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Department of Defense - Enhanced Use Lease (3-FD-o)

Information current as of 2019

A developer may apply to the United States Department of Defense (DOD) for an enhanced use lease (EUL) of land that is not "excess property" so long as the use will promote national defense or is otherwise deemed in the public interest. 10 U.S.C. § 2667. “Excess property” means property under the control of a federal agency that the head of the agency determines is not required to meet the agency’s needs or responsibilities. 40 U.S.C. § 102 (3).

To secure an EUL, developers must pay fair market value for the lease interest, but consideration may either be in cash or many discretionary forms of “in-kind. “In-kind” consideration includes the construction of facilities and/or improvements on the leased land, maintenance of constructed or existing facilities, and the provision or payment of utility services Title 10 U.S.C. § 2667 (c).

While the EUL process is administered internally by each military branch, the overall process is relatively similar.

Department of Defense - Enhanced Use Lease Process

3-FD-o.1 - Consult Integrated Natural Resources Management Plan (INRMP)

The 16 U.S.C. §§ 670a(a)-(f), authorizes the Secretary of Defense to carry out a program to provide for the conservation and rehabilitation of natural resources on military installations. The Act makes the Secretary of each military department responsible for determining whether an Integrated Natural Resources Management Plan (INRMP) is appropriate for each installation. The Secretary prepares the INRMP in cooperation with the Secretary of the Interior, acting through the Director of the Fish and Wildlife Service and the head of each appropriate state fish and wildlife agency. The INRMP is prepared and implemented to reflect the mutual agreement of the parties concerning conservation, protection, and management of fish and wildlife resources ensuring, to the extent feasible, that sufficient number of professionally trained natural resources management personnel and natural resources law enforcement personnel are available and assigned responsibility to carry out all of Title 16. The Sikes Act requires the DOD to develop and implement INRMPs for military installations across the United States. This includes leasehold interests for renewable energy projects. If a proposed project would not be compatible with the INRMP in place, development will be prohibited unless the military revises the INRMP so as to allow development of the proposed project. Revisions to INRMPs require the DOD to complete the NEPA process.

3-FD-o.2 - Does the Military Branch Solicit Proposals for an EUL?

In most cases, the EUL process will begin when a military branch first solicits proposals by publishing a solicitation or pre-solicitation notice on the Federal Business Opportunities Website. Each military branch has discretion in choosing whether to review unsolicited EUL proposals. Given the size, complexity and unique nature of EULs, developers risk wasting time and money preparing a thorough EUL proposal absent any indication that the applicable military branch is interested in the particular use at the particular installation. Increasingly, each military branch conducts an internal identification process, followed by market feasibility studies, in order to determine what available “non-excess” property is best suited for energy EULs.

3-FD-o.3 - Notice of Solicitation, Availability of Site Visit, Draft Request for Qualification (RFQ)

As indicated above, the military branch will post a Notice of Solicitation for EUL proposals on the Federal Business Opportunities Website. Where applicable, the notice will indicate the availability of a site visit (normally 10 workdays after the notice date) and/or “industry forum.” In some cases, the initial solicitation will include a draft version of the Request for Qualification (RFQ), providing further detail of the EUL opportunity.

3-FD-o.4 - Conduct Site Visit; comment on draft RFQ

On the date and time specified in the notice of solicitation the military branch will host potentially interested stakeholders to meet with DOD personnel for a site visit and/or industry forum. An essential part of the site visit / industry forum involves discussing the land in question and types of use(s) the military branch is interested in leasing it for. In addition, the site visit / industry forum allows potentially interested stakeholders to comment on the draft RFQ in order to clarify any confusion or ambiguity leading into the preparation of a final RFQ.

3-FD-o.5 - Final RFQ

After facilitating a site visit and/or industry forum, the military branch will prepare and post a final RFQ, on the Federal Business Opportunities Website. Final RFQs are extensive and detailed documents that set forth the specific criteria used in evaluating eventual proposals. The NRC Solomons RFQ is one example of a recent final RFQ, issued by the Navy.

