The landscape of renewable energy development on federal lands is undergoing significant changes with the passage of the One Big Beautiful Act ("OBBA"). This legislation marks a notable departure from the prior discretionary fee-setting mechanisms, establishing a mandatory statutory framework for acreage rent and capacity fees for wind and solar energy projects. Importantly, this new statutory framework does not extend to transmission lines, battery storage facilities or other renewable energy sources like geothermal, hydropower, or pumped hydro storage on public lands. Many of the new provisions of the legislation require specific approval by the Secretary of the Interior or the Secretary of Agriculture, as applicable.
Section 50302 of the OBBA rescinds those portions of the Energy Act of 2020 and the recently promulgated regulations entitled "Rights-of-Way, Leasing, and Operations for Renewable Energy" 1 providing discretion to the Secretary of the Interior in connection with solar and wind development on public lands to reduce fair market value acreage rental rates and capacity fees if the Secretary of the Interior finds that a reduced rental rate or capacity fee is necessary to promote the greatest use of wind and solar energy resources.
Previous Regulatory Framework
Prior to the OBBA, fees for renewable energy projects sited on federal land were primarily governed by the Federal Land Policy and Management Act of 1976 (FLPMA), with implementation by the Bureau of Land Management (BLM) and the U.S. Forest Service. There was no detailed statutory formula for these fees; instead, agencies exercised their discretion to develop administrative policies and schedules for wind and solar rights-of-way.
Under this previous system:
- Acreage Rent: Project developers paid an annual acreage rent based on BLM-published schedules, calculated using per-acre rates that reflected local land values, often referencing agricultural land rental rates.
- Capacity Fee: Wind and solar projects also incurred a capacity fee based on the authorized megawatts of the project. This was typically a fixed dollar amount per megawatt, adjusted periodically and not directly tied to project revenues.
- Fee Adjustments & Discretion: Both acreage and capacity fees were subject to periodic administrative adjustments, often tied to inflation or land value indices, allowing the BLM and Forest Service flexibility.
- Payment & Termination: While administrative practices allowed for late payment penalties and right-of-way termination for non-payment, these were not statutory requirements.
- Transparency: Although the BLM published fee schedules, there was no statutory requirement for detailed public reporting of all revenues from wind and solar projects.
- Fee Certainty: The Energy Act of 2020 (Section 3103) directed the Secretary of the Interior to establish a fee schedule to enhance certainty, but it did not impose a statutory formula.
Key Changes Introduced by the OBBA
The OBBA significantly alters the fee structure, moving from an administrative and discretionary approach to a statutory formula.
The new statutory structure:
- Statutory Formula: Replaces agency discretion with a specific formula for acreage rent and a revenue-based capacity fee.
- Acreage Rent: Bases acreage rent on local pastureland rates, with a 3% annual adjustment factor. The acreage rent is calculated using the equation: Acreage rent = A × B × ((1+C)^D), where 'A' is the Per-Acre Rate, 'B' is the Encumbrance Factor, 'C' is the Annual Adjustment Factor, and 'D' is the year in the term of the right-of-way. Holders of a right-of-way must pay this acreage rent until energy generation begins.
- Capacity Fee: During the operating term, the holder of a right of way for a renewable project must pay the greater of the Acreage Rent or a 3.9% capacity fee based on the gross proceeds received from the sale of electricity produced by the renewable energy project.
- In the case of a wind project, where not less than 25% of the lands subject to the right of way are authorized for use other than in connection with the wind project, both the Acreage Rent and the Capacity Fee may be reduced by application of a multi-use reduction factor of 10%, provided such reduction is approved by the Secretary of the Interior.
- Reduced Agency Discretion: Agency discretion in fee-setting is substantially reduced.
- Statutory Provisions: Includes statutory provisions for late payment, termination, and public reporting. Non-payment of acreage rent or capacity fees within 15 days of the due date may result in penalties, and termination of the right-of-way can occur if payment is not received within 90 days of the due date.
- Applicability: The new system applies to both BLM and National Forest System lands.
- Repeal of Energy Act of 2020 Authority: This new approach fully replaces the fee-setting authority under the Energy Act of 2020.
It is unclear whether Section 50302 of the OBBA applies solely prospectively, or whether there is some retroactive effect on existing rights-of-way. Further clarity is also needed on how these new fees affect projects located partially on BLM and National Forest System Lands as it is unclear whether these fees apply solely to a portion located on federal lands or to the entirety of the project's footprint.
Defined Terms in the New Legislation
The OBBA defines several key terms:
- Right-of-Way: As defined in FLPMA (43 U.S.C. 1702), referring to an easement, lease, permit, or license granted by the Secretary of the Interior (for public lands) or the Secretary of Agriculture (for National Forest System lands) for specific uses of federal lands, such as constructing and operating electric energy generation and transmission systems.
- Public Land: Includes "public lands" under FLPMA (43 U.S.C. 1702) and National Forest System land, but excludes certain forest reserves, lands located on the Outer Continental Shelf and lands held for the benefit of Indians, Aleuts, and Eskimos.
- National Forest System: As defined in the Forest and Rangeland Renewable Resources Planning Act (16 U.S.C. 1609(a)), referring to units of federally owned forest, range, and related lands throughout the United States and its territories. These lands are administered by the Secretary of Agriculture through the Forest Service.
- Project: A system described in section 2801.9(a)(4) of title 43, Code of Federal Regulations, as in effect on the date of enactment.
- Renewable Energy Project: A project located on public land that uses wind or solar energy to generate energy.
- Per-Acre Rate: The average of state pastureland rental rates over five calendar years preceding the issuance or renewal of the right-of-way, as published in the Cash Rents Survey by the National Agricultural Statistics Service.
Anticipated Development Community Reaction
This particular provision of the OBBA has largely remained outside of recent renewable industry discussions with respect to the OBBA, with the substantive changes to the tax credit regime therein receiving the most attention. We anticipate, however, that once the broader energy community becomes more aware of these provisions, significant concerns will arise, including with respect to the increased fee burden and additional administrative requirements in locating wind and solar projects on public land.
This article was prepared with the assistance of Charlotte McLaughry, summer associate at Baker Botts.
Footnote
1 Rights-of-Way, Leasing, and Operations for Renewable Energy; 43 CFR Part 2800 issued on May 1, 2024.
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