Pros and cons of wind turbines

Driving across Iowa you see more wind farms. What benefits and detriments do you see with wind turbines on your land? Is there a lot of difference in sale price of a farm because of the turbines? The benefit to the landowner is they have the additional income from a turbine, and I hear it’s $4,000 to $5,000 an acre. You could never rent those acres out for crops and get the kind of income you can from wind turbines.

Swanson: The key to their value to a farm is the contract easement language. They are not all the same. They may tend to favor the energy company and last for generations. While the benefits include immediate cash revenue, unless it is adjusted for inflation, the time value of the rent may be rather low at the end of the easement period. The construction period can be disruptive, as heavy equipment accesses the wind turbine sites and installation of underground cables cross existing tile lines. Another issue that hasn’t been given much thought is the removal status of the structure in the event of bankruptcy of the energy company.

Gassett: Turbines provide the landowner with an income stream greater than can be received from crop production on the amount of land used, with no additional capital or labor required by the landowner. The value of the land will increase relative to the value the new buyer will put on the remaining income stream of the lease. One disadvantage has been that contractors building the turbines have built access roads across cropland resulting in irregular fields.

More recent wind turbine leases provide for more input from the landowner in negotiating a development agreement with the contractor to make the access roads more user-friendly. Access roads have generally been designed to accommodate machinery crossing. If drainage tile is damaged as underground transmission lines are installed, the contractor is obligated to repair the tile. A final disadvantage is there have been cases where acreages have been harder to sell because of the aesthetics.

Herbold: We study wind energy issues regularly at the Center for Ag Law and Taxation and have a publication available to producers on our Web site at www.calt.iastate.edu/
windlegal.html
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While it is desirable to have an additional income stream one can count on from year to year, a landowner needs to thoroughly understand and take the opportunity to negotiate these wind leases and easements before signing. We recommend you use an attorney experienced with these agreements.

Every wind project is different and each farm has different wind potential, so it is hard to estimate the average amount of payment from these turbines. We have been seeing prices around $2,500 per megawatt of installed nameplate capacity, meaning if the developer installs a 2-MW turbine, you will receive $5,000 per year per turbine. Don’t be afraid to negotiate a better deal for yourself, as these are long-term agreements.

Expect additional payments for other facilities the developer installs, such as met towers, access roads or substations. You should also expect that these payments will rise with inflation.

Note: Edwards referred this question to Erin Herbold, staff attorney for ISU’s Center for Agricultural Law and Taxation.

This article published in the February, 2010 edition of WALLACES FARMER.

All rights reserved. Copyright Farm Progress Cos. 2010.