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Renewable Energy Projects – Getting Past Go

Renewable energy projects including utility-scale wind and solar energy developments are becoming more and more prevalent in Michigan. In response to the coronavirus pandemic, Congress passed the Taxpayer Certainty and Disaster Tax Relief Act of 2020 in late December. This Act contains several provisions that will continue the development of renewable energy projects in Michigan.

The Act extends large federal tax credits to wind and solar projects that begin construction within the next few years. Wind energy projects that begin construction this year may be eligible for a Production Tax Credit based on the amount of power generated for the next ten years. Because of these tax incentives, many townships may experience proposed renewable energy developments within their boundaries. This E-Letter builds off of prior E-Letters that discuss how communities can craft solar and wind ordinances and expressly discusses: (1) how a township can choose consultants to address an application for a proposed wind or solar development; (2) how to process complex applications for such developments and conflicts of interest related to such projects; and (3) how to sustainably enforce long-term ordinance provisions to safeguard township residents from potential nuisances unique to renewable energy projects. For those interested in our prior E-Letters addressing the preparation and drafting of solar and wind ordinances see our May 2015 (Wind Energy Ordinances) and September 2017 (Solar Ordinances).

Building Your Team for Review of Proposed Developments

Utility-scale renewable energy projects are complex. There are several layers of regulatory approvals from federal, state, and local governments and agencies. For townships, many of these developments will be subject to township zoning ordinances, which will impose special land use and site plan review processes. Unlike traditional projects, a renewable energy project may encompass large tracts of land spread throughout the township and include various land improvements such as wind turbines, substations, solar arrays, and temporary laydown yards.

Many townships do not have full-time employees to help process complex applications for utility-scale renewable energy projects. This is especially true for many townships with open or agricultural land suitable for wind parks or solar arrays.  It is crucial for townships to ensure that they have expert advice to consider these projects from planners, engineers, and township attorneys experienced with these types of projects. Among other reasons, these projects are often technical, requiring the review of numerous studies and documents. It is also important for a township to have expert advice to assist with these projects as they may be controversial in certain communities. Thus, a township should make sure that any decision to approve or deny a renewable energy project is supported by Michigan law to reduce litigation risk.

Step 1: Check the Escrow Provision in your Zoning Ordinance

Perhaps the most important step in hiring consultants to process a zoning application for a renewable energy development is to make sure that a township zoning ordinance or valid fee schedule has an escrow provision. An escrow provision is language that allows a township to receive funds from an applicant to use towards independent expert review of a particular zoning application.

A township typically needs to report the use of escrow funds to an applicant on a periodic basis and can request replenishment of the escrow account if exhausted. A township using escrow funds has no obligation to approve a developer’s proposed project. The legal authority allowing townships to require escrow accounts is the Michigan Zoning Enabling Act’s provision allowing a township to charge reasonable fees to defray the costs of reviewing a zoning application along with some action from a township (e.g., an ordinance provision) authorizing escrow accounts. See MCL 125.3406(1) and Forner v Allendale Charter Township Supervisor, unpublished opinion per curiam of the Court of Appeals, issued March 21, 2019 (Docket No.339072).

Because of the technical nature of energy developments, most townships will require a planner and/or engineer with experience reviewing large projects. Legal counsel is also necessary to assist with drafting zoning decisions and assisting a body such as a planning commission with applying a particular project to a zoning ordinance or other legal standards. Thus, to ensure that a township is appropriately considering a complex renewable energy project, it should utilize the escrow deposit process to obtain experts.

Step 2: Request for Proposal (RFP)

Assuming a township can request an escrow deposit, a township should pick experts qualified to help process zoning applications. While a township may utilize outside legal counsel, planners, or engineers for other projects, a township should consider retaining specialized consultants who have experience with particular renewable energy projects.

Townships can find experts to aid with reviewing renewable energy project zoning requests by issuing a Request for Proposal (“RFP”). An RFP is a document that requests specific services from an outside consultant based on a certain set of criteria. A good RFP should give some background information about the township, the nature of the project proposed, and request credentials and information from potential candidates/firms. A township can advertise any RFP it drafts by posting it on its website or sending it to a variety of firms throughout the state.

A township can create an internal scoring rubric to rank applicants based on how well their qualifications meet the scope of an RFP. Moreover, a township can also require firms who submit proposals in response to an RFP to make a presentation in front of the township to further assess their qualifications and to ask questions. A typical RFP scoring rubric may evaluate applicants based on criteria like experience, expertise, technology, reputation, references, and cost. Using a competitive bidding process based on price alone is not likely to give your township the information needed to choose the best qualified experts. Below is some information a township may want to request from firms when putting together an RFP:

      1. Experience with similar projects.
      2. References from other township officials.
      3. Number of qualified professionals at the company.
      4. Who will be the professionals that will assist the township.
      5. Any potential conflicts of interest.
      6. Knowledge of township government.

