On behalf of Hexagon Energy, we would like to submit the following comments regarding the Department of Environmental Quality amendments to 9 VAC 15-60 Small Solar Renewable Energy Project Permit Regulations to comport with the requirements of Chapter 688 of the 2022 Acts of Assembly.

On November 26, 2024, members of the Hexagon Energy (Hexagon) team had an opportunity to meet directly with staff from the Virginia Department of Environmental Quality (DEQ) to discuss their House Bill 206 (HB206) mandated regulations proposal. We greatly appreciated this opportunity and were encouraged by the conversation that many of the changes suggested in the following comments are aligned with DEQ’s desires to mitigate the environmental impact of solar projects through realistic and sensible regulations. We look forward to continued engagement with DEQ staff.

The comments presented below touch on many of the proposed regulations. As a Virginia-based renewable energy development company, we have specific interest in the proposed regulations’ impacts to solar development costs, conservation area identification, and mitigation methodologies. We have organized our comments accordingly. We then present alternative mitigation methodologies for DEQ’s consideration. Lastly, we would like to note that we sign on to the comments submitted by MAREC/ACP on behalf of the solar industry. Our comments are meant to supplement theirs and provide a perspective inclusive of our November 26th meeting with DEQ.

Impacts to Solar Development Costs:

The proposed regulation changes amendments coming to 9 VAC 15-60 Small Renewable Energy Project Permit Regulations drastically increase development costs. With already rising interconnection costs and the high risk associated with local zoning permitting, these proposed regulations will add anywhere from $23,000/MW to over $100,000/MW of additional mitigation costs to projects that are already cost- and risk-burdened. Regulations with this level of mitigation expense:

1. Work against the Virginia Clean Economy Act stated goals of developing 16,100 MW of onshore solar and wind energy;
2. Increase ratepayers’ cost burden, as project costs are ultimately passed along to ratepayers;
3. Favor developers with deep pocket books, pushing small, local developers out of the Virginia market;
4. Reduce the number of Virginians employed in solar energy development, engineering, construction, and operation;

Passed in 2020, the Virginia Clean Economy Act (VCEA) identifies solar energy as a vital source of energy Dominion Energy (Dominion) and Appalachian Power (AEP) are required to deploy in order to meet renewable portfolio standards (RPS) compliance. The VCEA also allows for costs associated with solar energy facility development, deployment, and construction to be passed onto the rate-payers of those utilities. The proposed mitigation regulations will add significant costs to the development of solar facilities and, in turn, make them more expensive for the utilities to acquire. Due to VCEA mandated RPS requirements, AEP and Dominion will continue acquiring solar projects at increased costs, passing those cost increases off to the ratepayer.

These ratepayer costs increases are especially important in the context of economic equitability. Solar facilities within AEP territory will see an outsized increase in costs because of these regulations given that area's mountainous topography and significant forestation. The land constraints within AEP’s territory do not allow for the traditional mitigation reduction techniques outlined in Table 1 of the regulations, which will likely make the average cost of a project in AEP more expensive than one in Dominion territory. This will drive up costs for utility customers who reside in southwestern Virginia/AEP territory more than other areas of Virginia.

Moreover, the regulations incentivize developers to create conservation easements on large tracts of land for cost savings on mitigation, as working with one large landowner is technically easier than working with numerous smaller ones. Landowners with larger tracts of land are more likely to be in a higher economic bracket. This creates an issue where the solar industry is forced to subsidize timber and agricultural practices of already wealthy landowners at the ultimate cost of lower-income ratepayers who will be burdened with increased costs of development associated with mitigation.

Additionally, many Virginia counties rely on solar development as a low-intensity land use that brings in significant real property tax, machinery and tools tax, and siting agreement revenue. These proposed regulations will burden development across the state and force these counties to consider other ways to meet their revenue needs. While increased citizen taxation is one way to meet this revenue shortfall, it is unpopular and rarely meets the full needs of a county. This will likely cause an increase in more intensive and permanent types of development (industrial and commercial) with more environmentally harmful effects than solar facilities.

