[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
H.R. 5156, TO AMEND THE OUTER CONTINENTAL SHELF LANDS ACT TO PROTECT
THE ECONOMIC AND LAND USE INTERESTS OF THE FEDERAL GOVERNMENT
=======================================================================
LEGISLATIVE HEARING
before the
SUBCOMMITTEE ON ENERGY AND
MINERAL RESOURCES
of the
COMMITTEE ON RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
July 25, 2002
__________
Serial No. 107-148
__________
Printed for the use of the Committee on Resources
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
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Committee address: http://resourcescommittee.house.gov
______
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COMMITTEE ON RESOURCES
JAMES V. HANSEN, Utah, Chairman
NICK J. RAHALL II, West Virginia, Ranking Democrat Member
Don Young, Alaska, George Miller, California
Vice Chairman Edward J. Markey, Massachusetts
W.J. ``Billy'' Tauzin, Louisiana Dale E. Kildee, Michigan
Jim Saxton, New Jersey Peter A. DeFazio, Oregon
Elton Gallegly, California Eni F.H. Faleomavaega, American
John J. Duncan, Jr., Tennessee Samoa
Joel Hefley, Colorado Neil Abercrombie, Hawaii
Wayne T. Gilchrest, Maryland Solomon P. Ortiz, Texas
Ken Calvert, California Frank Pallone, Jr., New Jersey
Scott McInnis, Colorado Calvin M. Dooley, California
Richard W. Pombo, California Robert A. Underwood, Guam
Barbara Cubin, Wyoming Adam Smith, Washington
George Radanovich, California Donna M. Christensen, Virgin
Walter B. Jones, Jr., North Islands
Carolina Ron Kind, Wisconsin
Mac Thornberry, Texas Jay Inslee, Washington
Chris Cannon, Utah Grace F. Napolitano, California
John E. Peterson, Pennsylvania Tom Udall, New Mexico
Bob Schaffer, Colorado Mark Udall, Colorado
Jim Gibbons, Nevada Rush D. Holt, New Jersey
Mark E. Souder, Indiana Anibal Acevedo-Vila, Puerto Rico
Greg Walden, Oregon Hilda L. Solis, California
Michael K. Simpson, Idaho Brad Carson, Oklahoma
Thomas G. Tancredo, Colorado Betty McCollum, Minnesota
J.D. Hayworth, Arizona Tim Holden, Pennsylvania
C.L. ``Butch'' Otter, Idaho
Tom Osborne, Nebraska
Jeff Flake, Arizona
Dennis R. Rehberg, Montana
Tim Stewart, Chief of Staff
Lisa Pittman, Chief Counsel/Deputy Chief of Staff
Steven T. Petersen, Deputy Chief Counsel
Michael S. Twinchek, Chief Clerk
James H. Zoia, Democrat Staff Director
Jeffrey P. Petrich, Democrat Chief Counsel
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SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES
BARBARA CUBIN, Wyoming, Chairman
RON KIND, Wisconsin, Ranking Democrat Member
W.J. ``Billy'' Tauzin, Louisiana Nick J. Rahall II, West Virginia
Mac Thornberry, Texas Edward J. Markey, Massachusetts
Chris Cannon, Utah Solomon P. Ortiz, Texas
Jim Gibbons, Nevada, Calvin M. Dooley, California
Vice Chairman Jay Inslee, Washington
Thomas G. Tancredo, Colorado Grace F. Napolitano, California
C.L. ``Butch'' Otter, Idaho Brad Carson, Oklahoma
Jeff Flake, Arizona
Dennis R. Rehberg, Montana
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C O N T E N T S
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Page
Hearing held on July 25, 2002.................................... 1
Statement of Members:
Cubin, Hon. Barbara, a Representative in Congress from the
State of Wyoming........................................... 1
Prepared statement of.................................... 2
Kind, Hon. Ron, a Representative in Congress from the State
of Wisconsin, Prepared statement of........................ 12
Markey, Hon. Edward J., a Representative in Congress from the
State of Massachusetts, Prepared statement of.............. 13
Statement of Witnesses:
Burton, Johnnie, Director, Minerals Management Service, U.S.
Department of the Interior................................. 7
Prepared statement of.................................... 9
Steve, Jaime, Legislative Director, American Wind Energy
Association................................................ 18
Prepared statement of.................................... 19
Additional materials supplied:
Cape Wind Supporters, List of members submitted for the
record..................................................... 40
Charter, Richard, Marine Conservation Advocate, Environmental
Defense, Letter submitted for the record................... 4
Duffy, Dennis Vice President of Regulatory Affairs, Cape Wind
Associates, LLC, Statement submitted for the record........ 33
Genthner, Captain Wayne, Email communication submitted for
the record................................................. 36
National Ocean Industries Association, et al., Letter
submitted for the record................................... 37
Yearley, Douglas, Executive Director, Alliance to Protect
Nantucket Sound, Statement submitted for the record........ 28
LEGISLATIVE HEARING ON H.R. 5156, "TO AMEND THE OUTER CONTINENTAL SHELF
LANDS ACT TO PROTECT THE ECONOMIC AND LAND USE INTERESTS OF THE FEDERAL
GOVERNMENT IN THE MANAGEMENT OF OUTER CONTINENTAL SHELF LANDS FOR
ENERGY-RELATED AND CERTAIN OTHER PURPOSES, AND FOR OTHER PURPOSES."
----------
Thursday, July 25, 2002
U.S. House of Representatives
Subcommittee on Energy and Mineral Resources
Committee on Resources
Washington, DC
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The Subcommittee met, pursuant to call, at 2 p.m., in room
1334, Longworth House Office Building, Hon. Barbara Cubin
[Chairman of the Subcommittee] presiding.H.R. 5156
STATEMENT OF THE HON. BARBARA CUBIN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WYOMING
Mrs. Cubin. The legislative hearing will come to order. The
Subcommittee on Energy and Mineral Resources meets today to
hear testimony on H.R. 5156, legislation on energy-related uses
of the Outer Continental Shelf.
This bill addresses issues associated with permitting
future nontraditional energy and energy-related projects on the
Outer Continental Shelf (OCS). Such projects would include
alternative energy projects such as wind, wave, and solar power
production, as well as ancillary projects to oil and gas
development on the Shelf, such as emergency medical facilities
and supply facilities that would support deepwater exploration
and development projects.
There is presently no statutory authority to permit such
projects. Earlier this year, I was contacted by the
administration about the need for legislation that would
clarify the permitting process for these innovative projects on
the OCS. Working with the administration, I have introduced a
bill that gives the Secretary of the Interior the authority to
permit and oversee energy-related activities under the OCS
Lands Act.
This legislation is needed because no authority currently
exists to permit alternative energy projects and ancillary
projects to support oil and gas development on the OCS.
Clearly, our Nation faces a growing energy supply and demand
challenge that calls for innovative solutions.
Two innovative ways that will meet that challenge are
through increased production and the use of renewable energy
and through production of oil and gas in deep water. H.R. 5156
facilitates both of these solutions. The bill clarifies the
jurisdiction for these projects so that private sector entities
wanting to develop alternative energy resources offshore will
know which agencies to approach for permitting. It is crucial
for the development of any alternative or traditional energy
project to have certainty in the permitting and regulatory
process that this bill provides. This bill also ensures that
future projects on the OCS will be performed in a safe and
environmentally sensitive manner, and that a proper abandonment
in the site clearance process will exist for each project.
H.R. 5156 enables the Department of Interior to inform and
work with other relevant Federal agencies that will be involved
in the project permitting process. It is my understanding that
the legislative language in H.R. 5156 has gone through an
extensive discussion and approval process amongst all Federal
agencies that have an interest in the OCS, and the legislative
language has been agreed to by those agencies and the OMB. This
bill will not supersede or modify any exiting authority of any
other agency responsible for permitting or regulating offshore
energy projects. It is designed to complement existing statutes
and ensure that all innovative offshore energy projects have a
clear permitting process.
The President's National Energy Plan called for the
simplification of permitting for energy production in an
environmentally sensitive manner. It also called on the
Secretaries of Interior and Energy to evaluate access
limitations to Federal lands in order to increase renewable
energy production. This legislation helps to address both of
these goals.
It is my understanding that offshore wind energy projects
are now being developed in Northern Europe and numerous
projects with significant generation capacity are on the
drawing board. This appears to be sound use of public resources
for energy production. We need innovative alternative and
traditional energy solutions in order to meet our future energy
needs. I believe this bill will facilitate these solutions.
[The prepared statement of Mrs. Cubin follows:]
Statement of Hon. Barbara Cubin, Chairman, Subcommittee on Energy &
Mineral Resources
The Subcommittee on Energy and Mineral Resources meets today to
hear testimony about H.R. 5156, legislation on energy related uses of
the Outer Continental Shelf. This bill addresses issues associated with
permitting future non-traditional energy and energy-related projects on
the OCS. Such projects would include alternative energy projects--such
as wind, wave and solar power production--as well as ancillary projects
to oil and gas development on the Shelf--such as emergency medical
facilities and supply facilities that would support deepwater
exploration and development projects.
There is presently no statutory authority to permit such projects.
Earlier this year, I was contacted by the Administration about the need
for legislation that would clarify the permitting process for these
innovative projects on the OCS. Working with the Administration, I have
introduced a bill that gives the Secretary of the Interior the
authority to permit and oversee energy related activities under the OCS
Lands Act.
This legislation is needed because no authority currently exists to
permit alternative energy projects and ancillary projects to support
oil and gas development on the OCS. Clearly our nation faces a growing
energy supply and demand challenge that calls for innovative solutions.
Two innovative ways that we will meet that challenge are through
increased production and use of renewable energy and through production
of oil and gas in deep water. H.R. 5156 facilitates both of these
solutions. The bill clarifies the jurisdiction for these projects so
that private sector entities, wanting to develop alternative energy
resources offshore will know which agencies to approach for permitting.
It is crucial for the development of any alternative or traditional
energy project to have certainty in the permitting and regulatory
process. This bill would provide such certainty. It also ensures that
future projects on the OCS will be performed in a safe and
environmentally sensitive manner and that a proper abandonment and site
clearance process will exist for each project.
H.R. 5156 enables the Department of Interior to inform and work
with other relevant Federal agencies that will be involved in the
project permitting process. It is my understanding that the legislative
language in H.R. 5156 has gone through an extensive discussion and
approval process amongst all Federal agencies that have an interest in
the OCS, and that the legislative language has been agreed to by those
agencies and the OMB. This bill will not supercede or modify any
existing authority of any other agency responsible for permitting or
regulating offshore energy projects. It is designed to complement
existing statutes and ensure that all innovative offshore energy
projects have a clear permitting process.
The President's National Energy Plan called for the simplification
of permitting for energy production in an environmentally-sensitive
manner. It also called on the Secretaries of the Interior and Energy to
evaluate access limitations to federal lands in order to increase
renewable energy production. This legislation helps to address both of
these goals.
It is my understanding that offshore wind energy projects are now
being developed in Northern Europe and numerous projects with
significant generation capacity are on the drawing board. This appears
to be sound use of public resources for energy production. We need
innovative alternative and traditional energy solutions in order to
meet our future energy needs. I believe this bill will help to
facilitate these solutions.
______
Mrs. Cubin. I have been asked to submit for the record
written testimony for Environmental Defense. And since there is
no one here to object, I so order.
[The information referred to follows:]
[GRAPHIC] [TIFF OMITTED] T0970.003
[GRAPHIC] [TIFF OMITTED] T0970.004
[GRAPHIC] [TIFF OMITTED] T0970.005
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Mrs. Cubin. This testimony opposes H.R. 5156. Environmental
Defense asserts that the purpose of this bill is to enact a
short-term mechanism--or, excuse me--a shortcut mechanism for
permitting liquefied natural gas facilities that sidesteps
environmental review. These assertions, however, are absolutely
incorrect. In fact, the language in H.R. 5156 excludes
activities authorized in the Deepwater Ports Act.
The Port Security Bill, which is currently in conference,
would amend the Deepwater Ports Act to give the Transportation
Department jurisdiction over LNG facilities. I understand that
the administration supports those amendments, but we will
specifically ask our administration witnesses to testify about
that.
So, without further delay, I would like to recognize Panel
Number One, Ms. Johnnie Burton, the Director of the Minerals
Management Service of the U.S. Department of Interior, a
longtime friend and a former colleague in the Wyoming State
legislature. I can honestly tell you Johnnie Burton is the most
knowledgeable person I know about mineral development and
severance taxes, royalties, the whole thing. She was the
Director of Revenue at the Department in the State of Wyoming.
And we are very, very blessed to have her as the Director.
Mrs. Cubin. So, without other delay, the witness is
recognized to testify.
