Update on the FERC Pilot Process and MMS Rule

by Carolyn Elefant on November 8, 2007

I’ve posted a quick update on the FERC’s proposed pilot license process over here at the Ocean Renewable Energy Coalition website. FERC proposed the process to help developers get prototype projects into the water in a shorter time frame than the present full blown 5-7 year process. Under FERC’s scheme, a pilot license will last for five years after which time a developer could file for a long term license to build out a prototype project.

As I’ve noted in my other post, many developers support the FERC pilot process in theory. But in practice, they have no incentive to apply for a pilot license unless it saves a substantial amount of time and expense over the cost of a full blown license process. Other commentors on the FERC proposal believe that FERC must implement a rule to govern the pilot process rather than pronouncing it as a policy or making it available on a case by case basis. Of course, implementing a pilot process by rule could mean an additional year before such a process is put in place. Finally, despite FERC’s request to other agencies to examine their regulations and policies and determine whether they could act flexibily in reviewing pilot proposals, few have taken up FERC’s request.

In the meantime, there are finally some significant developments out of MMS. As I described here, MMS completed a Final Programmatic EIS for alternative energy development on the OCS.

In addition, MMS also announced an interim program under which it will allow meteorologic testing facilities and wave energy collection data and has issued a notice seeking nominations for sites that developers seek to access. In addition, MMS is also seeking comment on these questions:

(1) Would you be interested in acquiring an alternative energy resource assessment lease or technology testing lease as proposed under the interim policy? If so, please identify the resource(s) you would want to assess (e.g., wind, wave, current) and the technology you would want to test and provide a general description of the type and number of installations or technologies you would use, prospective locations, and a project schedule for the activities you would propose to pursue. (2) Would you be willing to collaborate and enter into joint ventures with other prospective lessees who express interest in acquiring the same location for an alternative energy resource assessment or technology testing lease? (3) What would be an appropriate lease term (duration) for the authorization you are interested in acquiring? (4) Is the rental rate of $3.00 per acre appropriate? (5) How much acreage should be authorized for the types of activities proposed and how should leases for such activities be appropriately spaced (i.e., inclusion of buffers)? (6) How should the MMS define technology testing activities and what specific types of activities should be authorized by technology testing leases?

After lengthy delays, the MMS policy is at least a first step. But what kind of step? The MMS/FERC jurisdictional smackdown still remains unresolved. As such, the fate of sites on which developers have filed FERC permits in the MMS process is unclear. For example, if a developer has filed a preliminary permit for a site that straddles the OCS and state waters, can a second company file an application for a lease for the same site at MMS? Will the MMS leases allow companies to buy up leases and sell them to FERC applicants who’ve included OCS lands in their permit applications? And in a relatively new industry where many developers have shown willingness to bank sites or beat out competitors for sites, will companies be willing to come forward and voluntarily identify prime OCS real estate, and put themselves at risk that another company will stake a claim to it? And is an interim policy enough, with some offshore wind developers well past the testing stage and ready to build projects? Eventually, these questions will be resolved, but in the interim, we’re looking at another year, maybe two before we actually see even demonstration alternative energy projects on the OCS.

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