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Fracking Leases May Lower Property Values, Default Mortgages

Wednesday, October 17, 2012

Hydraulic fracturing to extract oil and gas may enrich drillers - but at a prohibitive cost for some landowners near wells.

The New York Times reported last month that uncertainty over whether hydraulic fracturing will be allowed in New York has significantly depressed real estate sales in the Catskills, because potential buyers fear that fracking could contaminate drinking water supplies, invite polluting industrial activity, and lower property values.

Investigations by EWG and Reuters have determined that landowners are rarely informed about the many risks associated with hydraulic fracturing. Companies like Chesapeake Energy Corp. have in recent years secured drilling leases on millions of acres throughout the country, often through the use of tactics that leave landowners in the dark about the threats fracking poses to their property and finances. 

The Environmental Working Group has mobilized more than 100 public interest groups to urge the new U.S. Consumer Financial Protection Bureau to investigate and address the risks faced by property owners who sign drilling leases. Among them:

  • Leases typically allow drillers to engage in dangerous activities and use and store hazardous substances on landowners' property - practices that may lower resale values.
  • Homeowners' insurance policies often do not cover property damage caused by fracking.  
  • Property owners who lease land to drillers without obtaining permission from the financial institutions that hold their mortgages may violate the terms of their mortgages and in the worst case could trigger foreclosure proceedings. 

With the nation still struggling to recover from the subprime mortgage crisis, the public can ill afford to ignore the ways that oil and gas leases may affect property values and mortgages. State and federal governments must act now to protect unsuspecting landowners from unwittingly exposing themselves to significant losses and liabilities.

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