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(submission for January 2015 Gem County Gazette by Gem County Concerned Citizens)

Surprises in Store for Seismic Testing Permit Signers?

Dec. 11th was the latest Gem County Oil & Gas Ordinance meeting, after which the topic of seismic testing came up.  A local realtor had some information about the effect of the gas industry on the ability of people to sell their homes here as the effort to obtain permission for seismic testing, and to obtain mineral rights leases, is ramped up.

Gem County realtors have been finding that banks/mortgage companies have gotten very leery of lending on any property where there is even a seismic testing lease (“permit”) in effect – or even of lending on a place next door to one where there is such a lease!  This is to say nothing of the actual mineral rights lease (permission to drill – oil and gas are considered minerals), the duration of which can be for decades.  While developers like to think (and tell people) that property values will go up – if all goes as they hope and mineral rights owners do get (unguaranteed) royalties from successful gas well development – property values could sink due to any number of factors:  new traffic, noise, dust, fire hazards, air/water contamination or just the risk of these.

This means that:

·       If you sign the seismic lease, or the mineral rights lease, and then want/need to sell your property, you may need to find a rare cash-only buyer. 

·      And if you wish to refinance your mortgage, you may not be able to do so at all within that up-to-2-year period. 

·      Then, perhaps, there is your insurance company’s constraints to consider (some say they will not renew policies for those who lease). 

·      There is also a standard clause in mortgage documents that allows the lender to call in the loan if the property is subject to any type of environmental harm. 

·      And as was reported at the G&O meeting, a great many prospective buyers looking here are now savvy/leery about the gas development coming to this area and are themselves demanding disclosure on leases and mineral rights, etc. – and turning away if these are found.

The purveyors of these documents naturally do not make sure that the property owners know what ramifications there may be if they sign.  Absentee owners are simply mailed a letter and don’t even have affected neighbors to confer with.  And some people have heard that they inevitably must allow seismic testing – and are feeling very worried about all this.

You do not automatically have to let someone onto your property for seismic testing.  You may hear from a promoter of such a lease that they’re going to have access to a public road or a right-of-way next to you anyway (common claim; not necessarily true, since a road easement may be only for a certain type of access) or that “you won’t be able to stop us anyhow” (also a recurrent theme).  You may sign if you want to; but know that these are not valid reasons for your signing – they are ploys to get you to sign.  You have every right to take your time to make a decision, one way or the other.

(And seismic testing is not “just imaging”, as door-ringers are claiming – it involves vibration of the ground…which has been known to affect springs or improperly cased water wells, or knock down shallow-rooted trees.  Unless only sensors are to go on your specific property, “thumper trucks” (veibroseis vehicles) will be used; and outside of a 200’ setback from structures/wells, dynamite charges may also be set in drilled holes.  Your agreement could limit specific times, numbers of times, or types of access, or access in specific locations, such as a garden or feeding area.  Make sure that any agreement you sign doesn’t release the survey company from damages.)

The reason some people are convinced that they must allow such access may be that, indeed, our dollar-hungry state legislators have given some unparalleled rights to the gas and oil industry.  But these involve, specifically, taking the actual mineral resources, under a certain condition.  Developers were not given the right to trespass on the surface of the land for purposes of seismic testing.

If you have already signed a seismic testing lease – which will help the gas exploration company establish where the gas is so they know where to concentrate their efforts – you are stuck with this decision and its effects…but only for the lease period.  This is entirely separate from a mineral rights lease that could lead to royalties (if a well is actually drilled, and if it is as successful as projected).  That is a much more serious matter, as such leases are for a far greater number of years and involve far greater risks…which concern lenders (and insurers – and home buyers) even more.  (Beware of any seismic testing lease permit that includes an option to lease mineral rights as well.)

Part 2:  Mineral Rights Leases

The decision to lease mineral rights under your land may be out of your control if another entity owns those rights.  Such rights often do not accompany a house sale (and the disposition of mineral rights often doesn’t appear anywhere in your mortgage/deed/title records – you would have to do a lengthy title search at the Assessor’s office to trace this).  This is called a “split estate”, where one party owns only the surface land (the “real estate”) and another owns the extractive rights below the top 3 feet of it.

If you do not own your mineral rights, it’s possible that the mineral rights holder may have already signed a document to allow seismic testing.  If this is the case, and you would not have allowed seismic testing access on your surface land, you may want to contact a lawyer.

If you do indeed own your mineral rights, the gas exploration company may again be at your door…in fact, whether or not there is gas under your land!  The legislature is expected to soon vote in new rules that give oil and gas developers rather shocking powers of “forced integration/pooling” common to other G&O states.  The upshot will be that they can take gas even from those who are utterly unwilling to lease their mineral rights...if they are able to talk certain mineral rights holders of large properties, or enough mineral rights holders of smaller properties, into leasing.

It is to be set up like this:  If the company can get the owner/s of 55% of the acreage in any given 640-acre section to lease their mineral rights to them, then they can force all the other owners in that section to accept drilling on their land as well…even though they "own" mineral "rights" under their land and don’t consent to lease them.  (Would this be unconstitutional? a clear violation of private property rights?  No matter – it’s done elsewhere, and it’s likely soon to be done here in Idaho.)

So even if everyone's land isn't drill-worthy, the exploration company will still be trying to get up to 55% to sign mineral rights leases…so that they can take gas from wherever they want to within that 640-acre section (and beat out any other extraction company that may be trying to do the same).  It's worth it to them to pinpoint (via seismic testing) where the best access points to the gas reservoir are…because even if your property is small and there's a too-close setback to your house to put a drill rig on it, they could always diagonal-drill under your property line to get to it (or perhaps build a road across your land to another location).  They'd rather pay you a share of the takings than not achieve the big Taking of "force-pooling" everyone into the "integrated" 640-acre “unit”.

If your property happens to be force-pooled in a successfully integrated unit, you’ll be compensated with the lowest royalty accepted by willing signers in the unit.  Too bad if you’d rather have waited for gas prices and therefore the value of your lease to go up – or rather not have had a gas(/oil) well, storage tanks, or access routes to them on your property at all. 

What to Do?

You might want to talk to your own mortgage holder and insurer, if not a lawyer, before you sign any papers from an “Alta Mesa” or “AM Idaho” representative.  You may also wish to make sure your neighbors understand what they will be getting themselves (and you) into by signing either type of lease.

You can find a list of questions/cautions/suggestions for seismic leases at:

Seismic testing itself has the potential to shake things you wouldn’t want shaken up or shaken apart; but more importantly, your decision could let loose undesired consequences for your future financial welfare as well.  We believe that all residents should be fully informed so as to make the right decision for them.  Take your time to consider your options.

The next Gem County Oil & Gas Ordinance meeting will be Thursday, Jan. 8th, 6:30pm at the County Courthouse.

Gem County Concerned Citizens


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