Interior unveils competitive leasing rule to guide development on federal lands

Source: Scott Streater, E&E reporter • Posted: Friday, September 26, 2014

The Interior Department today unveiled a major new proposal establishing a competitive leasing process for renewables projects that it said should spark commercial-scale project development inside more than a dozen solar energy zones across the West.

The proposed rule unveiled today by Interior Secretary Sally Jewell is meant to advance President Obama’s Climate Action Plan, which has challenged Interior to approve an additional 10,000 megawatts of renewable energy on federal lands by 2020.

But its major impact will be to promote solar development, allowing the Bureau of Land Management to hold competitive lease sales inside the 19 formally designated solar energy zones (SEZs) covering nearly 300,000 acres, similar to the process 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 has been forced to use an interim competitive auction process that the industry has criticized at times as confusing. Under the interim process, 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.

Today’s proposed rule, which will set rental and bonding requirements to ensure a fair rate of return to taxpayers, will be formally published in tomorrow’s Federal Register, kicking off a 60-day public comment period ending Dec. 1. The goal is to finalize the new rule by next year, said David Quick, a BLM spokesman.

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

“This competitive process will encourage access to leasing opportunities for renewable energy projects, create greater certainty for developers and provide a fair market return to American taxpayers for the use of public lands,” Jewell said in a statement. “The competitive proposal will help move the United States toward a cleaner environment — cutting carbon pollution and creating American jobs, while supplying communities with reliable and affordable power.”

BLM Director Neil Kornze said today in a statement that the proposed rule “is an important step toward having clear and fair rules for how to move energy development forward.”

He added, “Public lands offer some of the best opportunities for renewable energy development across the West.”

The Obama administration since 2009 has approved 52 solar, wind and geothermal power projects on federal land. If all are built, they will have the capacity to produce up to 14,000 MW of electricity — enough to power 4.8 million homes and businesses.

The Interior Department established 17 SEZs in the Western Solar Energy Plan finalized and approved by former Interior Secretary Ken Salazar in 2012. Two additional SEZs were established last year 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 today.

The proposed rule follows Interior’s release this week of a sweeping draft plan to manage development of renewable energy projects across a vast swath of public and private lands in the Southern California desert.

The draft Desert Renewable Energy Conservation Plan (DRECP) calls for establishing 2 million acres of “development focus areas” within a 22.5-million-acre planning area that are deemed suitable for commercial-scale renewables development or transmission line projects (E&ENews PM, Sept. 23).

The idea behind the DRECP and today’s proposed rule is to guide large-scale renewables development to areas with high solar and wind potential and low natural resource conflicts, said Janice Schneider, Interior assistant secretary for land and minerals management.

“By offering incentives to promote the use of preferred areas with the least potential resource conflicts, the initiative will enable us to better manage solar and wind energy development on public lands using a landscape level approach, improving efficiency for developers and reassurance that lands not suitable for development will be protected,” she said in a statement.

Providing industry certainty?

James Mueller, director of research for the George Washington University Solar Institute in Washington, D.C., said the competitive leasing rule announced today is exactly what the solar industry needs if the Obama administration is serious about advancing renewables on federal lands.

“The key is whenever you’re talking about developing public lands, you have all these conflicting interests and federal laws that apply … and anything that provides more certainty and a more streamlined process where solar development makes sense, that’s exactly what industry wants and needs,” Mueller said.

But Ken Johnson, vice president of communications for the Solar Energy Industries Association, said the industry has some concerns with the proposal.

“One of our biggest concerns is that money appears to trump merit,” Johnson said in an email, referring to the lease bidding process. “We need to think that kind of system through very carefully.”

Johnson also noted that commercial-scale solar projects have only started to take off recently. “To suddenly change the rules of the game now, when utility-scale solar is just starting to hit on all cylinders, could set back that progress.”

But BLM since late 2011 has been working to develop a formal rule that would establish a competitive leasing process by which the agency would issue leases to develop parcels in the SEZs, similar to the process in place for proposed oil and natural gas projects on federal land. Developers that hold federal leases have legal rights that the preferred applicants would not.

SEIA and others have complained that the interim competitive auction process for developing parcels inside the SEZs is confusing and has turned some energy developers off of developing in the zones.

That became clear when BLM held its first competitive auction in October 2013, involving three parcels covering 3,700 acres inside two SEZs in Colorado’s San Luis Valley, a region considered to have some of the nation’s best solar energy potential (E&ENews PM, Oct. 24, 2013).

The industry submitted no bids — in part, government and industry officials conceded, because of the “preferred applicant” process.

But a second competitive auction inside the Dry Lake SEZ in southern Nevada last summer was a resounding success, with energy developers bidding $5.8 million for a chance to develop six parcels covering 3,083 acres (E&ENews PM, June 30).

BLM officials were confident that the Nevada lease sales would be different because of favorable market conditions and tweaks to the auction process designed to give the industry more certainty over mitigation costs.

Chase Huntley, the Wilderness Society’s senior director of government relations, said his group favors transitioning to a competitive leasing process and believes BLM’s proposed rule will help ensure renewables projects are sited properly.

“This rule should help forward the transition to renewable energy by cementing the gains the BLM has made in building a responsible and orderly approach to developing solar and wind on public lands,” Huntley said in a statement. “Renewable energy has a bright future on public lands if we commit to avoiding the conflict and uncertainty that comes with responding to project applications as they crop up.”