As wind energy businesses are still knocking on doors to pursue potential wind farm investment opportunities, the next knock on your door might be from a company trying to obtain a utility easement for wind power transmission lines and structures.
Future wind farm projects, located in the north and south central region of the U.S., need to link up to the national electric grid in order to supply wind power to major energy markets east of the Mississippi River.
As wind power corridors from western states lobby for transmission line projects, a National Electric Grid Expansion Plan is starting to unfold for the eastern U.S.
It is projected that over 17,000 to 22,000 miles of newly built transmission lines will cross the eastern half of the country within the next 3 to 5 years.
As we speak, regional planners are mapping out the routes on where to run these large power lines (at the cost of over one million dollars per mile to install).
However, the problems associated with these types of utility easements (rights-of-way) crossing private land for public purpose are bringing to light the battle over land rights verses eminent domain.
Texas is a prime example - as major area transmission projects for new wind are being planned to carry the electricity to the marketplace. A total of 2,334 miles of transmission lines, totaling 56,581 acres of land, are needed to carry an additional 18,456 Megawatts of wind power across parts of the state.
Whether you are for or against utility easements, you need to know how to negotiate a deal or how to try to legally fight it in court.
The goal of a company utility agent is to go out and capture the right to use land for the placement of high-powered electrical energy structures and/or lines.
Agents will try to negotiate a simple lease agreement by initially offering some type of payment for land use that is normally priced under fair market value.
If that doesn’t work, the company will exercise their right to pursue eminent domain actions through the condemnation of your property as part of the legal process.
There are a lot of questions about proposed utility easement rights-of-way for public purposes.
Far too many landowners tend focus on the amount of the payment and not the property rights being taken for that payment.
Inevitably, existing wind farm leases & proposed utility easement conflicts are going to cause huge legal issues.
Who will get the transmission line royalty payments if the project crosses leased land under the authority of the wind developer - the property owner or the developer?
Tuesday, July 19, 2011
Wednesday, September 22, 2010
The Wind Energy Developer Question
In today’s U.S. wind energy market, business models and work practices are changing daily as many wind developers (big and small) are in a scurry to buy up as many wind farm land leases as possible for future expansion. These developers like to lease land in continuous 10,000 to 40,000 acre plots.
This is due in part to the world’s interest in the North American continent. Many major Wind Company’s know that Canada and the U.S. have the greatest capacity for generating wind power as compare to any other part of the world. We are known as the Saudi Arabia for wind power potential. We are, afterall, part of “Tornado Ally.”
In the political arena, the recent push for renewable energy polices in America have lead to the current economic boom for the wind industry. This has also lead to the onslaught of large overseas energy companies entering our wind market. They are eager to develop wind farms for monetary gain with the intent of also capturing the generous federal and state subsidies that make wind energy farms very profitable.
Wind farm development is solely dependant upon the issuance of government assistant programs such as production tax credits (PTCs) and the federal stimulus monies (located in the 2008 Resource and Recovery Act) for wind energy projects. Without these programs, annual wind energy growth decreases by 70% to 90% as profitability levels and the return-on-investment (ROI) basically become flat-lined.
Most commercial-scale wind projects need large capital investment and the right business environment to make it happen. The big European players (like EON Climate and Renewables, Gamesa, Siemens, TradeWind, and Iberdorla Renewables) are here in the U.S. for wind farm build out and massive investment opportunities.
Therefore, the American landowners must be keenly aware of the difference between a top wind power developer (like an Iberdorla, who has 6 billion dollars to spend in the US on wind energy projects) verses a small pioneer developer that doesn’t have the appropriate resources to develop a wind farm project.
For a successful wind project, a landowner may have to avoid the smaller domestic wind players since they constantly struggle to compete against the big companies and lack the practical experience, financial abilities and human resources necessary to develop a wind farm.
Know who you are dealing with before signing a wind energy deal. Favor the companies that have a good track record for wind farm development, key personnel and financial abilities. A missed step between a large or small wind company can lead to the loss of land rights and future development opportunities.
Mr. Jeffery J Stephens is an Attorney and Wind Energy Advisor for EHS Energy located at 1413 Garden St., Kendallville, IN 46755. EHS Energy can be reached at 260-582-9046 or re109@aol.com for additional comment.
This is due in part to the world’s interest in the North American continent. Many major Wind Company’s know that Canada and the U.S. have the greatest capacity for generating wind power as compare to any other part of the world. We are known as the Saudi Arabia for wind power potential. We are, afterall, part of “Tornado Ally.”
In the political arena, the recent push for renewable energy polices in America have lead to the current economic boom for the wind industry. This has also lead to the onslaught of large overseas energy companies entering our wind market. They are eager to develop wind farms for monetary gain with the intent of also capturing the generous federal and state subsidies that make wind energy farms very profitable.
Wind farm development is solely dependant upon the issuance of government assistant programs such as production tax credits (PTCs) and the federal stimulus monies (located in the 2008 Resource and Recovery Act) for wind energy projects. Without these programs, annual wind energy growth decreases by 70% to 90% as profitability levels and the return-on-investment (ROI) basically become flat-lined.
Most commercial-scale wind projects need large capital investment and the right business environment to make it happen. The big European players (like EON Climate and Renewables, Gamesa, Siemens, TradeWind, and Iberdorla Renewables) are here in the U.S. for wind farm build out and massive investment opportunities.
Therefore, the American landowners must be keenly aware of the difference between a top wind power developer (like an Iberdorla, who has 6 billion dollars to spend in the US on wind energy projects) verses a small pioneer developer that doesn’t have the appropriate resources to develop a wind farm project.
For a successful wind project, a landowner may have to avoid the smaller domestic wind players since they constantly struggle to compete against the big companies and lack the practical experience, financial abilities and human resources necessary to develop a wind farm.
Know who you are dealing with before signing a wind energy deal. Favor the companies that have a good track record for wind farm development, key personnel and financial abilities. A missed step between a large or small wind company can lead to the loss of land rights and future development opportunities.
Mr. Jeffery J Stephens is an Attorney and Wind Energy Advisor for EHS Energy located at 1413 Garden St., Kendallville, IN 46755. EHS Energy can be reached at 260-582-9046 or re109@aol.com for additional comment.
Sunday, May 16, 2010
Jeff Stephens (Attorney) and Rod Eagleson Articles
Wednesday, December 2, 2009
The Value of a Wind Energy Land Association
In today’s agribusiness environment, a quite land rush is underway for potential wind energy projects. Particularly, east of the Mississippi wind developers have been buying up land lease/option contracts in 10,000 to 40,000 acre plots for future development.
In the Midwest, this land grab is comparable to the California Gold Rush of the late 1840s. With access to major energy markets, this part of America also has favorable wind speeds and is underdeveloped or behind other exploited areas around the country for wind power.
