Archive for category: [Your] Land Blog

Owning a large plot of land can give you more privacy from the outside world. In return, the larger your property is, the harder it is for you to monitor […]

This post is part two of a two-part article from LandGate. It originally appeared in the Winter 2021 issue of Terra Firma magazine. Click here to read part one.

Resource Values & Deals

Solar

Landowners can now potentially earn millions of dollars from lease options, rental payments, and cash bonuses paid by solar developers. In some examples, a property owner with 40 acres can generate a total of $1.2 million dollars over the life of a utility scale solar project, but may have settled for 10-20% of the property’s resource potential by falling prey to competitive leasing tactics. Successful solar lease negotiations are defined by the property owner and developer reaching an agreement that is advantageous for both parties in the long term. The best way to reach an agreement is with a more transparent leasing process and by providing access to solar rights data, valuations, and expertise to real estate agents.

The important value drivers for solar on a specific property include:

• State and local credits and subsidies to developers
• Local marginal prices and nearby demand
• Nearby existing grid connection sites such as transmission lines and substations
• Solar irradiance
• Topography of the surface
• Buildable area (removing flood zones, forestry, dwellings, etc.)
• Network intake capacity

Wind

Wind leases function very similar to solar, with the exception that it is often possible to exploit both wind and oil and gas simultaneously, giving energy companies additional options. Unlike solar, wind can be exploited in various terrain conditions.

The important value drivers for wind development on a specific property include:

• Nearby existing grid connection sites (transmission lines, sub-stations)
• High average wind speeds
• Credits and subsidies to developers in specific states
• Spaces that are away from heavy residential areas to avoid noise and viewpoint damage

Beyond the energy markets, there are additional resources to consider such as water, mining, cell towers, agriculture, and recreation. The reality is that land resources impact the value of land and create additional opportunities for real estate agents to monetize on the transactions involving these property rights.

Marketing these land resources to specialized buyers, which include energy companies, involves a specialized skill and network. New and exciting platforms, such as LandGate, do all of the work for the agent and allow the agent to control the deal.

Oil and Gas

One of the more profitable energy resources derived from land would be oil and gas minerals. It is important for land agents to understand the potential of oil and gas development on the property, its value, and whether or not the mineral rights are part of the transaction. The property owner also has the right to sell the surface and retain the oil and gas mineral rights. The mineral owner has the right to use the surface in a reasonable manner to extract the minerals or lease those rights to an oil and gas operator, making these rights much more important than many realize.

The important value drivers for oil and gas on a specific property include:

• Location – value can change quickly over a mile
• Commodity prices and market conditions
• Type of ownership
• Operators activities and plans:
  • Existing production on the property
  • Horizontal development or permitting on or near the property
  • Is the owner receiving royalty checks
  • Is the owner receiving offers from mineral buyers/lessees
  • Is the owner receiving drilling notices or force pooling notices

Marketing Evolution & Future Opportunities

Land Resource Values Continuously Change

Technologies, developers activities, commodity prices, market conditions, costs, and subsidies change very rapidly in the energy sector. As a result, the valuation of land resources changes frequently. Real Estate agents need to have the latest information about activities and values at their disposal to inform their clients and leads.

Most states have energy divisions where people can painstakingly glean information about leasing activity, development, permits, and additional information. The process involves finding the specific division for the resource type, locating specific tracts, compiling documents, and researching the current activity.

LandGate and other companies work to compile data from major land resources across the U.S. and make them easily accessible and available for more efficient and profitable transactions. Agents need land resource experts to be able to manage these transactions.

Conclusion

There are big opportunities for land agents in today’s market and even more in tomorrow’s. Land resources are very complex, and it has been very difficult for landowners and their real estate agents to realize the full value of this very large market. Data and evaluations about land resources have been accessible only to large energy companies.
It is amazing how little information landowners still have about the resources sitting on or beneath their property. It creates an incredible opportunity for agents to assist these clients and access the full potential of multimillion dollar transactions in land resources. Agents need land experts to help them transact on land resources.

The future is bright for land real estate agents as the growing demand for energy is likely to increase the value of land significantly, as long as they manage to reap the benefits of this value. The industry will continue to see innovation providing the ability for agents to earn more income while helping landowners maximize their profits. The agents who have access to the tools needed to transact on land resources will be the ones that landowners will trust with their large, revenue generating, land assets.

