By Janice Schneider and Joshua Marnitz

On October 27, 2011, the Bureau of Land Management (BLM) and the U.S. Department of Energy (DOE) made available the much anticipated targeted Supplement to the Draft Programmatic Environmental Impact Statement for Solar Energy Development in Six Southwestern States (Draft Supplement). 76 Fed. Reg. 66958 (October 28, 2011). The Draft Supplement modifies the alternatives currently under consideration for utility-scale solar development on the public lands and, if adopted, could have the practical effect of dramatically reducing the amount of federal land available for solar energy development in the western United States. The federal agencies are currently taking comments on the proposed modifications though January 26, 2012.

Under the initially preferred alternative described in the Draft Solar PEIS, approximately 677,000 acres of land in 24 identified solar energy zones (SEZs) would have been prioritized for development, while approximately 22 million acres would have generally remained open for development. The Draft Supplement eliminates certain SEZs entirely from further consideration and reduces the size of other SEZs. The result is that BLM has lowered the total number of SEZs to 17, and restricted the acreage of federal lands available for utility-scale solar development within identified SEZs to roughly 285,000 acres. The Draft Supplement also proposes to increase the number and variety of specific categories of land that are known or believed to be unsuitable for utility-scale solar development (i.e., so-called “exclusion” areas), further restricting project proponents’ access to federal lands.

Even as it reduces the public lands available for prioritized solar energy development, BLM proposes a variety of activities to steer future utility-scale development to the SEZs. For instance, BLM is considering economic incentives for solar energy development in SEZs, including: lower megawatt (MW) capacity fees, a longer phase-in period for rental payments, a fixed MW capacity fee rental payment for the life of the authorization, a limited base acreage rental payment, and restructured bonding requirements, all for projects proposed in SEZs. Finally, BLM may also issue a 30-year fixed term lease with a fixed rental fee for projects in SEZs, ultimately reducing uncertainty for operators. Other proposed incentives are also included in the Draft Supplement.

The reduced number and size of SEZs and the increased incentives for development in them will create greater competition among developers to site utility-scale solar projects on public lands.  Perhaps in an attempt to mitigate that pressure, the Draft Supplement outlines a process for identifying new SEZs based on solar market conditions, existing and planned transmission systems, and new state or federal policies affecting the level and location of utility-scale solar energy development. The Draft Supplement also proposes a variance process, by which responsible utility-scale energy development can take place outside of SEZs and exclusion areas, that may provide a more promising pressure release. BLM notes, however, that the amount of land in variance areas will likely be reduced by the time the agencies present the Final Solar PEIS if new exclusion areas are identified, as is expected. BLM will consider variance requests on a case-by-case basis and has identified a number of factors it proposes to consider before granting a variance.

Utility-scale solar energy developers and those providing financing for these projects are advised to pay attention to and to participate actively in this process because it will impact not only where–but also how easily–solar projects can be sited on public lands. As BLM further restricts the public lands available for prioritized utility-scale solar energy development and increases economic and other incentives for siting projects in SEZs, developers will face stiffer competition for access to increasingly scarce federal lands.

For more information on the potential impacts of the Federal government’s proposal, please consult our Client Alert available here.