Solar and Wind Energy Performance and Reclamation Bonds and Reclamation Cost Estimate Review Requirements
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December 17, 2015 |
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In Reply Refer To:
2800 (301) P
Instruction Memorandum No. 2015-138, Change1
Expires: 09/30/2018
To: All State and Field Officials
From: Assistant Director, Energy, Minerals, and Realty Management
Subject: Solar and Wind Energy Performance and Reclamation Bonds and Reclamation Cost Estimate Review Requirements DD: October 27, 2015, November 27, 2015
Program Area: Right-of-Way Program – Solar and Wind Energy
Purpose: This Instruction Memorandum (IM) supplements the annual solar and wind energy bonding certification requirements of IM 2013-034, Oversight and Implementation Plan – Renewable Energy Coordination Office, issued December 20, 2012, with requirements for an additional review and update of solar and wind energy performance and reclamation bond requirements. The Bureau of Land Management (BLM) policy is to continue to facilitate environmentally responsible development and operation of solar and wind energy projects on the public lands, consistent with the provisions of Secretarial Order 3285, dated March 11, 2009, as amended.
Policy/Action: The BLM will review each authorized solar and wind energy right-of-way authorization project file to ensure compliance with the BLM bonding policies and verify that the performance and reclamation bond held by the BLM is adequate to cover the terms and conditions of the right-of-way grant. Current bonding policies require that a bond be provided to the BLM for all solar and wind energy authorizations prior to the start of land disturbance activities or with the approval of a Notice to Proceed (NTP) for such activities. These policies also require an annual review of bonds for solar energy projects (IM 2011-003) and a review at least every 5 years for wind energy projects (IM 2009-043) to ensure adequacy of bonds. This IM updates the policies for the periodic review of solar and wind energy reclamation cost estimates and bonds to provide consistency in the BLM’s administration of solar and wind energy authorizations on the public lands. These policies do not apply to solar or wind energy projects sited on non-public lands.
This IM was further revised and now includes a requirement for State Directors to annually certify that solar and wind energy authorizations, reclamation cost estimates, and bonds are adequate and meet the requirements of this IM. Refer to the section titled, Oversight and Implementation below.
The BLM field office responsible for administering any solar or wind energy authorization, including solar and wind energy development authorizations and wind energy site and project area testing authorizations, will:
- No later than 60 days of the issuance of this IM, review all solar and wind energy authorization project files to ensure a bond has been provided to the BLM that meets the minimum bond requirements for the authorized facilities installed on the public lands. A bond must be provided to the BLM for all solar and wind energy authorizations prior to the start of land disturbance activities, generally before the BLM issues an NTP for such activities. Solar and wind energy grant holders that do not have a bond in place, or whose bond does not meet the minimum bond amounts required by BLM policy, will be issued a letter of non-compliance by the BLM field office. The letter of non-compliance will notify the grant holder that it must satisfy the BLM’s minimum bond requirements by delivering a bond instrument within 60 days to the BLM field office administering the grant.
- No later than 60 days of the issuance of this IM, review all solar and wind energy authorization project files to verify that a reclamation cost estimate has been prepared by the BLM or submitted to the BLM by the grant holder. The BLM field office must either prepare a reclamation cost estimate or issue a letter to the grant holder requesting that it prepare a reclamation cost estimate for any project file without one. Reclamation cost estimates must be delivered within 90 days.
- No later than 90 days of the issuance of this IM, review all existing solar and wind energy reclamation cost estimates and bonds that are older than 5 years of age for bond adequacy. For any authorization determined to have an inadequate reclamation cost estimate, the BLM field office will issue a letter to the grant holder requesting that it provide an updated reclamation cost estimate within 90 days.
- Each year the BLM State Offices will coordinate field office reviews of at least 20 percent of the reclamation cost estimates and bonds for solar and wind energy projects within their administrative boundaries that are less than 5 years of age for bond adequacy. These reviews will prioritize higher risk projects that involve greater land disturbance acreage, projects with a history of incidents or noncompliance, projects with abandoned or disabled equipment, or projects that may have potential environmental liabilities associated with use of hazardous materials and substances, hazardous waste, or herbicides. Each bond and reclamation cost estimate must be reviewed at least once every 5 years, regardless of its review priority. These reviews must be completed within 90 days of the end of each fiscal year, including fiscal year 2015, and documented in each project file. For any authorization determined to have an inadequate reclamation cost estimate, the BLM field office will issue a letter to the grant holder requesting that it provide an updated reclamation cost estimate within 90 days.
