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Lost mineral rights

Mom and Lucy

Mark and I went to the courthouse Thursday to research a property that's one possibility for the Annex.  (One of these days I'll make a real post about the Annex idea, but our dream is still evolving and I don't want to tie it down yet.)  Our title search turned up a disappointing document --- an oil and gas lease from 2003.

Lost mineral rights are one of the main reasons to perform a title search.  As a landowner, you can sell some of your property rights while still living on and farming your land, and those lost rights don't come back when the property is passed on to another owner.  In Appalachia, selling mineral rights is common since many folks are living very close to the financial edge, so a few thousand dollars now and a few hundred every year from now on sounds good even if it means your well might be polluted, your house might cave in, and strangers can tromp across your land at will.

Stick tight flowers

In our case, it's possible the lease has expired --- I'm waiting until the holiday weekend is over to hunt down that data.  According to the contract I read, the gas company needed to either start drilling or start paying the landowner a certain amount within five years, and there's no sign of a well on the property, so we might get lucky and not have to deal with the issue.

But if the mineral rights are no longer attached to the land, Mark and I will be faced with a hard decision.  This property is within easy walking distance (unlike another one we've considered), has lots of road frontage (making it easy to hold public events there), and is south-facing.  There are also several acres currently being managed as hayfields, so it would be relatively painless to install our dream orchard and pasture.  Finally, the property is assessed at $600 per acre, which is right up my skin-flinty alley.  (That's exactly what I paid for our current ugly duckling farm.)

Mom and me

On the con side, the soil is terrible (which I consider more of an interesting puzzle than a real disadvantage) and there's no water.  And then there's the potential deal-breaker --- the lost mineral rights.  So here's my question for thoughtful readers --- would you ever consider buying a piece of land without the mineral rights?  If so, how would the lost rights impact your financial decision?

(As a side note, the photos have nothing to do with this post, as you probably guessed.  Mark and I celebrated Labor Day on Friday by inviting Mom over and we had a lovely time watching a Barred Owl, picking stick tight flowers, and hanging out on the porch.)

Our chicken waterer is the POOP-free alternative to traditional, filthy waterers.


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Could you get the land and then be a hold out against the natural gas company? If it gets in the wrong hands, this could be a really unhappy neighbor situation. So buy it to keep it in good hands!
Comment by Maggie Hess Sat Sep 1 09:15:15 2012
You look absolutely cute with Mom!
Comment by Maggie Sat Sep 1 09:16:55 2012
I mentioned before I live in Osage County, OK. We have an interesting prediciment in where the Osage tribe collectively retained all mineral and oil rights when they allotted and later sold reservation land. With some regulations, I or anyone living in the 2300 sq mile area could wind up with an oil or natural gas well in their backyard. In reality it doesn't happen often since most leases are still producing strong at 50-100 years old. Thank goodness we don't have to worry about mining!
Comment by Phil Sat Sep 1 11:02:23 2012
I desperately coveted a piece of land with natural gas rights. It was in New York, 32 acres, creek through it, sugar bush, etc. I think that I figured I would use such a small part of that space for myself, that the extra money would be fine. Especially when the price on the property was so right. It never fleshed out, though, so I can't tell you if it would've been a mistake.
Comment by Brandy Sat Sep 1 11:16:04 2012

Maggie --- Unfortunately, the oil and gas company has the legal right to do what they want there forever now that the previous owner signed the lease. So, I'd be in the wrong if I tried to fight against them.

(Glad you liked the Mom photos. :-) )

Phil --- Fascinating! Although it doesn't seem to be the case where you live, I could see someone retaining mineral rights as a way of preventing mining on land they sell, a bit like putting a conservation easement on a property.

Brandy --- That's where I'm going back and forth. If this land was cheap enough (don't know that yet), then it might be worth it even with rights gone for pasturing and orcharding. We probably wouldn't put as much money into building up infrastructure, though, which would delete the potential social reasons of the annex.

Comment by anna Sat Sep 1 12:07:04 2012

My suspicion was that drilling for oil or gas has possible pollution issues, unless carefully managed. A quick search confirmed it.

Drilling in a karst area seems extra hazardous to me; due to its poreous nature, it would be very easy to accidentally contaminate the groundwater. The state of indiana has special rules for drilling in karst prone areas.

