[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]




 
  RENEWABLE ENERGY OPPORTUNITIES AND ISSUES ON THE OUTER CONTINENTAL 
                                 SHELF

=======================================================================

                        JOINT OVERSIGHT HEARING

                               before the

                  SUBCOMMITTEE ON FISHERIES, WILDLIFE
                               AND OCEANS

                             joint with the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                        Tuesday, April 24, 2007

                               __________

                           Serial No. 110-19

                               __________

       Printed for the use of the Committee on Natural Resources



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                     COMMITTEE ON NATURAL RESOURCES

               NICK J. RAHALL II, West Virginia, Chairman
              DON YOUNG, Alaska, Ranking Republican Member

Dale E. Kildee, Michigan             Jim Saxton, New Jersey
Eni F.H. Faleomavaega, American      Elton Gallegly, California
    Samoa                            John J. Duncan, Jr., Tennessee
Neil Abercrombie, Hawaii             Wayne T. Gilchrest, Maryland
Solomon P. Ortiz, Texas              Ken Calvert, California
Frank Pallone, Jr., New Jersey       Chris Cannon, Utah
Donna M. Christensen, Virgin         Thomas G. Tancredo, Colorado
    Islands                          Jeff Flake, Arizona
Grace F. Napolitano, California      Rick Renzi, Arizona
Rush D. Holt, New Jersey             Stevan Pearce, New Mexico
Raul M. Grijalva, Arizona            Henry E. Brown, Jr., South 
Madeleine Z. Bordallo, Guam              Carolina
Jim Costa, California                Luis G. Fortuno, Puerto Rico
Dan Boren, Oklahoma                  Cathy McMorris Rodgers, Washington
John P. Sarbanes, Maryland           Bobby Jindal, Louisiana
George Miller, California            Louie Gohmert, Texas
Edward J. Markey, Massachusetts      Tom Cole, Oklahoma
Peter A. DeFazio, Oregon             Rob Bishop, Utah
Maurice D. Hinchey, New York         Bill Shuster, Pennsylvania
Patrick J. Kennedy, Rhode Island     Dean Heller, Nevada
Ron Kind, Wisconsin                  Bill Sali, Idaho
Lois Capps, California               Doug Lamborn, Colorado
Jay Inslee, Washington
Mark Udall, Colorado
Joe Baca, California
Hilda L. Solis, California
Stephanie Herseth Sandlin, South 
    Dakota
Heath Shuler, North Carolina

                     James H. Zoia, Chief of Staff
                   Jeffrey P. Petrich, Chief Counsel
                 Lloyd Jones, Republican Staff Director
                 Lisa Pittman, Republican Chief Counsel
                                 ------                                

             SUBCOMMITTEE ON FISHERIES, WILDLIFE AND OCEANS

                MADELEINE Z. BORDALLO, Guam, Chairwoman
     HENRY E. BROWN, JR., South Carolina, Ranking Republican Member

Dale E. Kildee, Michigan             Jim Saxton, New Jersey
Eni F.H. Faleomavaega, American      Wayne T. Gilchrest, Maryland
    Samoa                            Cathy McMorris Rodgers, Washington
Neil Abercrombie, Hawaii             Bobby Jindal, Louisiana
Solomon P. Ortiz, Texas              Tom Cole, Oklahoma
Frank Pallone, Jr., New Jersey       Bill Sali, Idaho
Patrick J. Kennedy, Rhode Island     Don Young, Alaska, ex officio
Ron Kind, Wisconsin
Lois Capps, California
Nick J. Rahall II, West Virginia, 
    ex officio
                                 ------                                

              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                    JIM COSTA, California, Chairman
          STEVAN PEARCE, New Mexico, Ranking Republican Member

Eni F.H. Faleomavaega, American      Bobby Jindal, Louisiana
    Samoa                            Louie Gohmert, Texas
Solomon P. Ortiz, Texas              Bill Shuster, Pennsylvania
Rush D. Holt, New Jersey             Dean Heller, Nevada
Dan Boren, Oklahoma                  Bill Sali, Idaho
Maurice D. Hinchey, New York         Don Young, Alaska ex officio
Patrick J. Kennedy, Rhode Island
Hilda L. Solis, California
Nick J. Rahall II, West Virginia, 
    ex officio


                                 ------                                
                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Tuesday, April 24, 2007..........................     1

Statement of Members:
    Bordallo, Hon. Madeleine Z., a Delegate in Congress from Guam     3
    Brown, Hon. Henry E., Jr., a Representative in Congress from 
      the State of South Carolina................................     4
    Costa, Hon. Jim, a Representative in Congress from the State 
      of California..............................................     2
    Pallone, Hon. Frank, Jr., a Representative in Congress from 
      the State of New Jersey....................................     5
    Pearce, Hon. Stevan, a Representative in Congress from the 
      State of New Mexico........................................     3

Statement of Witnesses:
    Bak, Jason, Chief Executive Officer, Finavera Renewables.....    54
        Prepared statement of....................................    56
        Response to questions submitted for the record...........    65
    Diers, Ted, Program Manager, New Hampshire Coastal Program, 
      New Hampshire Department of Environmental Services.........    28
        Prepared statement of....................................    29
        Response to questions submitted for the record...........    34
    Grader, W.F. ``Zeke'', Jr., Executive Director, Pacific Coast 
      Federation of Fishermen's Associations.....................    68
        Prepared statement of....................................    69
        Response to questions submitted for the record...........    72
    Hagerman, George M., Jr., Senior Research Associate, Virginia 
      Tech Advanced Research Institute...........................    81
        Prepared statement of....................................    83
    Hoagland, Porter, Ph.D., Marine Policy Center, Woods Hole 
      Oceanographic Institution..................................    86
        Prepared statement of....................................    88
    Keeney, Timothy R.E., Deputy Assistant Secretary for Oceans 
      and Atmosphere, National Oceanic and Atmospheric 
      Administration, U.S. Department of Commerce................    23
        Prepared statement of....................................    25
    Miles, Ann F., Director, Division of Hydropower Licensing, 
      Federal Energy Regulatory Commission.......................    16
        Prepared statement of....................................    18
    Olsen, Michael D., Deputy Assistant Secretary for Land and 
      Minerals Management, U.S. Department of the Interior.......     6
        Prepared statement of....................................     8
        Response to questions submitted for the record...........    12
    O'Neill, Sean, President, Ocean Renewable Energy Coalition...    48
        Prepared statement of....................................    50
    Rader, Douglas N., Ph.D., Principal Scientist for Oceans and 
      Estuaries, Environmental Defense...........................    76
        Prepared statement of....................................    77

Additional materials supplied:
    Duff, John, J.D., LL.M., Assistant Professor, University of 
      Massachusetts/Boston, Letter and article submitted for the 
      record.....................................................   101


 OVERSIGHT HEARING ON RENEWABLE ENERGY OPPORTUNITIES AND ISSUES ON THE 
                        OUTER CONTINENTAL SHELF

                              ----------                              


                        Tuesday, April 24, 2007

                     U.S. House of Representatives

     Subcommittee on Fisheries, Wildlife and Oceans, joint with the

              Subcommittee on Energy and Mineral Resources

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Subcommittees met, pursuant to call, at 3:18 p.m. in 
Room 1324, Longworth House Office Building, Hon. Jim Costa, 
[Chairman of the Subcommittee on Energy and Mineral Resources] 
presiding.
    Present: Representatives Costa, Pearce, Brown and McMorris 
Rodgers, Bordallo, Pallone and Capps.
    Mr. Costa. All right. The Subcommittee on Energy and 
Mineral Resources will now come to order. This is a joint 
hearing that we are now holding with the House Subcommittee on 
Fisheries, Wildlife and Oceans.
    We are very pleased that our colleagues from the 
Subcommittee on Fisheries, Wildlife and Oceans are here this 
afternoon and that we could be doing this together, Chairwoman 
Bordallo from the wonderful area of Guam, and certainly we have 
our other Members from both Subcommittees here.
    The efforts that we will look at today are on renewable 
energy opportunities and the issues surrounding those renewable 
energy opportunities on the Outer Continental Shelf.
    We are looking forward to hearing from our panels and to 
getting their perspective on the role that renewable energy 
opportunities may play and the issues that we may have to 
contend with as it relates to the Outer Continental Shelf.
    I want to apologize to the witnesses and those in the 
audience for our delay. We don't have a schedule for when votes 
are cast on the House Floor, and unfortunately those votes were 
called and we had to make them and it just happened to coincide 
with a fire drill.
    I want you all to understand. We had nothing to do with the 
fire drill. We do have some fires around this area. This isn't 
one we started. Anyway, as a result of all of that we are 
delayed about an hour and 15 minutes.
    It is the Chair's intention to try to be focused. 
Customarily what we like to do is have each panel make their 
presentation. You are allotted five minutes. We go through the 
panel, and then we provide opportunities for questions among 
the Majority and Minority Members of the two Subcommittees.
    There will be an opportunity for me and my colleagues to 
make opening statements--the Subcommittee Chair on Fisheries, 
Wildlife and Oceans, as well as the Ranking Members on both 
Subcommittees. With that, we will get started.

   STATEMENT OF THE HONORABLE JIM COSTA, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Costa. As Sergeant Friday once said, and now I am 
dating myself, just the facts, ma'am. The Outer Continental 
Shelf, I think as most of us are aware, consists of submerged 
lands, subsoil and seabed that are seaward of our coastal lands 
throughout our coastal areas in the United States.
    The Outer Continental Shelf is otherwise referred to as the 
OCS--but, as some of you know, I don't like using these 
acronyms. The Outer Continental Shelf begins roughly at three 
nautical miles from the shore and extends 200 nautical miles or 
more offshore from the U.S. coast.
    The Outer Continental Shelf, as we know, is important for 
its nonrenewable and renewable energy resources and for its 
important environmental and social values that involve 
fisheries, transportation and recreation, but not limited to 
these.
    About a quarter of the oil and gas production in the United 
States comes from offshore areas. The Minerals Management 
Service within the Department of Interior manages the energy 
and mineral resources on the Outer Continental Shelf, 
approximately some 1.76 billion acres. There are over 8,500 oil 
and gas leases on 47 million acres, and there are 4,000 
production platforms that provide an important needed source of 
energy.
    The Subcommittee on Energy and Minerals and the 
Subcommittee on Fisheries, Wildlife and Oceans are conducting 
this hearing because we have shared interests. We have shared 
interests in renewable energy and how we do that in a way that 
is efficient, environmentally responsible and how we coordinate 
the various affected Federal agencies that have a role in that 
area, have a role as it relates to the issue of greenhouse 
gases, have a role as it relates to new technologies, as a role 
in terms of balancing the sources for domestic energy.
    The jurisdiction under which these two Subcommittees 
operate involve Section 388 of the Energy Policy Act of 2005. 
That Act provided an initiative to facilitate increased 
renewable production on the Outer Continental Shelf in several 
different ways that I believe most of you are familiar with.
    In addition to that, we will be talking this afternoon 
about wind, waves and ocean currents, among other potential 
sources of alternative energy, that may provide additional 
resources on our Outer Continental Shelf.
    There is estimated to be much wind potential. I am not 
talking about the wind here in Washington, but an estimated 
900,000 megawatts on our coasts. Currently there is U.S. 
electrical capacity that has been cited both by a combination 
of states as they do the due diligence and research. We also 
have technology in hand to capture approximately 10 percent of 
that potential energy in what we refer to as relatively shallow 
areas of the coastal plains.
    Not only do we have data showing offshore wind projects in 
Europe that currently provide 600 to 800 megawatts of power, 
but there are lots of larger scale projects that are proposed 
in the United States. As we know, none yet have been installed.
    Finally, we will have testimony as it relates to the 
potential technology of ocean and wave current energy 
technologies. These are still in the prototype developmental 
stages, but there is belief that they offer tremendous 
potential.
    One estimate suggests that harnessing one-fifth of the 
annual wave energy off the nation's coast could--could if the 
technology proves feasible--provide up to maybe 50 percent of 
our energy. That would be comparable to all the hydropower of 
the dams in the United States.
    A lot of potential, a lot of focus, and that is what these 
two Subcommittees are attempting to do. I will now yield to my 
colleague, who is the Chairwoman of the Subcommittee on 
Fisheries, Wildlife and Oceans, the gentlewoman from Guam, Ms. 
Bordallo.

STATEMENT OF THE HONORABLE MADELEINE Z. BORDALLO, A DELEGATE IN 
                       CONGRESS FROM GUAM

    Ms. Bordallo. Thank you very much, Chairman Costa. It is a 
pleasure to hold this joint hearing between our committees, the 
Subcommittee on Fisheries, Wildlife and Oceans and the 
Subcommittee on Energy and Mineral Resources.
    Last week the Subcommittee on Fisheries, Wildlife and 
Oceans held a hearing on the impacts that climate change is 
having on our oceans and wildlife. We learned we can expect 
significant coral loss and more species extinctions unless we 
make significant changes.
    One partial response requires us to use cleaner fuels, 
including renewable energy technologies, capturing the energy 
from wind, waves and currents on our oceans. This is truly an 
exciting new field, especially in this country.
    There are no projects operating in Federal waters today. We 
have the opportunity to ensure that projects are planned 
appropriately and in a manner that promotes a sustainable use 
of our oceans.
    We also have a difficult challenge. We need to develop a 
regulatory climate that is workable for the industry. We must 
also address the impacts renewable energy products can have on 
marine mammals, endangered species, fisheries and other ocean 
resources.
    So it is my hope today that this hearing will shed light on 
what the Congress can do to encourage renewable energy projects 
that address environmental impacts in the exclusive economic 
zone. I do look forward to hearing the testimony from our many 
witnesses and appreciate their participation in today's 
hearing.
    Mr. Costa. Thank you for your statement.
    I will now defer to the Ranking Member, the gentleman from 
New Mexico, Mr. Pearce.

