Oil wells a boon for Manitoba families

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BILL REDEKOP / WINNIPEG FREE PRESS Larry Meggison�s family is sharing the wealth from the 31 oil wells on its property near Goodlands, where the family still holds mineral rights.

GOODLANDS -- What's more important, family or being a millionaire?The Meggison clan made a choice years ago, in case oil was ever found on the farm. They chose family.

Now, they find themselves in the middle of a major new oil discovery in southwestern Manitoba.

"It has been an amazing development. We are very fortunate," said Larry Meggison, who farmed the land where oil has been discovered before his son took over.

Meggison provided a tour in his pickup truck, travelling a gravel road parallel to, and just over a kilometre from, the Canada-U.S. border. From any vantage point, you can see a dozen new oil wells on people's farm fields.

Oil wells have been operating since 1955 in nearby North Dakota, but the activity only began to move north here in a big way in 2008. "It's been a long wait," said Meggison.

Now, the property his grandfather George Meggison first homesteaded in 1904 has 31 oil wells.

But the Meggisons won't become millionaires. That's because of the decision to split mineral rights with family members. Each of 18 family members holds an equal share of the royalties on whatever comes out of the ground.

"My mother (Helen) turns 90 this July, and she's the head of our company," said Larry. She heads Meggison Resources, which comprises her three children and their spouses, and their 11 grown-up children.

"Nobody is getting a big windfall," he said.

Although southwestern Manitoba produces less than one per cent of Canada's total oil production, what makes it so interesting is that people like the Meggisons still hold mineral rights. That's because their land was homesteaded before the Government of Canada took over mineral rights in Western Canada, which it later transferred to the provinces.

So the Meggisons get oil royalties instead of the provincial treasury. With Alberta oilfields, the Crown holds all the rights.

"Many times we thank our grandfather for not selling his mineral rights," said Larry.

Royalties on Manitoba wells tend to be in the 15 per cent range. That's on every barrel of oil that comes out of the ground. Current prices are over $70 a barrel. Royalty cheques are mailed out monthly.

The family doesn't like to talk figures, but admitted the royalties have been a difference-maker in their lives.

One young family can now afford to drive newer, more reliable vehicles, a relief when carting around young children. "It's made a big difference to the kids raising their families," said Nola Meggison, Larry's wife.

Oil production can fluctuate greatly. Some horizontal wells have started out producing 500 barrels a day, but quickly fall to the 100 to 200 level. They may only sustain that level for half a year, then drop again below 100. It's hard to say at what level wells will plateau and how long they will produce. Wells in the Virden area plateaued at about 20-30 barrels a day and many have lasted decades.

So it's hard to estimate what the Meggisons will make in royalties, especially since many of their wells are lower-producing vertical wells.

Even so, it's obvious returns will amount to several million dollars in the first years. They have 31 wells, nine of which are big-producing horizontal wells, with four more horizontal wells to be installed.

Many farmers don't have mineral rights on their land anymore. One such farmer is spurning oil-company advances to put wells on his property. But previous owners, who retained the mineral rights when they sold the land (a common practice), want the oil wells so they can collect royalties. The oil company can lawfully still drill on the property, but has chosen not to so far.

To that farmer, the annoyance of having heavy equipment churn up his fields and have 24-hour access to his property is not worth the surface-rights payments. Without mineral rights, a landholder still receives surface-rights payments -- a first time payment of $7,000 a well, plus about $3,000 a well for every subsequent year.

Others farmers, like brothers Bill and Jim McKinney at nearby Waskada, are rubbing their hands with anticipation. "(The oil wells) are getting close to us. It's getting a little exciting," said Bill.

Up to 80 per cent of the mineral rights in Manitoba's oil patch are privately held, while the Crown owns the rest, according to the Manitoba Petroleum Branch.

More than 400 land owners in Manitoba have at least one oil well on their property.

bill.redekop@freepress.mb.ca

Republished from the Winnipeg Free Press print edition February 16, 2010 A8