LEGALLY speaking

Opinion
Feb 5, 2010

Wind turbine developments on farms and ranches

The American wind power industry grew substantially in 2009 and at this point, almost 2 percent of the country’s electricity is produced from wind turbines. Many of these turbines are on farm and ranch properties all over the country. I have received many inquiries from people who have been approached by wind turbine developers.

Much of the growth is attributable to state laws that require a portion of local power to come from renewable sources. The most wind-intensive regions are in the Great Plains and Texas, and in large population centers on the coasts.

Wind turbines can be a significant source of revenue for the landowner.

There is also a 30 percent federal tax credit available when installing a wind turbine. This is a tax credit, not a deduction, so it directly reduces the landowner’s federal tax payment.

A wind turbine, which is installed on top of a tall tower, collects energy from the wind and converts it to electricity that people in the community can use, often in combination with a local utility system.

Wind turbine leases are usually the way to go. You would lease a portion of your land to a wind project developer, who would install and operate turbines, and sell the electricity to a utility company.

Your role would be to negotiate the contract with the developer to lease a portion of your land. These contracts are long-term and provide a fixed compensation rate. The documents are complex, so it’s important to review them carefully and make sure you understand the terms. You should always seek out experienced legal help in negotiating and evaluating these contracts.

There are usually at least two contracts, one granting a lease for wind development rights, and a second for constructing the wind towers and related development such as access roads. There is usually an option to renew the contract for a specific number of years. You should have the option to renegotiate the compensation terms at the time of renewal as changes in the marketplace are likely to occur. It is important to clarify how soon the tower and other structures will be removed after the contract expires, and who is responsible for the cost.

The terms of the contract are “standard,” but you should be able to negotiate better terms than initially offered. The most important issues to consider are: How long your land will be tied up, and how much land will be used, how much you will be paid and when you will receive payments, and how liability is determined in the event of damage to property, livestock, crops or personal injuries. There should be provisions for maintenance of access roads and snow removal. There should be terms related to fences, gates and cattle guards (if the towers are on grazing land).

Very little land is needed for the turbines, just enough for the tower and access roads for maintenance and repair, about one-half acre per turbine. Multiple turbines need to be spaced about five to 10 rotor diameters apart to ensure each one has good access to the wind.

An alternative is simply to have your own turbine project, and operate it on your own. But the advantage of a lease is that you do not have to be involved in paying for, constructing or operating the turbines, or in selling the electricity.

Wind turbines seem to be a growing field of energy, and can be a source of revenue for farmers and ranchers, as well as tax benefits.

Also, improvements to one’s farm or ranch increase the fair market value of the property.

Of course, the important factor to consider is whether your property has adequate wind resources. If you have already been contacted by a wind turbine developer, that is because your region is known for its abundant supply of wind. Otherwise, you can contact one of the many developers around the country and they can tell you what the situation is based on local weather data and wind maps from your state.

John Alan Cohan, Attorney at Law [John Alan Cohan is an attorney who has served the farming, ranching and horse industries since 1981. He can be reached at 310/278-0203, or by e-mail at JohnAlanCohan@aol.com. His Web site is at JohnAlan Cohan.com.]

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