Individual landowners are being enticed by large energy corporations into land lease agreements that may pay $40 an acre or $3,000 to $5,500 per megawatt for wind turbine placement when the value is much higher. Other additional payments might come in the form of other allowances for the staging of auxiliary equipment, utility transmission lines, and access roads, etc., but only if the landowner insists and ensures that it is in the contract.
Moreover, the selling tactics used by wind developers speak volumes for the growing state of wind energy development. Developers are trained and likely to individually seek out and prey upon property owners with little or no negotiation skills or legal background. This strategy has caused great difficulty and heartache for many unincorporated landowners.
Do not be persuaded into signing an agreement below its normal value. There are also numerous complaints about where the turbines are to be placed on one’s property. When shown the initial site plan, you may be led to believe that one or two wind turbines will be installed on a particular site, if you hurry up and sign the agreement. However, the contracts drafted by the developers will allow for placement in other locations and this is likely to occur as the project moves forward.
According to Paul Gipe’s (a Wind Energy Specialist) website, one of the best ways to deal with wind energy developer is to form a Land Association. A co-op for your protection. This forces the wind developer to deal with the association instead of isolated, uninformed landowners. This model plan is used quite commonly in Germany. In addition, it so happens that these types of associations are gaining momentum in our American west.
Landowners must understand the value of forming a Wind Energy Land Association that can leverage and protect the landowners’ interest. The purpose of an association is to have property owners share information about community relations, contract negotiations, land values, wind potential, etc. This allows landowners to deal with potential developers as a group that can bargain for better lease prices and protect them from high pressure, low offer tactics. Revenue sharing is also spelled out in the association according to landholder rights and local resident needs.
In summary, with many wind companies scurrying to sign up area land for future wind farm development, property owners need to be able to discern all the possible issues associated with wind power options and land lease contracts (i.e. – the loss of land rights, fair market value lease prices, and how will it affect their farm business and land values).
The power lies with the people, as it should in our country, and the strength and purpose of a land association is to fulfill the collective needs of its group. The association can provide for local empowerment and information sharing, establish long-term commitments from both members and the developers, and protect its members from unscrupulous and unethical tactics concerning wind development. Perhaps most importantly, land associations allow landowners to bargain collectively for better lease prices and revenue payments. As the group shares in the wind-generated profits, a win/win situation for the landowners and the local community is created.
Tuesday, October 20, 2009
Wind Energy Secrets
In many rural communities, the wind power of today is unlike the wind power of yesterday. The small wind powering systems that were once used to pump water have changed with the times. These little machines now are 400 foot tall, towering, high-tech structures that dot the American landscape.
As a result, the massive build out of these large-scale wind energy systems also bring about a new meaning to farming and land ownership. A lot of property rights are currently being tied to these big money projects as big government promotes renewable energy standards and subsidy programs that push wind farm development onto America’s greatest resource – the farmer.
The purpose of this article is to generically expose a few secrets related to wind energy lease agreements. Most wind energy contracts are very complex documents and are hard to decode, even for the local attorney. Farmers need to educate themselves about the ins-and-outs of wind energy development and how to effectively negotiate and bargain for the best pricing arrangement.
For negotiation purposes, an example of typical contract payment terms that are offered by various developers, are as follows:
• One-time turbine installation payment: $1,000 to $2,500/MW
• MET tower fee: $0 to $2,000 per year payment
• One-time adjacent property easement payment: $1,000 to $5,000 (with no turbine onsite)
• One-time Attorney/Financial Advisor payment: $100-$300
• Initial Signing/Land Development Option payment: $1 to $20/acre (yearly)
• One-time road construction payment: $1/linear ft or up to $30/rod
• Transmission line construction payment: $2 to $6/rod
Lastly, wind developers are procuring power purchase agreements that pay on average $49 to $57 per MWH with a 2 to 3% increase each year, over a normal 20 to 30 year contract term. A 1.5 MW wind turbine based on a 25% (Department Of Energy - 2008 national average) operating efficiency capacity rating at $49/MWH would yield about $160,965 in gross revenue annually. This doesn't include factoring in the generous production tax credits, grant money or additional allowances for carbon offsets. These are worth about another $15/MWH or extra $49,275 in gross revenue per year that the developer and/or utility company usually inherits, not the landowner.
Wind power, which is renewable, is fast becoming to energy generation what the American farmer is to our bread and butter. As most landowners are lucky to get 5% of the gross revenue stream per turbine (without government subsidies), the American farmer must aggressively negotiate for the better deal. Poor contract negotiation skills will lead to the loss of land rights and less money in your pocket.
Sunday, October 11, 2009
The Wind Energy Game and Landowner Dilemmas
The old saying goes, “Bulls make money…Bears make money…and Pigs get slaughtered”. In today’s business environment, market volatility speaks volumes and the rules on how to play the game define everything - especially, your profits and losses. This is the game American farmer’s play every day with the commodity market and now, within the agricultural industry, there is a new game in town. Wind Power!
But how does a property owner make the most money at the wind energy game, if they do not know the rules? Who wins…the developer, utility company…landowner?
Players, especially the landowners, soon find that there are many dilemmas and pitfalls associated with wind power land option contracts or lease agreements with numerous easements on, under and over your land.
In the past few years, the wind power energy market has accelerated rapidly since the Department of Energy (DOE) found that wind power could supply the U.S. with 20% of its electricity needs by 2030.
Most recently, in 2008, the American Wind Energy Association (AWEA) reported that the United States dethroned Germany as the world leader in aggregate wind generating capacity. This market boom has developed into the hottest ticket for property owners and economic development as many see the fruits of these large commercial wind farms dot the American rural landscape in real time.
Conversely, wind developers may be exploiting American landowners for the advancement of wind energy farms as they eagerly try to lease up hefty land plots (e.g. - 10,000 to 40,000 acres). Many of these companies are currently in a feeding frenzy mode for buying up lease agreements at low rates (i.e. - known as option contracts) for the future development of large-scale wind projects.
Therefore, landowners need to exercise caution and understand all aspects of the wind power game before signing or entering into any option or lease agreement. The following is a short list of pertinent concerns and things to remember:
• All contracts are negotiable but most developers tend not to negotiate. The best way to negotiate wind power contracts is to form a Wind Energy Association since all wind energy contracts are written to progressively protect the developer. Lengthy contract requirements are normally 30 pages or more.
• The first 10 years are the most profitable time for wind farm developers due to the frontloading and issuance of generous tax incentives. The normal payback period for a wind turbine is 9 to 11 years, just about the time the manufacture warranty expires. Most contracts are written with options to make them last 60 years or more.
• Ensure that fixed or royalty payment options adequately increase with the proper rate of inflation. Some contracts use the Consumer Price Index (CPI) to forecast future revenue increases. This representation does not adequately gage the rate of inflation over time.
• The number one mechanical problem associated with wind turbines is the gearbox issue. Replacement occurs every 2 to 4 years.
Lastly, property owners also need to understand what rights are lost or what hidden protection clauses are in lease agreements or option contracts with easements.
