A story in the Towanda Daily Review reveals that Chesapeake has mortgaged the mineral rights on over 1,000 leased properties in Bradford County, PA. In a couple of cases the minerals mortgages have prevented property owners from taking a mortgage on their home.
While the Chesapeake mortgage is technically on the mineral rights, in most cases there is no separation between mineral and surface rights so the mortgage is filed on the property as a whole. And most property owners aren’t aware that gas companies can – and do – mortgage the minerals from right beneath their feet.
Chesapeake, of course, says mortgaging mineral rights shouldn’t have any effect on the landowner’s right to get loans or mortgages.
Appalachia Midstream Services, a subsidiary of Chesapeake Energy, has jumped into the game too, mortgaging the pipeline rights of way on over 2,000 properties in Bradford County.
What is Chesapeake going to do with the $5 billion line of credit it received? According to a written statement from Brian Grove, the company will fulfill its obligations to leased landowners and …. stockholders.
Landowners who have not leased will want to make sure that their lease agreements stipulate that minerals may not be mortgaged without express permission (if ever).
What’s next: slicing and dicing mineral mortgages to create “rock solid” credit default investments?
You can read James Loewenstein’s excellent reporting here.