An Intro to Renewable Energy
This post is an introduction to renewables and why an attorney could help with your renewable energy project.
Renewable energy is any energy that comes from a naturally replenishing source. Examples include solar, wind, geothermal, and hydropower. The energy that comes from these sources is created by a natural resource, continuously replenished, and cannot be exhausted. As a boutique energy firm, Lear & Lear believes that there is an important place for renewables in the energy theater. And we also know that there is an important place for experienced lawyers to aid in the development of renewable energy projects. Let us give you one example why.
It is not enough to have full site control for your renewable energy project. Whether your project is developed on land you own, lease, or have easements over, obtaining financing for a solar, wind, battery storage, geothermal, or other renewable energy project requires a title policy. Like other forms of insurance, a title policy insures against losses outside of your control, and specifically for a title policy losses due to issues such as defects in the chain of ownership, severed mineral owners looking to occupy the surface for mineral extraction, foreclosures on mortgages or other liens on the underlying property, or pre-existing uses of the property. And, again, like other forms of insurance, a title policy can be confusing and difficult to read, so we are here to help. Below is an explanation of the basic components and functions of a title policy.
Schedule A – Here’s What We’ll Insure…
Schedule A to a title policy describes what is being insured. For your project, you should verify that Schedule A and your site control documents match exactly as to the name of the landowner and the description of the property. Schedule A must list every insurable piece of site control for your project, and it is helpful to organize the insurable estates by type. So all fee estates are listed first, then the leasehold estates are listed individually, then each project easement is listed individually. Licenses and other rights that are not considered interests in property cannot be insured under Schedule A. As with all things real estate, reviewing the names and descriptions of the insurable estates takes a keen eye for detail and the patience to match.
Schedule B – …Except Not These…
Schedule B to a title policy describes the exceptions to title insurance. Schedule B exceptions typically include pre-existing recorded rights affecting the property such as easements; mortgages or other monetary liens; covenants, conditions, and restrictions (CCRs); mineral severances; and defects in title. This is, in essence, your working list of title curative tasks as the holders of those pre-existing rights could potentially require you to remove project improvements to accommodate their future uses. Any exception that poses a risk to the renewable energy project must be cured and removed in order to obtain financing. Existing easements will need crossing agreements, existing liens will need subordination and non-disturbance agreements, CCRs that restrict renewable development will need to be amended, severed mineral owners will need to waive their right to use the surface, and defects in title will need to be remedied. These items can take many months, so start early.
Endorsements – …Except, Yes, We’ll Insure These
The final section to your title policy is the endorsements. Endorsements are additions to the title policy which are tailored to fit the needs of your specific project, and often provide affirmative coverage specific to an energy project. One key example of an endorsement is ALTA Endorsement 35.1-06 (Minerals and Other Subsurface Substances – Improvements). The mineral endorsement insures against loss to the project as a result of a mineral owner exercising its rights to the surface for developing the mineral estate. In order to obtain this coverage the title company will require this issue to be substantially de-risked, which will be subject to some negotiation with the title company. Most lenders will have a list of endorsements they will want included in the policy but remember that each state will be slightly different in which endorsements are available, and their cost. Pay particular attention to the ALTA 36 series, which are specific to energy projects.
We know that we can bring valuable understanding and know-how to your renewable project. Call today to talk to one of our experienced attorneys about the work we can do for you.