# Leasing land to Solar companies



## Teslan (Aug 20, 2011)

Anyone on here ever leased their land to a solar company? I got a letter in the mail a week ago from a company wanting to lease or buy 13 acres of a farm of mine. They finally called back the other day and it sounds interesting, but I asked them if they would be interested in some flood irrigated ground rather then what the letter asked about which is under a pivot. Got an e-mail back today that they do like my alternative site. $700-$800 an acre lease for 20 years with an increase for inflation every year. Anyone done anything like this?


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## mlappin (Jun 25, 2009)

All depends, the high tension lines were installed here shortly after Grandfather bought this farm in 54, still fighting compaction from them installing the towers.


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## somedevildawg (Jun 20, 2011)

Teslan said:


> Anyone on here ever leased their land to a solar company? I got a letter in the mail a week ago from a company wanting to lease or buy 13 acres of a farm of mine. They finally called back the other day and it sounds interesting, but I asked them if they would be interested in some flood irrigated ground rather then what the letter asked about which is under a pivot. Got an e-mail back today that they do like my alternative site. $700-$800 an acre lease for 20 years with an increase for inflation every year. Anyone done anything like this?


Rent it....


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## Lewis Ranch (Jul 15, 2013)

That would be a no brainer to me.. that’d pay for the whole farm ????


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## Teslan (Aug 20, 2011)

We will see what the lease terms actually look like. I am kinda hoping they want all the flood irrigated field. I had been exploring options to better irrigate it then siphon tubes and gated pipe, but that would entail me spending tens of thousands. Better this way and earn just slightly less then I do with hay and not have to worry about it. All my time saved I might just go look for pivot irrigated ground to lease. Though I suspect the county will make this difficult for the company and me just because that's how government works. They will dislike taking away irrigated farm acres. Though they allow it ALL THE TIME.

What is kinda funny. A week or so before the letter arrived I had been thinking to myself I wonder how one would go about making use of my flood irrigated and non irrigated portions of the farm for solar. I'm still wondering what the cost of such a thing is and if I could do it myself. Probably much easier this way.


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## swmnhay (Jun 13, 2008)

I've seen a few going in and it looks like a shit ton of steel posts go in the ground mounted in concrete.So my question would be what happens if they go broke or at end of lease what happens to the concrete in ground and all the eq?

One I seen covers 320 acres.

On another thought why don't they buy the land their cost would be less then $800 an acre,way less!!


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## Teslan (Aug 20, 2011)

swmnhay said:


> I've seen a few going in and it looks like a shit ton of steel posts go in the ground mounted in concrete.So my question would be what happens if they go broke or at end of lease what happens to the concrete in ground and all the eq?
> 
> One I seen covers 320 acres.
> 
> On another thought why don't they buy the land their cost would be less then $800 an acre,way less!!


Well supposedly at the end of the lease they would return the ground to the way they found it. But yes one of my first questions will be what happens if they go broke. Which very well could happen. My thoughts are that this company might be bought out by another before they go broke. Or another company would buy their assets and thus the lease. Kinda like all the changes in ownership of the oil and gas leases and equipment around over the years. My thoughts are to ask for a damage deposit. I've quite often thought if I ever rent out any of our farms again is to ask for a damage deposit. Because most farmers don't treat rented land or in this area, the equipment to irrigate it like their own. Heck the last renter treats his own irrigation equipment badly. But who knows how much it would cost to dig out the wires, posts, and cement of a solar farm if they abandoned it. And the panels will be almost worthless in 10 years due to advancement in solar tech.

The letter offered to buy. The company rep said they really didn't want to buy. Just the hassle and cost of dividing up land would delay projects a lot. They could find very cheap land here that is dry land. But the problem is most of that land is not near 3 phase electrical service. I'm kinda surprised they thought the electric service while 3 phase in my preferred location is good enough to handle 2 Megawatts.


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## swmnhay (Jun 13, 2008)

Teslan said:


> Well supposedly at the end of the lease they would return the ground to the way they found it. But yes one of my first questions will be what happens if they go broke. Which very well could happen. My thoughts are that this company might be bought out by another before they go broke. Or another company would buy their assets and thus the lease. Kinda like all the changes in ownership of the oil and gas leases and equipment around over the years. My thoughts are to ask for a damage deposit. I've quite often thought if I ever rent out any of our farms again is to ask for a damage deposit. Because most farmers don't treat rented land or in this area, the equipment to irrigate it like their own. Heck the last renter treats his own irrigation equipment badly. But who knows how much it would cost to dig out the wires, posts, and cement of a solar farm if they abandoned it. And the panels will be almost worthless in 10 years due to advancement in solar tech.
> 
> The letter offered to buy. The company rep said they really didn't want to buy. Just the hassle and cost of dividing up land would delay projects a lot. They could find very cheap land here that is dry land. But the problem is most of that land is not near 3 phase electrical service. I'm kinda surprised they thought the electric service while 3 phase in my preferred location is good enough to handle 2 Megawatts.


