FERC announced today that it signed a Memorandum of Understanding (MOU) with California for the coordination of procedures and schedules for the review of hydrokinetic projects off the coast of California. FERC has previously signed similar MOUs with Washington, Maine, and Oregon. FERC Chairman Jon Wellinghoff stated that this agreement with California “shows FERC’s continuing commitment to work with the states to ensure American consumers can enjoy the environmental and financial benefits of clean, renewable hydrokinetic energy.”

A DOE source told Energy Washington (subscription required) that the agency plans to sign a memorandum of understanding (MOU) with the MMS in the next two months to begin developing a streamlined permitting process for hydrokinetic power projects, including those on the OCS.  DOE reports that the MOU will broadly cover offshore renewable energy and outline a framework for collaborating on environmental assessments and streamlining the permitting process.  In addition, DOE plans to organize a series of meetings with the FERC, NOAA, the Department of Defense, and other federal agencies.  Reports of the DOE/MMS MOU follow on the heels of the House Committee on Science and Technology hearing on hydrokinetic energy earlier this month.

Although developments involving energy projects on inland waterways is not the usual focus of the Offshore Energy Law Blog, it is worth mentioning that the first federally licensed hydrokinetic power project has begun commercial operations.  The 100-kW hydrokinetic turbine, manufactured by Hydro Green Energy, LLC, began commercial power generation earlier this month in the Mississippi River near Hastings, MN.  The company’s press release offers additional coverage.

Today FERC and the state of Maine announced that they have signed a Memorandum of Understanding to coordinate review processes and schedules for hydrokinetic energy projects proposed for offshore Maine.  This agreement is the first of its kind on the U.S. East Coast and is similar to previous agreements between FERC and the states of Oregon and Washington.

Today's Federal Register carries an announcement that Ocean Renewable Power Company, LLC has filed a Notice of Intent to file an application for an original license for a hydrokinetic pilot project proposed for state waters offshore Eastport, Maine.  Phase one of the project will include the installation of one 1-megawatt hydrokinetic device located in Cobscook Bay.  Phase two of the project includes installing four additional 1-megawatt hydrokinetic devices in Western Passage.  The Notice of Intent and additional pre-filing materials were filed July 24, 2009, and comments on the pre-filing materials are due by September 8, 2009.

Today, FERC Chairman Jon Wellinghoff testified before the Senate Committee on Environment and Public Works (EPW) to address climate change legislation as it pertains to the energy sector.  Chairman Wellinghoff used the opportunity to express FERC's support for the development of hydrokinetic energy technologies.  As evidence, the Chairman referenced FERC's policy of allowing some hydrokinetic technologies to be tested without a license and others to receive expedited licenses under a "pilot license" process.  In addition, the Chairman pointed to FERC's Memorandum of Understanding with MMS clarifying jurisdiction over hydrokinetic projects on the OCS, as well as independent agreements on project development with Washington and Oregon states, as measures FERC has adopted to advance hydrokinetic projects.

Today, FERC and MMS issued joint Guidance to further clarify their respective roles in the application and development of hydrokinetic energy projects on the OCS. MMS has jurisdiction to issue leases to these projects and FERC has jurisdiction to issue licenses for these same projects. This Guidance is part of an ongoing effort to clarify each agency's authority and simplify the process for applicants and project developers. This process began in April when DOI and FERC issued a Memorandum of Understanding delineating each agency's responsibilities.

The Guidance follows a "frequently asked questions" (FAQs) format designed to facilitate the process of developing hydrokinetic projects on the OCS. The FAQs are divided into categories, including: general requirements and definitions; provisions for obtaining a lease and license; municipalities and competition; lease and license terms; financial assurance requirements; fee structures; hybrid project considerations; straddle projects; and contact information. Each FAQ provides step-by-step instructions explaining which agency's regulations should be followed throughout the project development process. 

On June 15, GreenWave Energy Solutions, LLC ("GreenWave") filed its proposed schedule of activities relating to its development of the San Luis Obispo Wave Park, a 100MW wave park off the California coast. FERC granted GreenWave a preliminary permit for the project in May, amending the boundaries of the project to bring the entire project within state waters, and thus allowing FERC to issue the preliminary permit under its recent MOU with the Minerals Management Service. GreenWave's proposed regulatory schedule includes: (i) the filing of its First Six Month Report on Oct. 31, 2009; (ii) the filing of a Notice of Intent and Traditional or Alternative Licensing Process Request on April 30, 2010; and (iii) the filing of its License Application on April 30, 2012. 

On June 4, 2009, FERC and the State of Washington signed a Memorandum of Understanding with regard to review of renewable energy projects in Washington State waters that employ  hydrokinetic technologies. In FERC's Press Release, the Commission explains the specific details concerning how FERC and Washington will coordinate potential license application review, environmental reviews of proposed projects, and siting plans. The Press Release can be viewed here.

