Although he didnt know it at the time, Larry Widdels
future in the world of wind energy development was secured years
ago when his family bought some farmland near Minot, North Dakota.
Widdel remembers hauling piles of rocks off the acreage, clearing
it for the familys cattle.
It was the poorest land we owned, Widdel laughed. My
uncle said, Boy, this is awful. We dont own mineral rights.
We dont own anything but the air above it. Who would have
guessed that the air above our land might be worth money someday?
No one could have predicted that Widdels rocky land, which has an
outstanding wind resource and small hills that are perfect for siting
wind turbines, would someday feature two 1.5-megawatt wind turbines. Thanks
to Basin Electric Power Cooperative, Widell and his family have
joined the ranks of rural landowners who are leasing their land and cultivating
the cash crop of the future: electricity from the wind. And Widell couldnt
be happier about it.
Were very lucky that we were chosen, he said.
At a time when economic predictions for the family farm are anything but rosy, wind energy is a bright spot on the horizon. Rural landowners like Widdel who lease their land to wind developers typically receive about 2 percent 4 percent of the gross annual turbine revenue or $2,000 to $4,000 for each turbine which can help compensate for a downturn in commodity prices. Annual farm income can be increased by $70 an acre.
But as with any business venture, rural landowners interested in leasing their land should do their homework.
Wind developers must take several preliminary steps before they can install turbines. First, they need to measure the wind resource on the site theyve selected and assess its proximity to transmission lines. Next, they need to line up capital and commitment from energy buyers. Finally, they must complete any required environmental analyses and zoning and permitting processes.
Some wind developers will offer a landowner a good faith
contract, which allows the developer to control the site while these
preliminary steps are taken. Under this contract, the landowner may
not enter into contracts with other wind developers. At the end of
the time period outlined in the contract (usually 1 to 5 years),
the developer must decide whether to install turbines or give up
interest in the land.
If all goes well in the preliminary steps, the wind developer
and landowner negotiate a lease. The arrangement is similar to
a lease used to reserve mineral rights. The landowner assumes
no financial responsibility for the project. The wind developer
may offer the landowner a single up-front payment, a fixed annual
payment, a share of the revenues from a wind project, or a
combination of these payment methods. The rate of return for
the landowner is proportional to the level of risk assumed.
The first option, a single up-front payment, may sound attractive.
Even if the wind turbines fail to produce as expected, the landowner
receives the guaranteed payment. But if the turbines produce more
electricity than expected, the landowner wont receive extra
compensation. Also, the value of wind is expected to increase over
time, in which case this payment arrangement would be a disadvantage.
Landowners should also know that any future sale of the property
is likely to be complicated by this arrangement. Up-front payments
are structured so that the developer receives a perpetual lease to
the wind resource rights on the property. The landowner should
consult with a tax adviser about the possible consequences of
receiving one large payment.
The second option, a fixed annual payment, is less risky for the
landowner, and it may have less impact on the landowners
income taxes. But it may also result in a smaller share of the
revenue. Still, some landowners prefer the relative security of
an annual payment.
Basing the lease on a share of revenues is the third option.
The compensation will vary according to the output of the turbines.
This is probably the best option for a landowner who wants to ensure
future compensation for increases in the value of wind power.
A leasing arrangement may include a combination of these
payment options. For example, a landowner may request a fixed
payment per acre along with a share of the revenue from each
Easements are another factor to consider in a leasing agreement with a wind developer. Although a wind turbine has a small footprint, which allows the landowner to continue normal farming and ranching operations on the land surrounding the turbine, developers also need access to the turbines and transmission lines for maintenance and repair.When developers from Cielo Wind Power approached Louis Woodward, a rancher in Girvin, Texas, he was concerned about the impacts such access would have on vegetation and the safety of his livestock.
Cielo Wind Power approached Louis Woodward, a rancher in Girvin, Texas about leasing his land to build wind turbines.
Nobody likes a bunch of vehicles running over their property, Woodward said. We dont get much rain out here, and needless to say, without rain, we dont get much vegetation.
Woodward finally signed a lease agreement after the developers agreed to install underground transmission lines and follow his recommendations when reseeding grass. Cielo also agreed to pay for any injuries to his livestock.
Today, Woodward has 242 turbines on his property.
should discuss all easement issues with their attorneys and the developers
prior to signing a lease agreement.
More Factors to Consider
While leases, taxes and easements are major concerns, there are other factors
to consider as well:
Heavy industrial equipment is used to erect wind turbines. New roads
may be needed, transmission equipment may have to be installed, and
equipment must be maintained. This can result in local jobs that benefit
the local economy. In general, local communities have responded favorably
to wind development projects.
should review their insurance policies before signing any contract.
If a policys coverage would be affected by wind development on
the land, a landowner can negotiate with the developer and add provisions
to the contract to compensate.
Landowners should discuss taxes with the developer and with an attorney.
Determine who will pay the property taxes, whether the developer will
pay for increases in property tax caused by improvements (usually this
is the case), and who will pay taxes on the sale of electricity. Discuss
whether one party will pay taxes owed by the other party if non-payment
would result in a lien or foreclosure on the property.
Wind turbines may be sited on Conservation Reserve Program and grassland
easements. Some restrictions do apply.
should not feel pressured by developers to enter into a leasing arrangement.
Developers should be willing to answer questions, and landowners should
investigate a developers history. Remember the old adage, If
it sounds too good to be true, it probably is.
final word of advice: Landowners who install wind turbines on their land
should expect a lot of attention. When Widdel goes to town, his neighbors
The first two or three months, the only thing people wanted to talk
to me about was wind. They didnt even ask me how I was, he said.
They just wanted to know about my wind power.
U.S. Department of Energy contributed to this article.
On the Web
For more information on wind energy and its benefits
to a rural community, including information on wind
energy provisions in the 2002 Farm Bill, please visit
the Wind Powering America Web site at Windpowering America.
Learn More about Wind Development on Your Land
These organizations and resources are recommended if you need additional
information on wind power development issues:
This organization partners with the Institute for Agriculture and Trade
Policy to promote wind education and outreach. The organizations
web site at www.windustry.org features a section called Wind Farmers
Network of America. You can also find out more about easements at
If you dont have Internet access, write to Windustry, 2105 First
Avenue South, Minneapolis, MN 55404; or call 800-946-3640.
American Wind Energy Association
The American Wind Energy Association offers a fact sheet entitled Wind
Energy for Your Farm or Rural Land. It is available online at
Factsheets Windy Landowners.
You can also access a list of developers at
AWEA Directory of Developers.
Write to The American Wind Energy Association at 122 C Street NW, Suite
380, Washington, DC 20001; or call 202-383-2500.
Corn Growers Foundation
Learn more about the Foundations Wealth from the Wind program
Write to the foundation at P.O. Box 18157, Washington, DC 20036; or