Lawyer Gives Tips for Getting Best Wind Deal

By Kevin Welch, Amarillo Globe-News, Texas

Apr. 22–There’s safety in numbers when doing wind deals.

More than 200 people attended a seminar in Pampa on Friday to hear suggestions on how to negotiate the best lease possible with wind energy companies.

Getting the best deal is very important.

“Once you hook up with someone, you’re married,” said Rod Wetsel, an Austin attorney who has worked with landowners in the Sweetwater area where wind development is surging. “You want to negotiate a lease where you won’t wake up in the morning and be mad at yourself.”

Organizing a group gives individuals more leverage with wind companies. It also lets people know what the local market price is.

“Everybody gets separate leases, not a pool lease,” Wetsel said. “But the compensation is the same.”

Mistakes can be expensive. While lease rates are highly variable and payments depend on the price of electricity and other factors — like how much the wind blows — Wetsel said he has heard of payments in the range of $8,000 to $14,000 per year for each 1.5 megawatt turbine.

The leases, up to 30 or 40 pages long, should start with an option payment to hold the wind rights. Those payments vary from $1 to $10 per acre for three to five years, and the shorter the better, Wetsel said. The options give companies time to conduct wind studies, which financing entities require to run at least 18 months, as well as environmental impact studies and “interconnection” studies to look at issues surrounding what would be required for a wind farm to plug into the power grid.

Compensation is a major part of the contracts. Provisions for surface damage during construction should be about $4,500 per turbine installed, Wetsel said. Roads and buried cables go for about $15 for every 5.5 yards, though overhead lines should bring more.

After the wind turbines are in operation, companies begin paying royalties to landowners.

Minimum annual royalty payments come in two parts, Wetsel said: A price per turbine — about $4,500 to $3,000, and a payment per acre, about $15.

Royalties based on production could produce more income, but the minimum royalty payments guarantee a certain level compensation. Production royalties are based on a percentage of the company’s gross revenue from the electricity produced, Wetsel said. That should be not less than 4 percent but could be as high as 6.5 percent.

“You want to negotiate a lease where you won’t wake up in the morning and be mad at yourself.”

Austin attorney Rod Wetsel Wetsel recommended landowners get a steady increase of the minimum royalty included in their contracts — about 0.5 percent every five to 10 years.

Frank Horak, who operates Astek Wind Energy, advising landowners and monitoring events in Austin at the Public Utilities Commission and elsewhere, updated the audience on regulatory activities.

“It’s not putting up turbines. The issue is how do you get the electricity to Dallas,” he said.

The PUC is considering the boundaries of Competitive Renewable Energy Zones — areas where the possibility of good wind power is high but where inadequate transmission options exist.

There are several proposed in the Panhandle. The agency is scheduled to make final decisions by July.

While the actual locations of proposed transmission lines are fluid right now, being located in a CREZ should help wind farms have access to a line.

The cost to get electric lines from a wind farm to a transmission line can run from $300,000 to $500,000 per mile.

“If you’re within three to five miles, it’s not an issue … but if you get beyond that it becomes an issue,” Horak said.

CONTRACT MUSTS:

–Form a group of landowners to negotiate.

–Shortest option period possible.

–Surface damage compensation.

–Legal fees reimbursed.

–Minimum annual royalty payments.

–Escalating minimum royalty payments.

–Lost hunting revenue compensation.

–Local dispute resolution.

–A match of best deals in area.

–Payments in spite of “acts of God.”

–Protection from injury claims.

Source: Rod Wetsel

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