 STATEMENT OF THE HONORABLE STEVAN PEARCE, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF NEW MEXICO

    Mr. Pearce. Thank you, Mr. Chairman.
    In one of our recent Energy Policy Act of 2005 hearings, we 
learned that increased natural gas prices have cost the 
American consumer $65 billion more per year for electricity 
than they paid in 2000.
    We also learned that because of higher natural gas prices 
we lost three million manufacturing jobs--that is 18 percent of 
our manufacturing jobs--since 2000. These are jobs that have 
left for China and India, and they are not coming back.
    Unfortunately, with our people and businesses starved for 
more natural gas, less than three percent of our Outer 
Continental Shelf is being leased for oil and gas production. 
This is true access denied to energy.
    Today's hearing focuses on renewable energy opportunities 
on the Outer Continental Shelf. I welcome the hearing, and I 
welcome the opportunity to have renewable and alternative 
sources of energy play a larger role in our nation's economy as 
I think our nation's oceans are filled with untapped renewable 
energy resources.
    I hope that the purpose of this hearing is to make sure 
that access to these renewable energy sources is not also 
denied as we need a diverse supply of energy to keep our 
economy strong, keep our people safe and keep our way of life.
    Some of the technologies we will hear about today, like 
tidal energy and wave energy, are in the early stages of 
development and I suspect years from true large-scale 
commercialization. In contrast, other technologies like wind 
energy are known and nearly commercial in other areas of the 
world.
    The mission is for OCS renewable energy projects to become 
a reality in this country. The Federal government should not 
and cannot be the hang up. Rather, it should be the facilitator 
and the assistor.
    As lead agency pursuant to the Energy Policy Act of 2005, I 
expect the Department of Interior to work diligently to lease 
and regulate these projects in an environmentally sound way. I 
also expect the Department to work collaboratively and 
effectively with its sister agency, the Federal Energy 
Regulatory Commission, to regulate these projects.
    The policy objectives of these two agencies is to regulate 
and oversee energy industries in the economic, environmental 
and safety interests of the American public. Their mission is 
to make energy projects happen, and I am looking forward to 
seeing progress on OCS renewable energy projects.
    Again, I look forward to the testimony and discussion. I 
just ask that all things be put in perspective. Welcome to you 
all. Thank you very much for being here, and I thank you again, 
Mr. Chairman.
    Mr. Costa. Thank you very much, Mr. Pearce.
    The Ranking Member from the Subcommittee on Fisheries, 
Wildlife and Oceans is the gentleman from South Carolina, Mr. 
Brown.

       STATEMENT OF THE HONORABLE HENRY E. BROWN, JR., A 
  REPRESENTATIVE IN CONGRESS FROM THE STATE OF SOUTH CAROLINA

    Mr. Brown. Thank you, Mr. Chairman, and good afternoon.
    As most of you know, I represent over 75 percent of the 
coastline of South Carolina. My district includes places such 
as Myrtle Beach, Charleston, Kiawah Island, and the tourist 
industry is a major part of my district's economy, as well as a 
major part of the economy of the State of South Carolina.
    A major part of the tourism industry in South Carolina 
involves the recreational fishing and boating communities. I am 
very concerned about how underwater turbines, above water 
windmills and wave technology will affect the recreational 
fishing in border communities, as well as the commercial 
fishing industry.
    As you can imagine, offshore drilling is a very 
controversial subject in coastal South Carolina. I would never 
do anything that I thought would harm the tourism industry or 
my district or the beauty of coastal Carolina.
    With that being said, I am supportive of drilling off the 
Continental Shelf because I believe that it is the right thing 
to do. I believe that offshore drilling is an important part of 
the solution to fix the energy crisis that we are all facing 
today in America.
    It is also an important step to stop America's dependency 
on foreign sources of energy. Becoming more energy self-
sufficient is not only an economic issue, but also an issue of 
national security. We must examine measures that will wean this 
country from its dependency on foreign energy and establish a 
new level of independence by utilizing natural resources that 
we have here in America.
    In the last Congress I was fortunate to attend a Resource 
Committee field hearing on renewable ocean energy in 
Congresswoman Thelma Drake's congressional district in Norfolk, 
Virginia. I was impressed with the potential of ocean wave and 
tide energy, but I am concerned at the cost and the 
practicality of using exclusive renewable ocean energy without 
incorporating natural gas development off the Continental Shelf 
into an overall national strategy for the future of energy 
development for our nation.
    I strongly believe the research and development of 
renewable energy is an important tool for our nation's future 
energy needs. The problem is that currently the United States 
imports around 62 percent of its energy from foreign and 
sometimes unfriendly sources.
    We must develop an energy plan similar to other nations 
such as Canada and Norway that utilizes all of their nation's 
energy resources, including natural gas, as well as renewable 
sources of energy.
    I thank you all for being here today, and I look forward to 
hearing the testimony.
    Mr. Costa. Thank you very much, Mr. Brown, for your 
comments. I believe we need to explore all of our options and 
alternatives. I think that is correct.
    Mr. Pallone, the gentleman from New Jersey, has a statement 
he would like to make. It is good to see you.

 STATEMENT OF THE HONORABLE FRANK PALLONE, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, and I apologize for going out of 
order, but because of the lateness and I have another meeting I 
have to go to, I was just going to ask you if I could take a 
minute. I thank both of you.
    I represent a portion of the New Jersey coastline that is 
heavily dependent on clean beaches and oceans to support a 
tourism economy that generates about $31 billion in spending 
and provides more than 836,000 jobs every year in the state.
    Coastal tourism is New Jersey's second largest industry and 
is closely linked to the state of our marine and coastal 
environment. This is an environment that could be seriously 
impacted not only by industrial energy generation facilities of 
any type, but also by the continued effects of global warming.
    Given these effects, I have some concern about the 
regulatory framework being developed by MMS for nonextractive 
energy uses of the Outer Continental Shelf and for the lack of 
a clearly defined scope of use. While it is in everyone's 
interest to promote clean energy solutions, siting regulations 
should be as protective as possible of the marine and coastal 
environment and recognize the potential economic impacts of 
industrial accidents or other pollution.
    In that light I have some questions that--I hope I will be 
here--I can ask of the panel later, but just in the event I 
don't have that opportunity, Mr. Chairman and Madam Chairwoman, 
I appreciate the opportunity to make a statement now. Thank 
you.
    Mr. Costa. You are welcome, and we will be happy to allow 
you the opportunity to submit those questions for the record so 
that you can get responses back to them.
    We know about the New Jersey shores, and we appreciate your 
participation. You are always welcome.
    Let us begin now with our panel, our first panel. We have a 
group of folks that are going to be talking about their 
perspective.
    We will begin first with Mike Olsen. He is the Deputy 
Assistant Secretary for Land and Minerals Management within the 
Department. Mr. Olsen, it is good to have you here.

 STATEMENT OF THE HONORABLE MICHAEL D. OLSEN, DEPUTY ASSISTANT 
SECRETARY FOR LAND AND MINERALS MANAGEMENT, U.S. DEPARTMENT OF 
                          THE INTERIOR

    Mr. Olsen. Thank you. It is good to be here, Mr. Chairman, 
Madam Chairwoman, Members of the Subcommittees. Thank you for 
this opportunity to appear here today to discuss with you the 
Minerals Management Service's alternative energy and 
alternative use program.
    The Department of the Interior appreciates the leadership 
that the Committee on Natural Resources has demonstrated in 
looking to the Federal Outer Continental Shelf as a source of 
alternative energy and in providing the legislative means to 
allow the Nation to tap into that energy.
    The Administration believes that renewable and other 
alternative sources are integral components of our nation's 
energy future. While the quantity of domestic energy produced 
from renewable resources is small in comparison to conventional 
resources, the growing cost of conventional energy resources 
and the need to diversify our energy portfolio has spurred an 
increased interest and growth in renewable energy development.
    The Energy Information Administration estimates that in 
2030 renewable energy will account for over 10 percent of our 
domestic energy production and about 7 percent of our 
consumption. The Department of the Interior, as the manager of 
over one-fifth of the nation's land, has a significant role in 
play in this projected increase in domestic renewable energy 
production.
    The Administration first proposed legislation to establish 
an OCS alternative energy program in June of 2002, and the 
legislation was first introduced as H.R. 5156 in July of 2002. 
The bill represented 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.
    The legislation reflected the best efforts of the 
Administration to address the array of issues associated with 
permitting various OCS energy-related projects that were not 
covered under existing statutes. Those projects included wind, 
wave, ocean current and solar energy.
    After careful analysis of the mechanisms that were 
currently in place to handle requests for innovative, 
nontraditional, energy-related projects on the Federal offshore 
lands, it became clear that with limited exceptions there 
existed no clear authority within the Federal government to 
comprehensively review, permit and provide appropriate 
regulatory oversight for such projects.
    Since the proposed legislation pertained to the permitting 
and oversight of energy uses on offshore Federal lands, it was 
only logical that any new legislative authority that was 
enacted remain with the department already entrusted with the 
overall responsibility.
    Section 388 of the Energy Policy Act of 2005 amended the 
OCS Lands Act and granted the Department the discretionary 
authority to grant leases, easements or rights-of-way for 
activities on the OCS that produce or support production, 
transportation or transmission of energy from sources other 
than oil and gas.
    It is important to note that while the Department is a lead 
agency for this program, MMS continues to work with the sister 
agencies to ensure that the unique roles they each have are 
addressed in order to ensure that the Federal government's 
myriad interests in such projects are fully considered and that 
the nation's economic, environmental and land use interests are 
adequately protected.
    MMS is working diligently to develop a regulatory program 
to authorize offshore alternative energy proposals. The renewal 
energy and alternative use draft programmatic environmental 
impact statement developed by MMS is currently open for public 
comment.
    This document is a high level analysis of the potential 
impacts of the activities that could result in establishment of 
an OCS alternative energy and alternate use program and 
regulations under MMS' new authority from initial site 
characterization through decommissioning.
    The EIS will form the foundation for the new alternative 
energy program and for future applications. The final 
programmatic EIS is on schedule for publication in late summer 
of 2007. MMS is also developing regulations to implement the 
new EPAct or Environmental Policy Act authority and expects to 
publish a proposed rule in late summer of 2007 and a final rule 
in early 2008.
    Producing energy from renewable and other alternative 
domestic resources is a critical component of the nation's 
energy portfolio. Lands managed by the Department have a major 
role to play in the diversification of the nation's energy 
sources. The Department stands ready to respond to the ever 
increasing need for energy development from the resources we 
manage on behalf of the nation.
    Thank you for the opportunity to highlight a few of the 
steps MMS has taken to encourage the development of renewable 
and other alternative energy resources on the OCS public lands.
    This concludes my testimony, and I would be happy to answer 
any of your questions.
    [The prepared statement of Mr. Olsen follows:]

Statement of Michael D. Olsen, Deputy Assistant Secretary for Land and 
          Minerals Management, U.S. Department of the Interior

