Wind Energy: Landowner Options

Lisa Daniels,Windustry Executive Director

Great Lakes Regional Wind InstituteWebinar

October 11th, 2007

“Yep, they make some noise, but it’s the soothing sound of money being made.”

Louis Woodward, Texas Rancher,Landowner

Prepared by Virtus Energy Research for Public Citizen and the SEED Coaltion

Outline About Windustry Levels of involvement in wind Community Wind in the US Why are Minnesota and Iowa

leading in community wind development?

A few success stories

Landowner Options for Wind Development

Landowner Options Lease your land to a

wind project Local project External developer

Be a partner in a community wind project

Own a residential/farm size turbine for your own power

Wind Development Options:Risk vs. Reward

Lower Risk & Responsibility

Intermediate Risk &

Responsibility

Greater Risk &

Responsibility

Leasing Land to a Wind

Company or Utility

Cooperative, Investment Pool,

Partnership

Individual Ownership

Easements and Leases are typical components of most wind energy projects, large and small.

Windustry’s Package of Lease/Easement Resources

Lisa Daniels, Executive Director of Windustry Ed DeMeo, President, Renewable Energy Consulting

Services, Inc., California Van Jamison, POWAIR, Montana, consultant and small

wind project developer Joe Richardson, North Dakota landowner Steve Wegman, South Dakota Public Utilities

Commission Fred Zalcman, Executive Director, Pace Law School

Energy Project, New York Windustry staff and consultants

Wind Easement Work Group - team of wind industry and landowner experts:

Wind Energy Leases and Easements Most common way that landowners are participating

in wind energy development No cash outlay Low financial risk

Few standards: range from good to bad to ugly. Compensation varies widely based on:

turbine size wind resource price of energy knowledge level of landowner and many other factors.

Long term commitments – usually last 20 to 40 years. Best results when landowners make

informed decisions.

Sustainable Wind Energy Development

Windustry’s Lease/Easement Resources Goals:1) To help landowners make informed decisions about

their land.2) To promote land agreement practices that are

mutually beneficial to landowners and project developers.

Motivation: Wind development must be an asset for both the

owners of windy land and their local communities for the industry to thrive long term.

Wind energy is a significant economic opportunity for rural communities if windy landowners and communities are well informed partners in the development process.

Windustry’s Package of Lease/Easement Resources1) Easements and Lease Agreements – What

might appear in these contracts and what to watch out for. An updated version of Windustry’s original “Wind Energy Easements: Legal Issues.”

2) Compensation – Compilation of compensation packages from real wind projects.

3) Policy and Best Practices – Recommendations and Proposals to facilitate sustainable wind development.

4) Bibliography of additional resources.

Before you sign on the dotted line…

How much of my land will be tied up and for how long?

How much will I be paid and how will I receive payments?

Are the proposed payments adequate now and will they be adequate in the future?

How will a wind project impact my other land uses? Have I considered all of my other options and is this

the best one for me?More questions listed in the Outline.

Types of Compensation Packages Fixed payments

Preferably includes an escalator Advantage: stable income for landowners, low

risk Royalty or Percentage of Revenue

Need to have access to relevant information about power sales.

Advantage: Landowner has a vested interested in the success of the project.

Combination Fixed payment plus a percentage of revenue Fixed payment OR a percentage of revenue

(usually, whichever is greater) Equity partnership

Old: $2,000 per turbine year. Based on turbines in the 600-750 kW range. “Average” figure popularized in late 1990s.

New: bigger turbines (1,500-2,500 kW) usually mean bigger payments.

Price of energy is another key factor (especially in contracts that offer a % of revenue)

Other factors to consider: wind resource, transmission access, competition, value of alternative land uses, geographic region.

Compensation Packages How much can you expect?

