The U.S. Bureau of Land Administration (BLM) not too long ago launched a prepublication copy of a ultimate rule that may cut back annual hire and capability charges for wind and photo voltaic power rights-of-way (ROWs), permit noncompetitive leasing in Designated Leasing Areas (DLAs), modify BLM’s method to prioritizing purposes, and make different adjustments to the appliance course of.
The Federal Land Coverage and Administration Act of 1976 directs BLM to gather honest market worth to be used of public lands. Underneath the present rules, BLM does so by charging annual acreage hire and capability charges for wind and photo voltaic ROWs based mostly on hire and price schedules that replace each 5 years. Acreage hire is predicated on the bodily dimension of a mission, and capability charges are based mostly on nameplate capability.
In January 2021, hire schedule updates triggered annual costs to spike properly past honest market worth in lots of areas. In June 2022, BLM responded to renewable power trade issues by issuing interim hire steerage that considerably decreased acreage hire and barely decreased capability charges pending new rules.
The ultimate rule overhauls how BLM will calculate annual costs for wind and photo voltaic ROWs and replaces the 2022 hire reductions. Probably the most vital adjustments within the new rule directs BLM to cost ROW grantees the higher of both acreage hire or capability charges in a given 12 months reasonably than each. This alone will assist decrease annual prices for tasks on BLM-administered lands. The ultimate rule additionally makes adjustments to how these costs are decided.
Acreage hire will probably be calculated based mostly on the statewide common money hire for pastureland within the 5 years previous issuance of the ROW based on knowledge printed by the Nationwide Agricultural Statistics Service. These reference knowledge characterize honest market rental worth way more precisely than the product of the convoluted formulation in BLM’s present rules.
The ultimate rule additionally reduces the encumbrance issue for wind power tasks from 10 p.c to five p.c. Charges for wind and photo voltaic tasks below the methodology are projected to be significantly decrease than below the present framework in most areas. The acreage hire price will probably be established on the time of ROW issuance and can solely enhance by 3 p.c every year for the lifetime of the ROW, lending much-needed certainty to monetary forecasts.
Capability charges will now not be charged based mostly on nameplate capability. As an alternative, they are going to be calculated based mostly on precise electrical energy manufacturing in a given 12 months and both the precise price-per-MWh within the mission’s energy buy settlement or the typical wholesale worth of electrical energy within the 11 western states on the time of ROW issuance. Capability charges will probably be topic to a blanket 80 p.c discount for ROWs issued earlier than 2036.
The ultimate rule gives extra 20 p.c reductions for tasks with American-made parts and tasks with organized labor agreements that may be utilized on prime of the blanket discount. For instance, the preliminary capability price cost for a ROW issued earlier than 2036 could be routinely decreased by 80 p.c, then decreased once more by as much as 20 p.c for home supplies, and once more by 20 p.c for a labor settlement, for a most whole discount of 87.2 p.c relative to the baseline price.
Even with these reductions, we anticipate capability charges to be higher than acreage rents for many working tasks and subsequently be the idea of annual costs. Like acreage hire, the capability price price will probably be established on the time of ROW issuance and final for the lifetime of the ROW, with the one variables being the three p.c annual adjustment issue and the precise electrical energy generated by the mission in a given 12 months based mostly on licensed annual statements from the proprietor.
The ultimate rule’s hire and price methodology will apply to all new wind and photo voltaic ROWs, and to present ROWs if the grantee opts in inside two years.
The ultimate rule is a significant step in the proper route for renewable power builders on federal lands. Nonetheless, in some situations the capability price charges nonetheless could end in costs that exceed the honest market worth of the general public lands underlying a mission. Moreover, the brand new hire and price construction doesn’t apply to standalone linear ROWs for ancillary renewable power services akin to gen-ties or battery power storage methods, which is able to proceed to be charged below the outdated system. Homeowners and operators of renewable power tasks on BLM lands subsequently ought to take into account acquiring site-specific value determinations to find out whether or not projected costs below BLM’s new hire rule are more likely to replicate honest market worth.
Aggressive leasing
The present rules present that BLM could solely supply wind and photo voltaic leases inside DLAs on a aggressive foundation. BLM has discovered {that a} lack of aggressive curiosity has hindered renewable power authorizations in these areas.
The ultimate rule provides BLM the discretion to challenge noncompetitive renewable power leases inside DLAs, providing extra flexibility and theoretically opening extra lands in these areas for growth. BLM additionally continues to retain the discretion to supply grants competitively outdoors of DLAs until it has already accepted a whole software, acquired a Plan of Improvement, and entered into a price restoration settlement for a given web site.
The profitable bidder in a aggressive course of turns into both the popular applicant or the presumptive lease holder. A most popular applicant has an unique proper to submit an software with out competitors, however approval isn’t assured. A presumptive lease holder skips the preliminary software evaluation and is awarded a lease upon submittal of an authorized Plan of Improvement. BLM could solely choose presumptive lease holders inside DLAs.
Utility prioritization
Underneath the present rules, BLM assigns renewable power ROW purposes a excessive, medium, or low precedence processing designation based mostly on a set of enumerated components. A low precedence software usually serves as an efficient denial of an software. We now have seen BLM apply the regulatory standards with broad latitude, and the outcomes can typically be inconsistent throughout, and even inside, native places of work.
The ultimate rule removes the high-, medium-, and low-priority distinction altogether and replaces the earlier prioritization components with six common issues for BLM to judge “holistically” when figuring out which purposes to course of first. The rule additionally gives that state and native BLM places of work could set up extra prioritization standards via coverage steerage. We anticipate these adjustments make BLM’s prioritization method much more subjective and grant native places of work higher discretion when organizing the appliance queue.
Different notable points of the ultimate rule
The ultimate rule makes another adjustments to how BLM processes wind and photo voltaic power purposes. For instance, the ultimate rule will permit BLM to disclaim an software after 90 days if cheap prices have been requested of the applicant however not acquired. If funding runs out for an software, BLM will cease processing it till funds grow to be accessible or the applicant elects to pay full precise prices. Value restoration account funds could also be used to rent extra employees or contractors to assist in software processing.
The ultimate rule additionally features a new requirement that ROW grantees preserve not less than 75% of power era capability for the licensed growth. Failure to fulfill this milestone for 2 consecutive years could end in ROW suspension or termination after an affordable alternative for the operator to justify or treatment the default.
Lastly, the ultimate rule extends the utmost time period of renewable power ROWs from 30 years to 50 years, which higher displays advances in wind and photo voltaic know-how. ROWs for storage and main transmission services will even have a most time period of fifty years.
The ultimate rule, whereas not excellent, is mostly favorable to renewable power ROW grantees as a result of it might considerably decrease annual prices of working tasks on BLM-managed federal lands. Builders ought to calculate acreage rents and capability charges for present and future tasks below the brand new methodology to find out the way it will influence the tasks’ financials and whether or not to choose in. The ultimate rule can also give rise to new alternatives for particular person purposes inside DLAs. Nonetheless, the appliance prioritization course of might grow to be even much less clear than below the present framework, and candidates will probably be topic to new diligence necessities.
Lastly, it is very important take into account the ultimate rule within the context of different ongoing BLM initiatives, akin to updates to the Western Photo voltaic Plan and the Public Lands Rule, each of that are anticipated this 12 months and are more likely to considerably limit reasonably than increase renewable power siting on federal public lands.
Reed McCalib is an legal professional with Bell Kearns, which focuses on advising on the evaluation and entitlement of large-scale renewable power tasks. Contact the agency at (415) 230-0599 or data@bell-kearns.com.
