How Mineral Rights Can Kill Your Solar Farm Deal

There is probably nothing more frustrating than spending months talking to land owners and learning late in the program that the deal is dead. How much did you invest in time and money knocking on doors and drumming up engineering resources?

With solar growing in the Midwest, so comes new risks. Solar was mostly a coastal business (west and east), minus the progressive work done in Colorado. What a lot of solar folks do know is to be aware of environmental issues. These can be flood plain surveys. Endangered spotted owls (and other animals). Native habitats that can’t be disturbed, amongst other issues.

The one that will get you in trouble in the Midwest is minerals. All different kinds. No, not diamonds, but natural gas and oil rights. These can go back for decades. Sometimes they get renewed. Sometimes they don’t. Yes, there are mineral issues in California, as they have drills in the middle of communities there in LA County! But this market is more mature and California is more progressive for renewables.

With the advent of horizontal drilling and fracking, you’d think it will be ok. But you can’t trust that someone with access rights, might want to start drilling right in the middle of your solar panels. This will kill the deal with investors and also push the land owner away very quickly. They will not entertain having an option agreement with you and their annuity dreams vanish like the sun setting.

And the tricky part is the mineral rights owner might not be the same person as the land owner. Now you’re dealing with yet an additional party in the transaction. And their interests are probably not going to be in alignment with your interests. They’re waiting for commodity prices to rise.

They might have also got the mineral rights for cheap decades ago, as the land owner believed that there was no chance of ever extracting anything of value at a price that made sense.

Well, now it went from being a lottery ticket to a possibility.

But there are ways to address this and research who owns these rights before investing hours of time and money chasing opportunities. If you look at 10 properties, often only 1 or maybe 2 will be good candidates for solar, because of this alone.

Add in interconnection costs, getting a PPA, getting a development plan that can hit your target IRR goals for your investors, this can make the 1 in 10 desirable property example, go to 1 in 40 fast.

The one thing we all don’t have enough of, is time.

This is why we’d like you to come join Chris and I in our next Solar MBA class.

You’ll be among the 300+ alumni that have leveraged the power of experience and will be able to apply this knowledge to your solar goals.

See you in the course.

Keith Cronin