Fracking: Many in NC don't control rights to gas under their land
Posted May 20, 2014
Updated June 6, 2014
Sanford, N.C. — Mike Tilley wants to plant a vineyard and offer wine-tasting tours on his 100 acres north of Sanford. But he wonders whether tourists would appreciate seeing a 120-foot drilling rig during a visit, or sitting in traffic among gas workers' trucks.
"I kind of wish the fracking issue would just go away, but I don't think it's going to," he said.
Tilley, like many landowners in Lee County, may not have a say in whether gas companies drill under his farm. He didn't know it when he bought the property six years ago, but the mineral rights had been sold off long before. And even if he did control the rights, he still could be forced to allow gas mining if a majority of his neighbors sign leases with drillers.
Mineral rights, "split estates" and "forced pooling" are relatively new concepts to most people in the Sandhills, but they are part of the reality of this potential gas boom.
State lawmakers are expected to begin granting permits next year for horizontal drilling and fracking. The controversial method uses explosive charges and large volumes of water to fracture ancient shale formations deep in the earth, releasing natural gas and other valuable minerals.
About this seriesThis story is part of the third day of a six-day series on gas drilling and hydraulic fracturing, which could begin in North Carolina as early as next spring. Follow the complete series at fayobserver.com/fracking, and tell us what you think by email to firstname.lastname@example.org or by calling 910-486-3565.
In gas-rich regions of states that allow fracking, landowners are more familiar with their rights. Lee County landowners began their research four years ago, when exploration companies showed up with lease offers.
Another possible shale basin with gas is beneath Cumberland, Scotland, Hoke and Sampson counties, where even fewer landowners understand the issues.
But Lee and Chatham counties are unique when it comes to mineral rights. In nearly every real estate transaction in North Carolina, mineral rights come with ownership of the land at the surface. In Lee and Chatham, coal mining several generations ago prompted people to sell off their mineral rights while retaining their homes.
State lawmakers recognized the confusion these so-called split estates could cause when gas drilling begins, perhaps in 2015. Two years ago, they passed a law requiring land transactions to include a disclaimer that "oil and gas rights can be severed," which would give someone other than the landowner the perpetual right to drill, mine and explore on the property.
According to county data, 427 parcels comprising nearly 9,100 acres are split estates in Lee County.
Tilley said he did not know his mineral rights were severed when he bought his overgrown land on Cumnock Road, a thin ribbon of pavement that cuts through vast timber farms and soybean fields.
'I kind of wish the fracking issue would just go away, but I don't think it's going to.'
The 53-year-old, who owns a firearms training center in Raleigh, envisioned a vineyard with wine tastings in a freshly stained, knotty pine barn that he and his brother are restoring. He may offer wagon rides and a small petting zoo.
"And maybe make a little money," he said.
He worries about the potential of having a well drilled close to his farm and has scaled back his plans. Gas companies will not be able to build a well pad, access road or other drilling infrastructure on his land without his permission. But companies could extend horizontal lines deep beneath his land without his permission or without him knowing.
According to the county Register of Deeds Office, Deep River Minerals has owned the mineral rights on Tilley's farm since 1983. Deep River Minerals bought the rights for $10 from Dan Butler of Southern Pines, a 70-year-old son of a coal miner. Butler had acquired the rights from Peabody Coal Co. years earlier.
Butler owns mineral rights to about 2,700 acres in the Cumnock Road area. He owns oil, gas and coal properties in three states, and he hopes to sign with a gas company in Lee County. Four have approached him this year, he said.
Butler said fracking opponents who talk about water and air pollution should not worry.
"You need to look at history," Butler said. "We are not on the cutting edge of technology. This has been going on for decades, so it's nothing new. The hazards are greatly minimized."
North Carolina landowners who control their mineral rights but still oppose drilling may be forced by state law to allow gas extraction beneath their properties.
Forced pooling is controversial in some cases, but states have done it to avoid a plethora of wells and to compensate landowners for having their minerals siphoned away by a neighbor.
The state's Oil and Gas Conservation Act of 1945 allows forced pooling.
"It's an issue that shocks people when you talk to them about it," said James Robinson of the Rural Advancement Foundation International-USA. The nonprofit organization in Pittsboro promotes better farming policies. The group has not taken a position on fracking but has opposed forced pooling.