A longstanding skirmish regarding jurisdiction over renewable energy development in the Outer Continental Shelf (OCS) may have been laid to rest.  Yesterday, the Federal Energy Regulatory Commission (FERC) and the Department of the Interior signed a Memorandum of Understanding (MOU) further clarifying each agency's respective jurisdictional authority over offshore renewable energy projects.  The MOU applies to wind, solar, and hydrokinetic energy projects, including wave, tidal, and ocean current initiatives.  The MOU, which is intended to facilitate the development of alternative energy on the OCS, clearly divides the agencies' authorities.
 
First, the agencies recognize that Interior's Minerals Management Service (MMS) has "exclusive jurisdiction" over the production, transportation, and transmission of energy from non-hydrokinetic renewable energy projects on the OCS, including wind power projects.  The agencies do not recognize any role for FERC in the MOU for non-hydrokinetic projects, effectively closing FERC out of regulation in this area of renewable energy development, including, apparently, the transmission of electricity from such projects. 
 
The agencies also agree in the MOU that FERC has exclusive jurisdiction to issue licenses for the construction and operation of hydrokinetic projects on the OCS, pursuant to the Federal Power Act, as well as exemptions for those projects (although the applicability of the referenced exemptions is questionable).  In a significant reversal, however, FERC will not issue preliminary permits for hydrokinetic projects located on the OCS.  Previously, FERC has stated that it would apply its process for hydroelectric licenses to hydrokinetic projects on the OCS, including the preliminary permit process, which generally allows potential developers to secure sites for projects on an initial basis without a comprehensive NEPA review.  This change necessarily will impact several project developers who already have filed applications for preliminary permits with FERC.  The agencies thus far have given no indication of how they will treat those existing preliminary applications that were filed in reliance on FERC's existing regulations and policies. 

MMS will retain a significant role in the consideration of hydrokinetic projects.  Specifically, consistent with MMS' historical authority, the MOU states that MMS has exclusive jurisdiction to issue leases, easements, and rights-of-way regarding OCS lands for hydrokinetic projects.  In addition, MMS has the authority to attach terms and conditions to these contracts, which FERC must include in any license or exemption it issues.  Moreover, FERC cannot issue a license for a hydrokinetic project unless the applicant already has obtained the appropriate lease, easement or right-of-way from MMS.  This places significant power in the hands of MMS and could negatively impact hydrokinetic project proponents who have filed with FERC for a site for which there is also a competing wind power project application pending at MMS.  
 
To this point, FERC and Interior agree in the MOU to work together to develop policies and regulations regarding OCS hydrokinetic projects including processes to address hybrid projects and projects that straddle the boundaries between state and the OCS.  This is a critically important piece that has yet to be fleshed out, as many renewable power developers believe that hybrid projects incorporating both hydrokinetic and wind power represent the most economically viable projects. 

Although the MOU adds important detail to the agencies' respective jurisdictions, significant gaps remain.  It is unclear whether this Solomon-like division of authority actually will result in a more streamlined, efficient consideration of offshore renewable energy projects.  Finally, it also remains to be seen whether members of Congress who have strongly advocated for the development of offshore renewable energy will agree with this new framework. 

Click here to read the MOU.  The agencies' joint press release is here.

In a major development for offshore renewable energy on the OCS, FERC Acting Chairman Jon Wellinghoff and Interior Secretary Ken Salazar today announced an agreement between their agencies to facilitate the permitting and siting of renewable energy projects on the OCS.  Salazar stated that the agreement "will help sweep aside red tape so that our country can capture the great power of wave, tidal, wind and solar power off our coasts," while Wellinghoff confirmed that the agreement "will help get renewable energy projects off the drawing board and onto the [OCS]."  While this agreement appears to settle the jurisdictional dispute, the details have yet to be worked out. 

The brief joint statement reaffirms Interior's and MMS's broad "responsibility for the permitting and development of renewable energy resources on the [OCS] .... [i]n particular, [its] permitting and development authority over wind power projects that use offshore resources beyond state waters."  It also expressly states that "FERC will have the primary responsibility to manage the licensing of such projects in offshore waters pursuant to the Federal Power Act, using procedures developed for hydropower licenses, and with the active involvement of relevant federal land and resource agencies, including the Department of the Interior."  Wellinghoff and Salazar state that they have requested their agencies' staffs prepare a short memorandum of understanding setting forth the principles outlined in the joint statement and "which describes the process by which permits and licenses related to renewable energy resources in offshore waters will be developed."

In addition, testifying this morning before the U.S. Senate Committee on Energy and Natural Resources and commenting on the new agreement with FERC, Salazar indicated that he expects the MMS will be able to move forward in the next couple months to finalize the rules for offshore wind power development on the OCS. 

This appears to be a win-win for both agencies.  MMS maintains authority over offshore wind power projects and likely will have a cooperating agency role in hydrokinetic projects.  FERC will have permitting and licensing authority over offshore hydrokinetic projects.  Although there are no details at this point, this appears to resemble the regulatory structure applicable to LNG deepwater ports, in which the U.S. Maritime Administration has lead agency authority over the siting and licensing of the projects, and in which MMS is a cooperating agency granting the appropriate leases and rights-of-way. 

