There are a number of topical property issues that landowners, developers and consultants who are involved in renewable energy projects need to take into account. Here, HopgoodGanim Partner Tony Baldwin and Associate Tammy Berghofer discuss the real property legal considerations for wind farm developers looking to break into the Queensland market, and considerations when negotiating wind farm developments across Australia.

Wind farms in Queensland

Queensland wind farms at Thursday Island and Windy Hill have been operating for over ten years now and there is great potential for further exploitation of this market. However, Queensland remains a largely untapped market for wind farm development and makes the smallest contribution to Australia’s wind energy capacity compared to other states. This has largely been due to the fact that investment has been buffeted by the low price that Renewable Energy Certificates have been fetching under the Renewable Energy Target (RET), the dismissal of the Carbon Pollution Reduction Scheme legislation, and the difficulty in obtaining funding after the global financial crisis.

Nevertheless, the redefinition of RET on 1 January 2011 (split into two components; the large-scale RET and small-scale RET), and the Government’s proposal to introduce a fixed price on carbon, have seen Origin Energy and AGL – two of Australia’s largest energy retailers – recently predict a positive future for their respective wind farm projects. If these incentives come to fruition, the certainty created will encourage investment through initial feasibility studies, and ultimately, the construction of wind farms.

The Queensland Government has placed a great deal of hope on renewable energy resource development, recognising that it could boost the Queensland economy by more than $3.5 billion and create up to 3,500 jobs. The Queensland Renewable Energy Plan outlines a number of initiatives designed to stimulate the development of renewable energy.

Stages of development

A wind farm development is complex, and a developer must invest a substantial amount of money and time before construction begins. A typical wind farm development will usually progress through the following stages:

1. Pre-feasibility: A low-cost assessment of various potential sites for wind farms and subsequently drawing up preliminary cost estimates for the optimal sites.

2. Feasibility: Analyse viable projects further to confirm assumptions and information gathered during the pre-feasibility stage. This involves:

• Inspecting the potential site
• Informal public consultation
• Preliminary environmental assessment
• Preliminary wind farm design
• A draft feasibility report.

At this stage, the developer will approach the landowner and seek access to the land to carry out inspections and install measuring devices. The developer may also start preliminary discussions about a formal agreement for lease of the land. During these discussions, the developer must consider:

• Hours of access
• Obligations when on the land (for example, to close gates)
• Delivering on obligations
• Whether security will be offered for performance of the developer’s obligations (for example, a bank guarantee)
• Insurance requirements
• Statutory requirements (for example, under the Queensland Sustainable Planning Act).

3. Development: If the developer decides to proceed with development, it must first have the necessary approvals and have secured rights to use the land on which the turbines will be constructed. Before construction begins, the developer must:

• Obtain permits and approvals (once the proposal has been accepted) from local and state government departments
• Obtain land rights for the sites
• Survey the site
• Negotiate financing.

At this stage, the developer will look to enter into a formal lease document with the landowner and secure the landowner’s consent to lodge a development application over the property. The developer should be confident about easement requirements so that meaningful provisions can be inserted into the lease documentation. If negotiations become protracted, the developer may have to negotiate a short-term agreement with the landowner to avoid project delays.

4. Design and planning: To plan for the construction and operation of the final wind farm site, the developer will call for tenders and enter into contracts with the relevant service providers and builders required to complete the project. Steps include:

• Choose final wind turbine sites
• Design mechanical and electrical systems
• Design civil engineering infrastructure
• Negotiate and conclude calls for tenders and contracts with suppliers
• Plan maintenance of the wind farm
• Plan management of the construction and operation phases, and environmental monitoring
• Plan decommissioning.

5. Construction: The practical construction phase involves:

• Constructing hardstands
• Undertaking civil engineering work
• Installing machines
• Connecting electrical equipment.

Due to the number of people entering the land at this stage, it is important that the agreement or lease adequately addresses the landowner’s expectations about the use of his or her land by the developer’s consultants and contractors.

6. Handover and close out: This marks the beginning of the operation phase of the wind farm – when the turbines start spinning. At this stage, the developer will:

• Commission the power station:
- Perform mechanical tests to ensure compliance with manufacturer's specifications - Verify electrical and communication systems - Restore condition of access roads and control erosion - Clean the site.
• Approve commercial commissioning of the power station and take official possession of the project.

Depending on the outcome of negotiations about rent payments, this stage may mark the start of payments to the landowner, as many wind farm leases provide for rent to be paid based on the revenue generated by the wind farm.

7. Maintenance and performance: Operation of a wind farm includes control, monitoring and maintenance activities that must be performed precisely to keep downtime to a minimum. This phase is the longest phase of all because it represents the majority of the lease term.

8. Decommissioning: When the power station's activity must come to an end for whatever reason (for example, the end of the machinery's service life or lack of markets), the developer must dismantle the facilities. This involves dismantling machinery and other installations, and restoring the site to its original condition in compliance with leases and other agreements concluded with landowners and other stakeholders (local and state government departments).

It is essential that the lease between landowner and developer – at this point negotiated some years ago – adequately addresses the developer’s make-good obligations. Given the impact that turbines, necessary infrastructure and improvements for a functional wind farm have on the land, developers must ensure that the lease adequately addresses exactly what the developer is (and is not) required to do. The law is dynamic, and changes are likely over the term of the lease. A properly drawn lease will recognise that requirements change over time, and effectively provide for those requirements to be met.

The contents of this paper are not intended to be a complete statement of the law on any subject and should not be used as a substitute for legal advice in specific fact situations. HopgoodGanim cannot accept any liability or responsibility for loss occurring as a result of anyone acting or refraining from acting in reliance on any material contained in this paper.