4

Path Forward

CURRENT STATE

DOE Lands Are a Valuable National Asset

Department of Energy (DOE)-managed lands continue to be a valuable asset among the nations’ property holdings. DOE-managed lands (hereafter, DOE lands) can present an opportunity for further study and ultimate energy resource development encompassing a broad range of existing and emerging technologies. With the most cost-effective resources developed at the most appropriate sites, DOE lands can serve as a commercial and research hub for innovative energy technologies. Monetizing these properties for commercial gain can generate income to developers, create jobs for local residents, and provide revenues for DOE. The intersection of public benefit and private interest is strong on these lands, and their development can further the national objective of energy independence and greater national security.

The economic viability of leasing potential DOE-administered energy resources on its lands may be affected, or possibly even enhanced, if the department formalizes a predictable regulatory program. The Department of the Interior (DOI), for instance, has several different leasing regimes for energy resources on both its managed lands as well as for resources it manages for other federal agencies. The nature and process for these regimes, however, is often dictated by the statutory authority allowing the development of the resource. Oil and gas leasing and coal leasing have tailored requirements, such as under the Mineral Leasing Act of 1920, the Federal Land Policy and Management Act, the Federal Coal Leasing Amendments Act of 1976, the Federal Onshore Oil and Gas Leasing Reform Act of 1987, the Indian Mineral Leasing Act, the Indian Mineral Development Act, the Indian Tribal Energy Development and Self-Determination Act of 2005, and the Outer Continental Shelf Lands Act. Congress, moreover, occasionally layers additional authority or requirements on the leasing of specific resources, as it did for geothermal leasing when it included a geothermal provision in the Energy Policy Act (EPAct) of 2005 (P.L. 109-58). The availability of leasable resources, in addition, is often first examined by the relevant agency when developing management plans for governing individually or collectively managed public lands. Yet, modeling any DOE leasing process after other leasing processes should be undertaken with considerable care. Notably, the offshore program for renewable resources took several years before the agency overcame jurisdictional issues and processes deemed cumbersome by developers. A similar scenario occurred with the development of wind and solar resources on federal lands, with DOI first exploring the appropriate authority and then working through a workable leasing process—and eventually finalizing a competitive leasing process in November 2016.¹ And more recently, the coal leasing process has precipitated questions and even a moratorium while DOI considers several issues. These varied existing leasing programs, therefore, counsel that any effort to craft a DOE energy leasing process should

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¹ Bureau of Land Management, 2016, “Competitive Processes, Terms, and Conditions for Leasing Public Lands for Solar and Wind Energy Development and Technical Changes and Corrections,” Federal Register 81(243):92122-92230, December 19.

consider the need for any statutory authority and the appropriate form that any leasing model could or ought to take.

For a variety of reasons, referenced in this and the underlying NREL report, limited development activity has occurred to date on DOE lands, but the development potential is encouraging, despite the flaws that the committee has noted in the NREL/CSM analysis. A variety of reasons can be cited for the limited development to date, including lack of information and familiarity of the DOE lands to developers, overlapping U.S. oversight and DOE land ownership and stewardship, environmental concerns, lack of available energy infrastructure at or near the sites, and site/project economics, to name a few. A few renewable energy projects have been developed on DOE lands to date. Some of these projects were presented to the committee and demonstrated the value of the department’s 2.2 million acres of land for energy production. The projects, while challenging to bring to fruition for a variety of reasons, demonstrate that commercial interest exists for developing energy on DOE lands. In addition to the commercial development opportunities presented by DOE lands, they can also be used for energy technology research and development, studying different technology designs and configurations, testing, and new cutting-edge applications. Whether for commercial or research and development use, such lands present DOE with real opportunities for development.

Energy Resource Production on DOE Lands Requires Secretary-Level Coordination

The congressional request for the study of energy resource potential for DOE lands was assigned to the offices of Environmental Management (EM) and Legacy Management (LM). These offices are responsible for the cleanup of contaminated DOE sites and their transition to other uses where appropriate and feasible. These offices are experienced in beneficial reuse of DOE sites and are in some ways a good fit to manage a program of energy resource development on DOE sites. Particularly in the early 2010s, DOE initiated the Asset Revitalization Initiative to improve use of DOE lands for reuse, including for energy development, coordinated out of the Office of Legacy Management.² Accomplishments have included installing solar panels on the roof of DOE’ headquarters in southwest Washington, D.C., and initiating metals recycling at the Portsmouth site in Piketon, Ohio.³

Because DOE site responsibilities and stewardship are disparate and spread across a number of offices and programs within DOE, a secretary-level program office might be necessary to coordinate the overall effort of developing DOE lands. Without such a coordinated and single-purpose effort, development opportunities will likely go untapped.

