Act 555 Adopted to Prevent Orphan Solar Farms

solar farm

On June 17, 2022, Louisiana Governor John Bel Edwards signed Act No. 555 (HB 655), which is the newest law regulating Louisiana’s burgeoning solar industry. This comes on the heels of last year’s law, Act 301, which called for the Louisiana Department of Natural Resources (LDNR) to draft regulations for implementing solar lease programs and identify a funding source for its staff to oversee the program.

Act No. 555, which went into effect on August 2, 2022, sets forth decommissioning regulations for solar generation facilities and requires a permit and a bond payable to the LDNR. The purpose of the Act is to prevent “orphan” solar farms and to avoid the mistake plaguing Louisiana’s oil and gas industry—abandoned wells. Louisiana is littered with thousands of abandoned oil and gas wells, some of which are leaking into the environment. The prior owners of the oil and gas wells have walked away, declared bankruptcy, or cannot be found.  As a result, taxpayers have been left to cover the clean-up costs of these abandoned wells. As Louisiana expands its renewable energy industry, lawmakers are trying to learn from the past, and passage of Act No. 555 is an early effort to do so.

The substantive requirements of the Act are that a company must (1) obtain a permit from the LDNR and (2) put up a bond payable to the LDNR. In any application for a permit, a company must submit a decommissioning plan for the facility for closure at the end of the life of the facility as well as a decommissioning plan for closure in the event of a disaster that renders operation of the power generation facility impossible. The decommissioning plan must be updated every five years after initial submission. Further, all plans will be reviewed for sufficiency and must be approved by the secretary of the LDNR. The bond requirement is meant to cover the costs of decommissioning if the solar company abandons the project without restoring the land to its original condition.

But not all companies are treated equally under the Act, and there are carve-outs for certain pre-existing utility providers. In particular, the Act exempts any solar power generation facilities that are “owned by an electric utility provider regulated by the Public Service Commission or the council of the city of New Orleans.” This carve-out allows these utility providers, such as Entergy, to be exempt from the bond process. Further, the Act also exempts the same types of companies from the permitting process and simply requires them to register by January 1, 2023, and then comply with any rules under the permitting section by June 30, 2024.

Finally, Act No. 555 contains one more noteworthy exemption. Where companies include a written decommissioning guarantee into the lease with the landowner, that company may be exempt from the bond requirements if the guarantee provides for the cost of decommissioning in a plan acceptable to the Secretary of the LDNR. Whether this exemption is sufficient to prevent abandoned solar facility is yet to be seen because if a company declares bankruptcy, it will be up to the bankruptcy court whether to uphold the company’s contract guarantees to decommission a facility. Regardless, the Act is a proactive effort to prevent orphan solar farms and not repeat a mistake of the past.

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