- No later than 30 days after the BLM receipt of updated reclamation cost estimates, the BLM field office will issue a bond determination letter for any solar or wind energy authorization that requires a new performance and reclamation bond. Bond determination letters must require that the bonds be furnished within 60 days of the issuance of the bond determination letter.
Reclamation Cost Estimate
The BLM will require that solar and wind energy reclamation cost estimates include consideration of at least three components of financial liability, but may include additional considerations as necessary. The three required components of the reclamation cost estimate are:
1) Environmental liabilities, such as the securing, removal or use of hazardous materials and substances, hazardous waste, herbicide, petroleum-based fluids, and dust control or soil stabilization materials;
2) The decommissioning, removal, and proper disposal, as appropriate, of any improvements and facilities; and
3) Interim and final reclamation, revegetation, recontouring, and soil stabilization. This includes the potential for flood events and downstream sedimentation from the site that may result in offsite impacts; the area and acreage of disturbance; and the resources affected by the project.
The reclamation cost estimate will help guide the BLM’s determination of an adequate bond amount for solar and wind energy projects. Detailed information for determining the appropriate bond amount for intensive land use is found under the 43 CFR 3809 regulations for mining operations. When requiring and reviewing reclamation cost estimates, the BLM will follow the mining operation guidance, IM 2009-153, to assist in calculating the bond amount for solar and wind energy projects.
Specific to solar and wind energy projects, salvage value for structures, equipment, or materials are not included in the reclamation cost estimate. Reclamation cost estimates will be calculated as if there were no such values since these are generally based upon a transient market value for commodities. An addendum to the reclamation cost estimate may be provided where the salvage and recycling value for the structures, equipment, or materials can be detailed. However, the addendum for salvage values will only be included in BLM’s bond determination with adequate third-party documentation and justification for salvage or considering special circumstances, such as State mandates to recycle and salvage project materials. The addendum must include current local market information and be readily available for BLM review and consideration in making its bond determination.
Bond Determination
The BLM authorized officer will identify the total amount of the performance and reclamation bond in its bond determination decision. Bonds must be posted to and accepted by BLM prior to approval of a Notice to Proceed (NTP) or approval to begin ground disturbing activities. The performance and reclamation bond is secured by the BLM to ensure compliance with the terms and conditions of the right-of-way grant. The bond is a single instrument to cover all potential liabilities. The entire bond amount may be used to address a single risk event or particular risks, regardless of the fact that in calculating the total performance and reclamation bond amount other risks were also considered.
Bond determinations must be issued in writing by the BLM and include the costs for the BLM to administer a reclamation contract and the cost recovery amount to inspect and monitor the reclamation activities. Costs for the BLM to administer a reclamation contract and inspect and monitor the reclamation activities should be commensurate with the complexity of fully reclaiming the land. This may be a percentage-based determination by the BLM which it adds to reclamation cost estimate as part of its bond determination.
Bond determination letters must be adequately documented in the project file and supported by a reclamation cost estimate provided by the grant holder. The reclamation cost estimate is the basis for determining the performance and reclamation bond. The additional administrative and other such costs must also be properly document and retained in the project case file to be included in the final bond determination. The project case file must include a separate file folder or section that fully documents the reclamation cost estimates for the project, the BLM review of the reclamation cost estimate, the basis for the final bond determination, communications with the grant holder regarding the bonding requirements for the project, and records related to the bond instruments provided by the grant holder. See the following section on Financial Instrument Handling.
Bond determinations must also consider compliance with State standards for public health and safety, environmental protection, construction, operation and maintenance of a solar or wind energy project area. Consideration must be made when the State standards are more stringent and are not inconsistent with the applicable Federal standard. If a State regulatory authority requires a bond to cover some portion of the environmental liabilities or other requirements for the project, the BLM must be listed as an additional named insured on the bond instrument and this documentation must be included in the project file. This inclusion would suffice to cover the BLM’s exposure should the holder default in any environmental liability listed in the respective State bond.
Legacy Rehost 2000 and Bond and Surety System Updates
Legacy Rehost 2000 (LR2000) and the Bond and Surety System (B&SS) are the BLM’s data systems used to track information for solar and wind energy authorizations, including the status of performance and reclamation bonds. It is critically important that all managers and staff place a high priority on the timely and accurate entry and update of information in LR2000 and the B&SS, consistent with current data standards for both systems. The LR2000 and the B&SS are used for both national and local reporting and tracking purposes and are also used as a public information and data source. This IM establishes a mandatory policy that LR2000 and the B&SS data entry for all solar and wind energy authorizations occur within 10 business days of the action. Each BLM field office will identify and designate the appropriate staff for LR2000 and B&SS data entry for solar and wind energy authorizations.
