Landowners' Rights and Mineral Leases in NC » Contract Agriculture Reform

If you are a farmer or landowner in Lee, Chatham, or Moore Counties in North Carolina, you may be approached by companies interested in leasing your mineral rights and tapping potential natural gas deposits beneath your land. (1)

Always seek legal advice before signing these contracts. Mineral rights leases are binding legal contracts that may have unexpected impacts for you and your family. RAFI has been working with NC State University and other legal experts to analyze the contracts being offered in our state, and we have serious concerns about potential liability and other impacts on farmers and landowners.

Hydraulic fracturing, shale and North Carolina

Natural gas is found in between layers of shale, sandstone or limestone.(2) Natural gas has been found in shale formations that run under central North Carolina and is concentrated in the Deep River Basin.(3)

Gas in this kind of rock formation is normally mined through horizontal drilling and hydraulic fracturing, also known as fracking.(4) In hydraulic fracturing, a drill shaft goes down into the layer of gas-bearing shale, then turns and runs horizontally for up to a mile. Water and chemicals are pumped at high pressure into the rock, causing it to break apart and release the gas that is trapped in tiny pockets in the shale.(5) Horizontal drilling and hydraulic fracturing are not currently permitted under North Carolina law.(6)

Protecting your propety rights

1) Talk to a lawyer. Gas leases are usually written to benefit the company, not the landowner, and can be difficult to understand.(7) Do not sign a contract without consulting a lawyer with experience in oil and gas leasing. For help finding legal representation, contact RAFI.

Leases don't just grant the rights to the minerals under your land. They can give the leasor the right to explore, drill, build, and travel across your land, and they can have major financial and practical impacts on your farm and your family.(8)

Always get agreements in writing. Leases are legal documents, and take precedence over any verbal agreement you might have with a company.(9)

2) Take time to explore your options. Mineral rights leases are binding legal contracts. Even if you sell your property, the buyer must accept the lease along with the land.(10) Leases often contain language saying that they will extend as long as gas can be extracted from the land.(11) You have time to consider any offer, to consult an attorney, and to negotiate if you decide to go forward.

The kinds of drilling that are normally used to extract these types of gas deposits are currently illegal in this state. According to Ted Feitshans at NC State Cooperative Extension, this means that North Carolina landowners are being offered abnormally low prices for their land. Most leases in North Carolina offer $2 - $3 an acre. In New York and Pennsylvania, landowners are leasing for $2,500 - $5,000 an acre.(12)

3) Don't accept responsibility for the gas company's actions. Mineral rights leases may put liability for environmental harms and other liability issues on the landowner, not the drilling company. If drilling materials are not handled correctly, they can contaminate surface and groundwater, which can lead to lawsuits and enforcement by government agencies.(13)

Drilling for gas may also interfere with local zoning ordinances, participation in conservation or present-use tax value programs (14), and other land-use regulations. Make sure the company is responsible for complying with local regulations, paying any fines and compensating you if you no longer qualify for one of these programs.

4) Know the impact on your land. Large drilling stations, roads, gates and buildings are required to extract gas through hydralic fracturing.(15) The drilling process also requires a large amount of water (up to 3-4 million gallons of water).(16) Some contracts allow the company leasing mineral rights to build buildings, pipelines and roads or to use a well on the property, even if this interferes with other activities, such as farming or hunting.(17)

5) Never provide a warrantee of title. Leases often include the clauses that leave the landowner responsible for any costs, including exploration or drilling, if it turns out that the landowner does not actually own the mineral rights on their land.(18) Mineral rights can be sold separately from land, and this kind of property title may be virtually impossible to trace.(19) Mineral rights in large portions of the Deep River Basin were sold during the Depression, so there is a relatively good chance that property titles in this area are separated from mineral rights titles.(20)

Experiences in other states

Hydraulic fracturing and horizontal drilling have been used in parts of the Midwest for years, and are now being used in Pennsylvania and New York as well. Landowners and farmers in these states have expressed concerns about the effects that drilling have on their lives and livelihoods. The New York State Senate has passed a moratorium on hydraulic fracturing that would give the state more time to study the impacts of hydraulic fracturing.(21) The United States EPA is conducting a study of the impacts of hydraulic fracturing, including its effect on drinking water. The New York State Department of Energy and Conservation is developing an environmental impact statement on hydraulic fracturing.

Cornell University Cooperative Extension, Penn State, and the North Carolina Cooperative Extension Service at NC State have all developed resources for farmers and landowners that explain concerns with gas leases and the impact of hydraulic fracturing on land, groundwater, and health. The New York State Attorney General has also issued a pamphlet warning landowners about misinformation surrounding gas leases.

