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Most Favored Nations Clauses In Wind Farm Contracts

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Scott A. Storey
Foster Swift Agricultural Law Update
January 2012

The current national focus on developing alternative sources of energy has resulted in a dramatic increase in efforts to obtain leases and/or easements for the development of wind farms. These efforts have expanded far beyond the Great Lakes shorelines and windiest areas of Michigan, and wind farm developers are now obtaining leases and easements in nearly every part of the State.

In general, the provisions in the wind farm contracts, like in other contracts, are negotiable.  However, an increasing number of developers are using "Most Favored Nations Clauses" to avoid negotiation over the financial terms in these contracts. 

A Most Favored Nations Clause usually promises that the developer will not offer anyone else a better deal.  The Most Favored Nations Clauses are typically applicable only to the financial terms of the wind farm contract.  Developers will promote the clause as assuring you that no one in the area will get a better deal than you.  However, developers will include a Most Favored Nations Clause in all of their contracts.  Thus, the practical effect of the clause is that the developer also cannot offer you better financial terms then it offers to everyone else.  The clause allows the developer to claim that its hands are tied and that it is impossible to negotiate any of the financial terms of the contract. 

Fortunately, Most Favored Nations Clauses are usually limited to the financial terms of a wind farm contract.  Thus, with the assistance of legal counsel, it may still be possible to negotiate issues such as turbine and road placement, drain field repair, burying lines below plow depth,  guaranteed payments for the length of the contract, and site restoration when the contract terminates.