Fracking leaves property values tapped out

The oil and gas extraction process can be lucrative for homeowners, but it can also jeopardize their mortgages and ability to sell their homes.

By Jason Notte Aug 21, 2013 7:13AM
Natural gas tanks at a site in North Dakota (© Rich LaSalle/The Image Bank/Getty Images)Depending on where you stand and what's beneath the ground you're standing on, fracking is either paving the way toward American energy independence or dooming it to methane-addled water and man-made tremors.

The one certainty about fracking, however, is that it doesn't exactly do wonders for property values.


As reported by The Atlantic, mortgage lenders are becoming more cautious about approving loans for properties near fracking sites. Lawyers, real estate agents, public officials and environmentalists have noted that banks and federal agencies are revisiting their lending policies to account for the potential impact of drilling on property values. In some cases they are refusing to finance property with or even near drilling activity.


That's particularly problematic, considering that many home insurance policies do not cover residential properties with a gas lease or gas well, though all mortgage companies require home insurance from their borrowers. Part of the problem stems from uncertainty over the effects of the process itself.


As MSN Money writer Charley Blaine explains, fracking is technically "hydraulic fracturing," which means using small explosions and lots of water and smaller amounts of chemicals to free up oil and gas resources locked in rocks far below the earth's surface. Fracking was largely responsible for a 14.4% jump in U.S. oil production in 2012 to 6.47 million barrels a day -- the most since 1995 -- and has set off a huge boom in natural gas exploration and production in Texas, North Dakota (pictured), Montana and the Appalachians.


As a result, the U.S. imported just 41% of its oil in the first five months of 2013, the Energy Department says, down from 65% in 2005. Some projections say the combination of new supplies from fracking and alternative sources and energy savings from conservation could make the U.S. energy self-sufficient by 2030, although the country will still be an oil importer.


Critics don't have to look very hard to find reason to fear the process, however. In the 2005 Energy Policy Act, the fracking industry was specifically exempted from violations under the federal Safe Drinking Water Act. State regulations weren't affected, but the question is whether state regulators have the will or resources to act.


A New York Times report documented a contamination in Jackson County, W. Va., in the mid-1980s. And a Vanity Fair magazine article documented groundwater contamination issues around Dimock Township, a small town in northeast Pennsylvania, from wells drilled by Cabot Oil & Gas (COG). The controversy was the basis for the anti-fracking movie "Gasland."


Brian and Amy Smith live across the street from a new gas well in Daisytown, Pa., just an hour south of Pittsburgh. Last year, when they applied for a new mortgage on their $230,000 home and hobby farm, they were denied. ABC affiliate WTAE notes it's the first case in western Pennsylvania of a homeowner being denied a mortgage because of gas drilling on a neighbor’s property.


Mortgage provisions prohibiting gas drilling, meanwhile, are becoming more common. The "mineral, oil and gas rights rider" on the loan paperwork at Sovereign Bank says the mortgage will be recalled automatically if the property owner transfers any oil or gas rights or allows any surface drilling activity. It also specifies that owners must "take affirmative steps to prevent the renewal or expansion" of a current gas lease.


The Federal Housing Administration's lending guidelines prohibit the financing of homes within 300 feet of a property with an active or planned drilling site. Mortgage lenders Fannie Mae and Freddie Mac also prohibit property owners from signing a gas lease or keeping hazardous materials on their property. Doing so puts their mortgages in "technical default."


While drilling companies tend to pay well for drilling rights, that's of little use to homeowners if  the property they're sitting on can't be sold or isn't eligible for a mortgage if it does.


