Wind energy development is known as green energy. Green energy is sexy. Everybody wants to jump on the bandwagon but few want to pay for the ride. A wind farm produces green energy. A wind farm itself is not green. It is steel, wires, underground cabling, electrical components and concrete. This describes the infrastructure of a government-permitted wind farm. Larger wind farm projects in South Dakota are subject to PUC jurisdiction regarding the permit application process and wind farm project oversight. This opinion piece focuses on projects under the jurisdiction of the PUC. Discussion of projects under the jurisdiction of the various wayward counties is left for another day.
In the eyes of a lawyer, which is not very romantic, when a wind farm contains steel, wires, underground cabling, electrical components and concrete we have potential legal liability. Wind farm infrastructure is not owned by the landowner. It is owned by the wind farm operator. A landowner has no right to control or interfere with a wind farm. Who may be liable and to what extent is always an interesting legal question. A court calls this the allocation of liability. It is best not to become involved in a question on the allocation of liability. General liability insurance coverage is one way in which liability risks are reduced.
The natural desire of a wind farm operator to protect its investment as well as a property owner’s natural desire to protect his land from liability are compatible ideas. Alas, the state of South Dakota is negligent; it does not require liability insurance coverage by wind farms. The conflicting and coexisting state policy of both encouraging green energy development and practicing laissez-faire wind farm oversight is dead wrong. A landowner, farmer or rancher on whose land a wind farm sits is the odd-man-out under the state’s current wind farm permitting process.
A government-permitted wind energy project creating electrical power is the definition of a wind farm. A wind farm is a public project permitted and overseen by the PUC because of its significant impact on the state and its people. Wind farm projects have a beginning, a middle and an end. The beginning is the development and construction stage, the middle is the operational phase and the end is the end. (The end of wind farm operations, whether by abandonment of the turbines, bankruptcy, or shut down by an operator is ‘The funeral’ of the operating project.) All three stages offer potential risks arising from claims or accidents related to wind turbines, wind farm operations and wind farm infrastructure. Importantly, these risks exist whether the wind farm is operating or not.
While I note the chief financial beneficiary of a newly written liability insurance policy is at first glance the insurance agent who wrote the policy, all the same – insurance should have an important role in PUC permitting and in the PUC’s project oversight. South Dakota law does not require that a wind farm carry general liability insurance. Wisconsin and North Dakota law require this. General liability insurance provides two areas of coverage for an insured party, that is, for the wind farm operator. A general liability policy covers bodily injury and property damage. Now to be clear, wind farm operators often have some insurance coverage. For example, a wind farm’s lender might require insurance. Yet when a loan is paid off such a lender’s insurance requirement would end.
I am now obliged to make my case for project-wide wind farm general liability insurance. If there are one or two sceptics out there among my numerous followers, my honorable readers should know I am not a lobbyist for and do not represent insurance companies. I propose a correction in the deficient and inequitable policy and practice of the PUC. The PUC should by law and or policy require project-wide general liability insurance. In my discussion in favor of insurance coverage I will: a.) first report the current lay of the land; b.) and then report the lay of the land as it should be.
The current lay of the land: Is an operator uninsured, underinsured or inadequately insured? Does the wind farm maintain a level of insurance providing for the type of loss or claims common to an operation? The PUC has no answer. South Dakota does not require that a wind farm maintain project-wide general liability insurance coverage. Both North Dakota and Wisconsin do. A recent wind farm permit approved in 2019 by the PUC will be used as an illustration. This wind farm development and operation was approved with 42 permit conditions to be met by the operator. These conditions were placed on it by the PUC. None of the 42 conditions required project-wide general liability insurance. The lengthy official application and approval file shows no indication of such insurance coverage. Naked in the wind.
The lay of the land as it should be: A wind farm operator should maintain general liability insurance relating to claims for property damage and/or bodily injury which may arise out of the development, construction, operation and closure of the wind energy project. A wind farm operator should maintain the required insurance coverage until such time as the PUC authorizes the termination of the coverage. The amount of coverage and required terms of the insurance should be set by the PUC in the course of its public process when considering a permit application. The amount of insurance coverage and required terms of insurance coverage should be described in an order granting a permit. Cancellation by an operator of the required insurance coverage should be prohibited. Property owners on whose land a permitted wind turbine or turbines are located should be named as additional insureds on the required insurance policy. The insurance policy should contain an endorsement obligating the insurance company to provide the PUC with at least 30 days prior written notice of any cancellation. No more than 15 days after the granting of a permit but before construction is started the permit holder should deliver a full and complete copy of the required insurance policy to the PUC. An insurance policy received by the PUC under these provisions should remain a part of the public record, not be sealed, and not be subject to proprietary or confidential claims by an operator.
Conclusion: The reasoning of government is a most uncertain thing. Will the state demonstrate leadership as well as equity and decide to change the law and its current practice of not requiring general liability insurance? Come see me in two years and we will cry together.
David Ganje of Ganje Law Offices practices in the area of natural resources, environmental and commercial law