    Mr. Chairman and Members of the Subcommittees, thank you for the 
opportunity to appear here today to discuss with you the Minerals 
Management Service's (MMS) alternative energy and alternate use 
program.
    The Department of the Interior appreciates the leadership that the 
Committee on Natural Resources has demonstrated in looking to the 
Federal Outer Continental Shelf (OCS) as a source of alternative energy 
and in providing the legislative means to allow the Nation to tap into 
that energy. The Administration first proposed legislation to establish 
an OCS alternative energy program in June 2002, and the legislation was 
first introduced as H.R. 5156 in July 2002. The Administration 
supported that bill and worked diligently with the Committee and others 
to bring the proposed legislation to fruition as part of the Energy 
Policy Act of 2005 (EPAct).
    Energy is vital to expanding our economy and enhancing Americans' 
quality of life. However, the Administration continues to be concerned 
with the imbalance that exists between our energy consumption and 
domestic energy production, and has been working to find ways to narrow 
the gap between the amount of energy used and the amount domestically 
produced. In his State of the Union Message on January 23, 2007, 
President Bush asked Congress and America's scientists, farmers, 
industry leaders, and entrepreneurs to join him in pursuing the goal of 
reducing U.S. gasoline usage by 20 percent in the next ten years--
Twenty in Ten. One key component of the strategy to meet this goal is 
to increase the supply of renewable and alternative fuels. There is no 
single solution, but the Administration believes that renewable and 
other alternative sources are integral components of our Nation's 
energy future.
    While the quantity of domestic energy produced from renewable 
resources is small in comparison to conventional resources, the growing 
cost of conventional energy resources and the need to diversify our 
Nation's energy portfolio has spurred an increased interest and growth 
in renewable energy development. The Energy Information 
Administration's (EIA) 2007 Annual Energy Outlook estimates that 
consumption of renewable fuels will grow from 6.5 quadrillion BTUs in 
2005 to 10.2 quadrillion BTUs in 2030. This growth will be a result of 
advancements in renewable energy technologies, higher fossil fuel 
prices, state requirements to produce renewable energy, and incentives 
provided under EPAct. This is an increase of about 1 quadrillion BTUs 
more than EIA estimated in its 2005 Annual Energy Outlook. The EIA 
estimates that in 2030, renewable energy will account for over ten 
percent of our domestic energy production and about seven percent of 
our consumption.
    The EPAct encourages the development of renewable energy resources 
as part of an overall strategy to develop a diverse portfolio of 
domestic energy supplies for our future. In fact, according to EIA's 
2007 Annual Energy Outlook, public and private wind and other renewable 
energy generating sectors of our economy are the fastest growing energy 
sources in the United States.
    The quantity of domestic renewable energy produced on Federal lands 
is small in comparison to conventional resources. However, the growing 
cost of conventional energy resources and the need to diversify our 
energy portfolio has spurred an increased interest in renewable energy 
development on federal lands both onshore and offshore.
    The Department of the Interior (Department), as the manager of over 
one fifth of the Nation's land, has a significant role to play in this 
projected increase in domestic renewable energy production. Lands 
managed by the Bureau of Land Management (BLM) currently supply almost 
half of the nation's geothermal generation and approximately 4 percent 
of domestically installed wind capacity. EPAct gave the Department's 
bureaus, specifically the Minerals Management Service (MMS), the BLM, 
and the United States Geological Survey (USGS), new authorities for 
encouraging and facilitating the development of promising new energy 
sources such as onshore and offshore wind, solar, and biomass energy 
and to assist in ensuring these technologies are developed in an 
environmentally responsible manner.
    Today, you have requested that I discuss with you the MMS's OCS 
Alternative Energy Program. The Administration first proposed 
legislation to establish an OCS alternative energy program in June 
2002, and the legislation was first introduced as H.R. 5156 in July 
2002. That bill represented 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, 
the legislation was developed in a consensus with MMS' sister agencies 
and reflected the best efforts of the Administration to address the 
array of issues associated with permitting various OCS energy-related 
projects that were not currently covered under existing statutes. Those 
projects included renewable energy projects such as wind, wave, ocean 
current and solar energy.
    After careful analysis of the mechanisms that were currently in 
place to handle requests for innovative, non-traditional energy-related 
projects on the Federal offshore lands, it became clear that--with 
limited exceptions--there existed 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 included 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 meant that the vast majority of OCS alternate energy-related 
projects that were being, or which may be contemplated in the future, 
by the private sector had no clearly defined permitting process. There 
was no single agency with an overarching role to coordinate that 
process. Instead, various Federal agencies with different 
responsibilities were responsible for permitting a specific part of a 
proposed project. As the Federal Government's ``land manager'' and 
since the proposed legislation pertained to the permitting and 
oversight of energy uses on offshore Federal lands, it was only logical 
that any new legislative authority that was enacted remain with the 
Department already entrusted with that overall responsibility.
    Congress recognized that management of alternative energy and 
alternate use activities would require comprehensive authority to 
permit access in a fair and equitable manner, to ensure environmental 
and operational compliance, and to achieve a fair return to the Nation. 
The Administration worked closely with the Committee to include the 
Administration's legislative proposal as part of the Energy Policy Act 
of 2005 (EPAct).
    Section 388 of the EPAct amended the OCS Lands Act, and granted the 
Department discretionary authority to grant leases, easements or 
rights-of-way for activities on the OCS that produce or support 
production, transportation, or transmission of energy from sources 
other than oil and gas. Simply put, the new authorities under EPAct 
gave the Department the ability to explore the future development of 
promising new ocean energy sources in the OCS such as wind, wave, ocean 
current, and solar energy. Additionally, the Department was given the 
authority to grant leases, easements, or rights-of-way for other OCS 
activities that make alternate use of existing OCS facilities. These 
other uses would be limited to energy-related and authorized marine-
related purposes, such as offshore research, recreation and support for 
offshore operations to the extent that those activities are not 
authorized by other applicable law.
    It is important to note that while the Department is the lead 
agency for this program, the MMS continues to work with its sister 
agencies to ensure that the unique roles they each have is considered 
and addressed in order to ensure that the Federal Government's myriad 
interests in such projects are fully considered and that the Nation's 
economic, environmental and land use interests are adequately 
protected. The Department's new EPAct jurisdiction does not supersede 
or modify existing Federal authority; all activities permitted must 
adhere to existing Federal law, including the National Environmental 
Policy, Coastal Zone Management, Endangered Species, Marine Mammal 
Protection, Magnuson-Stevens Fishery Conservation and Management, and 
the Migratory Bird Treaty Acts.
    The MMS is working diligently to develop a regulatory program to 
authorize offshore alternative energy proposals, such as wind, solar, 
wave, and ocean current technologies. The renewable energy and 
alternate use draft programmatic environmental impact study (EIS), 
developed by the MMS, is currently open for public comment. The EIS 
will form the foundation for the new alternative energy program and for 
future applications. The MMS is developing regulations to implement the 
new EPAct authority and expects to publish a proposed rule in late 
summer of 2007 and a final rule in early 2008.
    Interest in OCS-based alternative energy development in the United 
States is growing, particularly in the Northeast and along the West 
Coast. Many of these coastal states have put in place renewable energy 
portfolio standards (RPS) requiring utilities to substantially increase 
their reliance on renewable energy sources. For example, in the 
Northeast, New York has set a goal for public utilities to achieve a 
25% share by 2013, one of the most aggressive targets in the country. 
In the Pacific West, Oregon has instituted a plan that calls for 
renewable energy to account for a 25% share, approximately 1,600 
megawatts (MW) by 2025, while California has codified a renewable 
energy target of 20%, approximately 5,500 MW, by 2010. To put this into 
perspective, according to the Edison Electric Institute, based on 2005 
average annual usage by U.S. residential customers, one megawatt of 
electricity powered roughly 790 homes. The OCS can provide clean 
sources of energy and has a role in helping states and the Federal 
Government meet their renewable energy targets.
    Government resource estimates and industry interest indicate that 
the OCS provides several significant sources of alternative energy. 
According to estimates provided to the MMS by the Department of Energy 
(DOE), the potential offshore wind resource, excluding Alaska and 
Hawaii, is 2,500 gigawatts (GW), ocean waves 240 GW, ocean tides 7.5 
GW, and ocean currents 2.5 GW. Since the enactment of EPAct, the MMS 
has spoken to several companies and become aware of dozens of potential 
development proposals involving offshore wind off the east coast from 
Virginia, north to Massachusetts.
    The strongest wave energy resources are located on the West Coast, 
where there is already substantial interest in wave energy development, 
particularly offshore Northern California and Oregon. Currently, the 
MMS is working with the Federal Energy Regulatory Commission (FERC) on 
a Memorandum of Understanding (MOU) to coordinate Federal efforts in 
reviewing and authorizing these exciting new proposals. The goal of 
this MOU will be to provide an efficient and effective process for 
reviewing and overseeing wave and current energy proposals in the OCS.
Alternative Energy and Alternate Use on the Outer Continental Shelf
    The Department and MMS decided that to facilitate the orderly 
development of the new programmatic responsibilities and associated 
rulemaking, we would not entertain for review any new applications 
relating to alternative energy or alternate use on the OCS until the 
program is in place.
    As the first step in the rulemaking and program development 
process, the MMS on December 30, 2005, published an Advance Notice of 
Proposed Rulemaking (ANPR) to solicit comments from all interested and 
affected parties. The ANPR sought comments on five major program areas: 
(1) access to OCS lands and resources; (2) environmental information, 
management, and compliance; (3) operations; (4) payments and revenues; 
and (5) coordination and consultation. We received a total of 149 
comments originating from 26 states and the District of Columbia. These 
comments were submitted by private citizens, alternative energy 
industries and associations, environmental organizations, State and 
local governments, Federal agencies, nongovernmental organizations, 
universities, Members of Congress, small business, and the oil and gas 
industry. In general, the ANPR comments were supportive of renewable/
alternative energy developments on the OCS and reuse of existing OCS 
facilities. Some comments received advised the MMS to proceed with 
caution as it develops the program and supporting regulations and 
advocated early stakeholder involvement with both the program and the 
individual project permitting. Many commenters who were familiar with 
the MMS OCS oil and gas program suggested that MMS use the offshore 
program as a model for consultation and environmental compliance. The 
renewable energy industry and environmental groups suggested that MMS 
establish a structured, rigid process, citing the need for 
predictability and for compliance and timeliness in reviews. Others, 
noting the up-and-coming nature of the renewables industry, advocated 
that MMS remain flexible in our program approach and address each 
project on a case-by-case basis. A majority of comments identified 
preparation of a programmatic environmental impact statement as a first 
step.
    Currently, the MMS is preparing rules to guide the development of 
the program activities. At the same time, MMS is accepting comments on 
a draft programmatic EIS to examine the potential environmental 
consequences of implementing the program. However, the innovative and 
evolving nature of the offshore renewable technologies; the nascent 
industry; the need to acquire environmental and economic baseline 
information; and, the location of the promising resources in OCS 
frontier areas have all presented challenges to the program's 
regulatory development.
    Despite these challenges, the MMS is proceeding in a deliberate and 
diligent manner in developing this important new regulatory program. 
The Agency has been working with many of the same agencies involved in 
activities already authorized under the OCS Lands Act, such as the Army 
Corps of Engineers, the National Oceanic and Atmospheric 
Administration, the Environmental Protection Agency, the U.S. Coast 
Guard, and the Fish and Wildlife Service, to establish new ``renewable 
energy'' interfaces with each agency's existing Federal statutory 
requirements and responsibilities. The MMS has also begun to forge new 
partnerships with the DOE and FERC and we are actively working on 
agreements with each agency.
    On March 21, 2007, the MMS announced the availability of the draft 
programmatic EIS and the opportunity for public comment. This document 
is a high level analysis of the potential impacts of the activities 
that could result from establishment of an OCS alternative energy and 
alternate use program and regulations under MMS' new authority, from 
initial site characterization through decommissioning. The analysis 
looks at three alternatives: (1) establishment of a nationwide OCS 
program and regulations (the proposed action); (2) case-by-case 
authorization of activities; and (3) no authorization of activities 
authorized under section 388. The programmatic EIS does not evaluate 
specific sites on the OCS as to their suitability for alternative 
energy activities. Thus, MMS will analyze siting issues as it considers 
specific project proposals. Written comments on the draft programmatic 
EIS will be accepted through May 21, 2007 and MMS will hold public 
hearings on the document in April and May of 2007. The final 
programmatic EIS is on schedule for publication in late summer 2007.
    Currently the proposed rule is undergoing internal Departmental 
review in accordance with Departmental and the Office of Management and 
Budget guidelines. Major components of the alternative energy portion 
of the rule include, but are not limited to what rights will be 
associated with leases, rights-of-way, rights-of-use and easements; 
financial terms such as financial assurance (bonding); rentals before 
production begins and operating fees when production commences; process 
for site assessment, construction and operation plans; environmental 
and safety management, inspections and facility assessments; and, end 
of life decommissioning.
    The EPAct requires the Department to grant a lease, easement, or 
right-of-way on a competitive basis unless, after public notice, it is 
determined that there is no competitive interest. If there is no 
competitive interest, many of these initial applications may be issued 
noncompetitively, requiring the applicant to bear the cost of proposal-
specific studies. However, based on the state-initiated renewable 
energy portfolio standards and interest from industry, it is expected 
that MMS will offer a competitive lease sale in the next 3 to 5 years 
most likely in the North Atlantic or the North Pacific.
    MMS recently conducted a series of regional stakeholder meetings in 
several coastal states to assist in preparing the new rule. The purpose 
of these meetings was to identify and explore stakeholder issues and 
concerns; to discuss the various ocean energy technologies and 
economics; and, to identify state energy profiles and renewable energy 
portfolio standards.
    Several coastal states (i.e., New Jersey, California, Washington, 
and Oregon) have approached MMS about partnering to efficiently 
evaluate and offer prospective OCS areas for lease on a regional basis. 
The U.S. Commission on Ocean Policy, the Pew Oceans Commission, and the 
Joint Ocean Commission Initiative, made similar recommendations 
concerning federal-state partnering to improve ocean governance in 
general. To promote such cooperation and coordination, the MMS proposes 
to establish federal/state task forces--a concept that has been used 
successfully in MMS's Marine Minerals Program--and to begin assessing 
potential development and environmental implications.
Cape Wind and Long Island Offshore Wind Projects
    The EPAct also gave the Department and MMS responsibility for two 
existing offshore alternative energy proposals, the Cape Wind Energy 
and the Long Island Offshore Wind Park projects. The MMS is reviewing 
each proposal and supporting information, and is preparing project-
specific environmental analyses.
    Cape Wind Associates has proposed to construct an offshore wind 
facility located on Horseshoe Shoal in Nantucket Sound covering 24 
square miles in federal waters and located 4.7 miles offshore 
Massachusetts. The proposal entails 130 offshore wind turbine 
generators to produce about 460 MW of electricity. The MMS anticipates 
publishing the draft EIS in late summer 2007. Because offshore wind is 
a new resource and technology for the Nation and Cape Wind is one of 
the first OCS alternative energy projects under review by MMS, the 
agency is proceeding with the review of the proposal and associated EIS 
in an appropriately deliberate and diligent manner.
    The Long Island Power Authority and Florida Power and Light Energy 
have proposed an offshore wind project covering eight square miles in 
Federal waters, located between three and four miles off the south 
shore of Long Island, New York. The proposed wind project would entail 
installation of 40 offshore wind turbine generators with a capacity of 
140 MW of electricity for use in Long Island communities. The timeline 
for the project is being revised and should be available in the near 
future.
Conclusion
    In conclusion, energy is vital to expanding our economy and 
enhancing Americans' quality of life. Producing energy from renewable 
and other alternative domestic resources is a critical component of the 
Nation's energy portfolio. Lands managed by the Department have a major 
role to play in the diversification of the Nation's energy sources. The 
Department has been working with other agencies and has taken steps in 
a variety of scientific endeavors to understand renewable and other 
alternative energy resources and to help bring them to a place where 
they may contribute to the energy mix of the country in an 
environmentally friendly way. The MMS has been working on a variety of 
fronts, both onshore and offshore, to meet the demand for renewable and 
other alternative sources of energy. We stand ready to respond to the 
ever-increasing need for energy development from the resources we 
manage on behalf of the Nation.
    Thank you for the opportunity to highlight a few of the steps MMS 
has taken to encourage the development of renewable and other 
alternative energy resources on the OCS public lands. This concludes my 
testimony. I would be happy to answer any questions you have.
                                 ______
                                 

