Rutherford & Bidwell Law Office
Iowa Lawyers

Early on it seemed that a proposed Wind Energy contract was simply a way of memorializing a dominant (developer) subordinate (landowner) relationship. The proposed contracts are drafted by the developer, landowners are slowing becoming more savy about what to consider and Rutherford & Bidwell Law Firm has reviewed many and can review your proposed agreement.

Below are some considerations that should thoroughly examined before you consider signing a wind energy contract. The below is a combination of information I have collected from various sources including and my own review of these agreements. These considerations are by no means an exhaustive list and should not be solely relied upon to analyze any specific proposed agreement as all contracts are different and all the concerns of all landowners is not uniform.

Wind Energy Contract Considerations

• Duration of the agreement, renewal periods (e.g., 40 - 50 years)
  • Some agreements provide for optional renewal periods for the developer at the expiration of the original contract - hence some agreements can exceed 50 years - the landowner should be required to sign for a renewal
• Phases of development, length and termination
  • The purpose of the developmental period is to allow adequate time for the developer to acquire land and conduct relevant feasibility studies
  • Developers will put up MET (Meteorological)Towers during this period to measure the elements of wind
  • Typically the developmental period is four (4) years, some contracts have up to a ten (10) year developmental period - avoid an excessive developmental period as it pays the landowner less and the project needs to be moving as many of the tax advantages for the developer may dry-up(expire) which would deny the landowner the benefit of the bargain
  • If project never occurs, the contract should automatically expire
• Assignment by developer
  • The contracts are drafted with an assignment in mind, so it is safe to say you should presume the contract will eventually be assigned. Accordingly, a landowner should plan to be eventually dealing with parties/company that is currently unknown
  • Most developers are Limited Liability Companies
• Transfers by landowner during lifetime, subject to agreement terms
  • The contract "runs with the land"
• Scope of agreement, amount of property covered
  • Contract should allow for landowner to choose where the turbines would be located on the property and contract should also allow landowner to only provide a strict easement (as necessary) with a release of easement for any land not necessary - idea is do not sell easement to entire 160 acre farm when an easement over 5 acres is all the developer needs
• Compensation - types, amounts , timing:
  • Per turbine, fixed
    • Paid per megawatt per year, this amount should be at least $4,000-$5,000 per megawatt per year
    • Currently turbines going up are 1.5- 4.0 megawatt turbines, thus at $4,000 a 1.5 megawatt turbine would yield $6,000 for the landowner annually
  • Acre payment
    • Landowner will receive a payment per acre during the developmental period, typically this is $5-$7.00 per acre, these payments are for your lost opportunity costs as the landowner no longer has rights (to sell) the wind rights.
    • If your subject property has a MET Tower - generally $1-$2 per foot
  • Percent of gross revenue (royalty payments)
    • If offered by the developer at all, these are generally 3-5% of gross energy sales
    • Some contracts will offer either/or - receive payment per megawatt per turbine OR percent of gross revenue - but not both
  • Other Payments
    • Distribution Lines - if subject property is in the necessary location - distribution lines may be buried - typically payments of $1.00-$2.00 per foot
    • Temporary Facility Payments - during construction developer may need storage yards, locations to mix concrete, and lay down areas - payments can vary - generally $2,000 per acre per year
    • Home Base - developer will need operations, maintenance, and/or administrative structures in the vicinity of the project
    • Attorney Fees - Landowners should be paid at least $750.00 to be put towards attorney fees associated with document review and negotiations
• Escalators, fixed amount e.g. 2% or tied to Consumer Price Index
  • All payments should be adjusted for inflation, an annual adjustment for inflation should be a minimum of 2-4%
• Green tags and environmental attributes - typically claimed by developer
  • A "Green tag" is the term used to explain the relationship that has developed due to federal regulations that require utility companies to use a specified amount of wind generated energy, as a result a premium may be paid by a third party purchasing the energy produced from your wind project
• Property damages, tile damage, crop loss, compaction
  • Distribution lines should be trenched in - not plowed into the ground, plowed in lines will not allow the landowner to observe any possible destruction of underground tile, any harm to underground tile must be the liability of the developer and replaced at the sole cost of the developer
  • Use the June or July cash price for corn and soybeans in a crop loss computation
  • If trees may need to be removed - get compensated - may be helpful to include
• Restrictions on use of land - hunting, farming
  • Landowner may not impair the wind - typically the landowner may still hunt, farm, fish, etc.
  • If Landowner wants to construct a building, expect it to be subject to certain height and width restrictions, and set back requirements - thus avoid competition for wind
  • Typically landowner may not use the easement(s) for third party benefit (e.g., cell phone towers, cable, etc).
• Removal at end of agreement, abandonment
  • In the industry this is referred to as "decommissioning" - provisions must exist in the contract to protect the landowner from have a non-functioning turbine on the property at the end of the contract
  • Developer should be required to post a security bond (per turbine) to cover the cost of the decommissioning process
  • Landowners should also note that the concrete pads are not often removed at the conclusion of the contract but are merely removed 4-5 feet below the surface and then covered up with soil
• Consultation with landowners on placement of turbines, lines, roads
  • Landowner should have final say on where the turbine(s) will be located - a "first right of refusal"
  • Landowner should maintain the option of walking away from the contract if an agreement can not be reached
• Indemnification and hold harmless clauses, who protects who
  • Developer should be 100% responsible for all costs associated with wind operations, both pre and post completion of the project
• Setback requirements, separation distances and buffers, overhang easements
  • No building or structure can be within so many hundreds of feet from a turbine, generally a distance of 800 feet
  • If the turbine "hangs" over the property of another party it may be necessary for the developer to obtain an overhang easement
• Noise standards and methods to limit, potential nuisance claims
  • Any and all claims of nuisance from a third party must be sole liability of developer
• Property Tax Liability
  • All tax increases due to improvements associated with the project as well as all sales and use taxes should be the sole liability of the developer
• Liability for insurances coverage, who obtains
  • Developer should be adequately capitalized but are unlikely to pull down pants and show you what they got, however, what you can do is verify and require them to have adequate umbrella insurance - this is generally coverage of $2,000,000.00 - $4,000,000.00
  • Require proof (after signing) that landowner is listed as an insured party and demand a copy for your records
• Subordination clauses and compliance with laws and regulations
  • Developer must conduct business in a lawful manner
• Termination, varying rights of parties
  • Typically a provision exists that gives give the breaching party the opportunity to cure the breach before a party can terminate the contract
• Assignment of payments by landowner
  • Landowner needs to be able to assign the payments to a third party
• Mortgages, encumbrances on property
  • A lender may not authorize the construction of a turbine, the installation of a turbine could impact the marketability (value) of your farm in a negative fashion
• Recording of Memoranda of Lease not actual agreement
  • The contract itself is not recorded - only a memorandum that memorializes the terms so the existence of a contract will appear in an abstract search and financial terms are not filed of record
• Farm Service Agency (USDA) Implications
  • Before signing a contract, landowners need to consult the local FSA office to be sure or at least aware of what payments may be lost or financial penalties may be triggered
• Confidentiality clauses
  • Some contracts require full confidentiality
• Formation of a Land Association
  • It may be beneficial for landowners in an area to join a land association as the same can strengthen bargaining power, this proactive approach may reduce headaches down the road

Rutherford & Bidwell Law Office
106 S 1st Avenue # A
Marshalltown, IA 50158-5028

Phone: 641-753-3648

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