Michigan Opens the Door for Expanded Solar Development on Farmland

On Monday, June 3, Governor Gretchen Whitmer and the Michigan Department of Agriculture and Rural Development (MDARD) announced MDARD’s decision to allow for commercial solar energy development on land currently enrolled in the Farmland and Open Space Preservation Program, commonly known as PA 116.

PA 116 was established in 1975 and is designed to preserve farmland and open space in Michigan. PA 116  enables landowners to enter into Farmland Development Rights Agreements (also referred to as PA 116 Agreements) with MDARD that restrict development on farmland and provide tax incentives and special assessment exemptions to participating farmland owners. Land subject to PA 116 Agreements must remain in agricultural use for a minimum of 10 years and is protected from any non-agricultural development.

This new policy creates a substantial opportunity for solar developers with respect to land in the State of Michigan. Prior to this policy change, PA 116 Agreements frequently presented an obstacle to solar developers searching for large areas of land for projects within the State. A developer looking to build a commercial solar project on land subject to a PA 116 agreement had to seek a release, which is only available in extremely limited circumstances, and these were often not capable of being met. If a release could be obtained, however, the landowner had to then repay the tax credits taken during the last seven years, plus interest on the parcel being removed. Under the newly announced policy, a release, and the related immediate repayment of tax credits, is no longer required.

To take advantage of the new policy, the landowner must split their original PA 116 Agreement pursuant MCL 324.36110(4). The land that is not subject to a Commercial Solar Agreement will continue to operate under the original PA 116 Agreement. The landowner must enter into an Amended Farmland Development Rights Agreement for the land subject to a Commercial Solar Agreement. In signing the Amended Farmland Development Rights Agreement and a Commercial Solar Agreement with the Solar Project Company, the landowner agrees to certain conditions, including, but not limited to:

• The existing PA 116 agreement is extended by deferring its continuation until after the solar energy agreement ends.
• Landowner cannot claim tax credits during the time the property is used to generate solar power.
• Solar Project Company must design and plant the site to achieve at least a 76 on the Michigan Pollinator Habitat Planning Scorecard for Solar Sites.
• Any portion of the site not included in pollinator plantings must maintain United States Department of Agriculture—Natural Resource Conservation Service Cover Standard 327.
• Solar Project Company must obtain maintain financial surety sufficient enough to decommission the solar array and return the property to agricultural purposes.
• Establishment and maintenance of the site must be such that the land can to be returned to agricultural uses at the end of the solar agreement.

Currently, there is an estimated 3.4 million acres of farmland enrolled in PA 116 which presents a significant opportunity for new solar energy development in Michigan. Dykema has extensive experience handling MDARD agreements and in renewable energy developments throughout Michigan and is prepared to assist with the full array of real estate matters, including acquisition, construction, zoning and land use, leasing, financing, regulatory compliance, and litigation. If you have questions about solar development on PA 116 land, please contact Stephen Estey at 248-203-0538, Adam Fishkind at 248-203-0749 or your regular Dykema contact.