Imagine spending several months collaborating with a developer to build your dream home, and the day has finally arrived to officially own it. It’s just a matter of putting your “John Hancock” on the dotted line to seal the deal, and the home is all yours. You nod from time to time as the closing attorney goes over the small print written on pages and pages of legal size paper, but quite honestly the language is foreign to you.
One of the many documents requiring your signature relinquishes the underground mineral rights of the property to the builder. Your interest is what’s above the ground, so you sign on the dotted line, unknowingly giving the builder rights to drill and explore for gas, petroleum, coal and any other mineral under your property.
According to the wiring service Reuters, this was the scenario when landowners in North Carolina who purchased homes from homebuilder D.R. Horton were required to sign a deed at the loan closing that relinquished mineral rights to its Colorado-based energy company, DRH Energy, Inc. Though what Horton did was legal, the company began returning those rights to homeowners in August 2012 under pressure from the North Carolina Attorney General’s Office.
It was the same scenario in Tampa Bay. The Tampa Bay Times reported that Horton has signed over eternal rights to its energy subsidiary to explore, drill or mine beneath thousands of new home and townhome sites in the Tampa Bay area dating back to 2007. In response to the Tampa Bay Times investigation, Florida lawmakers Rep. Ross Spano (R-Dover) and state Sen. Jack Latvala (R-Clearwater) are sponsoring legislation that would require home sellers to disclose to prospective buyers in advance if they intend to keep the rights.
Now imagine your surprise learning DRH Energy owns the mineral rights of your property. Horton has built homes in subdivisions in six Alabama regions: Huntsville, Tuscaloosa, Birmingham, Montgomery, Auburn and Mobile. Jefferson and Shelby County probate records reveal D.R. Horton Birmingham is actively severing mineral rights under homesites in these counties and deeding them to its energy company.
Horton began mineral rights severing in Jefferson County in August 2007. Horton has deeded mineral rights under more than 200 properties in McCalla Trace, Glen Cross, Tannehill Preserve, Rosemont, Cahaba Manor, Deer Crossings, Green Valley Road, Chatham Crest, Doss Ferry, The Cotswolds, Caufield Park, Morgan’s Run, Chapel Hills, Lake Cyrus, Cheshire, Smith Glen, Southern Trace, Alden Glen, Hidden Valley at Trace Crossings, Owen Park, Letson Farms, Rosser Farms, Rosser Cove, Magnolia South, Belvedere Cove, Hoover Ridge, Briarwood, Oxmoor Glen, Tyler Loop Cove, Tyler Chase, Hidden Valley and Southern Trace to DRH Energy, Inc.
Since January 2010, Horton has deeded mineral rights of more than 100 Shelby County properties to the energy company in Union Station, Kensington Place, Timberline, Old Ivy, Camden Cove, Lacey’s Grove, Chelsea Park, Chelsea Station, Cottages at Chesser, Chesser Plantation, Village at Lee Branch, Polo Crossings and Dunnavant Square.
Alabama Code Section 35 requires any instrument that conveys real estate adhere to certain requirements. One requirement is the deed state what is transferred with the property in the change of ownership. Deeds often contain easements and restrictions — another is whether mineral rights transfer with the sale of the property.
The warranty deeds of homes that have sold on these properties state mineral rights are excepted (not included) with the property. By signing on the dotted line without regard to who owns the mineral rights, homeowners agreed to the terms of the Minerals, Resources and Groundwater Deed DRH Energy owns to their property, which
“releases and waives unto and for the benefit of the Owner of such improved Lot (and such Owner’s successors-in-title thereof) all rights of ingress and egress to enter upon the Surface of such Improved Lot for purposes of exploring for, developing or producing the Minerals, Resources, and Groundwater conveyed by this Deed; provided, however, nothing herein shall be deemed to prevent Grantee, or it’s successors or assigns, from exploring for, developing, drilling, producing, withdrawing, capturing, pumping, extracting, mining or transporting the Minerals, Resources and Groundwater in, on and under and that may be produced from the Lots (including improved Lots) or the Property by pooling, unitization, directional drilling or any other manner or method that does not require the entry upon the Surface of such Improved Lot, and this hereby expressly reserved to Grantee, and its successors and assigns, the rights to explore for, develop, drill, produce, withdraw, capture, pump, extract, mine and transport the Minerals, Resources and Groundwater from the Lots (including any Improved Lots) and the Property (and to have access to and control of underground formations of the Minerals, Resources, and Groundwater) through wells or other structures at surface locations situated outside of the boundaries of such Improved Lot.”
