Better Plan, Wisconsin

From Five Questions to Ask Before Signing a Wind-Energy Lease

Source: Corn and Soybean Digest

March 15, 2012

1. How will the lease affect my farming operation?

A commercial wind project needs about 60 acres of land per megawatt (MW). But only 3% of that area — roughly three acres — is occupied by turbines, substations and access roads. The rest is a buffer zone to preserve wind flow. The lease should clearly state your rights to use the land for farming, grazing, development of subsurface minerals, hunting or other uses, Jambor-Delgado says.

Despite a relatively small footprint, a wind project can significantly affect farm operations, efficiency and production, says Dwight Aakre, North Dakota State University Extension farm management specialist.

Turbines and access roads can change field configurations, disrupting row orientation and creating inconvenient end rows or land fragments inaccessible to large equipment.

Field-drainage patterns may be altered. Center-pivot irrigation systems can be blocked. On grazing land, fences, gates and cattle guards may have to be changed.

“Aerial crop spraying is often an issue,” Aakre says. In the north, snow plowing can cause headaches for growers. “Those access roads have to be kept open, and if the snow piles up in the field it can take a long time to melt in the spring, delaying or preventing planting.”

Farmers should raise agricultural-production issues in the initial contract talks, says Dean Retherford of Halderman Farm Management, Lafayette, IN. Retherford has helped negotiate leases for several wind projects in northwest and west-central Indiana, involving 39 wind turbines on farms he manages.

“We learned to request input on the location of roads,” Retherford says. “And the wind companies found that landowners were more of a help than a hindrance” in site decisions, he says.

The lease should clearly state how you will be compensated if land is taken out of production or crops, livestock, soil or other property are damaged during construction or operation. On one of the farms Retherford manages, for instance, a crane crushed half a mile of brand new 12-in. tile.

2. How long will the lease tie up my land?

Wind-power leases often last 50 years. The long lease period is necessary to give the developer time to earn a return on the huge up-front investment needed to build a wind farm.

The initial lease term is usually 25 years — the expected life of a turbine. Wind-power leases also include a renewal provision, extending the contract for another 20 or 25 years. The decision on whether to renew the lease is almost always the tenant’s exclusively, Ferrell says. “Landowners don’t have any say.” However, some leases may allow landowners to renegotiate the commercial terms at renewal time. “This is where collective bargaining is a very helpful tool.”

Wind leases will probably affect your estate plans, too, he adds, so it’s a good idea to include your heirs in the discussions.

3. What are my obligations under the lease?

The lease will prohibit you from doing anything that obstructs the flow of wind over the surface of your property.

This includes restrictions on the height and location of structures such as barns, grain bins, cell towers, even houses and trees. In some cases, Ferrell says, the lease may prevent you from improving your property without permission from the wind company. “If you have improvements planned for the property, get approval for them” before you sign the lease, he says.

That goes for drainage upgrades, too, says Retherford, the Indiana farm manager. Wind farms often include underground power lines. “If you’re thinking of installing pattern tile in the next 10 years or so, do it before the turbines come.” After the project is built, you will need advance permission to maintain or repair tile, he adds.

You must also avoid damaging the wind-power structures. Vehicular accidents, fires or other mishaps can result in big losses, which may not be covered by your personal and farm-liability policies, Aakre says.

You will probably need to buy additional insurance to satisfy your indemnification obligations, Ferrell says. “This is especially important if you lease the property to hunters.” He adds: Increased insurance requirements for the landowner should be factored into compensation negotiations.

 Likewise, the developer should indemnify you from damage claims arising from the tenant’s use of your land, Jambor-Delgado says.

Wind-power leases may also affect your obligations under other land agreements, she says. If the property has a mortgage, for example, you may need your lender’s consent to enter into a wind-company lease.

The lease should address the payment of debts secured by the land as well as placement of new liens on the property, she says.

Be wary of lease provisions that require you to personally obtain subordination agreements from your creditors, or that prevent you from using your land to secure future credit, Ferrell says.

A wind lease may also affect your eligibility for government farm programs, Jambor-Delgado says, so don’t sign a lease before checking with the appropriate agencies.

