Events

In North Carolina, fracking rights rise to surface

February 8, 2013

A natural gas pipeline is seen under construction near East Smithfield in Bradford County, Pennsylvania, January 7, 2012. REUTERS/Les Stone

Three years ago, Vince and Jeanne Rhea found the house of their dreams in Shirley, Arkansas. They couldn’t believe the deal: 40 acres complete with a separate workshop that Jeanne could use as an art studio and two nearby lakes. It was also thousands of dollars cheaper than a property of that quality should have been. They booked a plane ticket from Raleigh, North Carolina that day to fly down and buy it.

When they got to Arkansas, they found out why it was so cheap.

The owner of the house had recently sold the mineral rights under the property to a natural gas company for use in hydraulic fracturing, or fracking, a drilling technique that is opening new areas across the country for energy exploration. The front page of the local newspaper that day had a story about problems in the water supply and was advising residents not to bathe, Jeanne recalled. “There was no way we were making an offer after that,” she said.

The Rheas ultimately decided to stay at home in North Carolina and retired in rural Lee County outside of Raleigh. What they didn’t realize is that the new home they bought sits above the Deep River Shale basin, an area potentially rich with deposits of natural gas that makes it the next likely location for fracking.

To make matters worse, because of two arcane laws known as split estates and forced pooling, they may not even have the right to say whether gas companies can drill on their property.

In recent years, energy companies have used these precedents to bypass property owners who object to drilling under their turf. Now residents in North Carolina, which legalized fracking just last year, hope their government will protect their property rights before drilling begins.

“Whether we want to sell or not, the gas companies could take our property from us,” said Vince Rhea.

North Carolina gives mineral rights owners the right to drill on land without a property owner’s consent. A bigger problem is that some of its citizens live on plots of land with severed mineral rights and don’t know it.

The separation of mineral rights and property rights may be a familiar concept to residents of Pennsylvania, West Virginia, Colorado and Texas — all areas plentiful in production of oil, gas and minerals. But the meaning of mineral rights for North Carolina landowners, where the coal industry has been dormant for decades, was unclear until very recently. Most people didn’t even know such a thing existed.

A split estate applies to someone who owns a parcel of property, but not the rights to the minerals beneath it. It was adapted from a 16th century English law that declared the monarchy as the rightful owner of all the country’s buried gold and silver deposits.

This morning, Lee County officials released a map of the area that, for the first time, will inform residents if they own the mineral rights underneath their yards.

The reason many landowners may not know whether they own their mineral rights is because Lee County was formed in 1907. But landowners were not required by law to disclose the separation of oil, gas and mineral rights to purchasers until October 2012.

Dan Butler is a Lee County mineral rights owner who resides in a neighboring area. Back in 1974, Butler purchased the mineral rights for approximately 2,700 of acres of land. It’s the land under which his father, a coal miner, worked. He’s now the single largest holder of mineral rights in the jurisdiction.

Butler leased his mineral rights to WhitMar Exploration Company. They are working to determine if oil and gas resources are locked in shale-rock formations underneath.

Dr. Ray Covington, a member of North Carolina’s Mining and Energy Commission, which is responsible for developing regulations for natural gas exploration in the state, said about 90 families in Lee County own property that have been separated from the mineral rights. Twenty-eight of them own land above Dan Butler’s acreage.

One individual, who wished not to be named as he was unaware of his situation until he was reached by Reuters, owns nearly half of the land above Butler’s minerals. The individual’s over 1000 acres would fit an above ground well pad, which typically range in size from 5-15 acres.

Five other individuals who own land above Butler’s minerals for non-residential purposes that were reached by Reuters were aware of the split estate when they purchased their land. A sixth couldn’t remember if he learned about it at the time of sale or afterwards. Three of them expressed concerns about the condition their property may be left in if drilling happens on their land.

Of the three landowners with a residence above Butler’s minerals that were reached by Reuters, only one had knowledge of their situation.

While land purchasers prior to October 2012 could have asked for a title search to determine if the mineral rights for a given property were still attached, the antebellum days of copper and coal mining have been over for years. Fracking wasn’t yet a part of the public consciousness.

