Amended BLM Right Of Way Regulations

The Bureau of Land Management (BLM) published amended rules governing rights of way granted under Title V of the Federal Land Policy and Management Act (“FLPMA”) and under the Mineral Leasing Act (for oil or gas pipeline rights of way) on December 19, 2016, 81 Fed. Reg. 92,122 (https://www.gpo.gov/fdsys/pkg/FR-2016-12-19/pdf/2016-27551.pdf).  The rules take effect January 18, 2017, assuming they are not affected by Congressional efforts to undo “midnight rules” promulgated by the outgoing Administration.  The amended rules are most significant for their changes to the processes for obtaining authorizations to use federal lands for solar and wind energy development.  However, the amendments will also affect, to a lesser extent, oil and gas operators who seek FLPMA rights of way for roads or water pipelines, or Mineral Leasing Act rights of way for oil and gas pipelines.  Please see our earlier blog discussing the proposed rule amending the right of way regulations at https://www.wsmtlaw.com/blog/blm-buries-change-to-mla-rights-of-way-in-wind-and-solar-leasing-change.html.  

Until now, the BLM’s policy on processing right of way applications for renewable energy projects was contained in instruction memoranda.  Those policies, as modified in the final rule, are now contained in the regulations to be codified in 43 C.F.R. Part 2800.  

The rule seeks to focus wind and solar energy development in areas called designated leasing areas or “DLAs” which BLM has determined, through the land use planning process, as areas having high energy generation potential, access to existing or proposed transmission lines, and low potential for conflict with other resources. The preamble to the rule points to solar energy zones identified in the Solar Programmatic EIS and “development focus areas” identified in the Desert Renewable Energy Conservation Plan for southern California as examples of DLAs.  Outside of the southern California desert, no DLAs for wind energy development have yet been identified and, given the long timeline for BLM planning processes, it seems unlikely that any will be developed in the near term.  With some exceptions, lands within DLAs will be offered for competitive leasing, while solar or wind energy development proposals outside DLAs will be processed for right of way grants.  BLM believes that the issuance of a competitive 30-year lease will increase certainty for developers of wind and solar energy projects as compared to 30-year right of way grants, which are not issued until well into the project development process.  

Another goal of the rule is to ensure that the government receives fair market value for solar and wind energy development on public lands.  It does so by imposing both an acreage rent based on agricultural land values and a megawatt (MW) capacity fee.  The calculation of the MW capacity fee will result in a decrease in fees to solar energy producers but an increase in fees to wind energy developers as compared to current BLM policy.  In addition, the acreage rent had not previously been imposed on wind energy developers.  The fees for linear rights of way such as pipelines and transmission lines should not be significantly affected by the rule as compared to current policy.  

The new rule contains extensive provisions on bond requirements which will be codified in 43 C.F.R. §2805.20.  Solar and wind energy producers must post a performance and reclamation bond, which will be based on a reclamation cost estimate (RCE) but shall be no less than $10,000 per disturbed acre for solar projects or $10,000 per authorized wind turbine with less than 1 MW nameplate capacity or $20,000 per turbine with a nameplate capacity of 1 or more MW.  Although bonds are required for wind and solar projects, the BLM retains the discretion whether to require a performance and reclamation bond for other rights of way, including for oil and gas pipelines (§2885.11(b)(7)).  As in the existing regulation covering oil and gas pipeline rights of way, the BLM can require a bond, or an increased bond amount, either as a condition to the right of way grant or at any time during the term of the grant.  Amended §2885.11(b)(7) states that all “other provisions in §2805.12(b) of this chapter regarding bond requirements for grants and leases issued under FLPMA also apply to grants or [temporary use permits] for oil and gas pipelines issued under this part.”  The reference to §2805.12(b) appears to be in error; the preamble to the new rule notes that this sentence references “new section 2805.20” and §2805.20 is the regulation on bonding requirements.  Among those “other provisions” in §2805.20 is one that provides the bond amount will be determined based on the preparation of a RCE, which the BLM may require the applicant or grant holder to submit.  The RCE is defined as the estimate of costs to restore the land to a condition that will support pre-disturbance land uses, including the cost to remove all improvements made under the right of way authorization, return the land to approximate original contour, and establish a sustainable vegetative community.  The RCE must also include the cost to BLM to administer a reclamation contract.  It is likely that these requirements will result in larger bonds being required for linear rights of way, including oil and gas pipelines. 

The new rule provides that not only transfers of rights of way by assignment be submitted to BLM for approval but also “changes in ownership or other related change in control transactions,” including corporate mergers or acquisitions but not transactions within the same corporate family.  §2807.21.  This change also applies to Mineral Leasing Act rights of way for oil and gas pipelines, §2887.11.  BLM’s rationale for this requirement is that a merger or other corporate acquisition can result in material changes to corporate structure which could affect the financial or technical capability of the grant holder.  Because a change of control is not an “assignment,” we suspect that many grant holders may overlook this requirement to obtain BLM approval for “transfers” of right of way grants in cases of mergers or change of control by a stock transaction.

Operators of wind and solar energy projects on public lands will need to review the new rules in detail.  Because this rulemaking process focused on the changes to the right of way regulations that apply to wind and solar energy projects, it is likely that other current or prospective right of way holders such as pipeline, transmission line or communications facilities operators may not realize the effect of the revised rules on their projects.