Introduction.

 

My name is Chip Dicks and I am a partner with Gentry Locke Attorneys.  My comments are contained in this document. 

 

For more than a decade, I have been privileged to represent solar companies and industry associations in public policy discussions and legislation in the Virginia General Assembly.  In that capacity, I represented the solar industry in opposing HB 206 in the 2022 General Assembly.  Upon the passage of HB 206, I was appointed as a member of the stakeholder groups organized through DEQ to provide input over two years on behalf of solar clients and industry organizations on the proposed implementing regulations for which the public comment period ends on December 6, 2024. 

 

I compliment DEQ on its efforts to facilitate the discussions of the diverse stakeholders in the HB 206 regulatory processes. The diverse stakeholders did not agree on HB 206 in the 2022 General Assembly in first place and it should not be surprising either that we were not able to find consensus in the stakeholder regulatory processes over the two-year period.

 

In the big picture, the General Assembly has passed legislation with conflicting policy goals and objectives.  HB 206, had as one of its stated objectives, to attempt to bring some balance of these competing policies. The VECA directed Virginia make changes in its energy policies that puts tension on state policies of protecting farmland and forest assets. 

 

The passage of HB 206 clearly does not resolve this tension.  There will continue to be growth and development as the Commonwealth grows and embraces economic development to expand of our overall economy and tax bases, and there will continue to be resistance from rural communities to protect our rural ways of life in Virginia. The General Assembly will need to provide guidance in the future to help flesh out future public policies and provide a more specific statutory framework to resolve these tensions.  The regulatory processes can only implement the statutory frameworks passed by the General Assembly and enacted into law.

 

I make these comments as an interested party, not on behalf of any individual company or industry association. I, however, associate my comments with the thoughtful comments filed on behalf of Mid-Atlantic Renewable Energy Coalition ("MAREC") and the American Clean Power Association ("ACP") as well as any others filed on behalf of solar companies filed expressing concerns about the impacts of HB 206 and its implementing regulations. 

 

Background.

 

It is important to understand what actions the General Assembly had already taken prior to the 2022 General Assembly’s consideration of HB 206, and what significant changes had been made by the General Assembly to the energy economy in Virginia. 

 

The Virginia Clean Economy Act ("VCEA") passed by the 2020 General Assembly put required goals in Virginia Code to transition from monopoly generation of electricity mostly by fossil fuels to private sector participation in generation of renewable energy, mostly by solar but also by wind. The VCEA put specific targeted business and policy goals in statute to establish a schedule for transition from fossil fuels to renewables.  This schedule defined the business markets for solar marketplace and enabled solar developers to raise money, commit to debt and equity, and to help build a new renewable energy economy. 

 

In addition, the solar industry recognized the need for partnership between solar developers and localities, particularly in the rural areas of Virginia where many utility-scale solar ("USS") projects.  The solar industry proposed legislation that would require solar to be an economic development asset in rural counties.  To do that, we needed to provide a true economic development value proposition for rural counties, based upon the needs tailored to each locality.  

 

So, the solar industry created a new land use process that would not have the limitations and stigmas of the existing conditional use processes in statutes and case law. That new land use process commonly referred to as the "siting agreement" process, required solar developers to meet with county leadership and discuss their capital and operating needs for the locality in which a particular solar project would be located.

 

To that end, the solar industry examined the use case for broadband and how solar could play an important role providing the long-term resources over a 35/40-year timeframe. In general terms, a rural broadband project has a $20M price-tag, approximately $12M from the Feds, $4M from the state through the "VATTI" Grant process in Virginia, and $4M from the rural county.  The solar industry’s goal was to create funding for the $4M required from each county for a VATTI grant match from just one 150 MW solar project.  The economics of one 150 MW solar project would generate well over $4 M in unrestricted funding to the county, and that money could be paid over 3 years, under a siting agreement, to align with the requirements for payments under Virginia’s VATTI grant process.  With the siting agreement legislative structure, the solar industry knew we could provide the "last mile" funding to complete broadband deployment in rural counties, thereby changing the economic development base in those localities. In short, this creates economic development money that does not cost the county any money for infrastructure, unlike the requirements of most other economic development projects. 

 

Through the siting agreement legislative structure, the solar industry also authorized counties to issue revenue bonds, without a voter referendum, a grant of legislative authority currently reserved to Cities.  To make it easier for due diligence for the issuance of revenue bonds, the solar industry also proposed legislation for a "revenue share" instead of the caveats and reserves required for monetizing funds from "M&T" taxes, which have fluctuations with depreciation, capital obsolesce and installation of new solar equipment.  The revenues provided through these new revenue sources over a 35/40-year period provide a meaningful and reliable revenue stream to fund critical capital and operational needs of rural Virginia without the governing bodies having to raise taxes on its citizens.