In our case with the windmills everything is to be removed above the ground and 4' down.most of the concrete is below 4' and buried electrical lines are just below that.

And the co that built them and we signed the contract with sold them shortly after they were built so I would guess the contract dont mean shit.


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## Teslan (Aug 20, 2011)

swmnhay said:


> In our case with the windmills everything is to be removed above the ground and 4' down.most of the concrete is below 4' and buried electrical lines are just below that.
> 
> And the co that built them and we signed the contract with sold them shortly after they were built so I would guess the contract dont mean shit.


 I would think that any contract you signed with them would be enforce with any company that bought them. And with solar farm there are a lot more wires in the ground I would imagine then a windmill. Probably the cement wouldn't be down 4 feet either. Lots more cement. But not as thick or as big of chunks.


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## swmnhay (Jun 13, 2008)

Teslan said:


> I would think that any contract you signed with them would be enforce with any company that bought them. And with solar farm there are a lot more wires in the ground I would imagine then a windmill. Probably the cement wouldn't be down 4 feet either. Lots more cement. But not as thick or as big of chunks.


Yes a guy would think so,but they wrote the contract and have a room full of lawyers.


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## Teslan (Aug 20, 2011)

swmnhay said:


> Yes a guy would think so,but they wrote the contract and have a room full of lawyers.


. That is true. It's worked fairly well with oil and gas companies here. But then there is a state regulatory agency that governs those activities kind of. I don't think there are wind and solar state regulatory agencies to sort of watch over that industry.


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## swmnhay (Jun 13, 2008)

Teslan said:


> . That is true. It's worked fairly well with oil and gas companies here. But then there is a state regulatory agency that governs those activities kind of. I don't think there are wind and solar state regulatory agencies to sort of watch over that industry.


The county had lawyers look over the contract and put quiet a few stipulations in them.Also they had stipulations for road damage when building.They county ended up repaving some roads and the township got pd to rebuild a few miles of road that really got beat up.


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## Teslan (Aug 20, 2011)

swmnhay said:


> The county had lawyers look over the contract and put quiet a few stipulations in them.Also they had stipulations for road damage when building.They county ended up repaving some roads and the township got pd to rebuild a few miles of road that really got beat up.


i guess Colorado has a department of renewable energy, but it just just a giant pat on the back for itself and says wonderful things about renewable energy. No requirements for the renewable energy companies of any kind that I saw. That will happen probably 15 years from now. Just like in the 80s here the oil and gas companies didn't really have a regulatory agency sort of over them.


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## 32-0-0 (May 30, 2017)

Do you'll have to pay property taxes where you're located?

Will the change from agriculture use to a solar panel complex change the property taxes?


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## Teslan (Aug 20, 2011)

32-0-0 said:


> Do you'll have to pay property taxes where you're located?
> 
> Will the change from agriculture use to a solar panel complex change the property taxes?


For my county they will have to do a special use permit. If that results in higher property taxes they will pay that.

The 12-13 acres they want to lease is within a 25 acre flood irrigated field. I tore it up from grass hay in October and was going to rip and plant RR alfalfa this spring. They tell me if we agree on the lease they won't even be able to start construction until next fall at the earliest. Because they have a bunch of hoops to jump through with the county as well waiting on Xcel the utility to be ready to hook up to the solar farm. Xcel is mighty slow with anything these days.

So if I agree to the ease (supposed to get the 16 page lease today) I don't really know what to do with the 13 acres for the coming season. I wouldn't want to plant RR alfalfa. As that is costly for one season. Especially since this is flood irrigated and there is a chance that if we don't get enough moisture it won't come up until we do (It can happen here)

There is the chance the county will be ridiculous with their requirements on the solar company and they will give up. Though the solar rep says they get crazy demands wherever they go to build a solar farm from the specific counties and they generally can get through it.

For example this would be 13 acres of irrigated land being taken out of irrigation for 20 years. The county has a thing against that. Though they allow it all the time!

So I'm thinking of planting conventional alfalfa and oats/annual rye/or even orchard in all of it. So then the seed wouldn't cost all that much and I'll get one somewhat good crop year. Then if the county is crazy and we can't do the solar I'll have an established field.


