While abundant, wind resource locales on land in the United States are finite. The location of these resources is relatively easy to determine. With the push to develop green energy alternatives such as wind, it is perhaps not a surprise that a rush by developers over recent years has attempted to shore up these resources. If anything it seems there will be even more pressure to develop as the Obama administration comes into office with its green agenda.
The “rush” undeniably has produced some controversial if not questionable practices. Where the line is between unscrupulous development activity and unreasonable landowner expectations will need to be drawn by someone else. What developers and landowners alike can do, however, is get educated about the other side’s position.
In this context, a new academic study coming out of Iowa cites concerns that landowners may have regarding the leases and agreements necessary to develop a large scale wind project on rural landholdings.
The study concludes that:
From a landowner’s perspective, many wind energy leases and/or easements are inadequate, unfair and offer limited economic benefits when compared to the revenues generated (and tax subsidies received) by large-scale wind energy developers. The most common shortcomings of such agreements include: (1) contractual terms extending too long into the future; (2) contractual language that binds landowners to unilateral amendments; (3) inadequate compensation clauses (and compensation clauses that are difficult to understand); (4) provisions that are the result of unequal bargaining power. While some landowners are reporting better experiences in recent months – better contract terms and compensation levels – that may be the result of greater competition among wind energy developers, greater education on the part of landowners and lawyers, and increased oversight by state regulators (the vast majority of wind energy developers are not subject to the regulatory rules that most utilities are subject to).
Clearly, wind farming has the potential to provide significant economic benefits for rural landowners. However, substantial peril exists that landowners who don’t carefully evaluate proposed agreements with developers can be taken advantage of significantly. Landowners should have any proposed agreement evaluated by legal counsel and attempt to negotiate any unfavorable terms. Failure to do so could result in many years of dissatisfaction for landowners.
The study also discusses various state and federal wind siting court cases. “Wind Energy Production: Legal Issues and Related Liability Concerns for Landowners in Iowa and Across the Nation“, by Roger McEowen, was released by the Iowa State University Center for Agricultural Law and Taxation in October 2008.
As an addendum, it is worth noting that the New York Times reported last week that some rural landowners in Wyoming are forming groups to increase bargaining power while negotiating agreements with wind developers. It will be interesting to see the extent to which such a model may replicate elsewhere, including New York state.
More information on the landowner – wind developer relationship and leasing may be found here.