Shank questions state's proposed solar farm lease

July 24, 2011|By ANDREW SCHOTZ |

Maryland State Sen. Christopher B. Shank wants the state to renegotiate a proposed lease for a company to build a $70 million solar farm on prison land near Hagerstown.

His complaint is the lease price: $128 an acre per year, which he says is insufficient.

The state Board of Public Works is scheduled to consider the proposed lease Wednesday, but Shank, R-Washington, wrote a letter Friday to Gov. Martin O’Malley requesting that the discussion be tabled.

Shank’s letter says he doesn’t oppose the project, but indicated that governments elsewhere have received higher lease prices and charged additional fees based on the generation of energy from the project.

Word of Shank’s letter reached Del. John P. Donoghue, D-Washington, over the weekend, and he reacted with outrage, accusing Shank of trying to kill a project that would bring about 125 construction jobs.

Asked if Shank’s lease questions were legitimate, Donoghue said, “I really don’t care what he says in that letter .... He’s just trying to gum this up.”

Maryland Solar LLC is seeking to rent land near the complex of three state prisons on Roxbury Road, south of Hagerstown.

The annual rent is proposed at $32,050 for 250 acres for the first three years of the lease.

In the fourth year, and every other year after that, the rent would increase 3 percent.

There are options for a unilateral five-year extension by Maryland Solar and a second five-year extension at the discretion of the Board of Public Works.

The state “did a lousy job in negotiating with this vendor,” Shank said in an interview Friday.

D. Bruce Poole, an attorney representing Maryland Solar, said that as prison land, it’s “highly compromised” and not suitable for development.

“It’s either solar panels or razor wire,” Poole said.

When Maryland put out a request for proposal for a solar project on the land, only Maryland Solar — an affiliate of a company led by former O’Malley senior aide Michael Enright — responded.

“There’s nobody knocking on the door to Washington County right now,” Poole said, wondering why Shank didn’t contact him or the company with his concerns.

If the state seeks an exorbitant lease, Maryland Solar might go elsewhere with the project, Poole said.

He noted that Maryland has a statutory requirement to have more renewable energy.

In his letter, Shank said “a local government in Maryland” is setting a lease for a larger solar project, on “otherwise non-useable land,” at $2,000 an acre. The agreement also includes a payment in lieu of taxation, a megawatt capacity fee and a choice of either a share of profits from selling energy credits or “drastically discounted power.”

The total value of the deal will be about $1 million, Shank wrote.

He declined to name the project in his letter or in an interview, saying the lease information hasn’t been made public.

Linda K. McGovern, the chief of lease management and procurement for the Maryland Department of General Services, which manages state property, said it was difficult to come up with a reasonable lease price because solar energy is a relatively new industry in Maryland.

McGovern said her office, through Internet research, found a range for other solar projects in other states, but no consistent guide.

So, as a baseline, the state relied on U.S. Department of Agriculture data that showed agricultural land leases in Maryland at about $62 to $65 an acre, McGovern said.

The state doubled that and decided on $128 an acre, she said.

Coincidentally, that’s the same price a farmer has paid for that land under a lease agreement since 2007, McGovern said.

The farming lease price was derived through a bid process around 2005 or 2006 and, at the time, was considered high, she said.

Maryland Solar has proposed a 20-megawatt solar farm, made up of about 100,000 separate photovoltaic panels, according to a summary in the Board of Public Works’ agenda.

The agenda summary says the 20 megawatts would more than double the current solar energy now on Maryland’s grid, estimated at around 15 megawatts.

At peak output, the project could produce enough electricity for about 2,250 average homes, the summary says.

The lease would go into effect Sept. 1.

It includes a provision that apparently would let farming continue on the land.

Jeremiah Weddle said in May that he has been leasing the land to grow wheat, alfalfa and soybeans.

The proposed lease says Maryland Solar can sublease to Creek Bound Farm LLC, whose resident agent, or representative, is listed in state records as James K. Weddle.

Creek Bound Farm’s lease expires in April 2012, according to Maryland Solar’s application to the Maryland Public Service Commission, which has scheduled a hearing on the project for Aug. 18 in Baltimore.

It’s not clear how much land Maryland Solar would sublease, but a company official in May said the generating facility is expected to occupy about 150 acres.

The U.S. Bureau of Land Management has a schedule of solar lease rates in several western states, ranging from $15.70 per acre in some counties in Arizona, Nevada and New Mexico to $313.88 per acre in Riverside County, Calif.

The bureau also charges a megawatt capacity fee based on the increased industrial use of the land.

Constellation Energy plans to build a $60 million solar farm of about 16 megawatts on 100 acres owned by Mount St. Mary’s University in Emmitsburg, Md. It will supply the university, community and parts of Frederick County with energy, according to a summary posted on the school’s website.

In a voice-mail message, Michael S. Malewicki, the university’s vice president for business and finance, said he couldn’t disclose details of the lease.

However, he said, the university researched land values and had an appraisal done to come up with a “very competitive” price.

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