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DoD energy projects prompt interagency turf wars

Jun. 9, 2012 - 10:45AM   |  
By ANDY MEDICI   |   Comments
Nellis Air Force Base, Nev., which already has two solar projects, hopes to expand its use of solar power through enhanced-use leases.
Nellis Air Force Base, Nev., which already has two solar projects, hopes to expand its use of solar power through enhanced-use leases. (SolarReserve)

The Air Force is trying to turn dust into dollars at Edwards Air Force Base by leasing 3,228 acres of unused land to Fotowatio Renewable Ventures to build a 450-megawatt solar field.

In exchange, the developer will provide the base, deep in southern California’s Mojave Desert, with cash or other in-kind compensation, and have the ability to sell all the electricity it generates to local utilities. In short, the developer stands to pull in $34 million annually in energy sales to local utilities and other customers based on pricing data from the Energy Information Administration.

But for the deal to go through, the Air Force needs the approval of another federal agency: the Interior Department’s Bureau of Land Management. That is because BLM owns the land over which transmission lines will cross to connect the facility to the commercial power grid.

“We are going to run into problems on this one,” said Terry Yonkers, the Air Force’s assistant secretary for installations, environment and logistics, at a May conference.

BLM manages most federal lands — including more than half the lands on domestic military bases — and is responsible for ensuring that a portion of the revenues generated from exploitation of those lands — such as oil drilling or minerals mining — goes back to the U.S. treasury.

BLM has the ability to revoke the Defense Department’s rights to use its lands if it is not used for military purposes, such as test ranges and exercises.

But increasingly, military services are looking to parlay that property for another use: renewable energy. Government mandates that agencies use more renewable energy and shrink their carbon footprint, combined with the recent emergence of creative public-private financing options — known as enhanced use leases — makes such deals easier.

That flurry of deal-making activity by DoD has gotten BLM’s attention.

In the case of the Edwards Air Force Base solar energy deal, the Air Force will use only about 7 percent of the total energy generated. BLM argues that because only a small fraction of the project will serve military purposes, it should have a stronger role in forging the deal to ensure the government gets its due.

“Now it looks like the ‘Sopranos’ of the government are coming down and looking to take the military head on,” said Paul Bollinger, director of government solutions at Boeing Energy and a former deputy assistant secretary of the Army for energy and partnerships.

Speaking at a conference last month, Bollinger said DoD and BLM teamed up 25 years ago on a geothermal project at the Naval Air Weapons Station at China Lake in the Mojave Desert — which he described as a “little shakedown” by BLM. Since 1987, China Lake and BLM have run geothermal wells producing 270 megawatts of energy annually — enough to power 180,000 homes.

Ray Brady, manager of BLM’s national renewable energy coordination office, said the fundamental question BLM is asking about the lands being used for such deals is this: “If it’s not specifically needed for DoD mission purposes, shouldn’t it really be revoked and returned to BLM for broader use?” He said the agency would be willing to team up on projects, with DoD or BLM sharing the lead on a project and dividing the proceeds.

“Clearly, DoD does have an interest for the electricity that would be generated to meet their on-base need. We would like to be able to facilitate a process for that,” Brady said.

There is much at stake as the two agencies try to sort out such questions. One January report by the Pentagon points out that it could generate up to 7 gigawatts of solar power and $100 million in revenue at just 10 Air Force and Army installations in the Mojave and Colorado deserts. But BLM owns 90 percent of the land at these installations, according to the report.

DoD is under pressure to develop the lands to meet the mandates of the 2005 Energy Policy Act, which requires agencies to use renewable energy for at least 7.5 percent of their facility energy needs by fiscal 2013.

The Air Force has said 1 gigawatt of its energy will come from renewable sources by fiscal 2016. The Navy said it will reach the same goal by fiscal 2020, and the Army, by fiscal 2025.

The Air Force Real Property Agency is pushing to award enhanced use leases for $5 billion in total land and project value over the next four years. About half of that would be devoted to renewable energy projects.

The Army aims to turn more than 13,000 acres at Fort Irwin, also in the southern California desert, into a 500-megawatt solar field that will power the entire installation. Clark Energy group will front $2 billion in exchange for being able to sell the excess energy it generates. BLM owns virtually all of the more than 754,000 acres at the installation, which means the Army will need to get BLM approval.

Tom Hicks, deputy assistant secretary of the Navy for energy, said at a conference in May that much of the lands that BLM owns on military bases are buffer zones in between testing ranges or at the borders of military installations.

“A buffer zone is not really useful for much of anything other than things like renewable energy generation,” Hicks said.

He said Congress should step in and provide legislative relief by setting clear guidelines on how the land could be used.

“We need to see if we can come to some near-term resolution on this issue so we can build more renewable power on our land,” Hicks said.

Meanwhile, BLM and the Pentagon have formed a new working group that is trying to sort out how such deals will work and what will happen to any revenues generated on those lands.

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