A century ago, homesteaders Elbert and Alice Phipps no doubt cursed the relentless winds that raked their wide-open spaces. But today’s inhabitants, great-grandson Clarence Phipps and his wife, Lynn, and 8-year-old daughter, Emma, value the nonstop gale.
“We’ve got something to sell, and it’s wind,” Lynn said.
Montanans have long dealt in water, mineral and oil rights. But for the past few years, landowners like the Phippses have been leasing their “rights” to the wind.
The Phipps ranch is roughly 25 miles northwest of Columbus and more than a mile above sea level. There in the big open, the wind pushes up from the Livingston area and over the shoulder of the Crazy Mountains before dropping back into the Yellowstone Valley. As Lynn points out, the ranch is obscured by a red spot on Montana’s wind resource map. According to the key on the map, the color red signifies “outstanding” wind potential.
“It isn’t going to make us rich,” she said. “But we won’t have to worry about losing what we have. At the very least it’ll pay the property taxes.”
Hertha Lund, a Bozeman attorney who deals in wind issues, said Montana, like most states, lacks up-to-date wind legislation. There’s nothing that defines a landowner’s rights to the air that streams over his or her property. So, it’s not “wind rights” per se that a landowner leases but the right to use the land for construction of a wind farm.
“The current position is you cannot sever the wind from the land,” Lund said. “It’s not like a water right or a mineral right. It’s more a question of surface rights, where to put the turbines up.”
Whether or not they own the wind matters little to landowners like the Phippses and their neighbors. And even if a wind farm is never built, those who have leased their land figure they’re cash ahead.
Recognized as one of the state’s “hot spots” for wind energy – one developer referred to the area north of Reed Point as “the Jewel in the Crown” – wind development companies have come courting. Just about every landowner who’s sitting on desirable property and who’s favorable to leasing has already signed on the dotted line, said John Husar, an independent wind developer based in Billings.
“Pretty much, at this state of the game, most of the good property, near the grid – we’re talking 30 miles – is gone,” he said. “That grid is golden.”
Sven Svenson, whose place borders on the Phipps ranch, has been working with wind developers since 2001. All of the studies – several years worth of wind data, avian studies, archaeological studies, financial feasibility studies and multiple agency studies – have long been completed, but the years tick by without a turbine in sight.
His first contract defaulted when the developer went belly-up – “It sounded like it was too good to be true,” he said – and his second will likely expire this fall. If no development takes place within five years of signing, the lease terminates, he explained. He’s now considering a third company, one that “sounds more promising.”
But seven years of waiting and wondering have not been for naught. Svenson now knows what to look for when finalizing a contract. Some companies offer 2 percent to 3 percent of the gross revenues when the wind farm is operating. Other contracts base payments on the number of towers or megawatts installed. Svenson opted for a fixed-rate deal on his second lease.
“With a fixed rate,” he said, “you get paid whether the wind blows or not.”
Although some contracts seek to tie up mineral and oil rights, Svenson is adamant he’d never agree to such terms. Nor would he ever sign a 99-year lease.
“Some buy up wind rights and don’t even plan to develop for X number of years,” he said. “It leaves the landowners with their hands tied.”
He’s confident there will be development in the area, he’s just not sure when and what company.
“If I get the turbines,” he said, “I’d say the heck with the cows and the sheep. I’d go fishing.”
Sarah Hamlen has been working with wind leases for less than a year. As a regional economic development coordinator for Montana State University’s Extension Service, she travels the area offering workshops on the leasing of land for wind development. During her travels, she’s talked with hundreds of landowners, all of whom are convinced that a major project will be built on their property.
“That’s not real,” she said. “Only about one third of the projects ever make it to market.”
Hamlen and others cite two key bottlenecks facing wind development in Montana. First, transmission capacity is nearly maxed out. And second, a shortage of turbines continues to plague the industry.
In light of the state’s current situation, Hamlen cautions landowners against empty promises.
“The land banking in Montana is very real,” she said. “There are swarms of developers and speculators coming in to lock up land.”
Lund sometimes accompanies Hamlen to her workshops, where the two share their expertise on what to expect and what to avoid. They’ve found most legitimate companies to be landowner-friendly. Likewise, they’ve seen their share of fly-by-night developers and poorly written contracts.
“I shudder to think people are signing some of these documents,” Lund said.
Hamlen and Lund advise landowners to steer clear of pressure tactics, to reject leases with indefinite time frames and avoid signing contracts that fail to address critical issues. They also caution against signing confidentiality clauses too early in the process, developers who claim they can take short cuts with on-site studies and contracts that don’t cover reclamation. In addition, they recommend checking out a company’s track record and its access to wind turbines.
