Mineral Rights

[Ucsdryder]

Looking at houses with property along the Front Range of Colorado, I keep coming across mineral rights and leases. They all seem to be similar, leased to an oil and gas company, that doesn’t have surface access, but has a setup 1-3 miles away where they dig down 9000-10000 feet and then come in horizontally to the property.

I have 2 questions. First is safety. I have talked to a couple of people that I trust and both felt that safety was a non issue living on the property.

Second, do I want to retain the rights? Assuming the owner wants to keep them or possibly doesn’t have the rights himself, is there any disadvantage other than potentially losing out on income that the lease might produce.

Hoping to find someone with actual experience vs the I heard fracking was terrible or drill baby drill people.

Ok one more question…. Assuming this forever home becomes a not forever home, what does it look like selling the property without having the mineral rights myself?

 

[Mighty Mouse]

I can't give you an informed opinion on the mineral rights question, but having worked in the industry for 14 years and having owned a home near oil and gas wells for 5 years, I can say that I would have no safety concerns living 1-3 miles from an oil and gas site. Noise, lights, and truck traffic might be a concern, but I wouldn't be worried about safety. The horizontal portion of a well (aka, the "lateral") running under your property is of no concern. The lateral is thousands of feet underground, and you will never know it's there.

Depending on how close you are to the "surface hole" (the aboveground point from which the well is drilled) and what the terrain is like, you may be able to hear noise and see light from drilling rigs, frac equipment, workover rigs, and production equipment. Drilling and fracking are temporary, one-time activities (usually a couple weeks per well). Workovers (performing downhole maintenance or modification using a rig smaller than a drilling rig) are infrequent and short-lived. Production equipment will be on the well site indefinitely, and some of it can be obnoxious (e.g., noise from gas compressors, light and noise from flares). Traffic from 18-wheelers hauling oil and water (if the well isn't connected to pipelines) can also be a potential concern.

I had 3 well pads within 3/4 mile of my former house in Oklahoma. This was on the eastern edge of the plains with no topography and few trees to serve as a screen. The occasional noise and light from drilling, frac, and workovers were short-lived enough that it didn't bother me much. Flaring was uncommon, and those particular well sites fortunately didn't have large compressors. The neighborhood liked to blame all the potholes on tanker trucks, but I don't think the roads around our neighborhood were actually much worse than others in the area without nearby well sites (virtually every road in Canadian County Oklahoma that isn’t a state or US highway is riddled with potholes).

All in all, proximity to oil and gas wells isn't desirable, but it also wouldn't be a deal breaker for me if the wells were 1/2 mile or more from my house. If you have 1-3 miles of buffer, I wouldn't worry about it at all.

 

[wyosteve]

Typically mineral rights are reserved by prior owners, so not too likely you would receive them or any monetary benefit. However, the bigger issue potentially is that the mineral right owner/lessee has the right to access your property to develop the rights (i.e. drilling) if they deem necessary. You are at their mercy, but they would have to pay you for surface access/damage.

 

[Ucsdryder]

Typically mineral rights are reserved by prior owners, so not too likely you would receive them or any monetary benefit. However, the bigger issue potentially is that the mineral right owner/lessee has the right to access your property to develop the rights (i.e. drilling) if they deem necessary. You are at their mercy, but they would have to pay you for surface access/damage.

No surface access is how it’s written.

 

[Throwin Darts]

My hometown is in the middle of the Eagle Ford Shale. There isn't anyone in the county that doesn't live close to a producing well. No concerns there.

On the mineral rights, you should absolutely get them if you can. Here in Texas it is very rare for the purchase of a property to come with the mineral rights if the property is anywhere near an oil and gas play. When I bought my ranch here 10 years ago the seller had 36% of the mineral rights. I purchased them separately from the contract on the land and I was shocked that the seller was willing to sell them.

 

[TCUHunter34]

The majority of landowners don’t own the sub surface (mineral rights) under their land and most people don’t know there’s a distinction between the two . Mineral rights are and can be separated from the surface rights and sold or leased without the landowner knowing at all as it’s a different form of real estate.

You can buy surface real estate and not know the minerals are included and you now own them. The minerals are only reserved if expressly written into the contract that the seller is keeping them. If it’s not in the contract, the seller either doesn’t own them or they convey with the sell of the land even if the seller doesn’t know they own them.

Here in OK, some deals offer the minerals for sale with the land, or they expressly state up front that the seller is retaining the minerals.
If it’s not stated, they likely don’t own them. I have bought houses that I would eventually get a letter from an O&G company for, because I now owned the minerals. When I sell that house, I will always retain the minerals as there’s no reason not to.

Safety isn’t a concern but noise and lights couple be if a rig is ever put up near your house.

 

[ODB]

I can’t think of any reason not to obtain rights if all else is solid. We are still getting checks from the leases we retained on the Osage reservation. Then again, if you make too much they will deem you incompetent, assign you a “guardian”, and eventually start knocking you off - Ala Killers of the Flower Moon.

 

[aq3]

Great forum for general education on items like this. Being in PA, similar situation related to fraking and natural gas.

 

[Seth]

As others have indicated, if it is split estate (very likely in CO), mineral rights won’t convey with surface and would need to be purchased/negotiated separately. Value will be determined by potential for development of those minerals, ie a remote chance of development (not near an active play) would be valued significantly lower than rights already under contract with a defined royalty.

 

[Ucsdryder]

The Home we’re looking at, the current owner owns mineral rights and wants to retain them. It has already been drilled, and they are receiving monthly payments out of a pool payment for the entire area.

