Thousands of farmers have received a phone call or a knock on their door from an agent representing a company installing wind turbines used to produce electricity. In all likelihood, there will be many more, and you may be one of the next ones to be offered the opportunity to host a turbine on your farmland or land that you operate. While the offer of an annual rental payment and other amenities can be attractive, the land owner should also ensure the risks are covered by the compensation.
When being offered the opportunity to host a wind turbine the immediate thought turns to the benefits, but at the same time, land owners should consider a laundry list of considerations that need to be addressed. The issue is not just what happens if the thing falls through the roof of the machine shed some day, but what about the different legal arrangements, construction, access roads, decommissioning, payments, inflation clauses, liability issues and contract specifications? Those issues are addressed by Extension specialists Dwight Aakre and Ron Haugen of North Dakota State University in a report prepared for landowners.
At the outset the discussion should focus on a legal contract which should be understandable, and should not be signed if there are unanswered questions. Before the contract is signed, everything is negotiable, but afterwards it will likely not be changed. Keep in mind that whoever wrote the contract made it fair for themselves. And for you to be treated fairly, spend the money necessary to hire your own attorney to examine the lease and suggest potential changes.
Aakre and Haugen say there are a variety of options for involvement in a wind project, including land leases, partnership, and owning your very own personal turbine. An easement or lease is the most common choice, and compensation can vary widely including upon the knowledge level of the landowner. Before you sign on the dotted line, become fully aware of the details on both the construction aspect and the long term lease aspect, which are totally separate facets of the project. For example you may not have a turbine on your land, but contractors may negotiate access through your land to construct the turbine.
The terms of the lease will involve the length of time, any options to renew, and details on any annual payments or other compensation, and that essentially buys the wind from above your land, such as mineral rights to any underground coal seams. Another element is the construction and operation of the turbine, which will have a minimum time length with an option to renew. It may or may not give the landowner the option to negotiate new compensation or other terms at the expiration of the initial lease.
The big question mark is what happens at the end of the life of the turbine, since that has not yet occurred anywhere. The lease should address the process of dismantling the turbine and who is responsible for it. A more immediate question is the development of the roads and lanes that heavy equipment will use to put the turbine in place. The turbine company may want the roads to remain for maintenance access, but whose responsibility is snow removal and pothole filling? Landowner will need to know the impact on the yield when tons of cranes and turbine parts are hauled across fertile fields. Construction crews will likely work during the growing season, so crop damage should be addressed in the lease arrangement.
The issue of the payment is the climax to the negotiation, and how and when payment will be made. Each wind farm development company will have a different process, and ensure you fully know the process and when and how you are going to be paid. You will be receiving a payment based on the value of the wind above your land and how well it is converted into electricity. If the payment is based on the performance of the turbine, then you will need to be able to verify company records.
Another important aspect is the liability for the wind turbine. Certainly the company will be able to show you an insurance policy, but what does it cover? What happens if you, or a neighbor, visitor to your farm, passerby, or anyone else is hit by ice falling from the turbine, or television interference, or flicker from the blades? Here is a checklist for a few considerations:
communications microwave towers
TV and radio signals
emergency radio signals
Aakre and Haugen also suggest your lease address such issues as safety and maintenance, and use of the land beneath the turbine, including for farming, hunting, and aerial crop spraying. Also, how does the lease impact any farm program payments you might receive, and does it violate any mortgage on the land?
Different companies will conduct their business in different ways, regarding the leasing process. Some may provide a take it or leave it agreement, with a few hours to sign the contract, and others may be more reasonable about the agreement timeframe and their degree of confidentiality. While it may not be the first choice of the wind farm developer, some locations are organizing groups of farmers to negotiate a package with the help of a single attorney, and equal compensation to all landowners.
As the demand for renewable energy increases, more wind farms are developed and many landowners are faced with a number of leasing decisions in a short period of time if they want to take advantage of selling the wind above their farm. Leases can be simple or complex and your own attorney should guide you through the process. Many options may be available, but a multitude of questions should be answered before signing and getting a payment.
Important tips for landowners to know
By Jarod Wells
Monday, February 22, 2010 at 5:28 p.m.
