Thursday, July 19, 2007

Wind Resource Compensation



The graphic to the left lays a foundation for discussion over how an equitable resource-based compensation formula could be used. Note: you may click the image for a larger view.

This is using a 100 meter rotor diameter ("rd") turbine. The arrows show the most pronounced direction of the wind and the dashed lines reflect a 45 degree angle that encompasses most of the directional variation in the two seasons, summer and winter (Red River Valley). The wake extends 10 times the rotor diameter; however, the small erosion of wind resource between 8 and 10 times the distance from the rotor might arguably allow for a distance of 8x rotor diameter.

The green curved lines to the side are 4x rotor diameter reflecting the disturbed wind lateral to the turbine and therefore the diminishment of prospects for having wind turbine development within that distance.

The total acres covered are: 305.7. The wind turbine itself takes at most 2 acres of land out of agricultural production. Furthermore, a farmer will have that 2 acre obstacle to plow and plant around.

A common lease/easement compensation for a 1.5 megawatt wind turbine (by those who negotiate) is $5,000 per annum. As it now stands, only the owner of the real estate upon which the turbine is located is compensated. As you can see in the graphic, this means that the owner of the NW quarter in Section 4 loses his wind resource asset without compensation.

Oil Comparison

The practice of compensating only for where the turbine is located is quite like my allowing and being fully compensated for an oil well located on my property that sucks the oil out from under the neighbors land without compensating them - something that existing regulations do not allow. In grabbing all of the oil under the neighbors property, I might argue as some have, that I was lucky enough to be the one who received the well and that is just how life goes. The "I'm lucky and you are not" argument has been used. It amounts to "because I am lucky, I have the right to take your wind resource without compensation."

Toward a Solution

We should view the $5,000 per annum as an amount that could compensate for ALL of the assets consumed. I propose, for the sake of discussion, that all who contribute resources consumed by a turbine (or at least parties equaling something above 75%) negotiate to do a deal. Just as is the case with oil, if one minor party refuses to negotiate or come to terms that the others want to accept, that party is compelled.

I suggest that 25% of the amount provided for, in this case, a 1.5 MW capacity wind turbine be for the real estate (land upon which the turbine is located) and 75% be for the wind resource.

Therefore, the wind turbine site owner receives $1,250 per annum for the real estate resource consumed. However, the site owner also gets his share of the wind resource consumed. The 305.7 acre wind field owners receive collectively $3,750 or $12.27 per acre. In the case illustrated, the owner of the land upon which the turbine sits also has about 56.2 acres of wind resource consumed and would therefore receive an additional $689.57 per annum for wind resource. The owner of the NW quarter of Section 4 whose wind resource is almost entirely consumed, would have about 116 acres of wind resource taken, allowing for a compensation of $1,423.32 per annum. Now, given that this last party is being compensated rather fairly for the turbine placed on the neighbors land, there should be absolutely no gripe. Yes the NW/Section 4 party is unlikely to host a turbine on their land, but then, they don't have to plow and seed around the road and pad for the turbine either. Fair deal.?

See next post.

3 comments:

cowboy said...

Excellent work and presentation Joe. I hope that a good discussion is generated by your work.

Greg

Iain McClatchie said...

If a minority party refuses to negotiate, they can be compelled. The guy with the turbine and road on his property gets 25%, so it's entirely possible for him to be the minority party.

Does this mean I can compel a neighbor to have a wind turbine installed on his property for my benefit?

Joe Richardson said...

I will have to clarify that. I was meaning "minority party" with regard to the wind resource rights, not the real estate. The real estate can never be compelled. This is a copy of oil and gas pool leases. Two parts to these leases...or two leases, one is real estate the other is wind resource.