The U.S. Department of the Interior Bureau of Land Management (BLM) recently issued an Instruction Memorandum (Update) modifying its Solar Energy Development Policy (Policy), which is the agency's guidance on issuing rights-of-way for solar development on federal lands. The Update revises BLM's practices regarding evaluation of applications, imposes new procedures and time limits on development activities and creates criteria that BLM will use for establishing financial security to be posted by developers.
The Policy is BLM's procedure for processing applications for solar projects on federal lands. Developers who propose to build a solar project on BLM-managed land must submit an application demonstrating the developer's capabilities, and, among other requirements, provide a Plan of Development that describes the planned construction and operation of the facility. BLM then grants rights-of-way for the right to construct and operate the proposed facilities.
Historically, BLM's Policy provided that solar rights-of-way applications were generally processed on a first-come, first-served basis. During the application review, BLM evaluated developers' technical and financial capability to develop a project, and allowed liberal supplementation. The Update revises these criteria in an effort to ensure diligent development of solar facilities and to provide for expedited screening of applications to terminate those that are considered speculative.
While BLM was allowed to deny applications from those who could not demonstrate the financial or technical capability to complete the project, the process of screening was not aggressively pursued.
BLM will require more robust demonstrations of technical and financial capability, but will also consider alternative methods of making such demonstrations. In general, under the Policy and the Update, technical capability may be demonstrated by a history of funding, designing, constructing, or successfully operating an energy generating project. The Update adds the possibility of demonstrating financial and technical capability by providing a comprehensive plan for financing and developing projects. BLM will reject those applications that fail to demonstrate financial capability, either through actual ownership or through a sound business plan.
BLM could terminate a right-of-way if construction had not begun within three years of the grant.
The timeframe has been shortened and all grants of rights-of-way will be conditioned upon the agency's further issuance of a Notice to Proceed (NTP) that acts as the formal trigger for development activities. Construction must occur within twelve months of the date of the NTP and no later than twenty-four months after the grant of right-of-way. Construction must be completed within the timeframes established in the approved Plan of Development, which may be no later than twenty-four months after the start of construction.
A Plan of Development submitted by a developer may call for a project to be developed in phases. No more than three phases may be used, and construction of the each phase of development must occur within the same timeframe described above. Construction of later phases must begin within three years of the start of construction of the previous phase.
If construction does not begin on time, BLM will terminate the right of way unless the developer can show good cause for the delay (e.g., equipment delivery, legal challenges or acts of God).
Developers were required to post a "bond" to ensure compliance with the terms of the grant, including reclamation of the site upon completion of the term, but lacked specificity.
Financial security may be posted in the form of cash, a certified check, surety bonds (from approved sureties), irrevocable letters of credit (from approved financial institutions), and insurance. Corporate guarantees may not be used.
BLM will evaluate three criteria in determining the amount of security, which expand the types of costs for which developers will be held responsible:
- potential environmental liabilities, with a focus on the use of herbicides, oils, and solvents;
- decommissioning and removal of improvements; and
- site reclamation costs.