A short list is as follows:
• Confidentiality clause – this prevents any discussion with other area landowners over specific contract terms.
• Length of the lease clause – the developer’s term limits or extensions rights of the contract may prevent other future business opportunities with other developers.
• Compensation clause – This is dynamic because there are many payment options for the developing parcel of land for wind energy production (e.g. - percentage of revenue from electric sales, lump sum payouts, fixed land payouts or a combo of each). Also there are tax consequences for each payment type including land improvements. Renewable energy credits (RECs) and federal tax credits may also be negotiated as part of the compensation package for land owners of large-scale projects if the developer receives these as additional compensation from the government.
• Assignment clause – This clause may permit the wind developer to sell or transfer the lease rights to another party at any time for any reason, even if the other party is about to go bankrupt and will not be able to repair the turbine(s) or any damages caused to your land.
• Choice of law/Venue clause – Any litigation that arises under the contract must apply to the laws of the state in which the developer is located and/or heard by the court in the developer’s home state.
In summary, it is wise to consult with legal counsel experienced in wind power land lease agreements for investment opportunities. In addition, there are a lot of other concerns associated with property lease agreements, such as but not limited to; land scope and usage, liens and encumbrances, contract termination agreements, bonding and insurance, bankruptcy or insolvency, site remediation and end of project life, permits and conditions, creditor responsibilities, federal farm programs, third party liability, employee safety, etc.
Monday, September 28, 2009
Wind Farm Exit Strategies
At the start of 2009, there were a total 626 large-scale U. S. wind projects scheduled for development. However, the current commercial banking climate and the world financial situation have led to a downturn in the wind power market. Throughout the world, wind turbine orders fell by 50% in the first half of 2009 as compared to 2008. Current economic pressure has also forced many large wind manufacturers to slash jobs (e.g. - Vestas Wind Systems laid off about 1,900 employees and LM Glasfiber, the world’s largest maker of turbine blades, laid off more than 1,000 workers).
In addition, the largest voice for wind energy - Mr. T. Boone Pickens, has scrapped his largest wind energy farm in the U.S. due to a tight financial market and cheap natural gas prices. The Pickens’ plan was to invest $12 billion for wind power throughout 200,000 leased acres in northern Texas.
As a result, farmers must be aware of the current trends within the wind industry market as wind power is always changing directions, especially related to capital investment. Therefore, it is essential that farmers negotiate their wind energy contract carefully before a signature appears on an option contract/lease agreement. Key elements must be in place that best represent the interest of the landowner. Just signing the contact without negotiating is ludicrous and exactly what the wind developer expects and relies upon. Signing without consideration or negotiation can lead to undeveloped land use and no future income potential for the landowner.
Therefore, establishing a wind farm exit strategy offers the best opportunity (tool) that can be used to insulate the farmer from the loss of land rights to productive ground. This tactic is designed to make the wind developer perform a site-specific arrangement within a mandated time frame or the contract becomes null and void.
In short, this type of performance-based approach offers the greatest course of action if the developer does not develop the land for wind power within the allotted time frame. There are numerous ways to implement these types of various exit strategies.
First, it is wise to counter the original agreement with protective clauses that can shorten the life span of the written contract offered by the wind developer. Farmers must protect their wind rights that also tie up land rights. For example, it is best to include a clause in the contract that terminates the written land lease agreement if the wind project is not in commercial operation within 3 years.
Second, farmers should also be aware that some states set mandatory time limits on wind option contracts or wind easements. For example, North Dakota state law terminates wind option agreements if wind development has not occurred within 5 years after the agreement commences.
Finally, Farmers need to be careful of wind energy “checkerboarding.” There may be many wind developers offering wind power contracts within the same locality. This may cause confusion to the land owner if he/she happens to sign an agreement with developer X and finds out that he/she is land locked by other landowners who signed with developer Y. This creates a checkerboard pattern that proves worthless to the landowner who exercises his contract with developer X.
In summary, issues associated with option contracts/lease agreements relative to wind energy are numerous and complicated. The wind industry is always changing with the political climate and the financial market system. Landowners must protect their assets with proper negotiating tools and experienced advice that can promote a win/win situation for a sufficient payment of royalties.
Friday, May 15, 2009
Indiana and Wind Energy Contracts
The future of wind energy is expected to help lead the way to secure America’s leadership in reliable, clean energy technology and it is also projected to make up 20% of the electric power needs in the U.S. by 2030. According to the American Wind Energy Association, 5,144 Megawatts (MW) of wind power capacity were installed in 2007 and an additional 8,000 MW were installed in 2008.
In May of 2009, there are a total 626 wind projects scheduled for development. As a result, this market boom has become the hottest ticket for land owners and economic development throughout the U.S. Leasing companies and developers are buying up lease agreements (i.e. - known as option contracts) for the potential development of large-scale wind energy projects all over North America.
In Indiana, aerial wind map data show favorable wind shear at 300 feet (100 meters) above the earth’s surface in Benton, White, Lagrange and Clinton counties. Wind developers search for site selection opportunities, at a minimum, that offer average wind speeds of 6 m/s (meters per second). These wind speeds are required in order to maximize the greatest return on an investment for large wind turbine systems.
In LaGrange County, there is an area in the southwest part of the county that is an ideal setting for a wind energy project. This location has the greatest potential for opportunity. It is located in a rural area with significant wind speeds at 100 meters. It is also conveniently located near an existing electric transmission line and has good access to roads and open spaces. These key characters are essential for the making of a commercial-scale wind farm.
However, property owners should understand what land rights are lost in lease agreements or option contracts. There are numerous clauses within these legal documents that property owners should review and potentially negotiate better terms prior to singing on the bottom line.
The following is a short list of clauses that may appear in wind lease contracts.
Confidentiality clause – a wind developer may prevent a discussion with other landowners also involved in the project; and/or the developer may prohibit the release of preliminary wind collection data for future use to the land owner.
Length of the lease clause – the developer’s term limits or extensions rights of the contract may prevent other future business opportunities with other new developers if the current party is unable to finance or develop the project.
Compensation clause – This is dynamic because there are many payment options for the developing parcel of land for wind energy production. For example, a percentage of revenue from electric sales, lump sum payouts, fixed land payouts or any combination of these. Also, there are tax consequences for each payment type such as property tax increase due to land improvements. Renewable energy credits (RECs) and federal tax credits may also be negotiated as part of the compensation package for land owners if developers of large-scale projects get these as additional compensation from the government.
Assignment clause – This clause may permit the wind developer to sell or transfer the lease rights to another party at any time for any reason.
Choice of law/Venue clause – Any litigation that arises under the contract must apply to the laws of the state in which the developer is located and/or heard by the court in the developer’s home state. You have the right to negotiate that the venue be Indiana or any other state.
Force Majure clause – permits the developer to extend the time of the lease if such a delay may be caused by any natural causes, law, legal action or requirement of a government agency, court or utility, etc.
