"Development Companies Sell Homes — But Keep The Rights To The Oil And Gas Underneath"
U.S. homebuilders and developers are increasingly keeping the rights to oil and natural gas resources beneath their houses, and they’re keeping it very quiet. That means that when buyers purchase their homes, they have no idea that the natural resources underneath don’t belong to them — or in some cases, even that they’re there at all — and can be sold off to energy companies at any time.
That’s what a new report from Reuters has found. Companies like D.R. Horton, the largest homebuilder in the U.S., are holding on to the mineral rights of homes with “little or no prior disclosure” to the homeowner. According to Reuters, D.R. Horton has “separated the mineral rights from tens of thousands of homes in states where shale plays are either well underway or possible, including North Carolina, Alabama, Mississippi, Virginia, New Mexico, Nevada, Arizona, Oklahoma, Utah, Idaho, Texas, Colorado, Washington and California. In Florida alone, the builder has kept the mineral rights underneath more than 10,000 lots, a review of county property records shows.”
In most of these states, Reuters notes, the home seller isn’t even legally obligated to tell buyers that they’ll have no rights to the natural resources beneath their house if they purchase it. Some homebuilders and developers will include it in sales contracts, but it’s often buried, and unless they hire a lawyer to help them through the process, homebuyers often don’t read the paperwork thoroughly enough to catch the fact that they’re giving up all mineral rights to their property.
“This is a huge case of buyer beware,” Professor Lloyd Burton, professor of law and public policy at the University of Colorado Denver, told Reuters. “People who move into suburban areas are really clueless about this, and the states don’t exactly go out of their way to let people know.”
Members of one Colorado community highlighted in the story found out about the natural gas under their homes when an energy company invited them to a community meeting, where the company announced it would begin drilling under the neighborhood. The community had no say in whether or not the fracking would occur, but — to reassure the community — the company promised residents that they would be able to help choose the shrubs and trees that would be planted to minimize noise from the drilling operation. The community fought against the fracking, but lost the case, with the city council deciding that the fracking plan was acceptable under local land-use laws.
“We were shell-shocked,” said Mark Schreibman, a homeowner in the Colorado town who is now running for city council. “No one ever thought they would frack here — for any reason.”
They weren’t the only ones. Janet Damon, a homeowner in Denver, said the possibility of fracking in her community “has caused so much anxiety for families living in this radius that people started having health issues, panic attacks, because they’re so concerned about their kids and families.”
It’s not surprising that these homeowners feel desperate about their situations. Multiple studies have outlined the health and environmental effects of fracking operations — a recent report from Pennsylvania found residents living near natural gas operations suffered from a range of health effects, including skin rashes, infections, headaches and chronic pain. The movies Gasland and Gasland II made the sight of tap water catching fire a chilling symbol of fracking’s effect on nearby residents. Tying these health and contamination effects to fracking is difficult, however, because oil and gas companies routinely settle lawsuits with compensation to the affected residents but also with a gag order, which makes the residents swear to never speak of their experience with fracking operations again. That way, the oil and gas companies can testify to Congress and say there are “no documented cases” of contamination from their operations.
Some states are imposing slightly stricter laws on natural gas companies, requiring them to make the chemicals they use in the fracking process public, for instance. But so far, a home developer keeping the rights to mineral resources and not explicitly telling the homebuyer that that’s what it’s doing — rather than burying it in the housing contract — is perfectly legal in many states. And that’s good news for oil and gas companies, because dealing with the developers directly, rather than going door to door asking residents to lease the oil and gas under their property, makes it possible for the companies to “lock up entire neighborhoods via a single lease.”
“We appreciate and recognize [the residents'] concerns,” one energy company executive told Reuters. “But it doesn’t change what the state of Colorado allows us to do.”