When You are Heading for a Different Time Zone

Zoning, mineral rights and water rights move to the forefront in a regional relocation.

Q: My growing company is preparing for a site search to add a facility in a different region of the country than the one in which we currently operate. What aspects of site selection vary by region?

The Expert Says: There are a variety of often-discussed operating conditions that vary by region, including labor, transportation, utility costs, and taxes. Less “high profile”—but just as critical to a regional site selection process are three land-use and natural-resource factors: zoning, mineral rights, and water rights.

In many regions of the country, comprehensive land-use plans and zoning regulations are well established and widely accepted means for shaping development. There are, however, many communities throughout the nation that have not enacted zoning.

For a company considering such a community, the lack of zoning initially may be viewed only as a positive circumstance that will allow for quicker approvals and construction. However, the negative aspects of building in a location with no zoning also should be considered prior to choosing a site.

The same flexibility in the absence of zoning that allows a company to develop more freely on a site also applies to all the surrounding owners. Without land-use planning and zoning, a company is unable to predict with certainty how the property surrounding its site will develop during the future months and years. The impact of incompatible development occurring adjacent to a facility can severely impact property value and may be a particularly important consideration for companies in which image plays a key role in the success of the operation.

Creating a buffer by purchasing a much larger site than is operationally necessary is one way to protect your operation from the development of incompatible land uses adjacent to the facility, but that strategy may not prove entirely successful and may not be financially feasible, especially in the current economic climate.

Mineral rights are another factor that can be a significant consideration in the site selection process depending upon the region of the country where the new facility will be located. In some regions of the country, buying a parcel of land almost always means that you have the rights to all of the minerals beneath the surface. However, in other regions of the country, the severance of mineral rights from surface rights is common practice.

Multiple natural resources beneath the surface may be under the control of multiple entities. How and when the natural resources below the surface can be extracted should be considered by a company prior to constructing on a site where the mineral rights are severed. Be sure to have a title search performed (and be sure to read it). Even in areas of the country where mineral rights traditionally were included with surface ownership, strong interest in potential natural gas resources in shale deposits and advanced extraction methods has led to a surge of severance of mineral rights in states such as New York and Pennsylvania.

A third factor in site selection that differs significantly by regions of the country is water rights.

If water rights are not something that you have dealt with in the region where you currently operate, be prepared to utilize a local expert from the region. And as with mineral rights, emerging issues (global warming, overall water supply, watershed restrictions) are expected to make water a less certain factor in areas of the country where it was traditionally taken for granted, such as the southeastern United States.