Prior to 2018, the majority of solar leases entered into by land owners were for the production of on-farm electricity. However, since that time, the number of commercial scale leases has grown exponentially and will continue to grow given the changes in the administration and Congress in 2021. Over the past three years, the Mette, Evans & Woodside attorneys have assisted more than 100 individuals and landowner groups in the review and negotiation of community and utility scale commercial solar leases and sales agreements. If approached by a solar company, the following points, among others, should be considered and negotiated:
First, it is important to understand what acreage will be utilized within the Lease Agreement. More specifically, what acreage is available for the solar company to use, how many acres are they obligated to use, and what are the rights of the landowner on the acreage not utilized? For example, a company engaged in community scale solar development may approach an owner of a 200 acre tract with a desire to utilize 50 acres for solar development. It is important to define the exact location of the 50 acres, guarantee payment for 50 acres regardless of acres used (if the company will commit to such an acreage in writing, which is not often the case), and remove all restrictions on usage with respect to the remaining 150 acres. It is worth noting that guaranteed acreages can vary between community scale and utility scale types of solar projects.
Another major consideration is the effect of a solar lease on a property’s continued enrollment in Pennsylvania’s Clean and Green program. Currently, leasing enrolled land for solar use will result in roll-back taxes if a solar project materializes. It is essential to shift the burden of roll-back taxes, as well as the resulting increase in real estate taxes if the property cannot be re-enrolled, to the solar company.
Other crucial issues to address within the Lease Agreement include: (1) decommissioning provisions/bonding requirements to secure performance of the removal of solar panels and infrastructure and restoration of the land; and (2) the timing of payments so that landowners receive meaningful payments well before “commercial operations” have begun, but also during due diligence and construction periods.
If you have been approached by a solar company and are interested in moving forward, it is recommended that you contact an attorney experienced in solar lease negotiations as soon as possible. Solar companies often have deadlines related to filing applications for interconnection of a proposed facility. If you delay seeking advice, it may be too late for a professional to assist in the process. 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.