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## 32-0-0 (May 30, 2017)

Might want to check for any rollback taxes too...in Texas if property goes from Ag use to a Non Ag use then a rollback tax is initiated which collects the tax savings from the past 5 years plus interest.


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## CowboyRam (Dec 13, 2015)

You might want to talk with an attorney that is familiar with this type of thing. My experiences with contracts is that they are usually very much one sided. You know that solar company is going to have their best interest in mind in writing the contract.


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## Teslan (Aug 20, 2011)

CowboyRam said:


> You might want to talk with an attorney that is familiar with this type of thing. My experiences with contracts is that they are usually very much one sided. You know that solar company is going to have their best interest in mind in writing the contract.


I got the contract. It is very one sided as expected. Quite a number of things will need to be amended, clarified, and added before I sign it. And that's just after a brief reading. Like for example they want a right of first refusal if I were to sell. That is not happening. I would be happy to offer it for sale to them first, but not a right of first refusal. I actually would like of right of first refusal on their equipment and system were they to sell to another company. Because there is a good chance that would happen if their company is successful.

Also they say they would not remove anything after the lease over 30 inches under ground. I need to find out how deep they go with these things before I agree to that. If they anchor less then 30 inches we are good. If not that will have to change. It might just have to change to removing absolutely everything no matter what. There is even a part that says they will not remove any water well drilled. That needs to be clarified because if they are drilling a water well at all this deal won't work due to the permitting process required to drill wells. A kinda funny clause to me is that we are not to consult with any real estate broker (more having to do with commissions). But it's to late for that. As I and my wife are real estate brokers.

Plus they have a thing that they have up to 18 months to remove their equipment after the lease expires or if they terminate the lease. Maybe I missed it on the brief reading, but they better be paying rent for that 18 months. So I have to read that again.

Funny thing about real estate contracts of most types is there are very few ways for landlords or sellers to get out of contracts besides the leasee just not paying rent. Or a buyer not paying. But a million ways for a leasee to get out or a buyer. It's that way with our Colorado Real Estate contracts. A buyer can get out of most buy contracts if they want to simply by asking for ridiculous things on an inspection. Which they do all the time. This Solar company can get out of this lease by simply saying basically this site isn't making us the money it needs to, but by using a number of other excuses they have.

As for a rollback of taxes as 32-0-0 mentions. I don't think there is anything like that on special use permits. The lease states I have to submit tax bills every year and they will pay or reimburse me for any extra expense their solar farm adds to the taxes. That rollback thing in Texas seems outright cruel and un American! Man I hate taxes.


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## FarmerCline (Oct 12, 2011)

One thing I want to mention and you have probably already thought about this......before you lease it out for solar you better make sure you want it used for that from here on out and not decide after 20 years or whenever the lease is up that you want to farm it again as the land won't be worth farming any longer. There is a 20 acre field not far from me that had solar panels installed this past year and it pretty much ruined the land for the possibility of using it for productive agriculture again in the future.


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## rjmoses (Apr 4, 2010)

While the deal sounds pretty good, I would probably take it with one additional provision. I would ask them to post a bond or insurance policy to be used for removal/cleanup/restoration/non-payment in case of their bankruptcy, insolvency, or non-performance.

Many times, companies like this get into trouble 5-10 years down the road. Not only would bankruptcy/insolvency cause you to have an early termination of the contract, but there is a high likelihood that you would also get stuck with any cleanup costs simply because you can't get blood out of a turnip.

The performance bond or policy I have in mind would have to be posted with an independent company and made payable to you upon them filing bankruptcy, missing a lease payment, or failure to renew the performance bond 60 days prior to it's expiration. There might be a few other conditions that your lawyer can think of.

I would expect it to be worth two year's lease ( approx. $25,000) plus %25 (swag) of their installation and equipment costs.

I would not enter a deal anymore without this kind of coverage. I once got stuck by ADP (the big quys) because they fired the department head who I was doing business with and they decided to just not pay me because.... It took me about four years, but I did get paid!

If they're good people, they won't have a problem with this. If they're snakes, they'll give you all kinds of assurances that they are good for it but won't make it part of the deal.

A 20 year contract with you is about $250,000. Big money for you, but small change for them. Don't let $ signs cost you a down the road. 20 years is a long time and even though the people you are dealing with today might be honest, straight-shooters, management changes have been know to happen and a bunch of low-lifes could take over. (This happened to me also.)

Ohh, and make the inflation adjustment 2x the CPI. The CPI calculations recently were changed to exclude food and energy in order to bring down the COLA's for SS recipients.

Good luck, be smart, keep us posted.

Ralph

Bad business is worst than no business at all.


