Resource Documents: Contracts (55 items)
Documents presented here are not the product of nor are they necessarily endorsed by National Wind Watch. These resource documents are provided to assist anyone wishing to research the issue of industrial wind power and the impacts of its development. The information should be evaluated by each reader to come to their own conclusions about the many areas of debate.
Author: EDF Renewables Development
‘This Tenant Subordination Agreement states that you, as the tenant, agree to subordinate your priority under your lease with the landowner to the Wind Farm Lease and provide your consent for EDF Renewables Development, Inc. and their affiliates to develop and use of the property, as indicated under the terms of the Wind Farm Lease.’
Download original document: “Tenant Subordination Agreement”
Author: Tidgren, Kristine
We’ve recently received a number of inquiries regarding wind energy agreements. This article, while not offering legal advice, is intended to inform landowners as to some of the key legal issues they should consider when evaluating a wind energy agreement proposed by a developer.
According to the American Wind Energy Association, more than 31 percent of Iowa’s in-state electricity generation came from wind in 2015. The Iowa Utilities Board has reported that this is the first time that wind has ever supplied a state with more than 30 percent of its yearly electricity. Sustaining this increase in wind energy output is an increase in wind farm development. When wind farm developers approach landowners about constructing wind turbines on their property, many are left with many questions. Landowners are encouraged to consult with legal counsel and their tax advisors regarding the implications of the agreement they are evaluating. Following are some important considerations.
It’s All in the Contract
The backbone of any wind farm is the wind energy agreement. Every landowner who sells an easement or leases property to a developer does so pursuant to a detailed contract drafted by the developer. It is important that landowners fully understand the rights and obligations detailed in these contracts before signing them. With many of these agreements dictating land usage for the next 50 years or so, it is well worth the expense of hiring an attorney experienced in these matters to review the paperwork before signing. Given the voluntary nature of these projects to date, there may not be a lot of room for negotiation. Even so, landowners should not be afraid to ask for terms that better meet their needs. And landowners should not hesitate to walk away from negotiations if they are not comfortable with the terms offered. Because these contracts often contain a confidentiality clause, landowners usually don’t know the terms of their neighbors’ agreements. As such, it is sometimes difficult to evaluate the fairness of a financial offer.
Lease v. Easement
One sometimes confusing element of wind energy agreements is the nature of the interest being conveyed. Sometimes the agreement will use the term “lease,” and sometimes it will use the term “easement.” Sometimes the agreement will use the terms interchangeably. Many times, the agreement actually conveys a combination of both. While the two interests are similar, they are legally distinct. An “easement” is a right to use a landowner’s property for a specific purpose. Title to the property remains with the landowner, but the purchaser obtains a limited property interest. Because this is an ongoing interest, an easement is recorded in the county land records. It remains binding upon future owners or occupiers for the term of the easement.
Although an easement can be perpetual, wind energy easements are generally for a term, often between 30 and 50 years. Developers often purchase easements to secure a number of rights, including those for ingress and egress, installing transmission lines and facilities, and accessing unobstructed wind. Called “unobstruction” easements, the latter easement restricts landowners from building or conducting activities on their property that would impact the amount of wind reaching the turbine. An easement is usually nonexclusive, meaning that the landowner may continue to farm or otherwise use the land, subject to the rights conveyed by the easement. Some easements may be temporary. Construction easements, for example, usually allow the developer to travel over a larger portion of the property to build the turbine, but end when the construction phase of the property is complete.
A lease, on the other hand, is a conveyance of an interest in land for a term of years in exchange for a rental payment. Without special language in the lease agreement, a lease typically conveys an exclusive right of possession to the tenant. Developers often seek long-term leases for the small parcel of land on which the turbine is located.
Tax Treatment of Payments
The nature of the interests conveyed and the way the payments are structured impact the tax treatment of the payments. Landowners are strongly encouraged to consult with the tax advisors before signing a wind energy agreement. This will prevent surprises at tax time. Generally, if a landowner receives a payment in exchange for an easement in place for 30 or more years, that transaction—for tax purposes—is treated like a sale of the impacted property. If the price does not exceed the basis (generally, the cost) of the impacted property, the basis is reduced by the amount of the easement payment, and the landowner recognizes no income from the sale. If the amount of the payment exceeds the basis, the amount of the payment in excess of the basis is taxed at capital gains rates if the landowner has owned the property for more than one year.
Payments for short-term easements are taxed like lease payments. Both are taxed at ordinary income rates, not subject to self-employment tax. Payments to compensate farmers for crop damages are taxed as ordinary income, subject to self-employment tax. Because these transactions can be complicated, landowners should always consult with their tax advisors for information on the specific tax implications of any agreement before signing.
