Content area
Full Text
Abstract
Natural gas may be stored underground in depleted gas and oil fields. A developer of underground gas storage fields may seek to assemble the rights to several thousand acres, but the developer may only be interested in buying the rights to strata that, on average, are 1,000-5,000 feet below the surface. What is the market value of rights for these reservoirs? Where does the appraiser find comparable sales or rents? This article offers a brief discussion of the underground gas storage market, and how understanding rules relating to eminent domain valuation can guide the appraiser to a logical, defensible conclusion of value.
Introduction
Natural gas is a commodity that can be stored for an indefinite period. Land that once held naturally occurring oil or natural gas but has depleted reservoirs might now be suitable for a natural gas storage operation. Such gas storage occurs far below the surface and can encompass several hundred or several thousand acres. The land above the proposed storage field usually includes many ownerships, which means the rights must be acquired from a number of owners. Most landowners have no use for the permeable subsurface that is thousands of feet below the surface, and they give no thought to it having value until a developer for a proposed gas storage operation knocks on their door offering to buy the rights to those particular strata of rock that are permeable and partly void.
An assignment to appraise the value of underground storage rights for a proposed gas storage field might start with the appraiser researching relevant data or published reports regarding the valuation of underground gas storage rights. Although the research will produce many articles related to underground gas storage, and some articles discussing the value of the gas that is in storage, almost none will address the valuation of the rights to a subsurface layer suitable for storing and retrieving natural gas. One of the few discussions to address the valuation of underground storage rights can be found in the Internet question and answer service, "Allexperts." There, a gas and oil expert responded to a question about valuing the renewal of an expiring underground storage lease by stating,
It's pretty rare to have a gas storage facility under your...