It’s Blowing in the Wind
by Robert White
Robert White, a Cimarron County landowner has taken an interest in the potential of wind energy. he has agreed to write a serices of articles on what he has learned and will learn by attending seminars, and on a path to perhaps having a wind farm on his properties-Ed.
After attending the wind energy seminar in Guymon last January, I’d like to share more of the information presented by attorney Shannon L. Ferrell, Agricultural Law Specialist, and Assistant Professor/OSU Department of Agriculture Economics, who said:
1.A wind power lease involves a landowner giving permission to a wind power developer to put wind turbines on the landowner’s property.
2. There are dozens of factors to consider in a wind power lease besides just royalties.
3. Wind power leases are usually divided into two separate stages and agreements, which are the “option” contract and the “production” contract.
4. Wind power leases tend to be of two types: one in which the option stage of the contract is negotiated separately from the production contract. In the other type of contract the option to exercise the production terms are negotiated and acquired in the same contract, at the same time.
5. The option contract gives the developer the right to erect metering towers to measure wind speed without the landowner giving the developer the full right to erect wind turbines to produce energy. However, an option contract usually gives the developer the exclusive right to be the only party the landowner will sign a production contract with for the duration of the option period.
6. The production contract gives the developer the right to erect wind turbines and to set the royalties paid to the landowner for the power produced by the turbines. The production contract also grants other types of “easements” to the developer for: roads, electrical substations , underground power lines, making noise, causing shadows and overhang, and nonobstruction of turbines, etc.
7. When the option part of the contract is combined with the production terms, so that only one contract is offered, the landowner is signing a binding production contract.
8.In any wind production lease the landowner might ask:
a. Is the royalty negotiable?
b. Will I get as good a “deal” as the best deal the developer negotiates with other landowners in the area?
c. Who has the right to terminate the contract?
d. Who has the right to extend the contract?
e. What is the minimum amount of money the developer has to pay the landowner to retain the developer’s exclusive right to exercise any one of the types of easements in the production contract. That is, if your neighbor gets the turbine with royalties, and you only get a “nonobstruction” easement not to interfere with your neighbor’s wind, how much and how long will you be paid?
Mr. Ferrell advises landowners to always consult with their attorney before signing a wind energy development contract. Mr. Ferrell also advised landowners who have been approached by a wind energy developer to talk with their neighbors to compare facts.
Wind energy development is mostly positive and beneficial for a community but hard feelings can result if the landowner signs a lease they don’t understand, or other landowners don’t want turbines on their horizon.
Some other considerations
After attending the wind energy seminar in Stratford Texas last February I would like to share more wind energy information presented by Frank Horak, a wind energy consultant from Austin Texas, and attorney Rod Wetsel from Sweetwater Texas.
1. Just because you sign a wind power production lease you may not get a turbine on your land, even though the developer holds you to other easements and options in that contract.
2. Only if the production lease stipulates that the developer has to put a wind turbine on you land, in order for the developer to exercise other easements and options in the contract will you be guaranteed a turbine and royalties.
3. The nonobstruction easement in a wind power production lease can be used by the developer to form a buffer zone around a turbine, across one landowner with the turbine and onto another landowner with no turbine, if both landowners sign the developer’s production lease.
4. Other options and easements in the wind power production lease also fail to insure a turbine or pay a royalty. If you sign the production lease the developer can establish roads, bury cable, construct power substations, and overhang on your property.
5. Once the developer notifies the landowner and pays to exercise just one easement in the production contract, the developer enjoys the right to exercise all other options in the production contract, including prohibiting the landowner from signing another wind power lease with another developer.
6. By and large wind energy development is good for a community, generating significant tax revenue paid to the county by the developer and generating about $6,000 in royalties for the landowner per year per megawatt of turbine size.
At the Guymon wind energy seminar last January, a landowner in Texas County Oklahoma said he turned down a wind power lease offering a 4% royalty whereby the developer made a counteroffer of 8%, so negotiating the amount of royalty may indeed be considered by the developer. The attorneys at both wind energy seminars, in Guymon and Stratford, advised landowners who have been approached by a wind power developer to communicate openly with their neighbors who have also been contacted. Both attorneys advised that no one should sign wind power lease without consulting with an attorney.
Could YOU be a
wind power producer??
Theoretically, a group of landowners can operate their own wind farm on their own land. That business would need money to purchase and erect wind turbines and technical staff to operate the wind farm. Before you erect turbines you need to negotiate a long term agreement with a utility to purchase your power, or you need to plan to sell power on the spot market, which fluctuates hourly. Selling lots of electricity requires a high energy transmission lines from your wind farm connected to other transmission lines or connected to a load center (distant market). There are very progressive laws in America requiring the interstate operator of transmission line to allow independent power producers to input energy into those transmission lines, albeit, for a fair price. This law is found in Order No. 890 recently issued by the Federal Energy Regulatory Commission. Complying with this law requires advice from an expert and more than a working knowledge of high energy transmission technology, and obviously, someone else’s transmission line to connect to. Cimarron County will have high energy transmission lines in the near future, so if you plan to operate your own wind farm, you might think about negotiating your transmission interconnect agreement now because once all the capacity is used up on those transmission lines, you won’t be allowed to input your power because there won’t be any more room. There is one other option for operating a very small wind farm of 3 megawatts or smaller. You can connect your turbines to the local distribution grid and sell power to the local utility in accordance with the Public Utilities Regulatory Policy Act (PURPA). Don’t be discouraged, all you need to operate a wind farm is lots of money, an electrical transmission engineer, several lawyers, and maintenance staff; others have done it.
Robert White- (580)-544-3736
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