Landowner Ground Leases for Solar Power Projects

As large, proposed land-based solar power projects have become more prevalent in Illinois, many solar power developers have approached landowners interested in entering into long-term ground leases. A ground lease has many important provisions that a landowner should carefully consider.

The financial attractiveness of solar ground leases is clear. Based on the typical structure of a flat rental amount per month, or year, usually with a built-in escalation factor, an acre of farmland will bring significantly more than continued use for growing crops. The landowner also will no longer have the cost and time associated with maintenance of the leased land. The solar company will typically visit the solar site a few times a year to control vegetation and conduct routine maintenance. Compared to wind turbines, a solar array, consisting mainly of panels extending to a height of 8-10 feet, is much less obtrusive, visually and from a noise standpoint.

The length of the lease is determined, in part, by the length of the purchased power agreement with the purchaser of the electric power generated, and by the terms of the project lender.

Along with solar panels, a few other items of equipment and facilities are required. A concrete equipment pad within the leased area, which will contain electrical equipment such as transformers, switches, and inverters, will be located within the leased premises. Poles and an overhead electric line may be required to connect the solar array to the nearest utility interconnection point, providing a path to the larger electrical grid. Additional easement rights will be required for the overhead line, and possibly other equipment, to cross land not part of the leased premises. A gravel road from the nearest public right-of-way to the solar facility also may be required. Typically, the project site will be surrounded by a chain link fence, often with an access path or road surrounding the perimeter inside the fence line

The time between signing a lease and the construction of the solar facility can vary, usually from 1 – 4 years. Solar developers will need permitting from the local county authorities, among others The developer will undertake geotechnical investigations, surveys, environmental reviews, utility interconnect studies and an agreement, surface use agreements, as well as other activities required before a site can be developed.

The solar company should have a plan to remove (decommission) the solar facility when the lease terminates. Because solar equipment is designed to operate for many decades, the residual value of the modules combined with the salvage value of some of the metal and electrical wiring components, means that the overall value of the equipment will likely at least partially offset the cost required for a contractor to remove the equipment. A bond or other form of financial security to insure equipment removal and land restoration may be required by the county, or can be negotiated as part of the ground lease with the landowner.

Other important considerations that the lease should cover include liability, insurance, property taxes, events of and consequences for default, legal fees, rights to assign, sell and transfer, and other factors.

Finding a lawyer with wind or solar energy ground leasing experience will help insure the landowner of fair and reasonable terms for what is likely to be a several decades long contractual relationship and help both parties to efficiently and effectively undertake negotiations to achieve a mutually workable and fair, and legally clear, agreement for the solar energy project.

Shay Law, Ltd. has been retained by many landowners around the State who a solar power developer has approached about a land lease. Our experience in negotiating leases and easements on the behalf of landowners for wind energy projects, gas and oil pipelines, and electric transmission lines provides us valuable experience in providing quality legal representation to landowners who may wish to negotiate land lease terms, both financial and non-financial, with solar developers.

Cypress Creek Renewables Solar PV Continues Farm Land Lease Activity

Cypress Creek Renewables, LLC has continued to solicit leases from Illinois landowners in many areas of Illinois. CCR’s approach is to have the landowner sign a lease and easement agreement that contains a relatively inexpensive “option” through specifying a 6 month diligence period, with a nominal payment to the landowner. This allows CCR both to try to obtain other properties and to conduct engineering and other analyses to determine whether it wishes to proceed to the next step. The agreement then gives CCR a 2nd option through another 18 month diligence period, with a larger though still relatively modest payment to the landowner. These two “option” periods afford CCR opportunities to terminate and walk away from the agreement. The form of agreement also provides other opt-out provisions that soften CCR’s commitment to pay the landowner all the rent and other compensation expected through the term of the lease. The form agreement contains many other provisions that are slanted heavily in CCR’s favor. To date, it appears CCR is resisting any meaningful revisions that the landowner and landowner’s attorney may propose. It should be remembered that CCR does not have eminent domain authority in the State of Illinois and therefore cannot force any landowner to sign any type of agreement. Landowners are advised to obtain advice and negotiating assistance from an attorney experienced in leases and easements with utility and energy project developers.

Shay Law, Ltd. is experienced in negotiating leases and easements on the behalf of landowners for wind energy projects, gas and oil pipelines, and electric transmission lines, which provides us valuable experience in providing quality legal representation to landowners who may wish to negotiate land lease terms, both financial and non-financial, with developers like Cypress Creek Renewables.

 

Cypress Creek Renewables in Livingston and Grundy Counties

A California-based developer of large-scale solar power projects has started soliciting interest from farmers and other landowners in at least two Illinois Counties – Grundy and Livingston. Cypress Creek Renewables, LLC has developed large, multi-acre solar power projects in several states in the U.S., and is attempting to extend its reach into Illinois. In order to develop a project, Cypress Creek typically leases 10 - 40 contiguous acres, the flatter the better, for up to 40 years (typically 20 years base term and successive 5 year renewal options). After an initial diligence period, if the site is suitable, Cypress Creek will install a series of photovoltaic panels elevated on structures a few feet above the ground. 

These types of projects take land out of agricultural production until the lease expires and the solar facilities are removed. Cypress Creek is offering to pay a flat amount to the landowner during the initial diligence period, and if it decides to build the project, would pay a flat annual amount per acre, with an annual escalation factor, for the life of the project. The form of land lease Cypress Creek is proposing contains many important terms and conditions, and landowners are advised to consult an attorney experienced with long term land leases and easements for energy projects. 

Shay Law, Ltd. was retained by landowners who Cypress Creek has approached about a land lease, and we are available to represent others as well. Our experience in negotiating leases and easements on the behalf of landowners for wind energy projects, gas and oil pipelines, and electric transmission lines provides us valuable experience in providing quality legal representation to landowners who may wish to negotiate land lease terms, both financial and non-financial, with developers like Cypress Creek Renewables.

Advancing Renewables in the Midwest

John Albers attended the Advancing Renewables in the Midwest conference in Columbia, Missouri on April 11 & 12, 2016. The conference's primary thrust was to identify, display, and promote programs and policies aiming for the increased use of renewable energy resources in the Midwest.

Many rural electric cooperatives and municipal owned utilities were in attendance. We learned how these energy providers are bringing renewable resources into their energy portfolios as well as enjoyed meeting others in the industry.