Interior finalizes landmark competitive leasing rule

Source: Scott Streater, E&E News reporter • Posted: Friday, November 11, 2016

The Interior Department today finalized a new rule establishing a competitive leasing process for renewable energy projects on federal lands, a move the agency says will ensure future administrations continue to advance green energy projects.

The final rule unveiled today by Interior Secretary Sally Jewell is the agency’s top remaining renewable energy task to be completed before President Obama leaves office in January.

Its finalization was viewed as critical following Donald Trump’s surprise victory in Tuesday’s presidential election. The Republican has said he favors fossil fuel development on federal lands over solar, wind and geothermal but has not said he plans to undo rules governing renewable energy development.

The finalized rule is designed mostly to benefit solar power development by allowing the Bureau of Land Management to hold competitive lease sales inside 19 formally designated solar energy zones (SEZs) covering nearly 300,000 acres in the West. The process would be similar to the one already in place for proposed oil and natural gas projects on federal land.

BLM has had mixed results developing the SEZs, in part because the agency is using an interim competitive auction process in which winning bidders are little more than BLM’s “preferred applicants” — meaning they pay for the right to be first in line to have their right-of-way applications and plans of development processed.

The leasing process in the final rule would allow the solar industry to nominate parcels for lease and allow BLM to eventually hold regular lease sales on these nominated parcels in the SEZs.

The rule would also allow BLM to hold lease sales for large-scale wind and geothermal power projects inside 388,000 acres of “development focus areas” identified in the Desert Renewable Energy Conservation Plan in Southern California. That plan was approved in September.

“This new rule not only provides a strong foundation for the future of energy development on America’s public lands, but is an important and exciting milestone in our ongoing efforts to tap the vast solar and wind energy resources across the country,” Jewell said in a statement. “Through a landscape-level approach, we are facilitating responsible renewable energy development in the right places, creating jobs and cutting carbon pollution for the benefit of all Americans.”

But the wind and solar power industries have raised concerns about the rule, which Interior first proposed in September 2014.

The final rule has been under review since March by the White House Office of Management and Budget, mostly due to resistance from the wind and solar industries.

The industries have been concerned about rental rates, as well as megawatt capacity fees, bonding rates and lease fees. They’re also uncertain about adopting a system that guides them to prescreened “zones” that may not align with where the energy resource is located.

Industry sources say they need time to review the final rule before they can comment on it.

But the final rule released today includes a number of changes to the draft unveiled two years ago that are designed to address those concerns, according to agency officials and sources who have been briefed on the final rule.

Among them are changes to the way the megawatt capacity fee, which is based on the costs to produce electricity, is calculated. The industry pushed to use more recent cost figures, sources said, because the costs of developing wind and solar electricity have decreased as technology has advanced.

Another area of concern was BLM’s ability to change rental rates essentially whenever it wanted. The final rule puts forward a framework for how and when those rate changes would occur, giving the industry more certainty. For example, the final rule gives developers the option of locking in scheduled rent and fee adjustments that are not based solely on market conditions.

Today’s rule, which also sets bonding requirements and other measures to ensure a fair rate of return to taxpayers, will be formally published next week in the Federal Register and will become effective 30 days later.

Conservation groups today praised the issuance of the final rule, which they say is the first effort by the federal government to comprehensively address and regulate wind and solar energy on public lands.

“The Obama administration has made renewable energy on public lands a reality, and this widely supported rule establishes a 21st-century program that balances clean energy development and conservation,” said Alex Daue, the Wilderness Society’s assistant director of energy and climate. “It will ensure that best practices advanced by the Bureau of Land Management to develop wind and solar responsibly become standard across the West.”

Joy Page, the senior policy adviser for renewable energy and wildlife at Defenders of Wildlife, echoed Daue’s statements.

“I think this rule represents a win-win for wildlife and the industry,” Page said. “It ensures we conserve wildlife on our public lands. But it also provides significant opportunity and benefits for industry.”

Obama’s legacy

For Interior, the rule is clearly a top priority in efforts to cement Obama’s legacy as a champion of green energy.

Interior officials have said it should ensure renewable energy’s unprecedented growth spurt continues on federal land after Obama leaves office.

That’s because supporters say finalization of the new rule is a major step toward ensuring that renewable energy development is a permanent part of Interior’s regulatory framework, regardless of whether a Trump administration continues to push renewable energy projects on federal lands.

The Obama administration since 2009 has approved 60 commercial-scale solar, wind and geothermal power projects covering more than 305,000 acres of federal lands across the West. All told, the 60 projects would have the capacity to generate 15,569 megawatts of electricity — enough to power about 5.1 million homes.

Maintaining that momentum spurred a bipartisan coalition of congressional members in June to write a letter to Jewell urging Interior to complete the leasing rule (E&ENews PM, June 21).

“The BLM is incredibly proud of the work we’ve done over the last eight years supporting wind and solar development,” BLM Director Neil Kornze said in a statement. “We went from only a handful of approved projects in 2008 to a robust program with over 15,000 MW approved, six times the amount we had approved in the 25 prior years.”

The new rule advances Obama’s 2013 Climate Action Plan, which has challenged Interior to approve 20,000 MW of renewable energy on federal lands by 2020.

The Interior Department established 17 SEZs in the Western Solar Plan finalized and approved by former Interior Secretary Ken Salazar in 2012. Two additional SEZs were established in 2013 in Arizona and California.

If fully developed, projects in the designated SEZs could produce as much as 27 gigawatts of solar energy — enough to power about 8 million homes, Interior said.

Among the Obama administration’s other top remaining priorities outlined to E&E News:

  • Establish two SEZs on federal tracts along the Nevada-California line and identify the first wind energy zones where projects would be encouraged through streamlined permitting.
  • Direct BLM state offices to identify solar and wind energy zones when resource management plans are amended or updated.
  • Authorize construction of the first phase of the 3,000 MW Chokecherry and Sierra Madre Wind Energy Project in Wyoming, the largest wind project in North America, and the TransWest Express transmission line, which will carry the project’s electricity to major Western load centers.

Click here to read the final competitive leasing rule.