Processing an Application for a Renewable Energy Project:

Conflict of Interest Procedures

Renewable energy projects are unique land uses as they often impact many parcels and property owners within a township. Because these projects (e.g., a proposed wind energy development) can encompass large areas of land, they may cause township officials to have conflicts of interest with the project due to financial arrangements between a developer and a township official’s property or a family member of a township official and their property. Once a township begins considering a zoning application for a renewable energy project, it should have written procedures to address conflicts of interest.

Conflicts of Interest – Legal Standard

Conflict of interest procedures are especially important in the renewable energy context as renewable energy projects often involve large land areas. In some cases, renewable energy developers may also sign “non-participation leases” with landowners who will not host renewable energy improvements (e.g., a wind turbine), but will receive money in exchange for memorializing that they will accept impacts from renewable energy projects such as potential sound and light pollution. This can cause a significant number of township residents to have a financial interest in a particular project; thus, making conflicts of interest prevalent for those participating in review of the project.

Planning commissions and zoning boards of appeals will process most zoning requests for a renewable energy project in a township. Township boards may also be involved for approving items such as decommissioning bonds. All township officials are subject to the Standards of Conduct for Public Officers and Employees Act, Act 196 of 1973, MCL 15.341 et seq. (“Standards of Conduct Act). The Standards of Conduct Act generally prohibits township officials from voting or deliberating on actions when: (1) an official or official’s family member has a business relationship or works for a zoning applicant; or (2) an official or an official’s family member will financially benefit from a decision made by the official on a particular project. See generally, MCL 15.342.

The Michigan Zoning Enabling Act and Planning Enabling Act prohibit members of a planning commission or a zoning board of appeals from considering or voting on a matter when they have a “conflict of interest.” See MCL 125.3601(9) and MCL 125.3815(9). Both statutes do not define “conflicts of interest,” however, courts have referred to secondary sources such as judicial ethics guidelines to determine if a conflict of interest existed. See Schweihofer v Zachary, 103 Mich App 792, 798; 303 NW2d 896 (1981).

Although both statutes do not define “conflict of interest,” they allow planning commissions and zoning boards of appeals to establish bylaws, which can codify what conduct constitutes a conflict of interest. See MCL 125.3601(2) and MCL 125.3819(1). Likewise, a township board can also pass bylaws to govern conflicts of interest procedures.

In some cases, many members of township boards or commissions will have conflicts of interest related to a particular project such as a proposed wind energy project that involves a significant number of parcels within a township. In these cases, a legal doctrine called the “rule of necessity” exists that allows conflicted members to vote on a project if the conflicted members will cause a body to not have a quorum and if all conflicted members disclose their conflicts on the record during a public meeting. Champion’s Auto Ferry, Inc v Michigan Public Service Commission, 231 Mich App 699, 710; 588 NW2d 153 (1998). The rule of necessity process is codified in the Standards of Conduct Act (See MCL 15.342a(3)) because it would be an absurd result for a public body to simply not be able to consider a particular project whatsoever due to conflicts. The applicability of this legal doctrine to township boards and commissions has not been squarely addressed by the courts in all instances, but a township, with its legal counsel, can consider its applicability in any given situation.

The Two-Step Zoning Application Approach

Because of the extensive review involved with large renewable energy projects, townships can consider how they process associated zoning applications, such as reviewing the special land use and site plan simultaneously or reviewing them in two distinct phases. Although for many land uses it may be appropriate to consider a special land use permit and site plan at the same time (or even a site plan before a special land use permit), renewable energy projects often include numerous improvements making site plan review tedious and time-consuming.

Further, public hearings associated with the special land use process for renewable energy projects are often attended by many stakeholders as many properties will be within 300 feet of a proposed project (e.g., a wind park that spans most of a township). See MCL 125.3103 (requires mailing notice of public hearing to those 300 feet from a project).

Townships reviewing renewable energy developments under a zoning ordinance will likely consider the extent to which the development should be provided special land use approval. Special land use approval is all about the special land use discretionary standards such as whether a proposed development is harmonious with other uses and whether it fits with the master plan for a township.

The special land use permit review is a big picture look at the project. A township can review specific improvement locations during its site plan review. Separating these processes can assist in focusing on the public meetings held for reviewing the special land use permit.

If a planning commission finds that a renewable energy project is appropriate during the “big picture” special land use review, the site plan review will deal with the fine details of the project. During site plan review, a township can have its experts begin to review the specific impacts on every development site (e.g., every turbine). The review in this phase will cover, site by site, those requirements provided in the zoning ordinance relating to the specific parcels impacted and ensure that all operations will comply with the zoning ordinance. Unlike consideration of a special land use permit, the Michigan Zoning Enabling Act does not require a public hearing (and mailing notices to property owners) for the site plan review phase.