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## Teslan (Aug 20, 2011)

rjmoses said:


> While the deal sounds pretty good, I would probably take it with one additional provision. I would ask them to post a bond or insurance policy to be used for removal/cleanup/restoration/non-payment in case of their bankruptcy, insolvency, or non-performance.
> 
> Many times, companies like this get into trouble 5-10 years down the road. Not only would bankruptcy/insolvency cause you to have an early termination of the contract, but there is a high likelihood that you would also get stuck with any cleanup costs simply because you can't get blood out of a turnip.
> 
> ...


That's some good advice about the insurance Ralph. Thank you. Even though they sort of answered my questions in the case of bankruptcy. They said some of the reason to not fear to much even over bankruptcy is that Xcel (the utility) signs a 20 year agreement with that specific facility to provide power. So it becomes a pretty good asset that in bankruptcy would be kept going and bought fairly soon. I indeed will ask for the bond. I was thinking of asking a damage deposit of about that amount, but the bond or insurance is better. Since then I wouldn't have to keep track of a $25k damage deposit for 20 years. This is the biggest thing I worry about this deal. Everything else is kinda small.

Right now they have an increase of just 1.5% a year with no mention of the consumer price index. Seems way to little for me. And it's odd because their own website says it is attached to the CPI on the FAQ for landowners.


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## rjmoses (Apr 4, 2010)

Teslan said:


> I got the contract. It is very one sided as expected. Quite a number of things will need to be amended, clarified, and added before I sign it. And that's just after a brief reading. Like for example they want a right of first refusal if I were to sell. That is not happening. I would be happy to offer it for sale to them first, but not a right of first refusal. I actually would like of right of first refusal on their equipment and system were they to sell to another company. Because there is a good chance that would happen if their company is successful.
> 
> Also they say they would not remove anything after the lease over 30 inches under ground. I need to find out how deep they go with these things before I agree to that. If they anchor less then 30 inches we are good. If not that will have to change. It might just have to change to removing absolutely everything no matter what. There is even a part that says they will not remove any water well drilled. That needs to be clarified because if they are drilling a water well at all this deal won't work due to the permitting process required to drill wells. A kinda funny clause to me is that we are not to consult with any real estate broker (more having to do with commissions). But it's to late for that. As I and my wife are real estate brokers.
> 
> Plus they have a thing that they have up to 18 months to remove their equipment after the lease expires or if they terminate the lease. Maybe I missed it on the brief reading, but they better be paying rent for that 18 months. So I have to read that again.


Give them the right of first refusal. All that means is that if you decide to sell and get a written agreement between you and a buyer, they have the right to match buying it at the price in the agreement with the buyer. I've done this in all my real estate deals in the last 20 years as both a buyer and seller. The key is they have to match the price.

But the caveat that needs to be addressed is that it has to make provision for the total sale. This means that if you are selling a significant part or all of your land, they cannot queer the deal by taking only the 13 acres and causing the other buyer to back out.

For example, you're selling a 100 acres which includes the 13 for a $1000/acre. They can get the 13 acres at a $1000 and the other buyer gets 87. But this must be agreeable to the other buyer. If the other buyer says no deal because of the 13 acres, they have to buy the entire 100 acres at $1000/acre. A good real estate lawyer will be familiar on how to write this language.

As far as the 30", the deal should be simple: they put it in--they take it out, with the possible exception of water wells. Those you may want to keep. (I think I would.)

If they get snarky about any of this, consider setting up a LLC that you deed the 13 acres over to. Then the lease becomes a deal between them and the LLC. They pay the LLC, the LLC passes it through to you--should not be any problem with taxes.

Don't be afraid to walk away from any deal if the terms aren't pretty close to what you want.

Hope this helps.

Ralph


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## Teslan (Aug 20, 2011)

rjmoses said:


> Give them the right of first refusal. All that means is that if you decide to sell and get a written agreement between you and a buyer, they have the right to match buying it at the price in the agreement with the buyer. I've done this in all my real estate deals in the last 20 years as both a buyer and seller. The key is they have to match the price.
> 
> But the caveat that needs to be addressed is that it has to make provision for the total sale. This means that if you are selling a significant part or all of your land, they cannot queer the deal by taking only the 13 acres and causing the other buyer to back out.
> 
> ...


We used to do the right of first refusal thing also. Until it cost us $90k to buy off the right of refusal holder (my aunt) to allow us to sell water. Kinda worried about the same thing here because in the next 20 years who is to say we don't sell more water. Also once we were selling off 5 acres. Had the right of refusal The lender of the buyer refused to loan on it with that language. Buyer didn't care. Lender did.

