SummitWind’s lease and easement for the wind plant was a new idea for most. Our lease payments are based on the electrical production of each turbine. We expect this will result in higher income than most other wind energy leases. Although we offer a good business opportunity, for most landowners and advisors this venture is completely new, with very few precedents. Thankfully, most issues and unknowns could be explained to the satisfaction of the landowners. Yet to be completed are titling issues since this leasehold will be insured with title insurance.
When a wind farm is being put together, there are environmental studies at the federal, state and local level to complete. These studies are critical to receiving the permits to site a turbine somewhere within a framework of setbacks from homes, right-of-way and property lines. SummitWind will be working with Iberdrola on this phase of the project.
Where will the turbines be located? We don’t know precisely. What we do know is that the optimum wind design ratio is 100 acres per 1 MW (megawatt) wind turbine. (Verified through developer websites.) For example, a 2 MW machine would average 1 turbine per 200 acres over the entire wind plant. Of course, some parcels then will not have any turbines, but they will receive an income, under SummitWind’s lease. We pay for the wind rights over the property, to have access to other turbines, and for electrical transmission easements, if needed. Turbines on order are 1.5 to 2.1 MW, but could be larger.
Some people were concerned about wind turbines being abandoned. SD Public Utilities Commission requires a set aside by operators of a wind plant to insure removal of equipment and facilities, if it ever becomes necessary. SummitWind reminds landowners the operator is greatly motivated to have a site in a state of positive production, not idle and losing money.
Another question for some was: What happens to the turbine lease when the property is sold? The wind lease goes with the land and the lease must be honored by an operator of the wind plant and the owner of the land – it is binding on both. Income from the turbine can be a point of negotiation in the sale of the property. At any time the income can basically go where the landowner desires. Income from electrical generation is generally taxable income.
The operator will use environmental findings, wind engineering, economic factors and the permitting process to determine where the best placement is for each turbine. After turbine sites are staked, an access road is located by the operator. This will be checked by landowners and SummitWind to insure the most practical route is used and necessary gating is provided for.
Can you site turbines on land where federal programs and easements are in place? U.S. Fish and Wildlife has specific procedures for a wind development to follow, but will allow turbines on grassland and wetland easements. The same is true at the Farm Service Administration for land in CRP.
What happens if a landowner does not want to participate in the wind farm activities or siting of a turbine? This is not a problem. We can and will design the wind plant around their property.
Many landowners have a concern that the escalation clause in the SummitWind lease is not keeping up with the rate of inflation. We can’t predict what the electrical cost inflation rate may be in the future. But the average increase of electrical costs per KW in the past has not been as high as the general rate of inflation. The escalation (compounding) of our lease payments is set at the approximate average increase on electrical prices in the U.S. Electricity, through regulation and competitive bidding, has maintained a slow rate of price increase, even in South Dakota. Utilities are looking for wind to help stabilize increases of future pricing.
Some speculate that our production estimates are raising the expectations of landowners too high. Our electrical production estimates are based on local and third party wind studies and we compensate for industry factors known to reduce the maximum capture of the wind’s energy. Unless the wind stops blowing, we believe our estimates are reasonably accurate.
Because operators generally take a risk when investing, any possible tax credits, carbon credits, accelerated depreciation and the like are given to the operator. SummitWind’s plan has always been to negotiate a cash income to landowners without a landowners' investment.
Some folks are aware of the congestion problem that can occur at times on a heavily used transmission line. How will this affect landowners participating in SummitWind? Current electrical contracts allow landowners to get credit for all production on their turbine(s) without regard to congestion on the grid. So, night or day, any electrical production from each turbine gets paid.
