United States: BLM Issues Final Rule Streamlining Renewables On Public Lands

Tara Kaushik is a Partner in the San Francisco office and Stephen Humes is a Partner in the West Palm Beach office

HIGHLIGHTS:

  • The Bureau of Land Management issued a final rule designed to expedite solar and wind renewable energy project development on public lands.
  • The rule creates a new leasing program that uses competitive leasing processes and incentives to encourage development in designated leasing areas.
  • According to the BLM, the Rule generally will increase rents and fees for wind projects and decrease rents and fees for solar projects.

On Nov. 10, 2016, the Bureau of Land Management (BLM) issued its final rule (Rule) governing solar and wind energy development on public lands. The Rule creates a new leasing program that uses competitive leasing processes and incentives to encourage development in "designated leasing areas" (DLA) on the 700,000 acres of public lands identified in Arizona, California, Colorado, Nevada, New Mexico and Utah.

Solar and Wind Rule

Among other provisions, the Rule:

  • provides financial incentives to developers, including less frequent adjustments to rent and longer phase-ins for other fees, including megawatt capacity fees
  • allows standard performance bonds as opposed to bonds based on full reclamation costs
  • allows for leases in DLA through competitive processes
  • gives developers the option of selecting fixed rate adjustments instead of market-based adjustments
  • updates the BLM's current fee structure in response to market conditions
  • broadens the BLM's authority to utilize competitive processes outside of DLAs

According to the BLM, the Rule generally will increase rents and fees for wind projects and decrease rents and fees for solar projects. The BLM estimates that the Rule will result in both one-time and annual net reductions in payments to the BLM. The BLM estimates these reductions to be $1.5 million on a one-time basis and $14.2 million total on an ongoing annual basis across all projects.

Impacts on Solar and Wind Developments

The Rule provides some predictability for solar developers on fees, permitting and the leasing process within the DLAs for development. While it will increase the amount of capital costs that solar developments will need to put in place up front, the financial incentives will potentially offset some of those capital costs.

The Rule likely will make wind development a challenge on public lands, given the increased fees to be paid up front compared to solar developments. According to the American Wind Energy Association, the Rule provides little incentive for wind developments on public lands, as it would cost less and takes less time to develop wind projects on private lands.1

Post-Election Implications

It remains uncertain how long the rule will be effective after the inauguration of the president-elect in January 2017. The president-elect has indicated that his administration would repeal the majority of climate change and renewable energy regulations that the current administration issued in lieu of a possible return to supporting fossil energy projects. This Rule may be one of them. However, if the new administration targets this Rule, the BLM would have to issue a notice and comment period, which will likely take time.

As an example, the BLM issued the proposed Solar and Wind Rule on Sept. 30, 2014, for a 60-day comment period. The comment period was extended 15 days, closing on Dec. 16, 2014. The BLM received a total of 36 comment letters as well as other feedback during stakeholder engagement meetings over a six-month timeframe. This week's issuance was the final culmination of that process that began in 2014. So, if the Trump administration decides to target this Rule, the requirements of notice-and-comment rulemaking in the Administrative Procedures Act means that time will be required for the BLM to propose changes to the Rule, and then the BLM will need to review and reply to the comments and incorporate such comments into the final rule.

For now, the Rule will be effective 30 days after it is published in the Federal Register. The BLM stated it would schedule additional information sessions as part of the implementation process for the Rule, likely before the new year begins. The BLM's website contains more information on the rule.

Footnote

1 See November 2016 Solar Industry article.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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