One of the principals in our landowner client group recently asked me what I had learned from the competitive bidding process with wind developers. It was a great question (not a surprise — our farmer clients are on the ball!) and deserved some thought. So as the final expected post on this project, here are some reflections:
1. “Cooperative Bargaining” Best Describes the Process. We’ve been told that landowners east of the Mississippi have never formed a group and successfully conducted a competitive bidding process with wind developers. A phrase needed to capture the concept. At first, I thought “Collective Bargaining” was best. Now, “Cooperative Bargaining” fits the bill better in my mind. Farmers have worked in cooperatives for a long time, so the concept is not foreign. More importantly, though, the word “Cooperative” better describes the negotiation process. There were times when the interests of the landowners did not align with the interests of the developers, and in those situations very tough negotiations occurred. In most cases, though, there was more cooperation than confrontation: Ultimately, both the developer and the landowner group wanted to see a project built. That common interest can help drive the cooperation necessary to reach a fair agreement. The trick is to find an intermediary who understands the developers’ business and the landowners’ concerns, so that the process doesn’t lead to frustration for all involved.
2. Cooperative Bargaining Can Offer Something for Everyone. There’s no doubt that our landowner clients will benefit financially from our Cooperative Bargaining effort. All financial aspects of the deal saw material improvements over the offers that had been made on a landowner-by-landowner basis. But there were also real advantages for the developer who succeeded. It’s true that the developer reimbursed our client’s attorney fees and paid a more for the right to develop a project. Even so, the developer also assembled property rights much more quickly than if the developer had to go door-to-door, the developer did not have to negotiate with individual landowners or their attorneys, and the developer will enjoy built-in goodwill for the project because it has been supported on the front end by neighbors who are all participants. How can I be sure that this process worked for the developers? Most all of them who participated in the process — including many not selected — have asked to be involved in the next effort, should one develop.
3. This is a New Kind of “Community Wind.” In the traditional sense, a “Community Wind” project is one in which the community takes an ownership interest in the project. That would not have worked here, because our landowner client group did not want to be exposed to that sort of financial risk. However, the “Cooperative Bargaining” effort still secured many of the benefits that would be derived from a traditional “Community Wind” project, like assurance of participation and a higher anticipated return than if leases had been negotiated and signed by individual landowners.
4. Get Together Quickly. Developers, like landowners, don’t have much experience yet with “Cooperative Bargaining.” Consequently, developers should be expected to do what developers have always done: They will knock on doors one-by-one and offer a standard lease. If you want to increase your bargaining power, you should get together with your neighbors quickly to determine whether you want to negotiate as a group. Otherwise, a developer may believe that it has invested too much time and made too much progress through the traditional door-to-door method to deal with a group.
5. Don’t Rush the Process. The leases and easements that wind developers seek may commit your property for a very long period of time. The shortest lease period we’ve seen is about 35 years; the longest with developer-triggered renewal options can last around seventy years. Because farm property often passes through generations of a family, your decision to sign a wind lease is not just a decision you are making for yourself — it might be a decision you are making for your grandchildren, too. It’s important that you take the time to find competent counsel who can review the documents, negotiate your best deal, and answer any questions you have. Be wary of any developer who imposes artificial deadlines or tries to create a sense of urgency. It’s your land and you should be given the chance to thoughtfully consider the commitment that you might make.
6. The Process is Scalable and Can Be Transferred. The Cooperative Bargaining concept can be scaled to involve more landowners as the process develops. It can also be applied to other situations like Oil & Gas leases, where landowners have more experience negotiating as groups and where the documents are less complicated. Something less than a full-scale competitive bidding process is also possible. For example, neighbors can collectively engage counsel to review a proposed lease in order to split fees and make such a review more efficient.
I’ll try to boil down more “top tips” for “Cooperative Bargaining” soon.