This article comes from law firm Husch Blackwell LLP and is authored by Jason C. Moore, Alison M. Nelson and Paul Atkinson
NOTE: An earlier draft of this update indicating that the FAA policy was still under consideration was inadvertently published last week. That draft was out of date and should not be relied on as a statement of FAA policies currently under consideration.
Changes to a Federal Aviation Administration (FAA) policy concerning the issuance of Determinations of No Hazard to Air Navigation (DNHs) under discussion late last year would have had profound and potentially adverse repercussions on wind development projects nationwide. Fortunately, those far-reaching changes were not adopted as a change to FAA’s general DNH policy. However, the potential changes caused quite a stir in a few specific wind transactions and highlighted the significance to wind transactions of even rumored changes in FAA policy.
Under FAA regulations and policies, wind development projects are required to file a notice of proposed construction (Form 7460-1) for each planned turbine and meteorological tower that exceeds 200 feet above ground level. FAA assigns an Aeronautical Study Number (ASN) to each turbine, conducts a study to assess potential impacts to air navigation and then issues a determination – typically a Determination of Presumed Hazard or a DNH. The DNH is the golden ticket that every lender and tax equity investor on a wind deal requires.
Under FAA guidance, if the as-built elevation or total height above ground level increased by 1 foot or more after the issuance of the DNH, or if the latitude and/or longitude changed by exactly 1 second or more, the developer was required to file a new Form 7460-1. One second roughly translates to 100 feet in latitude and approximately 100 feet in longitude (although the latter varies depending on location). This written FAA policy results in the termination of existing DNHs, issuance of new ASNs, and performance of new studies when turbines were moved by the applicable distance. In most scenarios, a new DNH would be issued, often months later.
But several wind developers learned, as part of their communications with FAA during work on specific wind projects, that FAA was considering changing its policy in a way that would have had profound consequences. That new policy would have increased the specificity of both the vertical and lateral changes that trigger the mandate of its new study and determination requirements: If a turbine increased in height between 6 inches and 11 inches, FAA would round up to 1 foot and the mandate would be triggered or, most significantly, if the turbine moved laterally by 1/100 second (not 1 second as under prior policies) the mandate would be triggered. 1/100 second converts to approximately 1 foot in latitude, but at certain longitudes can be even less. Thus, for wind projects sited at some longitudes, a lateral movement of just a few inches could have triggered the need for a refiling.
Such a change in FAA policy would have had a monumental impact on wind projects. Lenders and tax equity investors have rigorous requirements to fund a deal, and having DNHs in place is one of the main boxes they must check for a deal to proceed to closing. Tax equity investors will be the owners of the projects, and lenders who will be repaid with tax equity’s funds want to ensure that tax equity will fund post-construction; thus, both types of financing entities are heavily vested in ensuring the project has all required approvals, including FAA determinations.
In the past, it was not unusual for a project to have a few turbines increase in height a foot or two, but lateral turbine shifts were almost always less than 100 feet. Although the need to refile for a handful of turbines raised red flags for the financing entities, a workaround was usually achieved without much difficulty, as the majority of the turbines were still covered by DNHs in effect. However, it is not unusual in a wind project for every turbine to move a few feet laterally, and such a policy likely would have affected every wind turbine currently under construction in the United States. Fortunately, the FAA appears to have moved away from considering such a change.
However, the potential change in policy caused delay in several deals as developers, lenders, and tax equity investors trying to close deals scrambled to address the possible need to start the process over again for hundreds of turbines, causing the termination of all DNHs for the project just weeks or days before closing (with the possibility that new DNHs will not be issued for many more months).
And these delays resulted from direct communications with FAA personnel. Future changes to FAA policy may not be memorialized in a formal FAA guidance document or written policy, and there is no requirement that FAA undergo a formal rulemaking process involving notice-and-comment procedures before the change takes effect.
Filed Under: Policy