Recently it seems as if our team has had some sort of mineral issue on every transaction that we do. Where mineral rights used to be rarely mentioned during negotiations, they are now almost always a factor in the contract. They are especially important in the DFW area due to the discovery of the Barnett Shale--the largest onshore natural gas field in the United States. I see drilling rigs almost everywhere I go.
Because we've had so many dealings in mineral rights as of late, I recently attended a seminar entitled "Understanding the Barnett Shale" by David Fair of Hexter-Fair Title Company. I wanted to share the following facts that I learned at the seminar and feel are relevant to both consumers and agents:
- The Barnett Shale was discovered October 15, 1981 in Newark, TX.
- From west of Fort Worth east to Dallas and south, the Barnett Shale covers an estimated 5,000 square miles and at least 18 counties.
- Geologists estimate it formed over 350 million years ago.
- The Barnett Shale is estimated to contain up to 30 trillion cubic feet of natural gas resources.
- Horizontal drilling made it possible to produce gas in commercial quantities from the formation.
- As of June 2008, 7,776 drilling permits have been issued.
- Gas wells are drilled approximately one mile below the earth's surface into the shale.
- A well in the Barnett Shale typically takes 20-30 days to drill.
- Notices of drilling are generally sent to residents & property owners within 1,000 feet of a well site.
- Each well is expected to produce 20-30 years or more.
- The Texas Railroad Commission and Texas Commission on Environmental Quality regulate the operation of drilling the wells.
- At the end of 2007, the Barnett Shale had generated an estimated 83,823 permanent jobs.
- In addition to billions of dollars in economic activity, the State of Texas receives an estimated $212 million in severance taxes from activity in the Barnett Shale. Other types of state tax revenues and fees are also positively affected with the total fiscal stimulus reaching $715.5million.
Because of the money, complexity, and expertise involved with mineral rights, we now recommend that our clients contact an oil and gas attorney to properly negotiate these rights. Agents can no longer write mineral clauses into the contract without fear of litigation. My understanding is that the Texas Real Estate Commission now views an agent as practicing law if mineral rights are addressed in the special provisions section of the contract.
If mineral rights are not addressed within the contract, the mineral rights go with the buyer. (As David Fair said, "Silence means safety.") The buyer would know if the mineral rights are partially or fully owned by anyone else when they receive the title commitment. The buyer should check Schedule B to see if there are any mineral exceptions.
My understanding is that both TAR and TREC will be coming out with new forms later this year to help address the mineral issues facing consumers.
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