Renewable Energy:

BLM Has Limited Assurance That Wind and Solar Projects Are Adequately Bonded

GAO-15-520: Published: Jun 5, 2015. Publicly Released: Jun 23, 2015.

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What GAO Found

The Department of the Interior's Bureau of Land Management (BLM) has different policies for the bonding of wind and solar projects on federal land. For example, BLM's 2008 wind policy established minimum bond amounts, but BLM's 2010 solar policy set no minimum. However, the agency has issued a proposed rule that would establish consistent requirements for the bonding of the two types of projects in several areas, including minimum bond amounts.

BLM has about $100 million in bonds for the reclamation of wind and solar projects on federal land. These bonds are primarily letters of credit and surety bonds. BLM has two data systems for tracking bonds, but GAO found that neither system is reliable for this purpose. Specifically, GAO found instances in both systems where information was missing or inaccurate, or had not been updated. The agency does not have a timeliness standard for wind and solar data entry, contrary to having such a standard for its mining program. Without accurate or complete information, BLM has limited assurance that its data systems are reliable for tracking wind and solar bonds to ensure that bonding policies are being followed and that projects have the required bonds.

BLM has limited assurance that bonds for wind and solar rights-of-way will cover reclamation costs, leaving the federal government potentially at financial risk if developers do not complete reclamation. GAO found about one-third of the wind and solar rights-of-way were underbonded by as much as $15 million in total. Also, BLM did not clearly document how it made its bond decisions, contrary to government standards that call for documentation of significant events. Specifically, GAO found that for about two-thirds of the wind rights-of-way, there was little or no documentation to support the bond amount. In addition, BLM does not adequately ensure that wind and solar bond instruments are properly secured, handled, and stored and does not have policies related to this. In one BLM field office, a staff member told GAO that someone mistakenly shredded several bonds. BLM also does not consistently adhere to its policies calling for periodic review of wind and solar bond amounts to verify their adequacy. GAO found about half of the bonds were at least 4 months overdue for review. BLM officials acknowledged that automatic notifications could be established in their data system as to when reviews are due. Without policies to document decisions and properly secure bonds, and steps to ensure bond adequacy reviews, BLM has limited assurance that bonds in place will be adequate to cover reclamation.

Examples of Wind and Solar Projects

Examples of Wind and Solar Projects

Why GAO Did This Study

Renewable energy projects can affect thousands of acres of federal land and involve significant infrastructure. BLM directs renewable energy developers to obtain bonds to cover the costs of returning the land to its pre-developed condition when the project terminates, a process called reclamation. Reclamation can cost millions and take years to complete.

GAO was asked to review the bonding policies for renewable energy projects on federal land. This report examines (1) BLM's policies for the bonding of wind and solar projects on federal land; (2) the amount and types of bonds held by BLM for the reclamation of these projects, and how BLM tracks the bonds; and (3) the extent to which BLM ensures that bonds for wind and solar rights-of-way are adequate to cover reclamation costs. GAO conducted a file review of all 45 wind and solar development project rights-of-way with a bond as of April 15, 2014; analyzed data from BLM data systems; reviewed relevant federal laws, regulations, and BLM policies and procedures; and interviewed agency officials.

What GAO Recommends

GAO recommends, among other things, that BLM develop policies on documenting bonding decisions, the proper handling and storage of bonds, and timely data entry. GAO also recommends that BLM take steps to ensure projects are periodically reviewed to ensure bond adequacy. Interior generally concurred with GAO's recommendations.

For more information, contact Anne-Marie Fennell at (202) 512-3841 or fennella@gao.gov.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On August 31, 2015, the BLM issued Instruction Memorandum (IM) 2015-138, "Solar and Wind Energy Performance and Reclamation Bonds and Reclamation Cost Estimate Review Requirements." The Financial Instrument Handling section of this IM reiterates that anything received as a bond payment to the BLM must be handled in accordance with the existing Manual 1270 - Records Administration, and Manual 1372 - Collections. Further, the IM specifically states that cash or check bonds are to be deposited in a BLM account in a timely manner, but until they are deposited, they are required to be safeguarded in a fireproof safe or file with adequate locking devised and with access limited to those designated employees with direct responsibilities for collections. In addition, other non-negotiable bond instruments received by the BLM must be properly safeguarded and documented within the project case file, within a secure BLM records room or secured file cabinet. Further, the IM clarifies that under no circumstances should case files or bond records be held in desk drawers or other inadequate storage containers where they are readily susceptible to loss or theft.

