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Wind Turbine Lease Considerations for Landowners

Wind Turbine Lease Considerations for Landowners. Dwight Aakre Ron Haugen February 2010. Wind Farm Development Contracts. Legal, binding contracts are necessary Before a contract is signed, terms are negotiable Upon signing, you have given written approval of all provisions.

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Wind Turbine Lease Considerations for Landowners

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  1. Wind Turbine Lease Considerations for Landowners Dwight Aakre Ron Haugen February 2010

  2. Wind Farm Development Contracts • Legal, binding contracts are necessary • Before a contract is signed, terms are negotiable • Upon signing, you have given written approval of all provisions

  3. First Rule of Contracts • Contracts reflect the interests of the party that writes the contract

  4. Second Rule of Contracts • Seek competent legal advice before signing

  5. Landowners Options to Participate in Wind Energy Development • Lease land to a wind project • Be a partner in a wind project • Own a residential/farm size turbine for your own use

  6. Wind Energy Leases and Easements • Most common way for landowners to participate • Few standards • Compensation varies widely based on: • Turbine size • Wind resource • Price of energy • Access to grid system • Knowledge level of landowner • Long term commitments

  7. Some questions to ask before you sign on the dotted line • How much of my land will be tied up and for how long? • Leases have two components • Contract to lease the wind development rights • Contract to construct and operate the wind turbine and related development

  8. Contract to Lease Wind Development Rights • Limited duration, 3 to 5 years is common • May include an option to renew • Provides exclusive development rights to that company • Provides annual payment to landowners • Payment may be $2 to $10 per acre for acreage contracted

  9. Contract to Construct and Operate Wind Turbines • Leases usually are 20 to 25 years • Usually includes an option to extend the lease • May or may not permit renegotiation of terms

  10. Wind Turbine Decommissioning What happens when the tower becomes obsolete or uneconomical? • Tower, access roads, other structures • Timeline for removal • Who is responsible (work and cost) Photo by Ron Beneda, Cavalier County Extension Agent

  11. Placement of Access Roads • Roads are necessary for maintenance and repair • Will impact efficiency of field operations • Landowner input in location of roads Photo by Ron Beneda, Cavalier County Extension Agent

  12. Construction Period • Considerable crop may be destroyed • Contract should provide compensation Photo by Ron Beneda, Cavalier County Extension Agent

  13. Roads, Fences and Gates • Responsibility for maintenance of roads (primarily snow removal) • On grazing land, who is responsible for: • Fences • Gates • Cattle guards

  14. How much will I be paid and how will I receive payment? • Types of compensation packages • Fixed payments • Royalty or percentage of revenue • Combination of fixed and royalty • Equity partnership

  15. Fixed Payments • Per tower or megawatt • $4,000 to $8,000 per megawatt of turbine capacity

  16. Royalty or Percentage of Revenue • 3 to 6 percent of gross revenue • Revenue includes • Production tax credits • Tradable renewable energy credits • Must have a means of verifying company records

  17. Inflation or Escalator Clause • Contracts will run for 20 or more years • Inflation will significantly reduce value of future payments • All fixed payments should be adjusted by an escalator such as the consumer price index

  18. Liability Issues Contract should specify the project developer and any company to which the contract may be assigned in the future are responsible for any financial obligations you may incur as a result of: noise visual pollution vandalism access roads construction period ice shedding blade drop/throw shadow flicker fire stray voltage electromagnetic fields lightening strikes communications microwave towers radar stations TV and radio signals emergency radio signals bird kill water/air pollution

  19. Have I considered other contract specifications? • Confidentiality clauses • Settling contract disputes • Negligence • Safety and maintenance issues • Limiting agricultural land use • Limiting hunting and recreational use of land • Aerial crop spraying

  20. Other Considerations • Mortgaged real estate • All lien holders must provide written approval before the landowner signs an agreement • USDA Programs • Need approval from USDA if land is enrolled in CRP • Other USDA programs

  21. Much of the wind development has been established using a “Divide and Conquer” strategy • Company representative contacts individual landowner • Drops off a contract • Requires decision to sign within a short time frame • Expects landowner to commit to a 20 to 50 year agreement • Contracts include a confidentiality agreement

  22. An Alternative Approach • Landowners organize into a business entity • Market their resource as a package • Landowners are compensated with or without a tower • Hire an experienced attorney to work for the group

  23. Photo courtesy of Langdon Research Extension Center

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