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155Comments
Aug 21, 2013 10:12AM
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If the spacings are even down to 80 acres, rarely if ever does a "homeowner" control all the minerals in a planned drilling location.  If they hold out, they will simply be force pooled into the well.  That is the law in most states and a contract provision cannot supersede a state law. 
Aug 21, 2013 1:29PM
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No one and nothing left to believe in for the truth. Used home sales are UP... but last week, Goldman Sachs revealed 50% of those sales were cash purchases. That would suggest that investors and foreigners with unverified funds are the buyers, not Americans- because 90 million of us are under and un-employed. With $85 billion going into the likes of JP Morgan Chase... a bank with hundreds of law cases against it and Bank of America- who has interns working 72 hours straight until they drop dead taking a shower... and all of that $85 billion going to prop up the stocks of business platforms that won't hire full time or pay family sustaining wages except to alumni... the TRUTH is... that America is dying, choked by greed, corruption, paper and button pushers and law firms. THANK YOU to those liquidating stock positions... and F Off And Die to those who feel it's your God-given Right to harm the rest of us through financial tyranny.
Aug 21, 2013 10:11AM
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Fracking to me is a metaphor on state of North America, things are getting so bad that many are willing to look the other way for the short term economic gains and ignore the potential long term consequences.  In Alberta, the fracking capital of Earth, there are area's where oil and gas are leaking out onto the ground and into lakes.  They aren't sure how or why the oil/gas bypassed the fracking system but it did, and is anyone surprised about this?  
Aug 21, 2013 10:25AM
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Obama threw the green crowd under the bus. Thanks for the vote...... under the bus you go.
Aug 21, 2013 11:12AM
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What really does not make sense is calling this a left or right issue. Either you believe the evidence of massive Global Pollution, GMO foods and their effects, plus doped up animals on steroid and more, or you don't. It's just not natural to continually inflict harm to ourselves without nature's help . Whenever nature erupts on it's own, we see and feel the consequences, sometimes quite severely.

I don't care whether you are on the left or the right, just that you have just enough commonsense to get we don't have a second EARTH to move to. We get it wrong, there is no Plan B. Putting profits for today over the future of tomorrow is just plain DUMB. If you can't see the proof and or research it on your own, then you are clearly beyond help, regardless of party.  There are some choosing to be Dumb as we live in a ERA were everyone can get viable access to real information. Why some continue to be DUMB, that clearly points to Greed, darn everything else.

Now here's the true Irony, some of the same folks that cling to the Bible the Most are the very ones that don't believe in the effects of Polluting the Environment we live in. Maybe they need to review Revelations. Regardless of if you believe or not, it will certainly become a self fulfilling  prophecy it we continue on our current path.

Aug 21, 2013 11:56AM
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And how much natural gas are we exporting to other countries. I would think for "energy Independence" one would limit this or discontinue??? Was this not the argument for fracking??
Aug 21, 2013 11:58AM
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Just because we have been doing something since the 40s hardly means that it's safe. Witness all the SuperFund Sites that are still being cleaned up. Some folks think that just because you don't see an immediate effect from something, then everything is just fine and dandy. The Human Body is very tolerant in the short haul in coping with many things. It's the long term effects which are very deadly and COSTLY. Just look at how most heavy smokers and drinkers are effected over time. Just go to the emergency rooms and see all the folks there, the costs of that will clearly outweigh any short term gains.

The Big Banks claimed no effects from their financial engineered scams yet we will be paying the price for decades to come.  The effects over time might not be obvious today but are crystal clear usually when it's far too late. These folks want to play Russian Roulette with not just their life, but yours as well. Just because they are selfish greedy, you know what.

Aug 21, 2013 11:31AM
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contamination is certainly possible, but it is highly unlikely. surface casing is almost always in place all the way down through the water table. furthermore, most of the fracking liquids come back up through the well bore. there are virtually no reports of problems in the areas of heaviest drilling. you would think some of those areas would be most likely to have the problem. in all cases, those with poor safety records (like bp) are where the issues come up. this is true in all industries. 95% of the drillers are trying to get it right. it costs them a lot of money to be sloppy.
Aug 21, 2013 12:45PM
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Try selling your place if there are 590 foot (59 stories) turbines anywhere near you!!!!!!!!!!
Aug 21, 2013 12:20PM
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Not to mention that there are homeowners running out of water in Texas en masse due to these operations!
Aug 21, 2013 11:43AM
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And I am sure that those noisy,  towering 400ft industrial wind turbines that can be located in many towns to within 500 feet of a property line are adding value to the adjacent properties??! Funny how enviros see fracking and drilling as an enemy of the state but embrace the fallacy of a wind powered nirvana. (Plus it's just not easy being green....and these turbines are far from it) Like global warming that has now become climate change...If it doesn't fit some agenda, just change the name. I remember when the Pres was sighting how he wanted America to become more like Spain...I say mission accomplished..The only way to bring people out of poverty is to create jobs. Fracking is the only thing we have going for us right now so let's git er done! I live in NY and can see our neighbors to the South benefiting from the fracking going on there while our Gov wants to keep studying technology that is way more efficient today than it was when it started decades ago. What is it that the left has against prosperity?!

