Wind development companies are actively pursuing leases on hundreds of acres in Wyoming, and landowners with wind-power potential need to know how to carve out their piece of the pie while limiting risk.
Wind generation is a great opportunity for some Wyoming ranchers to diversify their income and contribute to a quest for clean energy, but it’s also relatively uncharted territory.
Dale Hoffman, state energy program manager for the Wyoming Business Council, fields a lot of calls from landowners who’ve been contacted by companies concerning wind resources. His first advice is to find a good lawyer, right away.
An emerging expert in wind development is Cheyenne attorney Frank Falen of Budd-Falen Law Office. He has been working with four cooperatives and many individuals with wind resources, and he’s the first to admit that wind is new. The same old rules don’t always apply.
“Because it’s new, we don’t know if we’ve thought of all of it,” he said. “We can learn a lot by watching what has gone on in the last 100 years with the mineral industry. With this wind resource, it’s not like selling your yearly ag commodity. There’s no place to go to know what your resource is worth. The best way we’ve come up with to do that is to talk to as many wind developers as you can.”
Find the best deal
With wind, the best deal isn’t always obvious, Falen cautioned. That’s primarily because there’s no way to know if a wind farm will actually materialize, or if land will simply be tied up under a small lease fee for years. He typically suggests that landowners weigh up-front money heavily.
“That’s the only thing they can count on,” he said. “We don’t know what the odds are of any wind farm developing, but they have to be pretty small with so much land being leased.”
Shopping around for the best offer can pay big dividends.
“It’s real easy to get caught up just in the financial terms,” Falen said, urging property owners to consider the lease terms as a whole, not just as a dollar value. “That’s an area you need to spend a lot of time on. If you go out and really shop around, you can certainly do a lot better than if you just negotiate with one company.”
In particular, landowners should realize that wind developers have limited financial risk. Often, companies are spending money put up by a number of individuals who’ve limited the amounts invested. A landowner, on the other hand, is pouring his best asset – the property – into one investment.
Liability issues in wind development are another unknown, Falen said. Landowners should bear in mind they’re dealing with large companies who work in the millions of dollars, including in court should a liability issue arise.
Most contracts offered by wind developers specify that the company will indemnify damages they cause to the landowner, and vice-versa.
“On its face that looks fair, but it’s really not,” Falen said. “They’re talking about spending hundreds of millions of dollars. If the landowner does something that causes damage, it can easily run into the millions upon millions.”
The sorts of scenarios whereby a landowner damages a wind company are pretty speculative at this point, Falen said. Someone with a gun on the property could shoot a hole in an expensive turbine, or livestock could somehow disrupt equipment.
“The bottom line is, we don’t know for sure,” he said. “Landowners need to do everything they can to make sure they’re not going to get pulled into any type of legal situation with great big companies. It’s playing at a financial level that most landowners can’t afford.”
Landowners should also ensure that contractors agree to be bound by the same lease, Falen urged.
“Sometimes in the oil and gas industry we’ve seen projects get started and then go broke and leave a mess,” he said. In some cases subcontractors may not have been paid by the company and could put a lien on the land that has benefited from their work.
Further legal issues involve reclamation. Wind projects may leave a lesser footprint than some energy activities, but landowners will find roads, concrete bases for turbines, substation work and transmission infrastructure.
Talk to your neighbors
Knowledge is power, and sharing information with neighbors can help net stronger deals, Falen said.
Of course, some people are asked right away to sign confidentiality agreements with landmen or companies interested in negotiating leases, he said. But with so little information available about the worth of wind resources, it’s helpful to know what someone nearby is being offered, and by whom.
Associations can help. Falen has worked with four cooperatives, with another likely coming on board. Those associations are composed of smaller landowners who’ve consolidated their holdings – sometimes as little as 500 or 1,000 acres apiece – as an incentive to wind companies. In return, the landowners may find lower legal costs and greater competitive interest. As an added bonus to developers, they get to negotiate with one point person instead of with 30.
“We are very happy with the way the associations are working,” Falen said. “It blocks up enough land that it’s of interest to the developers.”
By Rena Delbridge
26 December 2007
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