N.C. Attorney General's Office releases draft report on fracking, consumer protection

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The N.C. Department of Justice's Consumer Protection Division released its draft report today on the impacts of fracking on landowners. In a word: If you're a landowner in North Carolina and you've signed away your mineral rights—or have been liberated of them by a homebuilder—you could be in trouble.

The report was presented at a meeting of the Environmental Review Commission, which is composed of 18 state legislators.

You can read it here: Oil_and_Gas_Study.pdf

Some key points of the DOJ's presentation include:

Strong landowner protections are needed before the state moves forward on legalizing fracking.

There is no requirement in North Carolina for a property seller to disclose up front to a prospective buyer that the mineral rights on a parcel of land have been sold or conveyed to another person or company. The disclosure can happen as late as the closing. This is important because homebuilder D.R. Horton had assigned mineral rights on at least 426 properties in the Triangle to its subsidiary, DRH Energy. In some cases, homeowners said they were not fully informed of the ramifications of this deal, or if they were informed, it happened at closing.

As for signing leasing agreements to oil and gas companies, landowners need a "cooling off period," during which time they can cancel the deal without penalty. Land men—brokers working for energy companies or independently—often show up at someone's home and pressure the owner to sign a leasing agreement. Property owners need to talk to an attorney and their mortgage lender to fully understand the implications of signing that agreement. Some mortgages prohibit the granting of these rights to a third party; a homeowner could technically be foreclosed on for doing so.

We're working on a longer piece for next week's paper. However, the DOJ is taking public comment on the draft report. The DOJ is expected to make recommendations in its final version.

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