House Bill 3809 Adds Obligations to Battery Energy Storage Lessees in Texas
On May 29, 2025, House Bill No. 3809 was signed into law by Texas Governor Greg Abbott. Born out of a crop of bills regulating renewable energy, including S.B. 388, S.B. 715, and S.B. 819, H.B. 3809 is the only one to be signed into law this session. It takes effect September 1, 2025 and places additional requirements on certain battery energy storage operators entering into a lease on or after that date. [H.B. 3809, Sections 2 and 3]. Specifically, the bill mandates decommissioning requirements in battery energy storage (BESS) facilities, other than those owned by an electric utility [New Sections 303.001(1)(B) and (5) of the Texas Utilities Code], requires financial assurance to comply with these decommissioning obligations, and sets forth non-waivable provisions in facility leases containing those requirements. As such, H.B. 3809 effectively aligns decommissioning and financial assurance obligations for BESS projects with those already established for wind and solar energy projects.
Key Provisions of H.B. 3809
The two most notable changes H.B. 3809 makes are mandating decommissioning and financial assurance provisions in BESS leases not entered into by an electric utility. These changes, which are designed to protect landowners and the environment, add more obligations to BESS storage lessees by mandating the removal of their facilities.
1. Mandatory Decommissioning Provisions in Lease Agreements
H.B. 3809 introduces a series of amendments to the Texas Utilities Code that mandate facility-removal provisions in battery energy storage leases. The lease must provide that the lessee is responsible for safely removing the facility and storage resources, like transformers and substations. [New Section 303.004(a)(1) of the Texas Utilities Code]. In addition to the facility and storage resources, the lessee must safely remove foundations, buried cables, and overhead lines. [Id. at subsections (a)(3) and (4)]. The lease must also include provisions that make the lessee responsible for disposing of and recycling components. [Id, at Section (b)]. Further, the amendments mandate landowner-requested obligations in leases, including maintaining and removing roads, filling holes, removing rocks with a 12-inch or larger diameter, returning the land to a tillable state, and restoring the surface. [Id. at subsection (d)].
2. Financial Assurance Requirements
H.B. 3809 mandates that BESS lessees that are not an electric utility provide financial assurance to ensure they perform the newly-created facility decommissioning obligations. [New Section 303.005 of the Texas Utilities Code]. Lessees must deliver financial assurance to the landowner before the earlier of the facility lease’s termination date or the facility’s 15th-anniversary date. [Id. at subsection (e)]. Acceptable forms of financial assurance include a parent company guaranty with a minimum investment grade credit rating for the parent company issued by a major domestic credit rating agency, a letter of credit, a bond, or another form of financial assurance reasonably acceptable to the landowner. [Id. at subsection (a)]. The amount of financial assurance must be sufficient to cover the facility removal, component recycling, and surface restoration costs minus the facility salvage value less the value of any portion of the facility already pledged as collateral for existing debt. [Id. at subsection (b)]. An independent third-party Texas-licensed engineer will determine the costs and salvage value. [Id. at subsection (c)(1)]. The lessee shall provide an initial estimated cost of removal and recycling or disposal on or before the 10th anniversary of the facility’s battery operation date, and must update the estimate at least once every five years for the life of the lease. [Id. at subsections (c)(2) and (3)].
Enforcement Provisions
H.B. 3809 introduces a series of legal and procedural safeguards to enforce its new decommissioning and financial assurance requirements. The bill includes a non-waiver clause that forbids contractual waiver of its provisions. [New Section 303.002(a) of the Texas Utilities Code]. It also entitles the landowner to injunctive relief, among other remedies available to the landowner, if their lessee violates the provisions of H.B. 3809. [Id. at subsections (b) and (c)].
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Special thanks to Chance Fraser, a summer associate in Foley’s Houston office, for his contributions to this article.
