Wind Energy Development Considerations for Landowners

Posted: Thursday, March 09, 2023

Author: Michael Hamblin, BROKER | LICENSED IN WA

WINDS OF CHANGE

As wind turbines begin to line the horizon among America’s heartland, many rural landowners are being approached with an opportunity to lease their land for wind energy development. Anyone that has an operational wind farm on their property knows the income can mean stability and passive income for decades. However, some landowners have experienced the opposite, leaving them without turbines on a 50-year lease or a wind project riddled with problems. Building a team of professionals to navigate the nuances of renewable energy development and choosing the right developer to work with can be the difference between a problem project and passive income for generations to come.

It is crucial to understand the differences between leasing directly to a developer of wind energy and leasing to a wind lease wholesaler. A developer is invested in seeing a project become operational, whereas a wind lease wholesaler is gaining control of the land to later assign that lease to a developer for a profit. However, wind lease wholesalers distinct from land brokers, who can specialize in wind, solar, and battery storage leases. Seeking representation from a competent land brokerage that is experienced in negotiating with renewable energy developers can save time, money, and energy. Building a team consisting of a land broker specializing in renewables and an attorney experienced in wind leases, estate planning, and tax law, can make a substantial difference.

East side of property windmills snowy mountains background fox hill ranch montana

A competent land broker will know wind lease rates for the local market while anticipating challenges during the due diligence and construction phases. Your broker should also be experienced in performing crop compensation estimates and broker price opinions on agricultural, commercial, and transitional land. It is common that portions of land be taken out of production during the construction phases, so it is important to have a professional provide independent price opinions on land and estimate lost revenues. Having price opinions prepared before negotiations is important in case the lease escalates into an outright purchase and sale agreement. Good land brokers will also have connections with multiple renewable energy companies and can bring competing offers to the table, so the landowners can choose which developer to work with. If the landowner does not have an attorney in mind, the land broker should have a network of reputable attorneys experienced in wind lease agreements for the landowner to work with.

A reputable attorney will be able to negotiate with the developers' legal team to ensure language that protects the landowner from liability by spelling out insurance and indemnification of the landowner throughout all phases of the project. The agreement will also state what resources the developer will need to utilize from the land, such as water, gravel deposits, or use of caliche during construction. It is important that the wind lease be limited to a surface right easement with the possibility of leasing sub-surface rights for such as mineral, oil, or gas. Additionally, having language that protects the landowners’ right to enjoy their property during and after construction by hunting, fishing, or other recreational activities will be another important aspect of the lease agreement. It is imperative that the contract includes land reclamation language to make sure the land is returned to its original state after the project reaches maturity. Finally, tax and estate planning will be crucial to structuring a trust or business entity, maximizing profits while protecting assets.

After choosing a land broker and attorney, the next steps are to begin interviewing renewable energy developers. It is imperative that the developer chosen has experience developing wind projects in the local area and has the resources and capital to see a project through to its operational phase. The due diligence, financing, and construction processes can take years to complete and are fraught with challenges that are state and region-specific. Reputable companies will understand local county zoning ordinances and choose areas where permitting a project has the best chance for success. Developers should also have relationships with regional county commissioners and be involved with contributing to the growth of a community. They should also have good relationships with the local Public Utilities Department (PUD), as this will be foundational for a future power purchase agreement (PPA). Building these relationships will help foster acceptance of the developer in that region and will lead to inevitable discussions of renewable energy development in that community.

Long before a landowner is approached with a lease agreement, renewable energy companies should have negotiated a Power Purchase Agreement (PPA) with local electricity providers. This agreement lines out a price per megawatt hour (MWh) of electricity sold to the grid and establishes a minimum number of megawatts (MW) a local provider plans on purchasing. While turbines may be capable of producing incredible amounts of energy, if there is not a purchase agreement in place with adequate transmission and substation capacity, the power generated will go to waste. The power purchase agreement directly impacts how many turbines should be built, what size they should be, and how many megawatts the existing transmission system has space for. A transmission line that is several miles long with substations that allow interconnection to the grid could cost more than the construction of all the wind turbines combined. Ask how far away the generation interconnect (gen-tie) will be located, as this is where the energy from the proposed wind project will interconnect with the county transmission system for distribution.

Preparation is key to successful wind lease negotiations, and increasing knowledge of renewable energy can poise a landowner for success. Having independent professionals who are experienced in renewable energy development is pivotal in developing sustainable agreements. Choosing the right developer can make or break renewable energy projects. Understanding the power of a professionally written lease can open doors for multiple income streams through the coexisting of crop-share, grazing, recreational, renewable, and mineral leases. Land is the foundation of this country, and empowering landowners means keeping the farm in the family while building a legacy for generations to come.

VIEW FAY RANCHES' WASHINGTON PROPERTIES FOR SALE

Featured Properties

Hansen Ridge Ranch

Anatone, Washington

Hansen Ridge Ranch is a testament to a classic Western way of life in the heart of the breathtaking Grande Ronde River Corridor. Sprawling across nearly 1,000± acres of prime...

$1,750,000

997± Acres

View Property

Coastal Mesa Retreat

Copalis Beach, Washington

Coastal Mesa Retreat is a 138± acre getaway nestled along the remote and rugged coastline of Washington State that beckons with its pristine beauty and serene ambiance. As a sought-after...

$1,500,000

138± Acres

View Property

Shoalwater Bay Retreat

Raymond, Washington

Shoalwater Bay Retreat, located just outside of Raymond Washington, is a one-of-a-kind opportunity that blends luxury living and the tranquility of a small coastal town with world-class saltwater and freshwater...

$1,299,000

34± Acres

View Property

Meet the Author

Michael Hamblin

FAY RANCHES
BROKER | LICENSED IN WA

425-507-8091

mhamblin@fayranches.com

View Bio

Click here to receive a Complimentary Copy

Click Here

Have a Topic You’d Like to See
Covered on Land Investor?

Submit Here

Adobe Stock historic western building ghost town montana 2

Westward Expansion in the United States and the Changing of the Western Frontier (Part 1 of 3)

Posted: Thursday, April 04, 2024

Author: Cody Richardson

The story of the Lewis and Clark expedition is a well-known telling of the discovery and exploration of the American Western frontier. Renowned historian and author Stephen Ambrose depicts the...

Sunset southeast landscape field trees southern estonia no powerlines adobe stock 2023

Seasons of the Southeast - Spring

Posted: Thursday, April 13, 2023

Author: Clayton C. Jeffords

Winter in the Southeast always leaves us wanting more, one more duck hunt in that flooded corn field or timber bottom, one more chase in the field where geese feed...

We Bought a Ranch! Now What?

Posted: Thursday, March 02, 2023

Author: Katie Salsbury

How to Draft a Ranch Management Plan in Five Steps You have spent years earning, planning, and shopping for a ranch, now that you own it, what should you do...

Listen to Our Podcast

Listen Now

Wind Energy Development Considerations for Landowners

WINDS OF CHANGE