Renewable Energy Update – Congress Moves at a Snail’s Pace
There are currently two pending alternative energy bills in the Pennsylvania legislature. House Bill 2104 (“HB2104”) in the Pennsylvania House of Representatives and Senate Bill 284 (“SB284”) in the Pennsylvania State Senate. Both bills attempt to regulate the decommissioning and/or bonding of alternative energy facilities in Pennsylvania, but both bills have their own unique flavor. HB2104 is more comprehensive, so we will review the specifics of that bill and then discuss how it differs or meshes with SB284.
HOUSE BILL 2104
On November 23, 2021, thirteen Pennsylvania House members introduced HB2104 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. History does not instill confidence that the state will act within two years.
The DEP 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 top soil 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.
SENATE BILL 284
On February 26, 2021, SB284 was referred to the Environmental Resources and Energy Senate Committee.
Definitions on Energy Facilities
The definitions of these terms are important because they dictate the general scope of each bill. HB2104 defines “Alternative Energy Facility” as the development or construction of a facility that utilizes solar energy or wind energy to produce or distribute alternative energy. SB284 defines “Alternative energy production project” in a much broader way. SB284’s definition is far reaching and includes waste coal, alternative fuels, biomass, solar energy, wind energy, geothermal technologies, etc. SB284 attempts to encapsulate the entire renewable energy sector, whereas HB2104 stick to solar and wind energy.
Posting of Bond
Under both of these bills, the energy facility will be responsible for posting a bond. HB2104 wants a decommissioning plan and a proof of financial assurance submitted to the county recorder of deeds office. HB 2104 also states that this must be done no later than 20 days before the commencement of construction. SB284 directs the energy facility to post a bond with the Department of Environmental Protection of the Commonwealth, such bond would be payable to the Commonwealth. SB284 is silent concerning timing. SB284 explicitly states that an energy facility which posts a bond sufficient to comply with the bill’s chapter shall not be required to post a separate bond for the permitted area under any other laws of this Commonwealth. These provisions may not directly conflict with each other, but the language in both of these bills needs to be tightened up.
Amount of Bond
HB2104 simply states that the amount of the bond will be equal to the cost of decommissioning, whereas SB 284 states that this amount may be based on any of the following: 1) potential hazardous liabilities, 2) decommissioning of the permitted area, 3) completing a reclamation plan for the affected site, 4) the proper recycling or disposal of the alternative energy production project and 5) any other factor as determined by the board. SB284 goes on to list even more criteria that may be considered when calculating this amount. To limit an exorbitantly high decommissioning bond, developers would favor the House Bill’s narrow definition of this amount.
As stated above, HB2104 states that a grantee is generally responsible for decommissioning the grantee’s alternative energy facility no later than 18 months after the facility has ceased production. SB284 is silent on decommissioning, other than mentioning it as a factor to consider when calculating the facility’s bond amount. Developers should welcome standardized decommissioning language as long as it isn’t overly burdensome.
Solar Forced Labor Prevention
HB2104 is silent on this issue. SB284 seeks to create a Solar Forced Labor Prevention List where a solar panel manufacturer may submit an application to be placed on this list. To be included on this list, the applicant must:
“Certify via a signed statement from an executive officer of the applicant that the solar panel manufacturer does not use polysilicon sourced from the Xinjiang Province of Chine or with the use of forced labor from other regions, whether for products shipped to the United States or to any other country where the solar panel manufacturer does business.”
In order to do this, the applicant must meet at least on of the following standards:
1. The Validated Audit Program of the Responsible Business Alliance; or
2. The Electronic Product Environmental Assessment Tool (EPEAT) NSF 457 Sustainability Standard for Photovoltaic Modules and Inverters.
It is important to note that any Commonwealth entity seeking to own, procure, or otherwise participate in a solar project shall comply with these provisions. Additionally, any solar project receiving financial incentives from the Commonwealth shall comply with these provisions. In a competitive market like renewable energy, it would be wise to check if your respective manufacturer would be able to meet these requirements today.
Well, Where Does That Leave Us?
Both bills are still stuck in their respective committee. It doesn’t necessarily seem like either bill outright contradicts the other, but it is unclear if any of the gaps in either bills are intentional. If the bills do end up explicitly contradicting each other, they will need to go to a conference committee (temporary committee composed of House and Senate members) to reconcile these differences. We will keep an eye on both of these bills. The standardization of decommissioning and bonding requirements may be a net positive for alternative energy producers if done correctly, but we will have to wait and see.
If you have other specific questions about these renewable energy bills or anything related or unrelated, please don’t hesitate to call (717-845-1524) or email Andy Miller (email@example.com) or Cory Dillinger (firstname.lastname@example.org) with any questions or comments.