Location Relief: Bureau of Land Management Reduces Rates for Wind and Solar | Davis Wright Tremaine LLP

On May 31, Home Secretary Deb Haaland announcement that the Bureau of Land Management (BLM) revise its policies on rents and fees charged for renewable energy projects located on federal public lands and establish five renewable energy coordination offices that will primarily serve the western United States United. Shortly after Secretary Haaland’s announcement, BLM job an updated rent handbook chapter, which adjusts downward the amounts charged to existing and new wind and solar energy projects located on public lands.1 BLM expects revised rates to reduce bills by more than 50 percent on average.

In terms of meeting climate targets, the reduced rates are a welcome update and could significantly reduce the bills owed by some renewable energy projects, although it is too early to say whether the newly created coordination offices will increase. the effectiveness of BLM Renewable Energy Law. significantly one-way process.

The landscape

As a backdrop, Title V of the Federal Land Policy and Management Act of 1976 (FLPMA) and its regulations govern applications for wind and solar energy projects located on public lands. These requests are treated by BLM as rights of way.

Generally, the FLPMA requires right-of-way holders to pay fair market value for their use of public lands. But thanks to the Energy Act of 2020, the Home Secretary has the express power to reduce rents charged for renewable energy projects in two cases:

Firstif existing tariffs:

  • Exceed fair market value,
  • Imposing economic hardship,
  • Limit business interest in a competitive lease sale or grant of right of way, or
  • Are not competitively priced comparable to other land available.

Secondif the Secretary determines that a reduced rental rate is “necessary to promote the greatest utilization of wind and solar energy resources”.

In this case, BLM apparently exercised the more amorphous second option. According to BLM announcementthe reduced billing rates are intended to promote greater use of wind and solar energy resources on public lands while collecting a reasonable return.

Implementation of reduced rates and fees

Today (as before), rental invoices issued by BLM for wind and solar projects have two components: (1) area rent; and (2) a capacity charge in megawatts (MW).

Surface rent. The area rent is calculated by multiplying the number of acres by the annual rate per acre of the appropriate area rent schedule. The calculation to determine the annual rate per acre is A × B × C × D = E where:

  • A is a value per acre;
  • B is the footprint factor (100% for solar and 10% for wind);
  • C is the rate of return;
  • D is an annual adjustment factor calculated on the basis of the average annual change in the implicit price deflator-index of gross domestic product (IPD-GDP) over a period of ten years; and
  • E is the annual rate per acre.

The updated manual revises the “A” factor by one per acre area assess (a dollar value at the upper end of a range in which each county falls) to a per acre statewide medium and reduces the rate of return (“C” factor) from 5.27% to 2%.

The updated manual provides an example that calculates the rent for a 350 MW solar PV project on 2,625 acres of BLM land. Assuming this project is located in San Bernardino County (which was assigned an area value per acre of $16,279 under previous BLM policy), the project would now be assigned a statewide per acre value of $3,679.16 and would owe an area rent of $201,363 in 2022, instead of $2,604,630 under a Previous BLM Rent Schedule.2

MW capacity charge. The MW capacity charge is calculated by multiplying the nameplate capacity of a renewable energy project by a MW rate determined by the BLM. The MW capacity charge comes into effect once the project begins generating electricity.

The New policy also revises the MW capacity charge. The MW rate, which previously ranged from $2,172 to $3,802 per MW depending on the technology, is now set at $2,000 per MW for all technologies. Wind projects, which had the highest MW rate ($3,802) under the previous policy, will benefit the most from the reduced rate.

The updated handbook retains a three-year phase-in for MW capacity charges from the start of production: 25% in year one, 50% in year two, and 100% in year three.

The new rental schedule provides rates through 2050 and is effective immediately. BLM has delayed sending invoices to right-of-way holders pending finalization of the new manual chapter and is now to resume its billing for wind and solar projects. BLM will issue recalculated invoices for calendar year 2021, with refunds or credits offered for any invoices already paid for 2021.

Increased capacity to handle renewable energy requests

In addition to the announcement regarding the reduced rates, Secretary Haaland also announcement the creation of five renewable energy coordination departments in the BLM offices. These coordination offices are intended to increase BLM’s internal capacity to process right-of-way applications and will include:

  • A national office at BLM headquarters in Washington, D.C.
  • State offices in Arizona, California and Nevada
  • A regional office, led by BLM Utah, representing Colorado, New Mexico, Utah and Wyoming

Coordinating offices are responsible for streamlining reviews among federal agencies for renewable energy projects.

This expansion of administrative capacity is part of BLM’s efforts to increase renewable energy permits on federal lands. In December 2020, Congress directed BLM will seek to license at least 25,000 MW of electricity from wind, solar and geothermal power projects on public lands by 2025 at the latest. Annual Report in Congress, BLM said it had prioritized 54 proposed projects with a combined potential capacity of 33,000 MW. However, in FY 2021, BLM only authorized 2,890 MW (still representing a 35% increase from the previous year). These numbers demonstrate the magnitude of the task ahead of BLM.

In theory, increasing institutional capacity is a good thing. In fact, BLM Annual Report estimated that 56 additional full-time employees would be needed to support its renewable energy workload if interest in wind and solar projects continues. Still, it remains to be seen whether the coordination offices will have the intended effect of improving efficiency or simply adding another layer of bureaucracy, slowing things down further.

Take away food

BLM said the new lease schedule is intended to encourage greater wind and solar development on public lands rather than better match fair market value – which continues to be the norm under the FLPMA. So while the rent reductions are a welcome update, these developments do not represent a fundamental change in the way rents are calculated. Additionally, it remains to be seen whether the newly created coordination offices will increase the efficiency of the BLM’s renewable energy scoping process.

Still, these announcements are just one piece of the larger initiative to facilitate clean energy on federal lands as part of the Biden-Harris administration’s broader climate strategy. While challenges persist, these changes ultimately provide an opportunity for industry and other stakeholders to ensure that our public lands are managed effectively to support affordable, environmentally responsible clean energy.

FOOTNOTES

1 In 2021, BLM offered several rent reduction options in a draft handbook section and hosted a 60-day public comment period.
2 After the publication of the memorandum of instructions 2021-005 in November 2020, BLM subsequently revised rates downward for Riverside, San Diego and San Bernardino in the California Memorandum of Direction 2021-008 in June 2021. The comparison above is based on the rates published in instruction note 2021-005, since the rates in 2021-008 are not available online.

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