Surface leases are the foundation of renewable energy ventures, whether solar and wind farms, geothermal, or even hydroelectric power. These agreements permit companies to build and access facilities, generate and capture power, and store and transport that power on or across the property. As a renewable energy company, you will typically execute multiple agreements with landowners throughout a single project.

The most common approach is to execute an Initial Option Agreement securing the exclusive right to develop large swaths of land. Within the term of the Initial Option Agreement, you’ll want to carry out more detailed site research. This may include performing on-site testing and conducting due diligence, such as confirming surface ownership, establishing existing property uses, and identifying current easements or encumbrances. Such information is critical to your future investment decisions as defects in title can leave you open to liability and be costly to cure. Existing oil and gas operations are especially critical to identify as Texas law dictates that the mineral estate is dominant over the surface estate, absent special circumstances. According to Texas’ accommodation doctrine, the surface use must be existing and it must be proven that the surface use would be negatively affected or prevented by the related mineral use. Additionally, those looking to extract minerals must have feasible alternative extraction methods available. While some renewable projects can be conducted concurrently with traditional mineral development, many cannot. Once in possession of all the relevant facts, you can formulate the most productive and profitable path forward for the project and proceed to obtain the necessary regulatory permits and approvals.

Once the project details are finalized, you’ll typically follow up with a Surface Use Agreement (“SUA”) containing terms more specific to the particular project. The duration of SUAs is typically long  and are designed to allow companies enough time to recoup large startup costs and guarantee a steady power supply to meet their obligations under other agreements to sell the generated power. At its most basic, a SUA should include the exclusive right to use the surface, the right to construct needed facilities, infrastructure, and roads, and ingress and egress to access them, and protection against interference with your operations, giving due consideration to any pre-existing uses.

As renewables projects can span decades, you’ll want to maximize the flexibility to adapt to changing needs and technologies by covering generous portions of land, retaining discretion as to the placement of surface facilities and equipment, and obtaining a waiver of damages due to noise, light, or other disturbances. In negotiating the SUA, be aware that concessions or overly favorable payment schemes in favor of the surface owner may affect the marketability of your project to future buyers or financing sources.

Renewable energy agreements are not just oil and gas leases by another name. They require unique considerations and specialized knowledge to negotiate. RR&A attorneys have broad experience negotiating renewable energy agreements. Contact us today to take advantage of our expertise for your next project!