Wind Turbines – Legal Advice for Landowners

Wind-turbines-strip

By David Walters – Accredited Specialist Property Law

Wind farms have the ability to produce clean energy, generate jobs and income and have minimal environmental impacts when appropriately located. They can also generate income for the owners of the land upon which they are constructed.

Australia currently has around 50 wind farms with approximately 700 turbines in operation. In 2008-09, 1.5% of electricity generation in Australia was from wind energy[1]. The Australian Bureau of Agriculture and Resource Economics predicted that in Australia wind energy generation will increase by 11 fold from 2010 to 2030[2]. It can be expected then that wind energy companies are looking for suitable land to construct wind farms.

What should you consider before installing Wind Turbines on your land?

The following scenario provides an example of dealings between a land owner (Terry Firma) and a wind energy company (Breezey Pty Ltd) when negotiating the construction of a wind farm:

Breezey Pty Ltd contacts Terry to discuss testing his property for wind with the view to construct wind turbines on his property.  Breezey Pty Ltd outlines the process that will be followed:

  1. Breezey Pty Ltd provides an Agreement to Lease to Terry;
  2. The Agreement to Lease provides that Breezey Pty Ltd will test Terry’s property and if they are satisfied with the results, they will construct a wind farm and enter into a Lease with Terry as Lessor;
  3. The testing is carried out, the results reviewed and the decision of whether to enter into a Lease or not is made by Breezey Pty Ltd; and
  4. Once the Lease is operative, Terry will receive an annual fee for each Turbine on his property.

Although assured by Breezey that the contracts Terry is being asked to sign are standard contracts for wind projects and the terms of the contract are fixed and the same for everyone, Terry needs to make sure he fully understands the terms which are being offered by Breezey Pty Ltd. Terry takes the Agreement to Lease to his solicitor to review and advise him what the terms set out in it mean.

The solicitor advises Terry that the terms provide:

  1. The tests for the lands suitability will be undertaken within two years from the date of the Agreement to Lease;
  2. Breezey Pty Ltd may extend the period for conducting tests by giving notice to Terry 14 days prior to the end of the two year period;
  3. Once the tests are complete, Breezey Pty Ltd will advise Terry if they wish to proceed with the necessary works to obtain the necessary approvals and authorisations to construct the wind farm;
  4. Breezey Pty Ltd will endeavour to obtain the necessary approvals and authorisations within two years from the date they advise Terry they will proceed with obtaining them;
  5. Breezey Pty Ltd can extend the period for obtaining the necessary approvals and authorisations by advising Terry in writing 14 days prior to the two year period ending;
  6. Breezey Pty Ltd will commence construction of the wind farm within 6 months of receiving the necessary approvals and authorisations; and
  7. The period for commencing construction can be extended by Breezey Pty Ltd by giving notice to Terry within 14 days of the 6 month period ending.

So what does this mean for Terry? This means that under the terms provided by Breezey Pty Ltd, the Lease may not be entered into for up to four years, which can be extended even further at the discretion of Breezey Pty Ltd. No fees may be received by Terry until the Lease is commenced and Breezey Pty Ltd is in possession of part of Terry’s land and the wind farm is constructed.

Terry instructs his solcitor that the terms currently provided by Breezey Pty Ltd are not acceptable and alternate terms are drafted by the solicitor and forwarded to Breezey Pty Ltd for its consideration. The solicitor notes that an Option for Lease provides a superior framework for the rights and obligations of the parties. An option to lease agreement will normally allow a developer to access the property to assess the wind farm feasibility with an option to move into a lease agreement at a later stage.

There are many other other things to consider before entering into an Lease agreement for a Wind Farm with an energy development company for example:

  • Duration of the Contract
  • Renewable period
  • Tower removal responsibilities and specifications
  • Placement of access roads
  • Responsibility for roads, fences and gates
  • Renumeration and payment structures
  • Restrictions on the sale and/or future
    development of land
  • Energy credits
  • and more

Entering into an agreement with a wind energy company for the construction of a wind farm can be highly advantageous, which is why it is imperative that the terms of the agreement be carefully drafted. Once signed, all parties involved have given written approval of the provisions of that contract and are legally bound to fulfill the terms of the contract.

Therefore, if you don’t like something about a contract, negotiate a change before signing. The difficult part is knowing to what degree the various components of the contract can be changed that is why it is extremely important to seek competent legal advice before signing.

For more information or to make an appointment please contact David Walters:

p: 6206 1300| e:  dwalters@erlingtons.com.au

 


[1] Based on wind and total generation figures from Electricity Supply Association of Australia (2010), Electricity Gas Australia 2010;found in NSW Government Environment, Climate Change and Water, Wind Energy Fact Sheet 2010

[2] ABARE Research Report 10.02 (2010) Australian Energy Projections to 2029-30 p 27.