STATEMENT OF JOHNNIE BURTON, DIRECTOR, MINERALS MANAGEMENT
SERVICE, U.S. DEPARTMENT OF THE INTERIOR
Ms. Burton. Thank you very much, Madam Chairman. I
appreciate the opportunity to appear before you today to
discuss the administration's legislative proposal to facilitate
energy-related uses on the Outer Continental Shelf (OCS). Madam
Chairman, I would also like to take this opportunity to thank
you personally for introducing the administration proposal as
H.R. 5156. We look forward to working with you and members of
your Subcommittee and others to begin to consider both the need
and the merits of this bill.
The administration strongly supports enactment of H.R.
5156. We believe that this legislation is both timely and
necessary, and has the potential to encourage innovative energy
projects on the OCS. The bill directly supports the President's
National Energy Policy initiative to simplify permitting for
energy production in an environmentally sensitive manner, and
also supports the Secretary of the Interior's goal of
facilitating renewable energy projects on the OCS. Hopefully,
my testimony today will help shed some light on several parts
of the bill and on the goals of the administration, and why the
Department of the Interior is given the lead role in this
particular issue.
Over the past 18 months, we have been approached at the
Department of the Interior by both the oil and gas industry and
other segments of the private sector concerning ideas and plans
for various initiative energy-related projects offshore. In an
effort to help address the issues raised by the private sector,
we began to examine the authorities and mechanisms currently in
place to permit such projects. What we found is that, generally
speaking, there currently exists no clear authority for the
Federal Government to comprehensively review, permit, and
provide appropriate regulatory oversight of those projects,
with a few exceptions. The exceptions are minerals activity,
which the Department of the Interior manages and oversees; the
oil terminals, which are under the Deepwater Ports Act and are
implemented by the Department of Transportation; and then the
projects that would be permitted under the Ocean Thermal Energy
Conversion Act under the Department of Commerce, although there
are no such projects at this time.
This means that a diverse array of OCS energy-related
projects that either are contemplated or may be contemplated in
the future by the private sector have no clearly defined
permitting process. Instead, various Federal agencies with
different responsibilities are responsible for different parts
of the permitting process. We think that there are drawbacks to
this. It is fragmented--and this process because it is
fragmented--cannot ensure that the Federal Government's myriad
of interests are fully considered. We would like to ensure that
the land use management interests of the Federal Government are
well protected.
The second drawback to the current situation is that the
private sector, which must make the tough investment decisions
concerning whether to proceed or not with those energy-related
projects, is now forced to go to many agencies and to find out
on their own where they should go, what they should do, and
hope they don't miss something. That is because down the road
it could have a negative impact on their project, something
they didn't plan for, didn't know they had to plan for.
So, clearly, this situation as it exists today in our mind
and in the mind of the Secretary of the Interior does not
encourage innovation in the energy arena. In fact, it might be
a deterrent.
H.R. 5156 is designed to rectify those problems. It will
provide the Secretary of the Interior with the authority to
grant an easement or right-of-way for various energy-related
activity on the OCS, and that would include renewable energy
projects such as wave energy, wind energy, solar energy,
perhaps even biomass. We are not sure what is going to come out
there in the future.
It will also include a project to support the existing
production and exploration of oil and gas and various minerals
on the OCS. It will also help us understand how you can convert
something that is there today and may have to be decommissioned
because of, let's say, an oil platform. And the fuel becomes
exhausted. And technically today we have to tell the owner of
that platform, which is the recordholder of the lease, that he
has 1 year to get everything out of there. Well, what if
another use can be found for that platform? We need to have
somebody have the authority to review the application and
decide whether or not it makes sense and be able to do it.
Right now, we can't.
So we want to protect the public's interest to capture the
fair value for the use of the Federal OCS by authorizing the
Secretary to require an appropriate form of payment for use of
those lands, and this bill would give the Secretary this
authority.
It would also grant the Secretary the authority to issue
easements or rights-of-way, either on a competitive or non-
competitive basis, as appropriately determined by the
Secretary.
It will give the Secretary the authority to oversee all
activities associated with a project through regulation and
inspection activities to ensure safety, the safety of people,
the safety of the environment. Right now, there is nothing
comprehensive on this front.
It will also grant the Secretary the authority to pursue
appropriate enforcement actions if they are needed.
And finally, and maybe very importantly, it will require--
it will give the Secretary the authority to require some kind
of financial surety, to make sure that when those facilities
are no longer needed there is money there to decommission them.
It appears to the administration that there should be a
regulatory regime that gives the tools for the Department to
act as a land manager with respect to these projects. So this
would help ensure that the full array of Federal interests in
the permitting of offshore energy-related uses can be
addressed, and also give the private sector certainty. They
know where to go, they know what to do. There is no question.
And that would help them make their decisions.
Another important aspect of the legislation is that one
Federal agency is given the lead role in administering the
provisions of the bill. There ought to be one place where
people can go and get all the answers. Although these answers
may come from different departments eventually, but you need
someone to coordinate. The administration determined that this
new authority contained in H.R. 5156 should be vested in the
Department of the Interior, since historically that Department
has been the Federal Government's land manager and is the
primary agency to oversee energy development on Federal land
through its various bureaus--BLM onshore and various other
bureaus. MMS has been doing it for mineral exploration
offshore. So we have quite a bit of experience in dealing with
submerged lands.
It is important to note, however, that while the bill gives
the Department the lead role in coordinating the permitting of
energy-related uses on the OCS, it also specifically recognizes
the important role of other Federal agencies in the permitting
process. In fact, the bill makes it clear that this legislation
does not supercede or modify the current authority of any other
Federal or State agency under existing Federal law. Nothing
else will change.
Within the Department of the Interior, as you know, MMS has
many years of experience in overseeing oil, gas, and mineral
activities on the OCS. It is this experience that led the task
force of Federal agencies to the conclusion that the primary
responsibility for offshore energy-related activities should be
invested in the Department of the Interior.
To summarize the experience that we have acquired over the
years, I would like to tell you some of the areas that it
covers:
Environmental expertise. Research which is used to make
informed decisions with regard to leasing and operations on the
offshore.
Engineering expertise. Research regarding emerging offshore
technologies used to develop oil/gas resources and various
safety issues associated with those activities.
Regulatory expertise in overseeing OCS oil and gas
activities to ensure human safety and environmental protection.
And, finally, a trained offshore inspection work force. In
addition to enforcing MMS regulations, this work force today
conducts offshore inspections both for the Coast Guard and for
the EPA. We work together with other agencies, but we have the
expertise. It is resident within the Department of the
Interior.
In closing, Madam Chairman, I would again like to thank you
for your interest in this important legislation. The
administration firmly believes that this bill will provide
numerous and immediate benefits, and it has the potential to
expand both our sources and supplies of energy that will be so
critical to our Nation in the future.
The administration feels strongly that we must encourage
new and innovative technologies to help our Nation meet its
increasing need for energy. Enactment of this legislation will
be one important step in getting us ready to support and manage
the development and the new energy sources that might come up
on the OCS.
Madam Chairman, this concludes my oral testimony. However,
I would be pleased to answer questions you have.
[The prepared statement of Ms. Burton follows:]
Statement of Johnnie Burton, Director, Minerals Management Service,
U.S. Department of the Interior
Madam Chairman, thank you for the opportunity to appear before the
Subcommittee today to discuss the Administration's legislative proposal
to help facilitate energy-related uses on the Outer Continental Shelf
(OCS). The Department is excited about H.R. 5156 and its potential to
encourage innovative energy projects on the OCS. Furthermore, the
legislation directly supports the President's National Energy Policy
initiative to simplify permitting for energy production in an
environmentally sensitive manner and also supports the Secretary of the
Interior's goal of facilitating renewable energy projects. We look
forward to working closely with the Committee as it further considers
both the need for and merits of this proposal. Hopefully, my testimony
today will help shed additional light on why the Administration
submitted a legislative proposal; some highlights of H.R. 5156; and why
the Department of the Interior is given the lead role in this
legislative initiative.
As you are aware, this legislative proposal was officially
transmitted to Congress on June 20, 2002, and introduced by Chairman
Cubin, as H.R. 5156. The Bill represents the results of more than six
months of extensive discussions and collaboration with all Federal
agencies having permitting responsibilities on the OCS, as well as the
President's Task Force on Energy Project Streamlining. More important,
H.R. 5156 was developed in a consensus with our sister agencies and
reflects the best efforts of the Administration to address the array of
issues associated with permitting various OCS energy-related projects
that are not currently covered under existing statutes.
These projects include renewable energy projects such as wind, wave
and solar energy. In addition, the oil and gas industry is
contemplating ancillary projects offshore that would directly support
OCS oil and gas development, particularly in the deep water areas of
the OCS. These projects include developing offshore staging facilities,
emergency medical facilities, and supply facilities. Since there
currently is no legal authority to permit these types of projects, H.R.
5156 would give the Secretary of the Interior the authority to permit
and oversee energy-related activities in the OCS under the OCS Lands
Act.
Why New Legislative Authority is Needed
Centralizing the overall responsibility for permitting energy-
related uses under one statute and within one agency will have two
significant benefits. First, it will clarify the regulatory process
considerably. When the private sector initiates a specific project, it
will know where to start the permitting process, and in turn, the
Department would inform the applicant of other Federal permits that may
be required. Likewise, the Department will be able to inform other
relevant Federal agencies of the proposal, thus better facilitating its
timely review and consideration. This approach has worked well for OCS
oil and gas activities, in which MMS serves as the one-stop starting
point for a coordinated review and approval process.
Second, it will clearly provide one agency within the Federal
government with the full array of tools needed to comprehensively
manage non-traditional OCS energy-related uses. In short, it will give
the Department the ability to act as a ``land manager'' with respect to
the permitting and oversight of energy-related uses of Federal
submerged lands.
In considering the Administration's proposal, a logical question to
ask is whether legislation is necessary to site and oversee energy-
related uses on the OCS, or can it be handled under existing
authorities. In fact, we asked ourselves that same question as we began
to consider how to best address issues associated with the siting of
such uses. After careful analysis of the mechanisms currently in place
to handle requests for innovative, non-traditional energy-related
projects on the Federal offshore lands, it became clear to us that--
with limited exceptions--currently there exists no clear authority
within the Federal government to comprehensively review, permit, and
provide appropriate regulatory oversight for such projects. The
exceptions to this general rule include oil, gas and other mineral
activities permitted under the OCS Lands Act (43 U.S.C. 1301 et seq.,
Department of the Interior); offshore oil terminals permitted under the
Deep Water Ports Act (33 U.S.C. 1501 et seq., Department of
Transportation); and projects permitted under the Ocean Thermal Energy
Conversion Act (42 U.S.C. 9101 et seq., Department of Commerce).
This means that the vast majority of OCS alternate energy-related
projects that are or may be contemplated in the future by the private
sector have no clearly defined permitting process. There is no single
agency with an overarching role to coordinate that process. Instead,
various Federal agencies with different responsibilities are
responsible for permitting a specific part of a proposed project.
There are two obvious drawbacks to the current situation. First,
this fragmented process cannot ensure that the Federal government's
myriads of interests in such projects are fully considered nor can it
ensure that its economic and land use interests are adequately
protected. This obstacle can be best overcome by giving a single
Federal agency the overall authority to coordinate and permit these
projects--while acknowledging the important role that other Federal
agencies play (and will continue to play) with respect to the
permitting process. The proposed legislation does just this by
investing in the Department of the Interior the primary regulatory
responsibility while explicitly noting that the legislation will not
supercede or modify the current authority of any other Federal or State
agency under existing Federal law.
A second drawback to the current situation is that the private
sector, which must make the tough investment decisions regarding
whether to proceed with new energy-related projects--is now forced to
``agency shop'' in an attempt to identify an authority that will allow
them to move forward on a creative new venture. Otherwise, their only
alternatives are to wait for clarified authority before proceeding, or
to proceed--with the possibility that a new statute will establish new
authority with new restrictions. Clearly, this situation stifles
innovation in the energy arena and, in fact, acts as a deterrent to
critical investment decisions associated with offshore energy-related
projects.
Already, the oil and gas industry has expressed interest in
developing offshore projects that support OCS oil and gas operations in
the Gulf of Mexico, such as offshore staging areas and hospitals, and
has approached the Department and others to discuss these ideas.
However, to date, they have not proceeded with such plans due, in part,
to a lack of clear authority on the Federal level. In another case, the
private sector is actively pursuing a proposed wind energy project
offshore Massachusetts. This proposal is being coordinated by the Army
Corps of Engineers (COE) under its authority under the Rivers and
Harbors Act since one of the permits the project must receive is a COE
section 10 permit certifying that it will not be a hazard to
navigation.
