An independent review suggests the Alberta government would have as much as $45 million in extra annual revenue if it revamped how it handles grazing leases.

The long-standing program allows cattle producers to rent vast swaths of Crown land and was criticized last summer by the province's auditor general.

Merwan Saher said the government manages 5,700 grazing leases on more than two million hectares of public land on behalf of Albertans, which contributes about $4 million each year to government coffers.

Saher said it appears ranchers leasing from the government are deriving personal financial benefits when they turn around and accept compensation from oil and gas companies to gain access to wells on that land. He said the province is forgoing more than $25 million each year as a result.

The independent review by the University of Alberta's Land Institute looked at alternative models for grazing leases, including one in place in neighbouring Saskatchewan. Each would result in increased compensation to the province ranging from $36 million to $45 million a year, the review suggested.

"We went into it somewhat naively looking at how those revenues would change ... but as we dug into the system, we realized it's a lot more complicated than just flicking a switch," said research director Vic Adamowicz.

"I think we went into it thinking it was a little more black and white than it was."

The government is doing its own review of the leasing program and Environment Minister Shannon Phillips has met with the land institute.

"The information they presented, and that provided by other stakeholders including agriculture and oil and gas producers, helps to inform and support future policy decisions," Phillips said.

Adamowicz said the government must consider rental payments leaseholders make as well as compensation they receive from energy companies. Oversight from Alberta's Surface Rights Board is also needed, he said.

System is 'super flawed'

Cliff Wallis from the Alberta Wilderness Association said leaseholders have been doing a good job caring for the land, but some are making a lot of money that could go elsewhere.

"It's super flawed. It basically creates haves and have-nots between the have ranchers who have oil and gas wells and those who don't," Wallis said.

"The money that comes from surface rights payments should be going back into a grassland conservation fund or a public land conservation fund to deal with wildlife issues, compensating ranchers for various things, help with conservation."

Wallis said his group would "scream like stuck pigs" if the government tried to divert any new lease money into general revenues.

The Alberta Grazing Leaseholders Association admits the program isn't perfect, but believes the auditor general should have done more homework.

"There are a lot of people who don't understand it and don't want to listen to why it works the way it does, but it's been a very good instrument over the years to ensure these lands were settled and cared for," said Larry Sears, who leases about 2,300 hectares in southwestern Alberta.

"The vast majority of the leaseholders in the province have five or less installations and less than half of the leaseholders get any oil and gas activity at all."