Another key issue for landowners to consider is liability stemming from the construction and operation of wind towers on their property. Landowners should ensure that developers agree in the contract to indemnify them for damages. This should include defending landowners in future lawsuits and compensating them for legal damages incurred because of the wind farm. The agreement should also require the developer to maintain a sufficient amount of liability insurance to protect the landowner. Landowners should review potential tort liability arising because of a wind farm—including nuisance, negligence, and trespass—with their legal advisors and their own insurers.
Wind farm improvements on a landowners’ property will cause property tax assessments to increase. The agreement should provide that the developer, not the landowner, is responsible for the taxes attributable to the wind farm. Iowa Code § 427B.26 allows counties, by ordinance, to provide for the special valuation of wind energy conversion property, which includes all wind farm facilities, including the wind charger, windmill, wind turbine, tower and electrical equipment, pad mount transformers, power lines and substation. If such an ordinance is passed, the wind conversion property is assessed as follows:
0% of acquisition value for the first year
5% of acquisition value through the sixth year
30% of acquisition value for the seventh and succeeding years
Acquisition value is the acquired cost of the property including all foundations and installation cost less any excess cost adjustment.
Impacted Third Parties
Landowners must not enter into a wind energy agreement without first consulting with and receiving approval from any lenders with a security interest in the property or any tenants farming the land.
A landowner risks accelerating the mortgage if he or she signs an agreement that inadvertently impacts the rights of the lender. Landowners should also ensure that the wind energy agreement will not restrict their ability to encumber the property in the future.
Farm tenants are largely impacted by wind energy agreements. Landowners risk breaching their lease agreements if they enter into a wind energy agreement without the permission of the tenant. While landowners with one-year leases can terminate those leases and renegotiate terms that accommodate the installation of a wind turbine on the property, landlords with multi-year farm leases must engage the tenant in any discussions with a developer. The tenant is in possession of the property for the term of the lease and cannot be displaced. Landowners should consider the impact of the wind farm on future farm tenants as well.
Farm Program Payments
Wind energy agreements can also impact farm program payments. If the land is enrolled in the Conservation Reserve Program, for example, the landowner should consult with the Farm Service Agency to determine the impact of the proposed development on the contract. Sometimes developers are interested in buying back contracts or repaying all benefits paid under the contract to release the land from future CRP obligations. Landowners should consult with their advisors to assess any legal obligations stemming from such an approach.
Land Restrictions and Damages
Landowners must also carefully consider the impact of a wind farm on their farming or other activities. Wind turbines can, for example, interfere with GPS technology. Although that is becoming less of a concern as technology advances. Turbines can also prevent aerial spraying. Some agreements allow farmers to schedule times for spraying when the turbines are shut down. Landowners must also ensure that they understand the full scope of the rights and obligations created by the contract. How many turbines can be built? Who controls the exact location of the turbine? What building and use restrictions accompany the agreement? These are just some of the many questions for which landowners should seek answers.
Landowners should also make sure that the agreement fairly compensates them for ongoing damage incurred because of these restrictions or provides that the developer will timely repair damage to the landowner’s property. For example, the agreement should specify that the developer must repair (within a reasonable period of time) any drain tile damaged because of the developer’s activities. The agreement should also provide for repair and/or compensation for soil compaction and similar types of damage.
What about the Neighbors?
In an effort to reduce future problems, developers often enter into agreements with landowners owning property adjacent to the wind turbine sites. Although not legally required, these agreements provide for a smaller stream of payments to these neighbors in exchange for refraining from activities that may interfere with the operation of the wind park. These agreements also lessen the possibility of tort litigation down the road.
Removal of the Tower
Wind energy agreements typically provide that the developer is responsible to remove the tower (up to a certain depth below ground) when the project ends. Landowners should read these provisions carefully and understand at what point this removal obligation is triggered.
This is merely a brief overview of some of the many issues landowners should consider before signing a wind energy agreement. These agreements can provide a stable source of income over a period of many years. They can also increase tax revenue for schools and bring new jobs to an area. However, landowners must understand the long-term consequences of any agreements they sign. Those consequences will impact the landowners, successive owners, and tenants far into the future. Investing in some trusted legal and tax advice before signing such an agreement will likely yield a positive return.