     Response to questions submitted for the record by Mike Olsen, 
                    Minerals Management Service, DOI

Questions from Chairwoman Bordallo (Subcommittee on Fisheries, Wildlife 
        and Oceans):
 NOAA's Role. What role, if any, do you envision the National Oceanic 
        and Atmospheric Administration (NOAA) will play with respect to 
        renewable energy projects on the Outer Continental Shelf? For 
        example, do you expect NOAA to be the lead agency responsible 
        for coordinating and preparing the documentation for the 
        environmental impact analysis required by the National 
        Environmental Policy Act (NEPA) prior to permitting individual 
        renewable energy projects?
    Answer: The Department of the Interior, and by delegation the 
Minerals Management Service (MMS), is the lead agency for alternative 
energy projects on the Outer Continental Shelf (OCS) and will therefore 
coordinate the National Environmental Policy Act (NEPA) analysis work. 
Many agencies, including NOAA, have unique roles that must be 
considered and addressed to ensure that the Federal Government's myriad 
interests in such projects are fully considered and that the Nation's 
economic, environmental and land use interests are adequately 
protected. These agencies have been, and will continue to have the 
opportunity to be engaged as cooperating agencies under the NEPA in the 
development of any proposal to produce alternative energy from the OCS. 
NOAA will continue to implement other required review processes such as 
the Federal consistency reviews under the Coastal Zone Management Act 
(CZMA) essential fish habitat consultations under the Magnuson-Stevens 
Fishery Conservation and Management Act, fish passage needs under the 
Federal Power Act, endangered species consultations under the 
Endangered Species Act (ESA) and consultations under the National 
Marine Sanctuaries Act.
 Sensitive Marine Habitats. There are currently 14 National Marine 
        Sanctuaries and one National Marine Monument which cover over 
        200,000 sq. nautical miles of the U.S. Exclusive Economic Zone 
        (EEZ). Does the MMS intend to prohibit the development of 
        alternative energy projects in these nationally-significant 
        marine environments? What about other Federal, State or local 
        marine protected areas set aside in the EEZ or State waters to 
        protect important natural and cultural submerged resources?
    Answer: The MMS has no authority to allow any alternative energy 
development in these specially-designated areas. Authorities granted by 
Section 388 of the Energy Policy Act of 2005 EPAct do not apply to any 
area within the exterior boundaries of a National Park, National 
Wildlife Refuge, National Marine Sanctuary, or National Monument. Nor 
does the MMS have authority over state waters.
    In areas where alternative energy projects may be permitted, MMS 
will conduct a NEPA review of each proposed alternative energy project 
under its jurisdiction in coordination with other Federal, state, and 
local agencies and the public. The review will include an assessment of 
alternative locations for the proposed action and will identify 
appropriate mitigation measures to protect sensitive marine habitats.
 State Role. The Coastal Zone Management Act (CZMA) recognizes the 
        authority and primacy of the States with regard to activities 
        in coastal areas. Mr. Diers recommended that the Federal permit 
        for a project include approval from the affected state. What is 
        your reaction to his recommendation? How will you coordinate 
        the States' interests during the project approval process?
    Answer: The Administration does not believe there is a need for 
changes to the CZMA review process for alternative energy projects on 
the OCS. Any EPAct section 388-authorized activity will comply with the 
Federal consistency provisions of the CZMA. As provided by the CZMA, 
coastal states can review alternative energy project plans and permits 
for consistency with its coastal management plan's enforceable 
policies. Over the years, the MMS has established a close working 
relationship with many of the coastal state governments. To develop 
working partnerships with coastal states such as New York, Oregon, 
Washington, Massachusetts, and New Jersey, the MMS hosted a series of 
stakeholders meetings to further its understanding about each 
locality's unique alternative energy issues, needs and concerns. In 
addition, we envision convening Federal/State task forces, which have 
been successfully used in the marine mineral program (i.e. the sand and 
gravel program), to assist in any phase of the OCS Alternative Energy 
Program from preliminary studies and lease sale formulation through 
site assessment and construction to decommissioning.
 National Academy study requirement Section of 1833 of the Energy 
        Policy Act of 2005 required MMS, within 90 days, to contract 
        with the National Academy of Sciences (NAS) to conduct a study 
        of the alternative energy potential in the outer continental 
        shelf; assess federal laws--including environmental laws--that 
        would relate to the development of those resources; and to 
        recommend statutory and regulatory mechanisms for developing 
        those resources.
 What is the status of that study and recommendations by NAS? If it was 
        never started, please explain why not?
    Answer: The study called for in Section 1833 of EPAct was unfunded 
by the legislation. The study was to look at renewable energy issues on 
Federal lands both onshore and offshore. Following several informal 
staff-to-staff discussions, the NAS submitted a proposal to the 
Department at an estimated cost of $875,000. The study would have 
required 20 months of work through the formation of a 16-member 
committee. The committee would have been comprised of a mix of public 
and private sector expertise in renewable energy technologies. However, 
the Department suggested to NAS that a regulatory review of other 
agencies with offshore jurisdiction, and possible overlap of 
jurisdiction or conflicts, would be useful. NAS declined due to what it 
considered to be too modest a scope for an NAS study.
    Given current budget constraints, prioritization of needs, and a 
review of the information already available in Bureau of Land 
Management and MMS, the NAS study proposal would have been duplicative 
and provided little, if any, new information.
 Mapping. The MMS has been mapping the oceans for years. But this 
        mapping has focused on mineral and fuel extraction products. Do 
        you plan to develop maps showing good wind sites, or other 
        attributes applicable to the renewable energy industry? Does 
        the MMS have the capability to do this work?
    Answer: The MMS is leading an interagency cooperative effort with 
NOAA, Fish and Wildlife Service, Federal Communications Commission, 
National Park Service and, to the extent possible, Department of 
Defense and Department of Homeland Security to develop the Multipurpose 
Marine Cadastre (MMC). The MMC is a digital mapping viewer which 
utilizes geographic information systems (GIS) technology to display the 
location and pertinent data related to uses and physical attributes of 
the OCS (e.g., navigation and shipping lanes, whale migration routes, 
essential fish habitat, oil and gas platforms, pipelines, sand borrow 
sites, trans-Atlantic communication cables, topographic features, 
hazardous waste sites, weather buoys, bathymetry/water depth).
    While the MMS does not contemplate classifying offshore areas based 
on alternative/renewable energy attributes, given the broad spectrum of 
potential activities, the MMC will provide a single location where 
managers (without GIS training or software) can go to view all existing 
activities and infrastructure features needed for decision making in 
any U.S. OCS area. The digital mapping viewer is expected to be 
available online in FY 08 pending availability of resources. The MMS 
plans to incorporate additional data layers from other Federal and 
state agencies and private parties that meet Federal Geographic Data 
Committee (FGDC) metadata standards as they become available. For 
example, there are individual private and joint private/public ventures 
underway, such as those underway at the Department of Energy, to gather 
OCS wind and wave data. MMS will work to incorporate that information 
into the Multipurpose Marine Cadastre. MMS has meteorologists and 
physical oceanographers on staff who can interpret that data to 
understand its applicability to energy development. Additionally where 
there is interest, MMS is partnering with coastal states such as 
California, Oregon, Washington, and New Jersey to work together to 
understand the environmental implications of and to assess the 
potential for renewable energy resource technology testing and 
development to meet the needs of those states.
 Migratory Birds. How are we going to make sure that the Migratory Bird 
        Treaty Act is enforced and that migratory birds are not 
        incidentally caught in offshore wind farms? What role will the 
        U.S. Fish and Wildlife Service (FWS) have in the permitting of 
        offshore wind energy facilities?
    Answer: The MMS's authorities under EPAct 2005 do not supersede the 
statutory responsibilities of any Federal agency, including those of 
the U.S. Fish and Wildlife Service (FWS). All OCS alternative energy 
proposals must comply with relevant Federal statutes including the 
Migratory Bird Act and the Endangered Species Act. Currently, the FWS 
is a cooperating agency on the Cape Wind Energy and the Long Island 
Offshore Wind Park proposals providing MMS with expertise on avian 
issues involving both protected and migratory species and helping us to 
identify potential mitigation measures. The MMS will continue to work 
cooperatively with FWS on migratory bird issues to minimize risks to 
populations.
 Birds. Many species of pelagic birds depend on isolated, unpopulated 
        rock outcroppings and small islands, such as along the coast of 
        Maine, for rookeries vital to their successful reproduction. 
        Does the MMS intend to prohibit the development of alternative 
        energy projects at areas where migratory birds congregate or 
        seasonally utilize these habitats?
    Answer: The siting of alternative energy projects is a key factor 
in providing mitigation and protection to avian resources. An 
assessment of environmental impacts associated with an OCS alternative 
energy proposal would be a critical element in understanding potential 
effects to birds and in MMS decision-making. The assessment would 
describe how the area surrounding the proposed site is used by resident 
and migratory birds, would evaluate whether the birds' movement 
patterns would put their populations at risk, and identify stipulations 
or conditions to minimize any potential adverse impact.
Questions from Chairman Costa
 Please describe how you are ensuring that adequate planning occurs to 
        accomplish the goals of increasing our supply of off-shore 
        renewable energy while also avoiding sensitive areas or other 
        permitting challenges, such as those facing the Cape Wind 
        Energy project.
 Are you proactively identifying off-shore areas that may present 
        thorny environmental or social issues for renewable project 
        siting (or areas where conflicting interests are minimal)?
    Answer: As part of the development of a new program for OCS 
alternative energy, the MMS is preparing a programmatic Environmental 
Impact Statement (EIS). The programmatic EIS generally identifies the 
potentially affected environmental resources on the OCS and describes 
generic impacts that could result from each of the alternative energy 
technologies (e.g., wind, wave, ocean current). MMS will continue to 
work on these issues on a regional basis as we move forward with the 
new program.
    The goal of the OCS Mapping Initiative (also referred to as the 
Multipurpose Marine Cadastre) is the identification of OCS locations of 
Federally-permitted activities; obstructions to navigation; submerged 
cultural resources; undersea cables; offshore aquaculture projects; and 
any area designated for the purpose of safety, national security, 
environmental protection, or conservation and management of living 
marine resources. The Multipurpose Marine Cadastre web viewer, which is 
currently under development, will provide the user the ability to view 
the official data provided by the agency of responsibility associated 
with the themes to assist in decision making related to alternative 
energy uses on the OCS.
 How are you assessing and integrating information about the on-shore 
        infrastructure necessary to transport energy with any analysis 
        of potential areas or projects for renewable generation on the 
        OCS?
    Answer: The MMS will assess onshore infrastructure information on a 
regional and/or a project-specific basis as we move forward with the 
new program.
 Your written testimony mentions that MMS might establish federal/state 
        task forces to promote coordination and cooperation. When might 
        these task forces be up and running, and how would you describe 
        their specific goals? Will they help with improved planning?
    Answer: Over the years, the MMS has established a close working 
relationship with many of the coastal states governments. To develop 
working partnerships with coastal states like New York, Oregon, 
Washington, Massachusetts, and New Jersey, the MMS hosted a series of 
stakeholder meetings to further its understanding about each locality's 
unique alternative energy issues, needs and concerns. In addition, we 
envision convening Federal/State task forces, which have been 
successfully used in the marine mineral program (sand), to assist in 
any phase of the OCS Alternative Energy Program from preliminary 
studies and lease sale formulation through site assessment and 
construction to decommissioning. As an example, the MMS has recently 
supported participation in a joint Federal - Tri-State Task Force with 
California, Oregon, and Washington to address regional ocean planning 
issues related to the OCS Alternative Energy program on the West Coast. 
This task force should be up and running this fall.
 The MMS was directed to prepare a marine cadastre--an integrated 
        submerged lands mapping analysis---as a requirement under the 
        Energy Policy Act of 2005. What is the status of this 
        initiative? When might the results be available to inform 
        renewable energy development and related issues on the OCS?
    Answer: To accomplish the directives of EPAct, the MMS and NOAA are 
taking the lead to create an online interactive map that will utilize 
web map services from Agencies of Responsibility (AOR's) for the 
various offshore features to be mapped. These agencies will include 
MMS, National Oceanic and Atmospheric Administration (NOAA), Department 
of Defense (DOD), National Park Service (NPS), Federal Communications 
Commission (FCC), Department of Homeland Security (DHS), and others. 
This service will provide a single location where managers (without GIS 
training or software) can go to view all existing activities and 
infrastructure features needed for decision making in any U.S. OCS 
area.
    The Marine Boundary Working Group (MBWG), a subcommittee of the 
Federal Geographic Data Committee, co-chaired by MMS and NOAA, is 
developing and implementing the Multipurpose Marine Cadastre (MMC). A 
subset of the MBWG has agreed to take the next steps in defining the 
Web interface and Internet mapping component of the multi-purpose 
marine cadastre. As part of the FY 07 work plan, the MBWG is in the 
process of:
    1.  Developing a comprehensive list of marine boundary data, 
restrictions and encumbrances, agencies of responsibility, and 
associated legislation and regulations.
    2.  Making data and information accessible through the Web and the 
E-Gov Geospatial One-Stop Portal.
    3.  Coordinating with the Marine Protected Areas (MPA) Initiative 
to ensure that marine boundary source data are accessible through their 
inventory.
    4.  Developing minimum requirements for accessible data.
    5.  Developing and implementing a project plan for the digital 
mapping component of the multipurpose marine cadastre initiative.
    Presently, a prototype web site has been developed at NOAA Coastal 
Services Center. This website is a concept evaluation, using a limited 
set of data layers from participating partners. During the next few 
months, we will be testing and evaluating the website, as well as 
soliciting input from agencies that could potentially participate, 
which will be vital to building the project. In the future, we envision 
a more robust version of the viewer, with GIS analysis tools. We also 
will include more data download options, such as exporting KML files 
for Google Earth viewing. Permanent hosting, as well as staffing, will 
need to be identified. More partners will be encouraged to participate 
as the project grows.
 Please describe the needs you envision in terms of new staff, 
        technical expertise, and internal systems to support the 
        permitting and review process for off-shore renewable energy 
        development in the next two-three years.
    Answer: The MMS is comprised of multi-disciplined staffs of marine 
and coastal scientists, geologists, geophysicists, engineers, 
economists, social scientists, and inspectors who conduct environmental 
and engineering evaluations of hundreds of offshore oil and gas 
activity plans. The agency's expertise and experience gained in 
managing such complex marine-based energy operations will serve the 
Nation well in managing and regulating alternative energy opportunities 
on the OCS. Depending upon industry's level of interest in acquiring 
OCS lands for renewable energy development and coastal states' interest 
in partnering with us, MMS may require additional funding in the future 
to augment its staff and studies program. If appropriate, MMS will 
include any such additional resources in its future budget requests to 
Congress.
                                 ______
                                 
