NC Department of Justice asks D.R. Horton to explain mineral rights policy

dbracken@newsobserver.com April 14, 2012 

The N.C. Department of Justice sent a letter to homebuilder D.R. Horton on Thursday asking for a description of its disclosure practices related to retaining the rights for drilling for natural gas under homes that it sells in the state.

The letter, from M. Lynne Weaver, assistant attorney general of the department’s Consumer Protection Division, also asks for copies of the documents D.R. Horton provides to homeowners.

According to property records, D.R. Horton began in 2010 systematically keeping the mineral rights starting at 500 feet below homes it sells. Texas-based D.R. Horton, the nation’s largest homebuilder, then transfers those exploration rights en masse to a subsidiary, DRH Energy.

The terms give DRH Energy, also based in Texas, “the perpetual right to drill, mine, explore ... and remove any of the subsurface resources on or from the property by any means whatsoever,” according to property deeds filed in Chatham, Wake and Durham counties.

The policy change took place not long after geologists announced that North Carolina sits atop an estimated 40-year supply of natural gas trapped in underground shale rock formations, much of it believed to be concentrated in Lee, Moore and Chatham counties.

It’s not clear why D.R. Horton is selling homes stripped of mineral rights, or whether the company hopes to profit from a potential natural gas bonanza in the Triangle and elsewhere. Company representatives have not returned calls and emails to its division office in Morrisville.

D.R. Horton’s policy has been criticized by some homeowners and by fracking critics who believe the practice exploits the environment and harms the public. Fracking is a shorthand for hydraulic fracturing, an aggressive method of mining natural gas by pumping millions of gallons of water mixed with chemicals deep underground to break up the prehistoric shale rock that traps the natural gas.

Fracking is illegal in North Carolina, but the state legislature is set to debate legalizing it as early as this spring. Gov. Bev Perdue has already come out in favor of fracking, and the N.C. Department of Environment and Natural Resources recently issued a lengthy study concluding fracking can be done safely as long as the right safeguards are put in place.

Weaver’s letter is addressed to O. Kenneth Bagwell Jr., D.R. Horton’s Orlando, Fla.-based regional counsel.

The letter says that although D.R. Horton disclosed its mineral rights reservations in property deeds, it is unclear when disclosures are first made to homebuyers about the practice of retaining mineral rights.

Bracken: 919-829-4548

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