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| 1/10/2009 10:31:00 PM | Email this article • Print this article | EDITORIAL: Mineral leases could be real estate headache
Ely Echo editorial
Could the value of your property drop because of the metallic minerals that could be beneath it? That's a question that is being asked of local real estate agents with the DNR set to sell leases west and south of Ely on Jan. 14.
The State of Minnesota controls most of the mineral rights below ground in northeast Minnesota. This isn't usually a problem, unless the land is leased to a mining company. The existence of the lease can be a real estate issue.
Local realtor Charlie Chernak said there is reason for concern. "If you've got a $300,000 house sitting on a 40 (acre plot) and a company gets a minerals lease for that 40, I can tell you your house isn't worth $300,000 anymore. I'm afraid this sale can have a harmful affect on a real estate market that's already on its knees here."
Chernak, who has been involved in economic development efforts in Ely, said the issue isn't about mining.
"I'm not against mining but these mineral leases shouldn't be on private ownership. The DNR says the odds of them drilling are slim and none but these are 50-year leases. My concern is it's not the norm to have the minerals leased to a mining company," said Chernak.
For more information on the sale, see the DNR web site: www.dnr.state.mn.us/lands_minerals/leasesale/index.html.
There are some maps and property descriptions on the DNR web site, but a spokesperson for the state agency could not provide information on how much of the 90,000 acres up for lease is on private property.
Chernak believes a rough estimate, put together by a private party of the 64,000 acres in St. Louis County, is 12,000 acres of private land.
"Out of the 90,000 acres, only a small portion is going to be bid upon," said Kathy A. Lewis of the DNR.
She said this was a pretty small sale and warned these types of sales have been going since 1966.
"There's been a lot of exploration and some do exploratory drilling but no mines have been developed even though hundreds of thousands of acres have been explored and there have been no problems with owners," said Lewis.
"It's not a big concern but it's an issue for some people who are not familiar with this and get concerned," Lewis said of leases under private land.
Lewis said there are state laws in place to protect the private property owner before an exploration company comes onto private land, including notice and responsibility for damages.
"Most of the activity is pretty low impact. They may just walk on the land to do a magnetometer reading. Some do exploratory drilling and depending on how you look at it, fortunately or unfortunately they usually don't find anything," said Lewis.
"A lot of people haven't really thought about what they actually own. A mineral leaseholder does have a right to go on the land but is liable to the surface owner for damages. The mining companies have always worked these issues out.
"We're not talking about taconite operations with a large open pit; they are looking for nonferrous metallic minerals which are small deposits. They're not creating a Mesabi Iron Range, it could only be 40 acres. The odds are long but these operations generate revenues for school districts and the state general fund," said Lewis.
Chernak said he believes the state should do a better job of notifying surface owner of upcoming mineral lease sales.
He is probably right that the state could do a better job of letting people know, but other than objecting to the sale, the only benefit to the property owner would be the knowledge of a potential sale of a mineral lease that may or may not be bid on.
There has also been a major impact on mineral mining during the current worldwide economic slowdown. The activity of companies like Duluth Metals has slowed to a crawl.
This sale may just turn out to be more like a stock offering for Chrysler than a chance to buy a Wii video game at the sticker price.
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