Obama Rule Could Take Wind Out of Renewable Power on Public Land

It was supposed to be the largest wind farm in North America, with 1,000 turbines spinning above 320,000 acres of southern Wyoming.

But after investing more than $50 million and nearly a decade seeking approval to build a wind farm on public lands, the Power Company of Wyoming’s landmark project is still tied up in required scrutiny of its environmental impact. 

“We understood that this is a complex process,” said the company’s vice president Roxane Perruso. “We did understand that it was going to be several years. We did not anticipate nine.”

The Wyoming project is hardly an outlier. Although the Obama administration has given initial approvals to 46 wind and solar projects on 216,356 acres of public lands since 2009, just 15 are in operation. Others have been abandoned, are still being built or are undergoing years of required environmental analysis.

New Rule

The administration says it has a plan to cut through that red tape: a new rule, set to be imposed within weeks, that would encourage developers to bid on government-selected tracts with gusty winds and intense sunlight that are pre-cleared of major environmental conflicts. The rule could be a boon to Berkshire Hathaway Energy Co., First Solar Inc., Iberdrola SA and other companies that have their sights on public land, but developers are wary it will stifle development, putting them at odds with environmentalists who champion the plan.

The proposal would mirror the competitive bidding process the U.S. government already uses to sell oil and gas rights on public land. Under that longstanding practice, the Interior Department identifies territory available for oil and gas development, energy companies weigh in with their own nominations and leases are auctioned off. Tracts that don’t get bids can later be offered for non-competitive leasing.

Under the proposed wind and solar rule, companies would be encouraged to vie for territory in U.S.-designated renewable energy zones, with the end result being formal leases that could lock in some terms for at least 10 years and provide more developer protections. 

Presidential Power

Currently, the Bureau of Land Management only offers renewable energy developers right-of-way authorizations laying out rental payments and fees tied to electric generating capacity. But the agency can easily change those terms. Under the standard right-of-way grant, the BLM explicitly reserves the right to change per-acre rents annually and the capacity-factor fee at any time to ensure a fair return to the U.S. taxpayers who own the land.

The new measure will dictate how much freedom the next president has to harness public lands to support wind farms and solar arrays that are critical to meeting both U.S. and North American climate goals. Democratic nominee Hillary Clinton has vowed a ten-fold increase in renewable power produced on public lands and waters within a decade, building on progress made during President Barack Obama’s tenure. When Obama took office, no solar and only 566 megawatts of wind capacity had been approved on public land; now, the government has signed off on 15,096 megawatts worth of those projects.

Fractured Coalition

But the proposed rule has fractured the usual coalition of renewable energy advocates, putting wary developers on the opposite side of environmentalists who argue the measure will unleash the zero-carbon promise of wind and solar power on public lands.

Right-of-way permits aren’t a good fit for “4,000-acre, utility-scale solar” projects, said Bobby McEnaney, senior director of the Natural Resources Defense Council’s Western Renewable Energy Project. “A right-of-way can be taken away, modified with very little justification,” he said. “A traditional lease affords far more permanence; it is a much better vehicle for these kinds of projects.”

Developers aren’t convinced. They’ve been lobbying the government with talking points borrowed from the oil and gas industry’s playbook, warning that the Bureau of Land Management proposal will stifle new projects by hiking costs and creating uncertainty that scares off investors.

‘Expensive, Complex’

“If BLM is making it even more expensive, complex and time-consuming to develop, that’s going to make it that much less attractive to pursue public lands projects,” said Tom Vinson, vice president of the American Wind Energy Association.

Competitive auctions virtually guarantee costs will go up. Rental payments and a proposed megawatt capacity fee that factors in wholesale power prices — like a royalty on oil and gas production — will make projects even more expensive, representatives from the Solar Energy Industries Association and SunEdison Inc. said in a meeting the White House Office of Management and Budget.

Federal regulators are tweaking the fee structure, but the Power Company of Wyoming says the proposed version would hike rent and megawatt capacity charges for its Chokecherry and Sierra Madre wind farm by as much as 55.6 percent.

The extra costs come with the promise of faster permitting and more clarity in the long run. Because broad environmental analysis is front-loaded in the designated zones, the Bureau of Land Management says the new strategy could cut permitting times in half.

The approach also makes sure the development happens responsibly, avoiding critical ecological resources and areas that are important for wildlife, said Alex Daue, assistant director of energy and climate at The Wilderness Society.

Preserving Landscapes

“You’re conserving some of the best landscapes in America, and you’re affording developers an opportunity to develop in a way that doesn’t entangle them with the degree of conflict that is often associated with large-scale energy projects,” McEnaney said.

The tactic has already worked once. A federal auction of prime solar real estate in the pre-screened “Dry Lake Solar Energy Zone” near Las Vegas two years ago nabbed $5.8 million in high bids. The government fast-tracked the winning projects, with all three approved and one already under construction. 

“BLM was able to permit the projects there in less than a year, which is less than half the average time for solar projects on public lands, and the projects’ impacts will be offset with funds going to restoration and protection of other areas nearby,” Daue said.

The bureau has established 18 other designated leasing zones for solar power, but none have been earmarked for wind. That raises the prospect that developers will have to wait for years of government legwork before windy hot spots are identified, much less auctioned off. 

Creating Uncertainty

“It’s the kind of thing that most likely will stifle development in the short term, not only because of the uncertainty that’s created, but because the whole rule lies on the premise of having these designated leasing areas — and they just don’t have any of those for wind,” said Bloomberg Intelligence analyst Cheryl Wilson. “Nothing in the rule points to how they are going to do that.”

Renewable developers already are losing interest in massive, utility-scale projects that require sprawling stretches of land. Companies that were excited years ago by the Obama administration’s “strong, proactive stance helping to open up public lands for potential development” are less enthused now, said Christopher Mansour, the Solar Energy Industry Association’s vice president of federal affairs.

“Now it is to the point where they really make a careful calculation: Where is the best place to do my 200-megawatt project?” Mansour said. “Is it going to public lands, where I know I’m going to have a lot of hoops to jump through in general on the environmental side? Or maybe do I go to some disturbed lands, some farm lands, which may actually be closer to the urban areas where the demand is?”

To contact the reporter on this story:

Jennifer A. Dlouhy

in Washington at jdlouhy1@bloomberg.net
To contact the editors responsible for this story:

Jon Morgan

at jmorgan97@bloomberg.net

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