Another component of these additional cost increases is their timing in a project’s life cycle. Solar energy development is a nuanced, capital intensive exercise with significant investment required early on in the development process. These additional mitigation cost impacts contribute to even more uncertainty in overall project costs. These will alter project investment theses and hold the potential to disincentivize further investment in solar development in Virginia.

Conservation Area Identification:

Hexagon believes wholeheartedly in the principles of conservation, environmental custodialism, and responsible development. Solar projects in the state of Virginia should be well-sited and take special care to limit their environmental impacts. Our in-person conversation with DEQ in late November was characterized by constant agreement in the mission and purpose of these proposed regulations. With that being said, there are several conservation area identification methodologies that DEQ uses that we believe do not accurately represent areas of high conservation importance. We would like to see these addressed in a new version of the regulations.

DEQ leans heavily on datasets collected under Governor Northam’s ConserveVirginia 3.0 program for identification of areas of conservation. If a project impacts an area meeting specific criteria, it must mitigate for these impacts through the methodologies identified in the proposed regulations. The ConserveVirginia 3.0 dataset is designed to “guide state investments for land conservation.” It is not intended to be a definitive land classification tool upon which mitigation requirements through regulation are determined.

The Ecological Cores clause of the proposed regulation is an example of this conflation of “guideline” and “definition.” Under the current proposal, projects impacting natural heritage resources described in the Virginia Natural Landscape Assessment Ecological Cores assessment must mitigate these impacts at a ratio of 7:1 for C1 cores and 2:1 for C2 cores. The Virginia Natural Landscape Assessment Ecological Cores assessment was conducted in 2016 by the Department of Conservation and Recreation. The dataset has not been refreshed since its initial publication, is not slated for refresh at any point in the future, and is not presented as a definitive classification resource. Additionally, this dataset does not account for any land that has since been cleared and timbered. We believe this dataset is not suitable as a foundational piece within the regulation framework. DEQ should consider revising this conservation area category by determining mitigation requirements through impacted forest type, rather than ecological core. Special importance should be placed on hardwood and old-growth forests that have a diverse species mix.

Furthermore, we believe DEQ is currently overemphasizing the environmental and ecological importance of monoculture timber plantations. Timber pine plantations are ecologically destructive and reduce biodiversity through their practices. Solar farms, in combination with native pollinators and plant species, provide ecological rehabilitation for areas impacted by timbering operations. If a solar farm impacts land currently used for planted pine plantation timbering (forested areas with more than 35% monoculture pine species), that impact should not be considered as severe as impacts to hardwood and old-growth forests. We believe this change aligns with DEQ’s desire to disincentivize development on areas of diverse forest mix that call for increased conservation.

We believe the additional 100’ buffer added to any project disturbance zone is arbitrary and unnecessary. Our conversation with DEQ revealed similar thinking from staff. Project boundary disturbance zones should be determined by true construction disturbance, similar to stormwater disturbance standards. This includes land that is taken out of its previous use and developed to hold any infrastructure related to the solar facility. Moreover, the additional 100’ buffer can frequently fall outside of the development site control area, forcing the industry to over-mitigate for areas they cannot and will not disturb. We suggest the removal of this conservation area identification clause.

Mitigation Methodologies:

Solar projects must mitigate the environmental impacts they cause in the course of their development and construction. Hexagon, as well as other solar developers, believe mitigation comes in many forms. This conflicts with DEQ’s proposed mitigation methodologies, which are limited to “conservation easements” except in case-by-case instances that are undefined in the proposed regulations. There are several issues with this adherence to conservation easements, and we would like to highlight these issues.