Kristine A. Tidgren
Center for Agricultural Law and Taxation, Iowa State University, Ames
May 19, 2016
Author: Amshore US WindAmshore US WindAmshore US WindAmshore US WindAmshore US Wind
This ORIGINAL WIND EASEMENT (this “Easement”) is made and entered into effective as of the Effective Date by and between ____ (“Owner”) and Amshore US Wind, L.L.C., a Texas limited liability company, its successors and assigns (“Grantee”).
“Easement Term” or “Term”: Subject to earlier termination in accord with the terms of this Easement and the Option to Extend Wind Easement Term, set out in Section 24 below, the period commencing on the Effective Date and continuing for thirty (30) years after the Date of Commercial Operation, as extended by the terms of this Easement for purposes of removal of Improvements and completion of Surface Restoration.
“Permitted Use”: (1) Installing, operating, maintaining, removing, replacing and collecting data from meteorological towers, stations and anemometers, conducting avian, archeological and biological assessments, environmental assessments, soil and preconstruction analysis, and other studies and evaluations deemed necessary by Grantee for purposes of evaluating the Wind Resources of the Premises, exercising the rights granted to Grantee hereunder, and developing the Wind Energy Project; (2) Constructing, installing, operating, accessing, maintaining and removing (including, when necessary, replacing) (a) WTGs on WTG Pads on the Premises for the conversion of Wind Resources to electricity, and including replacing WTGs for purposes of repowering for conversion of Wind Resources to electricity on WTG Pads located on the Premises and/or in connection or conjunction with other real property on which the Wind Energy Project is located; and (b) all related Improvements (i) necessary or convenient to Grantee in conjunction with WTGs for the Wind Energy Project (ii) for the use by Grantee in collecting, transmitting or otherwise making electricity from the WTGs on the Wind Energy Project marketable and available for sale; or (iii) for the use by Grantee for access to and from the Improvements or a public right of way to the WTGs for the Wind Energy Project (in each case, whether or not such WTGs are on the Premises), or (3) uses otherwise permitted herein. All references in this Easement to electricity or the production of electricity shall mean and include any forms of energy generated from renewable natural wind resources that might be developed, provided nothing contained herein gives Grantee the right to develop renewable natural resources other than wind without the written agreement of Owner regarding the manner in which such other resources may be developed and considerations due Owner therefore.
“Improvements”: Improvements include, but are not limited to, any of the following: WTG’s, buried electric collection lines, electric collection systems, electric transmission lines and poles, telecommunication towers and lines, buried fiber optic and other telecommunication lines, physical hardware, supporting components, Interconnection Facilities, O&M Building, Utility Substation, Collection Substation, transformers, junction boxes, any other operation and maintenance buildings, communication buildings, meteorological towers, stations, anemometers, electric substations, project access and other roads, staging and laydown areas for the construction and maintenance of such Improvements, gates, fences, and any other improvements, equipment, facilities, or fixtures completed by Grantee in accordance with the terms hereunder that are related to and for the purpose of converting Wind Resources into electrical energy (and transmitting data related thereto).
Development Spacing. From and after the Effective Date of this Easement, Owner agrees that it will not (and will not allow any other person or entity to) construct any improvements whatsoever on the Premises that will interfere with the free and unobstructed natural wind flow over the Premises to a WTG. Owner shall not construct any improvements on a WTG Pad without the prior written consent of Grantee. Owner shall not construct any building or other structure in excess of sixty (60) feet in height in the Wind Flow Zone. Owner shall have the right to construct and maintain normal and customary farm and ranch improvements such as livestock pens, water wells, barns and sheds within the Wind Flow Zone. The construction of such farm and ranch improvements within the Wind Flow Zone and the construction of improvements outside the Wind Flow Zone shall be deemed not to interfere with the free and unobstructed natural wind flow over the Premises to the WTG; provided however, Grantee shall not construct any WTG within one thousand four hundred (1,400) feet of the main residence on the Premises or one thousand (1,000) feet of any other existing, permanent residence or barn, either of which is located immediately adjacent to the main residence, or within one hundred fifty (150) feet from any other existing structures, pump jacks, tank batteries, or other above ground oil and gas facilities located on the Premises as of the Effective Date, without Owner’s prior written consent.
Utility Substation & Collection Substation. At any time during the Term of this Easement, and upon notice by Grantee, Owner agrees to either (i) accept rental payments or (ii) promptly execute a purchase agreement, for an electric substation (“Utility Substation”) and transmission facilities in favor of Grantee, or at Grantee’s option, in favor of any electric transmission utility company providing Grantee access for its electricity to the MISO grid, covering no more than twenty-five (25) acres of land, which land must be other than mineral classified land, the location of which will be selected by Grantee and approved by Owner (which approval will not be unreasonably withheld, conditioned or delayed). … Owner shall also grant appropriate easements or sales … for road and power transmission facilities to permit connection to existing transmission lines.
