Winds of Change

August 15, 2008 | Scott G. Buchanan*

Wind blows across broad stretches of northern Iowa at an average speed of 15.7 to 17.9 mph. year round, scouring the soil, swirling the leaves and chapping our lips. Those winds also light our homes, cook our food and power our computers. They make us more secure, enrich the community and help “save the family farm,” whatever’s left of it. Surreal white towers hold gracefully pitched props to the prevailing winds and power flows through the kinetic sculpture to a thirsty grid. What could be bad?

Wind farms are growing faster than the public’s awareness of their hazards or government’s acknowledgment of the need for forethought in fostering this development. Giant energy companies from around the country are campaigning furiously across the fields of northern Iowa contracting land rights--some for as long as ninety years--to build thousands of new wind power generators.

Some turbines may reach 400 feet into the air.  Companies may erect as many as twelve per square mile. Future total density is impossible to project but we could be looking at turbines on every horizon in our region. Is four thousand too many, eight thousand not enough? No one knows because we haven’t talked about it.

And it appears that by the time we do, it will be too late; landowners will have already granted these companies permission to erect thousands of turbines along the windy ridges and moraines of our state. And why shouldn’t they. It is their land. They are good people, our neighbors and families, seizing an economic opportunity. Some live on the land where the turbines will be whirling. Many do not.

Wind energy companies buy the exclusive right to erect turbines on an owner’s land using an easement or lease. The landowner is paid a small sum of money during a “development phase” while the company acquires other land and maps the local wind resource and topography. This data is entered into a computer and the optimum number and location of the turbines is calculated by a complex algorithm.

If a company deems a landowner’s ground ‘turbine worthy,’ they then construct one or more turbines along with the accompanying footings, roads and distribution lines. Start to finish it could take as little as two years. But some agreements give the operator six years or more to decide whether or not to build anything on the now-encumbered land.

Once operational, the landowner receives an annual payment per turbine.  Some companies pay more per turbine than others. Some pay one rate in Osceola County and a different rate in Hancock. Some companies pay a flat amount each year plus a royalty based upon the energy sales from each turbine that can dramatically increase the amount paid to the landowner; others refuse.

Few know the true economic value of the land rights underpinning this nascent industry. And landowners have no clearinghouse, like a local grain elevator, where they can gather the going price for a wind easement per MW. But that doesn’t seem to be slowing down the surprising rush to sell them without full knowledge. Especially since most companies will pay the owner’s attorneys fees to review the agreement.

These contracts are inherently biased against the landowner due to inflation. Without a robust CPI driven inflation adjustment clause, the economic value of the landowner’s compensation will begin to diminish before the turbines are even built.

Yet one Emmet County wind developer merely offers a flat 2% annual increase and refuses to adopt a CPI factor.  Given normal trends, in 25 years their annual payments will convey about half the economic value to their landowners that was paid year one. Depending upon the term, the net value could be all but gone by the end, especially once the burden of farming around them is valued.

These contracts last for generations and present issues that will likely be dealt with by people who did not write them. Operators zealously guard the right to assign their contractual interests to third parties, often denying the landowner any right to refuse.  So having had faith in the original operator may be cold comfort to ones children or widow who must later deal with strangers.

And despite the operator’s contractual duty to “indemnify and hold harmless” the landowner, what if the company does an Enron? Who is going to pay to remove that derelict wind turbine? Only a few companies have agreed to insure their obligation to decommission the turbines and restore the land at the end of the term.

We all want what’s best for each other. Wind energy can be a positive thing for our planet. But the competing interests of corporations, private landowners and the public need to be properly balanced before we bargain away the beauty of our land and burden it with intergenerational promises of illusory value.  Remember, “all that glitters….”


* The author is an attorney in practice in Algona, Iowa.