Is the Mineral Estate Dominant to the Aerial Estate?

January 29, 2014

By Maggie Griffin – 2L

 

Established property law has told us that the mineral estate is dominant to the surface estate. But what if the State of Texas allowed the aerial estate to be severed? Where does it rank against the mineral and surface estate? This conflict is occurring more frequently in the panhandle where wind farms have become a common sight and landowners are weighing the differences between oil and gas leases and wind leases.

 

Currently, Texas leads the nation in wind energy production with 7,690 turbines supplying 9.2% of the state’s electricity needs and powers roughly 3.3 million homes. 1 Many agricultural farmers in the gulf coast and panhandle have the possibility of creating an Energy Trifecta where there is an oil well paying royalties, a wind farm paying a minimum royalty, and the landowner generating income from the agriculture upon the surface estate. Recently, an Oklahoma court held that the surface owner may lease his land to a wind energy company to erect a wind farm on the surface while leasing the same acreage representing the mineral estate to an oil and gas company where each has the right to reasonable use of the surface estate. 2

 

The Accommodation Doctrine declares that oil companies leasing the mineral estate must reasonably accommodate the needs of the surface estate. 3 Could the aerial estate become dominant to the surface or mineral estates? University of Texas Professor Ernest Smith believes the validity of severed wind rights will become a pressing issue in Texas where deeds treat wind rights “as analogous to oil and gas and grant or reserve rights in wind apart from other incidents of land ownership.” 4

 

There has only been one case that permitted the severance of an aerial estate from the surface and mineral estate in California. District v Vaquero Farms is unique in its holding because a landowner who had previously leased his wind rights had the state of California condemn 3,500 acres of his property where 260 wind turbines had been erected. 5 The court held that wind rights could be severed when a public entity acquires the underlying fee through eminent domain. 6

 

However, a New Mexico district court entertained the idea of wind severance in Romeo v. Bernell with a fact pattern similar to Vaquero Farms. 7 Plaintiff owned a plot of land as a tenant in common with other parties and rejected the partition claim on his land based on the present value of the land for a wind farm. 8 Plaintiff saw his wind interest as a direct analogy to mineral interest in pursuing the argument that the land was not subject to partition. 9 The court held The right to “harvest” wind energy is, then, an inchoate interest in the land which does not become “vested” until reduced to “possession” by employing it for a useful purpose. Only after it is reduced to actual wind power can wind energy then be severed and/or quantified.” 10Although the Respondent lost his case due to inchoate interests in wind rights being unable to deny partition of his property, the court included convincing dicta above that once the wind is reduced to power, it may be severed. Interestingly, this quote from the Romero holding is cited to the Contra case without a pin point citation suggesting that they may be at odds with one another since Contra only discusses possession when respect to the amount of acreage in the surface estate.

 

Severed Wind Rights have not yet become an issue of litigation because the Texas Wind Industry can trace its rise in popularity to 1999 when Governor George Bush signed the State’s Renewable Energy Portfolio Standard calling for production of 2,000 megawatts of renewable energy by 2009 whereas the oil and gas industry can likely be traced all the way to Spindletop striking oil in 1901. 11. Professor Smith explains that the current process of a wind lease that severs wind rights begins with the original land-owner signing a memorandum recognizing the “validity of the wind lease from the owner of the wind rights.” As long as the original parties to the transaction are present, problems do not usually occur. Issues arise when the surface is transferred by deed, devise or inheritance to another party who can declare that a severance of wind rights is invalid. This new landowner will declare that he is the only party who can conduct a lease with respect to the surface. Since a wind lease is currently considered as an extension of the surface, the new owner would have a valid legal claim and the wind company is in for a legal battle.

 

Outside of Texas, the only legislative progress to be made with regards to the wind estate has ironically been found in the low wind energy producing states of North and South Dakota where they almost identically state that a land interest associated with the production of energy for wind power on the tract of land may not be severed from the surface estate. 12

 

With the technological advancement of horizontal drilling, it seems impractical that the oil and gas company would not have any reasonable alternative to develop the minerals. However, based on Texas’ Accommodation Doctrine, the mineral estate remains the dominant estate that will be permitted to interfere with the use of the surface. Thus, the hypothetical wind farm being built on the surface estate is currently subservient to the oil and gas company developing the mineral estate. If the wind severance debate yields the ability to sever the wind estate from the surface, will the mineral estate remain dominant in the current green race to renewable energy?

  1. Am.Wind Energy Ass’n, State Wind Energy Statistics: Texas (Oct. 17, 2013), available at http://www.awea.org/Resources/state.aspx?ItemNumber=5183.
  2. Osage Nation ex rel. Osage Minerals Council v. Wind Capital Grp., LLC, 11-CV-643-GKF-PJC, 2011 WL 6371384 (N.D. Okla. Dec. 20, 2011), appeal dismissed (Feb. 23, 2012).
  3. Getty Oil Co. v. Jones, 470 S.W.2d 618, 623 (Tex. 1971).
  4. Ernest Smith, Texas Wind Law, (Feb.-Apr.) §4.02 Severance of Wind Rights, 4-5, 4-6 (2012).
  5. Contra Costa Water Dist. v. Vaquero Farms, Inc., 58 Cal. App. 4th 883, 895, 68 Cal. Rptr. 2d 272, 278 (1997).
  6. Id. at 278.
  7. Romero v. Bernell, 603 F. Supp. 2d 1333, 1335 (D.N.M. 2009).
  8. Id. at 1333.
  9. Id.
  10. Id at 1335.
  11. Tex. Util. Code Ann. § 39.904 (West)
  12. N.D. Cent. Code Ann. § 17-04-04 (West); see also S.D. Codified Laws § 43-13-19.

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