Update (11/4/08) - Here's a link to a Report by the Congressional Research Service evaluating the MMS and FERC regulatory systems.
As I remember, the provisions of the Energy Policy Act of 2005, which authorized the Mineral Management Service to lease property on the Outer Continental Shelf (OCS) for alternative energy projects, were intended to clarify who's the boss on the Outer Continental Shelf. Before EPAct of 2005, it wasn't one hundred percent clear how companies like Cape Windcould acquire definitive property rights for siting projects on the OCS and the new law closed that gap.
Except...in closing one gap, EPAct 2005 created another question about which agency, FERC or MMS (or both) have the power to authorize wave or tidal projects on the OCS. Without any further guidance from Congress, FERC and MMS have been duking it out ever since. Now, FERC has upped the ante even further, with this recent Order, staking claim to the entire Outer Continental Shelf, where previously, it was willing to settle for a mere twelve miles. So how does FERC's reasoning stack up in this decision? Read on after the jump...
For those who haven't been following this drama with baited breath, here's the twenty second skinny on the back story. The Energy Policy Act of 2005 authorizes MMS to issue leases for alternative energy projects on the OCS, except for those projects already covered by statutes like the OTEC Act or the Deepwater Port Act. At the same time, EPAct 2005 contains a saving clause, providing that nothing in the new law diminishes another agency's existing authority under other laws.
That's where FERC came in, at least originally. Under the Federal Power Act, FERC has authority to license projects that use water to generate electricity and which are located on navigable waters, federal lands or reservations or on commerce clause waters with a grid interconnection. Though the FPA defines a project as a unit that includes a power house, dam or impoundment, in 2003, in the AquaEnergy decision, FERC decided that a buoy was a power house, and thus, its jurisdiction extended to wave and tidal projects on navigable waters, which FERC originally defined as extending 12 miles out or to the limits of the territorial seas. Because FERC's decision was on the books when EPAct 2005 passed, FERC argued that EPAct's savings clause preserved its jurisdiction. But MMS refuses to acknowledge FERC's jurisdictional claim beyond three miles; it has argued that FERC's authority over navigable waters only extend up to three miles offshore consistent with statutes like the Rivers and Harbors Act and traditional understanding of the scope of navigable waters. Recognizing the impasse, MMS and FERC have attempted to negotiate an MOU resolving the issue and from what I've heard of the proposal, it seemed sensible. But for one reason or another, the parties never signed off on it, and the dispute continued to fester.
Now, in the latest iteration of this regulatory drama, FERC's taken a different path. In its recent order, FERC declares jurisdiction over the OCS up to 200 miles out, offering dual grounds that these waters are navigable waters and further, that the OCS is a federal reservation.
FERC's been so assertive in helping to move marine renewables projects forward that I hate to criticize the agency, but in my view (and these are my personal views, not those of any of my clients or affiliations), FERC is dead wrong on some aspects of the law. First of all, the OCS lands aren't a reservation, not by a long shot as I view the issue. The FPA defines reservations as other lands and interests in lands owned by the United States, and withdrawn, reserved, or withheld from private appropriation and disposal under the public land laws..."Trouble is, OCS lands aren't withdrawn, reserved or witheld from private appropriation under public land laws, because they're not subject to public land laws to begin with. The Federal Land Policy and Management Act of 1976 (FLPMA), as amended (43 U.S.C. 1701 et seq.) excludes OCS lands from the definition of public lands covered under public land law statute.
FERC's decision stands on stronger footing with regard to navigability. Technically, waters extending up to 200 miles offshore are navigable, and technically, FERC's statute, unlike other contemporaneous statutes (e.g., the Rivers and Harbors Act) does not limit the scope of navigable waters to its traditional 3 miles. However, I'm not sure how FERC's definition of navigable waters will hold up beyond the limits of the territorial seas, where a sovereign state retains control of resources but cannot otherwise regulate or impede passage.
So why would FERC choose now to expand its authority, especially with a somewhat faulty interpretation of OCS lands as reservations? Well, under the Federal Power Act, agencies with jurisdiction over reservations have mandatory conditioning authority, which generally means that they can seek to have any type of license mitigation or condition included in a FERC license. By deeming the OCS as a reservation, seems that FERC may be offering MMS a consolation prize -- suggesting that even if FERC has authority, MMS will still have the power to include whatever conditions it wants in the license.
OK, now that you've endured these legalistic ramblings, you're probably wondering what's the bottom line? As I see the issue, a developer is going to need a land lease on the OCS since a FERC license does not confer property rights. Moreover, with MMS trying to engage in orderly development of the OCS, having a second agency like FERC on the OCS with the power to approve project sites can create conflicts. At the same time, to FERC's credit, it has developed an orderly system that is allowing marine renewables projects to make progress towards licensing and I'd hate to see FERC taken out of the process at this time. So, some of the alternatives I'd consider include:
Option 1: Requiring developers to obtain a lease from MMS through the competive bid process and then proceed to FERC for the license. This system allows MMS to ensure orderly development, but creates a role for FERC's expertise in project authorization. In fact, this system is somewhat similar to the UK model, where the Crown issues a lease and the Department of Energy issues a consent or project "authorization."
Option 2: Split the "buoy" at the three mile line, but require MMS and FERC to cooperate for projects that straddle the OCS. Or, allow FERC jurisdiction up to twelve miles out for the next decade as the industry gets its sea legs. FERC's regulatory system may work better for new technologies in the short run because it coordinates the state and federal process (the FERC process includes the transmission line as part of the process whereas in the MMS scheme, a developer will need separate authority form the state). Once the industry has become more mature and ready to move further offshore, MMS could then supplant FERC's authority.
Option 3: Continue to wait for the agencies to work out the dispute through an MOU. But that hasn't happened, and I don't think FERC's recent order will make the two agencies get along any better.
In any event, tomorrow's the election...and whatever the outcome, there's likely to be an opportunity to write the next chapter of this continuing saga in January.
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Posted by: Jordan 1 | August 15, 2010 at 06:38 PM