Wind Turbine Lease Considerations for Landowners  

February 2010, North Dakota State University Extension Service –

Wind Farm Development Contracts

• Legal, binding contracts are necessary
• Before a contract is signed, terms are negotiable
• Upon signing, you have given written approval of all provisions

First Rule of Contracts:
Contracts reflect the interests of the party that writes the contract

Second Rule of Contracts:
Seek competent legal advice before signing

Landowners’ Options to Participate in Wind Energy Development

1. Lease land to a wind project
2. Be a partner in a wind project
3. Own a residential/farm size turbine for your own use

Wind Energy Leases and Easements

• Most common way for landowners to participate
• Few standards
• Compensation varies widely based on:
• Turbine size
• Wind resource
• Price of energy
• Access to grid system
• Knowledge level of landowner
• Long term commitments

Some questions to ask before you sign on the dotted line:
How much of my land will be tied up and for how long?

Leases have two components

• Contract to lease the wind development rights
• Contract to construct and operate the wind turbine and related development

Contract to Lease Wind Development Rights

• Limited duration, 3 to 5 years is common
• May include an option to renew
• Provides exclusive development rights to that company
• Provides annual payment to landowners
• Payment may be $2 to $10 per acre for acreage contracted

Contract to Construct and Operate Wind Turbines

• Leases usually are 20 to 25 years
• Usually includes an option to extend the lease
• May or may not permit renegotiation of terms

Wind Turbine Decommissioning

• What happens when the tower becomes obsolete or uneconomical?
• Tower, access roads, other structures
• Timeline for removal
• Who is responsible (work and cost)

Placement of Access Roads

• Roads are necessary for maintenance and repair
• Will impact efficiency of field operations
• Landowner input in location of roads

Construction Period

• Considerable crop may be destroyed
• Contract should provide compensation

Roads, Fences and Gates

• Responsibility for maintenance of roads (primarily snow removal)
• On grazing land, who is responsible for:
• Fences
• Gates
• Cattle guards

How much will I be paid and how will I receive payment?
Types of compensation packages:

• Fixed payments
• Royalty or percentage of revenue
• Combination of fixed and royalty
• Equity partnership

Fixed Payments

• Per tower or megawatt
• $4,000 to $8,000 per megawatt of turbine capacity

Royalty or Percentage of Revenue

• 3 to 6 percent of gross revenue
• Revenue includes:
• Production tax credits
• Tradable renewable energy credits
• Must have a means of verifying company records

Inflation or Escalator Clause

• Contracts will run for 20 or more years
• Inflation will significantly reduce value of future payments
• All fixed payments should be adjusted by an escalator such as the consumer price index

Liability Issues
Contract should specify the project developer and any company to which the contract may be assigned in the future are responsible for any financial obligations you may incur as a result of:

noise
visual pollution
vandalism
access roads
construction period
ice shedding
blade drop/throw
shadow flicker
fire
stray voltage
electromagnetic fields
lightning strikes
communications
microwave towers
radar stations
TV and radio signals
emergency radio signals
bird kill
water/air pollution

Have I considered other contract specifications?

• Confidentiality clauses
• Settling contract disputes
• Negligence
• Safety and maintenance issues
• Limiting agricultural land use
• Limiting hunting and recreational use of land
• Aerial crop spraying

Other Considerations

• Mortgaged real estate:
  All lien holders must provide written approval before the landowner signs an agreement
• USDA Programs
• Need approval from USDA if land is enrolled in CRP
• Other USDA programs

Much of the wind development has been established using a “Divide and Conquer” strategy

• Company representative contacts individual landowner
• Drops off a contract
• Requires decision to sign within a short time frame
• Expects landowner to commit to a 20 to 50 year agreement
• Contracts include a confidentiality agreement

An Alternative Approach

• Landowners organize into a business entity
• Market their resource as a package
• Landowners are compensated with or without a tower
• Hire an experienced attorney to work for the group

Download original document: “Wind Turbine Lease Considerations for Landowners”