By Shanisha Y. Smith
What Lies Beneath Above:
Mineral, Wind, and Groundwater Estates in Texas and The Severance Implications
E
nergy companies will be left behind if focus is not shifted to what is shaking our global conscience: climate change, the economy, the COVID-19 pandemic, and racial inequality. This is a reckoning period. Reinvention is amiss. In 2021, energy companies must cut greenhouse gas emissions by exploring investments in renewable energy and green technology amid pressures from investors, regulators, and customers. Even the U.S. Securities and Exchange Commission is directing companies to focus on climate-related disclosures.1 These pressures have mounted in Texas after the statewide electricity crisis in below freezing temperatures. Yes, we now know that the cause of the Texas Blackout was a “perfect storm” literally and figuratively—the combination of freezing natural gas pipelines, failed wind turbines,
the loss of some natural gas and coal generation, and the loss of a nuclear reactor.2 Here’s what happened: Cold temperatures forced an extreme electric demand and a decrease in supply. Wind turbines froze. Natural gas wells froze, too. And pipelines. Don’t leave out the critical pipes at coal and nuclear power plants; they froze as well. Equipment panels went offline. The “perfect storm” for disaster. Energy companies face a complex problem: building reliable infrastructure in the midst of climate change while creating jobs and a clean energy economy under President Biden’s goal of reaching a net zero emissions future by 2050.3 The collective impact of the pandemic, the blackout, and climate change has increased the draw of investment in diverse, green energy assets such as wind power. The severance of the wind estate in Texas is unclear, but legal precedent provides guidance. Let’s analyze a scenario to highlight the issue. Wind Estate Severance: An Example You have volunteered to take a pro bono case. The client is an elderly developmentally disabled woman from Humble, Texas. The client’s personal representative is her brother. Upon death, the parents devised the client a ranch—understanding the gravity of the client’s current and future medical expenses, living expenses, and care. The 2,700-acre ranch has a producing well, an aquifer, and some farming equipment. The client wants to sell 25% of the wind estate to an Austin investment firm. The client’s brother says that this transaction would allow them access to immediate cash, funds to pay off expenses from the estate, money for future medical expenses and care, and future royalties. The client and her brother ask for your legal opinion on the severance of the wind estate and the implications of the client’s other property rights. Keep in mind that a wind lease could provide various payments and compensation for the client such as royalties, bonus payments, delay rentals (on development fees), rents, and options, along with fees for surface disturbance, installation, and facilities. Energy
