Saturday, January 11, 2014

Free Gas - Part 1 (Do You even Own Your Minerals?)

The cold snap that we just experienced got me thinking about how much "free gas" has influenced our farm life.  We use it to heat our house, workshop, water and tiny seed-starting greenhouse.  We did not have gas when we moved to our present farm in 2001 and it wasn't until several years and many cords of firewood later that it became a reality.  Although free gas is relatively common in this neck of the woods, many people have never heard of such a thing.  Over the course of several blog posts I plan to explore this topic and how it affects our current farm and the one we lived on just down the road when we first moved to Island Run in 1996.

First off, please remember that I am not an attorney, or anything legal for that matter, but have experienced way more than I have cared to regarding land and mineral ownership issues in WV.  In WV, minerals are generally owned separately from the surface and were split off generations ago. It is an odd arrangement to those who are not familiar with divided ownership but to us natives it is just the way it is and has always been. Many state that have historically had minerals extracted are subject to having divided ownership.  It is in some ways similar to water rights in the west. Anyone contemplating doing anything in WV regarding land needs a GOOD real estate attorney!

If you are lucky enough to be the sole owner of the mineral rights under your property and decide you want to lease to an oil and gas producer, then you can proceed unimpeded and can negotiate various things of importance to you in the lease.  Often though, the minerals are owned by jointly many individuals, having been passed down over the generations to various heirs or sold off when times were tough. Small County Courthouses are often buzzing with attorneys trying to sort out if Dorothy, who was your great grandmother's twin sister, really did sell her mineral interest to her daughter's ex-husband way back in the 30's in order to afford to buy two hogs.  Sometimes it takes years of work to locate and resolve issues regarding these long lost heirs.

When attempts to locate and buy these miniscule owner's (often 1.5 percent or less) in your minerals fails, one of the only remaining options to settle things is a land partition suit initiated by one of the landowners.  Generally if there are unknown heirs, the property cannot be divided (or partitioned) equitably among all the owners and the property is sold on the Courthouse steps to the highest bidder.  Sometimes just the minerals are sold and sometimes it is the surface and sometimes it is both the minerals and the surface land.  The very big downside to this arrangement is that you might get out-bid by someone with deeper pockets than you and the property is no longer yours. Proceeds from the sale and I think any future income that may result on behalf of the long lost heirs is somehow escrowed  practically forever and the new owners of the land (and/or minerals) now may proceed to do what they want to with the property. The whole process regarding partition suits and unknown heirs is confusing with lots of twists and turns so please don't quote me on any of this. 

If you are not the sole mineral owner of the land you occupy or have no ownership in the minerals at all, you really have no choice in whether or not a well is drilled on your property.  The decision is up to who ever owns the minerals.  That can be a scary proposition when you are faced with what amounts to a construction project on your property that you have little to no control over.  There are a few basic set-back requirements but in general the well gets drilled where it is easiest to get the equipment to or to where the well spacing dictates it needs to be.  This is not a good thing if it is plopped down in the middle of your only tillable corn patch or your flat hay field.  The good thing is however that often free gas was negotiated into the mineral sale way back when and many folks who do not own their minerals but live on the property still get free gas.

We have experienced both situations since moving back to WV.  If you have an interest in the topic of free gas, stay tuned for Part 2.

1 comment:

  1. Hi Shelley! Yes, I think it's very interesting to learn about the mineral rights and free gas in West Virginia. I've often wondered about that when "free gas" was mentioned in different blogs I've read.