Dear Director Paylor:

 

Please see the following comments of Virginia Solar (“VASOLAR”) regarding DEQ’s proposed regulations amending the Small Renewable Energy (Solar) Permit by Rule (“PBR”) program (the “Proposed Regulations”).  VASOALR was founded in 2015, and has developed 11 projects totaling 379MW, covering 3200 acres in the Commonwealth.  The principals for VASOLAR are responsible for 11 approved PBRs or ~20% of the total number issued to date. 

 

DEQ’s Proposed Regulations, however, would result in substantial, highly detrimental changes to Virginia’s regulatory environment. The Proposed Regulations would add new, burdensome regulatory requirements. In fact, DEQ’s Proposed Regulations would single out the clean energy industry for new regulatory burdens, imposing some of the agency’s most stringent environmental regulations on carbon-free generation. Most concerning, DEQ appears poised to impose new regulatory requirements that are not imposed on other energy projects such as new gas-fired power generation, high-voltage transmission line construction, or interstate gas pipelines. For example 9VAC15-60-45  D 1 d. Onsite surveys for natural heritage resources recommended by DCR based on the analysis required under this subsection, expands DCR’s authority as currently reports are only required for state or nationally listed species. 

 

DEQ’s Proposed Regulations would be out-of-step with the State Corporation Commission’s (“SCC”) permitting process for renewable energy and non-renewable generation assets and transmission facilities. DEQ proposes to impose new fees and regulatory burdens that have no parallel under the SCC’s permitting processes and that are unprecedented in Virginia.

These matters are even more consequential today than at the start of DEQ’s RAP process. After the conclusion of the RAP process, the General Assembly passed landmark clean energy legislation that will require Virginia’s two largest electric utilities to add thousands of megawatts (“MW”) of solar by 2035.   The proposed revisions to the PBR regulations, if enacted in 2020, could impede the solar industry’s ability to develop cost-effective projects, thereby jeopardizing the Commonwealth’s ability to achieve the ambitious clean energy goals established by the 2020 Virginia Clean Economy Act.

Attached is a summary of VASOLAR’s primary concerns with the Proposed Regulations, as published in the March 15, 2021, Virginia Register of Regulations.

 

We appreciate DEQ’s consideration of the following comments on behalf of Virginia’s solar industry. As always, we are available to meet with you or your staff should you have any questions about these comments.

 

Sincerely,

Matthew Meares

 

 

Comments and Objections of Virginia Solar regarding DEQ’s Proposed Amendments to Small Renewable Energy (Solar) Regulations

 

As published in the March 15, 2021, Virginia Register of Regulations

 

VASOLAR opposes DEQ’s unsupported application fee increase proposal – Proposed Rule 9VAC15-60-110

 

VASOLAR opposes DEQ’s fee increase proposal. The Proposed Regulations would result in meaningful fee increases for all new projects. Under the current regulations, applicants pay fees based on the size  (i.e., MW capacity) of the facility. Projects with rated capacities between 5 MW and 25 MW must pay a base application fee of $8,000. Projects between 75 MW and 150 MW pay an application fee of $14,000.[1] Currently, developers must pay a “modification fee” of $4,000 in the event that the applicant proposals a modification to the facility design that does not increase the MW capacity of the facility.[2]

 

Under the Proposed Regulations, would impose a new Notice of Intent (“NOI”) fee of $2,000 for all projects; new Modification fees equal to 20% of the application fees; new “Incomplete” fees equal to 20% of the application fees; and new annual “Maintenance” fees of $500 plus $15 per MW of capacity.

Under the Proposed Rules, a developer of a 150 MW would pay annual maintenance fees of $2,750/yr over the life of the project. If a developer were required to submit a modification to the design of proposed facility, even if such modification did not increase the acreage disturbed or change the location of the project, the developer would be subject to an additional $6,500 fee. Were an application determined to be “incomplete” for any reason, the developer would be subject to a yet another $6,500 fee.

 

VASOLAR is disappointed that DEQ has not justified the need for its dramatic proposed fee increases. DEQ has not offered any record basis for its application fee increase proposal. While DEQ has stated that it became necessary to revisit the fee structure “in order to fully support the program, including compliance and enforcement activities,”[3] DEQ has not indicated that it will increase staffing for the PBR program or undertake any efforts to improve the efficiency of the program. VASOLAR cannot support fee increases without a commitment from DEQ that it will increase staffing for the PBR program.

 

 

VASOLAR opposes DEQ’s proposal to apply so-called “maintenance fees” – Proposed Rule 9VAC15-60-110 D

 

Additionally, DEQ has not supported its proposal to impose annual “maintenance” fees for permitted facilities. DEQ indicates that all “projects permitted after the effective date of the amendments will be assessed an annual maintenance fee to cover ongoing inspection and compliance costs.” DEQ has not explained what “compliance and enforcement activities” DEQ expects to undertake for permittees that are not required to submit a mitigation plan. The maintenance fee proposal appears to be borrowed from DEQ’s Title V program under the Clean Air Act.[4] Title V requires state regulators to assess sufficient annual fees to ensure permittees’ compliance with emissions limits and other requirements.

