AUSTIN – State Attorney General Ken Paxton has opined that under Texas law, someone being paid to negotiate a lease for the development of a wind power project is not required to possess a license from the Texas Real Estate Commission, since wind “is not a mineral or mining interest.”
In a June 11 opinion, Paxton responded to an inquiry from Texas Real Estate Commission Chair R. Scott Kesner, who asked if licensure from his organization was required for an intermediary negotiating the lease for a wind power farm.
Kesner’s prior letter to Paxton explained that the Commission had received a complaint “alleging that an individual employed by a company hired to negotiate a lease for a wind farm development project was engaged in activity that required a Commission-issued license, but did not have one.”
Though the complaint was later dismissed for lack of jurisdiction, subsequent questions arose about the actual scope of the Commission’s jurisdiction. Kesner added that the Commission has historically interpreted an exclusion to the licensure requirement to include a wind lease.
According to Paxton, the Real Estate License Act found in Occupations Code Chapter 1101 states that a person negotiating or attempt to negotiate the listing, sale, exchange, purchase or lease of real estate on behalf of another for compensation, must hold a license from the Commission.
“Section 1101.005 excludes certain types of transactions from the application of Chapter 1101, including ‘a transaction involving: (A) the sale, lease or transfer of a mineral or mining interest in real property.’ You do not tell us about any particular wind lease transaction, but you generally describe a transaction involving ‘a lease in which a landowner leases the property for the development of a wind project.’ You presume, as do we, that the wind lease interest at issue is an interest in real property and thus real estate within the scope of Chapter 1101,” Paxton said.
“As noted previously, you explain that the Commission has historically ‘interpreted ‘mineral or mining interest’ broadly to include other energy sources, like wind, within [the Sub-Section 1101.005(9)(A)] exception.’ However, based on the ‘plain language of [the Sub-Section 1101.005(9)(A)] exemption and the lack of supportive case law,’ you question whether a person negotiating a wind lease as described herein would need to hold a license issued by the Commission. Such a statement suggests that the Commission now believes that Sub-Section 1101.005(9)(A) does not apply and that the negotiation of a wind lease for another is a transaction for which a person must hold a license under chapter 1101.”
Citing Supreme Court of Texas precedent in City of Richardson v. Oncor Elec. Delivery Co. LLC, Paxton explained “Texas courts have well-established jurisprudence involving construction of an ‘other mineral’ in the conveying phrase ‘oil, gas and other minerals’ – and that here, ‘one must ‘consider whether the substance is thought to be a mineral within the ordinary and natural meaning of the term.”
“Wind’ commonly means ‘the perceptible natural movement of the air, esp. in the form of a current or air blowing from a particular direction.’ Specifically in the energy context, ‘wind’ means ‘relating to or denoting energy obtained from harnessing the wind with windmills or wind turbines.’ A ‘mineral’ is ‘a solid inorganic substance of natural occurrence; a substance obtained by mining.’ Neither definition of wind connotes a mineral; wind is not a substance, and it is not ‘mined’ as that term is commonly understood,” Paxton stated.
“As wind is not a mineral or mining interest under the common meaning of those terms, a wind lease transaction is not within the scope of Sub-Section 1101.005(9)(A). Further, the list of exclusions in Sub-Section 1101.005(9)(A) does not expressly contain another exception that might encompass the negotiation of a wind lease, nor can the list be readily construed to be inexhaustive.”
Paxton further illustrated that under Occupations Code Chapter 954, governing land services, wind is classified as an “other energy source”, and not a mineral. Thus, a court would not likely find it to be designated as a mineral, per Paxton.
“In this case, there is no ambiguity. Wind is not a mineral and it is not mined. Accordingly, we think it is unlikely a court would defer to the Commission’s historical interpretation. And given our analysis above, we question whether the Commission’s historical interpretation was consistent with the statute such that a court would grant it deference,” Paxton said.
“Briefers inform us that the potential consequences of expanding the Commission’s jurisdiction to include landmen involved in wind energy leasing ‘would be negative and far-reaching, including slowing development of critical Texas energy resources, increasing costs to Texas energy consumers and reducing lease payments to partnering landowners. Like the courts, it is not for us ‘to judge the wisdom of the policy choices of the Legislature, or to impose a different policy of our choosing.’ Here, the Legislature has spoken clearly with its text. Occupations Code Sub-Section 1101.005(9)(A) does not include wind as a mineral or mining interest. And Occupations Code Chapter 954 clearly treats wind as an ‘other energy source,’ distinct from a mineral. The Legislature is free to modify these provisions should it wish.”
From the Southeast Texas Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com