Lassoing
Wyoming’s Wind

Landowners band together to bargain
for higher wind-power royalties

By Bill Brockhouse
Co-op Development Specialist
USDA Rural Development


Editor’s note: The author wishes to thank
Grant Stumbough, Southeastern Wyoming
RC&D Coordinator, for his assistance in
the preparation of this article.


yoming is a windy place. According to the American Wind Energy Association, Wyoming ranks seventh in the nation for wind-energy potential. Even more impressively, southeastern Wyoming enjoys more than 56 percent of all developable-class wind in the western United States. No wonder wind energy developers are so inter-ested in putting in wind farms there.

In other states, wind-energy developers have approached individual landowners to negotiate contracts to lease their land for placement of wind turbines, often with a “gag rule” so landowners weren’t free to discuss lease terms with anyone. Therefore, information about lease prices and other terms weren’t available for landowners to compare their offers.

This arrangement was favorable for developers, but landowners weren’t really sure if they were getting a fair price. Wyoming landowners didn’t want this to happen to them.

Grant Stumbough, Southeastern Wyoming RC&D Coordinator in Wheatland, Wyo., has helped establish four associations of landowners to bargain with wind-energy developers. Four more are in the formative stages. In all, these wind energy associations have 2,000 MW planned for development.

Stumbough was contacted by several ranchers who had heard about the idea of forming wind energy associations to enhance the marketability of their world-class wind resources. The concept was to create blocks of land and use collective bargaining strategies to reach agreement with wind developers. They knew they had to organize quickly to be ready for wind developers who might otherwise choose other states, or obtain leases from individuals before group collaboration could take place.

These landowners didn’t have the resources to invest in the wind projects themselves by buying turbines of their own. Even if they did, they felt the risk might be too high for them, (although there are examples of groups of rural landowners doing so; see page 14, November-December 2007 issue of Rural Cooperatives). The payoff potential of turbine ownership is far greater than land leases, but leases are still a way for landowners to significantly benefit from wind energy development.

Land blocks vary in size
The associations, with names such as “Windy Ranches,” range in size from 30,000 acres to 250,000 acres. Although informational barriers were formidable, landowners thought they had a lot to gain by cooperating. The main benefits are: Royalty payments to landowners are typically about $2,000 per turbine per year for each landowner. But that didn’t seem like much when taking into account the revenues from energy production being made.

It is estimated that bargaining can obtain 4.5 percent gross wind-power revenue for the first 10 years, and up to 7.5 percent of gross revenue of the for the following years. Other possible advantages of collective bargaining include: signing bonuses; land leases; payments for road and transmission easements; construction fee per MW of nameplate capacity; and loss of forage or crop production payments.

Slater Wind
The first association to be formed was the Slater Wind Energy Association LLC, with 30,000 acres and 45 members. The initial meeting held to talk about the idea was attended by five landowners who expressed desire and commitment to move forward with forming an association. There were two more meetings prior to actually forming the association in March 2007.

It isn’t easy, but when everyone understands it can impact their economic well-being, cooperation makes sense.

“By working with our neighbors to collectively market our world-class wind resources, we were able to enhance our ability to effectively negotiate with wind developers to obtain a fair and equitable price for everyone concerned,” says Gregor Goertz, chairman of the Slater Wind Energy Association. “In addition, everybody in the community will benefit in the short and long term as wind energy royalty payments will be distributed among all association members, including those who do not have turbines on their land.”

Landowners felt there was a need to develop their associations rapidly. Otherwise, events would have left them behind. Competing developers were beginning to contact individual landowners to negotiate with them on an individual basis.

Therefore, Slater Wind Energy developed and signed an operating agreement to legally form the association. It then developed a request for proposals (RFP), which was mailed to more than 40 premier wind developers, resulting in proposals from eight wind developers. Slater Wind is currently in final negotiations with a wind-energy developer who is enthusiastic about building a sizable wind farm. This all happened in less than 18 months.

Stumbough outlined the following steps in forming a wind energy bargaining association:
  1. Determine interest in forming an association;
  2. Delineate potential boundaries;
  3. Hold first meeting;
  4. Evaluate wind energy development potential;
  5. Form the association;
  6. Develop and sign an association operating agreement;
  7. Develop and send RFPs to windenergy developers;
  8. Review and select the best proposals;
  9. Enter into final negotiations with developer.
The biggest barriers to formation were the newness of the concept and lack of information on legal and technical issues, including how to structure such an organization to maximize lease values for members. There was also a feeling of being at a disadvantage against powerful developers. Therefore, experts from TransElect, Wyoming Infrastructure Authority, University of Wyoming, USDA Rural Development and others were invited to later meetings to clarify technical details.

Similarities to ag
bargaining co-ops
Although the bargaining associations are not formally incorporated as cooperatives, but rather as LLCs, there are some similarities to agricultural bargaining cooperatives. In agricultural bargaining cooperatives, producers of farm commodities unite to negotiate contracts with processors.

Similarly, in the case of wind energy, landowners negotiate with wind-energy developers for the price of their wind. It makes sense for them to cooperate in this endeavor, to know the terms received by all members and to attempt to receive the best terms possible. Group action can help counter-balance the market power of developers and get a better deal for landowners.

Although it’s a relatively new area, there is legal expertise available for this complex subject. After forming the association, an attorney was approached who guided the group through the legal technicalities and who told them what to watch out for.

Lease terms can be very detailed. Some issues which are covered in typical leases include the type of payment the landowner will receive, so it’s very important to get this right.

What lies ahead
What happens in the future will ultimately depend on transmission. In wind energy and other electricitygenerating projects, transmission is an essential component for the projects to be implemented.

This is because electricity is cheap and plentiful in Wyoming, so electricity from wind-energy projects will need to be exported. Transmission projects such as the Wyoming-Colorado Intertie are in the works. The eight wind-energy bargaining associations will be positioned to benefit from their completion.







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