Oil and gas development: What lies beneath

Worried Santa Fe County landowners are looking into who owns the mineral rights under their property — with mixed results

Phaedra Haywood | The New Mexican

12/23/2007 - 12/21/07

The possibility of oil and gas development in Santa Fe County is sending landowners scurrying to find out who owns the minerals under their property. Most are getting a crash course in researching property deeds in the process. Many are coming up empty-handed.

Steven Smith, the 48-year-old music director of the Santa Fe Symphony, said he's been poring over records at the County Clerk's Office for an hour or so almost every day for weeks. "You find out different things every time you go," he said.

Smith moved here from Cleveland nine years ago. In 2006, he bought a piece of land in the Galisteo area. He and his wife intended to build a house there. But Smith learned recently that Tecton Energy has leased the mineral rights under the land. Now his future homesite could end up surrounded by oil or gas wells.

Because Smith owns only the surface of his land and not the minerals underneath it, there's nothing he can do.

"We're stuck," Smith said. "It's impossible to think about selling. It's impossible to think about building at this point. All of us who own property out there are hung up to dry."

Smith said he knew when he purchased the property that the mineral rights didn't come with it, but the seller told him the rights weren't being leased at the time. Smith made other inquires, too. "We talked to quite a few people in the industry and state and county government, and they all told us exploration had taken place in the '80s, but nothing substantial was found, and there was no activity after that," he said.

Smith now knows it was a man named Don Cash, heir to part of the Cash Ranch estate, who leased the mineral rights under his property to Tecton, a company that has three drilling applications pending before the state Oil Conservation Division. He learned about it in a newspaper article on impending oil and gas development in the Galisteo Basin. Now Smith is researching something else. He's considering buying a new piece of property, but he wants to know who owns the mineral rights first, "so we don't get burned again."

The 'split estate'

In the old days, landownership was simple. You plunked down your money and owned your property straight through to the core of the Earth. The 1862 Homestead Act lured settlers west by promising 160 acres of free land if they could build a house, fence the land and survive on it for five years.

But then the federal government started to reconsider what it was giving away.

"They started saying we shouldn't be giving away all these minerals, we should keep them, so from now on they don't get the minerals," said Bill Dalness, a geologist with the Federal Bureau of Land Management.

In subsequent acts, such as the Stock Raising Homestead Act of 1916, the federal government kept the mineral rights and only deeded settlers the rights to the surface of the land. Another early law, the 1872 Mining Act, allowed people to claim mineral rights by working mineral-producing mines for set periods of time. The result is the oft-confusing "split-estate" situation in place today, in which the surface of the land and what lies beneath it are often owned by different entities.

Matters were further complicated in New Mexico by a multitude of Spanish and Mexican land grants made before New Mexico became a state. Fast-forward 100-plus years and dozens of land deals later, and today's landowners face situations in which they usually don't own the mineral rights to their land and can have a hard time finding out who does.

The search for mineral rights

"If you are capable of fogging a piece of glass, you are capable of finding out who owns the mineral rights under your land." So said Bob Gallagher, president of the New Mexico Oil and Gas Association, a trade organization for the oil and gas industry.

But The New Mexican's research suggests that's only true some of the time.

It is relatively easy — armed with the township section and range that describes the location of your property — to find out if the federal government or the State Land Office owns your mineral rights. All you have to do is call and ask. If they own it, they will tell you.

"If the mineral interests are private, that's when it really becomes a quagmire," Dalness said.

The New Mexican started this process of elimination using a 61-acre piece of Cerrillos-area property owned by Marianne Sacknoff as an example.

Sacknoff, who was startled to encounter surveyors from a mining company on her land last year (and angered when they wouldn't produce documentation of their leases), said she didn't know in 1995 when she purchased the property that she should be concerned about the mineral rights.

"I lived in New York City and grew up in Washington," she said. "It never occurred to anybody that you don't own what's below you. I did know to make sure I had property that was on a county road so it could get graded and plowed," she said. "But nobody ever said, 'Make sure you get your mineral rights.' "

Sacknoff, who makes her living investing in real estate, said she did find out before she closed on her property that someone else owned the mineral rights. "I was anxious about it," she said. "But (my lawyer) told me it wasn't a problem. Who knew oil was going to go to $100 per barrel?"

The New Mexican called the State Land Office and the BLM on Sacknoff's behalf and learned that neither agency owns her mineral rights.

There were several clauses on her deed that related to mineral rights. The first referred to Book H of Patents, where a microfiche film of a handwritten document from 1860 was found. After spending four hours deciphering three of the eight pages of text, The New Mexican was able to determine that Sacknoff's rights were part of the Ortiz Mining Grant, and suggested she might want to contact a title company or attorney for help finding out more.

She said she already had, to no avail.