 

Solar facilities, however, do not emit air pollution or require expert staff review of annual emissions reports and other filings. DEQ has not provided any record evidence to justify annual maintenance fees to “monitor” or “maintain” non-emitting solar generation facilities. There is little necessary ongoing O&M expense or a need for continuing DEQ oversight given other permits in place (e.g., local conditional use permits and stormwater permits) and the passive, static nature of these projects following commercial operation.

 

VASOLAR notes that SCC-permitted facilities, including solar facilities, fossil generating plants, and high-voltage transmission lines, are not assessed any ongoing maintenance costs as a condition to approval to construct and operate the facility. Neither the General Assembly nor the SCC have chosen to apply any maintenance fees for any generation resources. This is strong evidence that such maintenance fees are unnecessary.

 

DEQ’s proposed annual maintenance fees are not supported by the agency record and would single out the solar energy industry, subjecting these non-emitting, environmentally friendly resources to regulatory burdens not borne by fossil fuel generators and not imposed by the SCC. For these reasons, DEQ’s proposed maintenance fees appear to be arbitrary and capricious.

 

Notwithstanding the foregoing, VASOLAR would not oppose maintenance fees for projects where DEQ has imposed a mitigation requirement based on a finding of adverse impacts on wildlife or natural resources, provided that DEQ can reasonably demonstrate a nexus to its own costs in inspecting the site or reviewing annual reports. 

 

 

VASOLAR opposes DEQ’s proposed Predicted Suitable Habitat requirements – Proposed Rule 9VAC15-60-45

 

The Proposed Regulations require applicants to prepare a report regarding natural heritage resources that uses “predicated [sic] suitable habitat” (“PSH”) modeling.[5] This potential regulatory requirement was not discussed at any RAP meeting. DEQ has failed to establish in the record the basis for the use of a “predicted habitat” analysis rather than the actual presence of threatened and endangered (“T&E”) species, nor has it engaged in any cost-benefit analysis regarding the imposition of this new burden. It is not clear what additional areas would be covered, what mitigation would be required, or even how mitigation requirements would be determined for suitable habitat. Without any sufficient explanation or basis established in the record this requirement is arbitrary and capricious.

 

VASOLAR is not aware of any Virginia regulatory program that requires PSH modeling analysis, not to mention required mitigation for suitable habitat where species are not present.

 

Separately, use of this modeling could prove difficult, as this software is expensive and not easily accessible. It is not clear that a developer can simply make a request for state T&E PSH of the disturbance zone and have a report generated. The proposed PSH modeling requirements would unnecessarily increase permitting expenses for solar developers.

 

VASOLAR does not support DEQ’s apparent attempt to single out the solar industry for new, untested, potentially project-altering regulatory burdens. The PSH requirement has not been adequately considered and appears to be arbitrary and capricious.

 

VASOLAR opposes making DCR recommendations requirements- Proposed Rule 9VAC 15--60-45  D 1 d

The Proposed Rule makes Onsite surveys for natural heritage resources recommended by DCR based on the analysis required under this subsection.  The reason DCR only makes recommendations is they do not have the authority to require such studies.  These regulations make “recommended” studies requirements which effectively expands DCRs jurisdiction in relation to solar projects.  DEQ’s Proposed Regulations would single out the solar energy industry, subjecting these non-emitting, environmentally friendly resources to regulatory burdens not borne by fossil fuel generators and not imposed by the SCC.

 

VASOLAR opposes DEQ’s proposed ecological core analysis requirements – Proposed Rule 9VAC15-60-55

The Proposed Rules provide for an automatic finding of adverse environmental impacts any time a project disturbance area intersects an area designated by the Virginia Natural Landscape Assessment as a C1 or C2 ecological core area. In such cases, the applicant would be required to submit a mitigation plan to “include practices to minimize or offset significant adverse impact through activities to protect, restore, or enhance the affected or similar resource.”[6] Thus, DEQ proposes to require applicants to preserve similar land that may not be part of the disturbed site.  This offsite mitigation requirement does not appear to be authorized by the PBR statute, which provides for site-specific mitigation.[7] By contrast, the General Assembly has granted clear authority for offsite mitigation for wetland and stream impacts.[8] This proposed requirement is therefore beyond the scope of DEQ’s statutory authority. 

More broadly, areas designated as C1 and C2 ecological core areas are pervasive throughout the Commonwealth.[9] These areas will undoubtedly intersect with numerous solar development projects, resulting in potentially project-altering mitigation requirements.

VASOLAR is not aware of any other permitting program that utilizes the ecological core assessment. VASOLAR does not support testing novel regulatory requirements and analytical tools on the solar industry, especially when done without any direction from the General Assembly. As discussed through these comments, the solar industry is responding to clear policy directives from the General Assembly to develop tens of thousands of megawatts in the Commonwealth in a short period of time.