Compensation Packages: Examples Project State Year Size Turbine Per turbine* Per MW*Lake Benton I

MN 1998 107 MW 750 kW $1,500 $2,000

Storm Lake

IA 1999 193 MW 750 kW $2,000 ($750 + 2 % rev)

$2,667

Vancycle Ridge

OR 1999 25 MW 660 kW $1,500- $2,000$1,200-$2,400

Top of Iowa

IA 2002 80 MW 900 kW $2,400 $2,667

Wood-ward

OK 2003 102 MW 1,500 kW $4,000 $2,667

High Winds

CA 2003 162 MW 1,800 kW $9,500 $5,185

Trimont MN 2005 100 MW 1,500 kW $3,500- $4,500$2,500-$3,000

Crescent Ridge

IL 2005 55 MW 1,650 kW $5,000 (minimum)

$3,030

*Several figures are based on estimates and averages. Payments to individual landowners may vary.

Recent Articles Wall St. Journal, March 13, 2007Texas Wind Powers - A Big Energy Gamble

“In this pancake-flat country…Royal Dutch Shell Group, BP PLC and a wind-development company owned by Goldman Sachs Group Inc. are racing to lease vast expanses of ranchland. In a bet on wind power's long-term viability, they're planning to erect what would be some of the biggest wind farms in the world, with thousands of wind turbines costing some $2 million apiece.”

The Amarillo Globe-News, March 25, 2007Companies outline details of wind power projects

“A blizzard of paper blew into Austin on Wednesday and Thursday as wind power companies filed details on their plans in the Panhandle…. From the eight companies that include details of land deals, at least 477,000 acres, or 745 square miles, are leased for the right to use them for wind farms or are the subject of negotiations.”

Always consult a qualified attorney before signing a contract.

Consider how a wind easement/lease will impact how you use your land (farming, ranching, hunting, recreation etc.). Contracts should be clear on this point.

Consider negotiating for non-monetary compensation, such as access to wind resource data.

Learn as much as you can about wind energy and the specific project and company in question.

Recommendations

For royalty based compensation packages, consider what it would take to exercise your audit rights.

Carefully weigh your alternatives, expectations and goals. You don’t have to sign the first contract you see.

Work together. Whether you’re negotiating with a wind developer or trying to market your land with neighbors.

Worth Repeating: Always consult a qualified attorney before signing a contract.

Recommendations(continued)

Additional Wind Energy Legal References

Farmers’ Guide to Wind Energy: Legal Issues in Farming the Wind Farmers Legal Action Group http://www.flaginc.org/topics/pubs/index.php

Harvesting the Wind: A Legal Guidebook for LandownersNYSERDA Wind Energy Tool Kit www.powernaturally.org

The Law of Wind: A Guide to Business and Legal IssuesStoel Rives LLPwww.stoel.com/resources/articles/renewableenergy/LawOfWind.pdf

Minnesota Model Wind Ordinance (2005)The Minnesota Project, Lyon County (MN), Southwest Regional Development Commission, Pipestone County (MN), Nicollet County (MN)http://www.mnproject.org/e-windresources-tech.html

Wind Energy Guide for County CommissionersMike Costanti, Peggy Beltrone, U.S. Department of Energy, National Renewable Energy Laboratory, Wind Powering America, National Association of Counties

http://www.eere.energy.gov/windandhydro/windpoweringamerica/pdfs/wpa/county_commissioners.pdf

Wind Project OwnershipLevels of Local Involvement

High Local Involvement Public Projects Community or Farmer

Owned Projects Examples: Minwind

Energy, Spirit Lake Schools, Municipal Utility or REC

Lower Levels of local Involvement

• Conventional Developer Owned Wind Projects

• Local involvement limited to taxes, land leases, and indirect economic benefits

Varying Degrees of local Involvement/Value-added

• Some local organizing, equity and investment

• May or may not be locally owned

What is Community Wind?

Working Definition: Locally owned, commercial-scale

wind projects that optimize local benefits.

- Locally owned means that members of the local community has a significant direct financial stake in the project other than through land lease payments, tax revenue, or other payments in lieu of taxes.

