HB 2104 – Proposed Rules for Decommissioning Alternate Energy Facilities

On November 23, 2021 13 Pennsylvania House members introduced HB 2104 to regulate the decommissioning of all alternative energy facilities in Pennsylvania. The bill was immediately referred to the House Committee on Environmental Resources and Energy for consideration. This bill is clearly a first draft, with many details to be filled in, as we will discuss.

The bill’s purpose is to provide state-wide standards for the removal (decommissioning) of alternative energy facilities (AEFs), defined as solar or wind energy facilities, and the amount, form and timing of financial assurance that must be provided by the owner of an AEF on leased property (referred as a grantee) for decommissioning. The Pennsylvania Department of Environmental Protection (DEP) is the agency designated to implement the bill. The bill requires all AEF agreements to provide that the grantee is responsible for decommissioning within 18 months after the AEF has ceased producing electricity, unless actively working to recommence electricity production after a disruption, such as a natural disaster.

The bill requires that a grantee provide a decommissioning plan (DP) and proof of financial assurance (e.g. a bond or an escrow account) from a licensed banking institution or credit union. Interestingly, the bill designates each county’s recorder of deeds (Recorder) as the agency with which the DPs and the financial assurances are filed. The decommissioning cost shall be determined by a third-party licensed professional engineer (PE), and must be at least $10,000 per megawatt as measured by “nominal nameplate capacity” for an AEF. At least thirty days before construction begins, the grantee must provide the Recorder with the DP and “proof of financial assurance” of 20% of the cost of decommission as determined by the PE. Every five years an updated DP must be filed with the Recorder, along with proof of financial assurance for an additional 20% of the decommissioning cost. Thus, in year five, the financial assurance would be 40%, 60% in year 10, 80% in year 15, and 100% in year 20.

The bill requires DEP to create temporary regulations “in consultation with the AEF industry” creating a provisional form for a decommissioning plan and financial assurance. Per bill, to facilitate prompt implementation, such regulations are temporary regulations, exempt from the usual regulatory review process, specifically the requirements for:  public notice; receipt and consideration of public comments; approval of their legality by the Attorney General; and review by the state’s Independent Regulatory Review Commission. In short, the temporary regulations would be adopted by DEP without stakeholder input (except that DEP would “consult with” the AEF industry, but not be bound by their suggestions), or any other review or oversight. Likely, this would limit, if not preclude, challenges to the temporary regulations. The temporary regulations would remain in full force until permanent regulations following all of the required reviews take effect, and there is no timeline for that to happen (the bill says upon approval or two years, “whichever is later”). Thus, if the final regulations take more than two years, then the temporary regulations could go on indefinitely. Past history does not instill confidence that the state will act within two years.

The DP forms DPs must include the financial assurance, and (unless the property owner agrees on an “alternative condition for restoring the property”):  the removal of all equipment, conduits, structures, fencing, and foundations down to at least three feet below grade and graveled areas and access roads (unless the property owner requests that they remain); restoration of the property to a “condition reasonably similar” to the property’s condition before construction, including “the replacement of topsoil removed or eroded on previously productive agricultural land”, and the reseeding of “a cleared area” (unless the owner requested not to reseed for agricultural reasons). The DP filed on or before year twenty shall include an estimate of materials that will be salvaged, recycled, refurbished, or disposed of in a landfill (which is capped at 20% of the total combined mass). Most elements of an AEF, except cement support structures, are included in this calculation.

The bill exempts nonutility owners or operators of net-metered distributed generation systems with nameplate capacity of not greater than 3,000 kilowatts, and owners or operators of farms who own and operate an AEF on the farm premises, regardless of location or consumption of the energy generated.

The good news for municipalities is that there is little that they must do. They must presumably assure that the DP and financial assurance are in place before issuing a construction permit, and counties, municipalities, or other local governments are precluded from passing or enforcing any “ordinance/regulation that “materially impedes” the purposes of the Chapter, whatever that means.

There are other issues with the current bill. First, there are no penalty or enforcement provisions to assure compliance. Second, there is no provision for who will hold the financial security. The bill requires that the DP, including the financial assurances, be filed with the county Recorder, but does not seem to require that the actual bond or escrow agreement be filed with them. (And do we really want them to hold those documents or funds for 20 years? It is a safe bet that they will not want to do so.) Who would keep those? Third, our experience with any requirements that stretch over many years is that they often fall between the cracks. Who will assure that the 5-, 10-, 15-, and 20-year updates are done? Fourth, the bill is unclear about when the financial assurance is posted. According to one section, the decommissioning costs would not be fully funded until year 20. What happens if the grantee stops operation before then, when the plan is not yet fully funded?

It appears that this bill is an opening gambit, and that if it moves forward much of it certainly will change significantly. However, any interested parties should keep an ear to the ground.

For any other questions related (or unrelated) to decommissioning or solar farm development, please don’t hesitate to email Andy Miller (amiller@mpl-law.com), Cory Dillinger (cdillinger@mpl-law.com) or anyone in our office with questions or comments.

Author: Andy Miller