    Mr. Costa. Thank you very much, Mr. Olsen. You were 
actually ahead of time by 19 seconds. You will get a good mark.
    Mr. Olsen. Thank you very much.
    Mr. Costa. Yes. Well, we want to encourage people to do the 
right thing.
    Our next witness is Ann F. Miles, who is the Director of 
the Division of Hydropower Licensing for the Office of Energy 
Projects for the Federal Energy Regulatory Commission, 
otherwise known as FERC, but I like the Federal Energy 
Regulatory Commission.
    Ms. Miles, would you please open?

  STATEMENT OF ANN F. MILES, DIRECTOR, DIVISION OF HYDROPOWER 
LICENSING, OFFICE OF ENERGY PROJECTS, FEDERAL ENERGY REGULATORY 
                           COMMISSION

    Ms. Miles. Thank you, Mr. Chairman, Madam Chairwoman and 
Members of the committee. I hope I can meet Mike Olsen's----
    Mr. Costa. We hope you can too.
    Ms. Miles. I appreciate the opportunity to appear before 
you today to discuss ocean energy on the Outer Continental 
Shelf. Before addressing your questions, I would like to make 
some introductory comments.
    First, we expect at least initially the majority of the new 
technology projects will be located in state waters rather than 
on the OCS. Of the 23 preliminary permit applications for ocean 
energy projects that are pending at the Commission, only four 
would be located on the OCS.
    This distribution of proposals reflects the fact that the 
cumulative cost of development, including the cost of the 
transmission cable needed to bring power on shore, make it 
advantageous to locate projects nearer to shore.
    For those projects located wholly or partially on the OCS, 
the Commission will actively work with the Minerals Management 
Service, which has the responsibility to issue leases for these 
projects.
    Second, the Commission has seen a surge in applications for 
preliminary permits for these ocean technologies. Preliminary 
permits give application priority to permittees while they 
study the technological, economic and environmental feasibility 
of a project. They do not give any authority to construct any 
facilities.
    Before 2004, the Commission had received no preliminary 
permits for ocean energy projects. In 2004 and 2005, the 
Commission received 11 permits and in 2006 over 40. Since 2005, 
the Commission has issued 32 permits, 21 for tidal projects, 
eight for ocean current projects and three for wave projects.
    The Commission has received one license application for an 
ocean energy project. It is for the one megawatt Makah Bay wave 
energy project proposed to be located off Washington state.
    Besides responding to filed applications, the Commission 
has also been proactive in addressing issues related to 
processing ocean energy projects. In July 2005, the Commission 
issued an order that allowed the Verdant Project to install a 
six turbine demonstration project in the East River without 
holding a FERC license.
    In December 2006, the Commission hosted a technical 
conference to discuss the status of ocean technologies and to 
explore the environmental, financial and regulatory issues 
pertaining to their development. The Commission has adapted its 
approach to handling preliminary permits in response to 
comments from conference participants.
    Now let me turn to your questions. You first asked what 
Congress should do to clarify the Federal government's role, 
particularly the authority of the MMS and FERC. I do not 
believe that clarification of the government's role is 
necessary. The Commission is committed to achieving a fair and 
predictable regulatory program that allows orderly development 
of hydropower projects to be located on the OCS while 
considering existing uses and resources.
    In fact, we are already working cooperatively on a 
memorandum of understanding with MMS and have offered creative 
ideas on how to weave the MMS and FERC processes together for 
the benefit of applicants, stakeholders and the two agencies.
    The Commission's licensing process is transparent. It 
provides a timely review of projects and affords applicants, 
agencies, Native American tribes, nongovernmental organizations 
and members of the public numerous opportunities to participate 
and represent their interests. Both we and MMS have experience 
and expertise to offer in an ocean energy program that will 
undoubtedly cover both state waters and the OCS.
    Your second question was what role, if any, should the 
National Oceanic and Atmospheric Administration play in 
reviewing renewable energy proposals on the OCS. The National 
Marine Fisheries Service with NOAA is one of the Federal 
agencies that has been actively involved in the Commission's 
licensing process for conventional hydropower projects, and we 
expect they would be similarly involved in the ocean.
    They bring considerable expertise and experience to review 
of ocean energy projects and have a strong role to play in the 
protection of ocean resources, including their authorities 
under the Endangered Species Act, Marine Mammal Protection Act, 
Magnuson-Stevens Fisheries Act and the administration of the 
Coastal Zone Management Program.
    Your third question was what role, if any, should the 
states have in planning for renewable energy projects, and how 
could the Federal government improve that role. The state and 
Federal agencies play a central role in the Commission's 
existing hydropower licensing process. This role will continue 
to be essential as we address ocean projects.
    The Commission has several licensing processes, including 
our most recent integrated licensing process, which requires 
involvement of Commission staff in discussions with all 
stakeholders to projects. The process was developed 
collaboratively with all hydro licensing stakeholders, 
including state and Federal agencies, and includes the 
opportunity for consulting with agencies to determine the 
studies needed for an environmental analysis of the proposed 
project.
    The Commission's licensing process and supporting analysis 
incorporates other statutes in which Congress has given 
important authority to states such as the Coastal Zone 
Management Act and National Historic Preservation Act.
    Your last question was how should the Congress address 
environmental impacts associated with renewable energy projects 
on the OCS. The existing laws, including the National 
Environmental Policy Act and the Commission's regulations, 
provide ample opportunity to address environmental effects, and 
the Commission staff has many years of experience doing so. I 
believe this is a good foundation to adequately address the 
environmental effects.
    In summary, we are committed to working with the MMS to 
develop a program for the OCS that makes the best and most 
efficient use of our respective resources and provides a 
thorough analysis of environmental impacts, and we will 
continue to cooperate and consult with Federal agencies and 
individual states in licensing ocean projects.
    This concludes my remarks, and I would be pleased to answer 
questions.
    [The prepared statement of Ms. Miles follows:]

Statement of Ann F. Miles, Director, Division of Hydropower Licensing, 
                  Federal Energy Regulatory Commission

    Madame Chairwoman, Mr. Chairman, and Members of the Committee:
INTRODUCTION
    My name is Ann Miles and I am the Director of the Division of 
Hydropower Licensing, Office of Energy Projects at the Federal Energy 
Regulatory Commission (Commission). I appreciate the opportunity to 
appear before you to discuss the Commission's growing involvement with 
hydropower using new technologies and to respond to your questions. I 
use the term ``new technologies'' to mean mechanisms to produce 
hydropower from ocean currents, tides, and wave action, without the use 
of a dam. Today I will speak mainly about energy derived from waves in 
the ocean, as your focus is the Outer Continental Shelf (OCS), but I 
will also include some of our experience with ocean currents and tidal 
rivers projects, as applications before the Commission cover these 
areas. As a member of the Commission's staff, the views I express in 
this testimony are my own, and not those of the Commission or of any 
individual Commissioner.
    Before I present the Commission's regulatory program for new 
technology projects in general, I want to make several specific points 
regarding how these projects may affect the OCS. First, we expect that 
the majority of new technology projects will not be located on the OCS, 
but in State waters. Of the 23 preliminary permit applications 
currently pending at the Commission and proposing projects to be 
located in the ocean, only four would be located on the OCS. This 
distribution of proposals reflects the fact that the cumulative costs 
of development which include the costs associated with purchasing and 
installing transmission cable needed to bring project power onshore, 
make it advantageous to locate projects nearer to the shore. Second, 
for those projects located wholly or partially on the OCS, the 
Commission will actively work with the Minerals Management Service of 
the U.S. Department of the Interior (MMS) which has the responsibility 
to issue leases for these projects. Third, we are already working 
cooperatively on a Memorandum of Agreement with MMS and have offered 
creative ideas on how to weave the MMS and FERC processes together for 
the benefit of applicants, other stakeholders, and the two agencies. I 
will discuss our interactions with MMS in more detail, later in my 
testimony. Now I will turn to the Commission's regulatory program for 
new technology projects.
    The Commission regulates over 1,600 hydroelectric projects at over 
2,000 dams pursuant to Part I of the Federal Power Act (FPA). Together, 
these projects represent 57 gigawatts of hydroelectric capacity, more 
than half of all the hydropower in the United States, and over five 
percent of all electric generating capacity in the United States. 
Hydropower is an essential part of the Nation's energy mix and offers 
the benefits of an emission-free, renewable, domestic energy source 
with public and private capacity together totaling about ten percent of 
U.S. capacity. Today we are looking at development of a new source of 
hydropower that has the potential to add a substantial amount of power 
to the nation's generation capacity, particularly in the area of 
renewable energy.
    The Commission's existing procedures are well established and well 
suited to address this expansion of conventional hydropower with new 
technologies, and we are prepared to learn from experience in this 
rapidly evolving area and to make whatever regulatory adjustments are 
appropriate in order to help realize the potential of this renewable 
energy resource.
    First, I will give you some background on the industry in general 
and describe the level of application activity that the Commission has 
seen. Then I will describe 1) the compatibility of the Commission's 
existing program with the new technologies, 2) alterations the 
Commission is making to address the concerns of stakeholders about 
specific aspects of that compatibility, 3) the Commission's efforts to 
work with the MMS to weave together an efficient program for new 
technology projects to be located outside state waters on the OCS, and 
4) the Commission's coordination and cooperation with federal and state 
agencies in the licensing process.
Ocean-Based Hydropower Technology
    In the past, efficient and reliable conversion of kinetic energy 
from water has proven elusive, but with recent advances in technology, 
rising fuel cost, and a growing demand for renewable energy, the 
potential for hydropower using new technologies is on the rise. An 
Electrical Power Research Institute (EPRI) study estimated the 
potential for wave and current power in our nation's oceans to be over 
350 billion kilowatt hours per year, which would equal the output of 
traditional hydropower in its most productive years. In other words, 
ocean-based hydropower using new technologies could double hydropower 
production going from 10% to 20% of the national total. At present, 
however, the development and commercialization of the new technologies 
are just beginning.
    The wave energy technologies include a range of designs including 
buoys, barge-like devices, and small floating reservoirs. Designs for 
harnessing tidal and current energy generally are variations on 
traditional turbines, often using underwater ``propellers.'' In both 
cases, the energy of the moving water or wave is converted into 
electricity within each unit, making each device a small powerhouse. 
The current stage of technological development ranges from concept 
sketches to pilot demonstration projects.
    Wave energy can be harnessed in locations that range from at the 
shoreline to many miles off shore, while tidal energy is limited to 
tidal rivers and narrows associated with coastal bays and estuaries, 
and ocean currents are located mainly in offshore locations such as the 
Gulf Stream. Tidal power has substantial hourly variations during the 
day but the pattern tends to be very predictable across seasons and 
years, while wave power is much steadier on an hourly basis but shows 
more seasonal variation.
    Ultimately, whether the source is wave, tide, or current, it likely 
will take clusters or fields of devices to generate utility-scale power 
from the new technologies. The electricity from the devices will in 
most cases be connected by an underwater cable to the shore and then 
continue onshore to connect with the interstate transmission grid.
OCEAN ENERGY ACTIVITY BEFORE THE COMMISSION
    Applications for ocean-based hydropower projects can potentially go 
through three stages at the Commission. First, developers can apply for 
preliminary permits. Preliminary permits maintain priority of 
application for license for a site for up to three years while a 
developer researches site feasibility and makes financial arrangements. 
Second, developers can apply for a hydropower license. (A preliminary 
permit is not required prior to applying for a license.) By statute the 
Commission can issue a license for a term of up to 50 years. Third, if 
licensed, the developer must operate the project in compliance with the 
terms of the Commission's license order. Throughout the term of the 
license, the Commission monitors the project to assure compliance with 
the license.
    Recently, the Commission has seen a surge in applications for 
preliminary permits for the new technologies. Before 2004, the 
Commission had received no recent preliminary permit applications for 
projects using ocean technologies. We received 11 permit applications 
in calendar years 2004 and 2005 combined and over 40 permit 
applications in 2006 alone. We have received four more permit 
applications so far in 2007. In 2005 and 2006, the Commission issued 11 
preliminary permits, three for proposed tidal energy projects, and 
eight for proposed ocean current energy projects. So far in 2007, the 
Commission issued 19 permits, 16 for proposed tidal energy projects and 
three for proposed ocean wave energy projects.
    The Commission received the first license application for a wave 
energy hydropower project from AquaEnergy, Inc. in November 2006. The 
Makah Bay Offshore Wave Energy Project is proposed for Makah Bay in 
Clallam County, Washington. Part of the project would be located on 
lands of the Makah Nation Indian Reservation. The project would consist 
of four buoys moored 3.2 nautical miles offshore in the Olympic Coast 
National Marine Sanctuary. Together, the buoys would generate up to 1 
megawatt (MW), with an average of about 200 kilowatts (kW), through 
relative motion created by waves, which drives an internal pump that 
would force pressurized water through a closed-loop hose and a turbine.
    In the tidal hydropower arena, Commission staff has been working 
with Verdant Power, LLC, a permit holder seeking to develop a license 
application for the Roosevelt Island Tidal Energy Hydropower Project. 
The project ultimately would consist of as many as 494 free-flowing 
turbine generator units (about 10.3 MW total), located below the water 
surface in the East River in Queens County, New York.
    In addition, the Commission has been proactive in addressing the 
new issues unique to this nascent industry. In 2005, as activity in the 
field of new hydropower technologies began to increase, the 
Commission's Office of Energy Projects formed a committee of technical 
and legal staff to initiate research on the regulatory, environmental, 
and developmental aspects of these new technologies. On December 6, 
2006, the Commission hosted a technical conference to discuss the 
status of new technologies in hydroelectric generation from ocean 
waves, tides, and currents and from free-flowing rivers, and to explore 
the environmental, financial, and regulatory issues pertaining to the 
development of these technologies. Conference participants included 
ocean energy developers and consultants, trade associations, 
representatives from state and federal agencies, non-governmental 
organizations, and members of the public. Following the conference, the 
Commission solicited and received written comments from the 
participants.

