This is the last in a series of three posts outlining some of the major issues relevant to the negotiation of wind project leases or easements and providing general recommendations for developers.

The first two posts can be found here and here.

Lenders’ Rights

Wind projects are typically financed with the help of third-party lenders. To facilitate such financing, the developer should be able to mortgage its interest in the easement and the project facilities to its lenders without the landowner’s consent. The developer should also ensure that the lenders’ rights are adequately protected under the easement. For example, the easement should provide for a lender’s right to take possession of and operate the project facilities, to perform the developer’s obligations under the easement, and to foreclose on the easement and the project facilities or assign its security interest therein. The lender should also have the right to receive notice from the landowner of any developer default under the easement and to cure such default within a specified period. If no developer default occurs, the landowner is typically required to provide periodic certificates to that effect (known as “estoppel certificates”) to the lender for the duration of the easement. The easement should also provide for the lender’s right to consent to any amendment thereof.

Assignment

The economics of wind projects also make it important for the developer to enjoy maximum flexibility regarding the assignment of its rights and obligations under the easement. Electric utilities and other developers may be interested in contributing to, or even taking over the project in exchange for lucrative payments to the developer. Thus, developers typically insist on easement provisions allowing them to sell, lease, assign, mortgage and encumber their rights under the easement without the consent of the landowner.

Landowner Cooperation

The development of a wind project involves several externalities, which are usually addressed through both regulatory approvals and agreements with private parties. For example, wind turbines may generate high levels of noise, restrict views, interfere with residential development in the surrounding area, or disturb the flying patterns of migratory birds. It is important that the landowner agree to cooperate with the developer in obtaining and complying with the necessary regulatory approvals, including by participating in any hearings and other proceedings or investigations relating to zoning and permitting. In addition, the developer should secure the landowner’s cooperation in negotiating any necessary noise easements with immediate neighbors and in persuading such neighbors to agree not to erect structures that would interfere with wind speed and direction.

Last but not least, given the paramount importance of tax and renewable energy credits to the development of wind projects, the easement should provide that, if the developer becomes ineligible for such credits, the landowner will negotiate in good faith an amendment to the easement or any other instrument necessary to reinstate the developer’s eligibility for credits.

For further information about this topic, please contact Akin Gump.