In summary, it is always wise to consult with experienced legal counsel and real estate professionals that specialize in land lease agreements for the development of investment opportunities for energy projects. In addition, there are a lot of other concerns associated with property lease agreements, such as but not limited to; land scope and usage, liens and encumbrances, contract termination agreements, bonding and insurance, bankruptcy or insolvency, site remediation and end of project life, permits and conditions, creditor responsibilities, federal farm programs, third party liability, employee safety, etc.
The Value of a Wind Energy Land Association
In today’s agribusiness environment, a quite land rush is underway for potential wind energy projects. Particularly, east of the Mississippi wind developers have been buying up land lease/option contracts in 10,000 to 40,000 acre plots for future development.
In the Midwest, this land grab is comparable to the California Gold Rush of the late 1840s. With access to major energy markets, this part of America also has favorable wind speeds and is underdeveloped or behind other exploited areas around the country for wind power.
Individual landowners are being enticed by large energy corporations into land lease agreements that may pay $40 an acre or $3,000 to $5,500 per megawatt for wind turbine placement when the value is much higher. Other additional payments might come in the form of other allowances for the staging of auxiliary equipment, utility transmission lines, and access roads, etc., but only if the landowner insists and ensures that it is in the contract.
Moreover, the selling tactics used by wind developers speak volumes for the growing state of wind energy development. Developers are trained and likely to individually seek out and prey upon property owners with little or no negotiation skills or legal background. This strategy has caused great difficulty and heartache for many unincorporated landowners.
Do not be persuaded into signing an agreement below its normal value. There are also numerous complaints about where the turbines are to be placed on one’s property. When shown the initial site plan, you may be led to believe that one or two wind turbines will be installed on a particular site, if you hurry up and sign the agreement. However, the contracts drafted by the developers will allow for placement in other locations and this is likely to occur as the project moves forward.
According to Paul Gipe’s (a Wind Energy Specialist) website, one of the best ways to deal with wind energy developer is to form a Land Association. A co-op for your protection. This forces the wind developer to deal with the association instead of isolated, uninformed landowners. This model plan is used quite commonly in Germany. In addition, it so happens that these types of associations are gaining momentum in our American west.
Landowners must understand the value of forming a Wind Energy Land Association that can leverage and protect the landowners’ interest. The purpose of an association is to have property owners share information about community relations, contract negotiations, land values, wind potential, etc. This allows landowners to deal with potential developers as a group that can bargain for better lease prices and protect them from high pressure, low offer tactics. Revenue sharing is also spelled out in the association according to landholder rights and local resident needs.
In summary, with many wind companies scurrying to sign up area land for future wind farm development, property owners need to be able to discern all the possible issues associated with wind power options and land lease contracts (i.e. – the loss of land rights, fair market value lease prices, and how will it affect their farm business and land values).
The power lies with the people, as it should in our country, and the strength and purpose of a land association is to fulfill the collective needs of its group. The association can provide for local empowerment and information sharing, establish long-term commitments from both members and the developers, and protect its members from unscrupulous and unethical tactics concerning wind development. Perhaps most importantly, land associations allow landowners to bargain collectively for better lease prices and revenue payments. As the group shares in the wind-generated profits, a win/win situation for the landowners and the local community is created.
Tuesday, October 20, 2009
Wind Energy Secrets
In many rural communities, the wind power of today is unlike the wind power of yesterday. The small wind powering systems that were once used to pump water have changed with the times. These little machines now are 400 foot tall, towering, high-tech structures that dot the American landscape.
As a result, the massive build out of these large-scale wind energy systems also bring about a new meaning to farming and land ownership. A lot of property rights are currently being tied to these big money projects as big government promotes renewable energy standards and subsidy programs that push wind farm development onto America’s greatest resource – the farmer.
The purpose of this article is to generically expose a few secrets related to wind energy lease agreements. Most wind energy contracts are very complex documents and are hard to decode, even for the local attorney. Farmers need to educate themselves about the ins-and-outs of wind energy development and how to effectively negotiate and bargain for the best pricing arrangement.
For negotiation purposes, an example of typical contract payment terms that are offered by various developers, are as follows:
• One-time turbine installation payment: $1,000 to $2,500/MW
• MET tower fee: $0 to $2,000 per year payment
• One-time adjacent property easement payment: $1,000 to $5,000 (with no turbine onsite)
• One-time Attorney/Financial Advisor payment: $100-$300
• Initial Signing/Land Development Option payment: $1 to $20/acre (yearly)
• One-time road construction payment: $1/linear ft or up to $30/rod
• Transmission line construction payment: $2 to $6/rod
Lastly, wind developers are procuring power purchase agreements that pay on average $49 to $57 per MWH with a 2 to 3% increase each year, over a normal 20 to 30 year contract term. A 1.5 MW wind turbine based on a 25% (Department Of Energy - 2008 national average) operating efficiency capacity rating at $49/MWH would yield about $160,965 in gross revenue annually. This doesn't include factoring in the generous production tax credits, grant money or additional allowances for carbon offsets. These are worth about another $15/MWH or extra $49,275 in gross revenue per year that the developer and/or utility company usually inherits, not the landowner.
Wind power, which is renewable, is fast becoming to energy generation what the American farmer is to our bread and butter. As most landowners are lucky to get 5% of the gross revenue stream per turbine (without government subsidies), the American farmer must aggressively negotiate for the better deal. Poor contract negotiation skills will lead to the loss of land rights and less money in your pocket.
Sunday, October 11, 2009
The Wind Energy Game and Landowner Dilemmas
The old saying goes, “Bulls make money…Bears make money…and Pigs get slaughtered”. In today’s business environment, market volatility speaks volumes and the rules on how to play the game define everything - especially, your profits and losses. This is the game American farmer’s play every day with the commodity market and now, within the agricultural industry, there is a new game in town. Wind Power!
But how does a property owner make the most money at the wind energy game, if they do not know the rules? Who wins…the developer, utility company…landowner?
Players, especially the landowners, soon find that there are many dilemmas and pitfalls associated with wind power land option contracts or lease agreements with numerous easements on, under and over your land.
In the past few years, the wind power energy market has accelerated rapidly since the Department of Energy (DOE) found that wind power could supply the U.S. with 20% of its electricity needs by 2030.
Most recently, in 2008, the American Wind Energy Association (AWEA) reported that the United States dethroned Germany as the world leader in aggregate wind generating capacity. This market boom has developed into the hottest ticket for property owners and economic development as many see the fruits of these large commercial wind farms dot the American rural landscape in real time.
Conversely, wind developers may be exploiting American landowners for the advancement of wind energy farms as they eagerly try to lease up hefty land plots (e.g. - 10,000 to 40,000 acres). Many of these companies are currently in a feeding frenzy mode for buying up lease agreements at low rates (i.e. - known as option contracts) for the future development of large-scale wind projects.
