Article Courtesy of
The Tampa Bay Times
By Drew Harwell
Published November 16, 2013
BRANDON — When Mallory and Zach
Sinclair were looking for their first home, they swooned
over a new townhouse in the Brandon subdivision of
Whispering Oaks. With well-manicured lawns, it looked
fresh and untouched, with streets bearing pastoral names
like Spring Flowers and Summer Clouds.
But in January, when the young
parents cracked open their closing papers, they noticed
an alarming clause. Their home builder had quietly
signed away the rights to the land beneath their home to
its own energy company. It now had free reign deep below
the surface to drill, mine or explore.
Selling underground mineral rights
has long been big business in the oil- and gas-rich
boomtowns of Texas, North Dakota and beyond.
But homeowners
here might be surprised to learn
that they, too, could be part of the
prospecting. A Tampa Bay Times
analysis found that D.R. Horton, the
nation's largest homebuilder, has
pocketed the rights beneath more
than 2,500 Tampa Bay homesites,
whether the homeowner realizes it or
not.
It's unclear what
homebuilders expect to find deep
beneath Tampa Bay's suburbs. Homes
here sit on swiss-cheese blocks of
water and limestone, known more for
sinkholes than fuel or treasures.
But with recent
advances in drilling technologies —
including hydraulic fracturing,
known as "fracking" — tapping into
once-untouchable natural gas and oil
reserves, experts say builders see
the deeds as lottery tickets:
potential jackpots buried beneath
homes they can still sell at full
price.
"With the
possibility of fracking, as stupid
as it seems to do that in Florida,"
Tampa land-use
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Clockwise from top left: Mallory Sinclair poses for a portrait with
Piercen Sinclair, 6 months, her husband Zachary Sinclair, and Greyson
Sinclair, 3 in front of their townhouse in Brandon on October 30, 2013.
What their builder failed to tell them one important fact: much of the
land beneath them wasn’t theirs. Six months earlier, their builder had
given its own energy subsidiary free reign to drill, mine or explore
whatever is underground.
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attorney Pamela Jo Hatley said about builders,
"no one's taking any chances."
•••
D.R. Horton representatives did not respond to
calls or emails. But the builder's own words fill stacks of deeds filed since
2007 reserving the rights below homesites, including more than 400 this year.
The mineral-rights claims lie mostly below
cookie-cutter homes and townhouses sprinkled across the Tampa suburbs, but
affected homesites can also be found in every county across Tampa Bay, and in
cities from St. Petersburg to Spring Hill.
Signed over from the builder to its Texas-based
subsidiary, DRH Energy, the deeds hand eternal rights to practically anything of
value that it finds buried underground, including gold, groundwater and
gemstones.
They also give the energy firm the right to
explore, study, mine, drill, pump or install well sites to access any and all
goodies starting, depending on the deed, either 30 feet or 500 feet below
ground.
Homeowners are protected from oil derricks or
any other equipment in their front yard by a one-page "surface waiver," though
nothing prohibits a company from horizontally drilling from afar.
Not all homeowners are pleased to learn they've
settled the biggest purchase of their lives on a potential drilling zone. Some
worry underground meddling could lead to contamination, industrial noise or
home-destroying sinkholes. Others just want to earn a cut of any drilling
profits themselves.
But some homebuyers said they don't even
remember hearing of the underground deal. Mark McDonald, who bought a $150,000
townhome this year in FishHawk Ranch in eastern Hillsborough, said he remembers
a thick stack of paperwork at closing but nothing about the mineral-rights deed.
"I'm surprised," he said, when a Times reporter told him about the deed. "I
didn't expect that at all."
A home buyer who learns the land is encumbered
might decide to look somewhere else. And a homeowner who agrees to the deal
could have problems selling to someone else. Banks, lenders and insurers have
balked at giving mortgages or insurance coverage to homes where the underground
rights belong to someone else or drilling is underway.
"It could screw up a deal if that were brought
to the forefront," said James Ruffolo, a Realtor with Charles Rutenberg Realty.
"Buyers want the best deal possible, they want to own the home outright, and
that could really rub people the wrong way."
Florida law doesn't demand builders alert home
buyers that they own the rights beneath their feet. Attorneys rarely attend
closings. And though title-insurance policies and public county records can cast
light on the deeds, Realtors say it's all too easy to miss the fine print.
Buyers sometimes sign away their rights
knowingly, too. They learn of the mineral-rights deed at closing time, after
they've arranged a mortgage, prepared to move and daydreamed about their new
kitchen. The deal is set up, some buyers said, in a way that makes it nearly
impossible to say no.
Zach Sinclair, the Whispering Oaks homeowner,
said he first saw the mineral-rights clause after signing nearly 70 pages of
closing forms. A former property manager in Chicago, he said he knows well the
strategy of slipping in bad news near the end of the stack.
When he asked a builder representative about it,
he said, he was told it was "no big deal" but the form had to be signed.
"If I didn't sign all those papers, the deal was
off, and I had a waiting kid and a pregnant wife who wanted to kill me. I just
had to do what I had to do and assume nothing bad was going to happen," Sinclair
said. "It was kind of weird, and unprofessional. ... But a lot of people
probably went through on robot mode and just signed it."
***
At a typical closing, a home buyer can expect
the land is theirs down to the core. Most property law works off a Latin
doctrine, "For whoever owns the soil, it is theirs up to heaven and down to
hell."
But everything has a price, and since the mining
booms of more than a century ago, prospectors and "land men" have doled out big
money for subsurface rights, a tactic dramatized in the movie There Will Be
Blood. (This works in the other direction, too: In places like Manhattan,
millions of dollars are spent on "air rights" for high-rises, radio towers and
other skyward growth.)
Florida may not seem like an obvious choice for
energy conglomerates looking to boost their supplies. But more than 150 oil
wells are active statewide, with massive oil fields on both ends of the state
filling more than 2 million barrels of crude last year. As oil prices have
climbed, incentives to drill have strengthened. In five years, environmental
officials have approved 40 statewide oil drilling permits (and denied zero).
More refined technologies have also led drillers
to expand their horizons. Horizontal drilling, where long pipes can branch off
sideways from a vertical well, has opened up long-hidden pools of fuel beneath
residential neighborhoods. Hydrologists have pinpointed hot spots for
natural-gas fracking in Southwest Florida and the Panhandle that could prove to
be gold mines: Energy companies paid more than $20 billion last year in
natural-gas royalties alone.
Though drilling in Florida is nothing new, the
issue of energy prospectors' invasions upon the suburbs has recently heated up.
In August, protesters in Naples marched outside Gov. Rick Scott's home and set
up a model oil rig to criticize plans to drill about 1,000 feet from the nearest
home, on the edge of a Florida panther refuge.
Critics have warned that fracking's forceful
bursts of water, sand and chemicals, which are used to free deeply embedded gas
and oil, could poison or pollute soil, air and groundwater supplies. Florida
lawmakers this year attempted to demand well operators tell the state which
chemicals they use in their fracking fluids; the bill later failed.
Debates over fracking's explosive growth led
homeowners in at least one state to fight back against mineral-rights snatching.
Last year, after an outcry from homeowners and letters from the North Carolina
Department of Justice, D.R. Horton told state officials it would stop stripping
the drilling rights from property deeds and offered to give the rights back to
homeowners.
But some say builders would rather chance a
potential backlash than trade away a future payday.
"It's a gamble," said Mark Stewart, a professor
at University of South Florida's School of Geosciences. "It's something you can
reserve for yourself that might have some future value, and it costs you
nothing." |