the Board, or made up by your staff, it does not include that, and so you'll have to watch 23(2) when you do it. it's caused enormous problems in the other two jurisdictions and it'll certainly do it here. Nobody will give an offer at all. Now,

Section 12(1) , and once again, the last phrase "or by the Minister". The rest of the general powers, excellent. They're paraphrasing that which is found in the other two jurisdictions. lt works well, a great idea, "or by the Minister", I've made my comments. I don't understand why and it is not in either of the other two and I have never heard of a case where the Minister ought to have interfered over and above the decision of the Board. You might like to take a look at it. The 14 - no big point.

There's some fear, particularly if the qualifications consist of people that are not agriculturally familiar necessarily, b ut are oil-ind ustry oriented, that the oil industry member would, of course be this one member and there would be a fear.

I'm taking the most ridiculous possibilities here and I'm 18 sure it wouldn't occur that way, but it could, in the agony of trying to get members out, looking into situations, You will get a farmer just absolutely drying up because he knows who this fellow is, so if you clean the qualifications up, you have no problem with this and it's done in both of the other jurisdictions and it works out very well. But if you leave in the qualifications and create an antagonist Board, Arbitration Board, then, of course, you've got a real problem with this one.

Section 9(2) permits this type of thing in Saskatchewan, provided all parties consent. So if you leave this wide qualification in, then you might amend 14 by saying, "providing all parties consent". Now you haven't a problem at all. That is the whole of our comments on detail on the Board, Mr. Chairman. There might be some who wish to ask questions on the Board. Again, I'm quite willing to answer any of them from one end to the other, but we'd appreciate it being confined to the Board as we go through the whole Act. MR. CHAIRMAN: Mr. Graham. MR. H. GRAHAM: Thank you, Mr. Chairman. I would like to refer Mr. Kohaly to

Section 11 dealing with deposits with the Board. lt says: "In accordance with the Rules of the Board made under

Section 7."

Section 7 says, "the Board is not bound by the rules of technical evidence," do they mean

Part VII, which deals with appeals? Is that probably a misprint there? MR. R. KOHALY: it's a misprint, sir. There are a number of those, we didn't bother drawing that. We knew your Legislative Counsel would catch it. MR. H. GRAHAM: The other thing that I just raise, because I know that Mr. Kohaly is a lawyer, in your business quite often you keep large sums of money on deposit at times under pretty strict rules; should those rules not apply to the Board here, too? MR. R. KOHALY: Well sums of money in this day and age are not really that large, Mr.

Graham, unless you think of $7,000 and $8,000 times 10 or 20 as large. I have seen no problem with this, Sir, none whatsoever. You have some normal accounting procedures, I'm sure, in place here that would be applicable to this Board, as to all Boards who handle money. I would anticipate that's in place. MR. CHAIRMAN: This seems like an appropriate time to interrupt. lt's 12 :30, the usual hour of adjournment. What is the will of the committee? Mr. Graham. MR. H. GRAHAM: Before the committee rises, can the Chair give any indication of when this committee will meet again? MR.

CHAIRMAN: Yes, it would not be committee rise, I would merely be leaving the Chair until 8:00 o'clock tonight. (Agreed) I might note that people who are waiting to give their presentations, we do hope to finish them all tonight. lt may be a late session but we'll try to complete them after 8:00 o'clock.

Thursday, 7 April, 1983 WRITTEN BRIEFS SUBMITTED Canadian Association of Petroleum Landmen Surface Rights Sub-Committee Response to Bill 5, The Surface Rights Act. Opening Remarks, closing remarks and address regarding Surface Rights Board formation proposed in Bill 5, The Surface Rights Act, by Mervin Henkelman to the Honourable W. Parasiuk HARMONY We wish to congratulate your government for the introduction of Bill 5 at a time when surface rights activity is increasing.

Commencing with the Commission of Enquiry into Surface Rights in Manitoba, as well as your dialogue with the agricultural community and our industry in creating an environment for co-operative legislation in Mani toba today, we recognize it is necessary to promote harmoney between the industries of agriculture and petroleum. We attribute a lack of harmony in surface rights today to the period of relative inactivity Manitoba experienced in the 1970's compared to certain other areas of Canada. The past three years, though, in Manitoba, has produced a flurry of exploration and development drilling activity.

Given some consistency in Lessor's Royalty rates, there is optimism in our industry that this trend will provide long-term growth. You have recognized and proposed the two key ingredients we feel are necessary to provide harmony in surface rights. Bill 5 proposes: 1) a new Surface Rights Act and 2) the formation of a Surface Rights Board. SURFACE RIGHTS ACT lt is our experience that a surface rights act, in order to be successful, must accomplish the .following: A. lt must provide a fair formula for determining the compensation to be paid to a landowner in acquiring Right of Entry.

If such a formula is realistic, it will serve as a guideline to industry that will be accepted by landowners and result in settlement of more than 90 percent of all such dealings. In determining this formula, one must always be conscious of the relatively small profit margin available to our industry in developing Manitoba's reserves. The pools found to date in Manitoba are shallow sands of lower pressure that hold small volumes of oil and gas per acre foot when compared to reef developments, and other deeper reserves that have traditionally provided the necessary income for companies to grow in Canada.

One must also take into consider