Winnipeg Free Press - PRINT EDITION
Mineral rights have RMs rolling in oil-well dough
BIRTLE -- When scores of farmers were driven off the land in the Great Depression of the 1930s, rural municipalities such as the RM of Birtle repossessed their farms for back taxes.
The RMs held onto the land until the economy improved, then put the properties back up for sale.
Except in the case of the RM of Birtle, 20 kilometres south of Russell, where the chief administrator made a very forward-thinking decision. He kept the mineral rights for the RM.
No one gave mineral rights a thought back then. There was no whiff of oil here in the 1930s and '40s. The discovery of oil in Manitoba was still a decade away. In fact, no one suspected anything of value on the land other than the soil.
Flash forward to 2014 and the misfortune of those farmers is paying off in big oil royalties for the RM.
The RM of Birtle has mineral rights on nine quarter-sections in the new Birdtail Field. The first hole produced a oil royalty cheque for $25,000 in just the first month. "We thought we'd died and gone to heaven," said Roger Wilson, the reeve of the RM of Birtle.
Three more wells have since been drilled on RM mineral rights. While the oil volumes have levelled off, the RM is still getting monthly royalty cheques of $20,000 to $30,000 per month, with reasonable expectations more oil wells are coming. Not bad for an RM of just 640 people.
Not all Manitoba RMs held onto mineral rights from repossessed farms, but those that did are reaping rewards today. The RM of Archie, population 325, which borders Saskatchewan to the west, and roughly the Trans-Canada Highway to the south, has mineral rights on 25 quarter-sections. That's in and around Manitoba's newest oil play, the Manson Field. Oil hasn't been discovered on RM holdings yet, but it's only a matter of time. Oil companies have staked all 25 of the RM's parcels.
The granddaddy of them all is the RM of Pipestone, in the Sinclair Field of southwestern Manitoba. Manitoba's largest oilfield was discovered in 2004. Pipestone has mineral rights under 48 quarter-sections of land. It's receiving royalty cheques from about 200 oil wells, for a total of $2 million to $2.5 million per year in oil royalties. "We're blessed with that," said Russ Tycoles, Pipestone's reeve.
Pipestone has about $4 million in its reserves. In fact, the RM mails out $500 royalty cheques once a year to every household.
Manitoba is an anomaly in that about 70 per cent of mineral rights are privately owned, versus less than 50 per cent in Saskatchewan, and a negligible amount in Alberta. That's because the land was homesteaded before the 1890s, when the Government of Canada took over mineral rights in Western Canada, which it later transferred to the provinces.
Royalties aren't the only benefit from the oilpatch. Companies pay taxes of about $700 per year per well. They also pay about $150 per acre for three-year leases to mineral-rights holders on land they want to explore.
When companies build batteries for gathering raw oil and separating out the water, they also make sizable tax payments. The Manson Field has one battery on its tax roll that pays annual taxes of $30,000.
On the other hand, the oil industry does not produce a lot of local jobs, said Wendy Davidson, reeve of the RM of Archie. It's produced only six jobs in Archie, and six in Birtle. In Archie, three people work as well-trackers. Those are well-paying positions where individuals drive around to the wells each day to make sure they're working properly.
Oil companies have been generous to communities, municipalities say. For example, an eight-kilometre stretch of municipal road leading into Birdtail Field in the RM of Birtle, had soft spots and needed repairs. "Tundra (Oil and Gas Ltd.) said fix it and send us the bill," said reeve Wilson. Cha-ching! Tundra covered the $45,000 cost.
Tundra also chipped in $17,500 for renovations at Birtle's ice arena and $10,000 to upgrade its fire truck. Other oil companies have also contributed to local fire departments and community centres.
What an oil discovery brings to a community is a lottery mentality, where people with privately held mineral rights wait, hoping oil companies drill on their land. One of those with mineral rights is Wilson, the Birtle reeve whose main occupation is as cow-calf producer.
Wilson has heard rumours an oil company is supposed to drill a hole on his property this spring. "You can't take rumours to the bank," he said, but he's got his fingers crossed.
NEXT WEEK: Tracking a mineral-rights holder three generations removed
Republished from the Winnipeg Free Press print edition April 26, 2014 A13
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