How to Ensure Compliance with Ordinance and Zoning Requirements

Sometimes when a township approves a renewable energy project, they may remain concerned about verifying that the renewable energy project, as constructed and operated, will comply with applicable ordinance or zoning approval standards. For example, townships may not have the necessary equipment or data to determine if a wind energy development is meeting shadow flicker requirements or sound requirements. Similarly, a township may not know how they can enforce glare requirements for a solar development. Below are several ways that allow townships to enforce technical performance standards unique to renewable energy developments. Some or all of these may be relevant for any development.

Formal Conflict Resolution Process with Applicant

Developers often have the tools necessary and sophisticated reporting mechanisms to measure ordinance standards and whether their renewable energy projects are meeting such standards. There are incentives for regulated utilities to meet ordinance requirements due to their heavily regulated nature and the overall financial investment to construct such a large development. Moreover, developers also have an incentive to not fail to meet ordinance standards as most zoning ordinances allow townships to issue stop work orders or revoke special land use permits in response to non-compliance.

To utilize a developer or utility companies’ expertise and equipment to ensure compliance with ordinance requirements, a township may consider making a formal complaint resolution process a requirement for zoning approval related to a renewable energy project. For example, a township could work with a developer to make a publicly available form for residents to submit complaints regarding ordinance standards (e.g., wind turbine noise, solar array glare, etc.) and allow a developer to resolve such complaints.

A township may find it appropriate to be involved in the complaint resolution process or, at a minimum, have the developers and operators of the development report complaints and resolutions to a township body. Furthermore, a key component of a complaint resolution process is deadlines to ensure such complaints are handled timely. Complaint resolution processes are a good way to enforce ordinance requirements while also building a sense of community through developing relationships between township residents and the developer or operator.

Continuing Escrow Fund

As discussed above, escrow funds are a good way for townships to require funds from renewable energy project developers to hire experts to review complex zoning applications. They are also a good idea to help set aside money as a “continuing escrow” to hire experts in the event there are concerns a developer is not adhering to ordinance requirements.

Depending on a township’s ordinance, a township could require as part of approval that a developer sets aside a certain amount of money so the township could draw funds in the event there are unresolved complaints or violations of ordinance requirements. For example, if a wind turbine noise complaint is not adequately resolved by a developer using a complaint resolution process, a township could use continuing escrow funds to hire a sound engineer to determine if the turbine is adhering to applicable sound standards. If such investigation proves a violation, a Township could use the expert evidence to require a developer to fix a violation or as a basis to use legal remedies to have a court order compliance with applicable standards.

Post-Construction Studies

An additional method a township can use to ensure compliance with renewable energy performance standards is requiring reports and studies at the end of construction of a project and once operating as a condition of zoning approval. As discussed above, a township may not be able to know upon construction whether a wind development is meeting sound standards or whether a solar development is meeting glare standards. One way to help memorialize compliance at least initially is to require an independent firm to analyze a renewable energy project once constructed to determine if it is meeting ordinance requirements. A township can require funding of such post-construction studies from developers.

A post-construction study will show whether a project met ordinance and other requirements at a particular point in time. Accordingly, depending on the standard (e.g., wind turbine noise), a township could also consider whether to require independent reports every number of years. Requiring multiple reports during the life of the project can ensure that a project meets applicable requirements throughout its useful life.

Above are a few of the multiple ways that a township can make sure a renewable energy project is complying with ordinance requirements during its operation. As noted, these requirements can be complex to measure. Accordingly, it is important to leverage any assistance from a developer and to find ways to involve experts to review compliance. A township can use multiple strategies (including those above) to ensure a developer meets important ordinance standards and applicable conditions.

Conclusion

We hope you found this E-Letter helpful for how a township can review and approve renewable energy projects. With the continuously increasing incentives to build utility-scale renewable energy projects, townships should be aware of how to draft ordinances to sufficiently address these developments for their community and how to process a zoning application for such a development. Our firm has experience representing townships throughout the state that have considered renewable energy projects and do not hesitate to contact us if your township needs help or guidance.

– Kyle O’Meara and Anthony Warren

 

Upcoming Webinars

Renewable Energy Projects – Getting Past Go | Wednesday, March 24th, 12 – 1 p.m.

Renewable energy projects such as wind and solar developments are often some of the most complex and controversial land uses. Recent tax legislation from the federal government has further incentivized these types of developments. Come join attorneys Kyle O’Meara and Anthony Warren for a free webinar to address how communities can process zoning requests with expert assistance, identify conflicts of interests, and enforce ordinance regulations governing renewable energy projects.

Click here to REGISTER!

This publication is intended for educational purposes only. This communication highlights specific areas of law and is not legal advice. The reader should consult an attorney to determine how the information applies to any specific situation.

Copyright © 2021 Fahey Schultz Burzych Rhodes PLC

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