Financial Instrument Handling
The handling of financial instruments such as surety bonds, cash, checks and other instruments that are received as bond payment to the BLM must be handled in accordance with BLM Manual 1372 – Collections and Manual 1270 - Records Administration, and their policy guidance. Cash or check performance and compliance bonds are required to be deposited into a BLM suspense account in a timely manner, but until they are deposited, they are required to be safeguarded in a fireproof safe or file with adequate locking devices and with access limited to those designated employees with direct responsibilities for collections. Other non-negotiable bond instruments received by the BLM must be properly safeguarded and documented within the project case file, within a secure BLM records room or secured file cabinets. Under no circumstances should case files or bond records be held in desk drawers or other inadequate storage containers where they are readily susceptible to loss or theft. Access to safes and financial securities are addressed within these manuals and must be adhered to when reviewing and handling furnished bond instruments. Specific attention must be given to ensure that Personal Identifying Information (PII) received as part of the solar and wind energy bond instruments and documentation is not kept for public review in project case files.
Oversight and Implementation
Each state must coordinate with the BLM National Renewable Energy Coordination Office (WO-301) when implementing these policy requirements. The attached Bond Review Coordination Spreadsheet will be used and filled out for your state, documenting the status of each solar and wind energy authorization and associated bond, as well as the basis for minimum bond amounts and the bond determinations for the authorizations that require bonds. An updated spreadsheet must be provided to the BLM National Renewable Energy Coordination Office (Attn: Jayme Lopez) by the last business day of each month until all actions are completed.
Annually, each State Director must certify to the Assistant Director, Energy, Minerals and Realty Management, on behalf of the Director within 30 days of the end of the fiscal year that each solar and wind energy authorization, reclamation cost estimate, and bond are adequate and meet the requirements of this IM. A copy of the certification must be provided to the BLM National Renewable Energy Coordination Office electronically for tracking. The annual certification must provide assurance that No. 4 from above, and all the requirements under each section of this IM have been met for the past fiscal year. A list of all solar and wind authorizations for the state must be provided, and include all pertinent bonding information, such as the information included in the bond review coordination spreadsheet (Attachment 1), specifying which bonds were reviewed to meet the 20 percent requirement of No. 4.
The Director, through the Assistant Director, Energy, Minerals and Realty Management, will review all certifications to determine compliance with this IM. The Assistant Director may return for modification any certification that does not meet the requirements set forth in this IM.
Timeframe: This policy is effective upon issuance. The BLM National Renewable Energy Office (WO-301) will review activities performed under this IM.
Budget Impact: The application of this policy will have minimal budget impact. The bond adequacy and compliance review workload for solar and wind energy right-of-way authorizations are subject to the monitoring cost recovery provisions of the right-of-way regulations (43 CFR 2805.16).
Background: As part of an overall renewable energy program strategy, the Energy Policy Act of 2005 (Public Law 109-58, August 8, 2005) encourages the development of renewable energy resources on the public lands, including solar and wind energy projects. Secretarial Order 3285A1 established the development of environmentally responsible renewable energy as a priority of the Department of the Interior. The Government Accountability Office (GAO) entered into a review of BLM’s bonding of solar and wind energy projects (GAO 361559) in February 2014. A Final Report was issued by the GAO (GAO-15-520) in June 2015 with recommendations intended to improving the assurance that the BLM has adequately bonded solar and wind energy projects on the public lands. This IM helps to ensure the accomplishment of these goals.
Coordination: The BLM National Renewable Energy Coordination Office (WO-301) coordinated preparation of this IM with the Assistant Director of the Energy, Minerals and Realty Management Directorate (AD-300), the BLM State Offices, and the Renewable Energy Coordination Office leads and BLM national project managers. The BLM State and Field Offices and the Solicitor’s Office reviewed and provided input to this policy prior to its finalization.
Contact: If you have any questions concerning the content of this IM, please contact me at 202‑208-4201, or your staff may contact Lucas Lucero, Acting Manager, BLM National Renewable Energy Coordination Office at 202-912-7342 or llucero@blm.gov, or Jayme Lopez, Program Lead, BLM National Renewable Energy Coordination Office at 202-912-7547 or j06lopez@blm.gov.
Michael D. Nedd
Assistant Director
Energy, Minerals, and Realty Management
1 Attachment
1 - Bond Review Coordination Spreadsheet (1 p)