4. How will I be compensated?

Lease payments can be structured in many ways, including:

            •fixed payments based on acreage, towers or megawatt capacity;

            •royalty payments based on a percent of gross revenue;

            •or some combination.

All the wind-lease payments that Dean Retherfordhas negotiated are based on gross revenue per turbine. Each 1.5- or 3-MW turbine earns an annual royalty payment of $5,000 and $8,000, he says. The wind companies pay property taxes on the commercial facility, but not on the leased land.

Most wind-power leases today provide for similar royalties based on revenue, Ferrell says — typically 3-5% of gross earnings. The contract should clearly spell out how your payment will be calculated.

For example, if your royalty is 4% of gross revenue, how will gross revenue be defined? Does it include only the sale of electricity, or does it also include revenue from the sale of tax credits or renewable energy credits? Will your payment be based on revenue from the turbines on your land alone, or on average revenue for the entire wind farm? What can be subtracted from gross revenue? Can the wind-power company deduct for power lost during transmission or for periodic curtailments?

Leases that include a royalty should also set a minimum rent that will be paid whether or not the turbines are generating power for sale, Ferrell says. In addition, many royalty leases now include an “escalator” provision raising the royalty percentage at specified intervals. This arrangement can be a good deal for both the developer and the landowner, he says. During the early years of the project, the company can recover its initial costs faster. In later years, the landowner shares in a greater percentage of profits.

Royalty leases should always include an audit provision, Aakre says, which allows access to the company’s financial records “to verify the revenues produced by the wind farm.”

5. What happens when the project ends?

“A frequent fear of landowners is that the developer will default or dissolve, and the landowner will be left with huge, inoperable machines” littering the property, Ferrell says.

Such fears are not unfounded, Aakre says. “It’s a real risk.” North Dakota’s relatively weak reclamation law, for example, “permits turbines to stand idle so long that the company could be long gone.”

Your lease should provide for the removal of the wind farm structures and roads when the project is finished and restoration of the soils, Aakre says. The lease should outline your rights if the wind company doesn’t fulfill its obligation. Some agreements require a performance bond from the developer to ensure that money is available to pay for decommissioning.

Land reclamation is one of the most difficult parts of a wind-power lease negotiation, Retherford says. Although the towers have significant metal salvage value, they require specialized cranes to dismantle. And the massive foundations are expensive to remove.

“Each turbine has 40 yards of concrete in the foundation. One company wanted to grind the concrete down to 6 ft., but we negotiated removal down to 8 ft. so you could tile over it.” Benton County, IN, where the project is located, requires wind companies to deposit money in an escrow fund to pay for the reclamation, he adds.

Types of wind-power property agreements

There are several types of legal agreements that give developers access to your land and wind, says Jennifer Jambor-Delgado, a staff attorney at Farmers’ Legal Action Group, which has published a book on wind-power leases (www.flaginc.org). Farmers should keep in mind that “once you have a written agreement with a developer, that agreement controls” the rights and obligations of both parties, she says. “Any verbal agreements can’t be relied on if they are not written into the contract.”

Property agreements used to develop a wind farm include:

• Option: Gives the developer the right to lease the land at an agreed-upon price, subject to agreed-upon terms.
• Access Easement:Allows the developer to travel across your property and construct roads to reach turbine areas.
• Construction Easement: Gives access for construction of turbines and support equipment, as well as temporary “lay-down” areas for equipment and machinery storage.
• Transmission Easement: Allows developer to construct and operate underground and above-ground transmission lines and substations.
• Wind Non-obstruction Easement: You agree not to construct any improvements that could interfere with wind speed or direction.
• Overhang or Encroachment Easement: You agree to allow turbine blades to overhang your property, even if the turbine is not on your land.
• Noise Easement: You agree to allow a certain level of noise from the turbine.
• Covenant:Binds later purchasers of the land to abide by certain restrictions.
• Lease:Creates a landlord-tenant relationship for a set period of time allowing tenant the exclusive right to use the property. If the landowner wants to retain rights to use the land, such rights must be specifically stated.

Sources: Shannon Ferrell, Oklahoma State University; Windustry; Farmers’ Legal Action Group, Inc.

