COMPENSATION & LIVELIHOOD RESTORATION PLANS
With development comes the need to compensate the affected public. This is manifested in different ways. The first example relates to linear
or site development where a schedule of payments must be made to compensate a landonwer for land rights and damages incurred in traversing a property with a pipeline, cable or power line. Typically the full
market value of the land is paid, even for an easement providing for pipeline
operations and ingress and egress. Time spent, injurious affection to the remainder and damages to crops and trees must also be included.
Temporary use of additional working room and storage yards is typically paid at
50% of market value for the roject duration for agricultural land. Crop losses
are also paid as incurred, typically for two or more years and for over 10 years
where soils are damaged or specialty crops like orchards removed. Thus, Total Compensation = C1+C2+C3+C4+C5+C6
+ X. This process for compensation to an owner may involve payment for subsurface use and access, as is the case for pipelines, fibre optic cables etc. or for surface use for hydro
lines, tower or well sites and acccess along the RoW or via access roads to
facilities. Compensation is usually made early in the life of a project and fosters solid relations with landowners who typically tend the land where the facilities are installed. Increasingly there is interest in receiving annual rentals for linear facilities, in keeping with the rentals charged to pipeline companies for the occupation of the hydro corridors through Toronto and Montreal
e.g. land value X 50% X prime interest rate. Since this pertains to high value
lands in urban areas, a median industrial land value is typically used on a very
narrow easement of 3 m width with the rental reviewed every five years. Access
along the hydro corridor is included following construction, for occasional
maintenance work, on the narrow working room width (10 to 20 m). Although an
up front lump sum payment is most often arrived at, a rental or periodic payment, as mandated by the National Energy Board Act, fits in with the principle of sustainable development,
as per the hydro example above, since it addresses the needs of future generations to benefit from the installation of facilities, which are virtually perpetual.
This is relevant if a property is handed down, or sold to another party. In this
case the rental becomes a benefit to the new owners, just as compensation is
paid to landowners in Western Canada who derive annual incomes from oil and gas
production when they have surface rights agreements in place for well sites. The
following sets out the compensation framework out west, as provided by Alberta
Agriculture & Forestry:
"The compensation payment considers the following aspects when using the Surface
Rights Board as an arbitrator:
The company must pay the first-year compensation – the total for the above six
considerations – before doing any work on your land. Every year after the first
year, the company pays compensation for the loss of use of the land and adverse
effect (items 4 and 5).
- Entry Fee: The entry fee is equal to
$500 per acre of land granted to the company, to a maximum of $5,000. For
example, if the company needs a 4.25-acre site, the entry fee would be: 4.25
acres x $500 = $2,125. The $5,000 maximum applies when the area is 10 acres
or larger. If the area is less than one acre, then the fee is that fraction
of one acre x $500. The minimum entry fee is $250, paid when the area is
half an acre or less.
- Land Value: Usually the value of the
land leased to the company is determined by the price expected if the land
were sold on the open market by a willing seller to a willing buyer at the
time when the lease was prepared or the Right-of-Entry Order issued. The
value is also based on the highest approved use (agricultural, industrial,
residential) for the land. The per acre value for the well site is
determined by dividing the value of the titled unit by the number of acres
- Initial Nuisance, Inconvenience and
Noise: This payment is for nuisance during the first year of the lease.
For example, in the first year you will likely have to spend time dealing
with the company’s representatives and surveyors, preparing documentation,
negotiating with the company and/or seeking advice from government agencies
or lawyers. There may also be noise and inconvenience related to
construction. The company should pay reasonable compensation to you for
nuisance. Keep a record of all time spent, phone calls made and expenses
- Loss of Use of the Land: The company
pays an annual compensation for your loss of the normal use of the well site
area during the well site’s life. The amount should approximate the value of
the gross annual production reasonably expected from the area. To calculate
the amount, you can use the greater of yield and price averages from the
past five years, or today’s street price. For example, assuming canola
production at 35 bushels per acre on a well site and access road occupying
four acres, the loss would be 4 x 35 = 140 bushels. At $8.50 per bushel, the
total annual loss would be $1,190. Because you are asked to agree on losses
for the next five years (see “Five-year Review” below), consideration should
be given to future prices.
