Mineral Rights Leasing in North Carolina. Jordan Treakle - Mineral Rights Project Coordinator The Rural Advancement Foundation International-USA

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1 Mineral Rights Leasing in North Carolina Jordan Treakle - Mineral Rights Project Coordinator The Rural Advancement Foundation International-USA

2 Concerns over Predatory Mineral Rights Leases RAFI has worked closely with lawyers, NC St. Cooperative Extension Specialists and the Wake Forest School of Law to analyze NC Mineral Rights Leases Concerned that Leases are taking advantage of NC landowners lack of knowledge of property rights & experience with mineral extraction RAFI s goal is to improve public understanding of landowner property rights, mineral rights leases, and the potential impacts of fracking so that landowners can make informed decisions about their property

3 14 counties could be affected by fracking Over 9,000 farms on over 1.3 million acres of farmland Gas companies are targeting Lee, Moore, & Chatham Counties Companies active in NC since 2010: Whitmar Exploration Co. Old North State Tar Heel Natural Gas Magnum Land Services

4 Mineral Rights Leasing Process Legal contract that defines the relationship between the landowner and the drilling company Determines all payment terms, drilling phases, & activities of gas companies on landowner s property Landowner may review the contract, work with an attorney, add clauses, negotiate payment terms and contract length Landowner receives bonus payment when contract is signed, and in most cases marks the start of the contract

5 Predatory Mineral Rights Leases: Compensation NC leases offer landowners little compensation $2,000 - $15,000 per acre bonus payments in other regions $1 - $20 bonus payments in North Carolina Minimum Royalty Payments of 12.5% Unreasonably long drilling phases Typical Primary drilling phase 3-5 years Primary drilling phases in NC leases years, start date unclear Delays landowner royalty compensation and limits landowner ability to renegotiate lease with different company Drilling infrastructure development without gas extraction and royalties

6 Predatory Mineral Rights Leases: Landowner Liability Few landowner protections that limit financial risk and legal liability for landowners Landowner payment for infrastructure development such as wells-pads and access roads deducted from royalties No landowner compensation for damages from accidents and spills No landowner indemnification for damages to neighbor s property from drilling activities Neighbors suing neighbors over damages Leasing impacts on property value and eligibility for mortgage application Leases are often transferred to other companies without landowner consent or notification

7 Predatory Mineral Rights Leases: Land Impacts Few landowner protections that limit land impacts and damages to landowner property Lack of compensation for impacts to land and water resources such as agricultural fields, timber, or family water wells for construction of well-pads, compressor stations, and access roads No minimal set-back requirements for drilling infrastructure No compensation for water withdrawals on landowner property No reclamation requirements for drill-site after extraction has ceased

8 Split Estates Occur when surface estate and mineral estate are split Mineral estate is dominant Few rights for surface estate owners who do not own their mineral rights Inadequate notification to surface owner of drilling activities: 7-14 days before company enters property No landowner influence on the leasing process or location of drilling infrastructure No compensation for damages ~6,000 acres of Split Estates in Lee county alone, unknown number of surface owners will be affected.

9 Community Impacts Degraded rural infrastructure from significant truck traffic Social impacts from influx of non-local workers into rural communities Strain on emergency services Large landowners vs. small landowners

10 Potential Impacts on Farms Development of access roads and pipelines through crop fields, timber resources, or livestock pasture Spillage of fracking fluids or toxic waste water on agricultural lands Increased erosion from well-pad development, access roads, and increased truck traffic Soil compression affects crops for 3-5 years Top soil removal and top soil/sub soil mixing Damage to water drainage systems Potential impacts on water resources used for irrigation Possible affects on Farm Plan and Organic certification Disqualification from USDA/State cost-share/crep/farmland Preservation Programs & possible financial penalties

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12 Considerations Natural gas market and company competition in NC Current NC drilling infrastructure Immediate landowner liability (ex. mortgage disqualification) while economic benefits (royalty payments) are not. Drilling may not take place for 20+ based on lease terms Most active drilling companies are from out-of-state EPA is currently studying impacts of drilling, final study results out in 2014 Few attorneys in NC that can assist landowners with fair leases that protect their land and financial stability NC landowners are new to mineral rights leasing and risk management strategies necessary for fair contracts and safe drilling

13 Resources NCSU Department of Agricultural and Resource Economics Cornell Natural Gas Resource Center Dev/Pages/default.aspx National Agricultural Law Center Renewable Energy Reading Room: Water wiki Penn State Agricultural Law Resource and Reference Center al_law_center/resource_areas/natural_gas_exploration NC Department of Justice, consumer complaints

14 RAFI s Mineral Rights Lease Webpage: Jordan Treakle Mineral Rights Project Coordinator jordan@rafiusa.org;