From Michigan

EXELON SAYS IT'S WORKING WITH UPSET LANDOWNERS

“To say landowners are irate is putting it mildly,” said Fred Hasen, Huron County Planning Commission chairman.

By Kate Hessling, Assistant News Editor,

Source: Huron Daily Tribune, www.michigansthumb.com

March 10, 2012 

ELKTON — A spokesman from Exelon Corp. said Friday the company is working one-on-one with landowners in the Harvest Wind II project to address concerns about land being damaged because of preliminary construction activities for the 59.5 megawatt expansion of Harvest Wind I.

During Wednesday’s Huron County Planning Commission meeting, officials said they had been contacted by landowners in the project area, which includes land in McKinley, Chandler and Oliver townships, because they had concerns that contractors installing underground electrical cables have not been respectful of the farm land, and they fear the activities will affect the condition of the land in the spring.

“To say landowners are irate is putting it mildly,” said Fred Hasen, Huron County Planning Commission chairman.

Bob Judge, communications manager for Exelon Corp., said in the process of trenching land to install underground electrical cable, there have been some issues with equipment because the ground hasn’t frozen as deep as it normally would in this milder-than-normal winter.

“We are handling this situation … and Harvest Wind II will restore the land to the conditions (that existed) before construction,” Judge said, noting conditions in the lease agreements with landowners require the project restore the land to pre-construction conditions. “We are dealing with landowners on a one-to-one basis as this issue arises.”

Exelon still needs final site plan review approval before any wind turbines are erected, and building and zoning officials said the concerns of area landowners will be a topic of discussion when Exelon comes before the planning commission for final approval for its work in McKinley Township.

Oliver and Chandler townships are not under the county’s zoning jurisdiction, but concerns of those landowners will be discussed at the county-level because they are Huron County citizens, planners said Wednesday.

Hasen said Exelon, as well as other wind developers, need to remember they are guests of Huron County, using Huron County’s resources, as wind development projects progress.

Judge said Exelon understands some temporary damage has occurred, and it will restore the land to its pre-digging condition once the trenching is done.

He said trenching began earlier this year, and the project currently is in the beginning phase of construction. Turbine assembly is expected to take place this summer, and the project is expected to be operational by the end of this year.

Project officials previously stated the project will consist of 30 turbines if it uses 2-megawatt turbines and 32 to 33 turbines if it uses 1.8-megawatt turbines.

In the Harvest Wind I project, there are five turbines in Chandler Township and 27 in Oliver.

From Ontario

NO MORE TURBINES IN ONTARIO: FARMERS

By Vicki Gough 

Via www.nugget.ca

January 22, 2012

Ontario's largest rural voice is blowing back on industrial wind turbine development.

The Ontario Federation of Agriculture (OFA) released a position paper Friday calling for a moratorium on any further construction of the energy-generating giants emerging across the land-scape.

We are hearing very clearly from our members that the wind turbine situation is coming to a head -- seriously dividing rural communities and even jeopardizing farm succession planning," said OFA president Mark Wales.

The OFA's new position statement addresses concern over the price paid for wind power, inefficiencies and a lack of storage capabilities for use during times of peak demand.

Setback issues, health and nuisance issues, and the removal of municipal input from industrial wind turbine projects round out the anxieties.

I support what they're doing," Kent Federation of Agriculture president Louis Roesch told The Chatham Daily News Friday.

However, the owner of Roesch Meats and More, near Kent Bridge, added: We have not had that much of a problem in this area."

Not everybody is 100% satisfied, Roesch said, but everybody seemed to be able to come together with some kind of a conclusion that they're happy with, other than the one in Thamesville."

Chatham-Kent-Essex MPP Rick Nicholls told The Daily News he's pleased to learn of the OFA's stance.

These wind turbines are not efficient," Nicholls said, adding they are wasting taxpayers money."

Chatham-Kent is slated to become home to over 400 wind turbines by 2013.

Nicholls said each one generates $7,200 in taxes for the municipality, but few jobs.

The Ontario government has paid $1.8 billion over the past six years to Quebec and the U.S. as we are forced to export our excess power," Nicholls said.

Ontarians have paid 16.2 cents per kilowatt hour to produce that power, according to Nicholls.

The MPP added that wind turbines are only 28% efficient, and the wind blows the strongest at night when extra power is not needed and can't be stored.

