Blogging Tulsa Real Estate: August 2008

Real estate is like a cake.  When you own the entire cake, you own the land in fee simple, essentially from the top of the ground to the center of the earth.  When you own land in fee simple, you own the icing and the cake itself. 

When someone sells the land and retains the mineral rights, then it is said that they sever the mineral rights.  The surface owner effectively owns just the icing on the cake, which effectively means everything "from the grass roots up."  The mineral owner owns everything from "the grass roots" to the center of the earth. 

The pretty houses on the surface of land are like flowers on a cake.  Since it is not nice to mess up pretty flowers, in Oklahoma a new well cannot be spotted within 200 feet of a house.  However, you can build a house close to existing wells. 

Despite the fact that surface owners effectively own only the top few feet of land, they really own quite a ways down beyond the "grass roots." This probably amounts to tens of feet, but not hundreds of feet down. 

In Osage County, the landowners own just the surface.  The Osage Nation owns all the minerals. 

Generally in Oklahoma it is the surface owners who own the coal on the surface of the land and it is usually the surface owners who make agreements to have their properties strip mined for coal.  However, the deeper coal zones can contain coal bed methane, a fertile source of natural gas; therefore the mineral owners will own those coal beds.

When you buy a house in Oklahoma, find out whether or not you are purchasing it in fee simple.  If you are purchasing a property with mineral rights, your next question is, "What percentage of mineral rights are included?" 

If you do not own at least 50% of the mineral rights, then you cannot control what happens to your land.  It is incumbant upon all real estate sales representatives to explain this concept to anyone moving into Oklahoma from out of state. 

This concept is hugely important and is understood by most native Oklahomans in rural areas.  The emerging legal question is whether or not cities have the right to deprive land owners of their right to the minerals they own.

Homeowners should be encouraged to attempt to acquire the mineral rights to the land under them, because new technologies are making it much more cost effective to produce oil where heretofore it was not profitable. 

In short, try to get at least 50% of the mineral rights if you cannot purchase your property in fee simple.

http://TulsaRealEstateWeb.com

http://NortheastOklahomaRealEstate.com

http://BixbyOklahomaRealEstate.com

http://dsolano.homesandland.com

The interface between the rights of surface owners and mineral owners is very interesting and will become more of a problem in oil-producing states as we push to "drill here now" in an attempt to reduce our dependence on foreign oil.

I attended a meeting of the Sand Springs (Oklahoma) City Council on Monday evening, August 11, because I am a shareholder in an oil company that has plans to drill wells on it's lease in Tulsa County.

The Lancaster Lease has been in constant production since 1993.  Many of the wells on the lease were originally drilled in the 1920's.  Three new wells have already been drilled in the north half of the lease in 2008.  Plans are being made to drill in the more populated south half of the lease.

The lease lies outside the fenceline of the City of Sand Springs.

In the city of Sand Springs it is presently illegal to drill for oil inside the incorporated city limits, however, drilling is allowed inside the fenceline.  There is a distinction between being inside the fenceline and being inside the incorporated city limits. 

The Lancaster Lease sits outside the fenceline and so there has been no question that drilling is allowed.

There are a number of homes on the surface of the land occupied by this lease.  In Oklahoma, new oil wells cannot be spotted within 200 feet of a house. 

Landowners have recently been notified by the oil company that a seismic study would be conducted to determine where the best places will be to spot new wells.

The surface owners were aware that they did not own mineral rights under their land and that under the laws of the State of Oklahoma there was nothing they could do, because in Oklahoma the mineral estate is dominant over the surface estate.

Nevertheless, the surface owners have made an end run around the problem by petitioning the Planning Commission of the City of Sand Springs to annex them into the incorporated city limits.  (Heretofore they have not even been inside the fenceline.)

They went before the Planning Commission on August 5, 2008 without fully disclosing the reasons for the annexation, i.e., to stop the upcoming drilling.  Moreover, the oil company was not notified of the Planning Commission meeting.

On Monday August 11th the City Council of the city of Sand Springs met in regular session to consider Ordinance No. 1165 -- Annexation --  145th West Avenue and Weaver Road, 16 Owners. 

The agenda of the meeting stated that, "Council will consider approval of Ordinance No. 1165 annexing approximately 109.271 acres consisting of 19 tracts with 16 owners.  The property is generally located at the northwest corner of 51st Street and 145th West Avenue in Tulsa County.  The Planning Commission held a public hearing regarding this annexation on August 5, 2008 and voted 6-0-1 to recommend approval of said ordinance."

It became clear during the City Council meeting that the surface owners had not fully disclosed to the Planning Commission the reason for their requesting annexation.  The oil company representatives made clear that the oil lease was active and that they have been pumping millions of dollars into the project. 

During the discussion the question of rescinding the prohibition to drill within the city limits was raised by one of the Council members, who cited that the question is currently being discussed by the City of Tulsa.  He said that drilling is allowed within the city limits of Fort Worth, Texas and Oklahoma City, Oklahoma.

Representatives of the Planning Commission attested that the fact that the land being annexed was part of an active oil lease had not been disclosed.  The landowner representative admitted that their reason for wanting to be annexed was to stop the possibility of drilling on their land. 

The discussion by the Council members indicated that they were concerned about taking a vote without further investigation by the Planning Commission.  The City Council unanimously voted to send the issue back to the Planning Commission.

The Planning Commission will meet next Tuesday, August 19th.

I have been told that the same issue is also being addressed in Kiefer, Oklahoma and in Ramona, Oklahoma.

http://TulsaRealEstateWeb.com

http://NortheastOklahomaRealEstate.com

http://BixbyOklahomaRealEstate.com

http://dsolano.homesandland.com