6 things farmers should know when considering a wind farm lease
Wind and solar farms can be a low stress way for a farmer to earn regular income which is available in good years and bad. They can be positive for the land owner and for the community, particularly in the construction phase. Caitlin Walkington, a solicitor from our Adelaide office who hails from Jamestown in the States mid-north, has seen first-hand the effect wind farms have had on small country towns.
Any person approached about having their land used for a renewable energy project has to weigh up the benefits of the project against the possible issues that might arise.
A landowner should also be aware that the process usually involves an option deed- meaning that the Operator will seek to secure the landowners whilst they undertake testing of the land and the approval process. Entering into an option deed may not mean a wind farm will be built.
Caitlin suggests that landowners should consider the following 6 issues when deciding whether to enter into a wind farm lease.
What interest will the Wind Farm Operators have in my land?
A Wind Farm Lease is the lease of the land on which Wind Farm would be situated and the land over which the monitoring and preliminary works and investigations would take place.
You still own the whole of the land however the Operator generally will require the exclusive use of some portions of the land (e.g. where a wind tower may sit and the cable or other access runs) and also access to the whole property, for non-exclusive use.
The operator will usually require easements to register these interests in the land in addition to a caveat for the option deed or the lease itself.
What is an easement?
An easement is an agreement that identifies the Operator’s interest in the land, which is recorded on the certificate of title.
Easements are usually registered over the land during the construction and then during the operational phase of the Wind Farm.
There are a number of easements that the Operator can require.
One refers to access, being an easement mainly for roads, which will lead from the public roads to the facilities the Operator constructs. The Operator would be required to construct and then look after those roads. Where there are no restrictions as to access, you would also be allowed to use them.
There also will be a “power line” easement for power lines and cables for the electricity generated. Whether lines are underground will depend on the Operator’s plans. It is likely they will be underground if the area is suitable and be overhead in rocky areas or where costs become an issue from their perspective.
Another common easement relates to the “wind flow” area and allows them to ensure there are no trees or structures over a certain height surrounding the wind farm.
What does an easement stop you doing?
There are various obligations with respect to the easements areas. This will likely include that certain areas at certain times will not be able to be used by you for farming activities.
Use of the land (ie the non-exclusive use areas) by you is also subject to you indemnifying the Operator against any damage you may cause to their equipment. The chance of causing damage to the cables etc might be remote but if it was caused, obviously the potential claim could be huge. It would be important to make sure that you speak with your insurance broker to ensure that your insurance policy would cover this risk and would be sufficient in value to cover any loss.
What other obligations might I have?
Once again, this differs depending on the lease.
Commonly you are not entitled to allow others to obtain rights over the land, such as for mining, other wind farms, or similar.
You might not also be entitled to plant trees or shrubs without consent, again on the basis of how they may affect the wind generation, within the wind easement area at least.
The lease may also limit how the land is transferred either by sale or inheritance. The lease would likely not stop you from transferring the land, but would require that any transfer of the land is subject to the Lease, ie. a new owner cannot ask the Operator to remove their equipment etc. The lease may also require that any new owner would have to enter into a deed of transfer of lease. This is relatively usual in commercial lease transactions.
It also means that your mortgagee, if you have one, would need to consent to the Lease or caveat so that your mortgagee is aware of the tenancy and in the event of foreclosure could not deny the Operator’s use of the land.
What obligations does the Operator have to look after my land?
It is common term of wind farm leases to require the Operator to comply with environmental laws.
They are required to maintain the land and make good any damage and fence off dangerous areas.
They will take “reasonable precautions” against damage to trees, crops, vegetation, etc. There would be some instances where there would be no option but to cause damage to trees, crops etc, for example if they were constructing a road and the proposed road surface had trees or other materials on it. It would be a practical issue to consider what other forms of damage could not reasonably be avoided by their operations.
What if the Operator goes into liquidation?
This is perhaps one of the major potential risks of entering into any wind farm agreement. If the company that you enter into the agreement with (or its successor if they sell the rights) goes into liquidation, then there may be insufficient funds to de-commission the plant, and therefore the items could be left in place, potentially in a state of disrepair.
If the equipment had value it would probably mean that it would be removed. There is a real risk however that useless equipment could be left on the property at the end of the Lease.
We note that each agreement is different and these are not the only matters to consider. It is therefore important that you only use this information as a guide and you seek professional advice before signing an agreement.
Please feel free to contact Caitlin Walkington or our any member of our commercial team on 08 8231 1110 to discuss any potential wind farm agreements. The operator will usually pay the costs of obtaining advice from us.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
As a firm we pride ourselves on our progressive, personal and professional approach to all areas of law