Aug 21, 2013 11:23AM
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So many uneducated people. Most people that think fracking is the end of the world think it is a new process. Fracking is not new. It has been around for DECADES (as in 1940s and 1950s)! If it were half as bad as people say it is, Texas and Oklahoma would be uninhabitable by now. You might not have a desire to live in either state but it is habitable. They have water and it is perfectly safe to drink.

 

Don't be mindless robots and follow those that use fear as a tool to spread their agenda. Do your own research. Know the FACTS.

Aug 21, 2013 3:25PM
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greed will be the death of humanity.
Aug 21, 2013 12:05PM
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The reason we meddle around in other countries starting wars in first and foremost to Jack up the price of Crude so that Big Oil could benefit. These countries are no real threat to America. If we had instead invested those resources/funds into building a smart electric Grid here along with investing in and improving Green technology, we would already be Energy Independent. Talking about demonizing, that's what your greed and profit at any cost side does best. It's more like the kettle calling the pot black if anything. We have the technology, we just don't have the will.
Aug 21, 2013 11:12AM
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Frack all day, Frack all night, Frack the Arabs-

We need energy independence!

Aug 21, 2013 10:24AM
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Obviously the drilling companies don't pay homeowners very well if they are not paying off their houses. The drill, pump, dump and run technique only benefits the oil companies. It's too bad this country doesn't put so much fervor in alternative energy as the oil companies do in drilling and fracking. Drill baby drill!
Aug 21, 2013 1:07PM
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Good for you .I am in upstate NY and have been to more than 15 town hall meeting in NY and Penn.You have petitions  in multiple locations  800+ and hundreds  more You are calling all these people liars??and having spoken to these people heard about their health water problems Having seen the drill the plant the water These conditions exist because I was there I witnessed it personally.No one is a Lemming if you want the well  Fine it works for you take it have it.....FRACK YOU !!!!
Aug 21, 2013 1:45PM
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Here in Colorado this isn't the case. The article below comes from the Northern Colorado Business Report.

 

"Assessed property values in Weld County, long known for its affordable, rural lifestyle, have reached $7.1 billion this year, putting it on par with the wealthiest counties in metro Denver.

The increase in value is largely attributable to oil and natural-gas production, which makes up 55 percent of the county's total assessed value, Weld Assessor Christopher Woodruff said.

"In terms of what's driving the dollars, it's oil and gas," Woodruff said. "The other classes of property are not big enough or don't change enough to make enough difference into the actual tax dollars that are paid."

The largest increase came from the Wattenberg field, the area extending from north of Denver well into Weld County, which marks the sweet spot of Weld's oil and gas drilling boom."

Aug 21, 2013 12:33PM
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Fracking is nothing new. Back in the 1950's they were fracking gas wells. The bad thing back then was after putting the chemicals in the wells they blew it back out on the ground. Now they collect it in tanker trucks and send for recycling . The wells are much deeper than the early shallow wells were. Most are well below the water table. Some places do make mistakes and cause problems, but this is rare now days.
If we are going to become independent of rag head oil we need to drill baby drill
Aug 21, 2013 2:02PM
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Well, if I am a homeowner that can't get insurance or sell my home due to the neighbors oil company lease, I am going to be might pissed off. The oil company is not paying me anything and neither is my neighbor. I smell a bunch of lawsuits over this and eventually oil and my neighbor will not be able to afford to continue the process.
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