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Laws regarding wind energy development headed for Texas

Although Texas leads the nation in wind development, you may be surprised to learn that Texas law concerning the wind is basically non-existent. Similarly, there is little to no statutory regulation of the industry. So far, wind farms have been located in remote rural settings; however, as wind turbine technology advances and the land and wind speed necessary for the efficient development of wind energy decreases (and becomes even more profitable), it will not be long before the fight over wind finds itself deeply entrenched in Texas courts. ...While water law and the law governing the rights of wild animals may help resolve the issue of wind ownership, the question remains as to whether the right to develop the wind is a right that is severable from the land. In looking for guidance, the state courts may choose to rely on an area of the law with which they are quite familiar: oil and gas law. It is well established in Texas that the mineral estate (i.e., oil, gas and other minerals) may be conveyed and reserved apart from the surface. Texas courts have also held that certain substances which are historically considered part of the surface estate (such as near surface lignite and gravel, as examples) may be severed from the surface estate.

Wind is big business in the United States and, as everyone knows, "everything is bigger in Texas." Texas now leads the nation in wind energy development (installed and planned capacity), a title it took from California in July of 2006.

According to the American Wind Energy Association (AWEA), one megawatt of wind energy capacity generates enough electricity to power 225-300 homes for one year. Texas has an installed capacity of 2,768 megawatts compared to California's 2,361 megawatts. Not too bad, considering the first commercial scale wind farm in Texas went online in 1995 (compared to 1981 for California).

The future for Texas looks even brighter as Texas ranks second as the state with the most wind energy potential according to the AWEA. The result has been an increase in the number of wind companies doing business in Texas. This rapid increase in wind development has led some to compare the trend to the oil and gas booms of prior decades.

Short on regs

Although Texas leads the nation in wind development, you may be surprised to learn that Texas law concerning the wind is basically non-existent. Similarly, there is little to no statutory regulation of the industry. So far, wind farms have been located in remote rural settings; however, as wind turbine technology advances and the land and wind speed necessary for the efficient development of wind energy decreases (and becomes even more profitable), it will not be long before the fight over wind finds itself deeply entrenched in Texas courts.

A few cases sprinkled throughout Texas seem to indicate that this time may not be too far off. While these early cases deal with claims of nuisance, the larger questions that seem inevitable for Texas courts are, "Who owns the rights to the wind?" and "Can those wind rights be severed (and sold apart) from the rest of the land?" Whether or not Texas will be able to achieve its potential in the wind industry may largely rest on how these questions are answered.

With no law directly on point as to wind ownership, landowners and developers in Texas looking for guidance may be able to rely on early laws governing rights to wild animals or percolating waters. In Texas, wild animals are owned by the state so long as the animal is wild and unconfined. A landowner does not "own" a wild animal on his land until such time as he captures it or confines it.

While this legal theory is one way to approach wind ownership, a better approach may be to compare wind to water. When considering ownership of percolating waters, Texas courts have found that a surface owner owns the percolating water under his or her land and therefore has the right, absent malice or waste, to take as much of the water as he or she can capture.

Wind, like wild animals or percolating water, has no economic value to the surface owner until such time as it has been "captured" by the wind turbine. The difference between these legal theories of ownership is where ownership lies prior to capture: the wild animal with the State or the percolating waters with the surface owner. If courts were to conclude that wind is owned by the surface owner prior to its capture, Texas would likely classify wind as a natural resource (like water), subjecting the use of wind to state regulation.

Connections to land

While water law and the law governing the rights of wild animals may help resolve the issue of wind ownership, the question remains as to whether the right to develop the wind is a right that is severable from the land. In looking for guidance, the state courts may choose to rely on an area of the law with which they are quite familiar: oil and gas law. It is well established in Texas that the mineral estate (i.e., oil, gas and other minerals) may be conveyed and reserved apart from the surface. Texas courts have also held that certain substances which are historically considered part of the surface estate (such as near surface lignite and gravel, as examples) may be severed from the surface estate.

One reason behind severing the ownership rights to these resources from the surface was to promote their development as most landowners lack the means to develop these resources independently. Logically, to promote the development of wind energy, Texas courts should find that the right to develop the wind is a right that may be severed from the surface estate. If the wind energy boom is to continue, the parties whose land will bear the burden of the wind farms will have to be given the proper incentives. These incentives may include the right to reserve wind rights in conveyances of the land and the right to convey and assign wind rights to third parties as a source of income. One could preach the environmental-friendliness of wind energy to landowners all day, but nothing will increase development of wind energy like the "green" a landowner can make from using his or her land.

Despite being the leader in wind energy development, Texas law governing wind energy lags behind the technological developments. If Texas wishes to make wind energy a real priority, then the issues concerning ownership of the wind and its severability from the land must be definitively resolved in a way that creates incentives for development. In deciding the fate of wind energy and its potential in this state, Texas courts would be best served to rely on the "precedent" that it has established in other areas of energy law (water law and oil and gas law). Texas has long been the leader in energy law and, as a result, is well-positioned to be a formative influence in the establishment of wind law. While pitfalls and problems are sure to arise as the wind industry grows, relying on well established Texas precedent in other energy areas would create a solid foundation from which landowners, developers and all parties involved can rely when deciding to engage in wind energy development.

Paul Santoyo is an attorney in the Energy and Natural Resources practice area at Cox Smith Matthews Inc., where he assists clients with matters related to energy, environmental and natural resources law. Contact him via e-mail at psantoyo@coxsmith.com.

 


Source: http://sanantonio.bizjourna...

AUG 24 2007
http://www.windaction.org/posts/14765-laws-regarding-wind-energy-development-headed-for-texas
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