Wind and Solar Energy Development on Agricultural Lands: Physical & Lease Impacts 2018 RAAW Conference San Diego, California August 27, 2018

Transcription

1 Wind and Solar Energy Development on Agricultural Lands: Physical & Lease Impacts 2018 RAAW Conference San Diego, California August 27, 2018 Dr. Shannon L. Ferrell Professor, Agricultural Law Oklahoma State University Photo source: Stephanie Buway

2 Today s program Fundamentals of wind and solar energy Land impacts from renewable development Five questions lease stakeholders should ask Navigating creditors rights in renewable energy agreements

3 Photovoltaic (PV): The basic idea Source: Redarc

4 Photovoltaic (PV): The basic idea Source: Sunipod

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8 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Generation (1,000 MWh) Wind and Solar Generation 2001 to present 30,000 25,000 20,000 15,000 10,000 5,000 0 Wind Solar

9 Maybe something about LCOE?

10 U.S. wind energy projects Source: USGS U.S. Wind Turbine Database

11 U.S. solar energy projects Source: Solar Energy Industry Association Major Projects List

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13 P 1 v 3 r 2 2

14 P = A x r x H x PR

15 The developer s dilemma: Federal, state, & local policy

16 The Top 5 Questions to Ask about Wind Leases 1. How will property use be affected? 2. How long will agreement last? 3. What the landowner s obligations? 4. How will landowners be compensated? 5. What happens when the project ends?

17 How will property use be affected?

18 A sense of turbine scale Source: Paul Gipe, Wind Energy Basics (Chelsea Green Publishing Co., 1999)

19 Tower foundation preparation 21 X 21 X 17 deep - 30 concrete trucks Source: Western Farmers Electric Cooperative

20 Tower staging tons, 80 feet tall Source: Western Farmers Electric Cooperative

21 Nacelle staging Rotor Hub 20 tons Nacelle 51 tons Dude 0.09 tons (not permanently installed) Source: Western Farmers Electric Cooperative

22 Turbine blades 115 feet long 9.5 tons Source: Western Farmers Electric Cooperative

23 Apprx. 100 ft. min. ground clearance 328 ft. top of rotor disc 230 ft. hub height Final configuration Source: Western Farmers Electric Cooperative

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25 Field Geometry and Land Use

26 Total field area: ac

27 Total field area: ac Total obstructed area: 3.85 ac Use ratio: 2.46%

28 Slide with use ratio example for solar Total field area: ac

29 Slide with use ratio example for solar Total field area: ac Total obstructed area: 6.81 ac Use ratio: 43.92%

30 Land use requirements for PV and CSP projects in the U.S. Source: NREL, 2013

31 Oklahoma wind energy land use statistics Average land use per turbine: 0.87 acres Average land use per MW: 0.46 acres Project land use (over all projects): Turbines: 11% Support systems: 13% Roads: 76%

32 Livestock and turbines Source: Western Farmers Electric Cooperative

33 Livestock and turbines Source: Apex Wind Energy kingfisherwind.com

34 Source: Green Building Advisor, Solar Novus Today Sheep and modules

35 Key easements Access: assessment, construction, operations/maintenance

36 Key easements Transmission: overhead / underground

37 Non-obstruction Key easements

38 Encroachment Key easements

39 Nuisance Key easements

40 How long will the agreement last?

41 How long will the agreement last? Agreements typically run from years (150!) Review renewal clauses (automatic?) Notice of renewal provided? Opportunity to re-open?

42 What are the landowner s obligations?

43 What are the landowner s obligations? Indemnity? Property taxes? USDA program compliance (CRP, EQIP, WHIP)?

44 How will the landowner be compensated?

45 How will you be compensated? What are your payments for easements? What are your lease payments? Per turbine/module, per megawatt, or a royalty? Definitions matter! How will accuracy be verified? Payment statement? Right to audit? Interest/penalties for errors?

46 Example (your mileage may vary) Example: Assume one 2.0 MW capacity turbine, a capacity factor of 35%, a PPA price of electricity at $0.03/kWh, and a royalty of 4% of gross revenues Electricity produced in a year= 2 MW x 8,760 hr/yr x 35% = 6,132 MWh or 6,132,000 kwh Gross revenues = 6,132,000 kwh x $0.03/kWh = $183,960 Royalty = $183,960 x 4% = $7, or $3, per MW of turbine capacity.

47 What happens when the project ends?

48 What happens when Decommissioning should be required the project ends? Disassembly and removal of equipment Restoration of grades and soils Replacing vegetation Seek bond / financial assurance of decommissioning

49 Harmonizing surface, renewable energy, and petroleum interests

50 Generation interests Mineral Interests Landowner interests Source: Stephanie Buway, Oklahoma Wind Power Initiative

51 Surface Owners Literally and figuratively caught in the middle Unified estate owners bear burden of balancing development Severed surface owners: avoid Quiet enjoyment clauses Obligation to secure subordinations Agreeing to mediate between other estates Surface Damage Act protections(?)

52 Lenders interests in renewable development

53 Impact on farm cash flows: wind example

54 Impact on farm cash flows: wind example

55 Lien and Encumbrance Issues Many agreements require a subordination arrangement. Get in line behind developer, and perhaps developer s creditors. Frequent lender reaction: Preserve access to land equity; ability to sell or encumber the property? Landowners (and lenders) need to be sure to separate out interests in property. Potential acceleration of loan?

56 Wind projects and property values 2009 Lawrence Berkley National Laboratory Study (updated 2013) 50,000 home sales, 27 counties, 9 states No statistical evidence of effects on home prices in post-construction or postannouncement/pre-construction periods 2014 University of Connecticut No net effects due to arrival of turbines

57 Wind projects and property values 2014 Canadian study of impacts from Melancthon projects No statistically significant impacts from turbines on property values 2013 University of Rhode Island study 48,554 transactions over 13 years No statistically significant impacts on home prices

58 Wind projects and property values 2009 US DOE Office of Energy Efficiency and Renewable Energy / Lawrence Berkeley National Laboratory 7,500 sale transactions No evidence of widespread property impacts

59 Conclusions

60 Go here!

61 Thanks! Shannon L. Ferrell, OSU Department of Agricultural Economics