O&M Building. Grantee shall have the right to construct an operations and maintenance facility on the Premises with storage facilities and parking areas (“O&M Building”) covering no more than ten (10) acres of land, the location of which be selected by Grantee after consultation with Owner.
Construction. … Grantee shall construct and install all electric gathering lines, conduit, fiber optics and cables for the collection of electricity (and related data) from the WTGs of the Wind Energy Project underground, buried to a depth of at least forty (40) inches, to the point of connection with any Utility and/or Collection Substation. Upon Owner request, all ditching or trenching shall be done either by trenching using the double ditching method of trench construction whereby up to eighteen (18) inches of the topsoil will be separated from the balance of the dirt removed in making the ditch or trench, so that any caliche, other rock or shale will be separated from any topsoil so removed, or by the plowing method. In backfilling after any such operation, the topsoil first removed shall be used as cover soil in such a manner as to result in it being returned to the top of the ditch or trench as topsoil unless the existing soils are rocky and cause thermal resistivity issues which require the use of different soil.
New and Improved Road Payments. Grantee agrees to pay Owner for each new road constructed by Grantee for the Easement Term and existing roads improved by Grantee on the Premises a one-time payment based on Eight Thousand and No/100 Dollars ($8,000.00) per mile, with a minimum payment of Eight Thousand and No/100 Dollars ($8,000.00) regardless of the actual distance of any such road. Any such roads shall not exceed thirty-six (36) feet in width (or a temporary width of fifty (50) feet of such roads during construction or certain maintenance/repair activities for the WTG’s and other Improvements) without the consent of Owner, such consent not to be unreasonably withheld. … Payments under this Section 4.13 shall also constitute payment for surface and crop damages for the construction or installation of all underground electric gathering or collection lines and overhead power lines on the Premises that run along the route of or under new roads constructed by Grantee or existing roads improved by Grantee on the Premises, and any payments under this Section 4.13 shall be without duplication of the payments for Compensated Lines under Section 4.12.
Energy Royalty. Grantee shall pay Owner royalties on electricity produced from WTG’s located on the Premises, or on electricity sales from the Wind Energy Project otherwise attributable to the Premises (the “Energy Royalty”) as follows: (I) four percent (4.0%) of the Gross Revenues from the Date of Commercial Operation until the fifth (5th) anniversary of the Date of Commercial Operation; (2) four and one-half percent (4.50%) of the Gross Revenues from the fifth (5th) anniversary to the tenth (I 0th) anniversary of the Date of Commercial tion; (3) five percent (5.00%) from the tenth (10th) anniversary to the fifteenth (15th) anniversary of the Date of Commercial Operation; (4) five and one-half percent (5.50%) from the fifteenth (15th) anniversary to the twentieth (20th) anniversary of the Date of Commercial Operation; (5) six percent (6.00%) from the twentieth (20th) anniversary to the twenty-fifth (25th) anniversary of the Date of Commercial Operation; and (6) six and one-half percent (6.50%) from the twenty-fifth (25th) anniversary of the Date of Commercial Operation until the end ofthe initial Easement Term.
Definition of Gross Revenues. “Gross Revenues” means the total monies received by Grantee from a utility company or other power purchaser (provided, however, that if electricity is sold to a subsidiary or affiliate of Grantee, then, and only then, the gross receipts from the sale of electricity under such contract shall be calculated using a sale of not less than the arithmetical average of the prices quoted by market sources of information, which information may be based upon the price paid by any purchaser or purchasers, including Grantee or any subsidiary or affiliate of Grantee, for electricity produced in the Iowa region of the Midwest Independent System Operator (“MISO”) from operation of wind turbines during the calendar year immediate!y preceding the year in which such electricity production from the Wind Energy Project occurs, taking into account the aggregate terms associated with such transaction) derived from the sale of electric energy and capacity produced and sold from the WTG’s installed on the Premises, net of proportional energy losses associated with the power collection system or utility interconnection. For the avoidance of doubt, Gross Revenues shall (A) exclude monies received from any source other than the sale of electric energy and capacity, including, without limitation, any of the following: (i) any federal, state, county or local tax benefits, grants or credits or allowances related to, derived from, or granted to the Wind Energy Project or Grantee, including, but not limited to, investment or production tax credits, or property or sales tax exemptions, (ii) proceeds from financing activities, sales, assignments, partial assignments, contracts (other than the power purchase agreement) or other dispositions of or related to the Wind Energy Project (such as damages for breach of contract or liquidated damages for delays in project completion or failures in equipment performance), (iii) amounts received as reimbursements or compensation for wheeling costs or other electricity transmission or delivery costs, and (iv) any proceeds received by Grantee as a result of damage or casualty to the Wind Energy Project, or any portion thereof and (B) include any revenues derived from Grantee’s sale of carbon dioxide trading credits, renewable energy credits or certificates, emissions reduction credits, emissions allowances, green tags, tradable renewable credits, or Green-e® products, any of which are allocated to Grantee, if applicable, through its participation in any voluntary registry, association or market-based exchange.
