Lee County Residents Are Learning About Split Estates, Some The Hard Way.

[mmonk]

Concerns Grow About Predatory Mineral Rights Leasing Practices.

On February 9th, Hallie Seegal of Reuters told the story of Vince and Jeanne Rhea in an article titled “In North Carolina, Fracking Rights Rise to the Surface“. The Rheas were looking for their dream home and found what they thought was it, a home with 40 acres in Shirley Arkansas at an unbelieveable deal. When they flew to Arkansas from Raleigh, they found out why it was such a deal. The owner had sold the mineral rights to a natural gas company in a fracking zone. This made the home and land a split estate. The newspaper there had warned residents that day not to bathe because of water supply problems. So the Rheas returned home and decided to retire in rural Lee County instead only to learn their home is in the line of a fracking zone. The problems they are staring at are that much of the surrounding land is under split estate status and under compulsary or forced pooling, they could be forced to give up their rights or say so concerning their land. Forced pooling allows oil and gas companies to use private property without permission if a certain number of surrounding neighbors have leased their mineral rights to the companies. In fact, many residents in Lee in the shale gas area have severed or split estates and don’t even know it. This is because from Lee County’s formation in 1907 until October 2012, landowners were not required by law to disclose the separation of oil, gas, and mineral rights (which seems strange to this author since as a licensed real estate broker, it is drilled in our heads on the necessity of disclosure). So Lee County published a map to show landowners what areas were already split estates (which encompasses around 12 square miles). And so, the question arises, who is going to look after the property rights of landowners whose land borders say, the 2700 acres where Dan Butler bought the mineral rights from in 1974 and leased those rights to WhitMar Exploration Company or landowners that border the 941 acres Weyerhauser leased to Tar Heel Oil & Gas? Jim Womack, a Lee County Commissioner and chairman of the Mining and Energy Commission? Dr. Ray Covington, a member of the Mining and Energy Commission who owns N.C. Oil and Gas? Think again.

Jordan Trinkle, Mineral Rights Project Coordinator of the Rural Advancement Foundation International-USA (RAFI) released a presentation titled “Mineral Rights Leasing in North Carolina” which presented areas of concern. RAFI has worked closely with lawyers, N.C. State Cooperative Extension Specialists and the Wake Forest School of Law to analyze NC mineral rights leases. Some of the findings are as follows:


Concerns Over Predatory Mineral Rights Leases

NC leases offer landowner little compensation: $1-$20 bonus payments per acre when its been $2,000-$15,000 per acre in other regions.

Minimum Royalty Payments of 12.5%

Unreasonably long drilling phases: Typical primary drilling phases are 3-5 years but in North Carolina, the primary drilling phases are 15-20 years, start dates unclear. Delays landowner royalty compensation and limits landowner ability to renegotiate lease with different company.

Drilling infrastructure development without gas extraction and royalties.

Few landowner protections that limit financial risk and legal liability for landowners:
Landowner payment for infrastructure development such as well-pads and access roads deducted from royalties.
No landowner compensation for damages to neighbor’s property from drilling activities.
Leasing impacts on property values and eligibility for mortgage application.
Leases are often transferred to other companies without landowner consent or notification.

Few landowner protections that limit land impacts and damages to landowner property:
Lack of compensation for impacts to land and water resources such as agriculture fields, timber, or family water wells for construction of well-pads, compressor stations, and access roads.
No minimal set-back requirements for drilling infrastructure.
No compensation for water withdrawals on landowner property.
No reclamation requirements for drill-site after extraction has ceased.

Split Estates

Occur when surface estate and mineral estate are split.

Mineral estate is dominant.

Few rights for surface estate owners who do not own their mineral rights:
Inadequate notifications to surface owner of drilling activities:
7-14 days before company enters property.
No landowner influence on the leasing process or location of drilling infrastructure.
No compensation for damages.

6,000 acres of split estates in Lee County alone, unknown number of surface owners will be affected.

