Case Study: A Texas Landowner who found a solar lease that allowed him to retire
Sam is a landowner in West Texas who lives on a 450-acre ranch with his wife Lori. Sam’s family has owned this land since the days of the Civil War, and four generations of Sam’s family have successfully lived off this ranch, mostly by raising cattle and planting wheat – one of the 245,000 farms in Texas (99% of which are family owned).
In recent years, Sam and Lori have earned between $45,000 and $110,000 per year from farming. Although the ranch is large, the land is not very productive and so does not yield enough to justify major investments. The ranch’s income has varied due to fluctuations in commodity prices as well as weather, with crop yields and commodity prices leading to unpredictable income. During leaner years, Sam has supplemented his income by helping manage other farms.
Although in previous generations farming was a family operation, Sam and Lori’s three children are now in their 20s and have shown no interest in continuing the family tradition. Like many who were raised on farms, they sought their luck in nearby cities and do not see a future managing a ranch. Sam and Lori’s eldest son works in the oilfield as a field engineer, while their two daughters moved to the Dallas metro area to work as a nurse and dental hygienist. Texas’ booming economy offers them many possibilities beyond the farm.
Now that Sam is 54 and Lori is 52, the physical work on the farm is starting to take a toll and they are looking forward to a quiet retirement. Unfortunately, the ranch’s unreliable income and the high cost of putting their kids through college has meant that they have only been able to save about $80,000.
Sam remembers how in his grandfather’s days, the ranch had found itself on the edge of an oilfield, and a local company had leased part of the ranch and struck oil. Sam’s grandfather was able to afford one of the nicest cars in town.
Unfortunately for Sam, the wealth didn’t last, since the oilfield’s production declined, and the mineral rights of Sam’s land were split among several descendants of Sam’s grandfather. Although there still is some income from a well on the property, it never amounts to more than a few thousand dollars per year.
Sam is the sole owner of the surface rights of his ranch, and resolved to make 150 acres of it available for a solar project. After reaching out to energy developers for nearly a year, Sam ran into several dead ends, since the developers he found were only interested in projects that were easier to implement, and that did not require an extended negotiation with the local utility in order to connect to the nearby 115 kV transmission line.
Sam then reached out to Telkes and shared a description of the available land. The Telkes team sprang into action, reaching out to energy developers within our network. Within one week, we identified a developer who was willing to make the effort required to secure the interconnection, and made an offer to lease the 150 acres for $600 per acre per year for 30 years, or $90,000 in the first year, and indexed to inflation thereafter.
Once Sam and Lori expressed interest in this offer, the developer presented them with a Solar Lease Option Agreement, which grants the developer the option to lease the land from Sam, once the developer has secured the required permits, including the interconnection right. Since this lease is a complex document, Telkes encouraged Sam to hire a real estate attorney, who helped Sam understand his commitment to keep the land available for the project, so that the developer can invest in the permitting process with the certainty that he can lease the land from Sam once the permits are obtained.
After 14 months of applying for permits, the developer obtained the interconnection right and issued the Notice To Proceed, indicating that he was ready to start construction and exercise his option to lease the land. At this point, the first year’s payment of $90,000 became due and was received by Sam within 30 days of NTP. The developer is now constructing a 37 MWp solar project, and Sam has a guaranteed income stream for the next 30 years. The grass between the solar panels is being grazed by Sam’s sheep.
Sam and Lori have now chosen to retire, and are able to spend more time with their children, especially their oldest daughter who they are helping with her two little boys. They are also spending extended periods traveling and living in a condo they are renting near the beach on South Padre Island. Although they have hired a farm manager to help them continue to raise cattle and sheep on the ranch, the income from the solar lease has opened up new possibilities for them, without requiring them to give up farming completely.
Now that Sam has successfully implemented a solar lease, he is exploring the possibility of renting another piece of his family’s land for an energy storage project. He has found a way to combine farming with a solar project, opening up new possibilities with the guaranted solar lease rental income.
Email: telkes@telkes.org
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