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Wind Lease Warnings

March 3, 2010
 
 
 

jbernick@farmjournal.com

Winds of change are swirling around Livingston County, Ill., one of the breeziest parts of the Prairie State. Large wind developers have swooped down upon the region to take advantage of wind speeds that top 26 mph and the tax incentives for commercial-scale wind energy.

The latest wind development project by Vision Energy includes a 600-turbine wind farm, with sites on farms in Livingston and neighboring counties. Local attorney Mary Christine Ludwig sees new wind lease contracts every day.

"Most wind developers are asking farmers to sign leases at least two years ahead of actual construction of a turbine,” says Ludwig, with Dodd Ludwig Maatuka LLC in Pontiac, Ill.

With a wind lease, the developer owns and operates the turbines, paying compensation to the landowner based on the number of megawatts produced by each turbine, Ludwig says. Some landowners are paid a royalty percentage based on electricity produced off the farm.

The caution for farmers is that they are entering into complex and binding legal documents that last into the next generations, she says.

Wind leases and easements are often written to cover long periods of time—30 to 60 years is common. Not only is there the initial length of the easement but an option to renew 10 years, several times, plus five to seven years for construction.

William Shay, an attorney with Cover, Shay & Evans LLP, in Peoria, Ill., says delayed turbine siting is becoming a bigger concern now that more wind developers are vying for the same land resources. Wind companies must secure the land lease before they approach financiers or lenders for the project, he says.

The problem for farmers is that they don't have any guarantee as to exactly where the turbines or access roads will be located, Ludwig adds.

"I've yet to see a wind developer who will pin down where the turbine will be located prior to signing an agreement,” Ludwig says.

Rights Granted. Construction is typically six to nine months, and turbine operation is 25 to 40 years.

In a typical wind lease, the landowner grants rights to a developer for construction access, such as for towers, access roads and transmission lines, and ongoing access for operation and maintenance.

Since farming is a seasonal process, consider the following before signing a wind lease:
• construction timing relative to planting and harvest
• soil compaction
• tile damage and replacement
• weight limits of equipment
• overhang

"We make sure landowners understand that a wind turbine can directly affect production practices, such as aerial spraying of fungicides,” Ludwig says. In fact, some aerial applicators are now charging more for application if they have to fly around a wind turbine.

Some farmers have already reported wind developers accidentally tearing through tiles when installing underground cables to anchor the turbines. Ludwig recommends farmers have their attorney make sure the provisions in the easements are protecting the landowners so that tiles will get accurately repaired and the developer uses professionals in tile drainage for any repairs.

A good idea is to include GPS maps in wind lease agreements showing where all of the tiles are located in case they are accidently cut.

Before You Sign

With most wind lease agreements, the developer holds the right to terminate the project and thereafter cease making payment to the landowner, says attorney William Shay.

The landowner should also demand the agreement grant him or her the right to terminate upon material default, such as a developer's failure to maintain insurance, or if the developer files for bankruptcy or fails to pay taxes.

Landowners should ask the developer for financial security for deconstruction, removal and land restoration upon termination.

Keep in mind that every agreement attorney Mary Christine Ludwig has seen to date has been assignable to another company. So a landowner may enter an agreement with the developer who builds the project but end up with a different company for the next 40 years, she says.

 Visit www.windustry.com for more wind lease resources for landowners



Top Producer, March 2010

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FEATURED IN: Top Producer - MARCH 2010

 
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