FERC and Oregon Sign MOU

On March 27, 2008, FERC announced the execution of a Memorandum of Understanding between FERC and the State of Oregon to coordinate procedures and schedules for review of wave energy projects located in state and federal waters comprising the Territorial Seas, i.e., waters up to twelve miles off the coast of Oregon. There’s much to like about the MOU, particularly the efforts to coordinate state and federal permitting efforts. However, as I discuss below, it’s difficult to fully celebrate the MOU because one critical player – MMS – either wasn’t invited or declined to attend the party.

But let’s start on a positive note with the most promising features of the MOU. Most importantly, FERC and Oregon agree to coordinate their respective license review processes and to develop and adhere to a schedule. And they will also designate management contacts so that developers and other stakeholders have a direct contact to address procedural questions. Without doubt, these measures will facilitate the licensing process for all involved.

I have mixed feelings about some of the other provisions of the MOU. Paragraph 5 recognizes that Oregon intends to prepare a comprehensive plan for siting wave energy projects, and FERC will examine proposed projects for consistency with the comprehensive plan. This gives the state assurance that it will be able to retain control of development along its coast. While comprehensive planning will help ensure orderly development of coastal waters, my concern is that right now, we simply don’t know enough about the technology to identify optimal sites for development. In addition, comprehensive plans require considerable time and resources to develop, which could stall siting of pilot or early stage projects which generate the kind of data needed to inform sound comprehensive planning. Hopefully, Oregon will build enough flexibility into its process so that developers can move forward with pilot projects even before a comprehensive plan is finalized and will allow for changes (either adding new locations or eliminating locations) as the parties gather more information about how these projects work.

Ultimately, the biggest problem with the Oregon-FERC MOU isn’t what the agreement includes, but rather what it omits. The MOU purports to cover projects located in the Territorial Sea, up to 12 miles from shore, but MMS, the only agency with the power to lease lands on the OCS (more than three miles out) for wave energy projects is conspicuously missing from the MOU. And while the Paragraph 3 of the Agreement says that the parties will encourage other federal agencies to participate in the process, that may prove difficult, given that MMS doesn’t believe (correctly in my personal view) that FERC has the statutory authority to issue licenses on the OCS. As a result, a developer can go through the FERC and Oregon permitting procedures, only to learn at the end of the process that MMS won’t grant a lease or worse, will grant it to a competitor instead! Or, MMS might issue a lease with such onerous restrictions as to render the project economically infeasible. Of course presently these possibilities are all theoretical anyway because MMS hasn’t yet issued rules for administering a leasing program. So right now, developers can’t site projects on the OCS at all.

The Oregon-FERC MOU will faciliate permitting for wave energy projects up to three miles from shore where MMS doesn’t have jurisdiction in that area – and that’s good news. Moreover, the MOU will serve as a model for other state- federal collaboration which can benefit other wave and tidal projects located within the 3 mile band. But beyond three miles, the FERC-Oregon MOU puts in place a process that doesn’t give developers any guarantee that they can actually build the project. In addition, the agreement springs a trap for the unwary by giving the impression that FERC has authority over projects between 3 and 12 miles offshore, when that question remains unresolved. And in my view, these deficiencies add a disagreeable component to an otherwise promising Agreement.

Update: Here’s coverage of the MOU from the -->