PITTSFIELD, ILL. -- Illinois currently has 800 wind turbines in the state. And over the next five to ten years, the state could see five times more wind power as more turbines are built.
That's why the Illinois Farm Bureau has been holding talks across the state to inform land owners of their rights when entering a lease with a wind energy company.
One of those presentations was held in Pike County Monday, February 22nd.
An attorney with the Illinois Farm Bureau says one of the things he points out to land owners, is that wind turbine leases are usually long term, sometimes up to 90 years.
"We always encourage people to understand how long the contract is going to last. Talk about it with their family, attorney, accountant, anyone involved in their farming operations we want them to talk to because this is going to impact not just them but their grand kids as well," said Illinois Farm Bureau Attorney Ryan Gammelgard.
"Another thing we always recommend they look at is what rights are they going to have under the contract. Are they still going to be able to do their normal day to day farming operations, or is their farming operation going to be subordinate to the wind energy company," said Gammelgard.
The attorney with the Illinois Farm Bureau says many times land owners just focus on how much they'll get paid to put a turbine on their property.
But they don't realize their farming operations will be affected.
For example you may not be able to use aerial sprayer on your farmland once a turbine is installed.
KHQA was also told lease agreements are very complex and can be up to 40 pages long.
So it's not something you should just sign.
If you care about soil compaction in your fields, watch this video
|Fargen, Olson propose changes to wind-energy leases|
|By CHUCK CLEMENT, Staff Reporter|
South Dakota landowners interested in leasing their property to wind-energy developers should have an interest in bills to be presented to the State Affairs Committee on Thursday afternoon.
Three bills that the State Affairs Committee has scheduled for testimony at 4 p.m. deal specifically with the contracts that landowners can sign for leasing land to wind farm developers. Two of the bills have District 8 state legislators as their prime sponsors.
State Rep. Mitch Fargen, D-Flandreau, has proposed adding several new requirements and restrictions to state law in HB 1268 that are intended to protect landowners. Fargen has proposed a waiting period between a property owner's decision to sign a lease agreement and the actual signing of the contract.
"When developers sit down to talk about leasing your land, the details can get complicated and a landowner can wind up looking at a 20-page contract," Fargen said. "In my bill, when you sit down with me to talk about development, I have 10 days before I have to sign so I can talk to a lawyer."
Fargen's bill also contains other clauses that:
-- Disallow confidentiality agreements about negotiations or proposals, unless both parties agree to a mutual confidentiality agreement in the final executed lease or easement.
-- Ensure property owners have the right to continue conducting their business operations during the term of the agreement.
-- Ensure that the property owner is not held responsible for the facility's property taxes or damages caused by the equipment.
-- Disallow any requirement for the arbitration of disputes that would replace the landowner's option of taking disagreements to court.
Fargen said his bill is scheduled for a hearing on Thursday along with HB 1194, sponsored by state Sen. Russell Olson, R-Madison, and HB 1263, sponsored by Rep. Kristi Noem, R-Castlewood.
Olson's HB 1194 would specify the state's definition of development to actual construction at a wind-turbine site.
State law currently places a five-year time limit on wind-energy development that makes a lease void if the developer has not started construction within five years of the contract's signing. Current law provides protection against speculators who could hold land "hostage" to drive up the price that they would receive from an actual energy developer.
HB 1194 specifies that development means that a turbine foundation has been constructed on the property. According to Fargen, some development companies want the definition of development to include contract negotiations.
Noem has sponsored HB 1263 that would strip the five-year deadline for property development. Instead, Noem's bill would allow the term of an easement to become whatever length of time is agreed between wind-energy developers and property owners. The law would still require that the term of any such easement could not exceed 50 years.
HB 1263 also allows the developer to only need to file a memorandum of easement, not the actual easement, with the county register of deeds.
According to Fargen, plans have been made for the sponsors of the three bills to meet before Thursday to see if a compromise is possible.
"Hopefully, all of the parties involved can meet and work together to make a good bill," Fargen said.
Fargen is currently scheduled to offer testimony on Thursday regarding all three bills before the State Affairs Committee.
