Bureau of Land Management issues final right-of-way rules

In May 2024, the Bureau of Land Management (BLM or the Agency) issued final rules updating the renewable energy and rights-of-way (ROW) policy.¹ The BLM is one of the largest landowners in the United States, with large holdings west of the Mississippi River in particular, and the final rule signals that the Agency is open to renewable energy development on those lands. To drive renewable energy development on BLM lands, the final rule lowers costs and introduces a streamlined administrative process for renewable energy projects. The final rule is intended to support the Biden Administration’s efforts to promote clean energy development on public lands and could help achieve the Administration’s twin goals of creating a carbon-free energy sector by 2035 and a net-zero emissions economy by 2050. It also creates opportunities for developers as the clean energy transition continues.

REDUCED COSTS

As authorized in the Energy Act of 2020, the final regulations reduce capacity charges by applying an 80 percent reduction in the per-MWh rate through 2035, 60 percent in 2036, 40 percent in 2037, and 20 percent in 2038 and subsequent years.² The final rule also reduces the capacity fee for ROW holders in two potential ways: (1) a 20 percent reduction in the domestic share for grant or lease holders that use iron, steel, construction materials, or products manufactured in the U.S., as specified in the final rule;³ and (2) a 20 percent reduction in project labor agreement (PLA) costs for holders that use a PLA to hire workers to develop and build a solar or wind project.⁴ Rate reductions apply at the time the permit is issued and throughout the duration of the ROW subsidy.⁵ The final rule also bases the capacity fee for solar and wind facilities on the actual energy production at each facility, rather than on nameplate capacity. This should result in fees that are more closely tied to actual production for individual projects. The space rent and capacity fee will be set for the term of the ROW at the time the ROW is issued by the BLM, subject to adjustment by an annual adjustment factor.⁶ and in the case of a capacity fee – according to the actual annual electricity production by the beneficiary.

IMPROVED PROCESS

BLM provides a streamlined administrative process by introducing several key procedural changes. While BLM will continue to administer a competitive bidding process for proposed solar and energy ROWs, the final rule allows BLM to issue leases in circumstances where no competing interest exists, a departure from the previous procedure.⁷ Additionally, BLM is in the process of updating the 2012 Western Solar Plan, a programmatic environmental impact report that identified approximately 285,000 acres of agency-designated lease areas with high solar energy production potential and low levels of conflict with other resources.⁸ The updated Western Solar Plan is expected to include, among other things, programmatic decisions regarding solar energy development on BLM-administered lands in Arizona, California,⁹ Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Oregon, Washington and Wyoming.¹⁰

MOVE FORWARD

The final rule is intended to “address climate change” and “enhance America’s energy security” by promoting the development of renewable energy sources on BLM program lands.¹¹ Projects on BLM lands are still subject to the National Environmental Policy Act (NEPA), including NEPA review for power lines and ancillary facilities, and the NEPA process can take some time. The question remains whether the BLM’s attempt to streamline administrative processes for solar and wind projects in the final rule will affect the length of the NEPA process for these projects. In either case, the final rule’s provisions to reduce costs and streamline certain administrative approvals should be a welcome sign for renewable developers.