Policy Guidance for Federal Land Policy and Management Act Right-of-Way Rent Exemptions for Electric or Telephone Facilities Financed or Eligible for Financing under the Rural Electrification Act of 1936, as amended

July 13, 2016

In Reply Refer To:

2800 (350) P

EMS TRANSMISSION 07/19/2016
Instruction Memorandum No. 2016-122
Expires:  09/30/2019

To:                  All Field Office Officials

From:             Assistant Director, Energy, Minerals and Realty Management

Subject:         Policy Guidance for Federal Land Policy and Management Act Right-of-Way Rent Exemptions for Electric or Telephone Facilities Financed or Eligible for Financing under the Rural Electrification Act of 1936, as amended

Program Area:  Rights-of-Way Management, Lands and Realty.

Purpose:  This Instruction Memorandum (IM) provides guidance for processing requests for Federal Land Policy and Management Act (FLPMA) right-of-way (ROW) rent exemptions for electric and telephone facilities financed or eligible for financing by the United States Department of Agriculture, Rural Utilities Service (RUS) under the Rural Electrification Act of 1936, as amended (RE Act), 7 USC 901 et seq.  These exemptions (herein after referred to as “rent exemptions”) are provided for in Section 504(g) of the FLPMA, 43 USC 1764(g), and in the Bureau of Land Management (BLM) regulations at 43 CFR 2806.14(a)(4).  RE Act rent exemptions are available only for FLPMA ROWs.  ROWs granted under the Mineral Leasing Act of 1920 are not eligible for RE Act rent exemptions. 

The BLM and RUS signed a Memorandum of Understanding (MOU), dated August 1, 2014, BLM-2014-002 (in which the agencies agreed to a new rent exemption review process).  This IM improves administrative efficiency by discontinuing the form certification process established in the 2008 Interim Manual for Rent, and provides BLM state and field offices a process to receive and act on rent exemption requests at the earliest opportunity.  This IM improves consistency, increases field office control in the review and approval process, and improves timeliness in BLM and RUS reviews.  

With this policy, the BLM eliminates the need to submit every request for a rent exemption to the RUS and strengthens the quality of information requested of applicants or ROW holders. 

Policy Action:  Section 504(g) of FLPMA provides that ROWs “shall be granted, issued, or renewed, without rental fees, for electric or telephone facilities eligible for financing pursuant to the RE Act of 1936, as amended, 7 USC 901 et seq, determined without regard to any application requirement under that Act, or any extensions from such facilities.” 43 USC 1764(g).  The BLM regulations further specify that a rent exemption shall be granted if “[e]lectric or telephone facilities constructed on the ROW were financed in whole or in part, or eligible for financing, under the [RE Act], or are extensions of such facilities.”  43 CFR 2806.14(a)(4).  The regulation provides that the BLM may require ROW applicants and/or holders to document the facility’s eligibility for RE Act financing.

These authorities provide rent exemptions for three types of electric or telephone facilities: 1) facilities that are actually financed by RUS under the RE Act; 2) facilities that are eligible for financing under the RE Act, but are not actually financed; and 3) facilities that are “extensions from” facilities included in either of the first two categories. The BLM’s preamble to the final rule for the 2008 ROW regulations references the RE Act when defining electric or telephone facilities.

The ROW applicant or holder must supply information to support a rent exemption as part of a complete application in accordance with 43 CFR 2804.12(c) and 2806.14(a)(4).  Field offices will inform the applicant or holder of the requirements for receiving a rent exemption and request that interested applicants or holders submit the required checklist and documentation.  The new Information Request Checklist for RE Act Eligibility Determination (Checklist) is included as Attachment 1 to assist field offices with the rent exemption determination.

Discontinuation of Forms

Field offices will discontinue use of the form certification process established in the 2008 Interim Manual for Rent.  The only exception is for rent exemption requests pending as of the effective date of this IM.  In that instance, field offices will process those actions following the prior form certification process.

New RE Act Rent Exemption Procedures

Field offices are to notify all applicable utility FLPMA ROW applicants or holders of the existence of RE Act rent exemptions at the pre-application meeting or immediately after receiving a FPLMA ROW application.  Applicants and holders are to be provided a copy of the Checklist).  New applicants who seek rent exemptions may submit the Checklist together with either their Plan of Development (POD) or Standard Form 299 (SF-299) ROW application.  

Holders of existing FLPMA ROWs, or ROW applicants who have already filed their applications, may request a rent exemption at any time by submitting the Checklist and the accompanying documentation to the BLM.  The BLM will not refund rent previously paid by ROW holders.