The “Minerals, Resources and Groundwater Deed” gives DRH Energy the right to enter upon the property in order to access any and all substances beginning 30 feet below the finished grade. A surface waiver within the deed prohibits equipment being erected on the property, but nothing prohibits the company from drilling horizontally from miles away. This could allow DRH Energy to engage in forced pooling. Forced pooling, which is legal in Alabama, allows a company to assemble enough properties so that it can drill under your land without your permission — even if you own the mineral rights. The market value of the properties in these subdivisions could be severely affected should DRH Energy choose to exercise its “perpetual right” to drill or build tunnels, shafts or wells “without limitation.” Although the deed specifies that drilling or mining would originate outside the boundaries of the homeowner’s property, the activities would occur underneath it.
Jeff S. Daniel, a Birmingham attorney who practices in the areas of business and finance, including real estate disputes, said Alabama has a long history of mining and ownership of underground resources.
“Throughout our history, Alabama landowners have severed mineral rights from the property,” Daniel explained. “The chain of title of all mineral rights will be found in the Probate Court land records in your county’s courthouse. Many times, current owners are not sure who owns the mineral rights in their communities. The homeowner’s deed may state that the mineral rights are excluded, but not provide the identity of the mineral owner.”
In recent years, developers have kept the mineral rights under homes they build because of the growing movement of hydraulic fracturing, a process of extracting oil and gas from shale formations deep in the earth. Hydraulic fracturing, or fracking, is the process of horizontal drilling and injecting fluid into the ground at high pressure in order to release natural gas inside shale formations.
Dangersoffracking.com reports health hazards of fracking include: 1) Chemicals used are known carcinogens and toxins such as uranium, mercury, ethylene glycol, methanol, hydrochloric acid and formaldehyde. Less than 50 percent of the chemicals are recovered, the rest is left in the ground and is not biodegradable. Waste fluid left in open air pits creates contaminated air, acid rain and ground level ozone. 2) Documented cases of contamination of underground water used for drinking water in nearby cities next to areas of gas drilling, as well as cases of sensory, respiratory and neurological damage due to ingested contaminated water. 3) Fracking has been linked to earthquakes and sinkholes.
Geological studies of Alabama indicate shale formations in two different parts of the state. In Western Alabama sits the Floyd/Neal Shale, which extends from Mississippi. The Conasauga Shale, which lies in the Black Warrior basin and Appalachian thrust belt, extends down from Northeastern Alabama to South Central. According to retired University of Kentucky Earth and Environmental Sciences geologist William Thomas, the Alabama Conasauga shale field contain 625 trillion cubic feet of gas.
Dominion Exploration and Production, Incorporated discovered the gas in 2005, historically the first commercial gas production shale in Alabama. The first shale play in northeast Alabama, the Big Canoe Creek Field in St. Clair County, was established in February 2007 with wells drilled by Dominion Black Warrior Basin, Inc. According to the Oil & Gas Journal, current shale plays are in Cullman, Etowah and St. Clair Counties.
Conasauga shale consists of silica, iron oxide, alumina, lime carbonate, magnesium carbonate and sulfur dioxide. Sulfur dioxide is a colorless gas with a pungent and suffocating odor. It reacts with chemicals in the air to form tiny sulfate particles that can attach inside the lungs. According to the U.S. Department of Health and Human Services, breathing sulfur dioxide can irritate the nose, throat, lungs and cause coughing and shortness of breath. Short-term exposure can cause nausea and vomiting, watery eyes, loss of smell, headache, dizziness and convulsions. Long-term exposure to high levels could be life-threatening by causing chronic bronchitis, emphysema and respiratory illness.
Owning mineral rights is not the only requirement needed to begin extracting minerals in residential areas, Daniel said. “Just because a company owns mineral rights underground, it doesn’t mean they can suddenly appear and begin drilling or digging on your property. For example, most such activities are regulated by the Alabama Oil and Gas Board to monitor oil and gas production in Alabama. AOGB issues a permit for each well drilled and approves the infrastructure of the operation.”
A call was made to D.R. Horton, Inc Birmingham Division President Andrew Hancock, who signed the deeds, to inquire what the energy company intends to do with the mineral rights. Hancock’s executive assistant, Cheryl Basset, referred the inquiry to Corporate Public Relations Vice-President Jessica Hansen in Fort Worth, Texas. The call made to Hansen was taken by Executive Assistant Kathi Edwards, who had no answer for what the energy company plans to do with the mineral rights. Edwards did not have a contact name or number for DRH Energy and advised contacting Hansen by email. Hansen has not responded to emails sent August 7 and 11.