Recently had a Wind Developer tell us prospective land owners in Western Kansas the following:
1) That the Capacity for the Windmills was 40% (seems higher than what I can find others suggesting to expect). Our land appears to be in either wind category 3 or category 4 areas.
2) The Wind Developer said they were assuming they could sell the electricity at 5.5 cents per kilowatt hour to a buyer. (Is this a lie? I thought developers would have already negotiated the Agreements with the Buyers by now and furthermore is 5.5 cents too high?)
3) That using a 1.5MW Turbine we could expect a Royalty of $8700 per year. Again, this number seems high (They seem to be setting our expectations very high to encourage us to sign).
4) They do not index our rates based on inflation. Using various inflation calculators and adding up the loss per year we would sustain (over 30 years) by not having adjusted for inflation numbers our loss on that alone is over $70,000. Is it common to not adjust rates for inflation? This just seems like outright theft from the landowner.
5) They define Gross Revenue as the following: "All Gross receipts actually received by CPV from the sale of electricity generated by the project (excluding the sale of electricity generated in connection with testing)." However, if the Wind Developer spun off another company then the Wind Developer would not "actually receive" gross receipts from the sale of electricity. This definition seems terrible as it does not list out anything that would entail "gross receipts". Anyone have any other suggestions on this point?

I can advise you on this issue and general information regarding lease rates and power purchase rates in western Kansas. Please feel free to contact me. joelbannister@gmail.com

Atoney, I agree with pretty much everything Marin has said. I would also reitterate that not having your revenue tied to inflation is entirely against your best interests. We address this in our leases by basing the land owners revenue off of gross kWh production. As the price of electricity goes up, so does your revenue. Clean and simple.

Hi Atoney,

Thanks for posting your question to the forum.

I'm afraid I can't give you very satisfying answers, unfortunately. Specific numbers like you're quoting are hard, if not impossible, to assess out of context or without thorough knowledge of your specific situation.

I can give you some general reactions, but to get good answers you'll need to hire legal help, and make sure it's legal help with experience in wind leases!

Now for the general reactions:
1) A capacity factor of 40% is pretty high, especially for a class 3 resource, but it's certainly not impossible. You might ask them to back up this claim with numbers or other evidence.
2) Sale price of electricity can vary widely. I can't speak to whether or not 5.5 cents is reasonable without knowing the exact particulars of the situation. It is very possible that the developer hasn't confirmed a power purchase agreement (PPA) yet. Many power purchasers won't sign an agreement until they feel that the project is a sure thing, and if the developer has not secured land leases yet, I could see how they might also not have secured a PPA either.
3) The royalty you can expect, once again, depends on exactly how the contract is structured. This is where that legal help can really come in handy.
4) It does seem less than ideal for compensation not to adjust with inflation. It's not unheard of, and this is one area where your negotiation skills and the help of a lawyer may be key. If your neighbors have also been approached, negotiating as a group can give you a much stronger position.
5) Ack! This is the kind of legal language you REALLY need a qualified lawyer to help you understand. As you probably noticed, small nuances that mean nothing to normal people can have a big legal impact. The developer has a lawyer to help them, and so should you!

Have you taken a look at our Leases and Easements package? It has some good guidance about things to look for in a lease. You can find it here: http://www.windustry.org/leases

I can't emphasize enough how important it is for you to find legal help with experience in wind leases. We've got a short list of companies on our web page: http://www.windustry.org/companies?filter0%5B%5D=112&filter1%5B%5D=189

I hope this helps!

Marin