In sum, due to the absence of clear statutory authority for
permitting the range of various energy-related uses currently being
proposed or that may be proposed in the future for areas offshore, the
Administration is firmly convinced that new legislation is needed in
order to provide a clear and predictable regulatory regime and to fully
protect the Federal government's interests in such projects.
Highlights of the Administration's Legislative Proposal
In general, the Administration's legislative proposal sets up a
comprehensive framework for permitting energy-related uses on the OCS
not already covered by existing statutes by amending the OCS Lands
Act--specifically, it will add a new subsection (p) to section 8 of the
Act. Placing this authority under the OCS Lands Act, which already
provides the regulatory framework for OCS oil, gas, and mineral
activities, will allow the Department to build on many of the
regulatory provisions already embodied in that Act while still allowing
us the flexibility to tailor those provisions to more non-traditional
energy-related uses.
Specifically, the proposed legislation would grant the Secretary of
the Interior the authority to--
Grant an easement or right-of-way for energy-related
activities on the OCS including renewable energy projects, such as
wave, wind, or solar projects; projects ancillary to OCS oil and gas
operations, such as offshore staging areas; and energy or non-energy
related uses of existing OCS facilities previously permitted under the
OCS Lands Act;
Protect the public's interest to capture fair value for
the use of the Federal OCS by authorizing the Secretary to require an
appropriate form of payment such as a fee, rental, or other payment for
use of the seabed;
Issue the easement or right-of-way on either a
competitive or non-competitive basis, as appropriate and determined by
the Secretary;
Oversee all activities associated with a project through
regulations and inspection activities to ensure safety and
environmental protection;
Pursue appropriate enforcement actions in the event that
violations occur; and
Require financial surety to ensure that any facilities
constructed are properly removed at the end of their economic life.
Rationale for Designating the Department of the Interior as ``Lead''
Permitting Agency
As the Administration began to actively consider the best approach
for addressing issues associated with siting energy-related uses on the
OCS, it became clear early on that the Department of the Interior
should be given the lead role in the permitting of such projects and
the proposed legislation reflects that consensus. While there are
numerous Federal agencies with permitting responsibilities on the OCS,
historically the Department has been the Federal government's ``land
manager.'' The Department manages more than 500 million surface acres
of land, with the MMS managing approximately 1.76 billion acres of
offshore Federal lands and mineral estate. BLM manages 262 million
surface acres and more than 700 million subsurface acres of Federal
mineral estate.
In this role, the Department has demonstrated unparalleled
experience in multiple-use land management and routinely makes
decisions to balance economic activities with the need to protect the
environment. For this reason, the proposed legislation fits well with
the Department's core missions.
Also, the Department is the primary agency in the Federal
government to oversee development of our Nation's energy
resources'through BLM (onshore) and MMS (offshore). Since the proposed
legislation pertains to the permitting and oversight of energy uses on
offshore Federal lands, it is only logical that any new legislative
authority that may be enacted remains with the Department already
entrusted with that overall responsibility.
Within the Department, MMS has many years of experience in
overseeing oil, gas and mineral activities on offshore Federal lands.
This experience covers many areas such as:
Environmental expertise and research which are used to
make informed decisions with regard to leasing and operations;
Engineering expertise and research regarding emerging
offshore technologies used to develop oil and gas resources and the
various safety issues associated with these activities;
Regulatory expertise in overseeing OCS oil and gas
activities to ensure human safety and environmental protection; and
A trained offshore inspection workforce that, in addition
to enforcing MMS regulations, also conducts offshore inspections for
the Coast Guard and EPA.
Established working relationships with international
regulators to coordinate and share information and experience on
regulation of offshore energy projects to ensure safety of workers and
protection of the environment.
In closing, I would again like to thank the Subcommittee for its
interest in this issue and express our sincere desire to work with you
on this important legislation. The Administration firmly believes that
this bill will provide numerous and immediate benefits. First, it will
provide for the sound management of offshore public lands by ensuring
that principles of safety, environmental protection, multiple use, fair
compensation, and conservation of resources are all addressed before a
project is initiated. It will also provide the private sector, which
desires to invest in offshore energy-related projects with certainty
and predictability. Finally, the bill has the potential to help
increase both our sources and supplies of energy that will be so
critical to our Nation in the future. We have already seen that
interest and expect to see more once a statutory framework is in place.
The Department believes strongly that we must encourage new and
innovative technologies to help us meet our increasing energy needs
enactment of this legislation will be one important step in helping us
meet those needs.
This concludes my written testimony. However, I would be pleased to
respond to any questions from Members of the Subcommittee.
______
Mrs. Cubin. Thank you, Director Burton. And, Deborah--is it
correct--that there are statements that the Minority has that
now will be ordered to be entered into the record.
[The prepared statement of Mr. Kind follows:]
Statement of Hon. Ron Kind, a Representative in Congress from the State
of Wisconsin
I recognize the short-term need to increase environmentally sound,
domestic fossil fuel production. But in the long term we should be
focusing on the development of renewable energy sources such as wind,
solar and biomass. That makes sense for both economic and national
security reasons: the United States has only 3 percent of the world's
remaining oil reserves, but consumes nearly 25 percent.
Constructive ways to boost more domestic alternative energy sources
so that we can break oil dependency from unstable regions of the world
should be encouraged.
Therefore, I was initially heartened by the Administration's
announcement that they were transmitting legislation, incorporated in
H.R. 5156, to specify that alternate energy projects may be permitted
by the Minerals Management Service on the Outer Continental Shelf of
the United States.
Unfortunately, while H.R. 5156 would grant this authority to MMS,
the bill would also expand DOI's authority to permit the siting of
Liquefied Natural Gas - LNG - terminals, conversion plants and
pipelines, in the OCS. The prospect of LNG facilities off the
coastlines of States like California, Florida, New Jersey or North
Carolina, is controversial in those States to say the least.
Further, as you may know, the Bush Administration has recently
published an advance notice of proposed rulemaking under the Coastal
Zone Management Act that could greatly diminish the authority of
coastal States to assert that Federal consistency applies to ``far
offshore'' federal projects affecting their coastal zones.
Should H.R. 5156, as introduced, become law, and should NOAA
proceed to complete its ill-advised rulemaking, permitting LNG
facilities in the OCS would not be subject to the consistency
provisions of the Coastal Zone Management Act.
This possibility alone will make it very difficult to gain the
necessary support from Members representing coastal states, which
include Great Lakes States, to pass this bill.
H.R. 5156 will require a good deal more consideration before it
should be brought to a vote in Subcommittee. I would hope that the
Subcommittee hold at least one more hearing on this bill so that we may
hear from representatives of coastal states as well as others with a
vested interest in the bill. We have a number of other questions and
concerns about the bill that will be addressed in our questions to the
witnesses.
In conclusion, while we appreciate the stated intent to facilitate
the development of alternative energy projects in the OCS, the bill
would have to significantly rewritten to limit its scope to that end.
As it stands, the bill would give MMS the authority to permit just
about anything on the OCS, and that is unacceptable.
______
[The prepared statement of Mr. Markey follows:]
Statement of Hon. Edward J. Markey, a Representative in Congress from
the State of Massachusetts
Thank you, Madam Chairwoman. I appreciate your calling this hearing
today.
Proper management of the Outer Continental Shelf is extremely
important for our country--a country with over 12,000 miles of
coastline. It is especially important to Massachusetts'' economic
vitality. Many of our industries--from fishing to shipping to tourism--
depend on the health and management of the outer continental shelf and
coastal areas. I agree with the chairwoman that the current gaps in
federal laws need to be filled and that if there are jurisdictional
issues, they need to be solved as well.
I am concerned, however, that the legislation before us is too
broad. If it is passed in its current form, OCS would no longer stand
for ``Outer Continental Shelf.'' Instead, OCS would stand for ``Open to
Corporate Sale.'' Just asserting the jurisdiction of the federal
government, without a sound policy to guide the use of federal lands
and a commitment to a clear process by which innovative individual
proposals will be judged will not solve our current problems. That
clear policy is lacking in H.R. 5156. Specifically, I am concerned that
there is no explicit protection of the States'' right to consistency
review as established under the Coastal Zone Management Act. I cannot
support legislation that does not maintain the rights of states to
review projects that impact the health and safety of their people and
economy.
I am disappointed that this hearing does not include a broader
spectrum of panelists. I think the National Oceans and Atmospheric
Administration would have valuable insight to add to this policy
discussions, in particular comments from the Commission on Oceans
Policy on this legislation would be greatly appreciated. Recently my
colleague, Rep. Delahunt, has asked them to comment on this bill, which
could seriously affect his district, and I hope that their comments
will be considered before HR 5156 moves forward.
Furthermore, I would like to hear from other industries about their
current and future proposals for new ways of using the outer
continental shelf. What plans does the aquaculture industry have? Or
the liquefied natural gas industry? We will hear from a portion of the
renewable industry today but I believe we need to be better informed
about possible types of projects in order to develop a sound policy
about how to deal with their use of federal waters.
The frontier days are over. We can no longer just hand over public
land for industry to use. We must carefully balance the economic and
environmental impacts of all energy projects anywhere on federal land
or water, without usurping the right of States to comment on federal
projects that impact them.
______
Mrs. Cubin. I want to start out by making a statement.
Ranking Member Kind has been very active in this Subcommittee
and has rarely missed a Subcommittee hearing. And also this is
a very busy time of the year for us. We are trying to get
through all of the bills that we need to get through before we
take our August district work period. But I have to--and I
understand that, and I am sure that Mr. Kind is at some place
that is very important.
I want to respond--I want to make an observation, though,
about the rest of the Committee. I have heard nothing but
harping about the President's energy plan from the other side,
that it does nothing to protect the environment, or it doesn't
do enough to protect the environment, and that renewables,
renewables, renewables, renewables is the only answer. And I
have to express my deep disappointment that there is no one on
the other side here to work with us in bringing forward this
bill that will enable the development of renewable energy
sources in the short term as opposed to having to postpone it
and postpone it and postpone it.
So it is very disappointing that no one sees fit to be here
for what they have been denouncing the administration for not
providing. I can't help but think that there could be a
political reason that they are not here. I could be wrong, but
it is the way it appears to me.
So the first question I want to ask you, Director Burton,
is would you agree with me that this bill is all about
protecting the environment?
Ms. Burton. Absolutely, Madam Chairman. If we don't have
the comprehensive regulatory regime in place, we have no way to
see and make sure that all the safeguards are observed, and
that whatever industry does is designed in such a way that is
as safe as possible to the marine environment. We have a lot of
scientists on our staff that do nothing but study marine
environment and make sure that what is done on the OCS is as
sensitive as it can be to that environment.
So this would ensure that there is a thorough, complete
review of the environmental issues before anything is
permitted.
Mrs. Cubin. Recently I had the opportunity to go out on a
platform, producing platform 100 miles out in the Gulf, and
then we came back into a 30-mile-out platform that was a
drilling platform and a production platform. And in both
places, I asked about the MMS and their enforcement of the
regulations and how well they regulated, and all of the
workers--I didn't ask the bosses of the companies, the people
who were taking us on the tour. I asked the people who were
working on the platforms, I asked the workmen, the laborers on
the platform how MMS--how important MMS was. And to a person,
they said that MMS is very knowledgeable. And they come out and
they make inspections and they are very picky in their
inspections, which they consider to be good because it is about
their safety and about the safety of the environment. So I
don't think there is anyone that could argue the point that the
MMS is far and away the most qualified agency to deal with
environmental issues on the Outer Continental Shelf.
You did discuss this in your testimony, but would you like
to expand in any way on how MMS recognized the need for this
legislative language, and why we are pursuing the legislation?
Ms. Burton. Certainly, Madam Chairman. You know, one of the
initiatives of the President's National Energy Policy was to
find a way to simplify and to streamline the regulatory review
process for future energy projects. This legislative proposal
was the offshoot, if you will, of the work that the Department
of the Interior wants to do to support the President's agenda.
We viewed this as a way to streamline, to simplify, but also a
way to make sure that the Federal Government's interests were
protected and well managed. So that was one of the reasons this
legislation came to be.
The other reason was what we heard. And, like you, I went
offshore after I took this job because I wanted to see what we
were doing out there and how well our people were working with
industry to regulate them and to manage what they do.
I heard some interesting things. Such as, when we are
drilling in ultra deep water--and as you know, we are drilling
more and more in ultra deep water, which means 100, 150 miles
away from shore. For example, if we have an accident, either a
work-related or medical accident to some of the staff, by the
time they fly to shore, which may be a 2-hour flight by
helicopter, plus an ambulance ride, it may be too late to save
somebody's life. And they were talking to me about the
possibility of building medical facilities offshore that would
be just a few miles from various platforms, and they could all
use it and they would be a few minutes by helicopter ride. I
thought that was a wonderful idea. But right now, no one has
authority to permit and regulate such an activity. It is to
support the oil and gas industry, but it is not directly
drilling or production, and so the OCSLA does not cover that.
