Texas Legislature Expands Decommissioning Requirements To Solar Power Facility Agreements With Enactment Of SB 760

The Texas legislature recently passed Senate Bill 760 (“SB 760”). SB 760, which takes effect on September 1, 2021, relates to the decommissioning of solar power facilities.  Under the new law, solar companies must now comply with similar decommissioning requirements as those previously imposed on wind companies during the 2019 legislative session.  SB 760 requires solar power facility agreements to now provide that the grantee is responsible for removing its solar power facilities from the landowner's property.

1. Which solar power facility agreements are subject to SB 760?

SB 760 applies to “solar power facility agreements,” which the law defines as a lease between a grantee and a landowner that authorizes the grantee to operate a solar power facility on the leased property.  SB 760 defines the term “solar power facility” to include a solar energy device, such as solar panels, and any facilities or equipment used to support the operation of the solar energy device.  Like Chapter 301 of the Utilities Code, (which sets forth decommissioning requirements applicable to wind power facility agreements), SB 760 likely also applies to easement agreements that operate like a lease, but the bill does not apply to ancillary agreements solely for transmission, energy storage, access, or collection line purposes. However, both Chapter 301 and Senate Bill 760 include within their definitions of “wind power facility” and “solar power facility” facility or equipment “used to support the operation” of a wind turbine generator or solar energy device. Thus, facilities and equipment such as battery storage facilities “used to support” a wind or solar project will be subject to the statutory wind and solar decommissioning requirements.

On its face, SB 760 does not appear to apply to solar power facility agreements executed prior to September 1, 2021, or amendments to solar power facility agreements executed before or after the law's effective date, since the law applies only to solar power facility agreements “entered into” after September 1, 2021.  However, leases that are amended and restated after September 1, 2021, may trigger the inclusion of these new requirements.

Finally, SB 760 only applies to a solar power facility that is a “generation asset” as such term is defined under Section 39.251 of the Utilities Code. “Generation assets” are defined under the Utilities Code as  assets associated with the production of electricity, including generation plants, electrical interconnections of the generation plant to the transmission system, fuel contracts, fuel transportation contracts, water contracts, lands, surface or subsurface water rights, emissions-related allowances, and gas pipeline interconnections.

2. What restoration obligations are imposed on solar companies by SB 760?

SB 760 mandates solar power facility agreements now include specific provisions describing a grantee's responsibility to remove project facilities from the landowner's property.  The new law also requires the grantee to complete the following obligations safely and in accordance with applicable laws and regulations:

• Solar energy devices, transformers, substations, and overhead lines: Clear, clean, and remove each solar energy device, transformer, and substation from the property and each overhead power or communications line installed by the grantee on the property;
• Foundations and buried cables: Clear, clean, and remove the foundation of any solar energy device, transformer, or substation and buried cables installed in the ground to a depth of at least 3 feet below the surface grade of the land in which the foundation or cable is installed and ensure each hole or cavity created in the ground by such removal is filled with soil of the same type or a similar type as the predominant soil found on the property;
• Roads: If the landowner requests, clear, clean, and remove each road constructed by the grantee on the property and ensure that each hole or cavity created in the ground by that removal is filled with soil of the same type or a similar type as the predominant soil found on the property; and
• Rocks removal and surface restoration: If the landowners makes a reasonable  request, (i) remove all rocks over 12 inches in diameter excavated during the decommissioning or removal process from the property; (ii) return the property to a tillable state; and (iii) ensure that each hole or cavity created in the ground by the removal is filled with soil of the same type or a similar type as the predominant soil found on the property and that the surface is returned as near as reasonably possible to the same condition as before the grantee dug holes or cavities, including reseeding pastureland with native grasses prescribed by an appropriate governmental agency, if any.

While the grantee's restoration obligations related to rocks and roads must be included in the solar power facility agreement, they are only triggered by a landowner's request.  SB 760 provides that such a request must be made no later than 180 days after the later of (a) the date the solar facility is no longer capable of generating electricity in commercial quantities or (b) the date the landowner receives written notice from the grantee of its intent to decommission the solar power facility.  Timely delivery of this notice may help to shorten the period associated with the grantee's road and rock removal obligations.

A grantee may not attempt to draft around the requirements of SB 760: any waiver of the grantee's obligations under, or exemption of the grantee from, the requirements of SB 760 are deemed void.

3. What are the requirements related to the posting of financial security under SB 760?

As with wind agreements, solar power facility agreements must now include provisions indicating that the grantee must obtain and deliver evidence of financial assurance showing the grantee will be able to complete its restoration obligations.  The amount of financial assurance varies depending on the amount by which the estimated cost of the grantee's removal and restoration obligations exceeds the salvage value of the solar power facilities less the value of the solar power facilities pledged to secure outstanding debt.  SB 760 requires these estimates be determined by an independent, third-party professional engineer licensed in Texas.  The grantee must bear all costs of obtaining the financial assurance and determining the estimated costs and values. The grantee must deliver the restoration estimate to the landowner or before the 10^th anniversary of the commercial operations date under the solar power facility agreement and at least every 5 years thereafter during the term.

Further, grantee must deliver the financial assurance to the landowner not later than the earlier of the date the solar power facility agreement is terminated or the 20^th anniversary of such commercial operations date.

A grantee cannot cancel such financial assurance unless replacement security is provided to the landowner upon or prior to such cancellation.  Additionally, these obligations may continue even after the grantee has assigned its interest in a solar project until replacement security is provided to the landowner.  For this reason, a project company selling a solar project asset should require the buyer to provide replacement financial assurance to the landowner at or prior to closing.

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