Jim Womack, a Lee County commissioner as well as the chairman of the state’s Mining and Energy Commission, explained that very few people who bought land in Lee County over the past few decades knew about oil and gas locked in the ground underneath.

“Ten years ago, there just wasn’t much discussion about shale. Very few people knew there was oil and gas so very little consideration was given to whether anyone owned mineral rights. It wasn’t a major concern until word got out.”

Privately-held WhitMar, based in Denver, declined to comment on their leased mineral rights as is their policy on current projects. The American Petroleum Institute, a trade association representing the oil and natural gas industry, as well as Energy In Depth, a public outreach group representing the Independent Petroleum Association of America, also declined to comment on individuals who may be unaware of living on a split estate, citing lack of knowledge on the situation.

Womack says the county needs the economic boost that natural gas drilling will bring the community.

“Anything we can do to bring job opportunities is a good thing,” he said.

FORCED POOLING

Vince Rhea is skeptical of the commission, as some of its members have financial interest in natural gas drilling coming to Lee County.

Covington, a commission member, owns N.C. Oil and Gas, a group that represents landowner’s interests in exchange for a share of future profits.

“It’s like having the fox watch the chicken coop,” says Rhea.

Covington, who is also the chairman of the state’s compulsory pooling study group, says his first priority is to make sure land and mineral rights owners aren’t taken advantage of by predatory leases.

“It’s just like a civil rights attorney who represents a client and shares the profits if they win,” Covington says.

Compulsory pooling, also known as forced pooling, allows oil and gas companies to use private property without permission if a certain number of adjacent mineral rights owners lease their acreage out for gas production.

Part of the new wave of the shale boom that has raised property owners’ fears involves horizontal drilling, which includes subterranean infrastructure that crosses dozens of property lines at a time. If just one property owner objects, the whole project could dismantle. Forced pooling prevents this situation from becoming an issue.

As of this writing, North Carolina common law requires oil and natural gas developers to give property owners 30 days notice via certified mail before beginning drilling operations on their land. The notice must include an offer to discuss with the property owner where on the surface the disturbance should take place. It’s one of a variety of regulations that while limited, offers North Carolina residents “considerably more protections for surface owners than many other states,” the North Carolina Attorney General’s office said in an email.

Meanwhile, Butler is eager to get started. “It’s ridiculous to take two years to build regulations while they’re doing a great job in other states,” Butler said, “but politicians take awhile to work with attorneys so it’s one of those things we have to be patient and wait for.”

Jeanne and Vince Rhea, who narrowly escaped from buying a home with a split estate, now worry they’ll become “sandwiched” between other gas leases and be forced to concede their property.

“If I didn’t know better, I’d say I was living in some place other than the United States,” Vince said.

Contact the reporter at hallie.seegal@thomsonreuters.com

Comments
18 comments so far | RSS Comments RSS

Why is this information not available to the owner before they buy? We are not a monarchy to continue to allow preferencial old English monarchical rights to minerals over ownership rights of a private individual. Appears that Corporate mining (corporations) have more rights that a person. This is really so perverted and twisted and must be changed. Corporations are not people and get no rights of personhood and certainly no rights above the property owners. Unbelievable. “Land of the free” – I don’t think so anymore. Land of Corporations having all the rights and people have none!

Posted by Concernedcitz | Report as abusive
 

When all is said and done this fracking nigtmare will make Love Canal resemble nothing but a leaky water pistol.

Posted by sjfella | Report as abusive
 

Black gold. Texas tea. Thank God there’s no shale under my community. This how revolutions begin…when people’s homes and land are stolen.

Posted by krimsonpage | Report as abusive
 

This is NOT something unique to North Carolina. Mineral rights are separated from property in California and always have been.

Posted by neiman1 | Report as abusive
 

“If I didn’t know better, I’d say I was living in some place other than the United States,” Vince said

The US is now a Corportacracy. The laws and rules are for them now not the citizens.

Posted by bckrd1 | Report as abusive
 

Thank you for a wonderful article , Lee county is the smallest county of 100 in NC . We are scared it will ruin our lovely state and future for the children.

