- Lucrative Mineral Rights Driving Force to Find Rightful Heirs
Tuesday, August 30, 2011
Knight Ridder/Tribune Business News
by Jeremy Boren, The Pittsburgh Tribune-Review
Imagine winning the lottery without buying a ticket.
It was much like that for Glenn Pore when the Fayette County retiree accepted an energy company's offer to pay him and 10 relatives thousands of dollars to lease mineral rights beneath farmland his ancestors plowed a century ago.
"I was shocked to find out that I had any oil and gas rights," said Pore, 77, of Fairhope. "Remember, I don't own the land."
That doesn't matter.
In Pennsylvania, property owners can sell surface property but retain control of minerals. That includes natural gas trapped in the mile-deep Marcellus shale formation that was out of reach until the technology behind hydraulic fracturing evolved enough to extract it.
Mineral rights stick to the branches of a family tree no matter how many times the surface property sells. The rush to make money from the lucrative gas reserve includes a cadre of genealogists, title experts and landmen the energy companies hire to hunt down living heirs of last century's business-savvy relatives.
"They were old-time farmers, and they owned a bunch of land between Perryopolis and Arnold City," Pore said. "I thought they never left me anything, until this."
Pore's share, passed down from his great-grandmother, amounted to 5 percent, netting him $2,300 for a five-year lease but potentially much more from 14 percent in royalties if the firm drills a productive well. He plans to pass on the lease in his will so it can benefit his two children and six grandchildren.
"People are either really excited or really skeptical," said David Szuhay of Szuhay and Associates, a Robinson-based consultant to oil and gas companies. "When I call, I try to quickly mention great-grandpa Joe Flanagan, and if that name clicks, they're listening."
The larger number of eligible descendants, the smaller their shares.
"We've had cases that have gone down to 1/512th of a share," said Lester Greevy, a Lycoming County lawyer who specializes in estate planning and elder law. "They had a family tree that was eight feet long."
Finding family members spread across five or six generations comes with high stakes.
Relatives can sue an energy company for millions of dollars if it drills a well and takes natural gas without permission from everyone who owns a portion of the mineral rights.
"There is a line of cases in Pennsylvania where if you take somebody's gas, and you don't have a lease with them, they can become a partner in the well," said Harry Klodowski Jr., an attorney in Pine. "They certainly don't want to give them 50 percent of a well, when it could be 18 percent."
A typical title search before a home purchase goes back 60 years, said John Ward, a Greensburg attorney. Oil and gas searches reach back to about 1860, the year Abraham Lincoln was elected president.
Ward said drilling companies want to make deals quickly before regulations or scrutiny threaten profits. He advises clients to ensure firms accept responsibility for tracking down relatives and agree to pay royalties even if someone isn't found.
In 2006, state lawmakers enacted the Dormant Oil and Gas Act to address the problem of missing heirs. It allows the missing person's share to be put into escrow after a rigorous search.
"I like to think of ourselves as genealogists in reverse," said Dave Fittros, owner of Identifax Research Service in Clarksburg, W.Va., who works for energy companies. "Genealogists start with you and go backwards. We start with someone in 1894 and come forward."
Fittros' firm checks cemetery records, marriage certificates, death notices, genealogy websites, deeds and many other records to find family members. In one case, it took 2 1/2 years to find a man with the last name of White who moved as a child from West Virginia to California and was the sole heir to a natural gas well that later generated up to $20,000 a month.
Generally, people work with a genealogist to learn about family roots for religious reasons, medical issues or simply because they're proud of their heritage, said Elissa Powell, owner of Powell Genealogical Services in Marshall.
Searching for heirs who might benefit from an ancestor's mineral rights has created business opportunities for her and her industry as the Marcellus shale boom grows.
"That's the glamorous side of it," Powell said. "I enjoy the thrill of the hunt."
Szuhay of Robinson said energy companies typically go to the trouble of dealing with so many heirs because the cost of routing a mile-long horizontal drilling operation around a property can be high. Those who refuse probably won't get another chance, he said.
He advised family members to sign with large companies capable of drilling wells and generating royalties, rather than taking a high-dollar, up-front payment from an investment firm.
"There is so much work that goes into it before a well can be drilled," said Szuhay, whose 25-year business grew from a one-man operation to 60 employees and four offices thanks to Marcellus shale. "We want families to be happy they signed a lease."
(c)2011 The Pittsburgh Tribune-Review (Greensburg, Pa.). Distributed by MCT Information Services.
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