Decommission Performance Surety Bonds

A decommission performance surety bond can be requested by land owners, municipalities, states, and the U.S. Government when developers of a wind or solar energy system is granted rights to operate on private or public land.

Solar and wind energy systems are common structures around the country, and create clean, alternative energy. But when the project is completed, or if the project is abandoned, it can cost millions of dollars to return the land back to its natural state.

Activities that may be necessary in decommissioning include removing foundations, underground electrical wires, structures, access roads, and hazardous materials from the site, plus returning the land to its original condition and restoring vegetation.

If the project was built on private property, the expense of decommissioning could fall on the landowner. Projects built on government land or public land could place the cost burden of decommissioning on the taxpayers.

Decommissioning is usually at the local level, but some states and the U.S. Government also have the authority to enact decommissioning rules. Land owners, municipalities, states, and the Federal Government may require a decommission surety bond, or performance and reclamation bond, to be posted before a project begins.

Decommission Surety Bond Amounts:

A surety bond is a financial guarantee that ensures proper removal of the equipment and restoration of the environment to its pre-exsisting state. A decommission bond relieves the burden from the land owners and taxpayers and puts the responsibility of proper decommission on the project owner.

The required amount for a surety bond is determined by several factors that include environmental liabilities, decommissioning costs, and reclamation costs.

A Reclamation Cost Estimate is an estimate of expenses that it will take to return the land to its original state, which includes removing improvements made under the right-of-way, returning the land to its original contour, and establishing sustainable vegetation. Limiting the amount of vegetation removal in the project planning phase can help reduce the bond amount.

Once a project is completed and the restoration is satisfactory, the bond may be released.

Besides a surety bond, other acceptable security instruments may include cash, cashier's or certified check, certificate or book entry deposits, negotiable US Treasury securities, irrevocable letters of credit, and policy of insurance.

How Much Will This Bond Cost?

The premium that you pay for a Decommission Performance Surety Bond will vary on the factors mentioned above, plus business and personal financial statements.

Did You Know?

The Bureau of Land Management supports the use of public lands to help supplement the nation's energy needs, and requires a decommissioning surety bond when projects are granted a right-of-way on, over, under or through public land.

Related Links:

US Department of the Interior Bond Form
Example of Montana Decommissioning Bonding Rules
Why is a Landfill Bond Needed?