Solar and Wind Leases Making the Rounds
With renewable energy coming into greater focus for power companies, local, state, and federal governments, many farmers and other landowners are being presented with potential solar or wind leases. These leases can provide a nice opportunity to diversify some land and potentially qualify the farmer for some tax credits.
However, they tend to be very long-term (usually 30 – 40 years) and are not guaranteed, so there are a number of factors every landowner should consider.
Standard Form Leases
The process typically starts by the landowner being contacted by a land agent. The land agent is often a contractor for the solar or wind company whose job is to find and sign up landowners and a certain number of acres for a potential project. The land agent will typically present the landowner with a standard form lease. These leases vary from company to company but generally are fairly similar. The important thing for landowners to realize is that they can and should have the lease reviewed by their attorney. It is not uncommon to negotiate some aspects of these leases to be fair to both the landowner and the power company.
Terms to Consider
Some of the important terms to consider include the following:
How long is the development term? This is the period in which the company does their due diligence. During this time, the land can still be farmed while the company determines whether this is a viable project. This would be from 3 up to 7 years.
Is there a signing bonus? Most companies offer a signing bonus or first year payment as part of the development term rent.
How are they handling crop damage? We want to be sure there are specific provisions that compensate the farmer for damaged crop related to the activities of the company – whether directly or indirectly.
Is the lease area sufficiently defined? In some cases, the company might only want a solar garden of less than 10 acres. In that case, we wouldn’t necessarily want an entire 160-acre field subject to the lease.
Have they included restoration or just removal? The lease should require the company not only to remove materials at the end of the lease, but also to restore the land. Some leases do not include sufficient language regarding restoration.
This is just a partial list of what every landowner should consider when entering into a solar or wind lease. Most solar and wind companies will cover the cost of you to review with your attorney, so it always makes sense to take advantage of the opportunity to consult with an experienced attorney.