November 21 2011
The government has entered into several production sharing agreements with different contractors pursuant to the Petroleum Act. Each contractor is authorised to conduct petroleum explorations as defined by the act, within a designated area defined by the relevant agreement. While, according to Section 3 of the act, "the entire property in and control over all petroleum and accompanying substances, in whatever physical state located on or under the territory of Belize…are vested exclusively in the Government of Belize", and while the government may by contract "provide for a contractor to acquire property in, title to or control over any petroleum within Belize", the owner of the land which is the subject of an agreement retains certain rights in relation to the conduct of petroleum operations on and under such land.
Section 26(1)(b) of the act provides that a contractor shall not exercise any of its rights under a petroleum contract except with the written consent of the owner or lawful occupier of the land (except in the case of land set apart for a public purpose; land dedicated as a place of burial or which has religious significance; and other land already subject to some public use where the consent of a local authority may be required). Section 26(2) of the act specifically provides that any consent may be subject to such conditions as specified in the instrument of consent.
Where consent is withheld by a landowner, the minister must consider both the owner and the contractor's reasoning, and if he or she is satisfied that consent has been unreasonably withheld, he or she may instruct the owner to allow petroleum operations to continue on such terms as he or she determines. Therefore, where a landowner and a contractor can agree terms, there is no need for government intervention.
The contractor is given authority by the act to erect buildings, machinery or plants, acquire easements and rights of way, use water, construct bridges, roads and facilities as is necessary to enable it to conduct petroleum operations, but the right to carry out such activities must be exercised reasonably so as not to affect adversely the interests of any owner or lawful occupier and only to the extent necessary for the operations. Such rights terminate when the contract to which they relate expires or is terminated.
Section 27(6) of the act provides that a contractor is liable to pay the owner or lawful occupier fair and reasonable compensation in respect of any disturbance or damage to crops, trees, buildings, stock, works or other property. Such compensation shall be determined by agreement between the parties, or if they fail to agree, the appropriate sum will be determined in accordance with the provisions of the Arbitration Act. Since the parties are free to determine the conditions subject to which the landowner's consent is given, it is left to them to agree beforehand on a figure which they estimate is sufficient to compensate the owner. It is important that the freedom of contract between the owner and the contractor in these matters is not restricted in any way. There have been some instances where the Department of Geology and Petroleum has insisted on approving the terms of the agreement between owner and contractor before entry into such an agreement; this is not prescribed for in the act .
Finally, according to Section 31(4) of the act, the owner of private land beneath which petroleum is found is entitled to receive 5% of the royalties that the government collects.
For further information on this topic please contact Christopher Coye at Courtenay Coye LLP by telephone (+1 345 814 2013), fax (+1 345 949 4901) or email (email@example.com).
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