How Do You Lease Air?

The other morning I saw a photo of a wind turbine out in California. Part of the wind energy business. It got me to thinking how that endeavor is doing in Iowa. I came across an article “Wind Energy Production: Legal Issues And Related Liability Concerns For Landowners In Iowa And Across The Nation” by Roger A. McEowen. It was in the Iowa State University CALT (Center For Agricultural Law And Taxation) newsletter. Although dated June 20th 2011, the article is as pertinent today as it was five years ago.

Windmills have always been part of the our landscape. In the old days they pumped water for the traditional American farm. For me there was always something soothing about them. It meant people lived there, the crops were irrigated. They belonged on the farm on which they were located. It didn’t bother the people on the next plot of land because most likely they had a windmill too. Nothing rocked the boat.

What about now?

Wind energy has become a business in itself. The article states that Iowa is the second largest producer of wind energy in the country – Texas being first. What happens now is a wind energy company leases a portion of a farmer’s land to erect a wind turbine, which will stand among the crops in the field and hopefully produce wind energy to be used somewhere else. The full title is Wind Energy Conversion Property. Nice name – but how that affects the view of the landscape is up to those who live in the area.

It’s not that simple for the wind energy companies. Tax exemptions enter the picture and there is red tape blowing in the breeze along with the air. What is taxable and what is not? McEowen mentions that The Iowa Department Of Revenue released a policy letter which states that the sales price of a crane purchased for use in installing wind conversion equipment is “exempt from sales and use tax.” However purchase of other equipment to build a road to get material out to the turbine construction site is not exempt. Why? Because the road used for transportation of the equipment does not fit the definition of Wind Energy Conversion Property. Sounds like the flip side of the Field Of Dreams line “If You Build It, They Will Come.” Here it might read, “You Can Build it, But To Get There, You’re On Your Own.”

This is only point. What about the lease between property owner and wind energy production company? And what happens if the farmer wants the turbine off his property? McEowen concludes with a sample 18 page lease – prepared by Trent C. Hilding.

The McEowen piece is fascinating stuff. It gives us alot to think about and it’s happening now.

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