Therefore, landowners need to exercise caution and understand all aspects of the wind power game before signing or entering into any option or lease agreement. The following is a short list of pertinent concerns and things to remember:
• All contracts are negotiable but most developers tend not to negotiate. The best way to negotiate wind power contracts is to form a Wind Energy Association since all wind energy contracts are written to progressively protect the developer. Lengthy contract requirements are normally 30 pages or more.
• The first 10 years are the most profitable time for wind farm developers due to the frontloading and issuance of generous tax incentives. The normal payback period for a wind turbine is 9 to 11 years, just about the time the manufacture warranty expires. Most contracts are written with options to make them last 60 years or more.
• Ensure that fixed or royalty payment options adequately increase with the proper rate of inflation. Some contracts use the Consumer Price Index (CPI) to forecast future revenue increases. This representation does not adequately gage the rate of inflation over time.
• The number one mechanical problem associated with wind turbines is the gearbox issue. Replacement occurs every 2 to 4 years.
Lastly, property owners also need to understand what rights are lost or what hidden protection clauses are in lease agreements or option contracts with easements.
A short list is as follows:
• Confidentiality clause – this prevents any discussion with other area landowners over specific contract terms.
• Length of the lease clause – the developer’s term limits or extensions rights of the contract may prevent other future business opportunities with other developers.
• Compensation clause – This is dynamic because there are many payment options for the developing parcel of land for wind energy production (e.g. - percentage of revenue from electric sales, lump sum payouts, fixed land payouts or a combo of each). Also there are tax consequences for each payment type including land improvements. Renewable energy credits (RECs) and federal tax credits may also be negotiated as part of the compensation package for land owners of large-scale projects if the developer receives these as additional compensation from the government.
• Assignment clause – This clause may permit the wind developer to sell or transfer the lease rights to another party at any time for any reason, even if the other party is about to go bankrupt and will not be able to repair the turbine(s) or any damages caused to your land.
• Choice of law/Venue clause – Any litigation that arises under the contract must apply to the laws of the state in which the developer is located and/or heard by the court in the developer’s home state.
In summary, it is wise to consult with legal counsel experienced in wind power land lease agreements for investment opportunities. In addition, there are a lot of other concerns associated with property lease agreements, such as but not limited to; land scope and usage, liens and encumbrances, contract termination agreements, bonding and insurance, bankruptcy or insolvency, site remediation and end of project life, permits and conditions, creditor responsibilities, federal farm programs, third party liability, employee safety, etc.
Monday, September 28, 2009
Wind Farm Exit Strategies
At the start of 2009, there were a total 626 large-scale U. S. wind projects scheduled for development. However, the current commercial banking climate and the world financial situation have led to a downturn in the wind power market. Throughout the world, wind turbine orders fell by 50% in the first half of 2009 as compared to 2008. Current economic pressure has also forced many large wind manufacturers to slash jobs (e.g. - Vestas Wind Systems laid off about 1,900 employees and LM Glasfiber, the world’s largest maker of turbine blades, laid off more than 1,000 workers).
In addition, the largest voice for wind energy - Mr. T. Boone Pickens, has scrapped his largest wind energy farm in the U.S. due to a tight financial market and cheap natural gas prices. The Pickens’ plan was to invest $12 billion for wind power throughout 200,000 leased acres in northern Texas.
As a result, farmers must be aware of the current trends within the wind industry market as wind power is always changing directions, especially related to capital investment. Therefore, it is essential that farmers negotiate their wind energy contract carefully before a signature appears on an option contract/lease agreement. Key elements must be in place that best represent the interest of the landowner. Just signing the contact without negotiating is ludicrous and exactly what the wind developer expects and relies upon. Signing without consideration or negotiation can lead to undeveloped land use and no future income potential for the landowner.
Therefore, establishing a wind farm exit strategy offers the best opportunity (tool) that can be used to insulate the farmer from the loss of land rights to productive ground. This tactic is designed to make the wind developer perform a site-specific arrangement within a mandated time frame or the contract becomes null and void.
In short, this type of performance-based approach offers the greatest course of action if the developer does not develop the land for wind power within the allotted time frame. There are numerous ways to implement these types of various exit strategies.
First, it is wise to counter the original agreement with protective clauses that can shorten the life span of the written contract offered by the wind developer. Farmers must protect their wind rights that also tie up land rights. For example, it is best to include a clause in the contract that terminates the written land lease agreement if the wind project is not in commercial operation within 3 years.
Second, farmers should also be aware that some states set mandatory time limits on wind option contracts or wind easements. For example, North Dakota state law terminates wind option agreements if wind development has not occurred within 5 years after the agreement commences.
Finally, Farmers need to be careful of wind energy “checkerboarding.” There may be many wind developers offering wind power contracts within the same locality. This may cause confusion to the land owner if he/she happens to sign an agreement with developer X and finds out that he/she is land locked by other landowners who signed with developer Y. This creates a checkerboard pattern that proves worthless to the landowner who exercises his contract with developer X.
In summary, issues associated with option contracts/lease agreements relative to wind energy are numerous and complicated. The wind industry is always changing with the political climate and the financial market system. Landowners must protect their assets with proper negotiating tools and experienced advice that can promote a win/win situation for a sufficient payment of royalties.
Friday, May 15, 2009
Indiana and Wind Energy Contracts
The future of wind energy is expected to help lead the way to secure America’s leadership in reliable, clean energy technology and it is also projected to make up 20% of the electric power needs in the U.S. by 2030. According to the American Wind Energy Association, 5,144 Megawatts (MW) of wind power capacity were installed in 2007 and an additional 8,000 MW were installed in 2008.
In May of 2009, there are a total 626 wind projects scheduled for development. As a result, this market boom has become the hottest ticket for land owners and economic development throughout the U.S. Leasing companies and developers are buying up lease agreements (i.e. - known as option contracts) for the potential development of large-scale wind energy projects all over North America.
In Indiana, aerial wind map data show favorable wind shear at 300 feet (100 meters) above the earth’s surface in Benton, White, Lagrange and Clinton counties. Wind developers search for site selection opportunities, at a minimum, that offer average wind speeds of 6 m/s (meters per second). These wind speeds are required in order to maximize the greatest return on an investment for large wind turbine systems.
In LaGrange County, there is an area in the southwest part of the county that is an ideal setting for a wind energy project. This location has the greatest potential for opportunity. It is located in a rural area with significant wind speeds at 100 meters. It is also conveniently located near an existing electric transmission line and has good access to roads and open spaces. These key characters are essential for the making of a commercial-scale wind farm.
However, property owners should understand what land rights are lost in lease agreements or option contracts. There are numerous clauses within these legal documents that property owners should review and potentially negotiate better terms prior to singing on the bottom line.
The following is a short list of clauses that may appear in wind lease contracts.
Confidentiality clause – a wind developer may prevent a discussion with other landowners also involved in the project; and/or the developer may prohibit the release of preliminary wind collection data for future use to the land owner.
