Canadians May Not Hold Mineral Rights

Written by Posted On Monday, 06 March 2006 16:00

As world demand for natural resources grows, have you wondered whether any of Canada's vast store of geologic riches lies hidden under your real estate? Don't get your hopes up. If oil or mineral deposits were discovered on your property, you might not have the right to exploit the find.

At almost ten million square kilometers, Canada is the second largest country in the world and home-base for 60 percent of the world's mineral exploration and mining companies. Canada leads the world in gold, nickel, copper and an additional 14 of the 60 commodities produced in 115 communities across the country. In 2005, more than C$1 billion was spent by companies in search of new Canadian mineral deposits.

In most cases, mineral rights may be purchased or leased from the Crown. If the Crown holds mineral rights to your real estate, a prospector may stake a claim on these rights. Prospectors have an obligation to negotiate an agreement with the surface rights owner who may set some of the terms and negotiate the amount of royalty, but does not have the right to refuse permission for oil or mineral exploration and extraction.

"Someone might come to your door and say, 'I have mineral rights to your property'," said Geoscientist Mary Ann Mihychuk M.Sc., Director of Regulatory Affairs for the Prospectors and Developers Association of Canada (PDAC) and Manitoba's former Minister of Mines. "Mineral rights are held by the Crown or they can be held privately. In oil country, every neighbour has a pumper and gets a royalty of about $C5,000 for each. There is a small land disturbance, so landowners like having pumpers, but they don't have the oil and oil rights."

Surface, or ground level rights, are part of the bundle of rights held in fee simple ownership and involve the right to use and alter the land's surface. The rights to own subsurface minerals, including oil, are fractional rights that may be severed from title and sold separately. Mineral rights are usually held by the Crown and fall under provincial and territorial jurisdictions. The Ontario Ministry of Natural Resources grants mining leases and crown land leases and manages the database that records changes in rights ownership in that province.

Drilling and excavating are expensive undertakings, however, only an estimated 1 in 100 explorations becomes an economically-viable find. To decide where to spend the money and where to dig, most exploration involves maps, geophysics, satellite remote sensing technologies and geological interpretation.

If your property is targeted for exploration, you'll reap the benefits according to the arrangement you negotiate with the prospectors. Since oil or mineral deposits cross property lines, check with neighbours to learn the worth and terms of existing agreements. Some aboriginal lands are avoided because bands have made it clear they will oppose mineral extraction. Threatening a prolonged legal and public battle may cause exploration teams to back off, but on the whole you don't have the right to say no, so hire experienced legal council to negotiate the best deal possible.

In urban areas, prospecting is limited by noise-pollution bylaws and other legal restrictions, not the least of which is lot size. Surprisingly, however, mining activity is specifically prohibited in only a limited number of areas, mainly environmentally-protected locations. Mining is welcome in most jurisdictions since it's considered the best way to create new wealth.

"Mining creates new wealth with a very small footprint and a small disturbed area and we are getting better at making them clean projects since Canada is very high tech," said Mihychuk. "Mining pays the highest wages and government recaps enormous royalties and income tax. A miner makes C$94,000 and about half goes to government. Also a mining job is long-term, sustainable and high tech. In Canada, it is rare to have an accident and now the goal is to remove [the risk] so we use robotics. Most mining jobs in Canada are aboveground."

Toronto is considered a world-class mining town since it's home to 40 mining companies, 125 exploration companies, 600 service and equipment suppliers, 50 mining analysts, and numerous consulting and engineering firms. It's also currently host to PDAC 's annual international convention which is drawing more than 13,000 mineral exploration and mining professionals, including delegations from more than 35 countries. This Conference proves mining and oil and gas drilling can be lucrative ventures and are increasingly environmentally-friendly undertakings, but you may want to avoid involvement with this aspect of Canadian business when you buy recreational property.

"If want to ensure solitude, there are many parts of Canada that have very little risk of having mineral potential," said Mihychuk. "Go to local geologists and planners at the government and ask, 'Does this property have any probability of minerals?' and they will give high or low probability. You can see if mineral rights were ever claimed or ask a real estate agent if there are any claims."

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