Blender pumps bill
Fargen is also scheduled to speak on Thursday before the State Affairs Committee on HB 1192, which would create an ethanol blender-pump incentive program.
HB 1192, which is sponsored by Fargen, would create incentive grants so that retailers could install ethanol blender pumps at their facilities. Each retail location could receive up to $5,000 out of a $1 million fund created from federal economic stimulus dollars.
Fargen has cut the fund amount in half -- from $2 million -- since the bill was submitted. He expects to see support for the bill at this week's hearing from the Rounds administration.
Thinking of signing on with a wind developer but need to know more?
--Address Concerns over wind farm option agreements
Source: The Ogden Reporter
by KATHY PIERCE STAFF WRITER
February 3, 2010
A PROPOSED WIND energy farm south of Ogden remains at a standstill at the present time as many of the landowners still have unanswered questions and concerns with the project.
Local landowners were invited to an informational meeting last April hosted by Renewable Power Markets Access Iowa, Wind Development, LLC (RPM Access) to discuss development of a utility-scale wind energy project in this area.
Since that time the company has been talking with individual landowners to review and revise preliminary site plans and obtain landowner approval.
The proposed 120 megawatt Peoples wind farm will involve 60 to 80 wind turbines on 256' towers and will encompass 14,000 acres in 22 sections of Peoples and March Townships in Boone County. Expected construction start date is April 2011.
To help address these concerns, Erin Herbold, an attorney with the Center for Agricultural Law and Taxation (CALT)*, met with over a dozen landowners Thursday, Jan. 28 at the Leonard Good Community Center.
"There are easements and leases floating all around. My job is to give information to help you make a decision about the option agreements," Herbold told the group. "There is much concern over easements and payments."
Some of the landowners said they haven't decided what to do, that they are still "riding the fence." Most agreed that wind energy is a good thing and will help us become more energy efficient, and one landowner said he "was all for it, but in someone else's back yard."
A change in the landscape and noise are big concerns of those living near wind farms. Herbold invited those present to introduce themselves and share some of their concerns which included:
* Compaction of the soil when putting up the turbines
* Raise in aerial application costs
* How tile would be put in - plowing or trenching.
* Signing over your rights to the ground.
* Can the landowner benefit from the tax credits offered the company?
* What if the company were to go under?
* Concerns over assigning the agreement to someone else.
* Change in value of the land.
Although ag land in the wind farm area will probably not see much of a difference Herbold says there is evidence of a big effect on residential land values in some areas where wind farms are currently located.
Herbold said she did not find any fault with the wind energy contract and that it looks fairly normal compared to other contracts, but she thinks the landowner, through negotiation, can cut a more lucrative deal.
"Agreements look really attractive on the surface, but don't be afraid to ask questions." Mostly, she says, this is all about what you can live with or not live with. It's about location."
Looking through the contract Herbold shared some areas she saw as a concern.
* She says there is limited liability so landowners should check with their insurance company to see if they'll need any additional insurance coverage. If so, consider asking the wind company to compensate for this. Livestock could create other liability issues.
* Right now, Herbold says the energy tax credits make the wind energy business more lucrative. Her concern is if Congress will continue with the credits.
* Decommissioning of the towers is another concern. Herbold says to make sure the company is putting money in escrow to cover that expense.
* The current contract allows for a 2 1/2" inflation rate.
"I'd like to see the adjustment linked to the consumer price index," said Herbold. This she feels would keep payments more in tune with inflation.
* Herbold would like to see the option shortened from seven years as currently stated in the contract.
* Although there is allowance for crop damage Herbold thinks payments should be linked to another month when grain prices are higher.
* Since easements pass with the land she encourages you to talk with your children since it is likely they'll inherit the ground. It is also a good idea to make sure they have copies of the contract.
* Though it may not be a problem, she suggests you check with the Farm Service Agency (FSA) office concerning any CRP losses as the USDA has veto authority if you are in violation of the CRP contract.
Another concern for Herbold is that wind turbines may invalidate federal estate "special use valuation" in the courts.
* The Center for Agricultural Law and Taxation is a primary source of professional educational training in agricultural law and taxation. CALT does not provide legal advice.
Click on the image below to learn more about wind farm contracts.