DEQ has proposed a drastic change to this regulatory program without any discernable cost-benefit analysis or apparent awareness of the impacts. The proposed ecological core analysis and mitigation requirements are therefore arbitrary and capricious.   

 

VASOLAR recommends a modification to the proposed definition of “disturbance zone” – Proposed Rule 9VAC15-60-10

 

VASOLAR opposes DEQ’s definition of “disturbance zone” under the current regulations and under the Proposed Rules:  

"Disturbance zone" means the area within the site directly impacted by land-disturbing activity, including construction and operation of the small solar energy project and within and 100 feet of from the boundary of the directly impacted area. 

VASOLAR understands the intent is to capture areas actually disturbed (i.e., “directly impacted by land-disturbing activity”) by the construction of a solar facility. The actual definition is overly broad, however, and should be clarified to exclude areas not controlled by the applicant.   

The definition of “disturbance zone” is critically important. This definition could determine which projects are required to obtain a PBR.[10] The definition of disturbance zone would also be used to determine the areas that must be surveyed as part of the natural resources review process.[11]

VASOLAR recommends that the disturbance zone be defined to include no more than 15 feet from the boundary of the directly impacted area.

 

VASOLAR urges DEQ to consider the General Assembly’s public policy goals as expressed in the Virginia Clean Economy Act.

 

Since the conclusion of the RAP process, the General Assembly enacted the Virginia Clean Economy Act.[12] The VCEA represents the General Assembly’s most ambitious clean energy policy enactment to date. The VCEA is intended to remake Virginia’s energy economy by encouraging and mandating utility investments in renewable energy located in the Commonwealth. The VCEA includes a mandatory Renewable Portfolio Standard, which requires Virginia’s two largest electric utilities to meet increasing renewable energy procurement targets. Dominion Energy and Appalachian Power must reach 100% renewable energy by 2045 and 2050, respectively.

 

The VCEA also requires Dominion and Appalachian to add at least 16,700 MW of new solar and/or onshore wind generation by 2025.[13] Importantly, this new capacity must be located in the Commonwealth.

 

VASOLAR urges DEQ to consider this new policy when finalizing the solar PBR regulations. The VCEA is not only an invitation but a directive for the solar industry to begin developing projects in Virginia.  The new regulatory burdens proposed by DEQ will jeopardize individual projects, but the Commonwealth’s clean energy transition. In light of the clear public policy of the Commonwealth, VASOLAR urges DEQ to avoid imposing excessive fees, or singling out the solar industry for untested, potentially project-killing regulatory requirements.  

 

 

VASOLAR maintains that the solar PBR process was intended to be – and should remain – less burdensome than obtaining a CPCN from the SCC.

 

VASOLAR is concerned that the Proposed Rules would impose additional regulatory requirements that could make the solar PBR more burdensome than obtaining a certificate of public convenience and necessity (“CPCN”) from the SCC. As DEQ has recognized,[14] the State Corporation Commission does not assess fees when issuing CPCNs for electric infrastructure such as power plants, transmission lines, or distribution facilities such as substations. The SCC, as Virginia’s primary energy regulatory agency, retains jurisdiction to permit utility-scale generation facilities of any size. VASOLAR believes that the PBR alternative was intended to be – and should remain – a less burdensome permitting option for projects that have minimal adverse effects on the environment and further the Commonwealth’s clean energy policies.

 

 

VASOLAR recommends that DEQ provide additional time for the industry to comply with any new fees or regulatory requirements – Proposed Rule 9VAC15-60-40, 9VAC15-60-50, 9VAC15-60-55, 9VAC15-60-60 and 9VAC15-60-65.

 

Under the Proposed Regulations, certain new regulatory requirements would not be imposed on project applications submitted within one year of the effective date of the new regulations.  VASOLAR appreciates DEQ’s proposal of a grandfathering provision and believes that using the application date will establish regulatory clarity. However, VASOLAR urges DEQ to extend this period to at least two years. Solar development projects often take four years or more to complete, reflected in option agreement terms that are typically up to five years in length. VASOLAR has made significant investments in projects in the form of option payments to landowners, environmental studies, interconnection studies, engineering studies, legal fees, and other diligence. VASOLAR has made these investments based on a financial model that will not hold under the new regulations. As a practical matter, the PBR is the last development task (other than non-discretionary building or electrical permits) for a project developer to issue notice to proceed. Thus, there is a large existing pipeline of projects currently under development that may not apply for the PBR within one year of the effective date of the final regulations as proposed by DEQ. These projects will experience a change of rules midstream with some projects unfairly penalized and others projects simply made non-viable.

 

As a general rule, development projects in Virginia have been undertaken and financially modeled assuming a certain level of regulatory burden and expense. This has been done based on the current regulations. It is not appropriate to change the fundamental cost and viability parameters in midstream for these projects. VASOLAR recommends the DEQ minimize this hardship by extending the grandfathering period for any new fees or regulatory requirements to a minimum of three years.