I need to figure out if the other homes in the area, all sharing similar lot sizes, are being sold with or without the mineral rights being included in the sale. If mineral rights are being included the asking price should reflect him retaining mineral rights. If mineral rights are not being included in the sale price then it’s probably a non-issue other than the fact that it’s weird to think I own the land but not what’s underneath it.

 

[Rich M]

In my experience, we typically got the mineral and water rights with the property.

It all stems back to one ignorant buyer and now many folks only own the right to use a property. If you find gold, oil, a pure spring, whatever, someone else owns it? Pretty sad. Seems like we are just late to the party.

@Ucsdryder - yup, make sure you aren't being hosed. Can understand current owner wanting to keep cash flow but don't pay the same as if you had the rights and were getting the check for owning the place.

 

[Holski]

I am a Landman in the O&G industry and started my career in the DJ basin on the front range. Colorado has the strictest set-back rules of any state. Companies can't put wells or facilities within I believe 2000ft of homes or occupied structures without a waiver from the surface landowner (which still doesn't guarantee the commission approves it).

Sounds like the property has already been developed so I wouldn't worry about new development of a pad on the property. Since its producing I doubt whoever owns the minerals would want to part with them. I have wells near my home as well but I don't worry about any safety risk other than truck traffic. Most companies are respectful and want to have a good image/relationship with people that live around their development.

If you want to research new plans for wells or see how the wells are drilled the oil and gas governing body has a ton of useful information available to the public. The below link will take you to an interactive map where you can toggle on approved permits/existing wells and look around at development close to your home.

ECMC GISOnline

 

[Mighty Mouse]

If mineral rights are not being included in the sale price then it’s probably a non-issue other than the fact that it’s weird to think I own the land but not what’s underneath it.

If you find gold, oil, a pure spring, whatever, someone else owns it? Pretty sad. Seems like we are just late to the party.

IMO it's no different in principle than the fact that you don't own all the airspace above your property. The air and earth beyond a pretty short distance from the surface is practically inaccessible and unusable to the average landowner, so it makes sense to me to treat the air/earth beyond those limits as separate property and make it available for use by those who actually can access and use it.

A surface owner's depth of ownership varies by jurisdiction and deed history of the property, but freshwater aquifer depth would seem to be a reasonable default limit in most cases. The expense and technical difficulty of drilling beyond typical aquifer depths are far beyond the capacity of the typical surface landowner.

Oil companies don't really want to own surface beyond the few acres they need to place the wellhead and production equipment. Surface landowners don't have the means to access oil reservoirs. Separating surface and subsurface ownership allows both parties to own the piece they want and can use. The alternative (inseparable surface and mineral rights) would force oil companies to buy up hundreds of acres of surface per well then just let those acres sit idle.

 

[Svivian]

Looking at houses with property along the Front Range of Colorado, I keep coming across mineral rights and leases. They all seem to be similar, leased to an oil and gas company, that doesn’t have surface access, but has a setup 1-3 miles away where they dig down 9000-10000 feet and then come in horizontally to the property.

I have 2 questions. First is safety. I have talked to a couple of people that I trust and both felt that safety was a non issue living on the property.

Second, do I want to retain the rights? Assuming the owner wants to keep them or possibly doesn’t have the rights himself, is there any disadvantage other than potentially losing out on income that the lease might produce.

Hoping to find someone with actual experience vs the I heard fracking was terrible or drill baby drill people.

Ok one more question…. Assuming this forever home becomes a not forever home, what does it look like selling the property without having the mineral rights myself?

Well or city water to the property? My only concern would be possible contamination from leakage.

My area deals with this alot and grew up with wells all around. I wouldnt be too bothered by it but Id try to get ownership of the mineral rights.

 

[Rich M]

We bought some property recently and heard we will have to drill about 500 feet to install the well. No issues, but 500 feet is insane.

I know someone who has property in Canada that has about a $2 mil gravel bank on it - that was the offer by the company that "found it" and wants to harvest the gravel - wouldn't be able to sell the gravel if they didn't own the mineral rights. Have no idea what happened with that.

 

[Svivian]

We bought some property recently and heard we will have to drill about 500 feet to install the well. No issues, but 500 feet is insane.

Most well drillers charge by the foot....

 

[Mighty Mouse]

We bought some property recently and heard we will have to drill about 500 feet to install the well. No issues, but 500 feet is insane.

Most states have publicly available water well records that list well depths. You could look at records for nearby wells to see how far your neighbors had to drill. Local drillers should also have an idea on typical depths. The water well at my house is 320' deep.

 

[Ucsdryder]

Well or city water to the property? My only concern would be possible contamination from leakage.

My area deals with this alot and grew up with wells all around. I wouldnt be too bothered by it but Id try to get ownership of the mineral rights.

City water.

 

[RS_Non-Res]

I think for the O/P, the business boils down to this:

The property w/o mineral rights should be $1000's less than the same property with mineral rights, maybe tens of thousands.

 

[TCUHunter34]

I think for the O/P, the business boils down to this:

The property w/o mineral rights should be $1000's less than the same property with mineral rights, maybe tens of thousands.

Potentially, all depends on level of production and income generated. You can ask the owner for check stubs if he’d be willing to show them, probably not though since the owner wants to keep the minerals.

Sounds like it’s a home they may want to live in for a long time. Not owning the minerals is very unlikely to impact your level of happiness living in the home/property. Owning the minerals is an added benefit that you need to determine if it’s worth paying for or not.