Field offices will make a rent exemption determination for facilities, or extensions of facilities, actually financed in whole or in part pursuant to the RE Act, based upon a review of the materials provided in response to the Checklist.

Field offices will not determine whether the facility is “eligible for financing” under the RE Act.  These requests must be forwarded to the BLM WO-350 for review and coordination with the RUS.

ROW holders and applicants must demonstrate with proper documentation that each facility authorized or applied for on the ROW qualifies for a rent exemption.  A Checklist must be filled out for each facility; however, additional Checklists may be needed for amendment applications filed after an initial rental determination has been made.

Process Outlined

1. Facilities Financed in Whole or in Part under the RE Act and Extensions of Such Facilities:

1. At the Pre-Application meeting, field offices will ask electric or telephone ROW applicants or grant holders whether they intend to seek a rent exemption.

1. If yes, the field office will provide the applicant or holder with a Checklist (Attachment 1) and request that the applicant or holder complete and return the Checklist to the field office as part of its POD or SF-299 ROW application for new facilities or extensions.  Field offices will ensure the Checklist is accompanied by appropriate documentation indicating RUS financing of the same facility described in the ROW application, or of the facility from which it is an extension.  For requests that are incomplete, the field office will request the necessary documentation within 30 days.  Rent exemption requests will not be processed without appropriate documentation.  
2. If no, field offices will proceed with determining rent based on the regulations at 43 CFR 2806.20.

2. After receiving the application and the accompanying documentation, field offices should first confirm that the applicant has fully completed Part I, II and III, as applicable, of the Checklist.  Field offices will then complete question 2 of Part I.
3. Field offices will verify that the facility described in the rent exemption request matches the facility that is (or will be) located within the ROW, and will verify this facility has received funding from the RUS by referring to the RUS loan documents. 

1. If the facility is determined to be an extension from an RE Act-financed facility, the field office will verify this by referring to the RUS commitment letter and self-certification statement, along with post-filing of the RUS form 219 to BLM after construction (Checklist question 3-b)

4. Once verified, field offices will grant a rent exemption for the facility described in the rent exemption request in accordance with 43 CFR 2806.14(a)(4). 
5. Field offices will issue a decision letter approving or denying a rent exemption.  (Refer to the 2008 interim ROW manual part 2805.10(A) & (B) for further explanation.)  Field offices will file all documents in the official case file, update LR2000, and notify the applicant or holder by a decision letter of the determination made.

2. RE Act-Financed Projects Lacking Specific RUS Funding Approval:

If the applicant states the facility will be constructed using an existing RE Act loan, but no facility-specific documentation is available beyond the general information within the current RUS work plan, the applicant will be required to pay rent until facility-specific documentation becomes available.  The applicant can provide additional facility-specific documentation upon completion of construction.  Following construction the ROW holder must provide a copy of the RUS form 219 to the BLM showing the facility was constructed using RE Act financing.  Once documentation is provided, the field office will issue a new rent determination decision and update LR2000 with the rent exemption status.    

Supplemental information that may be required to support the Checklist includes the RUS commitment letter, RUS description of the proposed action on RUS form 532, 490, or 740c from the RUS loan package.  Examples of RUS documents include the Telephone Commitment Letter, Telephone application form, design form and environmental questionnaire (Attachment 3) and the Electric Commitment Letter and the 740(c) form (Attachment 4).  The supplemental information must demonstrate to the field office that the ROW applicant or holder has actually received a loan from the RUS under the RE Act.  Field offices are to verify the RE Act loan number; and verify the facility that is the subject of the ROW grant or application is the same facility that is funded by the loan. 

3. Facilities Eligible for RE Act Financing but Not Actually Financed and Extensions of such Facilities:

For ROW holders and applicants claiming the facility is eligible for financing under the RE Act, but has not actually received such financing, the RUS will assist the BLM Washington Office Division of Lands, Realty and Cadastral Survey (WO-350) in the review and determination.  The ultimate responsibility for determining whether the facility qualifies for an RE Act rent exemption lies with the BLM.

1. At the Pre-Application meeting or upon application filing, field offices will ask each ROW applicant or holder whether they intend to seek a rent exemption.

