Transcript Aakre-Haugen - National Wind Watch | Resource Documents

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
First Rule of Contracts
• Contracts reflect the interests of the party
that writes the contract
Second Rule of Contracts
• Seek competent legal advice before signing
Landowners Options to Participate
in Wind Energy Development
1. Lease land to a wind project
2. Be a partner in a wind project
3. Own a residential/farm size turbine for your
own use
Wind Energy Leases and Easements
• Most common way for landowners to participate
• Few standards
• Compensation varies widely based on:
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Turbine size
Wind resource
Price of energy
Access to grid system
Knowledge level of landowner
• Long term commitments
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
1. Contract to lease the wind development
rights
2. Contract to construct and operate the wind
turbine and related development
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
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
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
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
Construction Period
• Considerable crop may be destroyed
• Contract should provide compensation
Photo by Ron Beneda, Cavalier County Extension Agent
Roads, Fences and Gates
• Responsibility for maintenance of roads
(primarily snow removal)
• On grazing land, who is responsible for:
– Fences
– Gates
– Cattle guards
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
Fixed Payments
• Per tower or megawatt
• $4,000 to $8,000 per megawatt of turbine
capacity
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
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
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
Have I considered other
contract specifications?
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Confidentiality clauses
Settling contract disputes
Negligence
Safety and maintenance issues
Limiting agricultural land use
Limiting hunting and recreational use of land
Aerial crop spraying
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
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
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
Photo courtesy of
Langdon Research Extension Center