Typically, the state maps out what are called drilling units, or clusters of tracts about 640 acres each where gas companies develop one or more wells.
The state Mining and Energy Commission, which has drafted 120 new rules for fracking to modernize the 1945 statute, recommends allowing forced pooling only when 90 percent of the land in a drilling unit is voluntarily leased.
Some lawmakers do not like that proposal, according to Jim Womack, chairman of the Mining and Energy Commission. They would prefer the commission assign drilling units on a case-by-case basis and decide when to forcibly pool properties, Womack said.
A draft of an energy bill expected to be filed this year would direct the Department of Environment and Natural Resources to study forced pooling. DENR would make a recommendation to the Joint Legislative Commission on Energy Policy by Oct. 1, 2015.
Republican Sen. Ron Rabin, who represents Lee and Harnett counties, said forced pooling is an unresolved issue. Rabin sits on the energy policy commission.
"They are trying to figure out every way possible to make it fair to everybody," Rabin said.
Pennsylvania generally has not used forced pooling in its gas drilling boom, but there have been some cases.
Other states with forced pooling have varying thresholds for how much of a drilling unit should be voluntarily leased.
"This is a political hot potato," said Robinson, of the Rural Advancement Foundation. "It is something that is violating the landowners' rights, and it's not an easy thing for someone to say that."
Keely Wood owns a 12-acre pasture west of Sanford where her family lives and keeps two horses. Nearby, some of her neighbors have signed leases with a gas company.
Wary of fracking
Wood opposes forced pooling and says she may move.
"I think it's an abuse of eminent domain for the profits of a private company, and my property value will go down," she said.
The family has a water well. It was one of 71 wells tested by Duke University in 2012 to establish base-line samples of water quality. If residents complain of problems after gas drilling, officials can retest their water, said Robert Jackson, an environmental sciences professor at Duke.
That's important, because North Carolina law puts presumed liability for well contamination on drilling operators. To avoid that liability, companies must do base-line water testing before drilling within a certain distance of private drinking wells.
The 2012 law set that distance at 5,000 feet, but Sen. Bob Rucho of Charlotte said it was a mistake. The statute should require base-line water testing within 2,500 feet, and lawmakers likely will make the change this year to conform with what many states require, the Republican said.
The rules being written by the mining commission provide some protection for landowners who do not want drilling on their properties. In January, the commission sought to strengthen one standard by voting 10-1 to extend the minimum separation between a gas well and a home to 650 feet. The originally proposed setback was 500 feet.
Charles Holbrook of Pinehurst, a retired Chevron oil company vice president who serves on the commission, cast the dissenting vote. He said the wider buffer would further limit where companies can drill wells.
Setbacks from homes vary widely in the United States. Pennsylvania's setback for gas wellheads is 500 feet from homes. Arkansas requires a minimum of 100 feet, but many mineral leases require 200 feet from homes or barns.
Jackson, the Duke professor, has studied well-water contamination near gas wells in Pennsylvania. He recommends 1,000 feet.
The General Assembly could intervene, changing the rules proposed by the mining commission. Critics hope the legislature sets a buffer wider than 650 feet.
Some homeowners worry about their property values with an industrial-looking drill derrick nearby or hundreds of tanker trucks clogging the roads.
Mike Walden, an economist at N.C. State University, said public perception of fracking can affect home values. A 2013 report he wrote for the state says that residential property values dropped between 3 percent and 22 percent in the vicinity of drilling activities in four studies across the United States.
On the other hand, land tied to rich minerals could make property more valuable - and homeowners less likely to sell off their subsurface rights.
Sanford builder Van Groce has retained the mineral rights to 18 homes sold in the Copper Ridge subdivision that he is developing near the airport in northeast Lee County. Groce said individual property owners have less clout with gas companies.
"Our thinking is if those mineral rights are in a larger block, whoever controls it will have more power to negotiate a favorable contract than being forced into it," he said.
Groce, who helped develop the Carolina Trace community off N.C. 87, said he does not know whether gas companies will want to frack under Copper Ridge.
"I don't see a lot of downside, if it's done properly," he said.
Staff writer Andrew Barksdale can be reached at email@example.com or 486-3565.