1. If yes, field offices will provide the applicant or holder with a Checklist (Attachment 1) and request that the applicant or holder complete and return the Checklist to the field office as part of its POD or SF-299 ROW application for new facilities or extensions.  Field offices will verify the applicant has fully completed Part I of the Checklist and either Part II or Part III, as appropriate, and the Checklist is accompanied by appropriate documentation.  Field offices will also verify the facility described in the rent exemption request matches the facility that is (or will be) located on the ROW.  For requests that are incomplete, the field office will request the necessary documentation be provided to BLM within 30 days.  Rent exemption requests will not be processed without appropriate documentation.
2. If no, field offices will proceed with determining rent in accordance with regulations 43 CFR 2806.20.

2. Field offices will complete question 2 of Part I.  Field offices will then forward the Checklist to the State Office Realty Lead for surnaming prior to forwarding to WO-350 via SharePoint.
3. WO-350 will coordinate review with the RUS.
4. In accordance with the 2014 MOU, the RUS will determine whether the facility is eligible for financing, usually within 60 days.  The RUS will transmit its signed determination to WO-350.
5. WO-350 will upload the signed RUS determination to SharePoint within 15 days of receipt from RUS.
6. Field offices will issue a decision letter to document approval or denial of a rent exemption in accordance with BLM regulations at 43 CFR 2806.14(a)(4).  (Refer to the 2008 interim ROW manual part 2805.10(A) & (B) for further explanation.)

The ROW applicant or grant holder is responsible for providing information for Checklist Part II for electric facilities and Part III for telephone facilities to determine eligibility for financing under the RE Act as part of the SF-299 Application or POD.  The BLM may require additional information if necessary to determine eligibility.

SharePoint

Field offices will complete question 2 of the Checklist and obtain the State Office Realty Lead surname prior to submitting the Checklist to the WO-350 RUS SharePoint site.  Field offices should then forward the application and the accompanying documentation to WO-350 in PDF format by uploading them to the following SharePoint site. WO-350 will only accept submissions by fax or email if the SharePoint system is not operational.  If you do not have access to this SharePoint site, please contact WO-350 to request access.

Upon receipt of the certified Checklist from RUS, WO-350 will upload the determination to the SharePoint site and notify the field offices.

Important Note:  Field and state office personnel should contact WO-350 for updates on pending rent exemptions.  The ROW applicants or holders should contact the local field office or state office for updates on status of pending rent exemptions.

Existing grant holders are required to pay rent until the field office issues a decision approving or denying the rent exemption in accordance with 43 CFR 2806.12(a).  Rent is non-refundable once paid.

For new ROW applications, the grant should not be issued until the rent exemption determination is provided by WO-350.  If the applicant would like to expedite ROW grant issuance, field offices may issue the grant subject to the applicant’s agreement to pay rent.  Rent will be collected in accordance with regulations found in 43 CFR 2806 for a period no less than annually, or 10-year intervals, not to exceed the grant, until a determination of exemption from rent is made. 

RUS Determination Process and Notification

The RUS will complete questions #9 or #19, as appropriate, and return the signed Checklist to the BLM WO-350.  WO-350 will review the information and upload the signed Checklist to the SharePoint site.  Field offices will receive a SharePoint-generated email when new documents are uploaded to the site. 

Additional RE Act Guidance

Eligibility for a RE Act rent exemption is determined on a facility-by-facility basis, and not an operator-by-operator or applicant/holder basis.  The BLM defines a “facility” as an improvement or structure, whether existing or planned, that is or would be owned and controlled by the grant or lease holder within a ROW.  For purposes of communication site ROWs or leases, “facility” means the building, tower, and related incidental structures or improvements authorized under the terms of the grant or lease.

Rent exemptions are available only for facilities that are financed, eligible for financing, or extensions of facilities financed by RUS under the RE Act.  Facilities that are financed by RUS under a non-RE Act program do not qualify for a rent exemption on that basis.  However, they may qualify for a rent exemption if they would be eligible for financing under the RE Act.

Commercial use of an RE Act-certified facility will require the holder to pay rent in accordance with 43 CFR 2806.30.  Commercial use means allowing others to use the RE Act certified facility for other commercial purposes such as having tenants in a communication facility. 

Non-telephone service uses, including non-educational TV, radio broadcasting and message telegram service in particular, are not rent-exempt, as they are not eligible for financing through the RE Act.

Ancillary Facilities

Any equipment/improvements ancillary to the primary purpose of the telephone or electric facility ROW, such as access roads, generators, or fuel tanks, etc., are exempt from rent under the RE Act provision only if they are included and authorized under the primary ROW grant.  If ancillary facilities are authorized with a separate ROW grant and if the ancillary facility itself cannot be considered a “telephone” or “electric” facility, the ancillary facilities do not qualify for a rent exemption, regardless of whether the RUS finances such facilities. 