“What you’re looking for is a company that’s put together wind projects before,” Lund said. “And a wind project in Europe is not the same as a wind project in Montana.”
In fact, a wind project in Montana is not even the same as a wind project in Wyoming.
Lund, who has worked with landowners in both states, said development in the Cowboy state is about three years ahead.
In Wyoming, leases typically pay $6 to $8 an acre. Padded with bonuses, some large landowners there are banking nearly $1 million a year, she said. That’s definitely not the case in Montana, where some landowners have leased their property for a little as $1 per acre, or $640 per section.
Considering rates elsewhere, Lund tells Montana landowners they have lots of room to negotiate.
“They’ll still do business with you,” she said.
The European connection
Like their neighbors, the Phipps have grown accustomed to strange vehicles running the gravel roads and wind development companies with foreign names.
“Montana is saturated with European developers,” said Husar, who works from his office on Billings’ West End.
The story seems eerily familiar. Out-of-state investors flock to Montana, harvest its resources and then ship those resources out of state. As anyone in the wind industry knows, not only do the vast majority of developers come from Europe, where wind generation has taken a significant leap ahead of the American market, but wind power harnessed under the Big Sky will – transmission lines pending – provide energy for urban homeowners in destinations like Los Angeles or Seattle.
Husar said that doesn’t seem to bother the landowners he’s talked to.
“Their attitude is, ‘I raise sheep, I ship them to Houston,’ ” he said.
With a dozen years invested in the burgeoning industry, Husar has covered all the bases, from knocking on ranchers’ doors to fielding phone calls from Europe.
“I started in 1995 and I don’t have a blade up yet,” he admits. “A lot of it has to do with equipment issues and some of the wind people eating their own.”
Husar tells of speculators offering royalties far in excess of the going rate. Then, when a credible company considers developing the project, the inflated figure kills the financing and therefore the deal.
Of locals and longevity
Mostly, however, Husar talks about landowners.
“There’s a fair way of doing it,” he said. “We’re looking long term.”
The life of a wind tower and turbine may run 20-25 years, he said. But the life of the wind development itself could last centuries.
Husar is not the only local banking on Montana’s wind future.
Ross Keogh of Columbus is a representative for Sagebrush Energy, a small, American company that is striving to make inroads in the Intermountain West. Stressing the need for on-going relationships with landowners, he said Sagebrush Energy is looking to develop a series of smaller projects across the state. In at least one instance, the company purchased property outright rather than leasing.
“We have a number of different models,” he said. “And we may look at cooperative ownership.”
In the Martinsdale area, Bryan Rogan is co-owner of Oversight Resources, which offers alternatives for wind resource development. The business is pursuing what Rogan refers to as “community wind.”
“It’s where the landowner and the people in the community have the opportunity to have ownership in the project,” he said. “The goal is to maintain as much of the ownership and revenue in the state and county.”
Delbert Eder lives down the road from the Phippses and not far from Svenson. Though neighbors for generations, all are bound to silence by certain confidentiality clauses of their contracts.
“You can’t keep some of this quiet when they’re out in front of your place working,” Eder said. “People come along and say ‘what’s doing?’ and ‘what’s up?’ ”
In fact, the don’t-talk-to-your-neighbors stipulation has killed the deal for some landowners. Others, like the Phippses, however, are no longer keeping mum.
“We’re not supposed to talk to anybody,” Clarence said. “But what’s a guy got to lose?”
“I figure if we don’t talk about it, it may not happen,” Lynn adds.
Besides the “gag rule,” there have been other issues over the years. Lynn remembers, early on, attending a meeting with the Public Service Commission in Billings. A group from Missoula showed up to protest wind development, claiming turbines kill birds and destroy “viewsheds.”
Lynn admits that the old-style towers and windmills basically “Cuisinarted” birds. But she points to the newer smooth towers, which discourage nesting, and the slow-moving blades, saying they pose much less risk.
As for aesthetics, she questions the opponents’ priorities. Not only will wind development bring new jobs and taxes for the county and schools, she said, but it could make the difference for landowners just trying to hang on.
“The aesthetic value counts for nothing if you can’t stay on the land,” she said. “What’s the aesthetic value of living in a trailer court? Don’t whine. This is our commodity.”
For more information on leasing for wind developments, contact Hamlen at 406-209-7679.
By Linda Halstead-Acharya
Of The Gazette Staff
11 July 2008
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