Nicholls said farmers are getting huge signing bonuses, plus $12,000 a year for every wind turbine leased on their property for 25 years.

Yet there are about 90 municipalities that don't want them, Nicholls claimed.

We believe the Green Energy Act needs to be amended," Nicholls said.

The OFA will present its position statement to the government later this month.

WINDS OF CHANGE: WIND LEASE CONSIDERATIONS

Via RJL, attorneys-at-law

Author(s): Robert S. "Sam" Arthur, Jr., Justin H. Boyd
Published: 12/22/2011

Beware of a wind developer who attempts to include unnecessarily long evaluation periods or free extensions, as such lessee may be attempt­ing to stockpile potential wind sites, without any intent to develop and with the hope of assigning the leases to larger wind developers.

Colorado has become a leader in the wind energy industry. According to the American Wind Energy Association, our state is the third-highest wind energy generator in the United States. Farm­ers, ranchers, and other landowners should consider if their property is suitable for wind energy develop­ment and how such devel­opment could be integrated into the current uses of their land. Some major factors that impact the decision to enter into a wind lease are discussed in this article.

Power in Numbers

Owners of land in areas that are advanta­geous for wind farm development should consider joining forces. Increasing the acreage available for wind farm development will increase the land­owners' leverage when negotiating with a wind developer. Landowners in high wind-speed areas may wish to collectively engage an environmental consultant to determine the suitability of their land for wind development.

Factors that may increase the value of the lease opportunities include proximity to transmis­sion lines, local and state economic incentives, and the approval process of the local regulatory authority. Factors sometimes found in Colorado, which may decrease the suitability for wind devel­opment, include rocky or mountainous terrain and close proximity to federally protected lands. If neighbors join forces, in addition to enhancing their bargaining power, the evaluation costs can be spread among the collective group.

The Four Stages of Wind Development That Must Be Addressed in the Lease

Evaluation Stage – During this period, the wind developer studies the feasibility of the site for constructing wind turbines, evaluates environ­mental issues, determines the permitting process, and obtains the necessary financing. While the duration of this stage will vary, the landowner should attempt to limit this stage to a period that lasts no longer than three years. In addition, during this time the wind developer should be paying a guaranteed monthly or annual rent pay­ment. Beware of a wind developer who attempts to include unnecessarily long evaluation periods or free extensions, as such lessee may be attempt­ing to stockpile potential wind sites, without any intent to develop and with the hope of assigning the leases to larger wind developers.

Construction Stage – Assuming that the wind developer desires to proceed from the evaluation stage, the construction of the wind turbines will begin. The landowner should negotiate for a con­struction bonus that reflects the value of the site and also may be based on the number of turbines constructed. The wind developer should continue to pay the monthly or annual rent during this stage.

Operational Stage – Once the equipment has been installed, wind energy is produced and sold for profit to available markets. Generally, the landowner will receive a royalty or percentage of gross revenues received from the production of the wind energy. The landowner should negotiate the percentage of gross revenues that it receives to be increased every five or so years of the lease. While the percentage will vary from location to location, the landowner should be suspicious of any pro­posed royalty of 3 percent or less of gross revenues during the beginning period of the operational stage. Operations of the wind turbines can last anywhere from fifteen to fifty years.

Termination Stage – If the wind developer terminates the lease prior to even reaching the construction stage, the landowner should negoti­ate for a termination fee. Otherwise, the wind developer will have encumbered the landowner's property for the relatively low price of the monthly or annual rent, when the landowner could have been negotiating with another wind developer with the means to actually construct and operate the wind turbines. Assuming that the wind devel­oper does complete the operation stage, the lease will provide for the wind developer to "decommis­sion" the wind turbines. The landowner should receive some type of security, in the form of a bond or cash security deposit, to assure that the wind developer has an economic incentive to properly remove its equipment. The landowner should ensure that the wind developer removes its wind turbines and other equipment in an efficient manner, and leaves the land in a condition no worse than when the wind developer commenced construction.

