2015 Update

I am still here.  The information presented is still what I would propose for wind rights in the future. I know some legislators have looked and that a variation or two of the leasing concept has been proposed to no avail.  The concept of "pooling" wind (as happens with oil & gas) remains the most fair recognition of how upwind turbines depreciated downwind resource.  Unfortunately, using this type of approach for payments has not been supported by wind developers who find it easier to provide 100% of the compensation to the owner of the land upon which the turbine sits.  Until AWEA and developers take a more comprehensive approach to resource compensation - wind developers will continue to be plagued by dissension from those whose wind resource has been sullied or diminished without compensation.

Compensating for Wind Rights Within Windfarms

If we use the rectangles, as suggested in the previous post, as our first definition of area for which wind resource rights should be compensated, we also need to recognize that within a given windfarm there may be areas that fall outside the rectangles and that should be compensated. The simple rule should be: if there is any wind resource stranded within the perimeter boundary of a windfarm that could not reasonably be developed because of the existence of the surrounding windfarm, that stranded resource must be compensated for by the interfering windfarm. The perimeter can be defined by applying the 5rd x 10rd rectangles to the outer turbines and simply drawing the lines to the other outer turbines. All land within that is unlikely to be used for wind because of the larger windfarm should be compensated at the same acreage rate as all other land in the windfarm.

It is simple and fair.

Wind Pool Areas: Circle v Rectangle

Greg Brokaw, a horse guy from south central North Dakota, called to discuss circles and rectangles. A discussion was happening down in Spring Lake Township about who and how wind resource rights should be paid. One thought was that every acre within a distance equal to 5 rotor diameters from the tower should be equally compensated. This would therefore be a circle definition to compensated wind rights. Greg, an astute reader of this blog, thought a rectangle was best. He even suggested that rectangle be 5 rotor diameters across and 10 rotor diameters long with the long side pointed into the prevailing winds. I agree with Greg.

In determining the correct wind resource pool configuration from which wind resource compensation should be paid, it is important to recognize that typically there are two different prevailing wind directions, one in summer, the other in winter. Often, in the central U.S. these directions are near opposites. Windfarm developers recognize this when they space turbines 4 or 5 rotor diameters apart perpendicular (line running from southwest to northeast) to the prevailing winds and 8x or more apart downwind from the prevailing winds (northwest and south-southeast). Not all directions from a turbine are equal and they are not equally valued by the industry. A rectangle of approximately 5x rotor diameter wide and 10x rotor diameter in length, skewed so that the long side faces the dominant wind direction, better represents wind resource value than a circle. A circle that provides the same compensation equally in all directions of equal length from a tower unfairly discounts those who provide the most valuable resource in order to compensate those providing the least value.

In the above sketch, let us assume that each tower is providing $6,000 for resource use and that 25% of that amount or $1,500 is for real estate upon which the tower sits and 75% or $4,500 is for the wind resource. If one uses a 5x rotor diameter circle around the tower to define each wind resource pool eligible for compensation, then each of the 124.23 acres within the circle (using an 80m rotor diameter) is paid $36.22. Why should an acre four times rotor diameter laterally to the Southwest be paid the same as one to the Southeast when the wind hardly ever blows from the Northeast and when another turbine can be placed at the same lateral distance from the first? It makes no sense; however, some believe the circle is simple and therefore should be used. I contend that a rectangle is even more simple to calculate and certainly a better reflection of value.

I suggest a good wind resource pool print is the rectangle skewed toward the prevailing wind direction. It does recognize closer placement of turbines laterally to the prevailing winds and it doesn't dilute the pool shares needlessly. A rectangle would for an 80 meter rotor would contain 79.09 acres with each paying $56.90. A rectangle is more fair, pays better and is easier to plot.

Wind Rights - Attorneys & Legal Scholars Needed

Licensed attorneys specializing or wishing to specialize in wind rights work from a landowner's perspective or from an academic perspective are welcome to leave comments on this site. In using the comment area, let us know your experience or your interest including state of practice, or academic institution. While learning of those interested in vetting contract language in various states would be useful to our landowner readership, I have a particular interest in hearing from academicians and others who know of landowner wind related litigation in process or contemplated both of a general contract nature and most particularly aimed at protecting against uncompensated wind resource erosion, depreciation or elimination through siting/placement of neighboring turbines. Please provide citations that will allow our readers to access appropriate source materials. I know you are out there and that folk from around the globe are reading. Although, I suspect most of the readership is by landowners some of whom I know fear speaking out on these subjects and/or are contractually bound to silence, we would like to hear from attorneys who are free to speak on these matters.

Public policy makers need to realize that it is increasingly common (from what I have seen) to include contract clauses aimed at precluding landowners from speaking to any legislative or regulatory body except with the specific approval of the lessee. Your response may be that such a gagging is unconstitutional and I will respond by asking who will pay the legal bill in testing that assertion? Don't expect landowners to place themselves in a position of defending against multi-billion dollar corporations. And, we have learned that you can't expect broad-membership-based ag organizations to speak out as some of them have relationships with power companies to protect, some have ideological predispositions against regulations, and almost all have internal conflicts of interest among their membership (those who are receiving compensation versus those whose wind resource is diminished without compensation).

100 Year Leases

That's what was reported to me this last week. Ok, they were really 99 year leases. Ottertail Power offering 100 year leases in Sheridon County, North Dakota. Please send an anonymous copy to: Joe Richardson, Post Office Box 3112, Fargo, North Dakota 58108. I probably have the best collection of leases in North Dakota and always on the lookout for more. I am betting that this lease is one-sided as heck in that Ottertail, or the party offering, is given a 30 day out while the landowner is bound for generations. Hey, if it has a confidentiality clause in it, they would have an opportunity to sue several generations for disclosing the terms of the agreement.

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....

Resource Based Payment View

This shows how much each quarter section is paid using a resource model. In this model, using a 1.5 MW capacity turbine with 100 meter rotor diameter, the amount available for leasing is $5,000 annually (with escalators).

Twenty-five percent of the $5,000 goes to the owner of the land upon which the turbine tower and road sits (2 or fewer acres). The remaining 75% goes into the wind resource pool to be shared by all whose wind resource is likely to be impacted.

We have 305.7 acres above which the wind is disturbed or consumed by the turbine. Thus, each acre receives approximately $12.27. I did some rounding in the figures provided.

Landowner of the NE quarter of Section 1 has 19.6 acres used and is entitled, therefore, to 6.4% of the wind pool or about $240 per annum. NW quarter of Section 2 has 9.4 acres receiving $116 per annum; SE quarter of Section 1 has 82 acres of wind resource used and receives an annual payment of $1,005; SW quarter of Section 2 has the real estate for the wind turbine and collects that $1,250 annually along with his/her 16.5% share of the wind pool for another $619 or $1,869 annually; NE quarter of Section 3 has 16.6 acres taken for 5.4% of the wind pool paying $203 annually; NW quarter of Section 4 has 116 acres taken and receives 38% of the wind pool for $1,425 annually; and, last SW quarter of Section 4 has 11.7 acres receiving about 3.8% of the wind pool or $143 annually.

Everybody is fairly paid.