About the Authors

Eric Thompson is the Vice President of Business Development at LandGate, an online marketplace for land resources. Since entering the oil and gas industry in 2015, he has handled over $300 million in asset transactions. Eric holds both graduate and undergraduate degrees and lives in Houston, Texas.

Dan McCue is Vice President Land at LandGate. He has been a successful Oil and Gas Land Professional for 40 years. He is an adjunct professor and twice-published author with The University of Texas at Austin’s Petroleum Extension (PETEX).

Yoann Hispa is CEO and co-founder of LandGate. Yoann has 17 years of experience in the energy industry doing billions of dollars in valuations, acquisitions, divestitures, and development projects in leadership and technical roles. Yoann holds an Executive MBA, three Masters in Engineering and Geoscience, and a BSc in Math.

People just want to get away from it all.  Interest in owning land out in the country comes from the desire to hunt, fish, or farm in peace and solitude.  Big lots combined with few neighbors give people the privacy and security that they crave. 

Or so they might think.  Though landowners can keep private people off their land using trespassing laws, in many states the government may search the vast majority of private lands whenever they wish, and for any reason.  It doesn’t matter how many locked fences and “No Trespassing” signs the owner might put out.  

The reason?  A century-old legal rule called the “open fields” doctrine.  This constitutional error weakens every American’s property rights, but disproportionately hurts rural landowners.  Reform—whether through the courts or the legislature—is desperately needed to restore our basic right to be left alone.  

So how did it get to be this way? 

Many people know that the Fourth Amendment to the U.S. Constitution protects against “unreasonable searches and seizures,” as do all the constitutions of our 50 states.  When the Framers drafted the Fourth Amendment, they wanted to guarantee our right to be secure in, and on, our own property.   

And for a while that was how it worked.  Early Fourth Amendment decisions from the U.S. Supreme Court interpreted the amendment broadly so that it could achieve its important purpose.  Moreover, government officials rarely had to traipse across private property to enforce the laws, making constitutional conflicts few and far between. 

But that all changed in 1920 with Prohibition.  As the manufacture and sale of alcohol became illegal, government agents started prowling around for illicit hooch and stills, including on private lands.  In one such case called Hester v. United States, revenue agents hid on someone’s land to see if they were selling alcohol and gave chase when they saw his son hand someone a bottle.   

The son argued that the agents’ actions violated the Constitution.  But in a cursory opinion, the U.S. Supreme Court rejected that argument, holding that “the special protection accorded by the Fourth Amendment to the people in their ‘persons, houses, papers and effects,’ is not extended to the open fields.”  In one stroke, the Court categorically eliminated all constitutional protections for most of the private land owned in the United States.   

Hester’s narrow view of what the Fourth Amendment protects eviscerated Americans’ constitutional rights.  Worse, it was based on a false premise: that the “distinction between [open fields] and the house is as old as the common law,” a distinction that (if you read it) was actually about when private individuals could be charged with burglary, not about when government officers could intrude on private property.  Still, the damage was done. 

Hope sprang anew sixty years later, when the Supreme Court heard a case called Oliver v. United States, which asked whether Hester was still good law.  There was good reason to be optimistic:  In the years since Hester, the Court had developed a new Fourth Amendment test that broke from Hester’s narrow approach.   

But bad facts make for bad law, and the 1980s had their own Prohibition—the War on Drugs.  So it was little surprise that, in 1984, the Court reaffirmed Hester, holding—in service of the War on Drugs and with disregard for the Constitution—that private property owners have no “reasonable expectation of privacy” on any private lands the Court deems to be an “open field.”  

So, what’s the problem? 

The “open fields” doctrine has been widely criticized, and for good reason.  Its narrow reading of the Fourth Amendment undercuts the amendment’s broad purpose, which is to make us secure in our own property.  Its statement that the common law justifies that narrow reading lacks historical support.  And ultimately, the doctrine makes it hard for anyone to feel secure, since it means agents could be snooping around unannounced at any point. 

These concerns have only grown more pointed in modern times.  In the old days, if the government wanted to search your land, it had to hire and send out officers to do the deed.  But modern technology has made it cheap and easy for officials to instead run their own digital dragnet.   

