What to know before entering into a wind farm agreement
As Australia’s renewable energy sector continues to expand, more regional landowners are being approached by developers seeking to secure land for wind farm projects. Although these projects can provide a valuable additional income stream, deciding whether to enter into a wind farm agreement is a significant decision with long-term legal and commercial implications.
Wind farm agreements are long-term legal arrangements that can affect the ownership, use and value of a landowner’s land for decades. The documents are typically prepared by the developer and are primarily intended to protect the developer’s commercial interests. For this reason, it is important that landowners obtain legal advice to carefully consider the terms of the agreement to ensure their own interests are adequately protected.
What is a wind farm agreement?
A wind farm agreement is not just a single document, but a series of documents entered into over the life of a project. The process commonly begins with an option agreement that gives the developer the opportunity to enter the landowner’s land to undertake investigations, environmental assessments and wind monitoring. This allows the developer an opportunity to assess whether the site is suitable for a commercial wind farm. The option agreements also give the developer a right to require the landowner to enter into a lease in the event that their investigations and assessments confirm that the land is suitable to host wind turbine generators.
If the option to enter into the lease is exercised, then the lease will commence and often run for decades. The leases can also include easements and other rights to the landowner’s land to facilitate access roads, underground cabling or transmission infrastructure.
Developers can also approach landowners who have neighbouring land close by to wind turbine generators and request that they enter into a neighbour agreement which allows these landowners to receive some compensation for the impacts to their land arising from the wind turbine generators’ close proximity. These neighbour agreements will also impose restrictions on these landowners as well, so it is important that legal advice is sought before signing.
Not all wind farm projects proceed
It is important for landowners to understand that signing an initial option agreement does not necessarily mean that a wind farm will end up being constructed. These projects require extensive planning approvals, community consultation and financing. If these requirements cannot be satisfied, the developer may decide not to proceed with the project.
Key issues to consider
1. The length of the agreement
Wind farm agreements are significant long-term commitments. As aforementioned, lease terms can run for decades, commonly for around 30 years with further options to extend. Decisions a landowner makes today will not only affect them now, but also future generations of their family should they intend on continuing to farm or own the same land. It is important to consider how a potential wind farm agreement aligns with long-term farming operations, succession planning and future property development or sale of the land.
2. Rights over your land
Depending on the project, the developer may require rights to construct and operate wind turbine generators, install access roads or underground cables, enter the property for construction and maintenance, use temporary areas on a landowner’s land during construction and upgrade or replace infrastructure during the term of a lease. Landowners should ensure that they have carefully considered the location of any infrastructure on their land and that unnecessary rights are not granted over unaffected areas of the land.
3. Payment arrangements
Financial return is often a primary reason as to why a landowner might consider entering into a wind farm agreement, however payments can be more complex in these agreements. Some examples of payments might include signing fees, option fees, rent fees, compensation for impacts to land and more. It is important to consider whether payments will be adjusted according to CPI, when payments actually commence and what happens to your payments if the wind farm project becomes inoperative or delayed.
How will the wind farm affect a landowner’s land?
Wind turbine generators located on a landowner’s land or even on neighbouring land can cause changes in amenity and result in audible noise and shadow flicker. The wind farm projects themselves can also cause construction inconvenience, increased traffic and dust. Developers may also require limitations on the construction of new dwellings, the planting of vegetation near infrastructure or that the consent of the developer be obtained prior to the land being sold. The aforementioned issues are only a snapshot and it is important that landowners consider these issues thoroughly before entering into any agreement to help avoid unexpected consequences arising later in the life of the project.
What happens when a project ends?
A question that is sometimes overlooked is what happens when the wind farm reaches the end of its operational life. Most wind farm agreements will have decommissioning obligations included requiring the developer to remove the wind turbine generators and/or other associated infrastructure and to restore the land. The former Australian Energy Infrastructure Commissioner, Andrew Dyer, noted that some published decommissioning plans have calculated costs of around $400,000 per turbine (as at 2022) which is a significant issue that landowners must consider. It is impossible to calculate what these costs will be at the end of the operational life of the wind farm. Without appropriate protections in a wind farm agreement, there is a risk that a landowner could be left without appropriate decommissioning funds if the developer is unable to fulfil its obligations.
Why legal advice matters
Wind farm agreements are sophisticated and complex documents that can remain in place for several decades. Obtaining appropriate legal advice before entering into an agreement allows landowners to understand the practical effect of the agreement, identify provisions that may expose them to unnecessary risk and negotiate amendments that better protect their long-term interests.
How we can help
Nevetts Lawyers has extensive experience in advising landowners across all stages of wind and solar farm projects, from initial consultations and option agreements to neighbour agreements and long-term leases. Over the last two decades, we have advised and negotiated for landowners on many wind and solar farm projects across Victoria, New South Wales, Queensland, Tasmania and Western Australia. We often act for multiple landowners in the one project, enabling them to leverage their combined bargaining power to collectively negotiate better terms.
If you have been approached by a developer or have received a draft agreement, it is critical to get legal advice before signing any document. Documents signed early in the process can limit your ability to negotiate later. If you are interested in using our services to assist you, please contact us.
Author: Hayley Barrow