Ted Borrego, Adjunct Professor at University of Houston College of Law
Perhaps Bob Dylan would not have predicted this, but Texas generated nearly 22% of its electrical power from wind and solar energy in 2020, per the EIA, and also makes use of other natural resources, such as oil and gas and agriculture. The state allows minerals to be sold and owned separately from the surface. In the context of wind or solar companies contracting for using the surface, mineral and royalty owners of Texas often have their rights overlooked. In short, surface owners may find themselves unexpectedly restricted in their traditional activities.
The typical method of contracting for wind or solar is to enter a contractual lease. Initially, wind energy developers, and later solar farm developers, modified oil and gas leases. While somewhat akin to pounding the square peg into a round hole, modified oil and gas leases served well as a contractual model, but some problems stand to be addressed.
Clearly, wind or solar companies only need access to the surface. Some foundations penetrate a few feet into the ground at most, but there is no need to penetrate deep into the subsoil or beyond. Subsequently, the mineral or royalty owner – or the oil and gas operator – need not be a party to the wind lease contract. Texas law is clear and has been for well over a century: mineral owners, which include oil and gas operators, own the dominant estate. In translation: within certain spacing requirements, a well can be drilled anywhere the operator desires.
Wells can, and do, disrupt the wind currents when a rig is on location. Worse, when located too closely to a wind turbine, wells can disrupt the turbine’s operation. In the case of solar farms, shadows, vibrations and other activity also disrupt the use of carefully placed photovoltaic cells. Additionally, even when drilling has ended, oil and gas operators have access rights — along with the right to lay pipelines and place equipment on the surface. Generally, the surface owner, or the wind or solar company, can do little about this.
Texas has a long history of interpreting the rights of oil and gas operators. Generally, if summed up in a single thought: the operator wins, the surface owner loses. That was true until 1971, when the Texas Supreme Court reviewed the Getty Oil Company v. Jones case where the surface owner tried using an irrigation system but found it blocked by a pump jack. The surface owner sued and the Supreme Court announced a new doctrine: where the cost of accommodating the surface owner’s needs is low and does not require the expenditure of large amounts of funds, then the operator must accommodate the surface owner’s needs. Here, the Supreme Court required that the operator place its pump in a cellar and use a low-profile pump. Hence was born the accommodation doctrine.
Since then, the doctrine has been modified. The surface owner must have been using the surface before the well was drilled or the lease taken; the cost/benefit analysis must tilt toward low cost/large benefit.
An interesting problem arises when neither wind nor solar companies undertake a comprehensive review of mineral rights ownership and enter into a contract with the surface owner, only to discover that an oil company had leased the minerals from an owner who may not be the surface owner. Problems can be circumvented by researching the mineral ownership before the lease is proposed, and an accommodation reached with the mineral owner and the oil and gas operator. In the terminology of the business, a title report or opinion detailing the chain of ownership and previous agreements for the property are necessary. More importantly, the contract should be reviewed by someone that understands the relative rights of the parties.
The accommodation reached, typically, designates specific locations for drilling, locations of easements for roads and pipelines and placing equipment, all to prevent disruption to surface operations. Fortunately, today’s technology has evolved so that wells can be vertical, intentionally deviated from the vertical or drilled horizontally, all of which may accommodate the needs of all parties. This is a negotiation process, and there is no standard template.
Agricultural users, farmers, ranchers, and possibly recreational users frequently are unaware of what awaits them. The development of surface rights and the rights accorded to wind or solar developers may have an impact on grazing patterns. The placement of easements, solar cells, wind turbines, and related equipment can play havoc with plowing patterns and may permanently disrupt irrigation rights.
To those surface owners that lease their lands for hunting, no comfortable co-existence between hunters and construction crews exist yet, and so responsibility for damages to wind turbines or solar cells is an unexplored area of law. Insurance has not yet stepped into that breach. An increase in bird and bat collisions of the last 25 years has prompted efforts to document environmental impact and minimize risk to both wildlife and wind turbines.
Texas has not developed a body of law involving air rights, so we do not know if a surface owner has the right of winds across the property. Can a next-door neighbor build a silo, barn, or other structure or put in trees that may interfere with the wind or create shadows with no impediments? Do we need an air rights accommodation doctrine? Can the legislature provide an answer?
As alternative energy becomes increasingly important, answering these and other questions become critical for the rational growth of an important industry. It took nearly a century and a half to work out the issues of surface and mineral owner rights, and they still are not clearly delineated. Adding wind and solar to the body of law cannot wait a century.
Theodore R. (Ted) Borrego is an adjunct professor at the College of Law at the University of Houston. Since 2004, he has taught the advanced oil and gas contracts course. He has advised clients regarding wind leases, solar farms, geothermal leases, mining and other matters. He was the principal attorney advising the State of Texas on mineral matters regarding the SuperConducting SuperCollider and has spoken to industry and legal groups. His professional association as a lawyer began in 1974, when he joined Vinson & Elkins. Borrego has provided articles to various publications, and written articles for Matthew Bender on commonly used contracts in the oil and gas industry.