Texas Legislature Passes Decommissioning Statutory Requirements on Wind Energy Land Leases

The Texas legislature recently passed House Bill 2845 modifying Section 301 of Title 6 of the Texas Utilities Code to impose statutory decommissioning requirements on any person (“Wind Developer”) that leases property from a landowner for the operation of a wind power facility. The new statute affects all wind power facility lease agreements entered into on or after September 1, 2019. Such lease agreements must provide that Wind Developer is responsible for the removal of wind power facilities from the landowner’s property at the end of the lease term.

The bill was originally filed and supported by the Texas Farm Bureau and other landowner groups, while being opposed by various energy industry companies and groups for what they perceived as the creation of an imbalance in the division of costs and liabilities associated with the decommissioning of the wind power facility. After amendments in committee and on the house floor, the bill passed unanimously both in the House and the Senate.

Wind Developer’s decommissioning responsibilities that must be included in lease agreements consist of (i) clearing, cleaning and removal of each wind turbine generator, including towers, pad-mount transformers, and all liquids, greases and other similar substances; (ii) for each tower foundation, pad-mount transformer and buried cable that is installed, cleaning, clearing and removal to a depth of at least three feet below the surface grade; (iii) filling any hole or cavity that is created by the removal process with the same type of topsoil as the predominant topsoil found on the property; and (iv) at the request of the landowner, removing any road constructed by Wind Developer on the property and, if reasonable, removing all rocks at least one foot in diameter that are excavated during the removal process to ensure that the land is returned to a tillable state.

In addition, lease agreements must require Wind Developer to secure, not later than the earlier of the 10^th anniversary of the commercial operations date or termination of the lease agreement, evidence of adequate financial assurances conforming with the statute for all decommissioning efforts. 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 estimated cost of removing the wind power facility is to be determined by an independent Texas licensed third-party engineer. Wind Developer’s amount of financial assurance must be equal to at least the estimated amount of the cost of removal and restoration that exceeds the salvage value, less any portion of the value of the wind power facility that is pledged to secure the outstanding debt. The lease agreement must provide that Wind Developer will deliver to the landowner an updated estimate of the removal costs once every five years for the remainder of the term of the agreement.

Any provision in the lease agreement attempting to waive Wind Developer’s decommissioning responsibilities or to limit Wind Developer’s liabilities under the lease will be deemed void. If the landowner is harmed by Wind Developer’s breach of its responsibilities to remove the wind power facility, the landowner will be entitled to injunctive relief in addition to all other procedures and remedies available at law.

Disclaimer

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.