Keeping that in mind, I'd suggest to avoid purchasing land with lost mineral right. If there is a problem, you'll be dealing with the aftermath long after the drilling company has left or gone bankrupt.

Comment by Roland_Smith Sat Sep 1 14:39:37 2012

In your situation, I would consider the cost of hiring an attorney to explore what the mineral rights in this situation mean and how they would impact your plans.

I live on 5 acres in NM and the family that owned the land I live on retained the mineral rights. In our case it means that should oil or whatever be discovered on our land, we would not be able to profit from it. It did not hinder me in the least from purchasing the property as I do not want drilling in my area anyway. A lease like you describe may be a different subject.

Comment by Tisha Sat Sep 1 15:03:30 2012

Anna & Mark,

I went thru a similar exercise myself in 2010. I was buying a small lot in rural south San Antonio for a homestead. Did the county record searches myself, since it was a Tax Sale and there were no warranties from the county.

I found out that there were several leases to various companies through the years from 1910's until at least 1960's. All of them expired and the land was subsequently sold in smaller tracts. So my question was: who owns the mineral rights now? The answer: Me.

The reasoning is that the mineral rights always run with the surface rights, UNLESS they are separated(severed) at some point. If an owner decides to lease their rights to a drilling company, it is only for a set period of time, subject to timely payment of the lease or royalties from actual production. The drilling company never owns the rights, the owner does, subject to the terms of the contract for lease. Lease does not equal SALE. Of course, if the owner of the land is the drilling company, then yes, they own the subsurface rights.

What this means is that if the owner of the land you are looking to buy will sell it to you without specifying on the deed that he is retaining mineral rights, then you become the owner of the minerals too. You would become the new lessor too (leases can be transferred). In my case, all the previous deed transactions were Warranty Deeds, and none of them had a severance of minerals clause on it, at least as far back as 1889. If someone shows up with a deed earlier than that and claims they own the rights, it would be a moot point now because there's the concept of adverse possesion, which is kind of like a 'use or lose' law to prevent in part, land grabs. My main motivation was that I did not want to have the possibility of some stuffed suit finding kryptonite or some such in my 2 acres and one morning waking up to machines and drills and smells in my property.

This is how I read those old leases, and it follows logic to me. Plus, this link kinda supports my understanding: http://en.wikipedia.org/wiki/Oil_and_gas_law_in_the_United_States#Prior_to_and_at_extraction Like a car lease, you do not own it until you buy it. The lease is a payment for to acquire the right to use and abuse the car as if it were yours.

So, that land might still be a great deal guys. Do not be put off by a oil lease just yet. Especially if you cannot tell if something's being extracted today, find out who leased the rights to the oil company, and as long as that matches with the name on the Warranty Deed, then it might still be a good deal. The oil company already did the legal work of making sure who owns those rights, so that is some insurance too that you are dealing with the real owner.

Best of luck.

Comment by Pedro Sat Sep 1 15:40:16 2012

oops. I just realized I wrote a whole treatise on what a lease is, when it is patently clear from your post that you already know what it is. I focused on the title "Lost mineral rights" and did not analize what you wrote.

I will stay away from the 100 degree weather before commenting again.

Comment by Pedro Sat Sep 1 15:46:07 2012

Roland --- Yep, that's my biggest concern. There are very few environmental regulations in our area, and extraction businesses usually win anyway when taken to court, so it's worth envisioning the worst case scenario.

Tisha --- I'm not sure we really need an attorney --- the contract I read (although very long) was quite clear. We just have to do the legwork to see if it's still in effect. I'd be much happier with a situation like yours since I'd expect the previous owners would be less likely than an oil and gas company to come in and drill!

Pedro --- No need to apologize --- I actually found your "treatise" quite informative, and it's intriguing to see how you searched back through to find out that the leases on your land are no longer in effect.

Comment by anna Sat Sep 1 16:06:25 2012
You already have a lot of land -- I take it it's not practical to clear for an orchard?
Comment by BeninMA Sun Sep 2 01:30:30 2012

BeninMA --- There are a couple of different factors tempting us to add an annex. The simplest is that I just don't like to cut down trees, and we'd have to clear land to add any more apples to our homestead. I can work around that if need be --- the younger the forest, the less pain it gives me to cut, and there are some young areas that might make good orchard.