While other governmental agencies, such as DOI, have used its Secretary’s office to facilitate the marketing of opportunities to promote renewable resource development by examining program opportunities on public lands, DOE, by contrast, appears to have done much less. But with DOE’s depth and breadth of skills and technical capabilities with energy resources, it too could leverage such opportunities and play a major role in forging public-private partnerships in DOE land development serving the national interest.

The NREL study examined a number of sites across a range of DOE program offices that might be suitable and available for energy development and identified various characteristics and attributes of the sites that make them more or less suitable for development. The committee believes, however, that the assessment was limited by the budget available for the study. The committee provided a critique of the methodology and approach, assumptions, and findings of the NREL study. The committee agrees that the NREL study validates findings from earlier studies and provides a useful start for quantifying the development potential (albeit at a high level), establishing a more robust DOE-wide effort to develop

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² U.S. Department of Energy, “Asset Revitalization Initiative,” http://energy.gov/sites/prod/files/2013/08/f2/ARI%20Brochure%20Update%20062813%20FINAL.pdf, accessed November 11, 2016.

³ Further information is available at U.S. Department of Energy, “Accomplishments—An Ongoing Endeavor,” https://www.energy.gov/ari/accomplishments-ongoing-endeavor, accessed December 19, 2016.

energy resources on the DOE lands, and nothing more. The study stops well short of identifying sites and characterizing them in sufficient and necessary detail as to make them attractive and of interest to developers. As noted in Chapters 0 and 0 of this report, the NREL study did not provide a robust analysis of sites nor an actionable plan for developing energy resources on the DOE lands studied.

FUTURE STATE

The committee believes DOE management, including at the Secretary-level, could provide appropriate direction and funding to the full range of DOE programs and offices and realize the potential available on DOE lands. This effort would need to be focused and single-purposed and be established internally with a realignment of existing personnel and resources.

It will be important to engage with local sites and communities to determine if plans exist already or have been studied in this regard. For example, many communities have scoped out DOE sites and surrounding areas for their suitability for development as a result of having infrastructure such as roads, transmission lines, rights of way, water supplies, and the like already substantially in place. Case studies such as Hanford and Brookhaven exist to provide proxies for estimating other opportunities. Moreover, DOI’s Bureau of Land Management has sophisticated and proven approaches for the leasing of lands for development of oil, gas, and minerals, which the private sector has accessed for decades. This is the most analogous program to the end state that the committee suggests DOE might adopt. Once properties are characterized for disposition or development, projects should be pre-screened with developers to “pressure test” the suitability and attractiveness of the properties; DOE’s plan can then be refined and estimates developed to value the net impact of development. Lands can then be prioritized and offered to developers on a competitive basis with published criteria for awards.

The committee believes that the future state for developing DOE lands can result in leasing revenues or production interests payable to DOE by developers to offset the cost of maintaining such properties. By doing so, existing, idle DOE lands would become income generators, transitioning such DOE lands, currently carried as liabilities, into assets.

The committee suggests that DOE continue to evaluate opportunities for DOE land development as it evolves the use of such lands and that it update land inventories every 3 to 5 years to continue to offer property use opportunities to the market. The status of a DOE site may change as its footprint is reduced and more acreage becomes available (e.g., the DOE EM program) or as energy development technologies might change in cost, making certain properties more attractive than previously thought.

SUMMARY AND NEXT STEPS

The committee recommended above (Recommendation 4.2) that DOE establish a project management office as one way to increase its effectiveness. The committee further suggests that DOE establish the energy project development of the department’s lands as a Secretary-level priority and provide appropriate direction to the full range of DOE programs and offices provided that sufficient funding is provided by

Congress or DOE to prioritize viable project opportunities. Otherwise, absent such funding, DOE should remain open to opportunities to allow private development of DOE lands on a case-by-case basis, as is currently done, but not create the project management office suggested by the committee in this case.