Length of the lease clause – the developer’s term limits or extensions rights of the contract may prevent other future business opportunities with other new developers if the current party is unable to finance or develop the project.
Compensation clause – This is dynamic because there are many payment options for the developing parcel of land for wind energy production. For example, a percentage of revenue from electric sales, lump sum payouts, fixed land payouts or any combination of these. Also, there are tax consequences for each payment type such as property tax increase due to land improvements. Renewable energy credits (RECs) and federal tax credits may also be negotiated as part of the compensation package for land owners if developers of large-scale projects get these as additional compensation from the government.
Assignment clause – This clause may permit the wind developer to sell or transfer the lease rights to another party at any time for any reason.
Choice of law/Venue clause – Any litigation that arises under the contract must apply to the laws of the state in which the developer is located and/or heard by the court in the developer’s home state. You have the right to negotiate that the venue be Indiana or any other state.
Force Majure clause – permits the developer to extend the time of the lease if such a delay may be caused by any natural causes, law, legal action or requirement of a government agency, court or utility, etc.
In summary, it is always wise to consult with experienced legal counsel and real estate professionals that specialize in land lease agreements for the development of investment opportunities for energy projects. In addition, there are a lot of other concerns associated with property lease agreements, such as but not limited to; land scope and usage, liens and encumbrances, contract termination agreements, bonding and insurance, bankruptcy or insolvency, site remediation and end of project life, permits and conditions, creditor responsibilities, federal farm programs, third party liability, employee safety, etc.
Wednesday, December 2, 2009
The Value of a Wind Energy Land Association
In today’s agribusiness environment, a quite land rush is underway for potential wind energy projects. Particularly, east of the Mississippi, wind developers have been buying up land lease/option contracts in 10,000 to 40,000 acre plots for future development.
In the Midwest, this land grab is comparable to the California Gold Rush of the late 1840s. With access to major energy markets, this part of America also has favorable wind speeds and is underdeveloped or behind other exploited areas around the country for wind power.
Conversely, landowners are being enticed by feeble land lease agreements that may pay up to $40 an acre or $3,000 to $5,500 per megawatt for wind turbine placement. Other additional payments might come in the form of other allowances for the staging of auxiliary equipment, utility transmission lines, and access roads, etc.
Moreover, the sell tactics used by wind developers speak volume for the state of wind energy. Developers like to individually seek out and prey on unapprised property owners. This process has cause great heart ache for many such landowners since they usually are prohibited from talking to their neighbors about contract terms, if they pen the agreement.
With the average age of the American farmer at 62, a few elder land owners have reported that developers have persuaded them into signing an agreement below its normal value. There are also numerous complaints about where the turbines are to be placed on one’s property. It seems that everyone thinks that they may get one or two wind turbines on their land when shown the initial site plan for turbine placement - if they hurry up and sign the agreement. This judgment always seems to change after the signing of the initial contract.
According Paul Gipe’s website (A Wind Energy Expert), one of the top ways to deal with a wind energy developer is to form a Land Association. This forces the wind developer to deal with the association instead of isolated, uninformed landowners. This model plan is used quite commonly in Germany. In addition, it so happens that these types of associations are also gaining momentum out west. In Wyoming, there are eight established associations with potentially three others coming online by the end of this year.
Therefore, landowners must understand the value of forming a Wind Energy Land Association that can leverage and protect the landowners’ interest. The purpose of an association is to have property owners share information about community relations, contract negotiations, land values, wind potential, etc. This allows landowners to deal with potential developers as a group that can bargain for better lease prices and protect them from high pressure, low offer tactics. Revenue sharing is also spelled out in the association according to landholder rights and local resident needs.
In summary, with many wind companies scurrying to sign up area land for future wind farm development, property owners need to be able to discern all the possible issues associated with wind power option and land lease contracts (i.e. - loss of land rights, fair market value lease prices, and how will it affect their farm business and land values).
The power lies in the people and the strength of a land association is to fulfill the collective needs of its group, provide for local empowerment and information sharing, and establishing long-term commitments and visionary changes when needed. And most importantly, land associations allow landowners to bargain collectively for better lease prices and revenue payments. As the group shares in wind-generated profits, this creates a win/win situation for the landowners and the local community. No one goes away unhappy or mad.
In the Midwest, this land grab is comparable to the California Gold Rush of the late 1840s. With access to major energy markets, this part of America also has favorable wind speeds and is underdeveloped or behind other exploited areas around the country for wind power.
Conversely, landowners are being enticed by feeble land lease agreements that may pay up to $40 an acre or $3,000 to $5,500 per megawatt for wind turbine placement. Other additional payments might come in the form of other allowances for the staging of auxiliary equipment, utility transmission lines, and access roads, etc.
Moreover, the sell tactics used by wind developers speak volume for the state of wind energy. Developers like to individually seek out and prey on unapprised property owners. This process has cause great heart ache for many such landowners since they usually are prohibited from talking to their neighbors about contract terms, if they pen the agreement.
With the average age of the American farmer at 62, a few elder land owners have reported that developers have persuaded them into signing an agreement below its normal value. There are also numerous complaints about where the turbines are to be placed on one’s property. It seems that everyone thinks that they may get one or two wind turbines on their land when shown the initial site plan for turbine placement - if they hurry up and sign the agreement. This judgment always seems to change after the signing of the initial contract.
According Paul Gipe’s website (A Wind Energy Expert), one of the top ways to deal with a wind energy developer is to form a Land Association. This forces the wind developer to deal with the association instead of isolated, uninformed landowners. This model plan is used quite commonly in Germany. In addition, it so happens that these types of associations are also gaining momentum out west. In Wyoming, there are eight established associations with potentially three others coming online by the end of this year.
Therefore, landowners must understand the value of forming a Wind Energy Land Association that can leverage and protect the landowners’ interest. The purpose of an association is to have property owners share information about community relations, contract negotiations, land values, wind potential, etc. This allows landowners to deal with potential developers as a group that can bargain for better lease prices and protect them from high pressure, low offer tactics. Revenue sharing is also spelled out in the association according to landholder rights and local resident needs.
In summary, with many wind companies scurrying to sign up area land for future wind farm development, property owners need to be able to discern all the possible issues associated with wind power option and land lease contracts (i.e. - loss of land rights, fair market value lease prices, and how will it affect their farm business and land values).
The power lies in the people and the strength of a land association is to fulfill the collective needs of its group, provide for local empowerment and information sharing, and establishing long-term commitments and visionary changes when needed. And most importantly, land associations allow landowners to bargain collectively for better lease prices and revenue payments. As the group shares in wind-generated profits, this creates a win/win situation for the landowners and the local community. No one goes away unhappy or mad.
Sunday, November 22, 2009
Missed Opportunity for Carbon Offset Credits for Wind Farm Landowners
What does cap and trade and carbon emissions mean to the wind farm industry as this bulging billion dollar wind energy market is blowing through America?
