Defense Dept. report says Army did things right with solar project leasing

The Office of Inspector General at the U.S. Department of Defense issued a Sept. 28 report finding that the Department of the Army has properly awarded and obtained fair market value for leases supporting energy production projects.

Said the report: “We conducted this audit in response to an allegation reported to the Defense Hotline. The allegation stated that the Army and Navy leased land to utility companies to produce solar energy without using competitive procedures to select the lessee, and that the Army and Navy are not receiving fair market value for the land. This is the first in a series of audits related to leases supporting energy production projects and focuses only on the Army. We plan to review the Department of the Navy during the second audit in this series.”

As of March 2016, the Army had awarded three leases supporting energy production projects. The Inspector General selected two of the three for review—one at Fort Hood, Texas, and one at Fort Detrick, Maryland. The third project, at Fort Drum, New York, included a lease for less than an acre of land, so it was not reviewed.

U.S. law allows the Secretaries of the Military Departments to enter into a contract for up to 30 years for energy production facilities on DoD real property. These power purchase agreements require a real‑estate transaction, such as a lease. In addition, U.S. law allows the Secretaries of the Military Departments to lease non‑excess property. The same statute also requires that the Secretaries of the Military Departments use competitive procedures to select the lessees and that the lessees pay in cash or in-kind not less than the fair market value of the leased property.

Said the report: “We determined that Defense Logistics Agency Energy contracting officials awarded the two power purchase agreements at Fort Hood and Fort Detrick, using full and open competition, in accordance with Federal and DoD guidance. Specifically, the contracting officials properly issued requests for proposals, developed source selection plans, and evaluated proposals in accordance with the Federal Acquisition Regulation and DoD Source Selection Procedures.  

“In addition, the Army obtained fair market value for the two leases supporting the Fort Hood and Fort Detrick power purchase agreements. Specifically, U.S. Army Corps of Engineers personnel appraised the leased land at Fort Hood and oversaw the appraisal at Fort Detrick to determine the fair market value of the land. Furthermore, U.S. Army Corps of Engineers personnel ensured that the Army would receive lease payments in the form of in‑kind consideration or cash greater than or equal to the fair market value of the leased land.”

The reviewed projects are:

  • Fort Hood PPA – On Jan. 15, 2016, a DLA Energy contracting officer awarded a 30-year firm‑fixed-price PPA valued at $377.5 million to Apex Clean Energy Holdings for production, purchase, and delivery of electricity services generated from on-site solar energy and off-site wind energy at Fort Hood. Army Corps personnel executed a lease with Apex for 129.9 acres used to generate the on-site solar energy. According to the PPA, Apex is required to comply with the terms of the lease, which require a first year rent payment of $51,944. The rent increases 1.9% annually each remaining year of the PPA and lease.
  • Fort Detrick PPA – On March 13, 2015, a DLA Energy contracting officer awarded a 26-year, firm‑fixed‑price PPA valued at $61.8 million to Ameresco Inc. for production, purchase, and delivery of electricity services generated from an on-site solar renewable energy production facility at Fort Detrick. Corps personnel executed a lease with Ameresco for 66.2 acres used to generate the on-site solar energy. According to the PPA, Ameresco is required to comply with the terms of the lease, which require an annual rent payment of $427,700.

Notable is that Ameresco Inc. (NYSE: AMRC) on June 17 joined U.S. Army leadership and federal, state, and local officials for a ribbon cutting celebration to mark the completion of the 18.6-MW (dc) (15-MW ac) solar facility located at Fort Detrick in Frederick, Maryland. The solar project, now operational, is comprised of 59,994 solar panels installed across about 67 acres of land throughout Area B at Fort Detrick. The facility is one of the single-largest in the mid-Atlantic region as well as in Maryland. The project is designed to serve about 12% of Fort Detrick’s annual electric load requirements.

Also, Phoenix Solar Inc., a subsidiary of Phoenix Solar AG, said July 26 that it has been awarded its first project that will provide energy to the U.S. military and the company’s first project in the state of Texas. Phoenix Solar’s scope of services will include the design, procurement and construction of the solar facility of a hybrid project for Apex Clean EnergyApex is overseeing construction of the hybrid wind/solar project, which is designed to optimize solar energy produced on-site at US Army Garrison Fort Hood in Killeen, Texas. The project will incorporate low-cost wind energy produced at the Cotton Plains Wind facility in Floyd County, Texas.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.