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Why do you need a purpose clause in your solar energy lease?

Texas may be the best state in the nation when it comes to land appropriate for solar energy, and these have been boom times. With the proliferation of interest in leasing land for solar energy purposes, there has been a corresponding proliferation in leases. Each company seems to have its own version.

How is a landowner to know which leases are worth the trouble of signing? We can’t offer legal advice in a blog post, but one of the issues to look out for is very simple: the purpose clause in the lease.

When there is a statement of purpose in a lease, it is generally a very simple statement of purpose, such as “this lease is for the purpose of solar energy.” When there is no statement of purpose, one should certainly be added.

Why is a purpose clause so important?

A purpose clause sets out the very definition of what the lease is for. This is often done in combination with a list of definitions, as used in the lease. To determine what activities will be permitted under the lease, you need to know the definition of “for the purpose of solar energy.”

Between the purpose clause and the definitions, it should be possible to determine exactly what the developer is allowed to do on the leased property. For example, the lease might define “solar energy” as “the collection, conversion, transmission and distribution of electrical energy converted from solar energy.”

To avoid any surprises, there should be as little ambiguity as possible. The unwanted surprise might be a developer seeking to exploit your land in other ways besides that which is required to produce solar energy.

The sorts of activities required for the project should be spelled out clearly. These often include:

  • An easement for ingress and egress, often including the right to construct roads
  • An easement for the construction of collection, transmission and distribution facilities
  • Other rights necessary to operate the project

If the lease grants these easements, you should make clear in the contract that they do not survive the expiration or termination of the lease itself.

Your purpose clause should specify 1) that the developer cannot use the property for any other purpose, and 2) that no additional rights are granted beyond those listed in the lease. This should limit the developer’s activities to those you would expect from a wind energy operator and restrict the unexpected use of your land.

The purpose clause is only one of many terms in the lease that could have a profound impact on your happiness with your solar lease. Before you sign any lease of your property, you owe it to yourself to have an experienced energy law attorney review it and protect your rights.