Environmental: Wind Energy Contract Offers Call for Legal Scrutiny by Land and Mineral Owners

03.01.10

The Southern Plains has been blessed with abundant oil and natural gas resources. Energy has been an enormous economic driver in Oklahoma, Texas, New Mexico, and Kansas for over 100 years. As a result of this history, the oil and gas industry and affected landowners have developed basic expectations about their rights to the use of the land. Over the years these expectations have been expressed in standardized oil and gas leases, contracts, statutes, and judicial rulings.

Today, through a combination of tax incentives and public interest, development of energy from the wind is becoming a reality in the region. In some areas west of Interstate 35 and in parts of New Mexico, the wind is strong and consistent enough throughout the year to make wind energy development attractive. Landowners in some areas are being approached by wind energy ventures-some of whom have a track record of success and some just trying to break into the business. Prospective developers and promoters of wind energy projects are seeking to obtain contracts for the use of rural land for the placement of windmills and associated facilities to capture and deliver wind energy.

Oil and gas law has had a century to develop. In contrast, because wind energy presents such a new opportunity in this area of the country, standard form agreements for land uses have not yet taken shape. Statutory and case law are a long way from catching up as well.

The development of oil and gas resources can temporarily and permanently tie up land that otherwise would be available for farming and other uses, but generally only to the extent necessary for the mineral owner or leaseholder to capture the hydrocarbons. This could be true for the visible parts of the wind energy infrastructure as well-the windmills and turbines, even the roads and electric lines. However, wind energy projects cannot place windmills in locations where interference with the wind resource is going to be allowed. Above-ground structures (drilling units, barns, and even houses and trees) can cause disruptive turbulence and drastically lower the productivity of the individual wind turbines. As a result, in some cases landowners are being offered contracts that restrict their surface uses for up to forty years, even if the windmills are to be placed only near, and not necessarily on, the particular land in question. Some o f these agreements also call for landowners to commit to ten-year contracts prior to the wind energy company having to decide whether to actually construct and operate a project. The prospective developers may need to secure a number of land use contracts in order for them to acquire the credibility to seek financing for the projects and access to the electrical grid-for without financing and access to electric transmission lines, no wind energy project can become a reality. Landowners typically do not want to tie up certain uses of their properties for a very long time without knowing whether they will realize royalties from the actual sale of electricity by the developer.

One would think that energy from above the ground and energy from below could co-exist on a piece of land fairly easily. However, energy development in the form of oil and gas can conflict with the interests of the wind energy companies, particularly if the facilities used in the discovery, development, and production of hydrocarbons might conflict with the location of electric lines or cause turbulence around a windmill. Mineral interest owners and their leaseholders are not likely to give up any part of the dominant estate allowing development of oil and gas in order to increase the prospects of a wind energy project. Therefore, in the foreseeable future, it is more likely that the wind energy ventures will have to respond to the needs of oil and gas interests on developable land, rather than the other way around.

There are many other issues that arise around the use and enjoyment of the land juxtaposed against the need for flexibility in the development of wind energy projects. They call for legal scrutiny and clear-eyed interest analysis by all concerned.

By Mike Wofford, mwofford@dsda.com

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Rebecca D. Bullard

Rebecca D. Bullard

Rebecca represents clients primarily in labor and employment litigation and counsels clients regarding everyday employment matters. 

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