NewsFlash: Oil and Gas Price Tumbling

NewsFlash: Oil and Gas Prices Dropping

Unless you've been living under a rock for the past year or so, you've probably noticed something happening at the pumps. Every week those numbers lit up on the signs seem to be ticking ever downward. Why is that? What does it mean for you and me? What does it mean for energy in the future?

Tumbling Prices

Since late in 2014 prices of crude oil around the world has been dropping steadily, and at times erratically fast. If you talked to those in the lower-level oil and gas jobs in 2014 you would have heard that "this will go on forever." The belief was supported by the people steering the ships, though the writing was certainly on the wall well before fall 2014. 

Anyone who has worked in oil and gas for many years will be able to tell you one things about the market: Enjoy the boom times, because there will be a bust. Though this seems to many of us too young to remember the 1970's, the oil and gas market is anything but secure when you consider that this is the fourth oil price crash in the last century. This may be based upon our age but also because of the general economic panic that has been present in the lives of those, myself included, who came of age during the 2008 world decline. Today, we see the same emotive sentiments reflected in the massive cost cutting, job cuts, and pullbacks in investment for oil and gas operations nationwide. 

While these trends are certainly frightening for oil and gas employees and welcoming at the pumps, it's also shaping how energy in this country is produced in the future. It's a household idea that when prices for gas go up the average person buys smaller cars, drives less, and generally makes choices with this consideration in mind. Now that prices are falling, one would think that in the converse we would all start guzzling gas and slip back to our general mindset of endless oil. While there may be truth to these trends on the level of the individual consumer, this time around the energy industry itself may not be offering up the same business as usual. 

Make Room For the Alternatives

Despite the drop in prices last year, this country saw a record amount of energy being generated through solar and renewable sources generally. Reports are being published all the time showing a marked decline in the use of older energy sources like coal due to the continual rise of renewables, but the same drivers aren't at work in this context. Aside from the electric vehicle market, renewable source generators are largely separate from the forces that are pushing down oil prices. Still, many within the alternative energies industry are waiting out the weather of the energy price decline as well, but they're banking on increased share of the market when investment starts flowing back in. For the time being though they are happily taking those jumping from traditional oil and gas positions. At this point we can take it as a good sign that renewable sources are still maintaining and increasing in prevalence throughout this time, because when investment does start to tick back up they will be well poised both financially and in the minds of those of us who will be adopting their use. 

Land Title: Basic Types Of Land Interests

Types of Property Interests

Last time in this series on real estate and oil and gas, I spoke generally about some common types of documents that a landowner or company might come across in an abstract of their land title. Today I’d like to go over very briefly just some of the different types of arrangements that parties might choose to create when they convey an interest in real property. Generally we refer to these different types of arrangements as interests or estates. When a person is conveying land, for example, they may do so by any of the conveyance instruments we talked about last time. These might include a Deed, a Will, or a probated estate.

In each type of conveyance of real estate there are a few key points that must be determined prior to putting everything into writing. There are the most obvious elements of any sale including the exact size and shape, otherwise known as metes and bounds, the amount of interest being given or withheld from the conveyance, and the amount of money to be exchanged for the property. From there you have the basic information needed for the deed, excepting one key piece of information.

In real estate law, which varies by state, there are specific ways in which parties can create a structure for the ownership of property when it is conveyed. In the law we refer to these concepts as the creation of different types of Estates. Each estate is designed to structure the relationship between new owners of property to determine how the property is used and later conveyed upon their deaths. Below I've briefly outlined some of the basic estates and the key considerations to be balanced prior to their creation in a land conveyance. 

Types of Estates:

            
1. Fee Simple

Definition: A fee simple interest is the whole enchilada. When you buy a piece of land outright, and no one owns any interests in it but you, then you own it in fee simple.

Benefits: The benefits of owning a fee simple interest are right there in the name: it's simple. You don't have to worry about other owners, tenants, or what's going to happen after you die. You have the ability to do whatever you'd like with the interest and you are the king of your domain.

Example of language: Deeds or other conveyance documents are made in fee simple when they state the transfer in phrases such as, "A to B, and his heirs forever."  

2. Life Estate

Definition: A life estate is simply a conveyance where you're the owner of the land as long as you're alive, and then it goes to whoever is listed next in line. This second person is known as the remainderman and they essentially are the owner until the moment of the interest-holder's life. Typically life estates are used to make sure that a piece of property stays in the family for at least a couple of generations.

Benefits: You become the king of the castle for as long as you live (It's good to be the king). The person who is conveying the interest also gets to know what happens to the property before they sell it, or they die in most cases.

Example of language: "A to B for life, and then to C and her heirs."

3. Tenancy In-Common

Define: This is the general way by which two or more people own a single property. If there's not language other than a basic conveyance in these situations, then it's automatically a tenancy in-common.

Benefits: This allows each owner a lot of freedom to sell or do with the property what they'd like. It's not all cut and dry that either tenant can do with the property what they'd like, but the freedom is worth it in most cases.

Examples of language: "From A to B and C" or "From A to B and C, as tenants in-common"

4. Joint Tenancy

Definition: A joint tenancy is a form of ownership where two or more people all own the entire property, but when they die their share goes to the remaining living owners. For instance, you have three brothers who own the family farm through a joint tenancy. Because all three brothers own the property completely, none of them can sell it without the others. When the first brother dies, his 1/3 ownership of the property goes to the other two brothers automatically and they now own 50% each.

Benefits: This keeps the property's ownership extremely predictable until the owners all agree on some alternative sale or type of ownership. It also makes the conveyance after the deaths of any owner extremely predictable.

Example of language: "From A to B and C, as joint tenants with the right of survivorship."

5. Tenancy By The Entireties

Define: An entireties tenancy is a unique form of ownership whereby a husband and wife own a property that acts automatically as a joint tenancy. This is the default ownership that occurs, regardless of deed language, when conveyed to husbands and wives in marriages that aren't deemed legally separated. Check your State law to determine if this is automatic or even allowed in your state.

Benefits: The tenancy allows husbands and wives some predictability in how their property is transferred when they die.

Examples of language: "From A to B and C, as husband and wife"

Conclusion:

When you are considering what type of ownership is right for your conveyance look into the laws of your state and talk to a property attorney. Though I've made these interests seem simple, the effects of a few simple words on a deed can be the difference between security and risk.