Beware of the Landowners' Indemnifications

As with many legal agreements, parties often agree to mutually indemnify the other for any damage caused by their own acts or negligence. For example, if the wind developer breaks the farmer's fence or irrigation structures when install­ing its large equipment, the wind developer will fix and replace the damage; such repair or replace­ment costs could run into thousands of dollars. Conversely, imagine if the farmer's tractor runs into the wind turbine, which costs millions of dollars to replace. Such type of damage could force many farmers into bankruptcy. As a result, the landowner may wish to negotiate a maximum limit to its indemnification obligations, to account for the parties' potential economic risks.

Location of Wind Development, Reserved Uses, and Prohibited Uses

The landowner should expressly require the wind developer to refrain from development on or use of specific portions of the land if the cir­cumstances dictate. For example, the landowner may prohibit the wind developer from operating within 500 feet of a residence or within 25 feet of either side of a river or a creek that runs through the property. Most importantly, the lease should expressly reserve to the landowner the right to use his or her property for other uses, such as grazing, hunting, fishing, mineral exploration, or solar energy. In addition, the landowner may desire to reasonably restrict the access rights of the wind developer so as not to disrupt the landowner's peaceful enjoyment.

Taxes and Utilities

Upon construction of the turbines, the value of the property will increase. As a result, the county assessor likely will increase the property taxes assessed to the property. In addition, the utility costs on the property to operate the turbines will rise dramatically. The landowner should ensure that these increased costs incurred by the wind developer are passed on to the wind developer.

Assignment

As mentioned previously, some wind devel­opers desire to obtain numerous wind leases without ever intending to construct or operate wind turbines. Instead, their hope is to assign these wind leases to larger wind developers. As advised above, landowners should work with their neighbors and join forces to cut out this type of middleman, and they should attempt to present their own attractive opportunity to a large wind developer. As another protection, the individual landowner also should restrict the ability to assign the lease. At a minimum, the landowner should have some type of "reasonableness" standard in being required to consent to such assignment to ensure that the assignee has the same economic capacity to both construct and operate the wind development.

The above are just some of the major factors that landowners should consider before entering into a lease with a wind developer. The wind lease may provide attractive economic security; how­ever, given the long duration of these agreements, the landowners must ensure that their interests are protected. If you have any questions regarding wind-lease issues, please do not hesitate to contact Sam Arthur or Justin Boyd.

From Illinois

NO WELCOMING COMMITTEE FOR WIND FARMS: HAMILTON TOWNSIP AMONG COMMUNITIES IN OPPOSITION

BY DAVID GIULIANI,

Via www.saukvalley.com 

December 23, 2011 

“They wanted us to sign a 70-year contract,” Gonigam said. “That would affect my kids, grandchildren and great-grandchildren.”

WALNUT – Stacy Gonigam’s family decided against having wind turbines on their farm in southwestern Lee County.

Ireland-based Mainstream Renewable Power approached the family for its Green River wind farm, which is planned for Lee, Whiteside and Bureau counties.

Gonigam said she didn’t sign a contract with Mainstream because it would bind her family for a long time.

“They wanted us to sign a 70-year contract,” Gonigam said. “That would affect my kids, grandchildren and great-grandchildren.”

Gonigam also is the supervisor for Hamilton Township, population 236.

During the past summer, the township board voted unanimously for a comprehensive plan that recommended against the construction of wind turbines.

The township is not alone in its opposition. In the spring, the village board in Whiteside County’s Deer Grove, population 48, voted unanimously to regulate turbines within 1.5 miles of its boundaries. That was in response to news of Mainstream’s plans.

Now that Deer Grove has passed a zoning ordinance, the village has the right to ban wind farms in the areas near its borders, county officials say. Opposition to Mainstream’s proposal is strong in Deer Grove, so it’s doubtful the board will approve construction of turbines nearby.

While Hamilton Township’s comprehensive plan isn’t binding, it’s a statement against turbines, Gonigam said.

Sandy Cruse, a lifelong resident of Hamilton Township, said her survey found that 80 percent opposed wind turbines.

“Our area is recovered swampland,” said Cruse, whose family has a farm. “We’re 90 percent flood plain. It’s all supported by good drainage.

“We are stewards of the land, and we want to be good stewards. We’re all agricultural, and that’s what we would like to see.”