Carbon future market liquidity may have a huge impact on wind energy farms if Congress enacts climate change legislation. In short, wind power producers would get more money…more money…and more money for electric power generation.
In America, its farming as usual as Congress is trying to pass forceful legislation requirements to cap or limit suspected harmful green house gas (GHG) emissions that are supposedly responsible for global warming. This may set the stage for the U.S. carbon trading market and other sources of revenue growth for renewable energy.
To help add fuel to the fire, the U.S. EPA recently mandated a greenhouse gas reporting system that requires large emitters to report CO2 emissions starting next year. This rule laid the framework for annual reporting for any businesses that emit 25,000 tons or more of CO2 into the environment. It sets the precedent in quantifying the total amount carbon emissions and future market trading allowances for the U.S. in order to meet the proposed limits to cut carbon dioxide emissions.
The future U.S. carbon trading program may be similar to the government’s (Clean Air Act of 1990) cap and trade program since it was designed to reduce air pollution emissions related to Nitrous Oxides (NOx) and Sulfur Oxides (SOx) for acid rain and ozone reduction. Currently, these allowances are trading in open markets during November of 2009 at $105 per ton for seasonal NOx and $71 per ton for SOx, as CO2 trades at $3.18 to $3.38 per ton, respectively. Over time, the allotted allowances for CO2 become stricter, allowing less and less pollution, until the ultimate reduction goal is met (i.e. - 20% by 2020 and 80% by 2050 from 2005 baseline levels).
Overseas, it also appears that the U.S. carbon trading market is following in the foot steps of the European Union’s (E.U.) cap and trade market system that has been in operation during the last 4 years. This Emission Trading Market is progressively gaining momentum as trading of carbon offsets future contracts have seen a 36% increase year-over-year. Current credit futures are trading in U.S. dollars between $19 and $27 per ton, as reported on the European Climate Exchange (EXC) during October of 2009.
Moreover, the E.U. and the U.N. are also pushing for global climate change reform that will require key nations to progressively cap or limit specific GHGs that are supposedly responsible for global warming. This outcome will play out at the U.N.’s Climate Change Conference in Copenhagen that is slated for early December of 2009, as Mr. Obama is eagerly waiting to sign an energy treaty that would create a redistribution of wealth to third world countries.
Lastly, if cap and trade is enacted by Congress, the U.S. carbon offset trading market may greatly enhance each wind energy producer’s revenue portfolio as offsets or other trading allowances related to green energy credits are assigned a monetary market value and/or traded worldwide. This could easily equate into an additional $45/mega watt hour of power production per turbine or an extra $98,550 in revenue.
However, this may also present itself as just another missed opportunity for those landowners that did not actively negotiate additional payments for wind energy carbon offset credits before signing the wind energy contract. Contractually, this may also become a big legal issue for the landowners or farmers that are preparing for future carbon offset payments for no till farming practices related to carbon sequestering, as the release of all carbon offset rights may have become the property of the wind developer.
Therefore, it is wise to review what the wind energy contract may say about the management of carbon offsets.
Carbon future market liquidity may have a huge impact on wind energy farms if Congress enacts climate change legislation. In short, wind power producers would get more money…more money…and more money for electric power generation.
In America, its farming as usual as Congress is trying to pass forceful legislation requirements to cap or limit suspected harmful green house gas (GHG) emissions that are supposedly responsible for global warming. This may set the stage for the U.S. carbon trading market and other sources of revenue growth for renewable energy.
To help add fuel to the fire, the U.S. EPA recently mandated a greenhouse gas reporting system that requires large emitters to report CO2 emissions starting next year. This rule laid the framework for annual reporting for any businesses that emit 25,000 tons or more of CO2 into the environment. It sets the precedent in quantifying the total amount carbon emissions and future market trading allowances for the U.S. in order to meet the proposed limits to cut carbon dioxide emissions.
The future U.S. carbon trading program may be similar to the government’s (Clean Air Act of 1990) cap and trade program since it was designed to reduce air pollution emissions related to Nitrous Oxides (NOx) and Sulfur Oxides (SOx) for acid rain and ozone reduction. Currently, these allowances are trading in open markets during November of 2009 at $105 per ton for seasonal NOx and $71 per ton for SOx, as CO2 trades at $3.18 to $3.38 per ton, respectively. Over time, the allotted allowances for CO2 become stricter, allowing less and less pollution, until the ultimate reduction goal is met (i.e. - 20% by 2020 and 80% by 2050 from 2005 baseline levels).
Overseas, it also appears that the U.S. carbon trading market is following in the foot steps of the European Union’s (E.U.) cap and trade market system that has been in operation during the last 4 years. This Emission Trading Market is progressively gaining momentum as trading of carbon offsets future contracts have seen a 36% increase year-over-year. Current credit futures are trading in U.S. dollars between $19 and $27 per ton, as reported on the European Climate Exchange (EXC) during October of 2009.
Moreover, the E.U. and the U.N. are also pushing for global climate change reform that will require key nations to progressively cap or limit specific GHGs that are supposedly responsible for global warming. This outcome will play out at the U.N.’s Climate Change Conference in Copenhagen that is slated for early December of 2009, as Mr. Obama is eagerly waiting to sign an energy treaty that would create a redistribution of wealth to third world countries.
Lastly, if cap and trade is enacted by Congress, the U.S. carbon offset trading market may greatly enhance each wind energy producer’s revenue portfolio as offsets or other trading allowances related to green energy credits are assigned a monetary market value and/or traded worldwide. This could easily equate into an additional $45/mega watt hour of power production per turbine or an extra $98,550 in revenue.
However, this may also present itself as just another missed opportunity for those landowners that did not actively negotiate additional payments for wind energy carbon offset credits before signing the wind energy contract. Contractually, this may also become a big legal issue for the landowners or farmers that are preparing for future carbon offset payments for no till farming practices related to carbon sequestering, as the release of all carbon offset rights may have become the property of the wind developer.
Therefore, it is wise to review what the wind energy contract may say about the management of carbon offsets.
Tuesday, October 20, 2009
Wind Energy Secrets
In many rural communities, wind power of today is unlike the wind power of yesterday. The small wind powering systems that were once used to pump water have changed with the times. These little machines are now the (400 foot tall) towering, high-tech structures that are dotting the American landscape.
As a result, the massive build out of these large-scale wind energy systems also bring about a new meaning to farming or land ownership. A lot property rights are currently being tied to these big money projects as big government promotes renewable energy standards and subsidy programs that push wind farm development onto America’s greatest resource – the farmer.
