Inspector general recommends tighter bonding, monitoring requirements and competitive bidding for leases
By Bob Berwyn
SUMMIT COUNTY — The Bureau of Land Management needs to tighten up its collection procedures and beef up bonding requirements to ensure that the public gets a fair return on lands leased for renewable wind and solar projects, according to a Department of Interior inspector general report released last month.
The absence of a process to ensure timely collections on wind rental revenues on 22 projects resulted in a loss of $1.2 million between 2009 and 2011, and shortfall in bonding of $8.5 million on 14 wind projects, the report found.
Insufficient bonding could leave the BLM at risk to future liability for reclamation and damage to natural resources.
In a couple of cases, field offices failed to update rental rates, claiming they had questions about how they were to be implemented and were still waiting for guidance from state-level offices.
The agency could also potentially generate millions of dollars in additional revenues if it used a competitive bidding process for renewable energy projects. The BLM is currently developing new rules that would guide a competitive bidding process for wind and solar energy development.
Under Secretary Ken Salazar’s 2009 executive order, production of renewable energy is one of the Interior Department’s highest priorities, and the BLM has been on a roll, mapping and leasing tens of thousands of acres.
The broad policy goal, established by Congress under the 2005 Energy Policy Act, is to generate at least 10,000 megawatts of electricity per hour from renewable sources on public lands by 2015.
According to the inspector general’s office, the BLM is “poised for a massive expansion in renewable energy construction and development of wind and solar projects,” with 137 authorized wind-testing projects that could transition into full development projects, and an additional 47 pending applications.
The BLM also had five of nine authorized solar projects just beginning construction, and another 103 applications pending review.
The report found that bonding on wind and solar energy projects is critical because the renewable energy boom has resulted in a speculative business environment, “with some companies rushing to submit applications just to place “holds” on BLM land.
There are concerns about companies creating a speculative environment by trying to obtain a (right-of-way) and then sell or transfer the ROW for profit. The changing technologies and financial commitment required of wind and solar projects also creates a high-risk business environment, the report found.
The need for adequate bonding exists because of the volatile and uncertain business environment for renewable energy projects. Two-thirds of the authorized wind projects rights-of-way have been reassigned or have seen name changes, and eight of the 21 companies have gone through or more name changes. The 1,000 megawatt Blythe solar project is on hold, as Solar Millennium AG, a German company, declared bankruptcy and announce plans to change the project’s technology.
“Such uncertainties reinforce the importance of appropriate levels of performance and reclamation bonding,” the report found.
The rush to develop renewable energy has also resulted in shortfalls in the monitoring process, both on the administrative side and on the ground, where inspectors in Wyoming found one incident of an unreported, collapsed wind turbine.
Field monitoring is also needed to ensure that project sites are maintained properly and to identify leaks from hydraulic systems, bird deaths, and damage from fallen towers and turbines.
Inspectors also found that the BLM is using third-party contractors for monitoring, with little BLM oversight.
The report recommends developing a bureau-wide system for monitoring and enforcement, as well as a fee structure for monitoring to cover costs.