COMPATIBILITY OF THE COMMISSION'S EXISTING PROCESS WITH THE NEW 
        TECHNOLOGIES
    Projects using new technologies are compatible with the 
Commission's well-tested regulatory process that has been refined 
continuously since the original passage of the Federal Water Power Act 
of 1920. Regulating the development of power generation from the 
nation's waters is a primary role of the Commission. We analyze 
developers' proposals for energy generation from navigable and Commerce 
Clause waters, along with interests expressed by other stakeholders, 
and comprehensively balance the benefit of power generation with 
environmental protection and other values as directed by statute. After 
years of collaboration with other agencies and parties we have achieved 
a high level of regulatory efficiency. Over the years, we have improved 
our licensing process to include early engagement with the applicant 
and other stakeholders, earlier and more predictable study 
requirements, more certain timeframes, and overall reduced processing 
time.
    In reviewing a license application for a project, the Commission 
integrates and weighs the concerns of the licensee, federal and state 
resource agencies, tribes, and other members of the public. We do so 
through an information-gathering process and technical analysis that 
enables a fully informed Commission decision while complying with the 
mandates of the Federal Power Act, the National Environmental Policy 
Act, the Endangered Species Act, and other applicable laws.
    Within our established process, significant flexibility exists to 
implement innovative approaches when appropriate. For instance, in the 
Makah Bay and Roosevelt Island cases, Commission staff has allowed the 
use of different license processes that better fit the applicants' 
needs. This flexibility has enabled 1) the inclusion of Commission 
staff and stakeholders in the study development and implementation and 
2) for much of the National Environmental Policy Act information to be 
developed parallel to the project's license application development. In 
the Roosevelt Island case, the process may also encourage negotiation 
of a settlement.

CHANGES IN COMMISSION PROCESSES TO IMPROVE COMPATIBILITY WITH THE NEW 
        TECHNOLOGIES
    Where the needs of the industry have raised new issues, not within 
the scope of our standard procedures, the Commission has shown the 
maximum flexibility allowed by the statute. For example, the Commission 
determined that Verdant Power could install its six-turbine 
demonstration project in the East River without applying for a 
Commission license. In a July 27, 2005, Order on Clarification, the 
Commission concluded that Verdant's activities effectively would have 
no net impact on the interstate electric power grid or on interstate 
commerce. This determination established a policy that allows 
experimentation without a license when 1) the technology in question is 
experimental; 2) the proposed facilities are to be used for a short 
period and for the purpose of developing a hydropower license 
application; and 3) power generated from the test project will not be 
transmitted into, or displaced from, the national electric energy grid. 
In addition to testing power generation, Verdant will carry out 
extensive monitoring of fishery impacts as part of the experimental 
deployment. Although not required to be licensed during its testing 
phase, Verdant was of course obligated to obtain necessary approvals 
under other existing state and federal statutes.
    In order to respond to industry concerns about the applicability of 
the existing preliminary permit system to new technology projects, the 
filing of a large number of recent applications for preliminary permits 
using ``new technology'', and to follow up on the Hydroelectric 
Infrastructure Technical Conference, the Commission on March 1, 2007, 
issued a notice in the Federal Register seeking comments on how the 
Commission should treat applications for and regulate preliminary 
permits for hydropower projects involving wave, current, and instream 
technologies. The notice sets an interim policy for reviewing such 
applications, proposing to scrutinize them strictly by imposing 
requirements on any permits issued, such as the submission of progress 
reports, the development of study plans, and the establishment of 
deadlines to file a subsequent license application. Alternative 
policies would either: (1) continue the standard policy for processing 
applications for hydropower permits, by not subjecting them to 
extensive scrutiny and not imposing additional requirements on permit 
holders; or (2) decline to issue any preliminary permits for projects 
involving new technology, in which case applicants could only pursue 
such projects directly through the licensing process. Comments on the 
Notice of Inquiry are due by April 30, 2007.
    In applying the interim policy, the Commission will ensure that 
permit holders are actively pursuing studies and consultations that may 
lead to development of a license application in hopes of preventing 
site-banking, the practice of reserving potential project sites without 
intent to develop projects. The Commission will carefully scrutinize 
the reports that permit holders are required to file on a semi-annual 
basis, and will, where sufficient progress is not shown, consider 
canceling the permit. Stricter scrutiny will entail requirements such 
as reports on public outreach and agency consultation, development of 
study plans, and deadlines for initiating the formal license 
application process. The Commission will process preliminary permit 
applications with a view toward limiting the boundaries of the permits. 
This approach should provide a disincentive for developers to seek 
permits for projects that they are not ready to pursue.
    In the area of licensing, the Commission staff considers our well-
tested existing procedures to work well, yet to be sufficiently 
flexible to address the licensing of projects using the new 
technologies. Where appropriate, Commission staff will investigate 
making improvements to the current process to the extent consistent 
with existing law. We will continue to use our substantial experience 
and expertise in bringing other agencies together in determining 
appropriate studies and complying with all existing statutes and to 
make the regulatory process for agencies, applicants, and parties as 
efficient as possible. To address a concern about a lack of information 
about the environmental effects of these technologies, Commission staff 
has been gathering information and studies on the environmental effects 
of ocean energy and, in coordination with other agencies, will be 
making this information available as a service to developers as well as 
using it to accelerate our reviews. We also plan to provide outreach on 
our program to clarify our process for the industry and stakeholders, 
many of whom are new to it.

WORKING WITH THE MINERALS MANAGEMENT SERVICE ON THE OCS
    The Commission is committed to achieving a fair and predictable 
regulatory program that allows orderly development of new technology 
projects to be located on the OCS while considering environmental, 
recreational, cultural, and other uses of the resource. To this end, 
both staff and Chairman Kelliher have met with representatives of the 
Department of the Interior. I am happy to report that the two agencies 
are working together to develop a Memorandum of Agreement that will 
apply the best resources and authorities of both agencies to develop an 
efficient and effective program for promoting and regulating the 
development of hydropower in all offshore areas, including the OCS. We 
believe that the Commission brings several resources to the negotiating 
table. First, the Commission is uniquely positioned under the FPA and 
its regulations to give equal consideration to developmental and non-
developmental resources and to assure that any project licensed will be 
best adapted to a comprehensive plan for development of the water 
resource in the public interest. Second, the Commission has many years 
experience in hydropower licensing. The Commission's licensing process 
is transparent, provides timely review of projects, and affords 
applicants, agencies, Native American Tribes, Non-governmental 
organizations and members of the public numerous opportunities to 
effectively participate and represent their interests.

COOPERATION AND CONSULTATION WITH STATE AND FEDERAL AGENCIES
    State and other federal agencies (agencies) play a central role in 
the Commission's existing hydropower licensing process. This role will 
continue to be essential as we address the new hydropower technologies. 
The National Marine Fisheries Service (NMFS) within the National 
Oceanic and Atmospheric Administration of the U.S. Department of 
Commerce is one of the federal agencies that has been actively involved 
in the Commission's licensing process for conventional hydropower 
projects and we expect that they would be similarly involved in new 
technology projects. The Commission staff works closely with the 
agencies to address their interests and concerns and to tap their 
expertise with ``on the ground'' management of the resource. 
Cooperation and consultation with the agencies begins early in 
application development and continues throughout the licensing process.
    The Commission requires that applicants consult with agencies in 
the process of preparing an application. The application must include 
the results of this consultation with a description of agency 
recommendations and the applicant's response to the recommendations. 
The Commission's Integrated Licensing Process regulations require early 
involvement of Commission staff in pre-application phase discussions 
with agencies and the applicant. The process includes a formal 
procedure for consulting with the agencies to determine the studies 
needed for licensing and includes both an informal and formal dispute 
resolution process. Under the Federal Power Act, Congress assigned the 
state and federal fish and wildlife agencies specific authority in 
hydropower licensing. Essentially, the Commission is to accept state 
and federal fish and wildlife agency recommendations unless they 
clearly are in conflict with another part of the statute. These 
recommendations contribute to the comprehensive balancing of energy 
development and the protection of fish, wildlife, recreation, and other 
resources. Finally, the Commission's licensing process and supporting 
analysis incorporates other statutes in which Congress has given 
important authorities to the states such as the Coastal Zone Management 
Act of 1972 and the National Historic Preservation Act of 1966. 
Together, these statutory, regulatory, and informal relationships have 
supported good coordination and cooperation with the states that will 
extend to the new technologies.
    In addition, Section 10(a)(2)(A) of the FPA authorizes states and 
federal agencies to file Comprehensive Plans that address one or more 
beneficial uses of a waterway. The Commission takes these Comprehensive 
Plans into account when determining whether and under what conditions a 
project should be licensed. These plans enable state and federal 
agencies to have a substantial role in the Commission's public interest 
determination.
    Finally, I would suggest that the Commission's many years of 
experience in analyzing the environmental effects of hydropower 
projects under existing statutes, including NEPA, and implementing 
regulations provide an ample foundation to adequately address the 
environmental effects of new technology projects.

