Apples and Oranges to Oil & Gas and Wind – Part I

Wind energy continues to expand and develop, especially in the state of Colorado. With a new project planned by Xcel in eastern Colorado near Limon, Deer Trail, and Simla, concepts from oil and gas can often be borrowed in the negotiations for wind leases. Wind energy is a close sister cousin to oil and gas and there are many comparisons to be made of wind energy to oil and gas that make it like comparing apples to apples, but there are just as many comparisons making wind compared to oil and gas more like applies to oranges. In this two-part article, we first discuss the apples to apples of wind and oil and gas, and secondly the apples to oranges of wind to oil and gas.

Leases

Wind companies like oil and gas companies do not typically purchase properties, but rather acquire limited property rights. They are not interested in owning your property and instead desire a limited interest in your property for a certain time period. Also similar to oil and gas leases, leases are not typically a set number of years that you can set your watch to, but certain contingencies or developments by the operator either act to extend or terminate the lease or easement.

Signing bonuses

Oil and gas leases nearly always include a payment or bonus for signing at the outset and wind documents commonly do as well.

Royalty payments

Oil and gas payments for production are nearly entirely paid as royalties for the extraction of the natural resources. Wind leases commonly include provisions to pay as a royalty for use of the wind resource; however, wind leases can differ in that there may be alternate or different avenues in lieu of or in additional to royalties including flat rates for use of the property via a turbine or transmission line.

Surface Uses

Much like and oil and gas development, especially natural gas, you will see primary sites or pad sites coupled with associated routes and then lines. In oil and gas, you might see a gas well site with a road to access the same and then a gathering pipeline to transport the same. As a surface owner you should seek compensation for those uses with the later typically being paid on a per rod or per foot basis. With wind energy you may similarly see a turbine site and then a road and then transmission lines to transport the same. Again, the goal as a surface owner should be to cover payments for all uses. Similar to oil and gas leases negotiations, it is important as a landowner to negotiate before signing a lease as to terms and conditions for surface uses, or to include a clause at the lease stage prohibiting surface uses to ensure that your leverage is intact for protection of your surface estate.

Jenna H. Keller, Esq.

Attorney at Keller Law, LLC. (www.kellerlawllc.com)

The information is for general information purposes only. This should not be substituted for legal advice and should not be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or reading does not constitute, an attorney-client relationship. You are encouraged to contact an attorney for legal advice concerning the information provided.

Excellent article