The good times continue to roll on. Inventory is down and prices are stabilizing and…
This is likely not the first thought that crosses your mind when you are buying a residential or commercial property. A few weeks ago a house in Firestone, Colorado imploded killing two . Further investigation shows the cause of the explosion was due to an old abandoned well. Would you like a “blue dot” in your living room! Why is this so important?
Take a look at the picture above, how safe would you feel with an old well under your house? How confident are you in how the well was terminated up to 50 years ago? Standards and materials have changed allot in the last 50 years.
Unfortunately, there are not mandatory setback requirements for new gas/oil development. Like the house above, properties could literally be on top of an old oil gas pipelines.
Why is this an issue in Colorado? In many western states, including Colorado, mineral rights have been separated (bifurcated) from the surface rights. The vast majority of property owners in the state do not own both the surface and mineral rights. This allows mineral owners to extract below your property.
Why should you care? I’ve seen in real estate that considerable value is a result of perception. For example, people don’t want to buy houses near high-tension power lines. There were stories long ago about possible links to cancer. I’m not sure if there was scientific evidence to fully back up the claims but it didn’t matter. Being near a high-tension powerline leads to a substantial decrease in value. The same could be true regarding abandoned wells. Regardless of the health impacts it is the perception that will substantially decrease the value. I can guarantee, I wouldn’t want to buy the house I found with the blue dot under it! This decrease in value will occur both on residential and commercial properties.
What should you do?
- Check out this link where you can map a property address and it shows old wells along with active wells: http://www.denverpost.com/2017/05/01/oil-gas-wells-colorado-map/ I would definitely avoid properties in close proximity to wells whether they are active or abandoned.
- On commercial properties, a phase one is always a good idea on a property to be certain the property has not been impacted by environmental factors, if there is any concern, go ahead and move to a phase two with soil samples to be certain.
- Denver Post: http://www.denverpost.com/2017/04/27/firestone-explosion-investigation-worrying-homeowners/
- Denver Post: Oil and Gas Wells map: http://www.denverpost.com/2017/05/01/oil-gas-wells-colorado-map/
Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
Fairview is the recognized leader in Colorado Hard Money and Colorado private lending focusing on residential investment properties and commercial properties both in Denver and throughout the state. We are the Colorado experts having closed thousands of loans throughout the state.
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