State sees increased wind lease interestWritten by Jennifer Womack
While the state has some older wind leases in the Arlington and southwest Wyoming areas, Boomgaarden says, “We’re on the cusp of putting a significant portion of state land under lease for wind development.”
“We have three operational leases on 8,640 acres,” says Jim Arnold, who oversees the Real Estate Management and Farm Loans Division of the OSLI. Leases, involving 33 applications from 16 different applicants, are currently being reviewed on an additional 204,000 acres. “It’s starting to be a pretty big job for the office.” Arnold says those looking to research wind development potential on a piece of state property are able to do so in the initial stages of their lease agreement. If they’re looking to characterize the wind development their effort can be addressed through a Temporary Use Permit for up to five years.
Arnold says leases are being made through the agency’s Special Use Lease program.
Asked if statutory language specifically for wind energy development is needed, Boomgaarden says the existing statute authorizing leasing for industrial and commercial purposes and the Special Use Lease process works well.
“It’s highly variable,” says Arnold of the lease rates being received. “Numerous factors are evaluated when considering the compensation rate for wind energy development on state land. We want to see agreements negotiated on adjacent land, but also transmission availability, transmission agreements, wind quality and the market to which the power is to be sold.”
Arnold says, “During the initial phase values have commonly ranged from $4 to $10 an acre. This period is generally negotiated for a time not to exceed eight years, which we feel is consistent with proposed transmission development. Once they’re in the operational phase, compensation rates have generally ranged from $2,500 to $4,000 per installed megawatt.” Arnold says the state’s gross revenue percentage, once production is in place, runs from about four percent in the lease’s early years to eight or eight and a half toward the end of the lease. Most of the lease agreements have been made for 35 years.
“The other thing we’re often asked,” says Boomgaarden, “is if we look at the agreement that a wind company is doing with surrounding landowners. We have to make sure we are comparing apples to apples.” Using the scenario of landowner associations in southeastern Wyoming, she says they sometimes have different objectives than the state. “Some like cash up front in case the project is never developed; others backload the lease so you get more money if electricity is actually produced. There’s a spectrum of that.”
Boomgaarden says, “You hear a lot of talk on the street on who’s getting the better deal for wind leases, but you don’t really know until you look at the whole lease and how it’s structured over time.” She says, “We’re more interested in negotiating a healthy royalty if electricity is produced. We’ll choose the longer-term approach so our per acre rentals may be lower. You can’t make quick comparisons.”
Arnold says, “We don’t want to get the leases so high that the company is going to develop somewhere else. We’re getting market value, but not precluding the chances of development.” The state also researches a bidder’s success with past projects and their financial wherewithal to see the project through to completion.
Boomgaarden says they’re often asked, “‘What is the state going to do if it has wind turbines on its land and none on adjoining lands?’ The bottom line is, nothing.” She says the state, much like any other neighbor, has the right to move forward with economic opportunities on its properties so long as they’re within the parameters of state and local regulations.
Grazing permit holders, says Boomgaarden, do have an opportunity to participate in the process when the land they lease for grazing enters a wind development lease. “The grazing lessee,” she explains, “has the opportunity to comment regarding the proposed use of state lands. They also enter into negotiations on surface impacts and how that use may impact their operation. A lot of times those are favorable comments as they may have already entered into a lease on their private lands.”
“Come talk to us early in the process,” says Boomgaarden of landowner associations interested in working with the state. “We’ll be glad to share all of the information we have with the landowners.” While a dialog can be held she says state lands can’t be part of the Request for Proposals sent out by the association. “By law we can’t delegate our trust responsibilities to another entity,” she explains.