Texas Wind Leases - New Statutory Regulations
Texas has been a leader in the energy industry for many years, and that now includes wind energy. Wind energy is becoming a more prominent source of energy and as wind turbines become a common sight across the Texas countryside, it is important for landowners and developers to stay abreast new regulations regarding wind energy.
House Bill 2845
On June 14, 2019, Gov. Abbot signed House Bill 2845, which modifies Section 301 of Title 6 of the Texas Utilities Code; this law took effect September 1, 2019. This law requires that lessees under wind leases (Wind Developer(s)) remove all wind power facilities from the landowner’s property at the end of the lease term. As a part of this obligation, Wind Developers must also obtain financial assurances to secure the removal of wind power facilities erected pursuant to their leases. All wind power facility lease agreements entered into on or after September 1, 2019 must include the decommissioning requirement.
The new regulation defines a “Wind Power Facility” to include a wind turbine generator, facility, or equipment used to support the operation of a wind turbine generator; roads, meteorological towers with wind measurement equipment, and maintenance yards. A “Wind Power Facility Agreement” means a lease agreement between a Wind Developer and a landowner, that authorizes the Wind Developer to operate a wind power facility on the lease property. “Commercial Operations Date” means the date which the wind power facilities are approved to participate in the market.
What does the regulation say?
Wind Developers’ decommissioning responsibilities that are to be included in new lease agreements are:
(i) Clear, clean and remove from the property: each wind turbine generator including tower, pad mount, and substation; and all liquids, greases or similar substances contained in the wind turbine generator;
(ii) For each tower and pad mount foundation installed, a Wind Developer must clear, clean, and remove the foundation from the ground to at least three feet below the surface to ensure each hole created is filled with topsoil of the same or similar type as found on the property;
(iii) For each buried cable installed in the ground, a Wind Developer must clear, clean and remove the cable to a depth of at least three feet below the surface; and
(iv) Clean, clear, and remove each overhead power or communications line installed by the Wind Developer on the property.
The wind lease agreement should also provide that, at the request of the landowner, a Wind Developer will:
(i) Clear, clean, and remove each road constructed by a Wind Developer on the property; and
(ii) Ensure that each hole created in the ground by the removal is filled with topsoil of the same or a similar type as found on the property.
This request must be made by the landowner no later than the 180th day after the later of the date on which the wind power facility is no longer capable of generating electricity in commercial quantities or date landowner receives written notice of intent to decommission.
Furthermore, lease agreements will now require Wind Developers to secure evidence of adequate financial assurances conforming with the statute for all decommissioning efforts and that Wind Developers need to deliver the financial assurances no later than the earlier of the date the wind power facility agreement is terminated or the 10th anniversary of the commercial operations date of the wind power facilities located on the landowner’s leased property.
Some acceptable forms of financial assurances include:
(i) a guaranty from a parent company with minimum investment grade credit rating;
(ii) a letter of credit;
(iii) a bond; or
(iv) any other form of financial assurance that is accepted by the landowner.
The decommissioning price estimate is to be determined by an independent Texas licensed third-party engineer. Wind Developers will need to deliver to landowners an updated estimate of the removal costs once every five years for the remainder of their lease agreements.
Any attempt to waive the Wind Developer’s decommissioning responsibilities or to limit liabilities under the lease will be deemed void. If the landowner is harmed by the Wind Developer’s breach of its responsibilities to remove the wind power facility, the landowner will be entitled to injunctive relief in addition to other remedies available under the law.
As of September 1, 2019, Texas now requires wind lease agreements to contain language whereby Wind Developers agree to remove their materials at the end of the lease and provide financial assurances to support this requirement. These requirements may not be waived by the parties.
This blog is made available by Mazurek, Belden & Burke, P.C., for educational purposes only, and not to provide specific legal advice. This blog does not create an attorney client relationship between you and Mazurek, Belden & Burke, P.C. This blog should not be used or considered as a substitute for competent legal advice from a licensed attorney in your state. If you have any questions about this topic, please contact us.