Replacing a Williamson Act Contract with a Solar-Use Easement
- Requirements for a Williamson Act Contract Rescission
- Terms of a Solar-Use Easement
- Restoration and Surety Bond Requirements
- Extinguishing a Solar-Use Easement
In an effort to balance the protection of California's agricultural economy and the nation's food security with the need for renewable-energy production—specifically, solar photovoltaic (PV) electrical energy—the Legislature approved Senate Bill 618 by Senator Lois Wolk (Chapter 596, Statutes of 2011). This law, which took effect on January 1, 2012, was approved overwhelmingly in the Assembly 77 to 0 and 35 to 1 in the Senate after being approved in four policy committees and two fiscal committees without a single no vote.
The California Land Conservation Act of 1965, popularly known as the Williamson Act, provides for long-term conservation of agricultural land, open space, and wildlife habitat through the implementation of a contract that restricts land uses on encumbered properties to agricultural, open space, or compatible uses. In return for the enforceable restriction, the land's property tax valuation is based on its agricultural income instead of its speculative value. The Williamson Act has served as the state's most important farmland protection law for nearly half a century.
Farm Bureau watched with dismay as a growing number of electrical power generation projects were proposed on prime farmland in exclusive agricultural zones, including agricultural preserves, and on land restricted by Williamson Act contracts. Thankfully, both the Legislature in its enactment and the courts in their interpretation of the Williamson Act have established the importance of California agriculture to the state and the nation, as well as the fact that its preservation is essential due to the growing worldwide population and its ever-increasing demand for food. The adoption in 1994 of the principles of compatibility in Government Code (GC) section 51238.1 and a landmark 1981 California Supreme Court decision (Sierra Club v. City of Hayward) on contract cancellations advanced California's public policy to assure compliance with the enforceable restriction requirement in Article XIII Section 8 of the California Constitution.
SB 618 provides new protection to the integrity of the Williamson Act while providing incentives to renewable-energy developers to focus on the state's least productive lands. The new law allows a landowner to petition a county for a rescission of the landowner's Williamson Act contract if the affected land is predominately marginally productive or physically impaired for agricultural production, as long as the land is simultaneously enrolled in a Solar-Use Easement agreement for at least 20 years, unless the landowner requests a shorter period of at least 10 years. (GC § 51191.2.) Upon rescission of the Williamson Act contract, the affected land exits the land conservation program, and no further tax relief under the Williamson Act is granted. However, the significant benefit of the rescission process is that the landowner avoids the otherwise applicable nine- or 19-year nonrenewal period.
Requirements for a Williamson Act Contract Rescission
The application for contract rescission is not subject to the California Environmental Quality Act (CEQA), although a solar PV project would require environmental review. To verify that the land is truly marginally productive or physically impaired, the applicant must provide to the county the following information that must then also be provided to the Department of Conservation:
- A written narrative demonstrating that even under the best currently available management practices, continued agricultural practices would be substantially limited due to the soil's reduced agricultural productivity from chemical or physical limitations.
- A recent soil test demonstrating that the characteristics of the soil significantly reduce its agricultural productivity.
- An analysis of water availability demonstrating the insufficiency of water supplies for continued agricultural production.
- An analysis of water quality demonstrating that continued agricultural production would, under the best currently available management practices, be significantly reduced.
- Crop and yield information for the past six years.
The landowner must also provide the Department of Conservation with a proposed management plan describing how the soil will be managed during the life of the easement, how impacts to adjacent agricultural operations will be minimized, and how the land will be restored to its previous general condition, as it existed at the time of project approval, upon the termination of the easement. Also, if the Department of Conservation determines that the land is indeed predominantly marginal or physically impaired, the county must implement the management plan and include in its project approval any recommendations provided by the Department of Conservation.
A Solar-Use Easement agreement is effective upon its acceptance or approval by a resolution of the county's Board of Supervisors. The landowner must pay to the county a rescission fee based on the land's current market value of either 6.25 percent for a standard Williamson Act contract or 12.5 percent for land covered by a Farmland Security Zone contract. The county must forward the fee to the State Controller in the manner similar to a Williamson Act contract cancellation penalty fee. (GC § 51255.1, subd. (c).)