So that would be helpful.
Then we have the wind project off Nantucket Sound that
folks were looking to see how to work. Right now they are
working with the Corps Of Engineers. But, again, the Corps of
Engineers is trying to cover a lot of ground it is not used to
covering, because no one seems to be the point agency.
So all of these things put together brought the
administration to the conclusion that they needed to propose
some scheme that would take care of this regulation and this
management issue, and that is how this came about.
Mrs. Cubin. I have had conversations with other Members
specifically about the wind project that is proposed for the
Nantucket area. And it was expressed to me that hurricanes come
along the eastern coast, and that there are times when that
area is hit by hurricanes. And their concern was that if it was
not built far enough out--basically, they didn't want it to be
built at all. But the reason they were opposing it was they
said if a hurricane comes and one of those wind farms is there
and the hurricane blows it down, then, you know, people
wouldn't be safe there on the land.
And could you respond to that? Like, I am not asking you--
because I think it requires some study--I am not asking for
your opinion on it. But wouldn't the MMS in their studies have
to take that into consideration, those sorts of things, before
they could permit under this bill, before they could permit
that wind farm to be built?
Ms. Burton. Absolutely. These are the issues that would
come up on a case-by-case basis, depending on what the project
is. We don't have any involvement in that project at this
point. So you are correct; I can't answer this question
specifically. But this is what the agency does whenever a
project comes to the point where they have to ask for permits;
then we do a very comprehensive review of all the aspects of a
project, and that would be studied also. I am not sure anybody
is studying that right now. I am not sure anybody is watching
this particular issue.
Mrs. Cubin. You covered in your testimony that MMS has
approached other agencies about the jurisdictional details of
permitting alternative energy projects. Have the concerns of
those agencies been met in this language?
Ms. Burton. I believe so, Madam Chairman. We worked with
other agencies for about 6 months and went through--you know,
we have a collaborative process with a lot of agencies. For
example, we work very closely with the Coast Guard, we work
very closely with the EPA, with the Defense Department, with
the Navy, et cetera. We have taken this language and have
modified it as we met with all of those agencies, and the end
result is that we had the support of all of those agencies for
us to bring this language forward. So everyone has been
contacted.
Mrs. Cubin. The submitted testimony from Environmental
Defense asserts that the primary purpose of this bill is to
grant MMS unprecedented jurisdiction over LNG terminals. How do
you respond to that?
Ms. Burton. Well, unless I am mistaken, Madam Chairman, the
LNG terminal language is not at all in this bill; it is in the
Deepwater Port Act and it is under the Department of
Transportation's jurisdiction at this point. And we are
perfectly satisfied with that. This bill says very clearly that
it will not address any activity that is already covered in
other Federal statutes. So, if LNG is in the transportation
bill, that is who is going to take care of it, and we won't
have a thing to do with it.
Mrs. Cubin. I think that is obvious if one reads the bill,
but I wanted to have that on the record very, very clearly.
If this bill should be enacted, how will the jurisdictions,
requirements, and industry standards be defined for projects
that are covered by the bill?
Ms. Burton. At this point, Madam Chairman, it is hard for
me to answer that question because I don't think one size fits
all. I think that every project that will come along in new--
particularly renewable energy, so new technologies will have to
be studied on their own merit. Again, we are used to
undertaking a very collaborative process in order to arrive at
all the standards we require for various projects. We will
continue to do that. So we will consult with an awful lot of
people before we arrive at setting standards for a particular
project.
Mrs. Cubin. Another thing that I think is extremely
important is the role of the adjacent coastal States addressed
in this bill. And what role will the States play?
Ms. Burton. The role of the States is not really addressed
in this bill per se, because this bill doesn't change any
existing scheme that exists for States as well as Federal
statutes today. Nothing is going to abridge or change or modify
the role of the States. We consult the States now for anything
of the OCS that may have an impact on their coastal zone. We
will continue to do that regardless of what the project is. So
that does not impact them.
Mrs. Cubin. Another assertion that was made in the
Environmental Defense testimony is that the purpose of this
bill is really to derail emergent new renewable energy
resources through escalating royalties. Would you comment on
that?
Ms. Burton. My comment on that is that the bill doesn't
give us any such authority. We do not contemplate any kind of
royalty regime at this point. We are concerned with how we
protect the environment and how we manage the submerged lands
that are our responsibility. The MMS basically is charged
within the Department of the Interior to take care of 1.76
billion acres of land. But in order to take care of that, we
have to have the tools. Right now we have tools that are
limited to only mineral production. We need to make sure those
tools can apply to ancillary types of projects to support that
production and to renewable energy projects.
Renewable energy is one of the priorities of this
Secretary. She has worked diligently with the Department of
Energy to put together a conference, I believe it was last
October or November, I am not sure exactly when, I was still in
Wyoming. It had a very good attendance. And BLM followed
through in the winter, I think January or February, with
another conference. The report is going to come out pretty
shortly, put out by both Secretaries of Energy and Interior,
addressing renewables. She is very intent on doing anything we
can to foster renewable energies development. This legislation
is part of it.
Mrs. Cubin. Under this legislation, what I am speaking of
here are rights of way. How would the MMS coordinate with FERC,
another agency, to provide those rights of way for offshore
energy development as well as the transmission of the energy
that is produced?
Ms. Burton. Well, today, we communicate with FERC quite a
bit on those issues, and we will continue to do so. And there
won't be any change there. But we have to remember that MMS is
only interested in managing the land, and that is the right of
way, the right of way on that land, not in managing the actual
transmission of energy.
Today, for example, we work with FERC on pipelines. We
worry about the right of way. But they monitor the pipeline,
and they regulate what is transmitted through those pipelines
when there is still regulation. We know this is largely
deregulated today.
If there are lines that transmit energy, for example
electricity--it could be another form of energy besides oil and
gas, obviously; it could be electricity off the wind farm, for
example--FERC keeps its sole authority over the transmission
line itself. We would only be involved in the right of way.
That is all. So that doesn't change. This is already in
statute. It will be the same.
Mrs. Cubin. Well, I thank you very much for your
informative testimony and answers to the questions. We will
keep the record open for--5 days--10 days for other members to
submit questions in writing, and would ask that you respond to
those questions if there are any forthcoming. And I want to
thank you very much for being here, and I look forward to
seeing you again.
Ms. Burton. Thank you very much for your time. And we would
be more than happy to answer any questions of any member of the
Committee. Thank you.
Mrs. Cubin. Thank you.
Mrs. Cubin. Now I would like to invite the second panel,
Mr. Jaime Steve, American Wind Energy Association.
STATEMENT OF JAIME STEVE, LEGISLATIVE DIRECTOR, AMERICAN WIND
ENERGY ASSOCIATION
Mr. Steve. Thank you, Madam Chairman. My name is Jaime
Steve, and I am the Legislative Director for the American Wind
Energy Association based here in Washington D.C. Wind companies
that I represent include GE Wind Power, FPL Energy, American
Electric Power, PacifiCorp, Vestas American, Cape Wind, and
Arcadia Wind Power.
Increased use of clean, domestic wind energy on both
private and public lands is a bipartisan issue with broad
support in the Congress and from the Bush administration. For
example, in March of this year, Congress extended the wind
energy production tax credit through the end of 2003. An
additional extension of this tax credit is contained in H.R. 4,
the wide-ranging energy policy bill passed by the House earlier
this year, also passed by the Senate in different form, and
under consideration in conference committee. This provision was
also contained in the Bush energy plan.
Let me give you a little background on wind energy on land
before I jump over to the offshore. In the early 1980's, wind
energy development was essentially a one-State business,
California. That was it. Today, utility-scale wind power
facilities are in 29 States. All these projects are either on
private or Federal land. Currently, there are no operating
offshore wind developments in U.S. waters. This is in contrast
to Europe, where at least 10 offshore projects are operating in
shallow waters offshore in waters near Denmark, Sweden,
England, and the Netherlands. Europe has already moved to
offshore development because of the scarcity of land. Here in
the U.S., we have lots of available land particularly in the
West. There, heavy population, not a lot of open land, that is
why they moved to offshore.
The earliest European offshore project was built in 1990,
and it is off the Swedish coast. These European projects range
in size from .25 megawatts to as large as 40 megawatts in
capacity. That is a lot of power. Together these European
projects total over 90 megawatts of capacity, and the distance
from shoreline of these projects ranges from about five-eighths
of a mile to about 6 miles. Near term, there are currently 18
new offshore projects planned throughout Europe totaling 1,500
megawatts of energy capacity. Long term, Germany alone is
looking at 25,000 megawatts of power. That is a significant
amount of power just for one country.
While it is somewhat more expensive to develop wind
offshore, there are some simple reasons for doing so.
The first reason is to gain access to much higher, more
sustained winds. Therefore, your wind turbines are operating a
greater percentage of time and you are producing more power.
The second reason is that these projects can be located
closer to population centers, therefore reducing the need to
transmit power long distances over transmission lines. And that
raises questions if you lose some of the power the further you
have to transmit it. And also in some areas of the U.S., we
don't have the existing transmission capacity to move the power
from where it is to where it is needed.
I would like to address two specific issues involving H.R.
5156 and the ability to develop wind along the Outer
Continental Shelf.
No. 1 is what we call transitional issues. The industry
asks that any rules that may flow from this legislation be
sensitive to the financial investments and potential--of
potential offshore projects made prior to enactment of the
legislation. Specifically, we are concerned that companies now
working to develop sites offshore Massachusetts, which we spoke
about just recently, and offshore Long Island as well, are not
disadvantaged by new rules. Essentially, we feel these projects
should not be unnecessarily delayed by requiring developers who
have already put in significant amounts of money, time, and
effort over the last 2 to 3 years. We don't want those folks to
have to go back to square No. 1 under a new process and start
all over again.
Next is interconnection. And again, I think we were just
discussing the fact that this is really more of an issue for
the Federal Energy Regulatory Commission than it is for the
Department of Interior. But that is important to us as well. We
are concerned that if a current or future project gains
approval and begins construction, we want to be sure that there
is an orderly process to ensure that the project can actually
connect to the mainland; otherwise, there is no sense in
building the project in the first place. And that is a concern,
because those that want to stop a project, if they don't win on
stopping the project itself, they can then block the
transmission access. And that is another way to stop a
development.
In conclusion, I just want to say that offshore wind may be
a new concept here in America, but the Europeans have been at
it for more than 10 years with numerous projects. Expanding
U.S. wind development into appropriate parts of the Outer
Continental Shelf will allow environmentally responsible
development and help our country meet its pressing energy needs
with a clean, nonpolluting, domestically produced source that
creates high-tech jobs while also paying significant revenues
either to individuals; but, if we are offshore, we are assuming
that there would be some level of revenue paid to the Federal
Government as well.
Thank you, Madam Chairman.
[The prepared statement of Mr. Steve follows:]
Statement of Jaime Steve, Legislative Director, American Wind Energy
Association
Chairman Cubin and members of the subcommittee, my name is Jaime
Steve. I am Legislative Director for the American Wind Energy
Association based here in Washington, D.C. Wind energy companies that I
represent include GE Wind Power, FPL Energy, Inc., AEP (American
Electric Power) based in Cincinnati, Ohio, PacifiCorp, Vestas American,
Cape Wind and Arcadia Windpower.
Increased use of clean, domestic wind energy on both private and
public lands is a bipartisan issue with broad support in Congress and
from the Bush Administration. For example, in March of this year
Congress extended the wind energy Production Tax Credit (PTC) through
the end of 2003. This item was contained within the Job Creation and
Worker Assistance Act of 2002 (H.R. 3090, P.L. 107-104). An additional
three-year extension of this tax credit is contained in H.R. 4, the
wide-ranging energy policy bill passed by the House earlier this year
and currently under consideration in conference. This provision was
also contained in the Bush-Cheney energy plan.
The wind tax credit, coupled with more than 80 percent reductions
in wind power costs since the 1980's has enabled wind to compete almost
head-to-head with conventional energy sources in regions with good wind
resources. In 2001 alone, Texas saw more than 900 megawatts (MW) of
wind power come on line. This translates into more than $1 billion in
economic activity and roughly the amount of electricity needed to power
200,000 homes. At the same time, hard-pressed Texas farmers and
ranchers leasing small portions of their land for wind development are
gaining annual payments of about $3,000 per windmill, per year, for at
least twenty years. In addition, these wind developments are
contributing to the tax base of local governments. The simple point is
that wind energy is real and it is spurring significant economic
development in rural America.
In the early 1980's wind energy development was essentially in only
one state--California. Today, utility-scale wind power facilities are
in 29 states. All these projects are on either private or federal land.
