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Agricultural Solar Leases

Agricultural Solar Leases

To first understand what a solar lease is, it is important to understand what a solar farm is. A solar farm is a large-scale solar photovoltaic project which first generates energy and then sends that energy for distribution. A solar farm can help power a residential community and it can also be used on a utility-scale basis to provide energy for an entire community or region. As renewable energy becomes more popular every year, developers are looking for more land that would be suitable for large scale solar projects.

A solar land lease is an agreement usually between a developer (often a private company) and large-scale agricultural landowners. The agreement is usually for a long period of time, 25 years or more. While exact terms can vary, payments are made to the landowner on an annual per-acre basis, and the payment rate is finalized in a contract between the developer and the landowner. Predicting the anticipated solar energy generation of a solar project is fairly straightforward, which allows both parties to come to a fair agreement on the annual payments to be made.
Large-scale agricultural landowners are becoming more aware of the opportunities and benefits that can be obtained while negotiating a deal with a solar project developer. Some of those benefits include:

• a source of passive income,

• the advancement of more sustainable farming practices, and

• lower energy costs overall.

However, there are some aspects of solar projects that some would find unappealing. While this may not be viewed as a downside to some, a solar lease generally requires a long term commitment that some landowners would not be comfortable with. In addition, solar leases may lead to some complexities when it comes to property transfers. With that said, landowners who enter into solar leases generally seem to agree that the pros of a solar lease appear to outweigh the cons in the long run.

Recently, solar leases for large projects have become more popular in Indiana. Dozens of Northwest Indiana farmers have agreed to lease terms with Doral Renewables, to install solar panels on their land, which will total approximately 13,000 acres of farmland. This is currently the largest solar farm being developed in the United States. According to Governor Holcomb, the project will have three phases and should be completed by 2024.

Legal challenges have been present regarding the project, however, and such challenges can delay or ultimately derail solar projects if successful. Recently, a solar project in Indiana was sent back to the local zoning authority for further deliberation as a local judge found that a land use exception was improperly granted. In August of 2021, Superior Court Special Judge Kim Hall found that the Pulaski County Board of Zoning Appeals (“BZA”) improperly approved of a variance allowing a solar project to take place in conflict with the local zoning ordinance. The Pulaski County Uniform Development Ordinance requires all solar energy projects of five or more acers to get approval of a variance from the BZA. Since the judge vacated the BZA decision to grant the variance, the matter goes back to the BZA for additional deliberation per the court’s order.

From development planning to contract negotiation, it is important to work with experienced attorneys regarding your interest in a large-scale solar project. Contact the attorneys of McNeelyLaw today to discuss your Indiana solar lease or project today.

This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.

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