This article, from law firm Beveridge & Diamond PC, is authored by John G. Cossa.
The Department of the Interior’s Bureau of Land Management (“BLM”) intends to publish in the September 30 Federal Register a proposed rule that, if adopted, could significantly alter the landscape of wind and solar energy development on BLM-managed land. The changes contemplated in the proposal have been in the works for more than five years, and would remake much of the agency’s regulations governing the acquisition of solar and wind project rights-of-way (“ROW”), project permitting, rental payments and fees, and financial assurance obligations. The proposed rule would also affect ROWs granted for high-voltage transmission lines as well as large oil and gas pipelines. Interested parties have 60 days within which to comment.
Among the major changes, the proposed regulations would:
- Establish competitive bidding procedures for granting solar and wind energy ROWs both within and without “designated leasing areas”;
- Create new “variable offset” auction procedures, which appear to be modeled after the Bureau of Ocean Energy Management’s offshore renewable energy auction rules;
- Establish a rental fee system based on acreage, estimated real property value, and the project’s presumed “encumbrance” of the value of federal land;
- Institute an installed megawatt-based “capacity fee” as a proxy for collecting royalties;
- Establish provisions for the assignment of interests in a ROW, much like an oil and gas lease; and
- Create new provisions for cost recovery, transmission line ROWs, bonding/financial assurance, and site reclamation.
If adopted, the rule would have a significant impact on the future of renewable energy development, particularly in the American West, where much of the country’s prime solar and wind real estate is located.
One potentially contentious issue is BLM’s attempt to remake the ROW in the fashion of a mineral lease – something the agency may not have the authority to do. BLM has the authority to issue ROWs for renewable energy projects on federal land under the Federal Land Policy Management Act (“FLPMA”). While FLPMA requires annual rental payments of “fair market value” for a ROW across federal land, it does not authorize leasing or provide for royalty payments on electricity generated from a project sited on that ROW. Nevertheless, in addition to charging operators rent based on the “fair market value” of the land used for solar/wind projects, BLM is proposing to charge an additional “capacity fee” based on the project’s rated capacity to produce electricity. This capacity fee could be interpreted as an impermissible proxy for lease royalties, in excess of BLM’s authority to charge rent, which is normally based on the use of the land, and not on project revenues.
The full text of the proposal can be found at the following link: Leasing Public Lands for Solar and Wind Energy Development.
If the proposal was published in the Federal Register as planned on Sept. 30, interested parties will have until December 1 to submit their comments to the agency.
Beveridge & Diamond
Filed Under: News, Policy