    Recommendation: To help ensure that bonds are adequate to cover reclamation costs for wind and solar projects on federal land, the Secretary of the Interior should direct the Director of the Bureau of Land Management to develop detailed policies for processing wind and solar bonds to ensure bonds are properly secured, handled, and stored.

    Agency Affected: Department of the Interior

  2. Status: Closed - Implemented

    Comments: On August 31, 2015, the BLM issued Instruction Memorandum (IM) 2015-138, "Solar and Wind Energy Performance and Reclamation Bonds and Reclamation Cost Estimate Review Requirements." This IM established policies for how information related to bonding decisions should be documented in project files in the sections of the IM titled "Reclamation Cost Estimate" and "Bond Determination." Specifically, the Reclamation Cost Estimate section reiterates the requirement that each solar or wind energy project should have a reclamation cost estimate and clarifies the three components required in each estimate: (1) environmental liabilities, (2) decommissioning, and (3) interim and final reclamation of a project. In addition, the Bond Determination section of the IM states that bond determinations, which identify the total amount of the required bond--must be issued in writing by the BLM, and the bond determination letters must be adequately documented in the project files and supported by a reclamation cost estimate provided by the grant holder. In addition, the IM states that the project case file must include a separate file folder or section that fully documents the reclamation cost estimates for the project, the BLM review of the reclamation cost estimate, the basis for the final bond determination, communications with the grant holder regarding the bonding requirements for the project, and records related to the bond instruments provided by the grant holder.

    Recommendation: To help ensure that bonds are adequate to cover reclamation costs for wind and solar projects on federal land, the Secretary of the Interior should direct the Director of the Bureau of Land Management to develop policies that detail how information related to bonding decisions should be documented in project files.

    Agency Affected: Department of the Interior

  3. Status: Closed - Implemented

    Comments: On August 31, 2015, the BLM issued Instruction Memorandum (IM) 2015-138, "Solar and Wind Energy Performance and Reclamation Bonds and Reclamation Cost Estimate Review Requirements." The IM established a mandatory policy that all data for wind and solar energy projects must be entered into LR2000 and the Bond and Surety System within 10 business days. LR2000 and the Bond and Surety System are the BLM's data system used to track information for solar and wind energy authorization, including the status of performance and reclamation bonds. LR2000 and the Bond and Surety System are used for national and local reporting and tracking purposes and are also used as a public information and data source. The IM also states that each BLM field office will identify and designate the appropriate staff for LR200 and Bond and Surety System data entry to solar and wind authorizations.

    Recommendation: To help ensure that bonds are adequate to cover reclamation costs for wind and solar projects on federal land, the Secretary of the Interior should direct the Director of the Bureau of Land Management to develop a policy that all data for wind and solar energy projects be entered in BLM's Legacy Rehost 2000 System (LR2000) and the Bond and Surety System within 10 business days.

    Agency Affected: Department of the Interior

  4. Status: Open

    Comments: According to an August 2015 letter from the agency, BLM is currently engaged in a rulemaking effort for a competitive solar and wind energy leasing program that will include requirements for bonding. The letter also stated that BLM will put a policy in place as part of the implementation of the final rule that established standards for data entry into the Bond and Surety System, including standards for what data is to be entered and corresponding data that must be entered into LR2000 concurrently. As of July 2016, rule not yet finalized.

    Recommendation: To help ensure that bonds are adequate to cover reclamation costs for wind and solar projects on federal land, the Secretary of the Interior should direct the Director of the Bureau of Land Management to establish data standards for the Bond and Surety System.

    Agency Affected: Department of the Interior

  5. Status: Open

    Comments: According to a August 2015 letter from the agency, BLM will establish an action code that will be used to notify BLM staff that a right-of-way is due for a bond adequacy review. The letter also stated that a policy on the proper use of this coding will be established, which will facilitate the reporting of solar and wind energy bond adequacy reviews. As of July 2016, the policy is still being worked on.

    Recommendation: To help ensure that bonds are adequate to cover reclamation costs for wind and solar projects on federal land, the Secretary of the Interior should direct the Director of the Bureau of Land Management to develop an LR2000 action code to automatically notify BLM staff that a right-of-way is due for a bond adequacy review.

    Agency Affected: Department of the Interior

 

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