CONCLUSION
    In closing, the Commissioners have stated publicly their interest 
in promoting the development of this potentially important source of 
renewable energy. They also have expressed their desire to reduce 
regulatory barriers to the development of new technologies, where 
possible.
    We are confident that under the Commission's statutory structure, 
refined over almost a century, hydropower resources using new 
technologies can be developed in an orderly way while protecting other 
beneficial public uses, such as fish and wildlife, and meeting the 
requirements of other federal statutes and state interests. As 
experience is gained in the area of new hydropower technologies, we 
will make appropriate regulatory adjustments as we have in response to 
other technology changes in the past. We will work with the Minerals 
Management Service to develop a program for the OCS that makes the best 
and most efficient use of our respective resources and provides 
thorough analysis of environmental impacts, and we will continue to 
cooperate and consult with other federal agencies, including NMFS, and 
individual states in the licensing of new technology projects. We look 
forward to continuing to carry out the Congressional mandate in the 
Federal Power Act and performing our regulatory duties fairly, openly, 
and efficiently to realize the potential of this promising renewable 
energy resource.
    That concludes my remarks and I would be pleased to answer any 
questions you may have.
                                 ______
                                 
    Mr. Costa. Thank you very much, Ms. Miles. I am sorry. A 
minute 40 over. I can't give you the mark you were looking for.
    Ms. Miles. Sorry.
    Mr. Costa. Well, we are being patient here today.
    Our next witness is Mr. Tim Keeney. He is the Deputy 
Assistant Secretary for Oceans and Atmosphere with the National 
Oceanic and Atmospheric Administration within the Department of 
Commerce.
    We are very interested in hearing your comments, especially 
queued off the last comments of the previous witness.
    See if you can stay within the five minutes.

 STATEMENT OF TIMOTHY R.E. KEENEY, DEPUTY ASSISTANT SECRETARY 
  FOR OCEANS AND ATMOSPHERE, NATIONAL OCEANIC AND ATMOSPHERIC 
          ADMINISTRATION, U.S. DEPARTMENT OF COMMERCE

    Mr. Keeney. Mr. Chairman, Madam Chairwoman, Members of the 
committee, thank you for inviting me to appear before you 
today. I am Tim Keeney, Deputy Assistant Secretary for Oceans 
and Atmosphere at NOAA. I am pleased to be here to discuss 
NOAA's interest and role in alternate energy and related uses 
in the Outer Continental Shelf.
    NOAA takes our stewardship responsibilities very seriously 
and recognizes the need for a safe and environmentally sound 
supply of energy. Section 388 of the Energy Policy Act places 
jurisdiction over alternate energy related uses on the Outer 
Continental Shelf with the Minerals Management Service, 
Department of Interior.
    As you have already heard from Mr. Mike Olsen, MMS is 
currently in the midst of mapping out a regulatory process in 
consultation with the Department of Commerce and other agencies 
and state governments. MMS has recently published a draft 
programmatic environmental impact statement or DEIS which is 
currently out for public review and comment. NOAA's National 
Marine Fisheries Service and National Ocean Service are in the 
process of reviewing the DEIS and will be providing comments in 
the near future.
    Section 388 also referenced the Deepwater Port Act and the 
Ocean Thermal Energy Conversion Act. I would like to highlight 
the active role NOAA has played in each of these two regulatory 
schemes.
    The Deepwater Port Act allows for the licensing of 
deepwater ports in EEZ along our maritime coasts. Numerous 
energy corporations have submitted applications or have 
announced their intentions to apply for deepwater port licenses 
primarily for liquefied natural gas.
    In 2004, consistent with Executive Order 13212 and 
cooperation necessary by the DPA, NOAA joined other Federal 
agencies with regulatory responsibilities relevant to deepwater 
ports in developing and signing an MOU. The MOU is designed to 
expedite actions on pending and future applications for 
licensing deepwater ports.
    NOAA's National Marine Fisheries Service is responsible for 
a variety of activities and marine and coastal ecosystems as 
mandated by several statutes and authorities. These activities 
include managing protected species, managing commercial and 
recreational fisheries, protecting marine and coastal habitats.
    These activities are conducted pursuant to a number of 
environmental laws, including the Endangered Species Act, 
Marine Mammal Protection Act, Magnuson-Stevens Fisheries 
Conservation and Management Act and the Fish and Wildlife 
Coordination Act.
    Deepwater port construction and operation may overlap with 
several NOAA responsibilities depending on the location and 
type of project proposed. Federal agencies authorizing 
activities that may affect any of these resources are required 
to consult with NMFS regarding adverse effects to these 
resources and habitats upon which they depend.
    NOS is responsible for various coastal and ocean programs 
that may be relevant to deepwater ports, Coastal Zone 
Management Act or CZMA. NOS provides and works with states to 
implement comprehensive coastal zone management programs and 
national estuarine research reserves and mediates disputes 
regarding CZMA issues.
    Under the Coastal Zone Management Act, affected states must 
concur with consistency certifications submitted with deepwater 
port applications before Federal agencies can issue permits. 
NOS also manages designated national marine sanctuaries, as 
well as provides for coastal protection and restoration 
activities.
    While oil and gas activities are mostly prohibited within 
the sanctuaries under the National Marine Sanctuaries Act, 
Federal actions near the sanctuaries may require consultation 
with the Secretary of Commerce.
    NOS also provides technical assistance related to nautical 
charts, coastal observing stations, geographical information 
systems capabilities and tide and current information.
    The DPA sets forth the criteria that the Secretary of 
Transportation should use to permit a facility located in the 
EEZ and includes a requirement to consult with NOAA on the 
potential environmental impacts.
    The environmental stewardship statutes referenced above 
required Federal departments to consult with NOAA on Federal 
actions that could affect protected species and resources. The 
purpose of these laws is to ensure that the proper balance is 
given to issues such as energy security, economic matters, 
navigational safety and protection of trust resources and 
environment.
    In this interagency process, NOAA makes recommendations and 
provides comments on potential effects to protected resources 
and possible mitigation measures and works closely with the 
Department of Transportation's Maritime Administration and the 
Coast Guard to develop measures the applicant must adopt in 
order to mitigate potential effects on protected species and 
resources.
    In the late 1970s, there was also a period of interest in 
alternate energy sources. One of these alternatives, ocean 
thermal energy conversion or OTEC, is a process that uses the 
heat energy stored in the warm surface waters and through a 
temperature differential can produce electricity and other 
energy intensive products.
    The Ocean Thermal Energy Conversion Act gave NOAA lead 
responsibility for licensing the construction, ownership, 
location and commercial operations of OTEC plants. Following 
NOAA's initial environmental studies and implementation of a 
licensing program, NOAA has yet to receive a license 
application for OTEC facilities or plantships.
    NOAA has a well established history of working with agency 
partners. I look forward to continuing our close collaboration 
with MMS and other participating Federal agencies in developing 
this process.
    Thank you for your time and consideration. I would be happy 
to answer any questions you might have.
    [The prepared statement of Mr. Keeney follows:]

Statement of Timothy R.E. Keeney, Deputy Assistant Secretary for Oceans 
 and Atmosphere, National Oceanic and Atmospheric Administration, U.S. 
                         Department of Commerce

    Madam Chairwoman and Members of the Committee, thank you for 
inviting me to appear before you today. I am Timothy Keeney, Deputy 
Assistant Secretary for Oceans and Atmosphere at the National Oceanic 
and Atmospheric Administration (NOAA), in the Department of Commerce. I 
am pleased to be here today to discuss with you NOAA's interest and 
roles in alternate energy and related uses in the outer continental 
shelf (OCS). NOAA and the Department of Commerce take our stewardship 
responsibilities very seriously, and we also recognize the need for an 
environmentally safe supply of energy. Per Executive Order 13212, it is 
Administration policy for agencies to ``take appropriate actions, to 
the extent consistent with applicable law, to expedite projects that 
will increase the production, transmission, or conservation of 
energy.''
Energy Policy Act of 2005, Section 388:
    As you are aware, Section 388 of the Energy Policy Act of 2005 
(EPAct) placed jurisdiction over ``Alternate Energy-Related Uses of the 
Outer Continental Shelf'' with the Minerals Management Service (MMS) of 
the Department of Interior. As you have heard [will hear] from my 
friend from the Department of the Interior, MMS is currently in the 
process of mapping out a regulatory process, in consultation with the 
Department of Commerce and other agencies and state governments. MMS 
has recently published in the Federal Register a Draft Programmatic 
Environmental Impact Statement (DEIS), which is currently out for 
public review and comment. NOAA's National Marine Fisheries Service 
(NMFS) and National Ocean Service (NOS) are in the process of reviewing 
the DEIS and will be providing comments in the near future. NOAA also 
is an ex officio member of the MMS Outer Continental Shelf Policy 
Committee, and its Alternate Use of the OCS Subcommittee, so we are in 
close consultation with our colleagues at MMS as they develop a 
regulatory scheme for alternate energy and related use of the OCS.
    To illustrate NOAA's important role in the regulation of offshore 
activities, it may be useful to describe existing interagency efforts. 
Section 388 of EPAct, referred to above, gave the Secretary of the 
Interior discretionary authority over energy-related and other 
authorized marine-related activities not otherwise authorized in the 
OCS Lands Act, the Deepwater Ports Act of 1974 (DPA), or the Ocean 
Thermal Energy Conversion Act of 1980 (OTEC). As I will outline in my 
testimony, NOAA has an active role in each of these two regulatory 
schemes.
Deepwater Ports Act of 1974:
    The DPA allows for the licensing of deepwater ports in the 
Exclusive Economic Zone (EEZ) along all maritime coasts of the United 
States. Numerous energy corporations have submitted applications or 
have announced their intentions to apply for deepwater port licenses, 
primarily for liquefied natural gas. In 2004, consistent with Executive 
Order 13212 and cooperation necessitated by the DPA, NOAA joined other 
agencies with regulatory responsibilities relevant to deepwater ports 
in developing and signing an MOU to expedite actions on pending and 
future applications for licensing deepwater ports.
    To describe NOAA's regulatory interests in deepwater facilities, I 
will very briefly discuss some of the authorities NOAA is charged with 
executing. NMFS is responsible for a variety of activities in marine 
and coastal ecosystems as mandated by several statutes and authorities. 
These activities include managing protected species, managing 
commercial and recreational fisheries, and protecting marine and 
coastal habitats. These activities are conducted pursuant to a number 
of environmental laws including the Endangered Species Act, Marine 
Mammal Protection Act, Magnuson-Stevens Fishery Conservation and 
Management Act, and the Fish and Wildlife Coordination Act. Deepwater 
port construction and operation in coastal and/or ocean areas may 
overlap with several NOAA responsibilities depending on the location 
and type of project proposed. Federal agencies authorizing activities 
that may affect any of these resources are required to consult with 
NOAA Fisheries regarding adverse affects to these resources and 
habitats upon which they depend.
    NOS is responsible for various coastal and ocean programs that may 
be relevant to deepwater ports. NOS administers the Coastal Zone 
Management Act (CZMA) and approves and works with states to implement 
comprehensive Coastal Management Programs and National Estuarine 
Research Reserves and mediates disputes regarding CZMA issues. Under 
CZMA Section 307(c)(3)(A), affected states must concur with consistency 
certifications submitted with deepwater port applications before 
federal agencies can issue their permits. NOS also manages designated 
National Marine Sanctuaries (NMS) and coastal protection and 
restoration activities. While oil and gas activities are mostly 
prohibited within NMS, pursuant to Section 304(d) of the National 
Marine Sanctuaries Act, federal actions near NMS may require 
consultation with the Secretary of Commerce. NOS also may be able to 
provide technical assistance related to nautical charts, coastal 
observing stations, geographic information systems capabilities, and 
tide and current information.
    The DPA sets forth the criteria that the Secretary of 
Transportation should use to permit a facility located in the EEZ, and 
includes a requirement to consult with NOAA on the potential 
environmental impacts. Additionally, the environmental stewardship 
statutes referenced above require federal departments to consult with 
NOAA on federal actions that could impact protected species and 
resources. The purpose of these laws is to ensure that proper balance 
is given to issues such as energy security and regional and national 
economic matters and issues such as navigational safety and the 
protection of trust resources and the environment.
    In this interagency process, NOAA makes recommendations and 
provides comments on potential effects to protected resources, as well 
as possible mitigation measures. The Department of Transportation, 
through the Maritime Administration (MARAD), has the policy and legal 
discretion to give appropriate weight to the environmental 
recommendations of NOAA and to permit the facility when the Secretary 
``determines that the construction and operation of the deepwater port 
will be in the national interest and consistent with national security 
and other national policy goals and objectives, including energy 
sufficiency and environmental quality.''
    NOAA works closely with MARAD and the U.S. Coast Guard to develop 
measures the applicant must adopt in order to mitigate potential 
effects on protected species and resources. This interagency process is 
fairly new, and is not without challenges, but it is a process that 
provides some illumination to the various and often complex statutes 
taken into consideration when licensing new offshore activities.
Ocean Thermal Energy Conversion Act of 1980:
    In the late seventies, there was also a period of interest in 
alternative energy sources. One of those alternatives--ocean thermal 
energy conversion (OTEC)--is a process that uses the heat energy stored 
in the warm surface waters of the world's oceans to produce electricity 
or other energy-intensive products. The Ocean Thermal Energy Conversion 
Act of 1980 (OTEC Act), gave NOAA lead responsibility for licensing the 
construction, ownership, location and commercial operation of OTEC 
plants.
    The OTEC Act directed the administrator of NOAA to establish a 
stable legal regime to foster commercial development of OTEC. In 
addition, the OTEC Act directed the secretary of the department in 
which the U.S. Coast Guard is operating to promote safety of life and 
property at sea for OTEC operations, prevent pollution of the marine 
environment, clean up any discharged pollutants, and prevent or 
minimize any adverse impacts from the construction and operation of 
OTEC plants. In addition, the Act was designed to ensure that the 
thermal plume of an OTEC plantship does not unreasonably impinge on, 
and thus degrade, the thermal gradient used by any other OTEC plantship 
or facility, the territorial sea, or an area of national resource 
jurisdiction of any other nation. An exception would be made, however, 
if the Secretary of State had approved such an impingement after 
consultation with a nation. The OTEC Act also assigns responsibilities 
to the Secretary of State and the Secretary of Energy regarding OTEC 
plants.
    There has been a low level of activity under the OTEC Act since its 
passage in 1980. Following NOAA's initial environmental studies and 
implementation of a licensing program, NOAA has not received any 
license applications for OTEC facilities or plantships. The 
availability and the relatively low prices of fossil fuels, coupled 
with the risks to potential investors, have limited the interest in 
commercial development of OTEC projects. The need to protect the 
environmental quality of ocean resources and ecosystems may outweigh 
the benefits of constructing OTEC facilities in certain areas. 
Moreover, OTEC projects have offered an unclear return on a significant 
investment. (Source: Year of the Ocean Discussion Papers, 1998)
Conclusion
    NOAA has a well-established history of working with agency partners 
to ensure our ocean and coastal resources receive due consideration in 
the development of regulatory regimes for emerging and existing 
technologies that are in our nation's best interest. I look forward to 
continuing our close collaboration with MMS and other participating 
federal agencies in developing this process. Thank you for your time 
and consideration. I would be happy to answer any questions you might 
have.
                                 ______
                                 