Conservation easements, as described by the proposed regulations, are incongruent with historical conservation easement definitions. In the proposed regulations, conservation easements for the mitigation of forested land “should allow for timbering practices,” and conservation easements for the mitigation of prime farmland should “allow for agricultural practices.” While this aligns with the goals of HB206, it does not align with the values and mission of many of the eligible conservation easement holders as outlined in Section G.3. of 9VAC15-60-60 (Mitigation Plan), who tend to take a more conservative conservation approach that does not allow productive activity on the property. This limits the number of organizations that developers can partner with to execute conservation easements for mitigation and can bottleneck the permitting and development process.

Given the requirements outlined in Section G.3. of 9VAC15-60-60 (Mitigation Plan), conservation easement holders allowable by the standards of these regulations do not currently have a market for solar facilities to associate conservation easements with projects for PBR. Our research suggests that conservation easements will be expensive products in any marketplace, with pricing likely to follow nutrient bank pricing of up to $90,000 per acre, leaving in-lieu fees as the most attractive option for developers. On the topic of In-lieu fees, they are an appreciated mitigation methodology, but we believe they do not necessarily accomplish the underlying goal of actual land conservation. With a lack of other mitigation methodologies, there will be an overreliance on in-lieu fee payments. This is something we see as suboptimal from a land conservation perspective.

Additionally, conservation easements in the proposed regulations exist in perpetuity. We believe this is a serious oversight by DEQ. In our experience, small landowners are extremely reluctant to enter their land into perpetual easements. The reasons for this are multifold, but generally stem from the reluctance to encumber land and forego the possibility of future development of any kind.. This reluctance by smaller landowners to enter into perpetual conservation easement agreements will push anyone seeking to create a conservation easement into negotiations with parties wielding outsized influence due to their larger landholdings. There is more willingness for non-institutional landowners to put their land into conservation easements that are contemporary with the project’s lifetime.

The conservation easements mitigation methodology puts emphasis on “off-site” mitigation. We believe this is counterintuitive to DEQ’s goals. If disturbance is happening on site, so too should mitigation where possible. Removing the perpetuity clause opens up more possibilities for on-site mitigation, as it is much more feasible for developers to conserve areas within a property that is already being partially developed for solar, given their pre-existing relationship with landowners and the congruent timelines. Practically speaking, there is a greater chance of success in convincing a landowner who is already participating in solar development to agree to conserve other portions of their property than a third-party who is getting no additional benefits beyond easement payments.

Alternative Mitigation Solutions:

We propose the following mitigation alternative solutions for inclusion into a new regulation proposal. These alternatives were conceptualized with input from other solar energy developers, as well as DEQ staff. Generally, we have stuck to a common theme: more flexibility needs to be provided to developers for mitigation. Conservation easement creation as a mitigation methodology alone is unrealistic, overly burdensome from a cost perspective, and fails to capture innovative ways in which the solar industry can mitigate its impacts. We recognize DEQ has carved out the opportunity for “creative” solutions to mitigate solar development impacts. We appreciate those opportunities, but believe explicitly enumerating alternatives would benefit the speed and feasibility of the PBR process by providing the industry with more options for mitigation