The committee has envisaged the detailed implementation of Recommendation 4.3 and offers the following observations and guidance:

1. To the outsider, it might appear that DOE perceives many of its properties as liabilities. In the case of the Office of Legacy Management (LM), for example, staff and budget resources are allocated for maintenance, preservation, and protection. Instead, they could be considered potentially productive assets, through energy project development, that could be accretive to budgets. Moreover, DOE’s approach could extend well beyond LM properties to the full range of DOE offices and programs—for example, lands under the purview of the Office of Science, the National Nuclear Security Administration, and the Offices of Fossil Energy, Nuclear Energy, and Energy Efficiency and Renewable Energy.
2. The aforementioned inventory of properties (developed pursuant to Recommendation 4.2) might be complemented by asking site managers to provide information via a complex-wide survey. As noted above, this effort should go beyond the present inventory of lands within the LM program. The list will be a valuable resource for developers and the public.
3. The project management office suggested in Recommendation 4.2 would be dedicated to the purpose of coordinating and institutionalizing department-wide efforts dedicated to turning DOE-managed lands—now considered liabilities—into revenue-generating assets. In this effort, the team executing the work needs to follow commercial principles of energy project development and the underlying resource potential of the properties. For this, the committee recommends that DOE work closely with developers to provide the support and certainty needed to attract private capital.
   1. DOE should engage developers early and comprehensively in identifying resource potential and understand what it might take to plan and develop projects. Developers could participate and be interviewed in an open collaborative setting, affording NREL and DOE with the opportunity to receive unfettered feedback on commercial practices—a potentially critical factor if DOE lacks the requisite experience in project development of selected resources.
   2. DOE should strive to better understand site attributes in order to take advantage of unique advantages and disadvantages, including but not limited to site security, existing energy and related infrastructure, achievable resource development, and access to markets for the resource.

4. 3. DOE should understand the legal, commercial, and regulatory processes and requirements surrounding the repurposing or reuse of DOE-managed lands, such as leasing authority, royalty schemes, property sales requirements, environmental considerations and requirements, and other considerations deemed necessary to address before lands can be developed. Some DOE properties undoubtedly will not be available for development due to such environmental constraints or due to either prior encumbrances or arrangements with state and local entities.
5. DOE should partner with electric utilities and third-party developers of the resources identified for development that are expert at energy project and infrastructure development. Some of these entities have information that could be useful for determining potential for energy development at particular sites. Such entities, for instance, often know the condition of local infrastructure, such as natural gas, water, and waste-water pipelines or electric transmission access, roadway and right-of-way use—all of which can facilitate or constrain development at a particular site.
6. The committee feels it would be instructive for DOE to review and learn from other government programs, such as the leasing programs of the Bureau of Land Management (BLM; within DOI) and the positive experience that BLM has had in leasing oil, gas, coal, and geothermal, as well as DOI’s programs for granting access to public lands for solar and wind power development. Presently, BLM has an active geothermal leasing program, so it is recommended that DOE continue to contribute developable properties toward that program.
7. After establishing a comprehensive inventory of developable lands, DOE should estimate the value of such development to the region and country. Having some sense of the potential revenue stream created by the resource—offsetting maintenance and legacy costs—versus the cost of keeping the lands in their current state would be helpful in the process of deciding whether or not to develop. This alone could be instructive as a management tool. Although not within the scope of the current effort, DOE could use this same approach to explore development opportunities of other resources on DOE-managed lands—for example, mining of rare earth elements and other minerals.
8. DOE should develop case studies of existing energy projects on DOE sites to inform the development community, as well as other units within DOE and federal agencies and Congress, of such potential. Such case studies should be widely disseminated to demonstrate the value of such properties when developed.
9. Having identified a list of high-potential priority lands, DOE should solicit market input on the commercialization opportunities of those sites to begin the actual development of energy projects.. Undoubtedly, competitive practices would have to be followed to ensure the government’s fairness and open access to developing such lands.

Such a sequenced approach will support the single-purpose alignment of existing personnel and resources to realize and monetize the inherent value of DOE lands for energy development.

Appendixes

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