WIND LAW. Wind Energy Seminar Wednesday, February 22, Severance of Wind Rights

Transcription

1 WIND LAW Wind Energy Seminar Wednesday, February 22, 2012 Severance of Wind Rights

2 Steven K. DeWolf & Rod E. Wetsel Office Hours: Wednesdays 2:00 to 3:30 p.m. or by appointment Townes 3.119(H)

3 Conveyance and Reservation of Wind Rights Back into the Unknown Does wind cease to be property right once it is severed from the surface? Evolution of Mineral Severance Is it in Society s best interest to allow wind severance? Arguments for and Against Wind Severance The three favorable analogies of Prof. E. Smith Contrary Arguments by Prof. K.K. Duvivier Caselaw and Legislation Caselaw Legislation Back to the Future

4 Back into the Unknown Does wind cease to be a property right once it is severed from the surface estate? Although severance suggests a separation of the two interests, many argue that a wind rights holder does not own the wind rights separate from the surface; rather he or she acquires a specific right to use the surface and the wind that flows across it.

5 Back into the Unknown Comparison with Mineral Severance Ownership of oil and gas referred to as a bundle of sticks. (i.e. Executive rights and right to receive bonuses, rentals, and royalty all of which may be separately reserved) Can the same concept be applied to wind? Mineral law has had varying tests for determining difference between surface and subsurface minerals Surface Destruction Test Ordinary and Natural Meaning Test Does wind fit this model?

6 Evolution of Mineral Severances (Duvivier pp ) Concept of Separate Ownership of Minerals origin of royalty Greek and Roman Systems Bounty of Gods Materials for weapons, tools and ornaments Western Europe Germany free miners Spanish Law ownership by sovereign English law cases allowing severance were departure from common law; justified because surface owner not skilled enough to exploit them from beneath the surface. Also was benefit to the public.

7 Is it in Society s best interest to allow wind severance?

8 Arguments for and Against Wind Severance The Three Favorable Analogies of Prof. E. Smith 1. Game Animals Native game animals (e.g. deer) similar to wind Often move across property lines Productive income from hunting leases as wind leases do Owned by State Landowner has no rights in animal until reduced to possession Argue that holder of wind easement owns the electricity produced by wind turbines and would have a cause of action against adjacent landowners who tries to block wind flow

9 2. Water Two Kinds Subterranean Water Owned by the Owner of the surface estate, but subject to the Rule of Capture Validity of deed provision severing rights in ground water upheld in City of Del Rio v. Clayton (Tex. App. San Antonio 2008). Absolute Ownership Theory of Texas groundwater Grantor can reserve all groundwater rights when conveys remainder of the fee (See Smith & Diffen, Winds of Change, p. 178) Flowing water Flowing water in natural water course deemed to be owned by the State. Grant or agreement to extract and use flowing water upheld by Texas Courts. Texas Co. v. Burkett, 296 S.W. 273 (Tex. 1927).

10 3. Oil and Gas Hydrocarbons, like wind, traverse property lines Like underground water, subject to Rule of Capture, but still deemed owned in fee simple absolute Deed severing oil and gas upheld historically by Texas courts. Strong body of case law which could apply to wind If ownership of wind in fee simple unlikely then courts could turn to oil and gas law in other states (e.g. Oklahoma and Louisiana) Deem oil and gas un-owned while in ground and susceptible to ownership only after being reduced to possession. Recipient of rights in oil and gas receives an exclusive right to explore, drill and produce the hydrocarbons in the form of an easement in gross or in the common law, a profit a prendre.

11 Contrary Arguments by Prof. K.K. Duvivier (pp , Renewable Energy Reader Traditional mineral severance rationales of minimal surface damages and encouraging development of resources do not support severance of wind Unlike oil and gas drilling, wind ties up much of the surface with spider web of roads, turbines, substations, and transmission lines. Because wind is a non-depletable resource could be perpetual surface sue unlike oil and gas development which eventually ceases Severing wind rights discourages wind development: Removes the surface owner from the negotiation table either partially or totally Surface owner has financial incentive to promote co-operation between oil and gas and wind. Eliminated when wind rights are severed in a third party seeking his or her own financial gain Wind developers and lenders are hesitant to work with landowners who have severed their wind rights and with projects that have absentee wind owners Rule of Capture to wind could lead wasteful development as it did in the early decades of oil and gas Need for legislation on the state level.

12 Caselaw and Legislation Caselaw few Contra Costa Water District v. Vaquero Farms, 68 Cal Rptr 2d 272 (Cal. App. 1997) Held: Wind power rights can be severed when a public entity acquires property through eminent domain. Condemnation of land absent the wind rights was upheld. Romero v. Bernell, 603 F.2d 1333 (D.N.M. 2009) Held: The right to harvest wind energy is, then, an inchoate right which does not become vested until reduced to possession by employing it for a useful purpose. Upheld a partition of land in kind over arguments that land could not be equitably divided in kind because principal value was for development of wind farm

13 Legislation rare South Dakota: No interest in... wind power... may be severed from the surface estate... Except that such rights may be leased for a period not to exceed fifty years. Any such lease is void if no development... has occurred on the land within five years after the lease began. North Dakota and Nebraska have followed this model Oklahoma Property Act (60 O.S ) changes this long-standing law in Oklahoma in that it prohibits the severing of airspace from the surface estate for purposes of developing and operating commercial wind or solar energy conversion systems. Colorado bill in 2010 provided wind is a property right that can be severed from the future ownership

14 Back to the Future Texas legislature and courts tend to support policy of promoting the development of natural resources History favors upholding severance as does further wind development Generally favored by Texas landowners.