Earth, Wind and Fire: The Interplay of Mineral, Wind and Solar Leases
by Ron Holmes
If you own, or dream of owning, a farm or ranch, then you might find this article interesting. The article addresses two questions: can a landowner legally convey rights to the Sun and the Wind; and do mineral rights trump solar and wind rights?
All of us have some knowledge about oil & gas leases, especially since the Barnett Shale explosion, which brought gas wells close to our commercial properties, and even our back yards. Texas law recognizes a separation of the surface estate (the right to use the “surface” of land) and the mineral estate (the right to explore for, drill and produce oil & gas and other minerals). The mineral estate is dominant, meaning the owner of the mineral rights can use the surface estate to explore for, drill and produce minerals, unless the mineral rights contain a “surface waiver”, which means the owner of the mineral estate waives its right to use the surface estate to explore for, produce and transport minerals.
Who owns the Sun? Who owns the Wind?
While Texas law regarding the interactions of the mineral estate and the surface estate is well developed, not so with respect to the solar/wind estate and the surface estate or between the mineral estate and the solar/wind estate. Think about it. Minerals are primarily found under the surface (a few, like caliche, are on the surface). Solar (the Sun) beams down on the surface estate during daylight hours from a zillion miles away, without your permission. Wind erratically crosses the surface estate without permission. Who owns the Sun? Who owns the Wind? Can a landowner legally convey rights to the Sun and Wind? If he does, how will the rights of the mineral estate lessee and the solar/wind lessee interplay?
No Texas judicial decisions providing specific guidance
To my knowledge, as of this writing, there are no Texas judicial decisions providing specific guidance on these questions. Even so, wind and solar leases are being executed on a more and more frequent basis, including out of our law firm.
If you are a farmer or rancher, what issues should you and your lawyer consider when negotiating a solar or wind lease? Here are a few I focus on:
- Who owns the mineral estate and are there surface waivers? How will drilling activities (vertical or horizontal) affect the use of the solar or wind rights?
- What current activities of the landowner might interfere with a solar or wind easement (e.g., dust from farming or use of non-paved roads within the leased area or even grazing)?
- What is the market value of the sun and wind on your land and how is that payable?
- What happens to all that equipment at the end of your lease?
- How do you prevent the solar/wind lessee from spreading weeds and unwanted grasses on your ranch, damaging fences, carrying firearms and otherwise not being a good lessee?
Significant financial rewards or costly pitfalls?
When I am drafting or revising solar or wind leases, I analyze these issues and many more. The financial rewards of a solar or wind lease can be significant, but the pitfalls are numerous and potentially costly. So, I encourage you not to negotiate and sign a solar or wind lease without retaining legal counsel with experience in that arena.