 

From the solar industry perspective, we thought the solar industry had a defined market for USS and investors were committed to build in Virginia to serve this newly defined renewable energy economy. The solar industry had proposed and help create the legislative framework to help implement the VCEA passed by the 2020 General Assembly and enacted into law.  And, we provided new revenue sources to the localities that approved USS projects to provide meaningful assistance to our rural economies in Virginia.

 

So, in the 2022 General Assembly, along comes HB 206, along with other pieces of legislation to push back on solar and renewable deployment.  That Session, the proposed legislation to repeal the VCEA and directly reverse Virginia’s commitment to a renewable energy economy, as set in the VCEA, were killed by the General Assembly in committees and subcommittees through the legislative process. All anti-VCEA legislation that Session died except for HB 206. 

 

The solar industry opposed the reversal of the VCEA and other legislation that would have been "death by a thousand cuts" with respect to deployment of solar energy infrastructure needed to meet the transition from fossil fuels to renewable energy sources.  In multiple discussions during 2022 Session with Delegate Webert and supporters of HB 206, the solar industry understood that primary goals included balancing the interests of USS deployment with those of the farming community and forestry.  But, the solar industry was then, and still is, concerned about the real world effects of HB 206 on the vitality of building USS projects in Virginia.

 

Grandfather Clause.

 

Because so many solar developments had already committed funds, acquired land, spent time putting together projects, in other words, relied upon the rules set by the 2020 General Assembly for implementation of the VCEA, as Virginia often does, a grandfather clause was proposed by the solar industry.  We negotiated a grandfather clause into the enactment clauses to HB 206.  From a legislative drafting standpoint, the body of the legislation goes into the Code of Virginia but for the types of language that relates to timing or implementation, often goes into enactment clauses, which have the force of law but only go into the Acts of the Assembly for each legislative session. 

 

The grandfather clause in terms of timing and implementation on HB 206 says effectively: If an applicant for a permit by rule ("PBR") makes a request for service to PJM and receives back a document called an "Attachment N", which is approved prior to 12/31/2024, that solar project is grandfathered and does not need to comply with the state mandated mitigation requirements otherwise required under HB 206.

 

Key Concerns About the HB 206 Regs. 

 

The legislative language of HB 206 was not clear and the regulatory stakeholder groups organized through DEQ could not figure out the real-world impact of HB 206 in two years and thousands of hours of work effort. 

 

The expectation for the HB 206 regulations was that solar developers would be able to do a "desk-top analysis" so developers could easily determine whether a particular solar project pencils or not, without having to spend hundreds of thousands or even millions of dollars of internal company and third-party costs.  Unfortunately, there is an absence of such desk-top resources to aid in that decision-making processes for a solar developer. See the comments from MAREC and ACP on this subject.

 

The HB 206 regulations will frustrate the compliance with, and required target goals of, the VCEA. Virginia’s economy will suffer losses as a result. 

 

The HB 206 regulations are state mandated mitigation, on top of the mitigation conditions imposed in land use permitting and those agreed to by the siting agreement, which is required by state zoning law. 

 

In the HB 206 regulatory stakeholder discussions, members of the environmental and preservation communities stated there were 14 "functions and values" necessary to identified and evaluated to determine the amount of state mandated mitigation for each solar project.  The stakeholder groups were not able to find consensus on the functions and values discussion.

 

Nobody knows how much it is going to cost to make these determinations or how much the state mandated mitigation is actually going to cost.  HB 206 certainly does not provide any statutory guidance.  In short, the HB 206 regulations do not enable a solar developer to reasonably determine the costs of, or value proposition for, the mandated state mitigation and whether a solar project will be feasible or not.

 

There is no evidence that solar development causes a "significant adverse impact" on prime agricultural soils or forest assets more than any other kind of land development.  In fact, if studied, the solar industry conserves a good portion of land included in a solar project in its natural state for 35/40 years, unlike other types of land development which disturbs a large portion the development project and changes the uses of land.  Yet, there are no other types of commercial, industrial or residential development subject to any state mandated mitigation whatsoever.  See the comments from MAREC and ACP on this discussion. 

 

There are agricultural and other business interests that want to frustrate solar development and certainly, a nebulously worded piece of legislation like HB 206 drives a "death by a thousand cuts" impact on utility scale solar development. 

 

HB 206 and its regulations force a solar developer to either: (i) purchase a perpetual easement through a private organization or governmental entity (even though the life of a solar project is contracted to be only 35/40 years so the state mandated mitigation burden is not aligned with the timing on the solar project); or (ii) argue, debate and negotiate with DEQ the FMV of a payment in lieu. See the comments from MAREC and ACP on this discussion. 