3-FD-o.6 - Response to Final RFQ (Final Proposal)

Developers must submit their response to a final RFQ by the deadline specified in either the notice of solicitation or within the RFQ itself. The response serves as a final proposal, which the military branch evaluates relative to all proposals received, based on the stated criteria (as well as any additional statutory criteria). For more information, consult the [Air Force EUL Playbook].

Note: EULs allow for single proposals submitted by multiple entities as a joint-venture. Given the size and complexity of energy projects, joint-ventures are common.

3-FD-o.7 - Submit Unsolicited Proposal

While all three military branches have discretion in deciding whether to evaluate unsolicited EUL proposals, developers should be aware of the high risk of sunken costs incurred by pursuing an unsolicited proposal. The military branches spend significant time and resources evaluating potential areas on installations that are suitable for EULs. As a practical matter, it is highly unlikely that the military branches will even consider evaluating unsolicited proposals, let alone accept them. Developers are strongly encouraged to respond to solicitations as opposed to expending resources developing unsolicited proposals that are disfavored in almost all cases.

In addition, the military branch may choose to meet with the party responsible for the unsolicited submission, to discuss the possibility of an EUL. Although unsolicited, developers should still adhere to any formatting requirements expressed in other RFQs for the applicable military branch. For example, the NRC Solomons RFQ specifies required sections and page limits for each required section. At a minimum, developers should consult with the applicable military branch in order to determine the necessary documents and submission format for an unsolicited RFQ. For more information, consult the Air Force Guide to Unsolicited Proposals.

3-FD-o.8 - Does the DOD Accept the Proposal?

Whether the proposal was solicited or unsolicited, the process ends if the military branch does not accept the proposal. If the proposal was unsolicited, acceptance means that the proposal is in line with departmental and statutory criteria and that the military branch is interested in pursuing a project closely related to the proposal. However, even in the extremely rare case where an unsolicited proposal is accepted, the military branch must still solicit additional proposals in line with the competitive bidding process. Where not accepted, the military branch will notify the developer and the process ends. If the proposal was solicited, acceptance means that the proposal garnered the highest score among all other proposals. The military branch will notify the parties responsible for submitting proposals that were not accepted. In either case, an accepted proposal does not mean the military will enter into an EUL with the developer. The acceptance merely acts to give the developer a right to exclusively negotiate the specific terms and conditions of a potential EUL.

3-FD-o.9 to 3-FD-o.10 - Negotiate Terms of EUL

At this point, the required documents going forward differ depending on the military branch. Generally, the DOD works with the developer to create a viable business and leasing plan, otherwise known as a development or management plan. In particular, the planning documents will specify the:

  • Project/construction schedule;
  • Roles and responsibilities of each party going forward;
  • Amount and type of consideration to be paid; and
  • Sources of capital, including debt and equity, for the project.

For reference, consult the Air Force Generic Development Agreement. Concurrently with the business planning documents, the military branch must ensure that the project complies with the National Environmental Policy Act (NEPA). For a complete description of the DOD’s NEPA Process, see Department of Defense NEPA Process:

3-FD-o.11 - Enhanced Use Lease

After the terms and conditions of the lease are fully negotiated and agreed upon in the business planning documents, the military branch and developer will enter into the EUL. The Air Force Generic Site Development Lease is provided for reference. As part of lease execution, the military branch will post notice of the lease on the Federal Business Opportunities website. Note that the military branch will usually retain superior power to cancel or rescind the lease in the event of non-compliance with the agreed-upon terms.

3-FD-o.12 - Consideration Agreement, Proof of Insurance, Other Assurances

Even after execution, the developer may not commence activities under the lease until executing a Consideration Agreement, providing proof of insurance, and providing any other assurances required by the EUL. While consideration can always be in cash, the usual method for these types of transactions is in-kind. Developers can satisfy the consideration requirement with a negotiated Consideration Agreement that outlines the scope, schedule, and continued timeline of performance by the developer. For reference, consult the Air Force Generic In-Kind Consideration Delivery Agreement and Air Force Generic In-Kind Consideration Trust Agreement.

3-FD-o.13 - Notice to Proceed

After executing the EUL and required compliance documents and providing any other assurances, the military branch will issue a Notice to Proceed. Upon receipt of the Notice to Proceed, the developer may commence construction activities in strict conformance with the terms and conditions of the EUL.

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