Yesterday, the Montana legislature passed important new legislation that will have a significant impact on the development of wind projects within the state. The bill, titled the “Wind Energy Rights Act” addresses many of the big issues that state legislatures around the country are grappling with, including:
1) How to create uniform wind energy agreements between developers and landowners;
2) Whether landowners should be allowed to separately sell their interest in the airspace over their property from their interest in the land and mineral rights (commonly referred to as “severing” the wind rights); and
3) How to address any conflicts between wind developers and oil and gas developers that have rights to explore the same piece of land.
The Montana legislation takes an interesting approach to these issues:
On the issue of uniform wind agreements, the Act sets out the information that must be included as part of several of the most common types of agreements between landowners and project developers: wind energy agreements, wind easements, and wind option agreements.
Severance of Wind Rights
The Act follows the recent trend across the U.S. of prohibiting severance. However, interestingly, the Act states that if a landowner decides to enter into a wind agreement, but later decides to sell the property, the seller is allowed to retain any payments associated with those existing wind agreements to the exclusion of the new owner.
This would seem to increase the long-term risk for project developers, because the new owner of the property would be required to uphold the agreement with the developer, without being entitled to payments.
Dominance of Mineral Estates
Finally, the Act specifically states that it does not modify the existing statutory language regarding the dominance of mineral estates, so holders of a wind interest will be subordinate to oil and gas developers with existing mineral rights leases on the property. This potentially raises a number of problems for renewable project developers, and can significantly increase the cost and risk of a given project.
For example, say a developer spends a significant amount of money building a turbine on property that is already subject to an oil and gas lease. Arguably, should the oil and gas developer decide to construct an oil derrick or pipeline that interferes with the wind project in some way, this provision will make it very difficult for the wind developer to raise any objections.
The Act has passed the legislature and now just needs to be signed by Governor Schweitzer to go into law.