The Biden Administration has proposed a new regulation that will cut project fees for wind and solar energy on federal lands by about 80 percent and streamline its review of applications. Last year, the Bureau of Land Management (BLM) lowered rent fees and lease rates for solar and wind by about 50 percent, using departmental authority as developers had complained they were too high to draw investment. The new proposal would increase those fee reductions and make the changes a formal regulation, making it harder to reverse under a future administration. Under the proposal, BLM would also be able to accept leasing applications in priority areas for wind and solar development outside of competitive auctions and accept non-competitive applications. The agency is also considering additional fee reductions for projects using American-made equipment or built with union labor. BLM will accept public comments on the proposal for 60 days, until August 15, and will finalize the rule next year. The proposed rule was published in the June 16 Federal Register.
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Fast Facts
- The Biden Administration is proposing a regulation to cut fees for wind and solar power by 80 percent on federal lands, deepening last year’s 50 percent cuts.
- By contrast, the Biden administration raised costs for oil and gas projects on federal lands by 50 percent last year as part of Biden’s climate program to “end fossil fuels.”
- The Biden administration is also proposing waiving competitive bids on wind and solar, allowing the government to simply hand out leases to whomever it wants.
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To do this, BLM would use authorizations established under the Energy Act of 2020, which it also used to reduce fees in 2022. The Federal Land Policy and Management Act “generally requires” right-of-way holders to “pay in advance the fair market value” for use of public lands, but exceptions exist and were expanded by the Energy Act. If BLM finds that existing rates are imposing economic hardships or limiting commercial interest in competitive lease sales, or that reductions in fees are necessary to promote the “greatest use” of wind or solar energy, it can bypass the fair market value requirement.
Under the proposed rule, a component of the capacity fee, the megawatt hour rate, which is based on wholesale prices for the major trading hubs serving 11 western States or on prices received by the right-of-way holder under a power purchase agreement, would be reduced by 80 percent until 2036. The capacity fee would be collected in place of the acreage rent if the fee exceeds the rent, and in years where the fee is collected, no rent will be required.
The Interior Department has a congressional mandate to permit 25 gigawatts of renewable energy on federal lands by 2025. To that end, last year, the Biden administration said it would add employees to process renewable energy environmental reviews and permit applications by creating five coordinating offices in Washington, Arizona, California, Nevada and Utah. The new offices would improve coordination with other federal agencies such as the Environmental Protection Agency and the departments of agriculture, energy and defense.
In 2021, the Bureau of Land Management permitted 2.89 gigawatts, 35 percent higher than the previous year. The agency is currently processing 74 applications for solar, wind, geothermal and transmission lines. Combined, they could add more than 37 gigawatts of renewable energy to the grid. BLM is also in the process of identifying new areas for solar development in the Western United States.
Biden Increased Fees for Oil and Gas
Last year, President Biden’s Interior Department increased royalty rates and rents for oil and gas projects on federal lands, claiming that the American public was not getting their rightful value out of them. Last year’s 50 percent reduction in renewable projects and this year’s proposal to increase the reduction to 80 percent contrasts with a 50 percent increase in royalty rates for oil projects, increasing from 12.5 percent to 18.75 percent that the Biden administration announced last year. The Biden administration wants to push Americans into non-carbon energy by ensuring the price of fossil fuels is as high as the administration can get it, while at the same time, reducing fees on renewable energy and giving them massive subsidies. On top of that, many states have mandates requiring increasing percentages of renewable energy, and some have called for a federal statute requiring the same.
Renewables Get Massive Subsidies
The Federal government has spent well over $100 billion on renewable credits for electricity production since their enactment three decades ago, and the “Inflation Reduction Act” will cost taxpayers another $98 billion. The bill extends wind and solar tax credits, significantly increasing subsidies for them, provided additional criteria are met during construction. It also offers new tax credits for domestic manufacturing of solar panels and wind turbine parts as well as energy storage projects sited separately from renewable generation facilities. Wind and solar projects effectively get an extension on tax credits for production and investment, as would stand-alone energy storage projects.
The massive subsidies handicap natural gas and coal generators, helping to force their retirements as solar and wind get priority on the grid and with less operating time, coal and natural gas plants are not able to cover their costs. Wind production costs, in particular, can be reduced to zero with the production tax credit as wind turbines are paid even when the power is not needed, forcing fossil and nuclear generators out of the system.
Conclusion
The renewable energy industry in the United States gets lavish taxpayer subsidies in the form of tax credits for solar power and payments for producing energy from wind turbines. Despite these subsidies, the Biden administration is proposing a huge cut on fees for renewable production on federal lands, which is to help the solar and wind industries to expand despite their having the lowest capacity factors of U.S. generating technologies, meaning they generate some of the least electricity relative to capacity. Plus, because of their intermittency, wind and solar require battery back-up when the wind isn’t blowing or the sun isn’t shining—costs that are not included in determining their competitiveness. Nevertheless, the Biden administration has chosen to further their advance by reducing their fees on public lands by 80 percent after having reduced them by 50 percent last year. That means that the American public is getting less value from the use of their resources. Apparently, the federal lands where Biden has held the fewest leases for oil and gas since WWII are destined to become wind and solar plantations, producing electricity with very little return to the Treasury on top of massive subsidies and other incentives