LR2000 Data Standard

As noted in the current Consolidated LR2000 Data Standard issued on August 28, 2014, action code 852 is to be entered when it is determined that a facility is rent exempt.  The BLM use of action code 852 applies to FLPMA ROW applications only.  Rent exemptions are not allowed for ROWs pursuant to the Mineral Leasing Act of 1920.  The action code should be entered after the authorized officer (AO) has made the final rent exemption determination decision.  WO-350 will monitor LR2000 and coordinate with state offices regarding data adequacy and compliance with this guidance.  This change will be corrected in the 2015 Realty Data Standards.  The 852 action code, dollar amounts are important data that is currently used to determine the amount of rent exempted at any one time.

Upon field office entry of the 852 action code into LR2000, enter in action remarks the dollar ($) amount forgone and the ROW/Lease term (i.e. $25.46:30YR).  The field office should calculate the amount forgone based on a 30-year term, regardless of the billing cycle.  To calculate the annual forgone amount, use the rent amount for the year in which the ROW is authorized, multiply that by 29, and add the partial year.  For ROW grant authorizations issued in perpetuity, calculate the forgone amount using 29-years plus a partial year for consistency, and enter the 097 code with the future billing date. 

Renewable Energy (Wind and Solar) Grants/Leases

For renewable energy generation facilities of 20 megawatts or more, field offices must receive concurrence from BLM WO-350 prior to granting a rent exemption.  However, RE Act rent exemptions for such facilities will apply only to per-acre rents, and not to any megawatt capacity fees, bonus bids, or application fees.          

Timeframe:  This policy is effective immediately.  The attached sample RUS forms may be updated with each subsequent Farm Bill, which may result in the modification in the eligibility criteria for RE Act financing.

Budget Impact:  This policy will not result in a significant budgetary impact.  It is anticipated that use of the Checklist will reduce the number of requests that must be denied and will expedite the processing of requests.

Background:  FLPMA Section 504 (g) requires the BLM to authorize rights-of-way without rent for electric and telephone facilities financed in whole or in part, or eligible for financing, pursuant to the RE Act, and extensions from such facilities.  Originally, this exemption was provided only to those facilities actually financed under the RE Act.  FLPMA was amended in 1996 to extend the exemption to facilities merely eligible for financing.  BLM’s regulations, promulgated in 2005, specifically state that holders do not have to pay rent if the facilities constructed “were financed in whole or in part, or eligible for financing,” under the RE Act, and further clarify that holders “do not need to have sought financing from the [RUS] to qualify for this exemption.”  43 CFR 2806.14(a)(4).  The regulations provide, however, that “BLM may require applicants or holders to document the facility’s eligibility for [RE Act] financing.”  Id.

In 2008, the BLM and the RUS established a facility-specific (Electric and Telephone) certification form process to document the approval or denial of rent exemptions.  The process required the ROW applicants or grant holders to request the exemption by submittal of the Certification Form.

On August 1, 2014, the BLM and the RUS signed an MOU, number WO-350-2014-02, which established an updated review process.

Manual/Handbook Sections Affected:  This policy replaces the instructions provided in Interim Manual Section 2806.14, issued under IM 2008-203, Interim Right-of-Way Manuals.  The BLM will incorporate this interim policy into BLM Manual 2800 during the next revision. 

Coordination:  The BLM state, field and Renewable Energy Coordination (WO-301) offices reviewed and provided input for this policy prior to its finalization.

Contact:  If you have questions or need additional information, please contact either Stephen Fusilier, sfusilie@blm.gov, Branch Chief, Rights-of-Way at 202‑912-7148 or Christina Price, cjprice@blm.gov, Realty Specialist at 202-912-7503.    

Signed by:                                                                   Authenticated by:

Michael D. Nedd                                                        Robert M. Williams
Assistant Director                                                       Division of IT Policy and Planning,WO-870
Energy, Minerals, and Realty Management

7 Attachments

1. BLM-2014-002, Memorandum of Understanding between the Bureau of Land Management and the Rural Utilities Service (15 pp)
2. Information Request Checklist for RE Act Eligibility Determination (6 pp)
3. Instructions for Information Request Checklist  (3 pp)
4. RUS Broadband & Telecommunication Application, Offer Letter, Design Narrative and Environmental Questionnaire (15 pp)
5. RUS Electric Offer Letter, Form 740(c) (27 pp)
6. Communication Site Plan of Development Outline (2 pp)
7. Flow Chart (2 pp)