Earlier this year, the state of Montana passed legislation that would require owners of wind generation facilities in the state to submit a surety bond to the Department of Environmental Quality (DEQ).
According to the new legislation, in order for the Department to determine the exact amount of the bond, owners would also need to submit a decommissioning plan for their facilities. Apart from the specifics of the surety bond requirement, the bill further details which owners are exempt from its requirements, as well as the consequences for non-compliance.
Read on for an overview of the regulation!
Bonding Requirements for Owners of Wind Generation Facilities in Montana
Montana House Bill 216 was passed and became effective in the beginning of May 2017. It sets forth a number of new requirements for owners of wind generation facilities, among which is the requirement to obtain a surety bond to guarantee for the eventual decommissioning of each facility.
The exact amount of the surety bond is determined by the Department of Environmental Quality. To determine the amount, the Department needs to obtain a detailed decommissioning plan from owners of wind generation facilities by July 1, 2018.
This plan needs to include information concerning the scope of work that needs to be completed during the decommissioning, as well as the cost estimates for that work. When submitting the plan, owners must also inform the Department of the date that the facility began commercial operations.
After the DEQ receives the plan it will determine the amount of the bond required based on:
● the character and nature of the site of the facility
● the market salvage value of the facility, which will be determined by an independent evaluator
Moreover, if necessary, the Department may even modify a decommissioning plan in order to determine the bond amount.
The bill also allows for owners of facilities to reach alternative agreements with property owners to either restore or reclaim facilities or lands. In this case, owners need to provide the Department with a copy of this agreement, and their decommissioning plan does not need to include plans for removal or reclamation, depending on the agreement.
Finally, once every 5 years, owners of facilities may request a reduction from the Department in the amount of the bond they are required to maintain. When applying for a reduction, owners must provide details of any material changes to the information they provided to the Department when it determined the bond amount.
Exemptions From the Bond Requirement and Penalties for Non-Compliance
Owners of facilities do not need to post a surety bond to the DEQ if:
● They are owners of facilities that are repurposed, as determined by the Department in consultation with them
● They have posted a surety bond with one of the following: a federal agency, the Department of Natural Resources and Conservation, a tribal, county or local government
● The owner of the land on which the facility is located has a 10% share or more of the facility, as determined by the Department
● The facility has commenced operation on or before January 1, 2018, and has less than 25 megawatts in nameplate capacity
In all of the above cases, owners of wind generation facilities in Montana are exempted from posting a bond to the Department, though they must still provide a decommissioning plan or an agreement to restore or reclaim the facility.
Those owners who are required to post a surety bond but fail to do so within the deadline set by the Department will face penalties, according to House Bill 216. Section 9 specifies that a penalty of not more than $1,500 may be assessed by the Department for failing to submit a bond, along with an additional penalty of not more than $1,500 for every day during which the owner fails to submit the required bond. Owners are given 20 days from receiving notice of the penalty to appeal the assessment.
Why Wind Generation Facility Owners Need a Surety Bond
Surety bonds are financial guarantee agreements that provide protection to the state and the public against violations of state rules and regulations. In the case of wind generation facilities in Montana, owners are required to post a bond to guarantee that they will decommission the facility as required by law.
If an owner abandons their facility and fails to decommission it, a claim can be made against the bond by the state. The surety that backs the bond may then extend compensation up to the full amount of the bond to be used for decommissioning. In return, the bonded facility owner needs to repay the surety for its compensation.
In this way, bonds guarantee for the compliance of the bonded businesses or, alternatively, that parties that are harmed as a result of violations will receive compensation.
What are your thoughts on the new requirements? What do you think their effect on the functioning and decommissioning of wind generation facilities will be? Let us know in the comments!
Todd Bryant is the president and founder of Bryant Surety Bonds.