Balancing solar with agriculture in the US Midwest
Aug 29, 2019 09:27 PM ET
- Today we have heard of farmers in Australia unhappy at the approval given for three solar projects on agricultural land and also learned the benefits PV can bring for fish and shrimp farmers. In this op-ed for pv magazine USA, Stoel Rives LLP attorneys Sara Bergan and Thomas Braun discuss the balancing act to be made between solar and agriculture in the emerging Midwestern PV market.
State and local officials in the U.S. Midwest have long attempted to preserve the valuable agricultural land and rural character for which the heartland is known.
At times, those efforts have created real or perceived choices between farming and alternative uses of the land, often with well-intentioned policy creating hurdles for farmers seeking the best use of their land. In recent decades, conversations in multiple Midwestern states over using agricultural land for energy production have demonstrated the issue; whether it be for transportation fuels or electricity generation. Farmers who want to diversify their revenue streams in an era of depressed commodity prices by leasing land for solar development have been deterred by regulations restricting development on agricultural land and programs that incentivize continued agricultural use. Some Midwestern states have noted the potentially stifling effects of these regulations and programs, and are trying to find workable solutions and flexibility for landowners to more directly determine the best use of their land.
In Michigan, for example, the Farmland and Open Space Preservation Program provides tax incentives to farmers who agree to maintain agricultural practices on their land for at least 10 years. This program was created in 1974 to ensure productive agricultural land would remain in production even in the face of development pressure. With questions about whether solar was an agricultural practice such that a farmer who entered land into the program could lease it to a solar developer, governor Rick Scott in 2017 issued a policy that stated commercial solar development was not compatible with the initiative. Farmers interested in solar were left with a choice: forgo the opportunity to diversify income by staying in the program or paying back the previous seven years’ tax credits – plus 6% interest – to exit the program.
In June, governor Gretchen Whitmer reversed the policy and gave farmers the option of pausing participation in the program to be able to host solar. Under governor Whitmer’s policy, farmers can enter an amended Farmland Development Rights Agreement that extends their arrangement for a period of time equivalent to the amount of time the land will be used to generate solar power plus the remaining term of the agreement, resulting in no net change in the length of the original Farmland Development Rights Agreement. Tax credits cannot be claimed by the farmer from the time construction begins until all panels and structures are removed, at which time the land must be returned to agricultural use. This compromise allows landowners to keep the acres in the program, avoids associated over-payments or penalties, and gives farmers much needed flexibility to pursue solar options. Governor Whitmer’s policy affords the flexibility to host solar projects to the owners of the 3.4 million acres enrolled in the program.
Further west in North Dakota, the state’s energy generation siting statute and implementing regulations restricted the development of new energy infrastructure, including solar, on prime farmland. Prime farmland had been designated as an “exclusion area” along with national parks, historic sites and habitat critical to threatened and endangered species, such that energy development was generally ruled out. Although the North Dakota Public Service Commission (PSC) had some flexibility to approve projects with a “negligible” impact on prime farmland, the inclusion of such land among the exclusion areas still constituted a hurdle to the development of energy on agricultural land.
This year the public service commission changed the statute and rule to remove prime farmland from the list of sites designated exclusion areas. North Dakota PSC chair Brian Kroshus said the testimony from the late 1970s when the statute was enacted showed the impetus behind the law was a desire to protect farmers from the encroachment of unwanted pipelines and electrical transmission lines, not to ensure agricultural land be farmed in perpetuity. That change to the North Dakota siting law and implementing regulation became effective in July.
Like Michigan, Minnesota has agricultural land preservation programs that preclude enrolled farmers from hosting solar, including the Metropolitan Agricultural Preserves Program, the Minnesota Agricultural Land Preservation Program, and the Green Acres Program. Farmers enrolled in the Metropolitan and Minnesota programs can terminate participation but it does not occur until eight years after notice is given. To exit the Green Acres Program a farmer must pay back the deferred property tax assessment received during their time in the scheme plus three years’ back taxes. As such, Minnesota’s land preservation programs heavily restrict a farmer’s ability to take advantage of solar.
As in North Dakota, Minnesota state regulators have wrestled with restrictions on siting energy infrastructure on prime farmland that were probably not written with solar in mind. Minnesota’s state siting laws provide that no large electric generating plant be permitted in the state where the developed portion of the plant would include more than half an acre of prime farmland per megawatt of net generating capacity, unless there is no feasible and prudent alternative. For solar, which generally requires several acres of land per megawatt, this metric is relatively unworkable in areas where prime farmland is prevalent. While some developers have attempted to site projects in areas with little such land, doing so would be very difficult in large swaths of the state such as the southeast, where prime farmland soils are ubiquitous. This tension may be tested further as Xcel Energy, Minnesota’s largest electric utility, seeks to add several thousand megawatts of new solar generation capacity by 2030.
It is not yet clear whether Minnesota or other Midwestern states will follow the lead taken by states such as Michigan and North Dakota and take steps to formally adapt agricultural and soil preservation rules and regulations to reasonably allow for solar development. Meanwhile, landowners will surely continue looking for useful ways to diversify revenue streams; and utilities, corporations and residential electricity users will surely continue looking for the most efficient ways to add solar to the generation mix in the Midwest.
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