Yesterday, the Montana legislature sent HB 295, the Wind Energy Rights Act (the “Act”), to Governor Schweitzer to be signed into law. The Act revises wind easements and wind energy rights in the state in several ways and will become effective on the date signed by the Governor:
- Wind Easements. The Act sets out the contents and requirements for wind easements. A wind easement is defined as “the right granted . . . to a wind energy developer guaranteeing the developer the right to use the real property legally described . . . and the wind resource on and flowing over its surface to develop a wind energy project.” Such wind easements would be interests in real property that run with the land.
- Wind Option Agreements. The Act sets out the contents and requirements for wind option agreements.
- Severance of Wind Rights Prohibited. The Act prohibits the severance of wind energy rights from the underlying real property. However, the Act does not “prohibit or limit the right of a seller of the real property to retain any payments associated with an existing wind option agreement or wind energy agreement” (including leases, licenses, and any other agreement that contains a wind easement).
- Mineral Estate Remains the Dominant Estate. The Act does not “change or alter common law” with respect to “the rights belonging to or the dominance of the mineral estate.” Therefore, even though a developer may acquire a real property interest in the wind resource under the Act, that right – like the right of the landowner to occupy the surface – is subject to oil and gas and other mineral interests that were recorded prior in time to (and without prior notice of) the wind energy agreement. Although the Act requires landowners to “ensure the undisturbed flow of wind over the property,” they are not required to restrict structures and equipment “necessary to access minerals as they relate to the rights belonging to or the dominance of the mineral estate.” But what if they did anyway? Because the mineral estate is the dominant estate, even if a landowner agreed to restrict future development of senior mineral interests by, for example, limiting the height or location of exploration equipment, that covenant could be subject to challenge by the mineral interest holder under common law.
- Grandfathering. Wind energy rights created by lease, contract, or other agreement prior to the effective date of the Act will not be affected by the Act.
- Repealer. The current law governing wind energy easements, MCA 70-17-303, would be repealed upon approval of the Act.
The severance of wind rights and conflicts between wind project developers and oil & gas and other mineral interest holders are some of the leading issues facing project developers. These issues can be quite complex and have implications for project financing as well as project siting.