Learn more

RAFI's Comments on NC House Bill 242's Natural Gas Drilling Study (PDF)

Frequently Asked Questions about Oil & Gas Leasing and Production in North Carolina: What Every Landowner Should Know from North Carolina Cooperative Extension Service (draft document)

Gas Rights and Right-of-Way Leasing Considerations for Farms and Woodlands from Cornell Cooperative Extension, NY. Tips and a list of issues to consider when evaluating a mineral rights lease.

Oil and Gas Leases: Landowners' Rights from the New York State Attorney General's Office. This short brochure includes common problems with leases, tips for landowners, and a list of common misleading information about oil and gas leases.

Penn State Law Natural Gas Exploration Online Resources

Marcellus Shale: What Local Government Officials Need to Know from Penn State Cooperative Extension

Sources

(1) Murawski, John. June 26, 2010. Natural Gas Rights Going Fast in Lee County. News & Observer.

(2) Cornell University Cooperative Extension. 2008. Gas Exploration and Leasing On Private Land: Tips and Guidance for New York Landowners.

(3) Reid, Jeffrey C. and Taylor, Kenneth B. 2009. Shale Gas Potential in Triassic Strata of the Deep River Basin, Lee and Chatham Counties, North Carolina with pipeline and infrastructure data. North Carolina Geoloical Survey, open-file report 2009-01.

(4) King, Brandon, and Feitshans, Theodore A. 2010. Frequently Asked Questions about Oil & Gas Leasing and Production in North Carolina: What Every Landowner Should Know (draft). North Carolina Cooperative Extension Service.

(5) King, Brandon, and Feitshans, Theodore A. 2010. Frequently Asked Questions about Oil & Gas Leasing and Production in North Carolina: What Every Landowner Should Know (draft). North Carolina Cooperative Extension Service.

(6) Murawski, John. June 26, 2010. Natural Gas Rights Going Fast in Lee County. News & Observer.

(7) 2008. Gas Leasing Scams and Rip-Offs: Ways to Separate You from Your Property Rights and Money. Penn State College of Agricultural Sciences Agricultural Extension.

(8) Weidner, Krista. 2008. Natural Gas Exploration: A Landowner's Guide to Leasing Land in Pennsylvania. Penn State College of Agricultural Sciences Agricultural Extension.

(9) 2008. Oil and Gas Leases: Landowners Rights. Office of the New York State Attorney General.

(10) Feitshans, Theodore A. 2010. Evaluating Oil and Gas Lease Proposals. Powerpoint Presentation. NC State University.

(11) Feitshans, Theodore A. 2010. Evaluating Oil and Gas Lease Proposals. Powerpoint Presentation. NC State University.

(12) Henderson, Bryan. July 27, 2010. Natural Gas Drilling Coming to NC? The Charlotte Observer.

(13) King, Brandon, and Feitshans, Theodore A. 2010. Frequently Asked Questions about Oil & Gas Leasing and Production in North Carolina: What Every Landowner Should Know (draft). North Carolina Cooperative Extension Service.

(14) King, Brandon, and Feitshans, Theodore A. 2010. Frequently Asked Questions about Oil & Gas Leasing and Production in North Carolina: What Every Landowner Should Know (draft). North Carolina Cooperative Extension Service.

(15) Cornell University. 2010. Natural Gas Development: Frequently Asked Questions: Local Government and Community Impacts.

(16) Rogers, Michele, et al. 2010. Marcellus Shale: What Local Government Officials Need to Know. Penn State.

King, Brandon, and Feitshans, Theodore A. 2010. Frequently Asked Questions about Oil & Gas Leasing and Production in North Carolina: What Every Landowner Should Know (draft). North Carolina Cooperative Extension Service.

(17) King, Brandon, and Feitshans, Theodore A. 2010. Frequently Asked Questions about Oil & Gas Leasing and Production in North Carolina: What Every Landowner Should Know (draft). North Carolina Cooperative

(18) King, Brandon, and Feitshans, Theodore A. 2010. Frequently Asked Questions about Oil & Gas Leasing and Production in North Carolina: What Every Landowner Should Know (draft). North Carolina Cooperative

(19) King, Brandon, and Feitshans, Theodore A.. 2010. Frequently Asked Questions about Oil & Gas Leasing and Production in North Carolina: What Every Landowner Should Know (draft). North Carolina Cooperative

(20)Reid, Jeffrey C. and Taylor, Kenneth B. 2009. Shale Gas Potential in Triassic Strata of the Deep River Basin, Lee and Chatham Counties, North Carolina with pipeline and infrastructure data. North Carolina Geoloical Survey, open-file report 2009-01.

(21) Efstathiou, Jim Jr. Aug. 4, 2010. New York Senate Approves Halt to Shale Gas Drilling Over Water Safety. Bloomberg News.

 

Page Updated 09.28.10