Can You Profit From the Wind Blowing Across Your Land?
August 19, 2010

A bill that would have made the wind blowing across properties in Colorado a private property right failed to move forward in the Colorado legislature this year. That bill, as drafted, would have made clear that a wind interest is a property right like any other real property right and can be severed from the surface ownership and conveyed much like mineral interests can be severed. Even though the bill failed to move forward, it has been reported that several landowners on the Eastern Plains are starting to deed away their wind rights, even though it is not yet clear under Colorado law that wind rights are a property right that can be separately conveyed.

Even without the law clarifying ownership interests in wind rights, the right to lease property for the purpose of constructing and operating wind turbines, and the granting of surface easements for those turbine facilities, is one that is appurtenant to ownership of land. In fact, Colorado has a law that prohibits covenants or restrictions on real property that effectively prohibit or restrict the installation or use of a renewable energy generation device like a wind turbine (there are, of course, exceptions to this prohibition). Since Colorado is currently the 9th top state in the nation to generate energy from wind, as reported by the American Wind Energy Association, it is no surprise that we already have 906 commercial wind turbines in the State. Leases of property for wind generation are being considered by an increasing number of landowners, especially owners east of Interstate 25.

Before you proceed with a lease, you should know that it is like any other lease of your property. That is, it will give the wind generation company rights in your property and will restrict certain uses of your property for an extended period of time, often 25-40 years with optional extensions. Typically, a lease prohibits you as landowner from doing anything or allowing anyone else to do anything that would interfere with the wind speed or wind direction over your property, decrease the efficiency of the wind generators, or affect the construction and/or operation of the wind generators. A lease may specify what crops can be grown on your property and where livestock can be grazed, and may restrict mineral development which could interfere with the wind generation. A lease typically describes in detail an area around a turbine which must be free from any structure that would obstruct the free flow of wind to the turbine, thus affecting your ability to build buildings or otherwise develop that property. A lease will include an easement right for the wind energy company to have access over your property to and from its wind generators, associated equipment, and electric distribution and transmission lines for energy produced by the turbines. While this easement can be defined with specificity, it will give the wind generation company the right to enter into and use your property like any easement. The company will also usually have the right to use a larger portion of your property when installing the turbines and associated equipment. In exchange, you, as landowner, may be paid an upfront fee for the easement and initial access rights and annual rental and/or fees per turbine or a royalty based on income produced by the turbines.

If you are approached by a company seeking a lease, before you have serious discussions, you should visit properties that already have wind turbines on them to acquaint yourself with their size, noise (most current ones are fairly quiet), and overall effect on use of the property, including ranching, farming, and wildlife. You should discuss these impacts with the property owner. Then consider the income which could be generated by wind turbines on your property, including fixed rental fees and royalties based on energy generation, to analyze that benefit in light of the long-term restrictions on your property and overall economic effect on it. Most wind generation companies have their standard form of lease and like any business transaction, it is negotiable to some degree. Of course you should have a proposed lease reviewed by your counsel (before you sign it!) to ensure that it includes the terms and conditions you expected and so that you understand its impact. RJ&L has lawyers experienced in wind generation facilities and the types of agreements which accompany them, including leases and easements. Call us if we can help.