Storm brewing on wind contracts

Many land owners have been left in limbo following confirmation by Energy Minister Pat Rabbitte that plans for Ireland to export wind energy to Britain would not go ahead. Photo: Peter Houlihan.

Ken Whelan

April 21 2014 06:03 PM

Contracts signed by more than 1,000 farmers for the collapsed midlands' wind energy projects should be reviewed as a matter of urgency, a legal expert has warned.

While the midlands wind energy plans are in limbo following the failed energy export negotiations between the Irish and British governments, Nora Fagan – a member of the Law Society's commercial business panel – says the lease options negotiated by energy companies could still have serious long-term consequences for farming families.

Ms Fagan, who outlined her concerns at a recent Law Society seminar in Tullamore, told the Farming Independent this week that the main legal problem centred on the contracted options.

"While the wind turbine companies may only be leasing a hectare of land from a contracting farmer to construct the wind turbine, the option is placed as a burden on the entire farm," she said.

"This ensures that the energy companies have access to the land for the necessary cabling and ducting required for the transmission of electricity from the turbine, but it also has an impact on the zoning of the land.

"The effect of signing such an option essentially places the farm within a legal vacuum for the period of the option," Ms Fagan claimed.

Many farmers who signed the agreements with Element Power and Mainstream Renewable Power believed they were only pledging one hectare of land for wind farm development, but Ms Fagan said a clause in the agreements meant no registrations could be made on the farm without the consent of the wind farm operators.

Restrictions

"These legal restrictions cover a wide range of issues including leases and mortgages and indeed farmers have recently discovered that the transfer of land for housing sites has been prohibited,'' she claimed.

Ms Fagan also warned that the income from the wind farm leases – the bulk of them initially for five-year periods – will be treated as commercial income and not farm-related income.

"Many farmers have received a payment of €1,000 from wind farm companies for the execution of the option over their farm. These payments are fully taxable and do not qualify as income that can be set off against ordinary agricultural reliefs. Their net benefit after tax relative to the personal restrictions they impose on the farmer is questionable," she said.

Some lease agreements reviewed by Ms Fagan suggest that the energy companies will indemnify farmers against the loss of certain reliefs.

However, she stressed that the reliefs identified were those which existed at the moment and that the farmer was not indemnified against any subsequent or amending reliefs which may be introduced in the future.

"Considering some of the lease agreements have a life of 30 years with an option of another 30 and the payments are fully taxable, farmers and their families may find themselves in a worse situation in the years to come than they are today.''

Fagan also insisted that the options currently owned by the energy companies were "fully assignable" without the prior consent of the landowner.

Options

"Wind farm companies are multinational and trade their options on the international markets so it is quite possible that the options could transfer to another company at some stage during the lease and the landowner will have no say in this transfer or how it may affect his or her farm," she said.

She has called on the IFA, who assisted farmers with the wind farm lease option documents, to renegotiate the necessary amendments to these leases.

The wind farm proposals for themMidlands envisaged Element Power and Mainstream investing €8bn in the construction of 1,200 wind turbines in seven counties as part of a plan to export energy to Britain via an Irish Sea inter-connector.

Bord na Mona had also proposed investing over €1bn in a wind energy hub on cut-away bogs in the midlands. However, the semi-state company last week announced the project as originally planned would not proceed following the collapse of energy export negotiations between the Irish and British governments.

Energy Minister Pat Rabbitte stated last week that midlands project "would not proceed", saying the negotiations stalled because of "the economic, policy and regulatory complexities involved".

Reacting to Ms Fagan's claims, Element Power told the Farming Independent that it does not publicly discuss its commercial arrangements with landowners.

"Element Power has entered into agreements with hundred of landowners across five midland counties.

"Each of these individuals has obtained their own independent legal advice.

"The format of the agreement was negotiated at length between Element Power and the Irish Farmers' Association and its legal advisors and has since been reviewed by approximately one hundred different solicitors across the midlands,'' said the statement.

Mainstream Renewable Power was contacted last week for a comment on Ms Fagan's claims, but had not responded to our query before we went to press.

The IFA declined to comment when contacted.