Allocating Property Rights to Wind and Solar Resources

Michael Giberson

Troy Rule, a law professor at the University of Missouri, has a pair of articles applying Calabresi and Melamed’s “Cathedral Model” to rights in wind resources and solar resources.  As Rule notes, the law remains unsettled on these resource issues, but the potential for conflict increases as these resources become more frequently exploited.  I like Rule’s article because it brings an explicitly “law and economics” focus to this question of property rights and resource development.  (Links follow below.)

The cathedral model was offered by Calabresi and Melamed in 1972 as a way of organizing legal thinking about property and liability issues in a unified manner.  As summarized by Rule in the wind rights article, using the common example of pollution, the model provides four possible rules for allocating rights between a potential upstream “polluter” and a downstream “victim”:

RULE ONE: The victims are entitled to be free from pollution and their entitlement is protected by a property rule (an injunction against the polluter);

RULE TWO: The victims are entitled to be free from pollution and their entitlement is protected by a liability rule (the victims can force the polluter to pay them compensatory damages);

RULE THREE: The polluter is entitled to pollute and its entitlement is protected by a property rule (the victims have no legal or equitable right to stop the pollution); and

RULE FOUR: The polluter is entitled to pollute and its entitlement is protected by a liability rule (the victims can purchase an injunction to stop the pollution by paying the polluter’s costs of stopping the pollution).

A particular contribution of the Cababresi and Melamed article was the explication of the “Rule Four” possibility, an option which had not been much noticed in legal practice or scholarship up to that point. In the case of Rule’s wind rights article and solar rights article, he argues that Rule Four is the way to go.  For example, a downwind landowner should have the right to, in effect, buy a “non interference” easement from the upwind landowner.

As a practical matter, existing markets are solving the problem without much specific law.  For the most part lenders won’t lend money for a wind turbine that isn’t protected by an adequate buffer to protect the “supply” of wind.  This buffer can be from property owned by the same landowner leasing land to the wind project or it can be an easement negotiated with a neighboring landowner.  Of course this sort of lending market discipline doesn’t impinge on self-funded projects, and may lead to two neighboring landowners devoting too much land to a buffer area when coordinated development could have allowed them to devote less to the buffer.  Rule’s rule is intended to clarify just where the boundaries of neighbors rights and responsibilities are.

Curiously, Rule’s analysis proceeds as if the designation of “upwind developer” and “downwind developer” were stable when actually such designations will literally shift with the changing of the wind (unlike, say, upstream and downstream along a river, since rivers rarely change direction). So far as I recall, Rule didn’t worry about this point. Yet, I think the dynamic element here only complicates the analysis for wind without fundamentally upsetting the principles being advocated.

LINKS:

Troy Rule, “A Downwind View of the Cathedral: Using Rule Four to Allocate Wind Rights,” San Diego Law Review, (2009).

ABSTRACT: The rapid pace of U.S. wind energy development is generating a growing number of conflicts over competing wind rights. The “wake” of a commercial wind turbine creates turbulence and unsteady wind flow that can reduce the productivity of other wind turbines situated downwind. Existing law is unclear as to whether a landowner who installs a wind turbine on its property is liable for the lost productivity of a downwind neighbor’s turbine resulting from such wake effects. Legal uncertainty as to how competing wind rights are shared among neighbors can induce wind energy developers to abandon otherwise lucrative turbine sites situated near property lines, thus forfeiting valuable wind resources. This paper applies Calabresi and Melamed’s familiar “Cathedral” model to determine which rule regime would best promote the efficient allocation of competing wind rights while maintaining consistency with existing law. Surprisingly, the Cathedral model’s infamous and rarely-applied “Rule Four” seems best-suited for addressing these conflicts.

Troy Rule, “Shadows on the Cathedral: Solar Access Laws in a Different Light,” University of Illinois Law Review, (2010).

ABSTRACT: Unprecedented growth in rooftop solar energy development is drawing increased attention to the issue of solar access. To operate effectively, solar panels require un-shaded access to the sun’s rays during peak sunlight hours. Some landowners are reluctant to invest in rooftop solar panels because they fear that a neighbor will erect a structure or grow a tree on nearby property that shades their panels. Existing statutory approaches to protecting solar access for such landowners vary widely across jurisdictions, and some approaches ignore the airspace rights of neighbors. Which rule regime for solar access protection best promotes the efficient allocation of scarce airspace, within the constraints of existing law? This Article applies Calabresi and Melamed’s “Cathedral” framework of property rules and liability rules to compare and analyze existing solar access laws and to evaluate a model solar access statute recently drafted under funding from the US Department of Energy. Surprisingly, the Article concludes that a statute implementing the Cathedral model’s seldom-used “Rule Four” is best suited for addressing solar access conflicts.

Guido Calabresi & A. Douglas Melamed, “Property Rules, Liability Rules, and Inalienability. One View of the Cathedral,” Harvard Law Review, (1972).