Northwest Renewable News

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Wind leases: 30 years with no parole November 26, 2009

Wind power, the new neighbor on the energy block, presents Montana landowners with the opportunity – or potential disaster – of a lifetime, says Bozeman-based energy attorney Hertha Lund.

Montanans in particular seem in better shape to weather the pitfalls of previous black-gold rushes in petroleum and coal, she notes. However, in the fledgling Big Sky Country wind business, it’s unlikely there will be any rush or quick-hit boom at all.
She explained that wind companies get paid per unit of energy minus so-called “wheeling charges” for transmitting the electricity from Montana to light up Las Vegas and Southern California.
“It all goes through NorthWestern Energy Corp., and there’s not enough transmission capacity” for any big boost in production, Lund says.
The wind lease is a new legality completely foreign to mineral rights, oil and gas leases, or other centuries-old court documents.
“What is a wind lease? It’s not like an oil and gas lease where you have split estates and one estate (mineral) has dominance over another … A wind lease is not a property right. A wind lease is a contract for a term lease. It’s a lease with an easement,” Lund explained.
It’s also a long lease – a minimum of 30 years – so it’s incumbent on a landowner to get all the required documents in a row or face disaster and rip-off over the long haul.
Which all sounds fairly scary, given what two other panelists said Nov. 17 at the Northern Plains Resource Council’s 38th annual meeting in Billings.
North Dakotan Danny Nelson said that in half a century of negotiating with petroleum companies, his family never has signed an ideal agreement. “You just do the best you can and learn and move on,” he said. “As far as surface rights, you have none.”
In the case of wind leases, any mistakes stay with you for at least 30 years and then you can move on. Each turbine cost about $2 million, and most wind projects have about 150 turbines, which may justify such a long-term commitment with all of its promises and pitfalls.
“The property value of the personal property of the (wind-farm) infrastructure dwarfs the value of the real property, the land,” Lund said.
As in other energy businesses, said Wyoming lawyer Dennis Kervin, before signing anything, “It’s important to talk to your neighbors. Be organized and share information.”
Kervin said that when the coal-bed methane craze hit northeastern Wyoming in 1998 and “the courthouses were packed with people looking at land titles,” it resembled an Old West free-for-all.
Coal-bed methane was a different animal with its impacts on water rights and legal and environmental issues, and few non-corporate lawyers, let alone ranchers, were trained, equipped or experienced to deal with it, he noted.
“It’s all small print with a lot of words you would never use in your business,” Kervin said, and what is omitted often can be the bane of the landowner later on. Power line and pipeline easements, for example, can become perpetual if not spelled out otherwise.
If there are not surface-use agreements that limit activities such as roads and buildings and require restoration or weed spraying, Kervin said the oil industry will run roughshod over the land.
“With coal-bed methane, the number of subcontractors, the traffic – it’s enormous. There’s a maze of traffic, roads, dirt moving, dust … You can’t even remember what it looked like five or six years ago,” he said.
Although projects such as the wind farm in the Judith Gap area seem aesthetically pleasing and politically correct today, they don’t start out that way, Kervin said.
“They build the turbines with cranes that are so big they have to be assembled on the spot. The turbines are as big as a 747. They have to build a substation, service roads, transmission lines …,” he said, adding that there’s potential for disturbing not just the surface area but streams and aquifers.
Whatever the energy resource, Kervin said, it’s important that landowners get on the ground and with a qualified lawyer before starting anything. Paperwork should include a survey access just for driving out to check the stakes and corners.
Lund said that wind companies, like their petroleum industry counterparts, “try to get more than they need” such as water or mineral rights or passing off the indemnity to the landowner and making them liable for any problems that may occur.
If ranchers are stuck with such indemnity, they might be held responsible if they allow hunters on the property and they end up shooting the turbines instead of the antelope. A more likely scenario would be a windmill worker accidentally touching off a blaze that spreads to neighboring land and leaves the landowner holding the wet gunny sack of blame – and the neighbor the deed to the ranch. That’s why contracts Lund writes routinely include a “no smoking on the property” clause.
Among other advice for would-be wind farmers:
•Ensuring rights to check the books, as payment are based on the amount of energy produced and sold.
•Checking with lawyers and bankers to ensure that the mortgage does not become subservient to the wind lease.
•Doing baseline surveys of the environment to have ongoing projects such as weed spraying and erosion mitigation in legal form.
•Including restoration provisions so that the wind companies don’t just leave behind rusting towers and drooping power lines.

Queen City News –


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