When the time comes to lease part of your land to a solar developer, you want to be certain you understand what you’re giving up. It depends in large part on what you negotiate in your lease.
Generally, solar developers are granted the exclusive right to use the part of your property they lease. However, they may only use the land for a solar farm, not for any other purpose.
Exclusive means above and beyond your right to use the land. However, solar arrays have smaller footprints than wind farms or oil and gas exploration projects. Nevertheless, they cover a large surface area. Typically, a solar farm uses five to seven acres of land to produce a megawatt of capacity. That brings a 200-megawatt solar farm to around 1,000 to 1,400 acres.
In contrast, wind farms often involved leasing thousands of acres of land, but the use may not be exclusive. On a wind farm, you may generally continue to ranch or hunt with a few, minor exceptions.
Solar farms generally do not allow you to continue to use the leased portion of your land in any way because the solar arrays and supporting infrastructure tends to cover the surface of the land entirely. The leased land will generally be fenced off, and you will give up your rights to enter or use the land in any way.
Beyond that, you give up ingress and egress rights to the developer. That is the right to enter and exit the rest of your land as necessary to install and maintain transmission and support facilities. Your lease will generally specify that you must accommodate these needs. However, you retain the right to use the unleased portion of your land for any purpose you like, as long as it does not interfere with the solar farm’s generation of electricity.
For example, you can continue to use the land outside the area occupied by the solar array for:
- Oil and gas exploration
- Mineral exploration and extraction
- Wind energy projects
A removal bond guarantees your land will be cleaned up
You may be concerned that, at the end of the lease or if the project is decommissioned, you could be left with solar transmission and support facilities on your land. These could be expensive to remove.
Landowners’ concerns about this have resulted in removal bonds being required in virtually all energy leases. The bond (or equivalent security, such as a letter of credit) is a guarantee from a credit-worthy entity in an amount that reasonably estimates the cost to remove all facilities from your land. It often comes with a restoration clause promising to restore the land to the state it was before you leased it out.
Ideally, you would want a bond to fully remove the equipment and fully restore the land. However, it is not uncommon to see bonds for the cost of removal minus the salvage value of the equipment.
You may ask for this bond to include a dispute resolution provision. Additionally, you may wish to have a third-party engineer set the amount of the bond initially and periodically thereafter.
The removal bond is generally provided between the tenth and twentieth anniversary of the date the lease becomes effective. This is also negotiable.
Be sure to get an indemnity clause
Finally, your lease should include a clause requiring the solar company to indemnify you and hold you harmless should a lawsuit over the company’s use of your land arise.
As you can see, your solar lease needs to be vigorously negotiated and carefully drafted. Be sure to work with an attorney who has significant experience with energy leases.