The more important reason to add an annex is that we might like to use it for holding classes open to the public or teaming up with someone without land who wants to homestead. We value our privacy too much to do any of that close to home. But those are also very long-term goals, so we might choose to expand our orchard here at home and wait for the right piece of land to come up for sale.

Comment by anna Sun Sep 2 07:28:57 2012
Question for the LegalEagles: does holding a lease for the mineral rights automatically carry with it the right to build access roads, dericks, buildings, etc on the surface of the property if they decide to exploit the resources? Or is that not covered and the possibility of further leases for profit for the land owner would exist once they decide to mine the Kryptonite?
Comment by doc Mon Sep 3 07:30:43 2012
Doc --- I'm not a legal eagle but the following (portion of a) sentence suggests that in this case, the gas company can do just about anything they want: "Lessor further grants, leases, and lets exclusively unto Lessee said land for the purposes of injecting gas, waters, other fluids, air and any other substances into subsurface strata, conducting all types of recovery operations, establishing and utilizing facilities for the disposition of salt water and other waste materials, laying pipelines, storing leased substances, building roads, bridges, tanks, power lines, telephone lines, and any other structures and things thereon to produce, save, take care of, treat, process, store and transport said leased substances and other products manufactured therefrom, and housing and otherwise caring for its employees...."
Comment by anna Mon Sep 3 07:45:47 2012

Unfortunately, I believe holding mineral rights will become more and more rare. It is almost impossible to find land in northern Arkansas that has mineral rights anymore. After years of looking, I didn't see a single parcel that had mineral rights.

The frac'ing that's going on will leave decades or centuries of damage I fear. Clean drinkable water will become more difficult to find in the future in many areas of the country... if the stories coming out of the Ozarks and places like Pennsylvania are to be believed.

Comment by Shannon Mon Sep 3 21:13:08 2012
Shannon --- That's a shame! I heard back from the gas company today, actually, and the lease here expired in 2008. So it's worth checking whether any of those properties might have once had leases, but allowed the mineral rights to revert back to the land owner.
Comment by anna Tue Sep 4 13:41:27 2012

Anna - that sentence basically gives them carte blanche to do what they need on the surface of your land to access what is below your land. Reading the lease as if you are the lessor.

What is probably just as important as the terms of the lease is the state property law, get yourself a basic primer on it as to holding, transferring and whether or not that portion of the rights reverts and under what condition etc. I'd be wary of the deal but if you've got warranty deeds on offer with the exception of that lease and that lease is forclosed upon by language/trigger/events stated within the lease itself I'd maybe take the risk...

Best of luck.


Please edit and remove this... but OMG your face looks like you're pregnant. If so, and I don't need to know... But if so congratulations. Otherwise I'll just say "lots of sun and good health" :D

Comment by c. Tue Sep 4 23:38:56 2012

C, Luckily, it's not our land, just a piece we were looking at. I agree that the lease gives them just about any rights they want. (And I didn't excerpt the whole thing either --- it continues in the same vein.)

I'm a little disturbed to hear I look pregnant in that picture. Luckily, I know it's not the case since we've chosen not to have kids (and Mark made the decision permanent with a vasectomy.)

Comment by anna Wed Sep 5 07:16:59 2012

am not an attorney nor in the oil business.......just some thoughts that might help you

even if the land is not leased, does not mean an oil and gas company cannot lease it from the mineral owner another thing, I may be wrong, but i believe at least 35 states have forced pooling, so even if the mineral owner does not want to lease, under certain circumstances the minerals, whether held by you or someone else can be forced pool. what does forced pooling mean regarding the surface rigts and access to them.....can they drive across your property? actually drill on it? how close can they get to your home? do horizontally drilling underneath? might want to make an appointment with your state representative or state senator in the hopes of being put in contact with someone in your state who can tell you.....in Oklahoma, it would probably be someone in the Oklahoma Corporation Commission.....finally, always remember that the law can change.......BELIEVE you have to be as educated as possible upon what is going on in the area in which you want to buy, is there drilling, is land leased in the area, leasing going on, anyone know if there is potential in the area for production?? hope you have already found a special place

Comment by Coleen Fri Apr 19 23:08:52 2013

One very unique homestead, $1,500 per acre, the opportunity of a lifetime