Predevelopment work nets higher
royalties for landowners
By Dan Campbell, Editor
f any place on earth was
made to order for a
wind farm, Trimont,
Minn., would seem to
be it. Not only do
prairie winds blow here most of the
year, but a major power transmission
line runs through the area and there is a
nearby electric peaking plant (which
kicks into service during periods of
peak energy demand).
So when Great River Energy — an
electricity generation and transmission
co-op – put out a proposal in 2003
soliciting bids from anyone wanting to
supply it with 100 megawatts of
renewable energy, it got Neal Von
Ohlen and some other area farmers
thinking very seriously about
developing a community-owned wind
farm.
“We drew a big square
(encompassing about 16.5 square miles)
around the peaking plant and focused
on getting those landowners to join in
an LLC,” says Von Ohlen, who farms
about 1,700 acres of corn and soybeans
with his father and brother.
The farmers then hired a consultant
to pursue a project that they hoped
would result in the first large-scale,
farmer-owned wind farm in Minnesota,
says Von Ohlen, standing in the
driveway of his farm, nearly in the
shadow of a turbine that
seems to sprout from his
grain bins.
They were told the
logistics looked good, so
50 area landowners
formed Trimont Area
Wind Farm LLC
(TAWF). At that point,
they had only about three
weeks to pull their
proposal together and get
it to Great River Energy.
They managed to meet
the April 30 deadline, but
TAWF was far from
alone in seeking the
contract. Of 65 bids
submitted, 62 were from
would-be wind energy
developers.
Trimont bid wins
contract
After two months of
reviewing the proposals,
Great River Energy —
which supplies power to
28 local rural electric
utilities with 600,000
members — put the
Trimont bid on its short list of finalists.
Two months after that, Trimont Wind
was selected as the winner.
Of the 50 landowners who joined the
LLC, 47 are Minnesota residents, and
half are active farmers. More than
$500,000 was raised from the members
to pay the consultant, legal fees and
related costs.
“At that point, we still thought we
would own the project,” says Von
Ohlen, who is manager of TAWF.
What eventually killed that dream was
the determination that their LLCcooperative
would not be able to use
the production tax credits, which can
offset a major share of the cost for wind
turbines “That ruled out our being the owners.”
Some other ownership options were
studied, such as a contract under which
ownership would “flip” to the co-op
after 12 years. “But we were a little
nervous about suddenly becoming the
owner of 13-year-old wind turbines, not
knowing what kind of shape they would
be in at that point. So we instead
decided to team up with a major wind
power developer.”
Predevelopment work pays off
By doing the predevelopment work,
including the always tough job of
aggregating the needed land in the right
location, and by having the power
contract in hand to supply Great River
Energy, TAWF was in a much stronger
position than landowners typically are
to negotiate a strong deal on behalf of
its members.
The co-op ultimately opted to enter
a contract with PPM Energy, a unit of
ScottishPower, based in Scotland, which
has more than 1,700 megawatts of wind
energy in operation or under
construction around the globe. PPM
Energy built, owns and operates the
turbines.
TAWF not only negotiated land
lease payments, but got its members a
percent of the gross power revenue
generated by the wind farm. As the
efficiency of the operation improves,
the percent of revenue going to the
LLC will also rise, says Von Ohlen.
Members will earn a minimum yearly
return on their investment of 50
percent.
“By delivering signed leases and a
power purchase agreement, we were
able to get a much better than average
deal,” he says. “The industry standard is
for a lease payment of $2,000 to $3,000
per tower, but we were able to get
$4,000.”
The wind farm includes 67, 1.5-
megawatt turbines, manufactured by
General Electric. Each turbine stands
265 feet high from base to hub. About
75 percent of the towers were built in
Fargo, N.D., as were most of the
blades, Von Ohlen says.
Only minor disruptions
to farming
Of the wind farm’s 8,500-acre
“footprint,” 8,000 acres are in the LLC.
Construction started in May 2005 and
was completed within six months. Von
Ohlen says only minor disruptions to
farming operations were caused by the
construction.
The turbines themselves take up very
little land, with the biggest space
demand being for the 16-foot-wide
access roads. “Even if the road is a half
mile long, that still equals only about an
acre,” Von Ohlen notes. And the access
roads can come in handy for farming
operations.
The LLC still holds regular board
meetings, with its main function being
to administer and distribute the
payments from the wind farm to its
members.
Von Ohlen says a study showed that
for this project, the ultimate net return
to members will be about the same as
had they owned the turbines outright.
“The biggest difference is that we will
get more of the return in the early years
of the project, whereas with direct
ownership, more of the returns would
have come in the later years,” he
explains.
PPM Energy has an option in 15
years to pay a lump sum to TAWF and
would then own all the power revenue.
In that case, the LLC would dissolve,
and from that point on the power
company would simply work directly
with landowners to pay land lease fees.
The wind farm is expected to
generate more than $1 million annually
for the local economy through a
combination of taxes paid, easement
payments and power payments to the
LLC.
Great River Energy is putting out a
new proposal for another wind farm in
the area, and Van Ohlen says a new
LLC is being formed to again do the
predevelopment work and negotiate a
contract on behalf of its members. His
family holds land in the new area as
well, “so we’ll be involved in both. But
they will be separate entities, each with
their own boards.”
How is life with so many wind
turbines suddenly sprouting up from
their corn and soybean fields? “It’s
definitely something to get used to
when they first go up. But now they are
just part of the scenery — you hardly
even notice them.”