Local/Community Ownership Options

Municipalities & Municipal Utilities Palmdale, CA; Algona, IA; Moorhead, MN

Rural Electric Cooperatives Farmer/Local Investors

LLCs, Investors Pools, Cooperatives; Kas Brothers • Minwind Energy

Schools Spirit Lake, Iowa • Carleton College, Northfield, MN

Tribal Communities Example: Rosebud, SD

Spirit Lake, Iowa

Key Incentives in leading Community Wind States

Minnesota: Production payment for projects under 2 MW. Standard tariff and power purchase contract for wind

projects under 2 MW. Iowa:

Iowa Energy Bank- low interest loans. Net metering- unlimited for matched loads.

Successful incentives address financing issues, provide access to capital, and/or strengthen the market for community wind.

Recent Support for Community Wind in Minnesota and Iowa: 2005, 2006, & 2007

Minnesota: Community-Based Wind Energy Development (C-BED Tariff)

MN utilities required to establish a C-BED tariff based on the net present value of the energy.

Provides a framework for negotiating power purchase agreements between utilities and qualifying community projects.

Iowa: Personal Tax Credit for Small Renewable Energy Projects

For wind projects up to 2.5 MW owned by an Iowa resident, a farm operation or an electric cooperative.

1.5¢ per kilowatt-hour tax credit for 10 years. Available for 90 MW starting in July ‘06. Expanded and extended in 2006

Policy Resources Reaching Community Wind’s Potential

Windustryhttp://www.windustry.org/sites/windustry.org/files/FLAG_Report.pdf

Community Wind: A Review of Select State and Federal Policy IncentivesFarmers’ Legal Action Grouphttp://www.flaginc.org/topics/pubs/arts/CommWindAug06.pdf

The Farm Bill Environmental Law and Policy Center www.farmenergy.org

Community vs. Corporate Wind: Does it Matter Who Developes the Wind in Big Stone County, MN? University of Minnesota, Morris: Arne Kildegaard Ph.D. and Josephine Myers-Kuykindallhttp://cda.mrs.umn.edu/~kildegac/CV/Papers/IREE.pdf

The Debate over Fixed Price Incentives for Renewable Electricity in Europe and the United States: Fallout and Future DirectionsWilson Rickerson and Robert Grace http://www.boell.org/Pubs_read.cfm?read=161

Wind Energy – An Economic Opportunity for Rural Communities

Benefits of Conventional Wind Projects Wind easements and land owner payments

($3,000-$6,000 per year per MW) Local tax revenue

(Lincoln County, MN collected $471,822 from 156 MW in 2003)

New jobs and investment in rural communities.

Community Wind Energy –

A new economic opportunity

Benefits of Community Wind Projects Same benefits as conventional projects, PLUS: Creates bigger economic opportunity for

farmers, local investors, industry, and local businesses.

Keeps energy dollars local and electricity sales revenue local.

Builds more local support for wind energy by keeping more of the benefits local.

Additional Community Wind References

Community Wind Energy ToolboxWindustryhttp://www.windustry.org/CommunityWindToolbox

NYSERDA Wind Energy Tool KitNew York State Energy Research and Development Authorityhttp://www.powernaturally.org/Programs/Wind/toolkit.asp

Community Wind: An Oregon GuidebookEnergy Trust of Oregonhttp://www.energytrust.org/RR/wind/community/forms_request.html

A Comparative Analysis Business Structures Suitable for Farmer-Owned Wind Power Projects in the United StatesMark Bolinger and Ryan Wiser, Lawrence Berkeley National Laboratoryhttp://www-library.lbl.gov/docs/LBNL/567/03/PDF/LBNL-56703.pdf

In closing Community Involvement

Benefits reach across many sectors. Leadership

Policymakers, utilities and local communities can help lead the way by

• Supporting policy that establishes a market for wind • Creating this economic development opportunity

Building new industry in the rural economy Equipment, Contractors, Materials suppliers,

Bankers, Fabricators, Technical Training Programs, and potential for manufacturers

Keeps added value of wind projects local.

Contact Info:

toll free (800) 946-3640  Lisa’s phone (612) 870-3462    

e-mail info@windustry.org

www.windustry.org