Terms of a Solar-Use Easement
Even though SB 618 uses the term "Solar-Use Easement," these enforceable restrictions are not conservation easements as defined in Civil Code section 815.1, in that there is no loss or transfer of any of the existing property rights in perpetuity. Since no party or governmental entity receives any of the proverbial sticks in the bundle of property-right sticks associated with the land, this land-use restriction is more like a solar land-use contract than an easement. Furthermore, as there is little or no property tax relief associated with these solar land-use agreements, and since the 10- or 20-year minimum-term agreement can be converted to a self-renewing agreement on the anniversary date of its acceptance (or any other annual date specified in the agreement), there is absolutely no incentive to sign or agree to a perpetual deed restriction. (GC § 51191.2.)
A Solar-Use Easement agreement may also include restrictions, conditions, or covenants that the county deems necessary or desirable to restrict the land's use to solar PV facilities. For example, a local government may require mitigation measures on the land used for the solar development, or on land around the facility. The latter mitigation requirements may be in addition to a required management plan imposed by the Department of Conservation.
Restoration and Surety Bond Requirements
For term and self-renewing easements, a county must include a requirement that the landowner post a performance bond or other securities to fund the restoration of the land to the conditions that existed before the approval or acceptance of the easement by the time the easement is extinguished. (GC § 51191.3, subd. (c).) The county should consult with the Department of Conservation for its advice on the appropriate financial instruments to ensure restoration.
Extinguishing a Solar-Use Easement
A Solar-Use Easement may be extinguished on all or a portion of the land by immediate termination, nonrenewal, or petitioning the county to return the land to its previous Williamson Act contract.
Immediate termination of all or a portion of the land subject to a Solar-Use Easement requires a petition by the landowner to the county. While no specific findings must be made, a 12.5 percent termination fee is required. The method for determining the specific dollar amount of the fee, the timing of the payment and its deposit in the State General Fund is identical to that required for a Williamson Act cancellation. There is, however, much greater flexibility for waiving all or a portion of the fee both by the county and the Secretary of the California Natural Resources Agency. No fee is required if the land is condemned and taken for a public improvement. (GC § 51292.2.)
Nonrenewal of a Solar-Use Easement is also similar to that of a Williamson Act contract, although the length of the nonrenewal period can be as short as one year. For example, an easement with a 20-year term could be nonrenewed in year 19 of the agreement. A 20-year-term easement could also be converted to a self-renewing agreement in year 19 and allowed to run several more years before later nonrenewal. In both of these examples, the nonrenewal period would be for only one year.
Nonrenewal may be initiated by either party to the easement agreement. Written notice of the nonrenewal request must be provided at least 90 days before the anniversary of a term easement or the annual renewal date of a self-renewing easement. A landowner may protest a nonrenewal notice given by the county, and the county may withdraw the notice of nonrenewal before the renewal date. In all likelihood this issue is moot since there is no significant property tax advantage due to the presence of the easement, nor is there any requirement to abandon the solar facility and restore the land when a Solar-Use Easement is nonrenewed by the county. Thus, the landowner may continue to operate the solar PV facility without the Solar-Use Easement. (GC § 51192, subds. (b) and (c).)
If, however, the landowner initiates the nonrenewal process or seeks immediate termination of the Solar-Use Easement, then the landowner must, before the easement is extinguished, restore the land to the condition that existed before the easement was approved. (GC § 51192.1.)
The proper implementation of SB 618's provisions will take significant pressure off prime farmland that is subject to Williamson Act contracts, thus protecting the integrity of the farmland conservation program and helping to ensure our nation's food security. An owner of land that qualifies as marginally productive or physically impaired may apply for the immediate rescission of a Williamson Act contract if the landowner agrees to simultaneously enter into a Solar-Use Easement agreement. The benefits to the landowner are the elimination of the nonrenewal period of nine or 19 years, no need to mitigate for the principles of compatibility if the land is considered nonprime and meets other eligibility requirements, and a significant reduction in the risk of litigation for violation of Williamson Act cancellation provisions. The cost of a contract rescission under this program is one-half the amount of a cancellation, if the county can make judicially sustainable findings under GC section 51282.