Currently, there are no operating offshore wind developments within
U.S. waters. This is in contrast to Europe, where at least ten offshore
projects are operating in shallow waters near Denmark, Sweden, England
and the Netherlands. Europe has already moved to offshore development
because of the scarcity of available land.
The earliest European offshore project was built in 1990
(Norgersund off the Swedish coast). The European projects range in size
from 0.25 MW to 40 MW in capacity. Together these European projects
total over 90 MW. The distance from shoreline ranges from 5/8 of a mile
to 6 miles. Near term, there are currently 18 new offshore projects
planned throughout Europe totaling 1,500 MW. Long term, Germany alone
is planning for 25,000 MW of offshore wind power by the year 2025.
While it is somewhat more expensive to develop offshore wind, there
are some simple reasons for doing so. The first reason is to gain
access to higher, more sustained winds, producing up to 40 percent more
energy per wind turbine. The second reason it that these projects can
be located closer to population centers where the power is needed,
therefore reducing the need to build new long-distance power
transmission lines to get the power to customers.
I would like to address two issues specifically involving H.R. 5156
and the ability to develop wind along the outer continental shelf
(OCS).
Transitional issues
The industry asks that any rules that may flow from passage of H.R.
5156 be sensitive to the financial investments in potential offshore
projects made prior to enactment of the legislation. Specifically, we
are concerned that companies now working to develop sites offshore
Massachusetts and New York's Long Island are not disadvantaged by new
rules and requirements. Essentially, we feel that these projects should
not be unnecessarily delayed by requiring developers--who have already
put in years of preparation--to start all over again under a new
application process.
Interconnection
We are also concerned that if a current or future project gains
approval and begins construction that there be an orderly process to
ensure the project can connect to electric substations and distribution
lines on the mainland. Simply stated, there is little point in
constructing an offshore wind farm if it becomes too expensive or
difficult to transmit power from the wind turbines to the users on
land.
Conclusion
Offshore wind may be a new concept in America, but the Europeans
have more than ten years of experience with these projects. Expanding
U.S. wind development into appropriate parts of the outer continental
shelf will allow environmentally responsible development and help our
country meet its pressing energy needs with a clean, non-polluting,
domestically produced resource that creates new high-tech jobs while
also generating revenue for the federal government. Thank you.
______
Mrs. Cubin. Thank you, Mr. Steve. In your testimony you
describe the offshore wind farms in Europe. Is offshore wind
energy beginning to make a significant contribution? Now, you
said it is 25--.
Mr. Steve. Twenty-five thousand megawatts is planned for
Germany.
Mrs. Cubin. Oh, it is planned. OK. So it is beginning,
then, to make a major contribution to the electricity needs of
Europe.
Mr. Steve. Right. Yeah.
Mrs. Cubin. Are you hearing of increased interest from
energy companies about offshore projects in the United States?
Mr. Steve. Definitely.
Mrs. Cubin. Other than the Nantucket?
Mr. Steve. Right now, the only two that are under
consideration are the one offshore Nantucket Sound and one
offshore Long Island as well. The Long Island Power Authority
is looking into this. Part of the problem is, it is kind of a
practical issue to deal with here. It is very difficult in the
New York area to get power to Long Island. Again, we come to
this transmission issue. And if you can develop an offshore
wind farm, then you don't have to run the power all the way
through Manhattan or from Connecticut, you know, from other
areas into Long Island. You can have it right there at Long
Island, and then you are just running essentially a giant
extension cord from the wind power facility directly to the
mainland on Long Island.
Mrs. Cubin. You made a point that I think is really
significant. That is how, as energy, as the electrons travel
through the wire or the fiber or whatever, they diminish.
Mr. Steve. Right.
Mrs. Cubin. And so placing them in places like off of Long
Island and Nantucket would certainly prove to serve electricity
to a lot of people. And what I am thinking about right now is
that not-in-my-backyard stuff.
Mr. Steve. Yes.
Mrs. Cubin. So what kind of unique challenges have you had,
or do you know of those kinds of challenges in Europe? And how
did they deal with those? How did they get more public
acceptance of that?
Mr. Steve. I think you are referring to what most people
call NIMBY. Right? Not In My Backyard. But the best one I have
heard recently is NOPE, N-O-P-E, which stands for Not On Planet
Earth.
Mrs. Cubin. Right.
Mr. Steve. Don't do it anywhere on Planet Earth.
Here is one way to deal with that. In Europe--I don't know
if everyone can see the image up here; I passed out some
copies. I don't have enough copies for everybody else, for the
press. But the image here is of a wind farm offshore Denmark.
And a couple members of the Subcommittee and the full Committee
were there recently last summer, and I was fortunate enough to
go there myself, as well.
But what you see here is about 5 miles off the coast of
Denmark, of Copenhagen, are these windmills. Most days, you
can't even see them, No. 1. It is very shallow water, so it is
not a shipping channel. But interestingly, what the developer
did in that case was they allowed folks who lived along the
coastline to actually invest in the project. They received some
revenue. The objections kind of melted away at that point.
Mrs. Cubin. Funny how that happens.
Mr. Steve. Yeah. I mean, there are always going to be some
folks who--you know, some folks like windmills; there are
always going to be some folks that don't. What we are finding
is that most folks do, because it is a clean power source;
there is no pollution. And one of the great things about wind
power, which is unlike fossil fuels, is that with wind power or
other renewables as well, you sign a 20-year contract with the
utility for the power. What you are paying at the beginning of
the 20-year contract is the exact same price you are paying at
the end of the 20-year contract because there is no fuel cost;
the wind is free. All your costs are up front. And you levelize
those costs over the 20 years.
So we can come in at a rate of, say, 5, 6 cents per
kilowatt hour, whereas natural gas may currently be in the
range--it may be cheaper than us right now, but I think anybody
in the room who has--Mr. Inslee--anybody in the room who has an
electric bill or has a home powered by natural gas saw some
pretty significant price spikes about a year and a half ago.
And what wind brings and other renewables bring is this kind of
price stability.
Mrs. Cubin. I consider the potential offshore wind farms in
the United States, Nantucket, the incentive that occurred in
Europe to share in the revenues. Nantucket might not be quite
as good a partner in that, since the area that we are talking
about is--you know, a place where probably the people in the
top 1 percent of income in the country live there--and so they
might not have the financial needs to offset having to look at
what they would consider to be an offensive wind farm. But I
think we have to keep looking for ways to get the public to buy
into this. Certainly in my opinion, the fact that it is clean,
consistent, predictable, renewable, ought to be enough; but
obviously there are other things that have to be dealt with.
What other unique challenges are there that offshore wind
energy producers face?
Mr. Steve. Producing wind energy offshore is somewhat more
extensive than doing it on land. Just the process itself, the
specialized cranes that you need to get these facilities
placed. And essentially the way this is done is with large
concrete pads. Again, we are operating in shallow water, so you
will have a concrete pad which is filled with sand as well, and
then kind of sinks right into the--below the surface of the
water. So all these processes create a higher expense, but that
is balanced out by the fact that you can actually put a larger
windmill or wind turbine offshore--and we are talking in the
range of--the biggest ones on land right now would be
considered 1.5, say, to maybe 2 megawatts. And these get very
big. I mean, to the tip of the blade, we are talking about
higher than the Capitol building. That is pretty tall. But you
can do a 3-megawatt machine offshore, which you couldn't do on
land. It is kind of difficult. So in addition to that, so the
cost is going up; however, at the same time, you have, as we
said before, a much more sustained wind, stronger winds as
well, so you can actually produce more power out of each
windmill, meaning you need fewer of them.
Mrs. Cubin. How important is certainty to the industry in
permitting other--in permitting and other regulatory issues
that developers face?
Mr. Steve. That is very good question. The certainty is
absolutely vital. A developer needs to know as much as they can
about the requirements, both environmental and safety as well,
when they are going into this up front, because it can change
the whole economics of a project later on. So it is very
important to know that up front. And it also goes to the
issue--which I didn't delve into too much. But the wind energy
tax credit is another issue where we are always looking for
certainty, because investors want to know, if I put my money
down today, is that tax credit going to be there to help me out
a year and a half from now?
We are already facing it. We just got extended for 2 years,
and we are already facing another deadline coming up. So we are
hoping that the energy bill passes and that it contains an
additional 3-year extension of that provision. Certainty is
crucial.
Mrs. Cubin. Just overall in terms of acceptance of the wind
energy industry in the United States and financial
capabilities, bonding, just in general, what is the state of
the wind energy industry in the United States?
Mr. Steve. I would say we are doing pretty darn well right
now. What we are seeing is, as I said before, in the early
1980's, it was in one State and today we are in 29 States, to
varying degrees. But the best thing that we are seeing is that
throughout the whole Midwest there is significant development.
One of the most important things that happened to spur wind
energy development was when President Bush was Governor of
Texas, he signed a renewable energy requirement called the
Renewable Energy Portfolio Standard into law in the State of
Texas. That, coupled with the existing tax credit, has resulted
in a significant increase in wind energy development in Texas.
Last year, Texas alone saw over 900 megawatts--915 megawatts,
to be exact--of brand-new wind power going in. That is over 1
billion--with a B--$1 billion of economic investment in the
State of Texas.
Mrs. Cubin. Pretty good.
Mr. Steve. Yeah.
Mrs. Cubin. Are you working with the Interior Department to
develop a process to facilitate onshore wind energy projects on
Federal lands?
Mr. Steve. Yes. Actually, we have been working very closely
with the Bureau of Land Management, who--most people come to
Washington and they criticize the government. I can tell you
that our developers have been working very closely with folks
at the Bureau of Land Management who have been terrific to work
with. And that doesn't mean that they roll over and do what we
ask them to do; it means that they are looking for what--if we
do this, what is the practical effect of it? So that folks
don't have to come back later and change rules because somebody
did something that doesn't work out in reality.
It is a very good process. And what we are finding is that
the give and take of information has resulted--is resulting in
better rules which will probably be proposed for development on
Federal lands. And that is, again, something that the Secretary
put forward, Secretary Norton put forward, and folks in the
Department are acting on expeditiously.
Mrs. Cubin. So, other than the obvious issues, like birds
nesting and the Endangered Species Act and all of those things,
what sort of regulations are you expecting to have applied to
the industry in siting?
Mr. Steve. Specifically, two things. The first one is, you
want to avoid something that happened. You remember when all
these Internet Web sites were coming up and people were buying
up--speculators were buying up the names of Internet Web sites,
and then they would sell them later on for large amounts of
money? We don't want the same thing to happen with parcels of
Federal land, where nobody who has no serious interest in
developing wind power on Federal land buys up all these sites
and then sells them at a very high cost to developers. We want
to pay what is reasonable for them, but we don't essentially
want to pay ransom.
So essentially what is happening is that the Bureau of Land
Management is setting up the process where they say, stage one
is you pay a fee to actually monitor the winds on the land. You
don't have the rights to develop on that land yet, but you are
paying a reasonable fee for that.
Second, if you decide you want to gain access to those
lands, you have to pay a fee which is higher, perhaps something
in the range of $2,000 per parcel per year, and it may be
higher.
In addition to that, once a project goes in, the Federal
Government would gain revenues by not just payments for access
to the land, but also by essentially getting a cut of the
production of the energy as well.
Mrs. Cubin. One last question. What about decommissioning
these farms? Are you talking about bonding? Do you think that
will happen? I mean, what is the status on that?
Mr. Steve. Yeah. I think the Bureau of Land Management for
on-land development is looking at those kind of issues, the
bonding issues. Because certainly you don't--you wouldn't want
a developer to walk away from a property and then leave it
looking scarred. I mean, one would have to remove the bases or
whatnot. So that is an important consideration as well.
But what we usually find in the industry is people don't
walk away from the property, and they take very good care of
it. And essentially where you have older machines, what ends up
happening is people are knocking down the older, smaller
machines and replacing them with maybe one newer machine where
there had been 12 existing. So for those that don't like the
windmills, you are kind of reducing that visual aspect as well.
Mrs. Cubin. And as Director Burton testified, the
decommissioning of--or, this bill covers decommissioning of any
project that might be put out there as well.
Mr. Steve. Right. And we look forward to the same kind of
process with the Minerals Management Service that we have been
going through with BLM, Bureau of Land Management.
Mrs. Cubin. Well, thank you very much, Mr. Steve. I now
would like to recognize Mr. Inslee for questioning.
Mr. Inslee. Thank you very much. I want to show my
appreciation to the Chairwoman for holding this hearing. I
really appreciate her leadership and looking into this issue.
So thank you very much. I look forward to working with you on
this.
It is great to see you here, and I am very happy to see
your continued success and am very excited about moving forward
on wind throughout the country. And you may have talked about
some of these--I came in late; my apologies if I missed a
couple things. But why don't you brag a little bit about what
is happening in the State of Washington just for a minute?