• When solar development impacts monoculture pine plantations, the mitigation requirement should not be the creation of conservation easements, but rather the planting of native pollinators and plant species in areas under panel and in other suitable areas of the disturbance zone. This mitigation strategy helps to reverse the environmentally destructive actions of industrial timbering by increasing biodiversity and restoring depleted soils and native ecosystem balance.
• We recommend removing the mitigation district classification, given that the ultimate goal of these regulations is to ensure that the solar industry offsets its impacts on the agricultural and forestal lands across the Commonwealth. The “mitigation district” should be the entire state of Virginia, and not limited to surrounding watersheds.
• Instead of mandating conservation easements, DEQ should promote the creation and usage of Agricultural and Forest Districts (AFDs). The Agricultural and Forestal Districts Act (§ 15.2-4300 of the Code of Virginia) outlines the policy's purpose to be similar to that of HB206 and its proposed regulations. AFDs create conditions that promote agricultural and forestal use of land without tying the land up in perpetuity to a conservation easement. We highly recommend this be considered as an alternative to conservation easements as a mitigation technique. To effectively leverage the pre-existing AFD mitigation technique as a response to solar, the regulations should tie the AFD length to a solar project’s lifetime. We believe approaching the issue of conservation of forested and agricultural spaces from an AFD perspective will greatly increase the number of landowners who would be willing to participate in such conservation efforts. It would also promote the creation of AFD programs in counties that do not already have them.
• In cases where there is active cropping or grazing on a solar site, herein referred to as ‘agrivoltaics,’ we believe that site requires no mitigation given that the land is simultaneously being used for solar energy production and activities permitted in a conservation easement. Agrivoltaics provide the intended benefit of mitigating impacts to prime farmland. It contrasts with a conservation easement approach, as land put into a conservation easement alone is not required to be used for agricultural purposes (it can, but it’s not required to do so). Put simply: if a site mitigates its impacts to prime farmlands through agrivoltaics, there should be no additional mitigation requirement for the disturbed soils. Currently, agrivoltaics is identified as a mitigation reduction methodology. It should be a mitigation absolution methodology.
• Areas that remain undisturbed within the project's properties should be eligible to count towards mitigation if adequate site control agreements demonstrate that the land will remain undisturbed for the project's lifetime. This promotes co-located project disturbance zones and conservation easements that mitigate said zones.
• The in-lieu fee that is outlined 9VAC15-60-60 Section H refers to a projected administrative fee cost. We would like this amount to be estimated for projects of different sizes so the developer understands what to expect if pursuing this option.
• There should be different and lower mitigation requirements for solar development that occurs in areas characterized as low-to-moderate income (LMI) communities. If DEQ continues to use watershed basins as an analog for mitigation districts, we suggest “significant LMI rate-payer populations” be defined as 5% LMI earners per mitigation district. Emphasizing solar development in LMI communities additionally aligns with the goals of the Inflation Reduction Act to incentivize development in disadvantaged communities.
• To promote the establishment of biodiverse habitats, DEQ should reward solar facilities that utilize a diverse mix of native and naturalized hardwood evergreen and deciduous shrubbery and trees for their visual buffers with lowered mitigation ratios. It should also reduce mitigation ratios for projects that create conservation easements on land with diverse forest mix compared to monoculture timber pine plantations.
• If DEQ continues to offer conservation easements as a mitigation methodology, those easements should be contemporary with the project’s lifetime, not perpetual. Many landowners who would be ideal candidates to host conservation easements are likely to avoid an agreement that ties their land up in perpetuity. Conservation easements have their place in the conservation world, but they are not a scalable enough mitigation methodology to support health levels of solar energy development.
• If DEQ is adamant that conservation easements be an exclusive mitigation method, we recommend that DEQ, alongside developers and other stakeholders, establish a marketplace for conservation easements within the state. A clause should be added that allows any conservation easements created after January 1, 2025, to be eligible for a public “market” in which solar developers can purchase these easements for credit towards their PBR application. This can operate similarly to the existing wetland and nutrient bank credits used for wetland impact mitigation by various development types.

Conclusion

We recognize DEQ is mandated by the Commonwealth, through HB206, to create these regulations. We appreciate the tremendous effort that has gone into the current proposal and agree with the aims of DEQ to disincentivize environmentally harmful solar development. The above comments are meant to refine and create more realistic methodologies to achieve environmental protection goals. We appreciate DEQ’s consideration of these comments and look forward to the new proposal’s release. As a final note, small businesses based in Virginia, such as Hexagon, have spent invaluable time understanding the local community’s needs and developing best-in-class projects based on this information. We believe there is significant alignment in our mission to be a responsible development company and DEQ’s desire to protect environmentally sensitive areas.