"When this first came up, I tried to find a lawyer," said Sacknoff. "My regular lawyer gave me a bunch of names, and everyone was too busy. I think they were fearful of being involved with a surface owner, because they represented producers or their firms did. It was very weird."

Santa Fe County Clerk Valerie Espinoza said her office has been inundated with people coming in to search the record books for the owners of their mineral rights. Espinoza arranged to have Dalness give her staff a tutorial on how to help.

But despite their best efforts, recording clerk Lawrence Ortega said, about 90 percent of the people who come in searching for answers leave without any. "It's a hit-or-miss type of thing," Ortega said. "It's a mess. I feel bad for the landowners."

State, federal and county officials all said people having trouble determining the ownership of their mineral rights should hire a title searcher or real-estate attorney for help.

How Tecton did it

Tecton president Bill Dirks said his firm spent hundreds of thousands of dollars identifying the owners of the 65,000 acres of mineral rights it has leased in Santa Fe County.

Ninety-five percent of the mineral rights the company leased are privately owned. Like most oil-exploration companies, Tecton hired a "landman" to find available leases.

"We do a substantial amount of detective work," Dirks said. "We find a name from 1890 and research what happens to that family name until we find someone living, and then we'll call them up. ... Sometimes it takes months, even years, to do that kind of work. We spent about a year in Santa Fe County."

Surface-rights owners have asked Tecton to identify who leased the private mineral rights to the company, but Tecton has refused to disclose that information.

Dirks said nobody purposely makes it hard for surface-rights owners to find out who owns the minerals under their land. He said in other places it can be easy, but in Santa Fe County there hasn't been much mineral development, and rights sometimes haven't changed hands in a century. So tracking ownership isn't easy. "Chances are you are not going to get very far," Dirks said. "You'll run into dead ends."

Buying time

Fashion designer Tom Ford reportedly purchased $84,000 worth of the State Land Office mineral leases near his Galisteo-area ranch earlier this year to stave off Tecton's advances.

Panicked by visions of an oil-and-gas-drilling wasteland, some residents have suggested the county should do the same. Unfortunately, it's not that simple.

State and federal mineral rights can only be leased, not bought, and recent interest in the area has driven up their value.

According to a bid-summary sheet from a State Land Office lease sale held in March, competitive bidding between a company believed to have been acting on behalf of Tecton and a company believed to be owned by Ford drove the price of certain rights up to $546 per acre. Similar leases that weren't being competitively bid on sold for as little as $1.91 per acre.

Leasing mineral rights does buy time — 10 years is the standard length of state and federally owned mineral leases — but when the leases expire, they go up for bid again.

Property owners are learning that the safest way to protect themselves from unwanted drilling is to hope they can find and afford the privately owned rights under their property.

But even that isn't foolproof. If 75 percent of the mineral rights around a landowner are controlled by someone who wants to drill, the holdout property owner can be "force pooled" against the owner's will, according to Mark Fesmire, director of the state Oil Conservation Division.

The resistant landowner does get a percentage of the royalties generated from the mining activity, but only after the developer has covered costs plus 200 percent, Fesmire said.

Ike Pino, general manager of Rancho Viejo, a subdivision on Santa Fe's south side, said he has no idea who owns the mineral rights under the 2,350-lot community. "I don't know and I don't worry about it, either," Pino said. "Nobody is going to come put a pump jack in my front yard. It's not going to happen."

Pino later said he'd gotten curious about who did own the rights and was checking.

Ted Harrison, president of the Commonweal Conservancy, which is planning a 13,000-acre, eco-friendly development in the Galisteo Basin, said his company is in the process of the purchasing about 6,000 acres worth of mineral rights under their property from the family that owns them.

Bill Donohue, general manger of the Eldorado Community Improvement Association, said he has begun researching the ownership of the mineral rights under Eldorado's 4,000-acre wilderness area. "As far as I know, my deed doesn't say anything about mineral rights," Donohue said. "I've been told by other people that the preserve area is probably not rich in oil and gas. But who knows; I'm not a geologist."

Three-year reprieve

The BLM owns 516,735 acres worth of mineral rights in Santa Fe County. None of them have been leased for oil and gas drilling. And none of them will be, at least for the next three years or so while the BLM works on a resource management plan for the area. "We have a lot of people that want us to lease," said Dalness, "many, many, many. But it just so happens (we) are going through a planning effort that takes about three years ... ."

Dalness said the federal government can and does restrict drilling on government-owned land, including U.S. Forest Service land, but only if the planning document for the region states a reason why. The planning documents for specific areas are revamped every 20 to 25 years, according to Dalness, and all leases are put on hold while that is being done.

Contact Phaedra Haywood at 986-3068 or phaywood@sfnewmexican.com.