By: Jacob H. Kiessling, Esq.
Over the past few years, Pennsylvania landowners, and farmers in particular, have witnessed a surge in the number of solar companies seeking to lease their land for the purpose of constructing solar facilities. The nature of agricultural land, being undeveloped and of high acreage, makes Pennsylvania’s farmland ideal for commercial solar projects. On average, solar companies offer higher per acre rental payments than agricultural rental rates. The first question that many landowners ask is “how much will I be paid?” While payment is important, the questions and conversations should not stop there, as payment provisions are far from the only issues that need to be addressed in the lease negotiation process. Some of the more serious issues presented in many solar leases include the restrictions on the landowner’s use of the land, how much of the land will actually be utilized once the solar project comes to fruition (as this is often the basis for determining the payments), and what are the requirements for restoring the land once the solar lease terminates.
For instance, when a solar company approaches a landowner seeking to lease his 150 acre farm, there is a high likelihood that the company does not intend to utilize the entire 150 acres for its solar facilities. Instead, the company may propose to use only 50 acres while reserving easements over the rest of the acreage. These easements are not “paid” for and restrict the landowner’s use of his undeveloped and underutilized land. In this case, the landowner who thought he would receive $150,000.00 per year ($1,000.00 per acre based on 150 acres), will end up only receiving $50,000.00 per year. Negotiating a minimum acreage requirement can solve this problem. If the solar company fails to utilize the minimum requirement, payments will not be calculated on an acreage lower than the set amount.
Landowners must also be cautious in their negotiations of the terms concerning the expiration of the solar lease. Solar leases tend to last thirty or more years, and, although distant at the time of lease negotiations, what happens at the end of a lease is extremely important. The lease must contain proper decommissioning terms, such as the removal of both above-ground and below-ground solar improvements and the regrading of the soil. A properly negotiated solar lease should also require the delivery of a security bond or other financial guarantee to the landowner that secures the performance of the decommissioning of the solar facility. The landowner should also have the right to demand that such financial security be re-evaluated every few years so as to ensure that the amount of the bond or security is adequate to cover the costs of decommissioning.
These are only a few of the many issues which should be considered prior to entering into a solar lease arrangement. Any proposal received from a solar company should be reviewed by an attorney prior to its execution. Mette, Evans & Woodside attorneys have extensive experience reviewing and negotiating solar, and other alternative energy, leases and can work with you to ensure that you and your land are protected.
Read the second article in this series: “Update on Solar Leases in Pennsylvania and Further Landowner Considerations”