Entries in wind farm contracts (1)
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.