 

On the payment in lieu calculation, the HB 206 regulations estimate the value proposition for cost of such payment to be: (i) the purchase of any land purchase; (ii) the FMV of land as assessed by the real estate assessing authority for that locality after zoning is approved for the change in use from agricultural or solar use; or (iii) $1,000 per acre of land for each acre of land being mitigated after real estate assessment after change of use.  Just to put it out on the table, often the agricultural land is in "land use taxation" at a reduced tax rate or assessment of $200 per acre and the locality land use assessment after change of use to solar is between $10,000 to $15,000 per acre.  That is the real-world impact of the state mandated mitigation.  See the comments on MAREC and ACP on this discussion.  See the comments from MAREC and ACP which do a nice job of describing real world financial impacts of why these arbitrary ratios are not feasible and not an appropriate criteria for this state mandated mitigation.  

 

By state law, every piece of legislation and every proposed regulation is required to have a fiscal impact analysis and a resulting statement.  Please read through the fiscal impact analyses by the Virginia Department of Planning and Budget and the Virginia Office of Regulatory Management.  The inability for a solar developer to perform a "desk-top" analysis to determine how much all of this stuff set into motion by HB 206, and implemented by the HB 206 regulations, is staggering and daunting for the solar industry.  Also, see the comments from MAREC and ACP on this discussion. 

 

One thing that gets lost in the HB 206 discussion is the impacts of all of these competing policies on taxpayers, and in the energy space, on ratepayers.  The state mandated mitigation in HB 206 and its regulations is certainly going to increase the cost of electricity for the ratepayers.  We just don’t know how much!

 

While the fiscal analyses done by state agencies touch on this significant impact on ratepayers, we see will see those tensions play out at the State Corporation Commission.  The HB 206 stakeholder groups did not have the time or expertise to realistically contemplate this despite a directive in the enactment clauses of HB 206 to do so.

 

I recommend the draft HB 206 regulations need to be reviewed carefully for compliance with the HB 206 statutory requirements of the enactment clauses.  In that regard, I have the following questions:

 

Question #1. Since the draft HB 206 regulations do not address the increased costs of HB 206 to ratepayers, are the regulations in compliance with the statutory requirements of the enactment clauses in HB 206? 

 

Question #2. Do the draft HB 206 regulations establish an adequate criteria to determine "if" there is a significant adverse impact on prime ag soils or forest lands, in compliance with the statutory requirements of the enactment clauses in HB 206.  What generally accepted scientific authorities form the bases for that criteria?

 

Question #3. Do the draft HB 206 regulations establish an adequate criteria to limit the "disturbance areas" of a USS solar project when only a small acreage of the entire project are actually disturbed, in compliance with the statutory requirements of the enactment clauses in HB 206?

 

Question #4. Do the draft HB 206 regulations establish an adequate criteria to establish a state mandated mitigation through a conservation easement or the calculation of an in lieu cash payment, in compliance with the statutory requirements of the enactment clauses? Is there any basis to require conservation easements at all under the statutory requirements of the enactment clauses in HB 206?

 

Question #5. Do the draft HB 206 regulations establish an adequate criteria to establish a scheme of "mitigation districts" based upon watersheds, in compliance with the statutory requirements of the enactment clauses in HB 206? What generally accepted scientific authorities form the bases for that criteria?

 

Question #6.  Do the draft HB 206 regulations establish an adequate criteria to establish a reasonable "lookback period" for land designated as prime ag soils but not used for agricultural purposes, or forest lands cut for timber purposes, which would exempt such lands from the state mandated mitigation requirements of HB 206?

 

Question #7.  Do the draft HB 206 regulations take into account, using the USDA data, how much of the documented prime ag soil lands in Virginia were lost to farming use because of conversion into USS projects? What was the date of the most recent USDA report?

 

Question #7.  Do the draft HB 206 regulations take into account, using the US Forest Service data, how much of the documented C-1 and C-2 forest lands in Virginia were lost to forest use because of conversion into USS projects? What was the date of the most recent Forest Service report?

 

Question #8. Do the draft HB 206 regulations establish an adequate criteria for best construction and land management practices to "mitigate on-site"? And, are the mitigation percentages for such practices appropriately set? What generally accepted scientific authorities form the bases for that criteria?

 

Question # 9.  Do the draft HB 206 regulations establish an adequate criteria for evaluating the feasibility of a solar project if the "desk-top" resources are not available either because such resources are outdated or simply not available?  And, should such USS project be exempt from the state mandated mitigation since such resources are not available?

 

Question #10.  DEQ clearly complied with all the public notice requirements with respect to the HB 206 regulations.  But, I don’t believe that Department of Forestry, Department of Conservation and Recreation, Department of Historic Resources, Department of Wildlife, or other state agencies separately complied with required public notice requirements. As such, the question is, that to the extent any other state agency adopted or amended any guidance documents, regulations or other practices, policies and procedures, are such changes not valid because public notice requirements were not met?

 

There are other environmental and preservation mitigation programs in the US and abroad, which need to be examined.

 

Respectfully submitted

 

Chip Dicks

Gentry Locke Attorneys

7650 Hill Drive

Richmond, Virginia 23225

chipdicks@gentrylocke.com

chip@chipdicks.com

(804-225-5507) (Direct Dial)