Over the next 25 years, Ontario plans to double electricity grid capacity and reduce reliance on fossil fuel based energy for building heating, transportation, and industrial processes. Potentially, this includes some 6,000 MW of utility-scale solar, 17,000 MW utility-scale wind turbines, and Battery Energy Storage Systems (BESS) needed to make those variable facilities consistent, as well as significant transmission corridor developments.

These buildouts will mostly be decentralized in rural regions, increasing demand for access to farmland. OFA supports non-emitting energy frameworks that do not hinder normal farming practices, accommodate on-farm diversified uses, and protect prime agricultural areas.

The Ontario Government recently clarified the role of Agricultural Impact Assessments, restrictions on ground-mounted solar, and restrictions on large projects procured by the Independent Electricity System Operator (the IESO) in Prime Agricultural Areas. Although meeting these IESO qualifications is the responsibility of developers of energy sites, and qualifications do not currently apply to any projects outside of IESO procurements, you should become familiar with this information: https://news.ontario.ca/en/release/1004981/province-launches-largest-competitive-energy-procurement-in-ontario-history

Before signing a lease or easement agreement, ensure it fits your plan for your farm.

1. Meet and work with neighbours and your OFA Member Service Representative.
2. Before Signing Anything #1– Seek Legal Counsel .If a group of landowners are impacted, consider legal services for the group, and request the facility owner pay for all legal services.
3. Before Signing Anything #2 – Speak to your bank and insurance company. Make sure any concerns they have are addressed in all agreements.
4. To increase your bargaining power, apply to your local distribution company for the right to connect a generator yourself. The connection agreement is valuable. Own it yourself.
5. Lease vs. Easement – If you decide to grant access, try negotiating a lease, avoid an easement or conversion to an easement; as easements are hard to impossible to discharge.
6. Term of Lease – Set term of an initial option and consider a first lease term of 20 years with 5 year renewals. This provides enough time for pre-construction tests and approvals, sets a period to make profits and brings the replacement date a renewable energy facility and the lease renewal dates closer together, which improves your negotiating position.
7. Cooling off Period –Either party may cancel the agreement within 30 days without reason or penalty.
8. Lease Quitclaim – ensure a lease provides for a clean end so the facility cannot be released from the agreement or recover funds from the escrow account without your approval and certification that they have met all their obligations including decommissioning and restoration.
9. Lease Income – If lease income is based on a percentage of the power sale price, stipulate that power must be sold to the government, utility, or the Independent Energy System Operator. Otherwise, require your preapproval for sale to a third party, because sales to a subsidiary of the facility at a loss could artificially reduce your rental income.
10. Easement Income – Should you agree to an easement, in addition to the initial lump payment, consider negotiating for annual rent based on the value of the land and a prevailing bank term rate, including a schedule to reassess any upward land value increase.
11. Option to Purchase – A valuable agreement, separate from a lease or easement agreement, and includes valuation and option payment. Take your time to review an option; it can be exercised to achieve the underlying lease or easement.
12. Option Price – Ensure you have a fair option price on a good lease. A large option payment will not turn a bad agreement into a good agreement.
13. Option Termination – Negotiate an option expiry date that suits your needs.
14. Right of First Refusal (gives you the right to match an offer on assets such as turbines, before the owner can sell it to someone else) – A valuable agreement, separate from a lease or easement, should you want to buy assets or the facility that the owner want to sell.
15. Specific Rights Only – Do not allow any clause that gives the facility company a Right of First Refusal or an option for any purpose other than the specific renewable energy activity. Such clauses can encumber your ability to sell the property to someone, estate and succession plans, and your ability to develop other activities.
16. Insurance – Stipulate that the facility company must annually produce a valid certificate of insurance covering liability to the farm and others, indemnifying the farm and assuming full liability for damages to the facility, and any third parties.
17. Transferability – Stipulate that the agreement cannot be transferred by a facility owner to any person or company without your approval; or list steps to enable an agreeable transfer.
18. Building Restrictions – Include a map of the property as an appendix to the agreement that outlines areas where farm activities are prohibited, and the minimum distance that a turbine, solar array, or BESS will be from any home, barn, or other structure on the property.
19. Minimum Setback Distances – Stipulate where new buildings can and cannot be built in any agreement to ensure land remains available for new farm operation buildings.
20. Other Development – If the property does have value for other developments, do not sign; you will be giving the facility company your future profits or capital gains. Otherwise, have a rent structure that accounts for higher land value – one way, with no devaluation.
21. Your Other Rights – Some leases have clauses that appropriate development rights for aggregates, ground water, topsoil, sale outside of the family, and even non-disclosure clauses that restrict your right to speak in public. Remove such clauses from the agreement.
22. Net Metering – Depending on project type, consider asking the facility owner to connect your own equipment for net metering or on farm power. Use their expertise at their expense.
23. Trees and Cutting – Add a clause or map as an appendix to the agreement indicating where trees may or may not be cut.
24. Appearance – Prohibit advertising. Stipulate a maintenance schedule to ensure the appearance of a facility does not increase Injurious Affection. Stipulate site reclamation and decommissioning.
25. Fill Material & Chemicals – Do not allow fill to be taken from your land, prohibit toxic gear oils and fluids on your land, and stipulate remediation.
26. Site Security – Do not take on any obligation, paid or unpaid, to provide security, it could make you responsible for preventing damage.
27. Applies to One Lot Only – Limit the agreement to apply to the actual area leased and do not reference to any other land.
28. Area of Site – Limit the area covered in the agreement to a suitably small area.
29. Tenants’ Rights – These specify facility company rights to do studies, construct, operate and maintain the facility, and transfer electricity from to the grid. Stipulate the numbers and density and locations of their renewable energy assets, roads and wires, and study areas.
30. Times of Access – Access for emergencies at any time. Other access between 8:00 a.m. and 5:00 p.m. Monday to Friday and requires notice so there is no interference with seeding, harvests, calving, or other farm or family time restricted activities.
31. Property Taxes and Assessments – are landowner responsibilities. Having a clause to require the facility company to pay taxes associated with a project is essential and it requires an enforcement clause. You cannot afford to pay their taxes without their income. In the case of default, you should get ownership of licenses to produce and sell power.
32. Escrow Fund – Require the tenant to have an escrow fund held with your lawyer or a trust company. Escrows are created at the start of construction and are used to pay debts to contractors, taxes owed, any maintenance the company refuses to do and reclamation costs.
33. Registration of Surveys – surveys should only be registered with your approval. The agreement should state that the tenant does not acquire a legal right of way or any privilege that could lead to shared or sole title. The tenant only acquires limited rights to use specific land, for a specific use, for a specific period.
34. Know all your options – There are other firms and partnerships. You could also consider undertaking a similar project yourself, to earn more than you would as a landlord. Don’t sign any agreement until you have considered the choices and determined what is best for your farm operation for the next 20 plus years.

Original: December 2010

Revised: October 9, 2024