Posted by ecoterica | Report as abusive
 

I wonder if any of these people give any thought to whom they vote for. There appears to be a great deal of collusion between the legislature, the planners, and those who plan to rape the land.

Posted by palmer1619 | Report as abusive
 

Drilling companies should be required to offer to buy any property they plan to drill under, and should be required to pay 110% of market value, plus the owners’ moving costs.

Of course, if they don’t wreck the property, they should be able to sell it after they finish drilling, and recover much or all of their investment.

Posted by DifferentOne | Report as abusive
 

“If I didn’t know better, I’d say I was living in some place other than the United States,” Vince said.
Unfortunately Mr Rhea, you are living in some place other than the United Stated. The USA is gone and what we have in it’s place is only a shell of a once great country.

Posted by forzapista | Report as abusive
 

Does anyone need any further proof that the wealthy and the oil companies own us like masters own slaves?
They own Congress and State Legistatures.
Bribe money buys a lot.
Democracy?
That’s a laugh.
We are a dictatorship, the wealthy are the dictators.

Posted by americanguy | Report as abusive
 

Coverage of this issue — which is certain to become much more important than it has been for the past few decades — always misses a basic issue. Almost every state in the U.S. imposes state taxes (usually called severance taxes) on oil and gas production, and in some states such taxes are very significant sources of state revenue. Thus optimal production of oil and gas from existing reservoirs is an interest of the state (and its taxpayers), and not just the private landowners involved. Note that I’m not talking about wells drilled on state-owned lands, but a state tax imposed on production from private lands. In effect, the state has an effective ownership interest in all oil and gas production in the state, even on private lands. Laws that effectively compel private landowners to cooperate in operations that involve multiple adjoining surfacing lands over a common reservoir are not entirely a private dispute. We can’t talk intelligently about these important issues — which definitely can involve potential invasions of property rights — without understanding state revenue interests involved.

Posted by From_California | Report as abusive
 

““If I didn’t know better, I’d say I was living in some place other than the United States,” Vince said.”
===
No… this is exactly what the Untied States are rapidly becoming: The United States of (Corporate) America…

Posted by mb56 | Report as abusive
 

They want their government to protect them. How quaint.

Posted by borisjimbo | Report as abusive
 

This is just wrong, and on so many levels. Good luck to the residents because they’re going to need it.

Posted by JL4 | Report as abusive
 

Ray Covington is involved with NC Oil and Gas. Please read this page to see the conflict of interest. On this page, the goals are stated, “We want this land drilled.” and “We want it drilled in a certain time frame.”

It was a ‘mistake’ vote (supposedly) by one official that allowed fracking to be pushed onto NC. Since our representatives are not in tune with the landowners, at the very least we should bring this issue to a vote in a general election.

Posted by Stopthefrack | Report as abusive
 

When all is said and done this fracking nightmare will make Love Canal resemble nothing but a leaky water pistol.

Posted by sjfella | Report as abusive
 

I own property in NC and Colorado, I don’t even own the water under the Colorado property. Split estates and not owning your mineral rights are very old, settled law. If the state didn’t require disclosure of somebody owning the mineral rights under NC property, then it is the buyer’s fault for not checking: not the fracking companies, not the state. The information was available, and was ignored. We all use energy like there is no end to it, and are starting to pay the price.

If fracking is as harmless as these companies say, the companies extracting the resource need to post a bond sufficient to cover any permenant damage they cause. If they poison a well, they need to reimburse the land owner plus punitive damages. But they need to put the money up front. I’m sure brokers would love to swap these bonds. There are too many examples of corporate mining interest that destroyed an area, then dissolved before they could be held accountable. People got rich in the process of someone else loosing everything. Posting a bond would help prevent that.

Posted by diluded0000 | Report as abusive
 

One example of the costs passed on to the 99% is the damage to rural backroads and bridges by heavy trucks working under various weather conditions – pot holes and gutters become eroded, bridges need replacement by expensive concrete, etc.
On top of the personal tragedies of farming family being maimed and killed by speeding contractors.
And the “holding ponds” of chemical water discharge during rain, and poison downstream water, and force upgrades to the drinking water plant. Or just pay for bottled water you slave suckers.

Posted by Neurochuck | Report as abusive
 

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