Mr. Steve. Certainly.
Mr. Inslee. Just so everybody will know.
Mr. Steve. Well, we just had our biggest convention,
actually, annual convention. Over 2,000 people, believe it or
not, showed up for a wind convention. Unfortunately, it was in
Portland, Oregon, but it wasn't in Washington.
Mr. Inslee. We were close.
Mr. Steve. What we did do, though, is a lot of folks ended
up getting on buses and driving to the Columbia River Gorge
where the largest wind development really in the world is
taking place along the Columbia River Gorge. And it is referred
to as the State Line Project. Very profitable not only for wind
energy developers, but for landowners as well. Landowners are
getting in the range of 2- to $3,000 of rental payments from
developers per windmill per year for about 20 years. So a lot
of folks say--farmers ranchers--they say wait a minute, this is
a giant 401(k) on my property.
Mr. Inslee. We need those right now.
Mr. Steve. Yeah. I did hear somebody last night who said
401(k)s have turned into 201(k)s. But essentially this is a
real economic development tool for rural America and it
provides clean energy as well. There is very little downside,
except for the few folks who are going to say, hey, I just
don't like them.
Mr. Inslee. Tell me your thoughts about the necessity of a
specific legislative piece such as this bill that brings us
here today, as opposed to using existing statutory permitting
systems, existing statutory frame works. Do we need for sure
another piece to allow this to move forward? And, if so, what
are the most important aspects of that?
Mr. Steve. The two folks that are looking to do development
currently are working under existing law. But as we heard
earlier from Minerals Management Service, it is hard to jump
into a new area. Essentially, this is a new animal, offshore
windmills, and folks haven't looked at this before, so I think
it is important for the Federal Government to have some kind of
outline for how they are going to deal with these issues.
The one thing that we ask that I mentioned in my testimony,
please don't prejudice the folks who have been working on this
for 2, 3 years already, so if we have new requirements and
rules we don't send them back to square one after years and
many dollars investment. That is our biggest concern.
Mr. Inslee. There has been some thoughts expressed, or
concerns, about this legislation, that if we do move forward
with a separate piece, that we need to flush this out quite a
bit more in a variety of issues. Privatization of siting I
think is one issue we need to talk about on a national basis;
ability of input of local citizens. There are visual issues, of
course. People want some aspect of concern about fisheries
issues that probably at least need to be addressed.
Have you got any thought of how to put that in this
legislation specifically, or are we that far along yet?
Mr. Steve. I am not sure we are quite that far along, but
you put your finger on things that I hope all come up within
the process with the Minerals Management Service or whichever
agency ends up gaining authority over this area. I had
described the situation where we are currently working with the
Bureau of Land Management and we are finding that to be a very
good process. And they are not giving us everything we want. We
didn't expect that. But they are being very reasonable with us
and they are being sensitive to kind of learn our industry and
learn our concerns. So I am hoping to see the same thing in
this other agency. I am confident that we will.
Mrs. Cubin. Will the gentleman yield? I would like to
follow that because I agree those are very important issues. I
would like to have a follow-up question. Do you think that the
legislation needs to reflect dealing with those issues, or
should those issues be dealt with better by the MMS or by the
agency that this legislation would grant jurisdiction to?
Mr. Steve. If I understand you, are you asking specifically
about the concern about the transitional issues for existing
companies or the other issues as well?
Mrs. Cubin. No, the issues Mr. Inslee just discussed,
which all are very legitimate concerns. In your opinion, would
it be better to address those concerns in the legislation or to
have those concerns be dealt with by the MMS as they are now in
the Outer Continental Shelf, and by the BLM as they are now on
land?
Mr. Steve. I think my gut reaction would be--I will see
what the poll of my folks--but my gut reaction is I think we
are better off going through the process with the Agency so we
can kind of educate them as to what our concerns are, the same
way we have been doing with the Bureau of Land Management.
Mrs. Cubin. Thank you, Mr. Inslee, for yielding. Please
proceed.
Mr. Inslee. By the way, this is kind of an editorial
comment. I just want to tell you how much I appreciate in
general what your industry is doing. And the reason is, in the
last year--in fact we were on one research project in this
regard--I saw such a need for development of this resource
where we have this huge drought in the West that is associated
or could be associated with global warming. We have tundra
melting in the Arctic. We have research showing that the
glaciers are retreating in Alaska twice as fast as anybody
thought. The glaciers in Glacier National Park may be gone in
100 to 150 years.
We have a real global warming issue, and I just want to
thank you for the leadership your industry is showing in
finding one piece of the puzzle in how to do that. I want to
give you encouragement in this regard, and that is why I think
this is important legislation to deal with.
Just one last question. As far as new breakthroughs in
technology in your industry, what are we looking at?
Incremental changes? Is there another plateau to hit?
Mr. Steve. There is definitely another plateau. What we
have seen is the cost of wind power come down by almost 90
percent since the early 1980's, to the point where at one point
it was about 45 cents a unit of energy a kilowatt hour. Now we
are in the range, with the production tax credit of, say, 5 to
6 cents per kilowatt hour, even less at the better wind sites.
So what we are constantly doing is we are constantly trying to
bring down the cost of that power even further, working with
the Department of Energy to do that. So that is why research
and development dollars are really important.
The one most important thing we are working on with the
Department of Energy is this concept of a lower-speed wind
turbine. Sounds kind of wonky, but the idea is if you can put
windmills or wind turbines in areas that aren't the highest
wind speed areas, what you can do is you can certainly get to
other parts of the country and you can get closer to where the
power is needed.
Right now, for example, the States of North Dakota and
South Dakota, tremendous potential to produce wind energy,
tremendous potential. North Dakota--the top 20 States for wind
power potential, North Dakota is number 1, Texas is number 2,
South Dakota number 3. Why is it happening in Texas and not
North Dakota and South Dakota? Because of what President Bush
did as Governor with the renewable portfolio standard in the
State that really busted open the market in Texas, plus the tax
credit. North Dakota and South Dakota don't have the
transmission capability to move the power where it is, or where
it can be generated, to where it is needed. If you can do a
lower wind speed turbine, you can get into other areas that are
closer to what they call "load centers" or essentially where
the power is needed-- .
Mr. Inslee. Is it the transmission cost or just the lack of
previously developed transmission capacity?
Mr. Steve. Lack of transmission capacity. And that is a
problem not just for wind, but for all generation--coal,
nuclear, demand keeps growing.
Mr. Inslee. Where are we in potential big wind development
in the Dakotas where the big new distribution system coupled
with it? Is anybody really thinking in those terms or not.
Mr. Steve. There are a lot of folks thinking about it and
starting to work on it now, but this is not something that is
going to have a 6- or 12-month fix. This is going to be a
multiyear fix because it affects everybody. And talk about "not
in my back yard," people like windmills a heck of a lot more
then they like giant transmission lines. So there is other
technology involved there. 3M is experimenting with--they have
a product actually which is a higher-tech transmission line.
Essentially you can get more water through the hose so you can
restring existing lines, but this is not in wide use today. So
it is a partial fix, but you still have to do more building of
lines as well. It is a long-term problem but a lot of folks are
working on it.
Mr. Inslee. Thank you very much. Thank you, Madam Chair.
Mrs. Cubin. Thank you. Another thing I think is really
essential that we are going to need to do as leaders is figure
out how we can convince one another and our constituents to
limit consumption as well, because as we face all of these
problems like, you know, we are talking about not in my back
yard, transmission lines, turbines and whatnot, our consumption
is excessive as well. So that is another part of the
educational process we have to take.
Mr. Steve, thank you for your testimony and answers to your
questions. And thank you, Mr. Inslee, for being here. Before
you arrived, I expressed my disappointment that no one from
your side was here. So I appreciate your participation.
So, since there is no more business in front of the
Subcommittee, the Subcommittee on Energy and Minerals is
adjourned.
[Whereupon, at 3:10 p.m., the Subcommittee was adjourned.]
[Additional statements submitted for the record follow:]
Statement of Douglas Yearley, Executive Director on Behalf of The
Alliance to Protect Nantucket Sound
Ms. Chairwoman.
Thank you for the opportunity to submit these comments on H.R.
5156. I am Douglas Yearley, Executive Director of the Alliance to
Protect Nantucket Sound, a recently-formed coalition with the objective
of protecting the important environmental, scenic, cultural and
economic values of Nantucket Sound. The Sound includes offshore areas
owned both by the Commonwealth of Massachusetts and the federal
government. The Alliance is composed of a diverse mix of business,
local government, fishing, environmental and other interests, with the
common purpose of ensuring that development does not occur in the Sound
that would destroy the unique values and natural beauty of this
national treasure. Indeed, the Sound is a designated ``marine protected
area'' under Massachusetts law and the Executive Order issued by
President Clinton, and subsequently endorsed by President Bush.
The Cape Wind Project
While the interests of the Alliance are long-term and broad-based,
an immediate threat has galvanized our organization. Specifically, this
is the Cape Wind Project, which proposes to construct what would be the
largest wind energy plant in the world in the middle of the Nantucket
Sound. It is important for this Committee to have a sense of the scale
of this project and how serious its impacts will be. Cape Wind's
industrial facility would consume 28 square miles of the outer
continental shelf (OCS) in Nantucket Sound. The project would include
170 wind towers, each of which would be 425 feet tall. We believe this
project has significant potential to cause serious damage to the most
basic values of the Sound. This includes adverse affects on endangered
species, migrating birds, marine mammals, and commercially valuable
fish; creates threats to navigation and air traffic, including national
security flights; threatens significant declines in property values,
tourism, and tax revenue; and harms recreational activities and scenic
values. All of these adverse impacts would be caused by a project for
which there is no clear energy demand in the region, and for which a
variety of public subsides would be required.
While the Alliance, and the diverse interests and individuals who
support it, share the public policy goal of increasing alternative and
renewable energy as a part of our total energy supply, this general
goal simply does not offset or justify the negative impacts of a
project on this scale and in this location. Nor, as I shall explain,
does it in any way legitimize the rush to develop this site, without
adequate consideration of other, more suitable locations, and in the
absence of any federal law providing the authority even to build the
project.
This proposed project intersects with H.R. 5156 in the following
way. The Administration and the Chairwoman of this subcommittee have
correctly recognized that no legal authority exists to convey the
federal property rights which are mandatory to allow this project to be
developed. Equally important is the complete lack of a comprehensive
federal program to articulate standards for decision making, to set
environmental rules, to impose rent, or even to designate a lead
agency. In the meantime, in addition to Cape Wind, other wind energy
projects are being proposed in this region. Thus, the need for
Congressional guidance is clear.
Despite this absence of legal authority, Cape Wind is proceeding to
move the project forward with the assistance of one federal agency in
particular, the Army Corps of Engineers (COE). Cape Wind intends to
build this huge energy project in an offshore area owned by the federal
government simply on the basis of two permits under Section 10 of the
Rivers and Harbors Act, which has the important but narrow role of
permitting potential obstructions to navigation. One permit application
is for a single scientific data gathering tower, and a second permit
application, believe it or not, is for the entire 170-tower wind energy
project.
Remarkably, even with the admitted knowledge that no federal
authority exists to build the project on the federal OCS, and that a
Section 10 permit conveys no property rights whatsoever, the COE has
moved expeditiously to process the permits, including undertaking the
preparation of a major environmental impact statement under NEPA for
the 170-tower project. The COE explanation, conveyed directly to me and
other Alliance representatives is, to paraphrase - ``We get a permit
application; we process it.'' Such a single-minded approach by the COE
ignores the larger and more difficult issues that are presented by the
lack of legal authority, or the existence of any federal program, for
such a huge energy project in our valuable offshore waters. While the
COE has expressed its own doubts about processing the permits (at the
recent hearings of the U.S. Commission on Ocean Policy), and makes
clear that no property rights whatever are conveyed in a Section 10
permit, it nonetheless overcame its institutional misgivings, and
undertook a full EIS process for 170 wind towers, despite the fact that
the federal government has no authority for this project.
The Need for a Comprehensive Program and a Moratorium
Those larger questions of law and policy have now been framed even
more vividly by the appearance of numerous additional wind energy
projects that are proposed for the OCS off the southwest coast of
Nantucket Island. If the COE follows its narrow ``receive a permit;
process a permit'' approach for one or more additional projects, which
cannot be built under present law, it will have contributed to the
creation of an ``open to entry'' approach to the use of federal
offshore resources for energy development. And it will have done so
without adequate review, without meaningful standards, and without
revenue return to the federal government.
