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How to talk wind turbine contracts

By Staff | Apr 10, 2009

Attorney Scott Buchanan speaks at the April 2 second annual conference of the Iowa Wind Energy Association in Esterville.

If you’re a landowner and someone approaches you about placing a wind turbine on your property, are you getting the best deal possible? The best terms?

And if the wind company should go belly up, who’s going to pay to take down that 235-foot turbine?

Those were some of the questions that attorney Scott Buchanan addressed at the second annual conference of the Iowa Wind Energy Association Thursday in Estherville. The conference was held April 2 at Iowa Lakes Community College April 2.

Buchanan said that in the push to develop wind energy there could be an outpacing of good judgment.

As an example, Buchanan said there are many ag acres negotiated for wind projects without a strategic policy or zoning ordinance in mind. Speaking from the landowner perspective, Buchanan said contracts to place wind turbines on ag land are unique agreements due to a number of factors, including:

  • They are very long-term.
  • Contracts tend to be very long documents.
  • The agreements have complex language.
  • They are dynamic arrangements.
  • Bargaining is asymmetrical, meaning the developer/turbine owner often has the advantage since it is familiar with the complexities of the agreements while landowners generally are not.

Buchanan said there is a high degree of likelihood that lease agreements will be reassigned, possibly on both sides on the transaction. He said the agreements could be for as long as 50 or 90 years.

Addressing what he called the “terms of endearment,” Buchanan said landowners should retain the opportunity to negotiate agreements and shape the agreement to their benefit in order to maximize value.

Buchanan discourages landowners from “bargaining in secret” with a developer. He said an owners’ association could help landowners in negotiation.

Unfortunately for many landowners, they see the chance to site a turbine on their property as found money since the return per acre is relatively phenomenal compared to what they get from a crop.

“That doesn’t mean it’s a fair price,” Buchanan said.

Among the targets that Buchanan said landowners should bargain for were a target price of $4,000 to $5,000 per megawatt, a royalty of 3 to 5 percent of gross revenues, have developers pay the landowner’s attorney fees and have the lease payment adjusted for inflation. Buchanan suggested a 4 percent annual rate minimum.

In the event a turbine is decommissioned, Buchanan said that with marginal companies there is a great likelihood landowners could be stuck with the cost of dismantling a turbine.

He suggested a $25,000 performance bond be paid by the developer.

In siting, landowners should only pledge the land they want to let go and reserve siting approval. They should also reserve the right to walk away and be aware of nuisances that can result from a turbine such as safety, sound, “flicker,” or intermittent shadow from blades, and flashing FAA lighting.

Landowners should also make sure they are covered for tile repair, have the right of first refusal, reserve the right to erect their own tower and avoid signing a confidentiality clause.

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