BY: David Smith
Louisiana AMM Manager & Business Development Officer
Our goal at Argent Mineral Management has always been to maximize and protect the value of our clients’ mineral interests. However, a recent shift of focus on renewable energy options, such as solar and wind, has presented many of our clients with new opportunities to generate revenue on the surface lands that they own in addition to their mineral portfolio. Because solar energy is both clean and renewable, it is easy to understand why the demand for solar development is rapidly increasing. The focus of this article will be on solar leasing and considerations for landowners who decide this is a good option for them and their families. However, before we get into this, it’s important to understand some basics of solar energy.
Basics of Solar Energy
Solar energy is a renewable energy source that takes light and heat from the sun and converts them into electricity, which can then be used in several ways. Humans first used solar energy as early as the 7th century B.C. by concentrating sunlight through a magnifying glass to create fire.¹ In 1883, American inventor Charles Fritts created the first working solar cell, which was installed on a rooftop in New York City (picture below).² As of February 2024, there are over 4.2 million U.S. homes (4.96%) with solar panels, amounting to an estimated 105–126 million panels nationwide.³
The efficiency of solar energy has also evolved significantly The first solar cell developed by Charles Fritts converted only 2% of sunlight into electricity. Today, modern solar panels achieve an average efficiency of approximately 20%, with advanced models reaching as high as 50%.⁴ Efficiency depends on factors such as panel type, sunlight exposure, and temperature. The map below illustrates the average annual solar radiation across the U.S.⁵
Solar Leasing and Land Suitability
The smallest tract suitable for a solar lease is typically 10 acres, though larger areas are preferable. On average, it requires 10 acres to generate one megawatt (MW) of electricity, which produces approximately 2,146 megawatt-hours of solar energy per year.⁶ Considering the average U.S. household uses 10.8 megawatt-hours annually, a single megawatt of solar panels can supply nearly 200 homes.⁷
Several factors determine whether your land is suitable for solar development:
• Proximity to existing infrastructure – the closer your tract is to an existing substation, the more likely you are to get leased.
• State regulations – local policy can make your tract more or less desirable to a potential solar developer.
• Land conditions – clear, flat, dry land is preferable to wetlands or tracts with obstructions.
• Flood zone risk – prior to any lease being taken, a developer will conduct a risk assessment, which could potentially greatly reduce the acreage that gets leased or deter the lease altogether.
Lease Terms and Key Considerations
Now that you have a better understanding of what a potential solar developer is looking for, let’s take a look at some important considerations for you, the landowner, starting with lease terms.
Similar to an oil and gas lease, solar leases have many clauses that need to be read thoroughly and are ultimately negotiable. It is important to note, however, that signing a lease agreement does not guarantee a solar lease; rather, it ensures that the solar developer has the option to move forward with the project at their discretion. Additionally, solar leases are for 20 years or longer, and often contain options to extend for additional 10-year increments.
Another difference is that landowners typically sign two documents: an option to lease and an actual solar lease. Payments for solar leases originate when an option to lease is signed. Similar to a bonus payment made for an oil and gas lease, these payments can be paid up front or every year until the project is either approved or rejected, which can take as long as six years. Once the project is approved, however, landowners can expect payments between $250–$2,000 per acre per year depending on many of the factors previously addressed, along with a 1% – 3% escalator every year.
Because these leases are often multigenerational, much consideration needs to be given to the terms and conditions that are agreed to prior to signing, such as:
• What happens if the solar project is abandoned within the first few years of the lease?
• Who is responsible for any liability should something happen as a result of operating the solar farm?
• How will this impact any current or future oil and gas production underneath the solar farm?
• If I sign a solar lease, can I still sell my property?
• How can I access my property once the solar panels are installed?
• Am I responsible for insurance for the solar farm?
• What rights will the solar developer have on my property?
• Who is responsible for removing the panels after the lease expires?
Additional Fun Facts⁸
• Texas ranks 2nd in the U.S. for total installed solar capacity, with nearly 38,000 MW—enough to power 4,586,093 homes.
• Louisiana ranks 30th, with 1,137.62 MW—enough to power 117,254 homes.
• Oklahoma ranks 40th, with 376.41 MW—enough to power 45,909 homes.
Ultimately, solar leasing is a complex process requiring clarity and professional guidance. At Argent Mineral Management, our team is well-versed in these matters and ready to assist. If you or someone you know has been approached with a solar lease opportunity, or you want to explore your property’s potential for solar development, contact me at (318) 251-5854 or email: dsmith@argentmineral.com.
References
¹ EnergySage: The History and Invention of Solar Panel Technology
² Smithsonian Magazine: A Brief History of Solar Panels
³ SolarInsure: How Many Americans Have Solar Panels
⁴ Enel X: Are Solar Panels Energy Efficient?
⁵ U.S. Energy Information Administration: Where Solar Is Found
⁶ Freeing Energy: Solar PV Energy Output
⁷ EIA: Average U.S. Household Energy Use
⁸ SEIA: Solar State by State