While this agreement undoubtedly will provide some regulatory certainty for many project developers going forward, how the two agencies actually flesh out their respective authority remains uncertain.  In particular, in offshore locations where there are competing offshore wind and hydrokinetic proposals with overlapping land claims, there is no indication at this point how such claims will be resolved.

The New York Times published an article today on the ongoing jurisdictional dispute between FERC and MMS over the siting of hydrokinetic power projects on the OCS.  While the dispute centers squarely on which agency has authority to authorize projects in federal waters that generate electric power from ocean tides, waves and currents, offshore wind power appears to be caught in the wake.  Offshore project developers have been waiting for months for MMS to issue a set of rules governing the development of all offshore renewable energy resources on the OCS, including wind.  Without the rules, it is difficult for any project developer to proceed with certainty.  As a result, wind power projects on the OCS, which FERC is not claiming jurisdiction over, also have stalled.

While Both Interior Secretary Ken Salazar and FERC Acting Chairman Jon Wellinghoff (reportedly soon to be named Chairman) have expressed confidence that the dispute will be resolved, Secretary Salazar has characterized the dispute as a significant threat to renewable offshore development, while Chairman Wellinghoff has downplayed its importance by comparison.  According to the New York Times article, Interior and FERC are reported to be close to a memorandum of understanding resolving the dispute.  Given the Obama Administration's push to aggressively develop domestic renewable energy resources and the growing chorus of complaints about the delay from the offshore renewable energy industry, it seems likely that both agencies are getting significant pressure to resolve this turf war.

On October 16, the Federal Energy Regulatory Commission (FERC) announced its position that it has jurisdiction over the licensing of hydroelectric projects, including wave, tidal and other forms of ocean energy, located on the Outer Continental Shelf (OCS). FERC’s jurisdictional claim directly conflicts with the position taken by the U.S. Department of the Interior, Minerals Management Service (MMS), which currently is developing regulations for its Alternative Energy and Alternate Use (AEAU) program. The AEAU program involves the leasing of OCS lands for the development of hydroelectric, wind, solar and other alternative energy projects. FERC’s announcement does not assert jurisdiction over OCS wind or solar projects.

MMS’s Claim to OCS Jurisdiction

MMS derives its authority over hydroelectric projects on the OCS from Section 388 of the Energy Policy Act of 2005 (EPAct), which directs the Secretary of the Interior to grant leases, easements or rights-of-way for activities on the OCS that are related to production, transportation or transmission of energy from sources other than oil and gas. MMS asserts that its authority includes OCS hydroelectric licensing activities, as set forth in its proposed rule for the AEAU program. Specifically, MMS states that FERC’s jurisdiction is limited to issuing licenses and permits for projects located within state waters, which are generally limited to three miles offshore. MMS currently is reviewing comments received on its proposed rule and has stated that it expects to issue a final rule by the end of 2008.

FERC’s Claim to OCS Jurisdiction

FERC asserts that its jurisdiction derives from the Federal Power Act (FPA). Under the FPA, FERC claims that it has jurisdiction to license hydroelectric projects located on “navigable waters” and “streams or other bodies of water over which Congress has jurisdiction.” FERC concludes that these waters include the OCS. In addition, FERC contends that the FPA grants it jurisdiction over hydroelectric projects located on “reservations,” which are any lands owned by the United States, including OCS lands.

FERC further contends that Section 388 of EPAct did not alter its existing authority to permit hydroelectric projects in federal waters, but merely established MMS’ authority, as a federal land management agency, to issue leases, easements and rights-of-way necessary for such projects.

Continued Dispute

FERC addressed the jurisdictional dispute with MMS in the context of a rehearing order on two preliminary permits issued to Pacific Gas & Electric Co. to study the feasibility of developing wave energy projects on the OCS offshore California. FERC also raised the issue in comments it filed to MMS’s AEAU rulemaking, requesting that MMS remove hydroelectric facilities from its proposed program.

Although FERC Chairman Joseph T. Kelliher stated “I am confident that today’s decision puts to rest any questions about FERC’s jurisdiction over hydroelectric projects on the OCS,” this jurisdictional question likely will remain unanswered at least until MMS issues its final AEAU regulations. If MMS concedes jurisdiction to FERC in its Final Rule—an unlikely scenario—project developers will have clarification as to the regulatory process required for project authorization. If, on the other hand, MMS continues to assert jurisdiction over hydroelectric power projects on the OCS—the more likely scenario—the jurisdictional uncertainty may continue, leading to regulatory delay for project developers.

FERC’s order can be found on the FERC website’s eLibrary system in Docket Nos. P-12781 and P-12779.

Sutherland encourages all of its clients with interests in this matter to assess the possible impact on their commercial interests from the potential delay and this interagency jurisdictional conflict, and consider whether any action in response is appropriate.