The purpose of this article is to generically expose a few secrets related to wind energy lease agreements. Most wind energy contracts are very complex documents and are hard to decode even for the local attorney. Farmers should educate themselves about the ins-and-outs of wind energy development and how to effectively bargain for the best pricing arrangement. For negotiation purposes, an example of contract payment terms that are offered by various developers, are as follows:
Misc. Payment Types/Market Price Ranges
• One-time turbine installation payment: $1,000 to $2,500/MW
• MET tower fee: $0 to $2,000 per year payment
• One-time adjacent property easement payment: $1,000 to $5,000 (with no turbine onsite)
• One-time Attorney/Financial Advisor payment: $100-$300
• Initial Signing/Land Development Option payment: $1 to $20/acre (yearly)
• One-time road construction payment: $1/linear ft or up to $30/rod
• Transmission line construction payment: $2 to $6/rod
Lastly, wind developers are procuring power purchase agreements that pay on average $49 to $57 per MWH with a 2 to 3% increase each year, over a normal 20 year contract term. A 1.5 MW wind turbine based on a 25% (DOE - 2008 national average) operating efficiency capacity rating at $49/MWH would yield about $160,965 in gross revenue annually. This doesn't include factoring in the generous production tax credits, grant money or additional allowances for carbon offsets. These are worth about another $15/MWH or extra $49,275 in gross revenue per year that the developer and/or utility company usually inherits.
In closing, wind power is fast becoming to energy generation what the American farmer is to our bread and butter. As most landowners are lucky to get 5% of the gross revenue stream per turbine (without government subsidies), the American farmer must actively negotiate for the better deal. Poor contract negotiation skills may lead to the loss of land rights and less money.
As a result, the massive build out of these large-scale wind energy systems also bring about a new meaning to farming or land ownership. A lot property rights are currently being tied to these big money projects as big government promotes renewable energy standards and subsidy programs that push wind farm development onto America’s greatest resource – the farmer.
The purpose of this article is to generically expose a few secrets related to wind energy lease agreements. Most wind energy contracts are very complex documents and are hard to decode even for the local attorney. Farmers should educate themselves about the ins-and-outs of wind energy development and how to effectively bargain for the best pricing arrangement. For negotiation purposes, an example of contract payment terms that are offered by various developers, are as follows:
Misc. Payment Types/Market Price Ranges
• One-time turbine installation payment: $1,000 to $2,500/MW
• MET tower fee: $0 to $2,000 per year payment
• One-time adjacent property easement payment: $1,000 to $5,000 (with no turbine onsite)
• One-time Attorney/Financial Advisor payment: $100-$300
• Initial Signing/Land Development Option payment: $1 to $20/acre (yearly)
• One-time road construction payment: $1/linear ft or up to $30/rod
• Transmission line construction payment: $2 to $6/rod
Lastly, wind developers are procuring power purchase agreements that pay on average $49 to $57 per MWH with a 2 to 3% increase each year, over a normal 20 year contract term. A 1.5 MW wind turbine based on a 25% (DOE - 2008 national average) operating efficiency capacity rating at $49/MWH would yield about $160,965 in gross revenue annually. This doesn't include factoring in the generous production tax credits, grant money or additional allowances for carbon offsets. These are worth about another $15/MWH or extra $49,275 in gross revenue per year that the developer and/or utility company usually inherits.
In closing, wind power is fast becoming to energy generation what the American farmer is to our bread and butter. As most landowners are lucky to get 5% of the gross revenue stream per turbine (without government subsidies), the American farmer must actively negotiate for the better deal. Poor contract negotiation skills may lead to the loss of land rights and less money.
Tuesday, October 13, 2009
Key Aspects of a Community’s Wind Ordinance
Wind power is fast becoming to energy generation what the American farmer is to our bread and butter. Without the expansion of these two possessions, we may be just another feeble third world state void of our plush life style that provides us with our daily needs.
As many U.S. communities are dealing with the invasion of wind energy farms that now have the total capacity to generate over 30 gigawatts of electrical power, it is important that local government have written rules that progressively provide for the harmonic future of those living near large commercial wind energy farms or other smaller sources. It is imperative that local government develop a model plan that best protect the interest of the property owner and the welfare of its population in which it serves.
As a result, there are countless opportunities that face our provincial communities as it relates to developing a comprehensive wind ordinance. It could turn ugly if local government officials forget to address the gravity of all the issues related to the establishment of local wind power rules. A missed step could spark an outcry from the community or landowner since wind energy is relatively a new industry source to rural America as many wind farms are less than five years old.
First, there are strategic elements to an effective wind energy ordinance that should be paramount to the protection and welfare of its population. It should be written to necessitate a fair and balanced approach that produces an equal opportunity for area property owners as well as other interested parties. It should be written specifically to protect the best interest of the landowner, local community or other outside economic groups from undue hardship since its future growth and associated problems are expected to likely encroach upon more densely populated areas.
Therefore, local officials must carefully navigate through all the wind energy related problems that have troubled other neighborhoods where wind energy farms exist. In some areas of the county, it has caused outright civil war - pinning brother against brother. To steer clear from these types of short-term issues, it is best that local government develop a comprehensive wind energy ordinance before the entertainment of any wind development project proposal exists. This framework will protect the greatest interest of the community from any unfavorable risks and establish minimal guidelines for wind developers to follow.
Secondly, legislative foresight is also critical because there are also major long-term issues that can impact large-scale wind farms and the local community. Wind power producers may start to run into problems within the second 10 years of operation after the production tax credits and/or turbine warranty service protection usually expire. By this time, the normal wear and tear on the mechanical equipment may lead to lower revenue and costly capital endeavors for repowering or retooling turbines for continuous power generation. This may lead to insolvency problems for the developer which may trickle down to the landowner and thus the community.
Lastly, community officials must be knowledgeable of the hot buttons affecting wind power projects. Here is a short list of some issues that are often not adequately addressed:
- Establish proper noise and setback requirements that will abate any potential nuisance lawsuits or public safety or health issues
- Promote the procurement of surety bonds for end-of-life-project decommissioning related to the removal of all wind powering equipment
- Written ordinances should also include residential and community wind projects within the establishment of proper zoning requirements
Create a building and driveway megawatt production fee fund to provide for county inspections and other related services- Provide firefighting equipment and training fund for high angle rescues
- Promote additional tower lighting requirements that could impact areas residents
- Guard against personal health issues related to living near wind farms
- Protect against soil management and drainage issues
- Restore all roads to county and town specifications
- Institute appropriate insurance and liability coverage for wind farms
- Seek out expert third-party representation to guard against any wind energy oversight issues
In closing, it is up to the county officials to develop a comprehensive wind ordinance for the benefit of its population and community. Local governments must remember that the build out of the commercial wind energy market is still a maturating industry that encompasses lengthy contract agreements lasting 20 to 30 years, in which area residents must interact with on a regular basis.
It is very important that elected county officials focus on key elements that protect the landowner and community from undue hardship. Local officials should also try to keep as much money circulating in the area since most wind developers are from large corporations located overseas. And lastly, local and community officials are not wind energy experts and third-party representation may be needed to weigh out any foreseeable impacts offered by the developer.
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