Illinois farmers are increasingly approached with opportunities to lease or sell farmland for renewable energy projects or to participate in carbon credit markets. These offers can look attractive—guaranteed income, diversification, and a chance to support clean energy. But they also come with long-term legal and financial risks. In this article, What Illinois Farmers Should Know About Selling or Leasing Land for Solar, Wind, or Carbon Credits, we share the key issues to consider before signing a contract that could affect your land, family, and future.
Why Energy and Carbon Projects Target Illinois Farmers
Illinois farmland is valuable to energy developers and carbon programs because of its size, quality, and location. Farmers may be approached for:
- Solar energy projects: Leasing land for large-scale solar farms, typically 20–40 years in length.
- Wind energy projects: Allowing wind turbines, access roads, and substations on farmland.
- Carbon credit programs: Getting paid to implement conservation practices (reduced tillage, cover crops, reforestation) that capture and store carbon.
While these opportunities can create stable, long-term income streams, they also bind the land and heirs to new restrictions.
Solar Land Leases in Illinois
Solar leases are often long-term agreements, sometimes 30 to 50 years including extensions. Key considerations include:
- Payment Terms: Leases may pay $500–$1,500 per acre per year, but payment structures vary. Some include fixed rent, while others tie payments to energy production.
- Land Use Restrictions: Once land is leased, farming is usually prohibited on those acres. Check whether non-leased acreage is affected by easements or construction.
- Property Taxes: Converting farmland to solar use may change its tax classification from agricultural to commercial. This can dramatically increase annual property taxes unless negotiated into the contract.
- Decommissioning: The contract should require the developer to remove panels, wiring, and foundations when the lease ends. A decommissioning bond is essential to ensure the company and not the farmer pays for cleanup.
Wind Energy Leases
Wind projects typically involve fewer acres but much larger structures. Farmers should carefully review:
- Payment Structures: Some contracts pay annual rent for turbine sites; others pay royalties based on energy generated. Confirm escalation clauses to account for inflation.
- Access and Easements: Developers may need permanent access roads and easements for transmission lines, which can affect farming operations on nearby land.
- Noise, Shadow Flicker, and Neighbor Disputes: Wind turbines can create disputes with nearby landowners, and leases should address liability if issues arise.
- Succession Planning Impact: Because these leases can run for decades, they will bind heirs to the terms.
Carbon Credit Programs
Carbon markets are newer and more complex than solar or wind. Illinois farmers may be approached to enroll in voluntary carbon markets or sell credits to corporations seeking to offset emissions. Key issues include:
- Practice Requirements: Common commitments include reduced tillage, planting cover crops, or managing grazing differently.
- Verification & Monitoring: Carbon credits require third-party verification and ongoing recordkeeping. Farmers may need to share soil data and farm records for years.
- Contract Length: Many carbon programs require commitments of 10–20 years. Early termination can result in repayment obligations.
- Ownership of Credits: Contracts should clearly state who owns the credits—the farmer or the aggregator.
- Market Uncertainty: Carbon markets are still evolving, and payments per acre may fluctuate significantly. Farmers should be cautious about locking into long-term commitments without guaranteed pricing.
Risks to Watch Out For
- Long-Term Restrictions: Leases and carbon contracts can tie up farmland for decades, limiting future use or sale.
- Tax Consequences: Land reclassification, commercial use taxes, and income tax obligations must be considered.
- Bank and Mortgage Issues: If land is mortgaged, lenders often require consent before entering into long-term leases.
- Impact on Government Programs: USDA subsidies and crop insurance eligibility may be affected if farmland is converted, or practices change.
- Developer Solvency: If the energy company or aggregator goes bankrupt, farmers may be left with abandoned structures or unenforceable promises.
Best Practices Before Signing a Contract
- Get Legal Review – Never sign a standard contract without an agricultural attorney reviewing it. These agreements are written to benefit developers, not landowners.
- Negotiate Terms – Key areas like payment, easements, tax liability, and decommissioning can often be negotiated.
- Involve Your Accountant – Understand tax implications for lease payments or carbon income.
- Check Local Zoning – Counties in Illinois vary on zoning for energy projects. Some require permits, hearings, or special approvals.
- Plan for Succession – If your children or heirs will inherit the farm, make sure the lease or contract aligns with your succession plan.
FAQs: Solar, Wind, and Carbon Contracts for Illinois Farmers
Q: How long are typical solar and wind leases?
Solar leases often last 20–40 years with renewal options, while wind leases may extend 30–50 years. These agreements can bind your land for multiple generations.
Q: Who pays property taxes after I sign an energy lease?
Unless the contract states otherwise, you could be responsible for increased taxes. Always negotiate for the developer to cover additional property taxes.
Q: How much money can I make from carbon credits?
Payments vary widely—some programs offer $10–$40 per acre annually. However, prices are volatile, and verification costs may reduce profits.
Q: Can I sell or transfer farmland that’s under a solar, wind, or carbon contract?
Yes, but the buyer must honor the existing lease or contract. This may reduce land value or make sales more difficult.
Q: What happens if the developer or aggregator goes bankrupt?
If contracts don’t include financial guarantees, farmers may be left with unusable equipment or unenforceable promises. Always require performance and decommissioning bonds.
Q: Can carbon contracts conflict with USDA programs?
Yes. Some practices required by carbon markets may overlap with or disqualify you from federal programs. Review carefully with an attorney and your FSA office.
Are You a Farmer That Needs Assistance With Solar, Wind or Carbon Contracts?
Selling or leasing Illinois farmland for solar, wind, or carbon credits can provide long-term income and help diversify your operation. But these contracts are complex and carry significant risks that may impact your land and heirs for decades.
At Rincker Law PLLC, we help Illinois farmers review, negotiate, and structure renewable energy and carbon agreements to protect both income and legacy.
Call us today at (217) 774-1373 to schedule a consultation before you sign.