Replies to This Discussion

Permalink Reply by gary smith on April 11, 2013 at 9:49am

i didn't know the public could own the oil and gas rights in new york.  just kidding.

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Permalink Reply by Mike Coles on April 11, 2013 at 4:23pm

Mark,

 

I do real estate appraisals in New York and teach a seminar on mineral rights valuation to realtors and appraisers.

The owner can keep the mineral rights.  I value mineral estates as a regular part of my appraisal business.

A potential problem may arise when you sell the property.  Different real estate markets experience various forms of buyers resistances and/or bank financing resistance.  In markets with active drilling and landowners receiving royalty payments, keeping the mineral estate or the royalty estate is common.  In some New York markets where anti-drilling activity is strong, buyers will walk away from a home purchase where the owner is retaining the mineral rights.  In yet another twist, I have numerous examples of residential developers that have setup an LLC to hold the mineral estate of the large parent large parcel as they proceeded to sell the individual building lots.  Thus, none of the homes in the subdivision own the mineral estate under their lot.  Yet, this did not keep people from buying homes in the subdivision.

The question you need to answer is whether retaining the mineral rights on 1 acre will jeopardize the sale and/or buyers financing.  Shallow gas wells have been in existence in western New York for over 100 years.  Yet, when I consulted with a banker in charge of residential mortgages headquartered in western New York, the person had never seen any reference to a gas lease or royalty payments on any appraisal.

I won't render an opinion as to whether its worth the effort keep the mineral estate.  There are many variables that the appraiser must consider.  Your effort to keep the mineral estate is understandable.

If I have done nothing but muddy the water, welcome to understanding property appraisals in New York with fracking in limbo.

 

Good luck,

Mike Coles, NYS Cert General Appraiser

 

 

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Permalink Reply by mark ondrusek on April 12, 2013 at 1:42am

thanks mike..i wont let it kill the deal but I want out of new York.  I will never invest another cent there.  the state is a mess!

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Permalink Reply by Inchworm antenna on April 12, 2013 at 4:02am

Check the New York State Code or whatever they call their book of laws.  I'm sure it would be the biggest book in the work.  OK enough sarcasm.

In any case, my understanding (from what I've heard) is that in some states minerals don't always include gas & oil.

If that were the case in NYS, then don't reserve the minerals,  just reserve the oil and gas,

Go to the NYS code and look for definition of minerals.  good luck

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Permalink Reply by Zack Smith, Geologist/Appraiser on January 2, 2014 at 9:20am

A couple months late, but yes, you can retail the rights, though there may be some resistance to financing of a property with surface rights only. Regional banks will generally do it. Also, 45% of sales in the 3rd quarter of 2013 are cash sales, so it may not be an issue. But then, the value of mineral right in Olcott, NY is probably negligible - you certainly won't have any contributory value due to the Marcellus.

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Permalink Reply by Gas Boy on January 3, 2014 at 3:41am

Mineral rights are worth nothing in New York - $0.  Can't frac what you drill, and forget about mining anything either.  Btw..........don't forget to "register" your guns as well, and don't be sipping on a Coca Cola Big Gulp while standing in-line to do so. 

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Permalink Reply by pg guy on January 3, 2014 at 7:35am

Actually, Oil and Gas wells are being drilled on a regular basis in NY, including Upper Devonian Sandstone wells, Herkimer wells, Medina wells, and others.  The prohibition is on large volume hydraulic fracturing, thereby precluding the typical high volume Marcellus and Utica Shale horizontal completions.  I believe that the law allows frac jobs of up to 80,000 gallons, which is adequate for many relatively shallow conventional wells in NY. 

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Permalink Reply by Zack Smith, Geologist/Appraiser on January 3, 2014 at 8:11am

There are plenty of producing wells in NY in the Herkimer, Trenton, Black River, just not any shale. But the productive formations are not present along Lake Ontario where Olcott is located.

Along the PA/NY border the contributory value of mineral rights is actually significant, sometimes exceeding the surface use value.

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Permalink Reply by Gas Boy on January 3, 2014 at 8:57am

thank you pg guy and zack for the clarification!  you're right regarding the large size water volume frac jobs - "shallow" wells are still being drilled and frac'd.

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