She feared that a wind farm would affect the drainage. She also said she and others don’t want the noise and shadow flicker associated with turbines.

Mainstream officials have pledged to be good neighbors, saying they want to reach out to residents.

Mainstream plans to put in 60 to 90 turbines in the first phase, the vast majority of which would be in Lee County. The second phase would include a similar number, officials say.

Last month, Whiteside County finished its review of its wind energy regulations. Officials decided against making changes.

Mainstream was expected to turn in its application to Whiteside County soon after that. But the company has yet to do so.

John Martin of Mainstream said his company is working on the application and expects to complete it soon.

The Lee County Zoning Board of Appeals has been meeting since the summer; it has recommended many changes to the existing ordinance.

On Thursday, the board will debate perhaps the biggest issue of all – the required distance between turbines and houses.

That should be the last major item of business.

The board’s recommendations will go to the full Lee County Board, which has the final say.

WIND TURBINE REGULATIONS STILL UP IN THE AIR

by CLAY BARBOUR,

SOURCE madison.com 

December 5, 2011

Officials with the Public Service Commission are still holding on to a set of wind siting rules that were supposed to go into effect almost nine months ago.

The rules were sent to PSC in March. Lawmakers hoped the agency could work out a compromise between the wind industry and its critics and have the new rules in place by now.

Kristin Ruesch, PSC spokeswoman, said the agency had little luck in bringing the two sides together. The issues separating them have not changed: setbacks, noise levels and the effects turbines have on neighboring property owners.

The PSC spent more than a year working out the original rules, with the help of Democrats and Republicans, the wind industry and its critics. Those rules were scheduled to go into effect in March. But after taking office in January, Republican Gov. Scott Walker introduced a bill to increase setbacks.

In the end, the legislative committee that reviews agency rules chose not to act on the governor’s bill and instead voted to send the original rules back to the PSC to see if an agreement could be ironed out.

If no changes are made by March, the original rules go into effect. However, two bills sit in Legislative committees designed to kill the original rules and force the state to start from scratch.

NEXT FEATURE:

West Virginia

YOU CAN'T ESCAPE THE WINING OF THE WINDMILLS

Cumberland Times-News, times-news.com 3 December 2011 ~~

The noise from these windmills on Green Mountain is so great that it is impossible to live near them.

When the wind is from the east there is a constant loud whining that can be heard from inside your home and if it is from the west it sounds like a train running.

The vibrations are so great from the windmills they rattle the windows in my and other neighbors’ homes. The only time there is no noise is when they are shut down.

The front picture window in my house frames three windmills perfectly. I can close the blinds to get away from seeing them, but I cannot get away from the noise.

Anyone who would like to experience this high noise level is welcome to come into my driveway and listen to it. I know this noise is so great that it can never be eliminated.

Neighbors have told me that they have spoken to our county commissioners about this, but they were told they could not do anything.

I believe all of our county commissioners were for the wind farm, These windmills have ruined the lives of both my family and my neighbors.

I want the public to know what these windmills will do to anyone’s life who lives close to them. I have never heard or read anywhere where the windmill advocates ever mentioned the noise level of the windmills.

Most of the time I can hear the windmills from in every room of my house. I have called almost everyone associated with the windmills that I could find a phone number for, but they quit answering or calling me back.

I even called Maria Litos in California who works for I believe Edison Mission Energy and she said they would shut them down at night until they found a solution to stop the noise, but this never happened.

This constant drone from the windmills even makes your head hurt. Something has to be done about this noise because the people around here cannot live with this.

Another problem we have is with the Tasker Road, which I live on, is the cap they put on our road.

This was nothing but a layer of gravel over our original hard surfaced road. This made our road very dangerous as cars would slide almost like on ice.

Most of the gravel has been thrown off of the road by the traffic within a few days. Even the residents on the Pinnacle Road told me they were not happy with the repairing of their road.

I can hear the windmills loud whining even as I write this letter.

Richard L Braithwaite

Keyser, W.Va.

The photos below were taken by Jim Bembinster. They were taken in Columbia County, Wisconsin during the construction phase of a WeEnergies wind project in 2011. One concern farmers have about leasing their land to wind developers is that their fields will be fragmented, making agricultural activities more difficult.

They are right to be concerned.