Search

I AIN’T SIGNING NOTHING – FOR NOTHING


BIO: The Wilhelm Law Firm, consisting of Edward Wilhelm and Jack Wilhelm, provides a broad range of legal services to oil and gas well operators, mineral estate and royalty interest owners, mineral and royalty buyers and sellers, and oil and gas landmen. We also assist surface estate developers, including but not limited to, solar panel farm investors. You can learn more about our practice by visiting our web-page at www.wilhelmlaw.net.


The most recent publication of the Oil, Gas & Energy Law Section of the State Bar of Texas is devoted to Solar Energy (83 pages). A significant amount of discussion centers upon “solar panel farms,” which are essentially large tracts of land that will be covered by solar panels. Among other things, the various authors recommend that owners of solar farms obtain surface use waivers from the owners of the mineral estate. And, in fact, a number of local clients have recently contacted me about proposals, from solar farm investors, that such waivers be executed. Accompanying the request is a slick little legal document that confirms the waiver (to be signed before a notary, that conveys such rights as are necessary to effectuate the waiver, is binding upon successors, and is to be recorded in the official public records of the county where the land is located).


When I represent a mineral estate owner, my recommendation will always be to respond as follows:


- What’s in it for me and how much?


In layman’s terms, the owner of the mineral estate has the right to use as much of the surface as may be reasonably necessary to develop his or her mineral estate. Of course, very few mineral estate owners drill their own wells – they lease the mineral rights to oil and gas operators. These operators then use this right to develop the mineral estate for the mutual benefit of the operator and the mineral estate owner(s). The right to “use as much of the surface as is reasonably necessary” actually places a limitation on the use – it is something less than “the unfettered right to use the surface.” Problem is just as mineral estate owners rarely drill wells, similarly, they rarely know how much of the surface may be required to develop to the minerals – that will be determined by an oil and gas operator after an oil and gas lease has been negotiated – and that may be never or a very long time in the future.


So, what to do, what to do?


Well, I recommend to my mineral estate clients that they do not sign these waivers – especially if they are not receiving a “significant” economic benefit (known as a CHECK). If you sign the waiver, then your future mineral estate lessee (e.g. oil well driller) may determine that your minerals are, in fact, worthless, because they cannot be accessed, economically or otherwise.


- My rejoinder. Sure, I own mineral rights in ________ County, Texas. I will gladly waive surface rights for the following - $2,000,000 for 25 years (prefer the money by wire transfer, please).


It is just not a good idea to “give up a property right” for nothing. And the value of this property right (namely, surface access) is going to be very difficult to value.


A solution looking for a problem?


When representing a solar panel investor, I remind them that the owner of the mineral estate can only use “as much of the surface as is reasonably necessary;” that while there are some disputes between oil operators and solar farmers, they are rare; and that both parties have a duty to “reasonably accommodate the other.” Oil companies drill oil wells, they are not in the business of disrupting solar panel farms. It just makes economic sense to “get along.”


As lawyers, we are always obligated to look to the “dark side” and identify every horrible thing that can go wrong – but I argue there is no reason to scare the bejeebies out of one’s client. In short, absent total naivety by the mineral estate owner, there will almost always be some level of risk of some interruption, in the future, by a mineral estate developer. Few economic investments are “risk free,” one can only “minimize the risk.” And, to paraphrase Blanche DuBois from A Streetcar Named Desire, if you are relying on the kindness of strangers to make your project viable (namely mineral estate owners giving up valuable property rights, willy-nilly, just for the asking), then your project is, well, probably not viable.


If you are really worried -


For those solar farmers who need absolute certainty, I direct your attention the TEX. NAT. RES. CODE §92.001 et seq. That statute sets forth a procedure whereby surface use developers (principally residential subdivision builders) can petition the Railroad Commission of Texas for an order that designates “pre-ordained” sites for future oil and gas development. The statute has certain limitations (e.g. applies only to “larger” counties population wise and counties abutting these highly populated counties), but the solar farmers could work with our Legislature to expand the breath of this procedure, if they are really worried. If they don’t want to do that, then they are probably just not that worried.


But for a mineral estate owner to determine what surface will be necessary to develop his or her mineral rights way out in the unknown future, - well, be sure you have a good engineer, good geologist, good lawyer, and, most importantly, an excellent crystal ball.


by Jack M. Wilhelm


Edward Wilhelm and Jack Wilhelm provide tremendously high value legal assistance to a large number of very desirable clients.


THE WILHELM LAW FIRM, 5524 Bee Caves Road, Suite B5, Austin, TX 78746; (512) 236 8400 (phone); (512) 236 8404 (fax); www.wilhelmlaw.net


DISCLAIMER: The information on this site is not intended to and does not offer legal advice, legal recommendations, or legal representation on any matter. You need to consult an attorney in person for legal advice regarding your individual situation.

224 views

Wilhelm Law Firm, 5524 Bee Caves Rd., Ste B-5, Austin, TX 78746 (512) 236-8400