Legal Q&A: Planning a wind farm

Stephen Unwin and James Worthington highlight some of the key practical and tax planning issues which should be considered by landowners when planning a wind farm.

A wind farm can be an attractive use of land. Estimates are that there are currently 176 projects and 2,033 turbines in the UK but the EU-wide target of 20% renewable energy by 2020 means that numbers will grow fast.

Heads of Terms

As a landowner you may develop your own wind farms or enter into partnership with a developer. If the latter, the developer may ask you to sign up to an agreed Heads of Terms which will govern the contents of any exclusivity agreement, option agreement and lease.

You will need professional advice before committing to the Heads of Terms on issues such as:-

• the length and terms of any exclusivity agreement or investigatory lease, including:-
  • location
  • term
  • payments to be made to you by the developer
  • scope of activities to be conducted by the developer and protections to be reserved by you
  • restrictions to be imposed on you including confidentiality
• the principal terms of the option agreement and the lease if the project proceeds, including:-
  • period of option and term of lease
  • implications e.g. continuing existing activities
  • payments to be made by the developer to you during the option period
  • payments to be made by the developer to you once the wind farm is established
  • reinstatement of your land on termination of option agreement and lease
• the rights to be granted by you to the developer during the exclusivity period and option agreement to carry out investigations and erect any temporary anemometer masts;
• the impact of the investigations on the site by the developer and the project on your ability to claim the Single Farm Payment,  subsidies and environmental payments.

Mines and Minerals

As landowner you need to establish as soon as possible ownership of the mines and minerals underlying the wind farm site. Cabling will need to be installed between the wind turbines and the national grid and the wind turbine foundations may raise issues.

The development of the wind farm may impact adversely on the possibility of extracting value from the minerals. If ownership of the mines and minerals is vested in another party then negotiations may need to be entered into with it to enable the project to proceed.

Are there Taxation issues?

You need to consider the possible effect of the wind farm on the availability of agricultural property relief for Inheritance Tax and other reliefs.

Additionally, advice should be sought on the transfer of value attributable to the wind farm as part of normal inheritance tax planning.

Recommendation

Whether going it alone or working with a developer, establishing a wind farm raises a number of issues, so specialist advice is required from the outset.

Stephen Unwin is a partner and James Worthington, specialising in agricultural issues, is a senior solicitor in the real estate department of Andrew Jackson

Darlington & Stockton Times [2008-08-22]