Following Illinois’ passage of a comprehensive energy bill in late 2016, setting minimum goals for renewable energy production and providing incentive for development, a number of developers have begun pursuing the construction of solar energy facilities. While only a small number of solar energy facilities have been completed in Illinois, the developers have been signing lease and lease option agreements with landowners to reserve building sites for future development.
The lease agreements are generally structured to have an initial exploratory period where the landowner retains the use of their land, but the developer has the right to survey and perform testing on the site to determine its suitability for construction. Then, if the developer decides to build, annual rent is paid over a long lease term.
An important part of lease negotiations is to secure a plan for decommissioning the facility at the end of the lease term to ensure the land, usually cropland, is restored to farmable condition. Until recently, neither Illinois law nor Stephenson County ordinances contained provisions requiring standards for minimizing the impact on farmland or decommissioning the facilities.
Under a newly signed law, in order for new solar energy facilities to be eligible for approval by county authorities (the developer must generally seek a special use permit to construct a facility), the facility must present a decommission plan to the zoning authority that includes sufficient financial assurances that funds will be available to decommission the facilities even if the developer is otherwise bankrupt—an important consideration since many of the developers are new companies relying heavily on lenders to fund development. The construction of the facilities will also be subject to the standards of an Agricultural Impact Mitigation Agreement (referred to as an “AIMA”) that specifies, how facilities should be constructed, and provide standards for site restoration to minimize the impact on farming. While the parties to a lease may negotiate different standards than what the AIMA contains, it will provide a useful starting point for negotiating lease terms and to strengthen the position of landowners in obtaining assurance they will not be burdened with restoring their land should the developer fail.
A separate new act also addresses property taxes for solar energy facilities which is awaiting the governor’s signature. The developer must submit a plat map describing the boundaries of the solar energy facility to the county. Then, a new tax parcel will be created for the facility so the land and improvements may be taxed separately from the larger parcel on which the facility was built. Unlike with windfarms, a separate tax “parcel” will not be created just for the equipment.
The attorneys at Plager, Krug, Bauer & Rudolph, Ltd. have assisted a number of landowners negotiating lease agreements for solar energy development. A solar energy lease is a major commitment, usually lasting 20 years or more. If you are contacted by solar energy developers, we are ready to assist you.