Wind Turbine LeaseWind Turbine Lease Considerations for Landowners Considerations for Landowners

Dwight AakreRon Haugen

February 2010

Wind Farm Development ContractsWind 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 ContractsFirst Rule of Contracts

• Contracts reflect the interests of the party that writes the contract

Second Rule of ContractsSecond Rule of Contracts

• Seek competent legal advice before signing

Landowners Options to Landowners Options to Participate in Wind Energy Participate in Wind Energy

DevelopmentDevelopment1. Lease land to a wind project2. Be a partner in a wind project3. Own a residential/farm size turbine for your

own use

Wind Energy Leases and EasementsWind 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

Some questions to ask before you Some questions to ask before you sign on the dotted linesign 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 Contract to Lease Wind Development RightsWind 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 Contract to Construct and Operate Wind TurbinesWind 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 Wind Turbine DecommissioningDecommissioning

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 RoadsPlacement 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 PeriodConstruction Period

• Considerable crop may be destroyed• Contract should provide compensation

Photo by Ron Beneda, Cavalier County Extension Agent

Roads, Fences and GatesRoads, 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 How much will I be paid and how will I receive payment?will I receive payment?

• Types of compensation packages– Fixed payments– Royalty or percentage of revenue– Combination of fixed and royalty– Equity partnership

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

capacity

Royalty or Percentage of RevenueRoyalty 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 ClauseInflation 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 IssuesLiability IssuesContract 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 vandalismaccess roads construction period ice sheddingblade drop/throw shadow flicker firestray voltage electromagnetic fields lightening strikescommunications microwave towers radar stationsTV and radio signals emergency radio signals bird killwater/air pollution

Have I considered other Have I considered other contract specifications?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

Other ConsiderationsOther 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 beenMuch of the wind development has been established using a “Divide and Conquer” strategy 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 ApproachAn 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