We often talk with clients regarding wind leases for their farms. Wind leases can be a way to diversify the income from the farmland. However, these are long term agreements with lasting impacts on the farm. It is important to think through the decision and review the lease agreement carefully before moving forward.
Wind leases have multiple parts. First the option agreement provides the wind developer with a period of time to study the land to determine if it is a good fit for their project. The option agreement will state how long the option period will last and the amount paid to the landowner. The second part is the lease agreement. This sets forth the terms for the use of the land for the wind project.
When reviewing the wind lease, the following are just some of the items we recommend considering:
Farm changes. Review how the wind project will change the profitability and efficiency of the farm. It will be helpful to determine the areas where wind turbines will be placed and how the access roads will cross your property.
Compensation. Make sure the lease agreement discusses how your property can be used for agricultural purposes and determine how you will be compensated for land that cannot be used. Be sure to negotiate the terms for any agricultural losses you experience.
Damages. Determine how damages to the farm will be repaired or replaced during the option period and during construction and maintenance. In particular, address the issues of tiling, fencing and ditches.
Other concerns. Think of all aspects of the farm operation. How will you spray crops? How will the access roads be kept open in the winter? Will there be restrictions on planting or harvest because of the construction? If tiling or ditches need to be repaired or replaced how will this involve the wind farm? Will there be restrictions on build new farm buildings and grain bins?
Restoration. How will the land be restored after the project is over and what guarantees are there for funding this restoration?
It important to think long term because these lease agreements can run as long as 50 years. In your farm succession plan, it will be important to determine how the income from the wind farm will be distributed to your beneficiaries. Will the income stay with the farm or flow to the landowners? This is important especially if there are farming and non-farming beneficiaries who will end up owning the land.
Balzarini is an attorney at law with Miller Legal Strategic Planning Centers, P.A. Email your questions and comments to Miller Legal at firstname.lastname@example.org.