Ted Borrego, Associate Professor at the University of Houston College of Law
UNITED STATES – APRIL 10: A solar farm will produce electricity on Saturday near Bakersfield, Texas. … [+]
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Perhaps Bob Dylan wouldn't have predicted this, but Texas generated nearly 22% of its electricity from wind and solar power in 2020, according to EIA, and it also uses other natural resources like oil and gas and agriculture. The state allows the sale and possession of minerals separately from the surface. In the context of wind or solar companies entering into contracts to use the surface, the rights of mineral and royalty owners in Texas are often overlooked. In short, surface owners can be unexpectedly restricted in their traditional activities.
The typical contract method for wind or sun is to enter into a contractual lease. Initially, wind energy developers and later solar park developers modified oil and gas leases. Modified oil and gas leases, while a bit like pounding the square tenon into a round hole, served as a contractual model, but some issues still need to be addressed.
Of course, wind or solar companies only need access to the surface. Some foundations go a few feet at most, but there is no need to go deep or beyond. As a result, the mineral or license holder – or the oil and gas operator – does not have to be a party to the wind lease. Texas law has been clear for well over a century: mineral owners, which include oil and gas operators, own the dominant property. In translation: within certain distance requirements, a borehole can be drilled anywhere the operator wishes.
Wells can and can disrupt wind currents if a drilling rig is on site. Worse, if wells are too close to a wind turbine, they can disrupt the operation of the turbine. In solar parks, shadows, vibrations and other activities also interfere with the use of carefully placed photovoltaic cells. In addition, oil and gas operators have access rights even after drilling is complete – along with the right to lay pipelines and place equipment on the surface. In general, there is little the surface owner or the wind or solar company can do about it.
Texas has a long history of interpreting the rights of oil and gas operators. In general, when summed up in a single thought: the operator wins, the surface owner loses. This was true until 1971 when the Texas Supreme Court examined the Getty Oil Company v Jones case in which the surface owner tried to use an irrigation system but saw it blocked by a pump jack. The surface owner sued and the Supreme Court announced a new doctrine: when the cost of meeting the surface owner's needs is low and does not require large sums of money, the operator must consider the surface owner's needs. Here the Supreme Court requested that the operator put their pump in a basement and use a low profile pump. Hence the theory of accommodation was born.
Since then the teaching has changed. The surface owner must have used the surface before drilling the well or signing the lease. The cost-benefit analysis must tend towards a low cost-benefit ratio.
An interesting problem arises when neither wind nor solar companies do a full review of ownership of mineral rights and enter into a contract with the surface owner to determine that an oil company has leased the minerals from an owner who may not be the surface owner. Problems can be circumvented by investigating the mineral ownership before proposing the lease and reaching an agreement with the mineral owner and the oil and gas operator. In business terminology, a title report or opinion is required, detailing the chain of ownership and previous arrangements for the property. More importantly, the contract be reviewed by someone who understands the relative rights of the parties.
The accommodation reached usually determines specific drilling locations, road and pipeline easement locations, and placement equipment to prevent disruption to surface operations. Fortunately, today's technology has advanced so that wellbores can be vertical, intentionally deviated from vertical, or drilled horizontally, which can suit everyone's needs. This is a negotiation process and there is no standard template.
Agricultural users, farmers, ranchers and possibly recreational users often do not know what to expect. Surface rights development and the rights granted to wind or solar developers can affect pasture patterns. The placement of easements, solar cells, wind turbines and associated equipment can interfere with plowing and permanently affect irrigation rights.
For those surface owners who lease their land for hunting, there is still no comfortable coexistence between hunters and construction crews. Therefore, responsibility for damage to wind turbines or solar cells is an unexplored area of law. The insurance has not yet entered into this violation. An increase in bird and bat collisions over the past 25 years has led to efforts to document the impact on the environment and to minimize the risk to wildlife and wind turbines.
Texas didn't develop a law that includes air rights, so we don't know if a surface owner has the right to pull winches over the property. Can a neighbor build a silo, barn, or other structure, or put trees in place that can disrupt the wind or create shade without obstruction? Do we need a doctrine to accommodate in air rights? Can the legislature give an answer?
As alternative energies become increasingly important, answering these and other questions becomes critical to the rational growth of an important industry. It took nearly a century and a half to clear up the issues of surface and mineral owner rights and they are still not clearly outlined. Adding the wind and sun to the law can't wait a century.
Theodore R. (Ted) Borrego is an Associate Professor in the College of Law at the University of Houston. Since 2004 he has been teaching the advanced oil and gas contract course. He has advised clients on wind leases, solar parks, geothermal leases, mining and other matters. He was the primary attorney advising the state of Texas on minerals related to the SuperConducting SuperCollider and has spoken with industry and legal groups. His professional association as a lawyer began in 1974 when he joined Vinson & Elkins. Borrego has contributed articles to various publications and has written articles for Matthew Bender on commonly used contracts in the oil and gas industry.