Minimum Royalty. … Grantee shall pay Owner a minimum royalty (the “Minimum Royalty”) equal to the greater of (I) the dollar amount per nameplate rated Megawatt Capacity or (2) the dollar amount per WTG Installed on the Premises based on the minimum dollar amount per year, as set forth in the table below. In the event the Megawatt Capacity per WTG increases during the Easement Term as a result of any repowering effort, the Minimum Royalty shall likewise increase where applicable. The Minimum Royalty shall be prorated for partial years. Grantee shall be allowed to credit against the Minimum Royalty any Energy Royalty accrued during any applicable year and timely paid to Owner as provided in this Easement. In each year that the Energy Royalty timely paid to Owner in accord with this Easement exceeds the Minimum Royalty, then no Minimum Royalty shall be due. I f following Commercial Operation, Grantee terminates this Easement prior to the end of the Easement Term, the full Minimum Royalty for the year of termination will be due and payable unless such Energy Royalty paid during such year exceeds the Minimum Royalty.
|APPLICABLE PERIOD||MINIMUM ROYALTY|
|From the Date of Commercial Operation through the fifth (5th) anniversary of the Date of Commercial Operation||$3,500.00 per Megawatt Capacity or
$7,000.00 per WTG
|From the fifth (5th) anniversary of the Date of Commercial Operation through the tenth (10th) anniversary of the Date of Commercial Operation||$4,000.00 per Megawatt Capacity or
$8,000.00 per WTG
|From the tenth (1Oth) anniversary of the Date of Commercial Operation through the fifteenth (15th) anniversary of the Date of Commercial Operation||$4,500.00 per Megawatt Capacity or
$9,000.00 per WTG
|From the fifteenth (15th) anniversary of the Date of Commercial Operation twentieth (20th) anniversary of Commercial Operation||$5,000.00 per Megawatt Capacity or
$10,000.00 per WTG
Exclusive Use and Owner Access. This Easement grants to Grantee a sole, superior and exclusive right of use, enjoyment or possession of the Premises for the Permitted Use, including without limitation as to (a) each WTG Pad during the period of construction of the WTG located on such WTG Pad, (b) fenced construction staging or storage areas of Grantee, (c) any Utility Substation, (d) the O&M Building and (e) any Collection Substation, where Grantee shall have the exclusive right of use, possession and enjoyment of such facilities, all subject to Owner’s inspection and emergency rights under this Easement.
Standards for Removal of Improvements. … Tower Foundations and Pad Mount Transformer Foundations: All foundations installed on the Premises shall be demolished, cleared and removed from the ground to a depth of at least three (3) feet from the grade of the surface of the land (i.e., below plow depth). Grantee shall ensure that any holes or cavities created in the ground as a result of such removal are filled with topsoil of the same or similar type at the Premises in accord with Surface Restoration. …
Amshore US Wind, Corpus Christi, Texas
Download original document: “Amshore Wind Easement, Kossuth County, Iowa”
Author: Nextera Energy
“Next Era Energy has destroyed our lives and has caused the death of 26 of our animals since Sept. 17, 2015 (when these blades started turning). Now something must happen as all we have seen is death. We are struggling to live here in our beautiful home. Sleep deprivation is killing us. We hope you can use these documents. We got them from our county government.”
- Option for Transmission Easement Agreement and Transmission Easement (pages 2-11)
- Wind Project Neighbor Easement Agreement (pages 12-23)
- Grant of Electrical Line, Communication Line, Road and Wind Rights Easements (pages 24-42)
- Grant of Road Easement and Easement Agreement (pages 43-55)
- Road and Transmission Line Easement Agreement (pages 56-74)
- Windpark Easement Agreement (pages 75-97)
Download original document: “Sample Lease Documents, Golden West Wind Energy Project, El Paso Country, Colorado”