- Adverse Effect: This payment is
related to your inconvenience, nuisance and extra costs on the rest of the
quarter section where the well site is located. For instance, farming around
the well site may require constantly turning corners, which can cause
overlaps, extra strain on machinery, soil compaction, loss of seed and
grain, and extra field and labour costs. Other factors related to adverse
effect can be noise, dust, odour, additional traffic on the land,and
proximity to a residence or farm site.
- Other Relevant Factors: If there are
other considerations specific to your situation, include them when
Five-year Review -
Under the Alberta Surface Rights Act, the annual
compensation must be reviewed every five years during the life of the well site.
The company must give notice to you on or within 30 days after the fourth
anniversary of the date the lease commenced or the Right-of-Entry Order was
made. You do not have a right to an increase; only to a hearing. You need to
have evidence to support an increase."
In Europe, for major pipeline
projects where rural property values are high, a different approach to easement
acquisition is taken. In Greece and Turkey for example a narrow permanent
easement, 8 m wide, inside the standard 38 m wide contruction RoW is acquired
through negotiations or expropriation, with the right of ingress and egress
across the entire parcel included. A safety zone of 20 m or 7.5 m for these
countries respectively, either side of the pipeline, which is installed in the
centre of the easement, is established, so that no residential development
encroaches on the pipeline. Further, in Greece, for 200 m either side of the
pipeline, no more than 45 residential buildings per 1.6 km are permitted.
Compensation for injurious affection to the remainder of the land where
subdivision potential exists is thus made. This requires detailed appraisal of
the partial acquisition and points out the virtue of routing a pipeline through
remote, rural tracts of land, both for safety and economic reasons. Block valve
and compressor or pump station acquisition at market value is also needed,
generally every 30-35 km for valves and every 50-100 km for stations, depending
on throughput. Permanent access roads may also be purchased with work camps,
pipe yards and marshalling areas leased for the construction period which
generally runs to two years for major projects.
Excavation work during an integrity dig up of a 30 inch oil pipeline on an 18
m wide RoW is shown. Topsoil conservation methods include stripping and storage
and laying down sheets of plywood to prevent rutting and compaction of
this silty soil so that damage to this specialty vegetable crop production land
would be minimized.
IFC compliant livelihood restoration plans (LRP) are required where project
related restrictions affect individuals, families or communities' ability to
make a living. The main objective should be to ensure that landowners and users
are treated fairly, with respect and provided with just compensation. This
relates to wage-based income, agriculture, fishing, foraging other natural
resource-based livelihoods, informal trade and bartering (see IFC PS 5, 2012).
Under these requirements the proponent must compensate project affected people
for loss of assets, at full replacement cost and provide other assistance to
help them improve or restore their livelihoods, particularly vulnerable groups.
Where commercial businesses are displaced owners are to be compensated for the
cost of re-establishing commercial operations elsewhere. Engagement with
affected communities is required to review suitable options, with a grievance
mechanism available to address concerns regarding the compensation on offer.
Monitoring of the LRP is required to determine if the objectives have been met,
and if not, to establish corrective actions to get it back on track.
To establish those who are to be compensated a census and asset inventory of
the project area is required, from the outset. The compensation package is then
presented to the project affected people with payments made in advance of
construction. Crop losses and other business losses are paid for at following
the loss so that equitable payments can be made based on current market values.
Lessons learned from the Chad oil field development from 2000 onward include:
- Evolution of the project design and project affected people's needs will
take place over time so the initial so solid land use and socio-economic
baseline data is needed to manage the compensation program;
- Follow up is therefore needed to measure effectiveness and to determine
barriers to success so that corrective actions can be taken;
- Land mapping tools using GIS technology and periodic socio-economic
surveys is required to manage the LRP;
- Key performance indicators need to be established from the outset to
measure how well the LRP is functioning and how well obligations are being
- A key position checklist is required to manage the transition from one
project stage to another so that there is an understanding and appreciation
of the commitments and obligations made form the outset for construction
through to production onward. This is needed to assure that management
continues to follow through on LRP objectives.
Local communities with a tradition of subsistence agriculture and very basic
housing may be vulnerable if access to grazing land is restricted so
compensation needs to be paid to offset long term effects of development. These
may include livelihood issues that provide for the survival of local residents
so good socio-economic baseline surveys are needed to develop an effective LRP
that will contribute to the sustainable development of the project and the local
firstname.lastname@example.org regarding the assessment and resolution
of damage claims.