Such an applicant-driven program, called an ``over-the-counter''
program in some states, puts the federal government, the adjacent
state, and all affected interests, including local and regional
regulatory bodies already strapped for resources, in the position of
always responding to the initiative and pressures of a project sponsor,
one at a time. Such sponsors relentlessly press for quick decisions on
a specific location of their choice which, as in the case of Nantucket
Sound, may not be an appropriate place to develop such a project at
all. This ``open-to-entry'' pressure is just what is happening with
Cape Wind. Such project-driven programs to commit public land or other
resources to private development may work for selected, unique, and
smaller projects, like a single offshore platform for a support
function, or a right of way for an underwater transmission line.
Congress has recognized previously, however, that such a ``permit on
demand'' approach does not work for larger nationwide programs like
geothermal or oil and gas, which require vast tracts, in different
regions, and which, because of the presence of rich resources in
certain locations, should involve competition for a site. Clearly, the
permit by permit approach is the wrong one for the large-scale wind
energy projects which are proliferating. A comprehensive federal
program is essential, rather than an open to entry land rush.
A comprehensive program for developing federal resources or for
using federal offshore tracts is proactive, positive, and best protects
the public interest. A good program should, among other purposes,
encourage wise and needed energy development, guarantee a fair return
for the taxpayers, set uniform standards for environmental protection,
and provide extensive state, local and public participation in the
process. Moreover, because of the importance of these public policy
objectives, there is a real need to put a hold on all such development
until a comprehensive program is enacted. If this is not done,
important resources, such as Nantucket Sound, could be sacrificed.
We recognize and appreciate that H.R. 5156 addresses the reality
that no authorization now exists under which any federal agency may
grant and condition legal rights to develop resources on the OCS, other
than those already authorized under the Outer Continental Shelf Lands
Act (OCSLA). The new offshore uses which are being proposed are
currently without federal legal authorization, despite their extensive
and significant impacts, and the value of the taxpayer owned resources
they will use. These unauthorized uses include not only the wind energy
projects I described, but also the construction of platforms and
transmission systems for liquid natural gas (LNG) gasification
projects, electric transmission lines, pipelines and cables, oil
storage platforms, and other offshore industrial facilities. Without a
doubt, such intensive uses of the federal OCS call for a comprehensive
and thoughtful program. Specifically, there should be a leasing program
for certain uses, for which the best general model available in our
current system of laws is the OCSLA itself.
H.R. 5156 and the OCSLA Model
For these reasons, the Alliance applauds the intent of H.R. 5156 to
provide much needed authority for new energy-related uses of the
federal OCS. The Alliance cannot, however, support passage of the bill
unless it is substantially amended to provide for the sort of overall
program and standards that are included in the OCSLA and its
legislative history. The OSCLA is a law that has evolved since 1953 to
provide a balanced federal program intended to encourage the
development of federal oil and gas, and mineral resources on the OCS.
Because of the OCSLA, this development has proceeded on terms that
ensure the balanced protection of the public interest, affected local
governments, and the significant participation of states, which, after
all, are the owners of offshore land up to three miles from shore. As
introduced, H.R. 5156 amends only Section 8 (43 U.S.C. Sec. 1337) of
the Outer Continental Shelf Lands Act. Beyond this, H.R. 5156 makes no
reference to the OCSLA, almost as if the application of the OCSLA
principles is being avoided. To the contrary, H.R. 5156 would be a
significantly more credible bill if it included many OCSLA provisions.
Respect for the role of states runs throughout OCSLA, and other
laws regulating the use of outer continental shelf, such as the Coastal
Zone Management Act. Federal laws for offshore and marine resources
reflect this respect by recognizing that the three mile limit of state
ownership must be regarded with flexibility so that states, localities
and federal agencies can work together to provide the best management
of the resources.
While H.R. 5156 is well intended in its creation of authority for
the Secretary of Interior, the problem is that, because of the
generality of the delegation of authority in the bill as introduced,
the Secretary is given too little guidance as to the details of the
program to be created. In addition, H.R. 5156 fails to give a proper
role to agencies with responsibility over marine resources, such as the
National Oceanic and Atmospheric Administration.
The following specific areas must be addressed if H.R. 5156 is to
provide a credible foundation for new offshore energy development, as
it appears intended to do.
Recommendations
Although this testimony does not include specific language for
amendments to H.R. 5156, the following points should be covered by
amendments if the legislation is to provide a level of authority,
guidance and protection of the public interest, similar to the OCSLA.
First, it is essential that any new authorization, such as H.R.
5156, that would allow a broad range of new, energy uses on the OCS, is
based, at least in large part, on a programmatic approach relying on
leases, rather than a permit-to-permit, ``open-to-entry'' approach to
the commitment of federal property interests for project development.
Where 28 square miles, or more, of the OCS is committed to intensive
permanent energy development, the federal government should not be
permitting one project at a time. Rather, it must develop a serious and
comprehensive program that applies to all projects.
Descriptions of such a program are scattered throughout the OCSLA
and other federal laws, but the central description of the OCS program
is in 43 U.S.C. Sec. 1344. Section 1344 directs the Secretary to
prepare, periodically revise, and maintain a leasing program for
offshore oil and gas, and minerals that implements the policies set out
in the Act. The program is specified to be conducted in a manner that
considers economic, social and environmental values of both renewable
and non-renewable resources contained in the OCS, as well as the
potential impact of oil and gas exploration on other resource values
including the marine, coastal and human environments. The program is
based on a broad range of existing information regarding developmental
benefits and environmental risks among regions of the country, so that
the risks and benefits may be equitably shared. The program must also
fully consider other uses of the sea and seabed, including
conservation, fisheries, and navigation.
Such a programmatic approach can give full and fair attention to
corporate project sponsors by comprehensively studying various areas
for the significance of their resources, including wind resources, and
seeking nominations for those areas that are most favored by industry.
It also should allow for certain areas to be excluded, where for a
variety of reasons, development would not be appropriate. Any
nominations can be balanced against other factors that would include
competing resource and economic values in the area, the nature of
federal or state protection of the marine resources in the area, the
opinions of the adjacent state and local governments, and other
factors. Such a process is intended ultimately to make available for
development those areas which have high potential for energy
production, but which present few conflicts for enabling the
development to occur. This is exactly the sort of program that has
evolved with respect to offshore oil and gas development. It is also
the sort of program that led to the decision not to lease and develop
some areas off of Alaska, Florida, California and New England, despite
the industry's belief, that promising resources were there. It is
essential that a similar program be instituted for the new offshore
energy uses authorized by H.R. 5156.
Second, this program should not be vested exclusively in the
Department of the Interior. These projects will dramatically affect
marine resources, and joint authority should be shared with the
Department of Commerce through NOAA.
Third, such a program must have respect for, and provide for the
substantive involvement of states, local governments and the public, in
each area for which new offshore energy development is proposed. Among
other provisions, 43 U.S.C. Sec. 1344 and Sec. 1345 set out important
standards directing that the federal program be fully cooperative with
adjacent states. These provisions include not only coastal zone
management planning, but also involve the states in the federal
offshore development planning process. They establish the right of
states to submit recommendations to the Secretary regarding the size,
timing or location of a proposed project or lease sale. The Act also
permits a state to recommend areas that should not be eligible for
leasing. In essence, much of the success of the offshore oil and gas
leasing program is due to the fact that the consultative process
eliminates areas where state-federal conflict is likely to forestall
development, even if leases are issued. H.R. 5156, in contrast,
provides only general direction for state consultation and fails to
detail a role for states, local governments or the public.
The legislation also must authorize an ongoing program of
environmental studies to identify areas where alternative energy
resources, like wind, are greatest. The studies must also assess the
environmental effects of developing those resources. Such a program, as
directed in 43 U.S.C. Sec. 1346, has been established and maintained
for many years with respect to offshore oil and gas. The same type of
program, specifically modified to address alternative energy
development, could serve as a basis for an alternative energy
environmental studies program. The goal is a successful long-term
approach to alternative energy development, not a rush to get the first
project expedited on any terms.
Fourth, a fair return for taxpayers is addressed only in the most
general terms in H.R. 5156. The bill, as introduced, directs the
Secretary only to establish ``reasonable forms of annual or one-time
payments for any easement or right-of-way granted.'' It also authorizes
negotiated arrangements with the party to whom the easement or right-
of-way is granted. The one-time payment and negotiated arrangement
approach is typical of right-of-way and easement grants, for single
facilities or for very defined and limited land-uses. Such a one-time
fee payment approach is, however, totally unsatisfactory for large
projects that consume a great deal of land or resources, and for which
the taxpayers deserve a market value return and a marketplace approach.
In contrast, under the OCSLA, federal leases are sold competitively to
the highest bidder, an approach which is made possible by the fact that
leasing of tracts occurs only after a plan has been developed that
identifies high priority areas in which more than one bidder will be
interested. This is far preferable to a ``first come, first served,
let's make a deal'' approach. 43 U.S.C. Sec. 1337. A fair return for
taxpayers can be accomplished for alternative energy development, but
not under the open-to-entry approach that H.R. 5156 presents. At the
very minimum, H.R. 5156, or any bill intending to provide authorization
for new energy-related uses of the OCS, should direct that competitive
bidding be treated as a preferred approach to be used, unless there is
justification not to do so. High resource value areas, either for
industrial wind projects or pipeline rights of way, should be
competitive where possible. Otherwise, public resources will be
negotiated away, and sold for single payments at levels that do not
return to the taxpayers the fair market value of the valuable resource
rights that are conferred. The development of alternative or renewable
energy resources is a good objective, but not at any price,
particularly considering the other subsidies that are provided.
Neither Cape Wind, nor other alternative energy proposals, are
``public service projects'' undertaken by non-profit organizations. The
project may provide cleaner electric generation, but the projects are
private, for-profit enterprises by corporations; they create other
environmental impacts, and they are based on the use of taxpayer-owned
resources, just like oil and gas. This is precisely what is happening
now in Nantucket Sound and is another reason that an immediate
moratorium must be imposed on the permit speculators until authority
and standards are established by Congress.
Fifth, H.R. 5156 fails to provide for specific environmental
standards. As the Cape Wind Project demonstrates, these projects have
the potential to be very damaging to the environment. Any authorization
for such a program must establish detailed standards for environmental
review, including prohibitions on locating any such project in areas
designated as sanctuaries or protected zones under state or federal
law.
Other issues that must be resolved in any bill establishing new
authority for alternative energy uses for the OCS include the
following:
The authorization should contain provisions, such as
those in 43 U.S.C. Sec. 1347, providing for safety and health
regulations including the use of best available and safest economically
feasible technologies. No such provision exists in H.R. 5156, in spite
of the potential for such problems in LNG operations, oil storage and
even wind energy facilities.
The authorization should incorporate 43 U.S.C. Sec. 1349,
to provide rules for citizen suits challenging program decisions and
dealing with significant jurisdictional issues. No such provision
exists in H.R. 5156.
The issue of separating leasing and development
decisions, as OCSLA does with respect to OCS oil and gas, should be
fully considered and applied where appropriate. H.R. 5156 contains no
such provisions, and in the limited hearings afforded to this
legislation, there was no way in which this option could be explored.
The point is that the separation of leasing and development into two
phases makes sense in certain situations, and it affords states an
added opportunity to review the specific plans for development before
it proceeds.
There are numerous other features of the OCSLA that would be
desirable for inclusion in a bill authorizing alternative energy uses
on the OCS. These features include the requirement of annual program
reports, as well as regular reports on human and budgetary resources
needed to carry out a credible program that will make a contribution to
the nation's energy supply, while protecting the environment and other
significant interests.
Perhaps no element of the OCSLA demonstrates the differences
between the approach of H.R. 5156, and the approach taken by the
Congress for the offshore oil and gas program than does 43 U.S.C.
Sec. 1332. This section is an impressive declaration of policy by the
Congress with regard to petroleum and mineral development on the
federal OCS, and confirms that it will occur only in balance with other
significant interests, including environmental protection and state and
local government involvement. It is unclear why H.R. 5156 did not
incorporate such a declaration of policy or reference Section 1332 at
all.
Comments on Other Testimony
In addition to the points made above supporting comprehensive
legislation to authorize the new alternative energy uses proposed on
the OCS, it is also necessary that we comment on some elements of the
testimony given on behalf of the American Wind Energy Association.
First, this testimony asks that any rules that may flow from
passage of H.R. 5156 ``be sensitive'' to the financial investments in
potential offshore projects made prior to enactment of the legislation.
The Association is concerned, as it said, about projects that have
already begun being ``disadvantaged by new rules and requirements'' or
``unnecessarily delayed'' by whatever system Congress ultimately
chooses to put in place to manage these new uses of the outer
continental shelf.
This position essentially stands reason on its head. It asks that
the speculative corporate developers who proceeded to invest in and
force consideration of projects, in a legal setting that clearly does
not provide authority for such projects, should actually be rewarded
for the attempt. Just the opposite is called for; not only should such
``transitional relief'' not be granted to those who were presumptuous
enough to assume that they could begin these developments without legal
authorization, but a moratorium should be placed on all federal
agencies from processing such permits to avoid creating even a
suggestion of such grandfathered rights to proceed free of the
constraints of a new program.
