BY: Dean Graves, Underwriting Counsel, AmTrust Title Issues regarding the legality of the severance of wind estates in Texas are now pending before the Amarillo Court of Appeals. For the first time a TX court has recognized wind rights as a severed property interest. A Texas state district court in Hale County, Texas issued a verdict under Texas state law that wind rights, or the ability to capture wind energy for profitable sale, were a severable property interest, and that a trespass claim was actionable where there was a violation of these rights.
The basic facts of
Ridge Renewables, LLC v. Hale County Wind Farm, LLC et al. are as follows:
- Glendale King, the fee simple owner of approximately 256 acres in Hale County, Texas executed a Wind Easement lease with Hale County Wind Farm, LLC that expressly provided for termination on 8/24/2017 unless energy was being generated and sold.
- 1/12/2011 King sold the 256 acres to Kelly and Ronna Smalley, but reserved a life estate in all royalties derived from the production of wind energy and all rights to lease the property for wind energy production purposes.
- 10/30/2017 Hale County Wind Farm, LLC and the Smalleys executed an amendment to the expired lease which extended the termination date from 8/24/2017 to 8/24/2020. Hale constructed two wind turbines on the property and generated and sold electrical energy.
- 9/22/2020 King conveyed all title and interest owned by him in the 256 acres including all wind rights and causes of action accruing or accrued with respect to the wind rights in the property to Ridge Renewables, LLC.
- 12/30/2020 Ridge filed suit seeking a declaratory judgment for trespass claims and asserting trespass-to-try title claims to determine the rightful owner of the wind rights. The District Judge granted Ridge’s motion for partial summary judgment, finding that Ridge owned the wind rights.
- This was the first court in Texas to recognize that wind rights are severable from a surface estate. The case is now pending before the Amarillo Court of Appeals at the time of this writing.
There is, however, a limited body of case law establishing some severability of wind rights from courts in other states. In
Contra Costa Water Dist. V. Vaquero Farms, Inc., a California court allowed Contra Costa Water District to sever wind power development rights from the surface estate owned by Vaquero Farms in an eminent domain condemnation. In
Romero v. Bernell, A New Mexico court reasoned in a partition case that a treatment of wind rights would be similar to both mineral rights and water rights.
Texas does not have any statutes or regulations regarding the severability of wind rights. However, other states have prohibited or restricted the severance of wind rights by means of statutes. Nebraska provides that: “No interest in any wind or solar resource located on a tract of land and associated with the production or potential production of wind or solar energy on the tract of land may be severed from the surface estate.”
Neb. Rev. Stat. § 66-912.02.
Kansas provides that: “No person other than the surface owner of a tract of land shall have the right to use such land for the production of wind or solar generated energy unless granted such right by the lawful owner of the surface estate by lease or easement for a definite period.”
KS Stat § 58-2272(b). North and South Dakota as well as Wyoming prohibit severance from the surface estate except by means of a lease.
North Dakota Cent. Code Ann. § 17-04-04, S.D. Codified Laws § 43-13-19., WY Stat. §34-27-104(a), (b). Colorado likewise provides that: “A wind energy right is not severable from the surface estate, but like other rights to use the surface estate, may be created, transferred, encumbered, transferred, or modified by agreement”.
Colorado Rev. Statutes Title 38 §38-30.7-103(1). Like Colorado, Montana and Oklahoma provide that wind rights cannot be severed from the surface estate, but an easement in Montana or a lease in Oklahoma is allowed.
Montana Code Ann. §70-17-404(1), 60 OK Statutes §820.1 F.
That a Texas court would find wind rights to be severable is not a surprise given the history of land rights in Texas. Anticipation of legal support for the severability of wind rights is demonstrated by thousands of such severances recorded in instruments throughout Texas.
Under well-established Texas law, landowners have the legal right to either retain complete ownership or a lesser interest in the surface estate while conveying severable estates in the minerals to third parties. Texas courts have also recognized severances of substances qualified as other than minerals from the surface estate including limestone, fresh water, sand, gravel, caliche, surface shale, near-surface lignite, iron, and coal. The Amarillo Court of Appeals now has an opportunity provide a framework for the severability of wind rights.
Developers and/or investors in wind projects need to resolve any potential issues caused by wind severances not prohibited by law. Well before the holding in
Ridge Renewables, AmTrust has treated Texas severed wind interests as affecting title and has worked with its clients to determine where wind severances have been recorded and to cure potential severed wind rights issues. AmTrust is available to review potential severed wind rights issues throughout the United States.
Securing severed wind rights can involve purchasing the severed interests for a reversion of these rights to the surface owner or more likely, contracting with the wind severance owner for the use of these rights. Typically, a joinder to the wind lease specific to the wind rights holder will simplify the negotiation process, as the wind rights holder will have more limited interests than the surface owner.