Have you thought about what you would say if a solar company approached you asking to lease or buy your land for a solar project?
As a result of increasing interest across the country in alternative energy sources, the solar industry has experienced substantial growth in recent years. According to an article published by Aaron Davis at Amarillo Globe News, “There have been significant reverberations in the energy industry recently — the nation signed a clean energy partnership with Canada and Mexico, Texas’ utility-scale solar market grew at a record pace in the first quarter of 2016, and ERCOT, an organization that manages the state’s grid, projected solar plants to be the only new plants to be built over the next 15 years.” Increasingly across Texas and even in the panhandle and south plains, landowners are being approached by solar companies seeking to lease agricultural land for solar projects.
Nathan Fabrik, with National Land Realty, wrote a fantastic blog called “5 Questions You Need to Ask Before Leasing Your Property for a Solar Project.” In his blog, he points out that sometimes these types of offers are too good to be true. “As a manager who has overseen the execution of 600 of these types of leases across 12 states, I can tell you there are some important questions that aren’t being asked,” says Fabrik. As a result of his experiences, he put together a list of five important questions that landowners should be asking before agreeing to lease or sell their property for a solar project.
- Is that really the actual dollar amount I’ll receive?
- Is the developer reputable?
- Should I lease or sell? Or both?
- Should I wait?
- Should I shop around?
To view the entire article, click here.
In May of 2016, the Texas A&M AgriLife Extension Service published an article to their Texas Agriculture Law Blog called “Key Solar Lease Considerations for Landowners” written by Tiffany Dowell. Dowell gives her opinion on the subject by saying, “As always, I highly recommend that landowners consult an experienced attorney to review any lease agreement before it is signed. As Stamford, Texas attorney James Decker explains, “We’re still early in the era of solar energy development in West Texas. Lease rates appear very enticing, particularly in an area of low commodity prices, but landowners should seek advice from straightforward, practical-minded legal counsel to minimize unintended consequences and avoid a deal that’s ‘too good to be true.’’” In the article Dowell outlines some of the key considerations land owners should think about when negotiating a solar lease.
- To which estate does the sun belong?
- Rights of mineral owners.
- Solar leases are usually not short in duration.
- Royalties are not common in solar leases.
- Solar leases will likely prevent any other use of the property.
- Watch for prohibitions on use of other properties.
- A solar project could impact special tax use valuation eligibility.
- Landowners should watch for these common legal technicalities.
- Guarantee of title
- Confidentiality clauses
- Forum clauses
- Attorney fee provisions
- Dispute resolution clauses
To view the entire article, click here.
To help landowners understand the opportunities and implications of leasing their properties for solar installations, the Solar Energy Industries Association (SEIA) developed a comprehensive “Guide to Land Leases for Solar.” The guide gives a step-by-step explanation of what to expect following an initial inquiry. It also gives a list of questions to ask a solar developer and some tips on how to work out any issues you may face while dealing with the developer. To view this guide, click here.
With the solar industry experiencing a large amount of growth in a short period of time, there is very little information available for landowners considering the pros and cons of entering into a solar lease agreement. We hope that this blog has helped you understand a bit more about solar leases. As always it is a good idea to consult an attorney before entering in to a legal agreement.
Sources:
http://agrilife.org/texasaglaw/2016/05/31/key-solar-lease-considerations-landowners/
http://amarillo.com/news/latest-news/2016-07-12/booming-solar-industry-could-mean-big-business-texas
http://www.land.com/owning/questions-to-ask-before-leasing-property-for-solar-project/
http://www.seia.org/research-resources/seia-guide-land-leases-solar