One way is through automated surveillance cameras.  Hunters often secure these cameras to tree trunks to learn more about nearby fauna.  But the government can just as easily use these cameras to learn more about you.  With this new technology, officials don’t have to hide in the bushes 24/7.  Instead, they can enter someone’s land, attach a surveillance camera to a strategically placed tree trunk, and then sit back as it automatically takes and stores pictures of any activity, any time of day.   

Sound creepy?  That’s what Terry Rainwaters thought.  Terry is a lifelong resident of Camden, Tennessee who owns 136 acres of land along the Big Sandy River. He lives there with his son, with whom he spends time hunting. Terry also farms the land and rents out a separate house on the property to a long-time tenant. Terry values his privacy, so he keeps his gates locked and posted with a “No Trespassing” sign. 

In December 2017, Terry’s son was driving around the property when he saw an unmarked camera hanging from a string in one of Terry’s trees.  From its vantage point, the camera was able to capture images of people and cars moving past, of Terry and his son’s private activities, and even of the back of Terry’s tenant’s home.  They found a second camera set up nearby, with a tree branch cut to provide the camera with a clear view of the property.  A few days later, both cameras suddenly disappeared. 

It turned out that officers from the Tennessee Wildlife Resources Agency (TWRA) had surreptitiously snuck onto Terry’s land.  As part of their mandate to “[e]nforce all laws relating to wildlife,” Tennessee law gives TWRA’s Executive Director (and, through him, TWRA officers) the power to “go upon any property, outside of buildings, posted or otherwise” to search for hunting violations.   

Terry has had a Tennessee hunting license for decades and has seen TWRA officers wandering around his property without permission several times in the past but had never encountered cameras before. Rattled, Terry spoke to other hunters in Camden, who told him that TWRA officers had trespassed on their land and installed cameras as well. 

What can be done? 

Terry and another Camden resident, Hunter Hollingsworth, grew sick and tired of TWRA’s warrantless snooping.  So, they joined forces with the Institute for Justice to sue TWRA in state court to bring it to an end.  Their lawsuit contends that, even if the federal “open fields” doctrine means TWRA agents could enter their property without violating the Fourth Amendment, they cannot do so under the Tennessee Constitution. 

This position has a lot of support behind it.  The Tennessee Supreme Court has rejected the “open fields” doctrine on several occasions as inconsistent with a free society that respects private property and privacy.  And so have other states.  The Mississippi Supreme Court, for instance, saw the decision in Hester and immediately rejected its reasoning on state constitutional grounds.  In more recent years several other states, including Montana, New York, Oregon, Vermont, and Washington, reached the same conclusion. 

That’s good for the citizens of those states, whose land would otherwise largely be without any constitutional protection. Sure, it means that officials have to get a warrant, but that’s what they are supposed to do.  And the lack of any horror stories coming out of New York, Montana, or elsewhere shows that respecting people’s property and constitutional rights need not come at the public’s expense.   

Terry’s case is a wake-up call, both to Tennessee courts and the nation more generally.  It asks the Tennessee Supreme Court to remind TWRA officials that, in the Volunteer State, “No Trespassing” signs apply to the government too.  And it is part of a larger campaign by the Institute for Justice to persuade courts around the nation, including the U.S. Supreme Court, to repudiate the “open fields” doctrine and restore the Fourth Amendment’s broad protections for all Americans. 

But the courts aren’t the only way we can restore our constitutional rights.  Legislatures can also help rein in out-of-control officials.  That is the objective behind the Institute’s model legislation, which requires that, absent a real emergency, officials either get owners’ permission or a search warrant before searching private property.  And to give that requirement real teeth, the legislation allows owners to sue government officials for any offense or damage that results from their illegal entry. 

Of course, no single case or single bill can fix the damage caused by Hester and the “open fields” doctrine, which has plagued us for almost an entire century.  But the fact that a mistake is long-lived does not make that mistake right.  Whether through litigation or legislation, it is long past time to restore our right to be secure on our own land.  Finally closing the door on the “open fields” doctrine will give us all the freedom to once again get away from it all. 

This article originally appeared as “Open Lands: A Century-Old Doctrine and Your Property Rights” in the Winter 2021 edition of Terra Firma Magazine.

About the Author

Robert Frommer is a Senior Attorney at the Institute for Justice, a nonprofit, public-interest law firm dedicated to strengthening Americans’ right to be secure in their persons and property. Robert has a Juris Doctorate from the University of Michigan and a Master’s degree in Economics from George Mason University.