"There's a Moment When All Old Things Become New Again": The Canadian Oil and Gas Royalty - A Modern Rent Charge

Abstract

While American law recognizes the oil and gas royalty as a real property interest, Canadian law, although based on the American experience, is not as clear. This Article argues that the oil and gas royalty, an integral part of the investment necessary to the operation of the Canadian oil and gas industry, represents a modern example of the rent charge, a proprietary interest in land with origins in medieval common law. The Article makes this claim for two reasons: one is pragmatic, the other theoretical-pedagogical. First, pragmatically, as the value of oil and gas rises precipitously in response to the global supply crunch created by the Russian invasion of Ukraine, exploration for and production of Canadian reserves will expand. Therefore, the owners of those oil and gas reserves will seek to ensure their share in the resulting revenue; recognition as a rent charge provides that security. And second, theoreticallypedagogically, while the oil and gas royalty may be representative of a dying industry in the midst of a world transitioning from fossil-fuel dependency into a clean renewable energy future, the analysis that demonstrates it to be a proprietary interest in land is valuable for what it reveals about real property: its ability to adapt to changing circumstances. Outlining this analytical method provides important guidance as to the flexibility and organic development of the law of real property in accommodating future novel legal relationships. In demonstrating this analysis, the Article provides a framework within which to consider the legal characterization of the oil and gas royalty interest in both Canadian and American law. But more importantly, the Article is prospective, providing a methodology capable of use in considering the proprietary status of new legal relationships which may emerge as part of a clean energy future.