Office of Sen.

Mike Johnston
Colorado General Assembly | 200 E. Colfax Avenue | Denver, CO 80203 | 303.866.4864

FACT SHEET MEMORANDUM

HB 12-1105 Concerning Wind Energy Property Rights Rep. Becker & Sen. Tochtrop Staff Name: Travis Gardner What the Bill Does: Under current law, the space above land belongs to the surface owner of the land.1 However, there is uncertainty over whether the surface owner may sell wind rights to another party while retaining ownership of the surface land.2 Despite the confusion, Colorado landowners have severed wind rights from their surface rights and sold the wind rights to developers.3 HB 12-1105 establishes that a wind energy right is an interest in real property that is not severable from the surface estate. Under the provisions of the bill, any development of a wind energy right can only be accomplished through a wind energy agreement, which is a lease, license, easement, or other agreement. Additionally, HB 12-1105 requires all wind energy agreements to be recorded with the county clerk and recorder in the county where the land subject to the agreement is located. Wind rights that have been previously severed will be grandfathered in, as long as they record the agreements with the county clerk and recorder before September 1, 2012. HB 12-1105 also allows the surface estate owner to request that the wind energy developer records a release of the agreement in the office of the county clerk and recorder upon termination of the agreement. The developer must record the release within 90 days after receiving the request from the surface estate owner. A developer that fails to record a release is liable to the surface owner for any damages caused by the failure to record the release. Additionally, a wind energy right acquired after July 1, 2012, will revert to the owner of the surface estate if wind energy production has ceased for ten years and if the generation of electricity has not commenced within ten years, unless the parties to the agreement otherwise agree. However, a reversion does not transfer any obligation to restore or reclaim the surface estate.

1 2

C.R.S. 41-1-107. Debi Brazzale, HB 10-1158: Wind Rights: Just Around Corner in New Energy Economy?, STATE BILL COLORADO, http://www.statebillnews.com/2010/02/hb10-1158-%E2%80%98wind-rights%E2%80%99-just-around-corner-innew-energy-economy/. 3 Peter Blake, Lawmakers seek to harness the windlegally speakingand tie it to the land, COLORADO NEWS AGENCY, http://www.coloradonewsagency.com/2012/02/02/lawmakers-seek-to-harness-thewind%E2%80%94legally-speaking%E2%80%94and-tie-it-to-the-land/.

DRAFT 3/27/2012 9:18 PM

For a complete list of fact sheets, visit www.mikejohnston.org/in-the-legislature.

HB 12-1105 exempts production equipment from the collection and levy of personal property taxes until wind energy production begins. Colorado Context: Colorado has 1,800 megawatts of installed capacity for wind-generated electricity, with an added capacity for 16,602 megawatts in development.4 Wind power provided 6.6 percent of Colorados total electricity in 2010.5 Colorados wind potential, which could provide twenty-five times the states current electricity needs, is ranked twelfth in the United States.6 National Context: In 2011, Montana and Wyoming passed legislation establishing that wind energy rights are real property rights attached to the surface estate that cannot be severed.7 Both states established the use of wind energy agreements for the development of wind energy rights.8 Additionally, Kansas passed legislation that prevents any person, other than the surface owner, from producing wind energy unless granted such a right by a lease or easement.9 Bill Provisions: Declares that the right to wind energy is an interest in real property appurtenant to the surface estate Provides definitions for wind energy agreement, wind energy developer, and wind energy right Establishes that a wind energy right is not severable from the surface estate, but wind energy may be developed pursuant to a wind energy agreement Requires the owner of the surface estate or the wind energy developer to record a wind energy agreement in the office of the county clerk and recorder in the county where the land subject to the agreement is located Upon termination of a wind energy agreement, the owner of the surface estate may request the wind energy developer to record a release of the agreement in the office of the county clerk and recorder o The developer must record the release within 90 days of receipt of the request o A developer that fails to record the release is liable to the owner of the surface estate for damages caused by the failure to record the release Requires wind energy agreements or conveyances made prior to July 1, 2012 to record a contract, lease, memorandum, or other notice by September 1, 2012 Clarifies that the bill does not restrict the transfer of a wind energy agreement, including the transfer of the right of the owner of the surface estate to receive payments under the agreement

American Wind Energy Association, Wind Energy Facts: Colorado, available at http://www.awea.org/learnabout/publications/factsheets/factsheets_state.cfm. 5 Id. 6 Id. 7 National Conference of State Legislatures, 2011 Renewable Energy Legislation, http://www.ncsl.org/issuesresearch/energyhome/renewable-energy-legislation.aspx. 8 Id. 9 Id.

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For a complete list of fact sheets, visit www.mikejohnston.org/in-the-legislature.

All easement interests to produce wind energy acquired after July 1, 2012 will revert to the owner of the surface estate if wind energy production has ceased for ten years and if the generation of electricity has not commenced within ten years after the execution of the agreement, unless the owner of the surface estate and the wind energy developer otherwise agree o A reversion does not transfer any obligation to restore or reclaim the surface estate Exempts equipment used in the development of wind energy from personal property tax until the equipment is used in the production of wind energy

Fiscal Impact: The bill may increase state revenue by increasing opportunities for the State Board of Land Commissioners to benefit from wind energy development, but the potential for increased revenue is not quantifiable.10 County clerks and recorders may see an increased workload, but the new revenue from recording fees will offset any increase in costs.11

10 11

Alex Schatz, Fiscal Note: HB12-1105, Feb. 6, 2012.

Id.

DRAFT 3/27/2012 9:18 PM

For a complete list of fact sheets, visit www.mikejohnston.org/in-the-legislature.