They actually have the provision for the entire sale. It's very expensive and takes a lot of time to divide off that 13 acres at this time. And I'm not sure I would want to divide up the farm anyways right now. However I'm going to ask for a provision to assure myself that I can without terminating the lease. I say there is a fairly good chance within 20 years I'll divide up this 80 acres into smaller lots and grow some houses. Given the population growth. So deeding the 13 acres to an LLC is kind of out. Though with the new tax reductions for passthrough corporations if the bill is passed I might want to consider an LLC for the whole thing.

I feel the same about if they put it in they take it out. Or the landowners decision at the time. The oil and gas companies have to take out their flow lines and the well itself is capped and cemented 10 feet down.

Getting a well here is a big application process. There are 3 types of wells. Household (inside a house only) Domestic-15 gallon a minute up to an acre., and Irrigation. (huge and almost impossible to get now). I guess there are community wells. Like one well to serve several houses. So getting one well permit needs to be thought out in advance. So that's something that needs clarified.

And yes I'll walk away if it isn't right. I've even contacted a more local, but larger solar company as they are asking for landowners also. Though I suspect this local company could be a potential contractor to build this solar farm for the solar company I'm negotiating with.

Thanks for the advice Ralph.


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## Teslan (Aug 20, 2011)

FarmerCline said:


> One thing I want to mention and you have probably already thought about this......before you lease it out for solar you better make sure you want it used for that from here on out and not decide after 20 years or whenever the lease is up that you want to farm it again as the land won't be worth farming any longer. There is a 20 acre field not far from me that had solar panels installed this past year and it pretty much ruined the land for the possibility of using it for productive agriculture again in the future.


I didn't see this comment. Why did it make the farm unfarmable again?


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## carcajou (Jan 28, 2011)

Very good advice Ralph. I too would never sign without an insurance policy and it would have to be for the full lease amount plus damages. I would find the policy, they would have to pay me for it.


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## FarmerCline (Oct 12, 2011)

Teslan said:


> I didn't see this comment. Why did it make the farm unfarmable again?


 Way too much soil disturbed and compaction. After thinking about it now this may not be as big of an issue for you since I'm assuming to have flood irrigated ground it must be flat so there wouldn't be much if any grading involved. Still the compaction could be an issue.....the one I'm talking about the ground looked like a construction site for a development.....extremely compacted and messed up soil structure.


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## Teslan (Aug 20, 2011)

FarmerCline said:


> Way too much soil disturbed and compaction. After thinking about it now this may not be as big of an issue for you since I'm assuming to have flood irrigated ground it must be flat so there wouldn't be much if any grading involved. Still the compaction could be an issue.....the one I'm talking about the ground looked like a construction site for a development.....extremely compacted and messed up soil structure.


I'm glad you mentioned this. I did some google searching on it. And you are sure correct. These solar farms are hard on the soil. You sure wouldn't think so. From what I've read I'm rethinking allowing it at all. The site where it would go is level and I don't think they would have to do any dirt moving at all. The soil in that particular place is also fairly sandy and never has been that compacted even after oil and gas rigs have done their thing. It has never been hard to rip after they were done. The solar farms that I've seen around here don't look graded or anything. Just kinda like they came in and stuck them in the ground.


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## swmnhay (Jun 13, 2008)

Teslan said:


> I'm glad you mentioned this. I did some google searching on it. And you are sure correct. These solar farms are hard on the soil. You sure wouldn't think so. From what I've read I'm rethinking allowing it at all. The site where it would go is level and I don't think they would have to do any dirt moving at all. The soil in that particular place is also fairly sandy and never has been that compacted even after oil and gas rigs have done their thing. It has never been hard to rip after they were done. The solar farms that I've seen around here don't look graded or anything. Just kinda like they came in and stuck them in the ground.


I would think there would be quite a bit of subsoil brought to the surface when they auger the holes for all the concrete pillars.IDK how deep they are but there is a lot of them.The ground would be pretty much worthless if they were not removed at end of lease for any farming.I would think it would be very costly to remove them all and dispose of.


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## Teslan (Aug 20, 2011)

swmnhay said:


> I would think there would be quite a bit of subsoil brought to the surface when they auger the holes for all the concrete pillars.IDK how deep they are but there is a lot of them.The ground would be pretty much worthless if they were not removed at end of lease for any farming.I would think it would be very costly to remove them all and dispose of.


Yes and the panels themselves. They are full of environmental hazards as I've been reading. So in 20 years the current solar panels will be about worthless and look how expensive asbestos on old houses is to get rid of. Imagine a solar panel.


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## Teslan (Aug 20, 2011)

I wonder how many solar farms have been cleaned up yet? They've only started appearing over the last 10-12 years. So they aren't through their life cycle yet.


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