Friday, October 17, 2008

FERC asserts itself on OCS hydrokinetic projects

Just when you thought it was safe to go back in the water, the Federal Regulatory Energy Commission (FERC) of the Department of Energy yesterday issued a ruling which makes a detailed case for FERC to regulate "hydroelectric" energy on the entire Outer Continental Shelf (OCS), not just within the 3-mile territorial limit:

In short, based on our review of the statutory language, relevant case law, and pertinent legislative history of the FPA [Federal Power Act], we find that the FPA provides the Commission with two bases of authority under section 4(e) to issue preliminary permits and licenses for hydroelectric projects located on the OCS, or the submerged lands extending ten miles from the coastal baseline in the case of this rehearing. The first is the authority to license hydroelectric projects located on "streams or other bodies of water over which Congress has jurisdiction" under the Commerce Clause and the second is the authority to issue hydroelectric licenses for projects located on "reservations" of the United States. Second, we find that FPA section 23(b)(1) makes it unlawful for any person to develop these projects without a Commission license, because of their proposed location on both "navigable waters" and U.S. "reservations."

(This conclusion appears as section 56 on page 27; their argument leading to this conclusion begins on page 15: "The Commission’s Jurisdiction on the Outer Continental Shelf ")

Which federal agency has or should have jurisdiction over ocean energy? EPACT05 tried to segregate the roles: FERC would have jurisdiction over all hydrokinetic projects within the 3-mile territorial limit, and MMS would continue to oversee leasing for energy developers on the OCS. Obviously this was an imperfect decision for a lot of reasons both practical (most projects, especially cables, will straddle this arbitrary line) and philosophical (what minerals are being managed there anyway?)

EPACT05 didn't resolve matters, but seemed rather to set the battle lines to come. For a few years now FERC and the Minerals Management Service (MMS) of the Department of the Interior have each laid claim based on their respective areas of expertise and involvement. I have been to several panel discussions where representatives of the two agencies speak temperately about finding a modus vivendi that would encourage ocean energy. They have been working on a MOU to define their respective roles; FERC's latest salvo suggests that a final MOU won't see light of day.

Meanwhile we've all been waiting for the MMS to issue final rules for leasing portions of the OCS for ocean energy projects. The comment period closed in September; according to remarks from Maureen Bornholdt of MMS at the AWEA Offshore Wind conference, final rules are expected before the end of the year. The differences between the preliminary rules and the submitted comments make guessing the final rules difficult. This pre-emptive strike by FERC will make those rules more interesting still. Will their issue be delayed? Probably, because MMS will need to respond to FERC.

More uncertainty is clearly harmful to the industry. There's uncertainty regarding the PTC (extended a feckless one year.) There's uncertainty regarding financing for projects (both from the short PTC period and the global credit squeeze.) Now there's even more regulatory uncertainty. The determination of project developers to go ahead anyway is remarkable in the face of so many challenges. What could we do if Congress took the time and initiative to directly address renewable energy and provide a crisp, comprehensive framework that provided clarity and confidence? A robust manufacturing industry, economic benefits, and a better energy future for our country awaits.
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Carolyn Elefant said...

I don't think that the FERC order will delay the MMS rulemaking. FERC filed comments in the rulemaking two weeks before the comment period closed, and those comments conveyed FERC's position on the jurisdictional issue. There may be other factors that delay the rule issuance, but I don't think the FERC issue is one of them.
Carolyn Elefant

CLeyerle said...

Thank you Carolyn for your comment. You are correct that any delays will more likely be from other factors (e.g. the change of party control of the White House.)

(Carolyn has also posted a much more detailed and nuanced summary of FERC and MMS on her web site than I could possibly write. Very worth reading.)

Perhaps I am being unduly pessimistic about a delay and reading too much into the fact that the MOU remains unsigned. I hope so. FERC encouraged MMS to sign the MOU at the time of their comments on the proposed rules, and months have passed. Now FERC acts unilaterally (although consistently with their position) in exactly the way they asked MMS not to do. This suggests ongoing disagreement, even antagonism.

How will MMS respond? And will they respond differently if they view the FERC action as a provocation? The ball is in their court.