Community Impacts

Degraded rural infrastructure from significant truck traffic.

Social impacts from influx of non-local workers into rural communities.

Strain on emergency services.

Large landowners vs. small landowners.

Potential Impacts on Farms

Development of access roads and pipelines through crop fields, timber resources, or livestock pasture.

Spillage of fracking fluids or toxic waste water on agricultural lands.

Increased erosion from well-pad development, access roads, and increased truck traffic.

Soil compression affects crops for 3-5 years.

Top soil removal and top soil/sub soil mixing.

Damage to water drainage systems.

Potential impacts on water resources used for irrigation.

Possible affects on Farm Plan and Organic certification.

Disqualification from USDA/State cost-share/CREP/Farmland Preservation Programs & possible financial penalties



Bottom line is this: if you live in any of 14 counties where shale gas deposits are (and maybe even downstream), best you lawyer up because the gasmen and the politicians and government officials that have skin in the game are coming.

Original with links (I'm the author).

[supernova]

1. Thanks for all of this info

I think a LOT of people are going to get very nasty surprises in the coming few years. I wouldn't be surprised if things turned violent in some cases.

Is there anyway to look up our own status re: mineral rights on our property? I had heard that 60 acres is minimum tract for an owner to have their own mineral rights, but have been unable to verify it. Edit: I found a reference to that number on a real estate blog, of all things. The realtor was discussing the case of the subdivision development in Raleigh who sold houses but sold the mineral rights to a firm that enjoys close ties to fracking companies out west.

edit: Would you mind of I shared your blog link on FB?

[mmonk]

3. Yes, in the case in Raleigh, the builder had other subdivisions out west.

As a property owner, your property extends below and above. If your mineral rights have been sold, that is a material fact and Realtors are supposed to disclose material facts. Usually one finds out through the title search. In Lee County's case, recordation wasn't required for some reason.

[supernova]

4. My situation

is that I inherited the property were I live now. I am the third generation to live here. The original "sale" to my grandparents was back in, oh... the late 1920s if not 1930.

Do I still do a title search? This situation applies to my brother and myself.

[mmonk]

5. It's doubtful unless someone in one of those generations sold the mineral rights and didn't record

it. Where do you live?

[supernova]

6. In Orange County

on the outskirts of Durham.

I've looked at the maps but would have to see a more detailed map to see if we are in that zone. Nevertheless, we could get blowback effects from drilling nearby. Some of it might be in the Duke Forrest.

I'm also concerned about my niece and her family who live in Brier Creek in Raleigh. I don't think any of those homeowners are aware.

I do truly feel for everybody in the potential drilling zones, though. It seems that there is little legal recourse if you truly do not want it.

[mmonk]

7. You're probably ok. Find a link to the Register of Deeds and look for a search engine on it.

I think this is going to put a lot of pressure on the Real Estate Commission. I expect definitive guidelines from them to try and protect the public.

[AndyA]

2. Read a horror story about a similar situation in North Dakota

People don't own the mineral rights to their property, and with all the fracking in North Dakota, people are getting sick because of bad air and water, crops and trees and dying, and even some pets have gotten sick and died.

Corporations are legally raping American citizens, and our government is protecting the rights of the corporation, but not the people. It's a disgrace.

[littlemissmartypants]

8. Excellent work! eom

[mmonk]

9. Thanks much.

[DURHAM D]

10. Sorry to bother but

is there a list of the 14 counties?

Also, I can't believe there are no setbacks for the infrastructure and they can use the farmer's water. What a clusterf*ck.

Good article and thanks for posting.

[mmonk]

11. The 14 are as follows:

Stokes, Rockingham, Granville, Orange, Durham, Chatham, Wake, Lee, Moore, Richmond, Montgomery, Anson, Davie and Yadkin. Rules for NC haven't been determined yet such as setbacks. The material in the post is a study of current NC leases.