Similarly, in a short section entitled ``Interconnection,'' the
Association expresses its concern that if a current or future project
gains approval and begins construction, that there be an ``orderly
process'' to ensure the project can connect to electric substations and
distribution lines on the mainland. While no one can oppose an
``orderly process,'' and we do not, our concern is that this is
``code'' for the preemption of legitimate state and local rights with
respect to rights-of-way across state offshore lands or local planning,
zoning and utility location requirements. This would amount to an
extraordinary breach of the federalism concepts so long championed by
this Committee.
Essentially, what the Association appears to have in mind here is a
totally federalized program for alternative energy projects that
preempts legitimate state and local prerogatives. That kind of federal
overreaching should not be tolerated by this Congress. In essence, any
bill that is passed to establish a new program for granting and
conditioning rights for alternative energy development on the OCS
should be fully applicable to all proposals, whether underway or not,
and should be deeply respectful of the prerogatives of state and local
governments, avoiding federal preemption in all cases. Those who invest
prior to the existence of such authority should do so at their own
risk.
Conclusion
The Alliance to Protect Nantucket Sound recognizes, as do the
sponsors of H.R. 5156, that no authority currently exists for the
federal government to grant property rights for the OCS to develop
alternative energy, or for other energy activities, which are not
already authorized by the OCSLA. We have already learned from the
emerging wind energy project proposals that these developments can be
of immense scale and impact. Fully recognizing the general and long-
term value of alternative or renewable energy, offshore projects of
this type must be undertaken. But they will be most successful if done
through a comprehensive program incorporating virtually all of the
elements that are already delineated in the OCSLA. This is the
approach, not the ``give me my project now,'' approach, that will truly
get renewable energy institutionalized over the long-term.
If the motivation for introducing H.R. 5156 at this late point in
the 107th Congress is simply to get the issue on the table and to pave
the way in the next Congress for the comprehensive committee
consideration which is necessary to enact such authority, then we
applaud the sponsors for their foresight. However, if the intent is to
ask this Congress to pass hastily a very general authorization that
allows these new uses of the OCS to occur without any of the safeguards
and process that are applied to federal oil and gas leasing and
development, we think every coastal state, local government, business
or interest group should be concerned. The Alliance clearly opposes
such an approach. All who care about the manner in which the offshore
areas of our country are developed should oppose this legislation until
it is amended to cover the points that are outlined in this testimony.
The Alliance will work constructively with the Congress to achieve
legislation that provides for the development of new offshore energy
resources in balance with all of the other factors which are involved.
We trust that such a program, properly administered, is more likely
than not, to determine that a site such as Nantucket Sound should never
be chosen for a project like Cape Wind. The outcome on this
authorization raises issues which go well beyond one project and one
location. Thank you again for this opportunity to submit comments.
______
Statement of Dennis J. Duffy, Vice President, Regulatory Affairs, Cape
Wind Associates, LLC
1. Introduction of Cape Wind.
Cape Wind Associates is developing the nation's first offshore wind
farm, which will be located in waters subject to Federal jurisdiction
some five miles off the coast of Massachusetts. It will be capable of
generating 420 mw of clean and renewable energy. The Cape Wind project
has been under development at considerable effort and expense, and the
applicable permit application under existing Federal law was filed with
the Army Corps of Engineers (ACE) last fall. A protocol for coordinated
review of the Project by Federal and State agencies has been agreed
upon and a comprehensive joint review process is now well underway. The
project has received strong support from the region's leading
environmental and ratepayer advocates (including MASSPIRG, Greenpeace,
Union of Concerned Scientists, Cape Clean Air, the Massachusetts Energy
Consumers Alliance and the Massachusetts Climate Action Network), as
well as endorsements from the editorial pages of The Boston Globe, The
Boston Herald, and The Providence Journal. (More comprehensive project
information is available on our website at www.capewind.org.) As other
commentators on H.R. 5156 have noted, offshore wind energy represents a
tremendous potential for enhancing the Nation's supply of clean and
renewable energy, and we welcome any initiative to streamline and
expedite the necessary approval process.
2. General Comments on H.R. 5156.
We very much appreciate the initiative of the Minerals Management
Services in sponsoring legislation with the stated purpose of ``to
simplify permitting for energy production in an environmentally
sensitive manner'' consistent with the Secretary of Interior's goal of
facilitating renewable energy projects. We think that MMS could add
meaningful expertise and experience to the current regulatory process,
and applaud all efforts to expedite clean energy projects. As noted
below, however, we do have several particular concerns with the Bill
and thus propose revisions that would preclude any potential for
inadvertently adverse effects upon ongoing offshore renewable projects.
3. The Current Process for Permitting Offshore Wind Projects.
As an initial matter, consideration of H.R. 5156 requires a clear
understanding of the current regulatory treatment of renewable energy
projects on the outer continental shelf (OCS), a matter on which there
is often some confusion. Under current International and Federal law,
any such project requires the affirmative prior authorization of the
United States. Such authorization is given in the form of a permit from
the Army Corps of Engineers under Section 10 of Rivers and Harbors Act.
The ACE's powers under Section 10 have been held to constitute the
``affirmative authorization'' of proposed structures pursuant to
delegated Congressional authority. Pursuant to such provisions, ongoing
OCS wind energy projects are subjected to comprehensive review under
the regulations of the ACE and require the preparation of a Federal
Environmental Impact Statement pursuant to the NEPA. Indeed, the
following provisions of the ACE's regulations (33 CFR Sec. 325.3(c))
confirm the comprehensive scope of the currently required permit
proceedings:
The decision whether to issue a permit will be based on an
evaluation of the probable impact including cumulative impacts
of the proposed activity on the public interest. That decision
will reflect the national concern for both protection and
utilization of important resources. The benefits which
reasonably may be expected to accrue from the proposal must be
balanced against its reasonably foreseeable detriments. All
factors which may be relevant to the proposal will be
considered including the cumulative effects thereof; among
those are conservation, economics, aesthetics, general
environmental concerns, wetlands, historic properties, fish and
wildlife values, flood hazards, floodplain values, land use,
navigation, shoreline erosion and accretion, recreation, water
supply and conservation, water quality, energy needs, safety,
food and fiber production, mineral needs, considerations of
property ownership and, in general, the needs and welfare of
the people. (Emphasis added.)
Id. The recently issued scoping order of the Massachusetts Secretary of
Environmental Affairs confirms the comprehensive range of issues now
under review in Cape Wind's ongoing permit proceeding, and such order
concludes that ``Cape Wind holds out the prospect of making
Massachusetts a worldwide leader in renewable energy production'' and
that ``the project represents the hope for a cleaner and more
sustainable energy supply through application of innovative and simple
technology.
There is, however, no express provision under current law for the
payment of royalties or other fees to the Federal government in
connection with non-extractive renewable energy projects on the OCS. In
contrast, in the case of the extraction of undersea oil, gas and
minerals, the Outer Continental Shelf Lands Act (OCSLA) provides for
royalty payments to the Federal government pursuant to ``mineral
leases'' for the extraction, purchase and sale of submerged deposits.
In this regard, current law treats offshore wind energy projects in a
manner more comparable to the treatment of offshore thermal energy
projects. In recognition of the special policy benefits and challenges
of developing new renewable energy sources, the Ocean Thermal Energy
Conversion Act (42 USC 9101) provides for the Federal permitting of
thermal energy projects on the OCS, but does not require any lease
payments or royalties to the Federal government. To the contrary, such
act makes available certain financial assistance for the construction
and operation of ocean thermal energy facilities.
4. This Bill Should Include Transitional Recognition of Pre-Enactment
Offshore Investment.
While we support the initiative to streamline the current process,
we are concerned that, in its current form, the proposed amendment to
the OCSLA could introduce uncertainty and inadvertently delay the
development and financing of those ongoing renewable energy projects
that have already made major investments and that have permit
applications pending in compliance with current law. Accordingly, we
believe that the legislation should include some provision for the
recognition and transitional treatment of such ongoing projects so as
to avoid the possibility of such an unintended adverse result. Federal
and international law have in the past afforded recognition and
transitional treatment of investment in offshore developments
undertaken prior to the effective date of new regulatory and
legislative regimes. For example, when the United Nations Law of the
Sea Conference adopted new protocols for minerals mining operations
beneath the high seas, it included specific transitional protections
for ``preparatory investment in pioneer activities,'' i.e., development
activities undertaken prior to the effectiveness of the new protocols.
See, UNCLOS, Art. 308, Sec. 5. Further, when Congress adopted
corresponding provisions in the Deep Seabed Hard Mineral Resources Act
(P.L. 96-283, 30 U.S.C. 1401, et seq., the ``Act''), it similarly
included specific recognition of offshore developments and investments
that had been undertaken by United States citizens, and articulated the
following Federal policy objective of assuring the ``security of
tenure'' of such pre-enactment activities:
It is the intent of Congress [that]...any international
agreement to which the United States becomes a party should, in
addition to promoting other national oceans objectives--
,...provide security of tenure by recognizing the rights of
United States citizens who have undertaken exploration or
commercial recovery under title 1 [30 U.S.C. Sec. Sec. 1411, et
seq.] before such agreement enters into force with respect to
the United States, to continue their operations under terms,
conditions, and restrictions which do not impose significant
new economic burdens upon such citizens with respect to such
operations with the effect of preventing the continuation of
such operations on a viable economic basis...
30 U.S.C. 1441 (emphasis added).
Pursuant to such statutory provisions, the National Oceanic and
Atmospheric Administration (``NOAA'') subsequently adopted regulations
that provide transitional protections and ``priorities of right'' for
offshore projects commenced before the effective date of the Act. See,
15 CFR Part 970, Subpart C (``Procedures for Applications Based on
Exploration Commenced Before June 28, 1980''). Such regulations
established a procedure whereby a United States citizen who had engaged
in substantial offshore mineral development before the effective date
of the Act ``qualifies as a pre-enactment explorer'' and is thereby
allowed to continue to engage in such exploration, with procedures ``to
receive a pre-enactment explorer priority of right'' for the issuance
of a mining license pursuant to the Act. See, Id. at Sec. 970.301. Such
regulations also provided a specific window within which pre-enactment
developers are afforded a ``priority of right'' to the area of such
development, as follows:
Effect on Priority for New Entrants. (1) A pre-enactment
explorer is entitled to a priority of right over a new entrant
for any area in which the pre-enactment explorer has engaged in
exploration prior to June 28, 1980 if, with respect to that
area, the pre-enactment explorer files an application in
accordance with this part on or after January 25, 1982 and on
or before the closing date for pre-enactment explorer
applications established under Sec. 970.301(b).
15 CFR Sec. 907.302(m). The rationale for such transitional provisions
applies with equal force to any proposed amendment of the OCSLA under
H.R. 5156 respecting renewable energy projects. The addition of
comparable transitional provisions to H.R. 5156 would also avoid
potential delays and financial uncertainties and thus be consistent
with Federal policy as reflected in Executive Order 13212, ``Actions to
Expedite Energy-Related Projects,'' as well as the general charge of
the White House Task Force for Energy Project Streamlining.
5. If New Fees and Charges for Wind Energy Projects are Assessed
Pursuant to H.R. 5156, They Should Not be so Large as to
Counteract Current Economic Incentives for Renewable Energy
Projects.
We also think it very important that, if any new fees for wind
energy projects are to be payable to the government under H.R. 5156,
they should not be set so high as to discourage investment in this new
and developing industry, which still has levels of introductory risk
and uncertainty that do not exist in the well-established oil and gas
industries. It would also seem reasonable to assure that any new fees
do not unduly offset the economic incentives provided by the production
tax credit and other current programs, and do not put offshore wind at
a disadvantage to other generating technologies. As noted above the
Ocean Thermal Energy Conversion Act provides for the Federal permitting
and financial assistance of offshore facilities without the requirement
of royalties or fees.
6. Conclusion.
For the foregoing reasons, we applaud initiatives to expedite and
facilitate offshore renewable energy in areas of the OCS that are
subject to the jurisdictions of the United States. It is important,
however, that any proposed legislation contain provisions for the
recognition and transitional treatment of pre-enactment investments
undertaken pursuant to current law, with particular emphasis on
avoiding any cloud of uncertainty that could impede project financing.
Finally, if new fees are to be assessed to ongoing OCS renewable energy
projects pursuant to some legislative change, it is critical that the
amount be (i) determinable as soon as possible and (ii) not so large as
to offset the currently effective economic incentives for the
developing offshore renewable energy industry.
Thank you for your consideration and please feel free to call if
you should have any questions or comments.
______
[An Email communication from Captain Wayne Genther
follows:]
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