Rows of solar modules generate electricity at UL-Lafayette’s Photovoltaic Applied Research and Testing (PART) Lab — Aug. 9, 2021. (Photo credit: Wes Muller/Louisiana Illuminator)
A new law enacted to prevent “orphan” solar energy farms in Louisiana contains a carve-out that exempts most of the current solar farm projects in the state.
House Bill 655, sponsored by Rep. Jean-Paul Coussan, R-Lafyatette, establishes decommissioning regulations for utility-scale solar projects, requiring companies to pay permitting fees and purchase a bond payable to the Louisiana Department of Natural Resources as financial collateral in the event that the company abandons the project without restoring the land to its original condition.
The bill stems from a problem lawmakers decades ago failed to foresee with the oil and gas industry. Thousands of abandoned oil wells, many of them leaking contaminants into the environment, are scattered across the state after the companies that owned them went bankrupt or walked away because the wells did not produce enough. Unable to identify or track down the previous owners, state authorities have been forced to stick taxpayers with the cleanup bill.
It’s a situation current lawmakers don’t want to see repeated as the renewable energy sector, including wind and solar, continues to expand in Louisiana and across the globe. Coussan’s bill received unanimous support in both chambers of the Legislature, and Gov. John Bel Edwards signed it into law last week.
“We’re looking at it from the context of the oil and gas industry background that we have and making sure that we have the financial security in place to decommission these sites if and when these contracts become void and they have thousands of acres of solar panels out there,” Coussan said when he presented the bill on the House floor April 19.
One provision of the new law that has some solar industry professionals asking questions exempts any solar projects that utility companies such as Entergy and Cleco own, giving them an additional financial advantage over smaller, independent companies. All five solar plants currently in Louisiana and most currently in the planning stage will be exempt from the law, which takes effect Aug. 2.
Sen. Eddie Lambert, R-Gonzales, voiced concern with the bill during debate in the Senate Natural Resources Committee on May 17.
“It looks like we’re treating people differently,” Lambert said.
Sen. Bret Allain, who co-authored the bill, explained that the state has good reason to treat independent solar companies differently because they are not subject to the same level of oversight as utility companies, which are regulated by government bodies. Allain said utility companies have a more permanent presence in the state.
“Utilities are here,” Allain said. “They have assets here. They ain’t going anywhere. They’re not going to go bankrupt – even the co-ops… But when it comes to third parties that’s generating electricity, would you have trusted if Enron would have been here doing this?”
However, the law also treats certain utility companies differently. Terrence Chambers, who runs the University of Louisiana-Lafayette’s research-based solar farm, pointed out that the law does not expressly exempt Lafayette Utility Systems in the same way it does for Entergy New Orleans even though both companies are municipally regulated.
Lafayette Utility Systems Director Jeffrey Stewart pointed out that another provision of the law provides an exemption if the utility has a decommissioning guarantee written into the lease with the landowner. So although his company is not specifically exempt like Entergy New Orleans, Stewart said he believes Lafayette Utility Systems could qualify for an exemption by taking such actions.
“The specific terms of this law detail the requirements of those not under [Public Service Commission] or New Orleans jurisdiction,” Stewart said. “From all that we read and from our discussions with the legislators, there is a level playing field, and we believe fairness and equity have been applied.”
While Chambers said decommissioning bonds are a good thing for the industry, he said the cost should include offsets from the salvage value of the solar panels and their steel racks, which are a “huge part” of the cost.
The law gives the Department of Natural Resources broad rule-making authority regarding how it will calculate the bond amounts, but it does not require DNR to include salvage value in its calculation.
After several solar company representatives testified to this point at the Senate committee hearing, Lambert proposed an amendment that would have required salvage value to be factored into the bond cost, but the proposal failed.
Austin Scheffy, chief investment officer of Heelstone Renewable Energy, told lawmakers that without such a requirement, the law would create a level of uncertainty that the solar industry does not face in other states such as Texas and Mississippi.
If the Department of Natural Resources should adopt best practices from other states, the bonds should not be very expensive, Chambers said.
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