	BLM Has Different Policies for Bonding Wind and Solar Projects, but a Proposed Rule Would Establish Consistent Requirements

As detailed in our report, in 2008, BLM issued a wind energy  development policy that includes provisions for bonding wind energy  projects on federal land. BLM Has About $100 Million in Bonds for Wind and Solar Projects, but the Systems for Tracking These Bonds Are Not Reliable

We found that BLM has about $100 million in bonds—primarily in the form  of letters of credit and surety bonds—to cover reclamation costs  associated with 12 solar rights-of-way and 108 wind rights-of-way on  federal land in nine western states, according to our analysis of BLM  data. BLM tracks bonds through LR2000 and the Bond and Surety System, but  we found that neither system was reliable for this purpose. We found instances where a  bond’s status or amount had not been updated in one or both  systems. Because information in these  two data systems was missing, inaccurate, or out of date, BLM has  limited assurance that either system is reliable for tracking wind and solar  bonds to ensure that bonding policies are being followed and that all  projects have the required bonds. BLM has taken some limited steps to improve its bonding data. BLM Has Limited Assurance That Bonds for Wind and Solar Rights-of-Way Will Cover Reclamation Costs

BLM has limited assurance that bonds for wind and solar rights-of-way  will cover reclamation costs. BLM also inconsistently adheres  to its policies for the periodic review of the amounts of wind and solar  bonds to verify their adequacy. We found  that 14 out of 45 wind and solar development rights-of-way were  underbonded by as much as $15 million in total—approximately $5.5  million for wind rights-of-way and as much as $9 million for solar rights-of- way—according to our review of BLM project files and data.we identified 10 wind rights-of-way where the bond amount was lower  than the $10,000-per-turbine minimum established in BLM’s 2008 wind  policy. Unclear documentation of bond decisions. Specifically, for 21 of the 33 wind rights-of-way we  reviewed, there was little or no documentation to support the bond  amount. Specifically, for 1 right-of-way, the  holder did not develop a reclamation cost estimate, as directed by BLM’s  2010 solar policy. BLM also does not  adequately ensure that wind and solar bond instruments are properly  secured, handled, and stored. However, the National Renewable Energy  Inconsistent adherence to periodic review policies. Of the 45 wind and solar rights-of-way we reviewed, 23  had bonds that were at least 4 months overdue for an adequacy review. BLM does not have detailed policies to ensure that all bonds are properly  maintained and secured and bond decisions accurately documented in  project files. As a result, BLM may not have accurate  and complete information with which to track wind and solar bonds, and  BLM has limited assurance that the bonds in place will be adequate to  cover reclamation costs if the right-of-way holder does not meet its  obligations. As a result of these findings and to help ensure that bonds  are adequate to cover reclamation costs for wind and solar projects on  federal land, we made five recommendations to the Secretary of the  Interior in our June 2015 report. Specifically, we recommended that the  Secretary 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; develop policies that detail how information related to bonding  decisions should be documented in project files; develop a policy that all data for wind and solar energy projects be  entered in LR2000 and the Bond and Surety System within 10  business days; establish data standards for the Bond and Surety System; and develop an LR2000 action code to automatically notify BLM staff that  a right-of-way is due for a bond adequacy review. In its comments on a draft report, the agency concurred with each of  these recommendations.
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.
This testimony addresses (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. It is based on a June 2014 report, for which 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 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. Further, 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.

What GAO Recommends

In its June 2014 report, GAO recommended, 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.