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04.05.22

Controlled environment agriculture — Environmental due diligence considerations

By Dana P. Stanton

Controlled environment agriculture (CEA) is an indoor farming method gaining interest and popularity in the United States, including among venture capitalists. CEA encompasses greenhouse farming as well as vertical farming techniques. By controlling environmental factors such as temperature, light, and water, CEA enables produce to be locally grown year-round, even in northern climates and urban areas. A well-designed CEA facility uses less water and less land than traditional agriculture. In addition, a CEA can be designed to be fully contained with no run-off of agricultural chemicals.

However, CEA requires more energy than traditional farming to operate the climate control and lighting systems. Despite higher yields due to year-round production, the high start-up costs, together with high energy costs, have impeded CEA from a cost-competitive standpoint when compared to outdoor agriculture. Many CEA facilities focus on high-value produce, such as tomatoes, strawberries, and herbs.

Due to the high energy demands, there is increasing interest in pairing CEA projects with on-site renewable energy generation, such as solar panels. However, this paring adds a layer of complication to the permitting and development of CEA projects that developers, lenders, and investors should consider.

As with any transaction involving real estate, developers, lenders, and investors should scrutinize potential projects, especially for projects with an on-site renewable energy generation component, with an appropriate degree of environmental due diligence, including conducting or relying on a current Phase I Environmental Site Assessment. In addition, other areas of inquiry include evaluating potential impacts on wetlands, endangered species, and cultural resources, as well as ensuring that the construction of the project complies with stormwater runoff requirements, FAA requirements (if the project is located near an airport), and the necessary state and local approval requirements.

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Dana P. Stanton

Counsel

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