Fracking Headaches: Homeowners Battle Developers for Mineral Rights

Colorado homeowners are learning a rude fact about the process of buying and owning a home these days: you can own the land you stand on, but not the final say as to whether companies can drill on it.

Case in point: some years ago, my husband and I were in the process of buying a home on Colorado’s Western Slope. It was our first home, so we decided we wanted to do it right. We asked copious questions and read volumes of information about Colorado’s complicated real estate laws. But we were still fairly naive to the process – naive enough not to realize that we shouldn’t invest our trust in a realtor that also represented the seller (as is legal in Colorado). The realtor however, seemed helpful enough; he encouraged me to ask questions and promised full disclosure about everything that would be a concern to us.

A few days later, after submitting the contract for purchase, I came across a small paragraph that we had seemed to have missed. The paragraph, in short, terse language, deeded the mining rights under our property to another owner – that is, unless we objected.

When we asked the realtor about it, he waved the issue off nonchalantly, saying that it was very unlikely that there would be any mining in the tiny town in which we lived. Hydraulic fracturing hadn’t quite arrived to the Western Slope yet, and he was able to put up a good argument against changing the contract.

Still, I wasn’t comfortable with the idea of having someone own the rights to land underneath our property. After some consideration, we told him we wanted the mineral rights to be part of the sale. He was decidedly not happy with our decision.

By the time we left the Western Slope years later, fracking was in full swing. Stories abounded about homeowners who discovered, after the fact, that they now shared their property with drilling operations. The local bars and cafés were filled with drilling crews; the town thrived from the business, but local residents in the scenic ranch and farming lands below the Grand Mesa were finding that prosperity came with a price. In the town where I worked as a journalist covering the fracking boom, agriculturalists and mining companies now competed for rights to the area’s coveted water sources under private lands.

And apparently, the problem has continued to grow.

According to an investigation conducted by Reuters, developers in Colorado’s expanding residential areas have been quietly reserving mineral rights to land that they sell, leaving new residents with the surprise of finding that they have little control over what happens when mining companies come knocking. The increasing focus on hydraulic fracturing has given owners of mineral rights an advantage. They are able to lease out mining rights – whether or not the homeowners agree.

And Colorado isn’t the only state in which developers, fully cognizant of the value of mining rights, have been scooping those rights off the table before selling property to new homeowners. New residents in gated communities in Florida that feature scenic retirement benefits like golf courses are finding that property rights that they thought came with the sale are, in fact, part of a massive investment company that is owned all or in part by the very developer that built their home.

At the heart of what may often be judged to be a “bait and switch” concept are 100-year-old laws that recognize “split estate” sales, in which the homeowner owns surface rights and oftentimes, limited rights to access below his property. Depending upon the wording of the contract and state law, the new homeowner may have the right to drill a well to a certain depth, but would be limited as to other resources he could extract from the soil.

And, as Reuter’s report points out, many buyers don’t read the long sales contract thoroughly enough to realize they are at risk of losing the mineral rights. In some cases, the information is best found by doing title searches, but isn’t always apparent to buyers either unless a lawyer has been hired to review the contract.

In Colorado, strong laws exist to support oil and gas drilling. The Colorado Oil and Gas Conservation Commission exists theoretically to protect both industrial rights and environmental conservation, but residents (and journalists) have been finding for years that environmental issues are often debatable concerns when it comes to oil and gas exploration, particularly in semi-rural areas. The COGCC is practiced at smoothly pointing out to concerned homeowners that “Wildlife biologists from the Colorado Division of Wildlife have advised that there are generally more impacts to wildlife from a typical rural residence than from an oil and gas well.” Yet concerns still exist regarding water quality and fracking spills, some of which have occurred in or around residential areas.

Western Resource is only one of several nonprofit environmental organizations that have been working to inform members and residents on changing laws when it comes to oil companies’ rights to subsurface exploration. It has published tips online to inform Colorado residents about ways that oil and gas exploration can extend beyond “setbacks” that are designed to protect homeowners from encroaching gas wells.

http://vimeo.com/westernresourceadvocates/frackingrules2013
And homeowners are mobilizing. While the rights of developers and sellers to hold back mineral rights from unsuspecting buyers is still very much a case of “buyer beware” and legal, many communities affected by fracking are joining together to lock out or limit access to their properties by fracking crews. The Colorado Oil and Gas Association, a strong supporter of hydraulic fracturing, recently threw $600K into the legal pot to fight efforts by citizens to enact laws against fracking in their backyards.

With more than 50,000 operating wells throughout Colorado, many of which are within or near residential areas, the two sides seem to be gearing for a new showdown regarding oil and gas exploration and homeowners’ rights. It will be interesting to see the outcome as voters go to the polls in 2014.

Image by Ecopolitologist