Sunday, October 21, 2007

Wind Contract Clause Hall of Shame

These are from actual contracts. The names of the parties are not provided.

1. "This grant of easement of the Wind Non-Obstruction Easement expressly includes the right of [Wind Company] to enter on any part of Owner's Property to enforce [Wind Company's] rights." So if you find them sitting in your office going over your email, get 'em a cup of coffee because you gave them the right to enter upon any of your property to fish around in an attempt to enforce what they consider their rights.

2. "Payments from Third Parties and for Non-Wind Energy Purposes. [Wind Company] shall pay to Owner ten percent (10%) of any rent received by [Wind Company] from third parties such as telecommunications providers for equipment of the third pary located on or in the Wind Farm Improvements." Um, telecommunications towers pay far more than wind towers. Did you know that you gave them the franchise to lease your land for release to telecommunication company's for only 10% of the proceeds. Good deal, eh?

3. "[Wind Company] shall have the right in its sole discretion and at its sole expense, in its name or Owner's name to contest the validity or applicability to the Easement Properties or Wind Farm Improvements of any law, ordinance, statute, order, regulation, property assessment or the like made by any governmental agency or entity. [Wind Company] shall control any such contest and Owner shall cooperate with [Wind Company] in every reasonable way in such contest." "Owner" means the landowner. You just made yourself the tongue of the wind company. Whatever governmental policy they want that could conceivably effect your easement is now sought in your name and you will cooperate "in every reasonable way." Got it! You thought you were just a simple landlord.....ha!

4. "Removal of Wind Farm Improvements. Owner shall have no ownership or other interest in any Wind Farm Improvements installed on the Easement Properties, and [Wind Company] shall have the express right, at any time and in its sole discretion, to remove one or more Turbines or other Wind Farm Improvements from the Easement Properties. Owner expressly waives any statutory or common law liens to which Owner migh be entitled. Upon full or partial termination of any of the Easements, [Wind Company] shall remove all physical material pertaining to the Wind Farm Improvements from the affected Easement Properties to a depth of forty-eight inches (48") beneath the soil surface and restore the area formerly occupied by the Wind Farm Improvements to substantially the same physical condition that existed immediately before the construction of the Wind Farm Improvements (the 'Removal Obligations'). If [Wind Company] fails to complete its Removal Obligations within twelve (12) months of full or partial termination of the applicable Easement, Owner may do so, in which case [Wind Company] shall reimburse Owner for reasonable costs of fulfilling [Wind Company's] Removal Obligations incurred by Owner, less any salvage value reasonably recoverable by Owner." If the company ever went bankrupt they would not be around to haggle with you about what might be both "reasonable cost" or "salvage value reasonably recoverable." Of course if they are in bankruptcy, you have no ownership interest in the equipment and it could take you quite some time to unravel who actually has the authority to allow you to remove the equipment. In any case, it is unlikely that they would make the effort to clean up the mess when the contract specifically states that they can leave it to you and haggle over what you spent (or received in salvage) later. I have heard the arguments that the steel alone is worth the cost of cleaning up. Ya, but you do not own it and who knows who might come after you for that salvage value? Then I have heard that the pad will be reusable by another turbine. Likely that the turbines twenty years in the future will be as different as the current turbines are to those that were placed in the early eighties. There is no reason to believe the foundation pads will be usable, that you will have a power contract to place anything on them, etc.

5. "Exclusivity. Owner agree that [Wind Company] shall have the exclusive right to convert all of the wind resources of the Owner's Property." Unless the definition for "Owners Property" is carefully specified, signing an agreement including this clause gives the company the rights over all your property.

6. "[Wind Company's] Right to Terminate. [Wind Company] shall have the right to terminate this agreement as to all or any part of the Easement Properties, or as to any Turbine or other Wind Farm Improvement, at any time effective upon thirty (30) days' written notice to Owner.

Owner's Right to Terminate. Except as specifically allowed by this Section 12, this agreement and the Easements shall not by terminable by Owner under any circumsatances."

Under the contract [Wind Company] has the right to terminate upon 30 day notice and the payments upon such termination cease. The landowner is locked in for the term which, in this contract, is 20 years. Newer contracts are going for 99 year terms. That is, if they are like this one, they lock the landowner in for 99 years and the wind company for 30 days.

7. "Confidentiality. Owner shall not disclose to others (except Owner's family, legal counsel, respective Mortgagees and Assignees, and financial advisors who recognize and agree to preserve and maintain the confidentiality of such information) the terms of this agreement and ifnormation about [Wind Company's] methods, power production, or availability of Wind Farm Improvements unless the information is already in the public domain. Owner also agrees not to use such information for Owner's own benefit or permit its use by others for their benefit or to the detriment of [Wind Company]."

I will close with the confidentiality clause as it is truly a doozy and warrants more writing. For instance, in order to prove that your wife was told of the need to maintain confidentiality and agreed to it, I would suggest you use a Non-disclosure Agreement prior to telling your wife the terms of the agreement. Should your wife leak information to her friend and begin a chain, you might be liable and will need to prove that you told your wife of the need for confidentiality. So too with your lawyer, banker, etc. You may not list the value or otherwise inform prospective purchasers of your land of the value you are receiving for your wind under this clause. When I asked a representative of this company about that, he said that you could contact the company and let them know who it is you wish to tell and they would not unreasonably withhold permission to inform them of the value. This clause drips liability like few others.

You will not get this kind of information from your general farm organization....