I am looking at buying acreage here. I am from back East and I have heard that you have to be careful buying land in Colorado because a big oil and gas company can come in and drill in your front yard if you don’t own the mineral rights. So here are my questions: How do I find out if there are mineral rights, how do I find out if I will own hem, and if I don’t own them, what might happen?
Dear Cautious Buyer,
You are wise to inquire about this interesting facet of law in the West. Mineral estates and surface estates are two distinct and separate private property rights. They may both be owned by the same party or may be owned (or leased) by one or more different parties. When much of the West was patented (parceled up), the U.S. government reserved many of the mineral estates in their name. Other mineral estates that were originally owned by some surface estate owners often became divided up in family inheritances and/or sold off or leased to oil and gas companies during the course of many years. Therefore, it is seldom that you would ever buy a property in Colorado where you own all or even part of the mineral estate. This is true if you are buying a home in Beaver Creek or an outlying acreage.
The Colorado Real Estate Commission includes in every contract to purchase property, a special section that explains this “severed” or “split estate” issue. In paragraph 8.7 the Title Advisory, the Real Estate Commission put the following in bold faced sentences in every property purchase contract:
“The surface estate may be owned separately from the underlying mineral estate, and transfer of the surface estate does not necessarily include the transfer of the mineral rights or water rights. Third parties may hold interests in oil, gas, other minerals, geothermal energy or water on or under the property, which interests may give them rights to enter and use the property.”
I presume your Realtor has pointed this out if you have drafted an offer. The title company should have the recorded information about the mineral rights ownership and I would advise that you have an attorney look at the information and interpret it for you. The ownership chain can be extremely complicated.
The good news is that there are laws that give the surface owner some say where drilling could occur (so it will not be in your immediate front yard), and common practice is that large oil and gas companies usually negotiate with the surface owners on placement and often compensate them for any surface damage. Besides speaking with an attorney that is knowledgeable in minerals, you can talk to the Colorado Oil and Gas Conservation Commission and they can answer many questions you may have. Although there are never any guarantees, your knowledgeable Realtor can help you understand the likelihood of mineral estate impact on the space you are interested in by giving you the history of the area.
Joan Harned is an owner-broker for Keller Williams Mountain Properties and heads up Team Black Bear, her own real estate team. Harned has been selling real estate in Eagle County for 27 years, is a past chairman of the Vail Board of Realtors, past Realtor of the Year, past director on the Great Outdoors Colorado Board and a member of the Luxury and Land Institutes. Contact Harned with your real estate questions at Joan@TeamBlackBear.com, 970-337-7777 or www.SkiAndTeeHomes.com.