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New Guidelines May Aid Ocean Energy Development

July 21, 2012 posted by Eric Christensen

At its July 19 meeting, the Federal Energy Regulatory Commission ("FERC") issued guidelines developed jointly with the Bureau of Ocean Energy Management ("BOEM" -- formerly the Minerals Management Service) designed to clarify jurisdiction and streamline the permitting process for marine hydrokinetic energy resources, that is, generation devices driven by waves or ocean currents. Marine hydrokinetic resources may be subject to both FERC and BOEM jurisdiction if located on the Outer Continental Shelf ("OCS"), the offshore area under federal control, which generally includes all submerged lands lying three nautical miles or more from the shore to the outer extent of federal jurisdiction, generally 200 miles offshore. The guidelines provide important waypoints for project developers attempting to navigate the complex legal regimes governing electric power development on the OCS. While FERC's hydro licensing jurisdiction is generally thought of as covering hydroelectric dams on rivers and streams, in fact, any private developer constructing an electric generation project on navigable waters of the United States, or which is interconnected to the interstate grid, is required to obtain a FERC permit under Part I of the Federal Power Act. A developer is also required to obtain a lease from BOEM if its project will produce energy and involves any attachment of a structure or device to the seabed on the OCS, whether temporary or permanent. As a practical matter, this means that nearly every electric generation project located on the OCS will require both a FERC license and a BOEM lease. In certain respects, the FERC and BOEM legal regimes do not easily co-exist. For example, BOEM leases are generally granted based on competitive bidding, while FERC is required to grant a hydroelectric license to the entity that, in its judgment, is best suited to the comprehensive development of a particular site. In making this judgment, FERC must take into account a number of factors, including giving preference to state and municipal entities. The new FERC-BOEM guidelines, which build on a Memorandum of Understanding between the two agencies signed in April 2009, attempt to simplify and clarify the relationship between these two legal regimes, at least to the extent that can be accomplished without Congressional action. The guidelines, which are not considered legally binding, explain how FERC and BOEM intend to carry out their responsibilities in a coordinated fashion. Topics covered range from fee structures and FERC's obligation with respect to municipal preference to coodinated permitting of projects straddling the line between the OCS and nearshore waters. Given that marine hydrokinetic resources are generally in an early stage of technical development, the portions of the guidelines explaining how FERC and BOEM will coordinate review of research and demonstration projects is particularly important. Because BOEM will issue non-competitive leases for such projects, the guidelines promise to ease the way for research and demonstration of promising marine hydrokinetic technologies. A second noteworthy section of the guidelines explains how FERC and BOEM will coordinate review of environmental assessments of hydrokinetic energy projects and how prospective licensees can aid this process. Because compliance with such environmental obligations has proven to be quite burdensome for many ocean energy research projects to date, this portion of the guidelines also promises to be of particular importance for entities involved in marine hydrokinetic energy development.