    Mr. Costa. Thank you very much, Mr. Keeney, for your 
testimony. We will be looking forward to asking questions. You 
did go a little over your time though.
    Without objection, the Chair, the Chairs I should say, 
would like to ask unanimous consent to allow Mr. Inslee, the 
gentleman from Washington, to sit in the two Subcommittees. He 
is a Member of the Natural Resources Committee, but not on 
either of these two Subcommittees. We are pleased to have you 
here.
    [No response.]
    Mr. Costa. Hearing no objection, all right.
    Our last witness on this panel is Mr. Ted Diers, who 
represents Coastal States Organization.
    As we know, our states have responsibilities within three 
miles of the coastal line there for states throughout the 
coastal perimeter, so I suspect that that is the perspective we 
will get from Mr. Diers, and we will look forward to your 
testimony.

      STATEMENT OF TED DIERS, COASTAL STATES ORGANIZATION

    Mr. Diers. Thank you very much, Chairman and Madam 
Chairwoman. Thank you very much for allowing me to be here 
today.
    My name is Ted Diers, and I am the program manager of the 
New Hampshire Coastal Program, but today I am serving in my 
capacity as Vice Chair of the Coastal States Organization. The 
Coastal States Organization serves as a voice in Washington and 
elsewhere for the states and of course the territories.
    My testimony today will cover three points, and those are 
1) that the states, territories and tribes should be partners 
with the Federal government in relation to Outer Continental 
Shelf issues; 2) that much more information is needed as we 
approach thoughtful management of the Outer Continental Shelf; 
and 3) that we really need to contemplate the big picture of 
how we are doing management of our marine waters.
    So in terms of states and territories being partners with 
the Federal government, I would like to highlight three reasons 
why a strong partnership is needed from the states' 
perspective. The first is the dynamic nature of the ocean and 
coasts. There are lots of things that interact between the OCS 
and within the state waters.
    Second of all, there is infrastructure issues. Whatever 
energy is created on the Outer Continental Shelf has to get 
onto the land somehow, so there is infrastructure issues.
    One interesting example that we are going through right now 
in New England, and this is not necessarily a renewable energy 
example, but with liquefied natural gas. There is an 
application in downeast Maine, which is some 200 miles away 
from New Hampshire, yet in order to get that gas to the market 
which exists in Massachusetts and Connecticut additional 
pipeline capacity is going to have to be built through our 
coastal zone, so there are a lot of interrelated issues when it 
comes to infrastructure with offshore projects.
    Finally, affected states and local communities that are 
involved with siting of different structures really ought to 
have a voice in these decisions. The Energy Policy Act of 2005, 
there were some preemptions that were made in that Act as they 
related to liquefied natural gas. I think that the loud cry 
from the states is that we would really prefer not to see any 
more preemptions in this area.
    In fact, the National Governors Association has a policy 
out, and I have that here which can be entered into the record, 
Policy NR-10, which is relative to ocean and coastal zone 
management.
    My second point today is that a lot more information is 
really needed for thoughtful management of the Outer 
Continental Shelf. First of all, mapping and observation I 
think are really key. As you have probably heard Dr. Robert 
Ballard, the undersea explorer, say, we have better maps of 
Mars than we have of the bottom of the Pacific Ocean.
    We need to really be thinking about how we do our mapping. 
The MMS has already started a cadastre map. This is a mapping 
of the locations of boundaries and overlapping jurisdictions. 
That needs to be funded.
    We need additional mapping such as some of the regional 
mapping that is going on through the Gulf of Maine Mapping 
Initiative and others like it which have already showed their 
importance in helping with siting decisions, especially in the 
area of cables. If it can work for cables, it can work for 
other things.
    Observation. You have probably heard about the Integrated 
Ocean Observation System, the IOOS. We are trying to make use 
of the IOOS by trying to get that data. In fact, last week we 
had a serious nor'easter in New England, and I was immediately 
onto the website for those buoys that were off our shore 
looking at what the wave heights were, looking at what the 
barometric pressures were. It told us we were going to have a 
doozie, and we did. We had massive destruction last week.
    All the mapping and observation needs to come together in 
assessments. The Ocean Commission report calls on NOAA and EPA 
to develop a system of ecosystem assessment. We feel that that 
is an excellent approach to be able to guide some of its siting 
decisions that will happen.
    My final point is that really a new management regime needs 
to be examined. You will hear on Thursday at a hearing about 
the advances in regional ocean governance. The coastal states 
are committed to regional ocean governance. We are pulling it 
together with our Federal partners, and we are making these 
efforts work.
    The West Coast has an effort, the Gulf of Mexico of course, 
the Great Lakes and now the northeast with the Northeast 
Regional Ocean Council. Energy issues are high among the 
priorities amongst those regional organizations.
    Finally, at the end I would just like to make one 
recommendation, and that is to look at Recommendation 24-5 of 
the U.S. Ocean Commission report which calls for a new 
comprehensive management regime looking at the oceans are a 
public resource, that we streamline the process for licensing 
and permitting, that we subsume some of the existing statutes 
to make it simpler and that we ensure that the public receives 
fair return on the use of the resources.
    If I could add one more bullet to that list that came from 
the ocean report it would be that the states and territories be 
full partners and that regional interests be taken into 
consideration as these move forward.
    Thank you very much for your time and the opportunity to 
speak here today.
    [The prepared statement of Mr. Diers follows:]

Statement of Ted Diers, Program Manager, New Hampshire Coastal Program, 
           New Hampshire Department of Environmental Services

    Representatives Bordallo and Costa, and Members of the Subcommittee 
on Fisheries, Wildlife and Oceans and Subcommittee on Energy and 
Mineral Resources; thank you for the opportunity to appear before you 
today to discuss renewable energy opportunities and issues on the outer 
continental shelf (OCS).
    My name is Ted Diers, I am the program manager of the New Hampshire 
Coastal Program in the Department of Environmental Services. I am here 
today on behalf of the Coastal States Organization, where I serve as 
vice-chair. My comments here today reflect both the New Hampshire 
experience with renewable energy as well as the experience in many 
other states. As such, I will identify issues on which there is broad 
national consensus from coastal zone managers. Before I begin, I 
request that my written testimony be included in the record.
    This testimony will cover three main points:
    1.  States and territories should be partners with the federal 
government;
    2.  Much more information is needed for thoughtful management of 
OCS; and
    3.  A new management regime for our nation's marine waters is 
needed.
    First of all, I would like to thank you for taking the issues of 
ocean energy and global climate change to heart. It is gratifying to 
see the policies needed to create a climate of change beginning to take 
shape.
    Energy and reducing greenhouse gas emissions are both critical 
national needs, which make the possibilities of alternative energy so 
promising. This is a local and state phenomenon as well as a federal 
one. The State of New Hampshire is taking this issue seriously. At this 
Spring's town meetings, 157 towns passed resolutions. That resolution 
is as follows:
        ``New Hampshire Climate Change Resolution

        To see if the town will go on record in support of effective 
        actions by the President and the Congress to address the issue 
        of climate change which is increasingly harmful to the 
        environment and economy of New Hampshire and to the future well 
        being of the people of our town. These actions include:

        1.  Establishment of a national program requiring reductions of 
        U.S. greenhouse gas emissions while protecting the U.S. 
        economy.

        2.  Creation of a major national research initiative to foster 
        rapid development of sustainable energy technologies thereby 
        stimulating new jobs and investment.

        In addition, our town encourages New Hampshire citizens to work 
        for emission reductions within their communities, and we ask 
        our Selectmen to consider the appointment of a voluntary energy 
        committee to recommend local steps to save energy and reduce 
        emissions.''
    This resolution and much of Congress' work on climate change is 
focused on reducing greenhouse gases, which is a critical thing to do. 
I urge you to also include the issues of adaptation and mitigation in 
your legislative deliberations. Even if all greenhouses gases emissions 
were stopped tomorrow, the effects of climate change would continue for 
decades. Coastal states are literally on the front lines of sea level 
rise and we need more resources and tools to conduct assessments and 
develop models of the potential future impacts; develop adaptation and 
response strategies; and increase the resilience of coastal 
communities.
    Concerning greenhouse gas reduction at the state level, Governor 
John Lynch has endorsed the ``25 by 25'' initiative--that is 25% of our 
energy will be produced from renewable sources by 2025. New Hampshire 
already obtains 14% of its energy from renewable sources. We will 
accomplish the 25% goal in a variety of ways, some of which are already 
well underway. Given that our state is 80% forested, wood power is a 
viable source of energy, and a new facility was just build on our 
shore. Last week, the Town of Salem planning board approved the first 
in the state biofuel plant. The first land-based wind power facility is 
likely to be constructed this year. And, importantly, Renewable 
Portfolio Standards for the state are working their way through the 
Legislature. This will require all power producers to include a certain 
percentage of renewables to make up energy portfolio. Finally, New 
Hampshire exports about twice as much power as we use so energy is an 
important commodity to the state.
    We may be able to achieve our 25% renewable target within the 
bounds of our small state, however, it is clear that achieving that 
sort of goal on the national scale will likely require a significant 
ocean based component. And, the likely place for that power generation 
is the last frontier for America--the outer continental shelf.
    However, alternative energy development on the OCS needs to be done 
thoughtfully and in coordination with other programs, activities and 
resources. The U.S. Ocean Commission report, ``An Ocean Blueprint for 
the 21st Century,'' has a number of recommendations that are germane to 
this subject. I will refer often to that report because, as the report 
titles itself, it is a blueprint for moving forward.
    I hope that this hearing will be the start of an intense process to 
act on those relevant recommendations. As mentioned above, I will cover 
three main points as they relate to creation of a comprehensive policy 
for renewable energy on the OCS.
I. States and territories should be partners with the federal 
        government.
    As Congress determines the regulatory structure for alternative 
energy and other development on the OCS, it is imperative that the 
states have a meaningful voice in how these decisions are made. I would 
like to highlight three reasons for a strong partnership between the 
states and the federal government regarding activities in the OCS.
    First, what happens on the OCS can impact state resources. As you 
are all well aware the ocean is a dynamic place where species can 
travel over long distances and the currents and tides can carry things 
hundreds of miles, often coming to rest onshore in a state. Given the 
dynamic nature of the ocean and coast, we strongly recommend that 
Congress consider all potential impacts and not just impacts to an 
individual site. With the knowledge of their coastal waters, the states 
can aid the federal government in ensuring that all potential impacts 
are taken into account.
    A second reason for ensuring a strong state partnership is that 
eventually the coastal states will have to address the impacts of 
infrastructure that will deliver the energy onshore. If the federal 
government sites facilities on the OCS without having considered the 
entire scope of all infrastructure then unintended consequences could 
result, such as the applicant encountering difficulties in obtaining 
the necessary state permits even with their federal permits in hand. An 
example from New Hampshire illustrated how infrastructure issues can be 
quite complicated. The recent application of the LNG facility in Quoddy 
Bay in downeast Maine may provide needed natural gas to New England. 
However, Quoddy Bay is a long way from the people who need the gas down 
in Massachusetts and Connecticut. Thus, the gas must be piped across 
four states, including New Hampshire. So, additional pipeline capacity 
with all of its accompanying impacts will be installed through our 
coastal communities. Any alternative energy development on the OCS 
should require that the land-based component be included in the federal 
permit and that state approval is necessary for portions of the project 
in the state or potentially affecting state resources.
    Third, we believe that affected states and local communities should 
be involved and have a voice in these decisions. The coastal states do 
not want to see a repeat of the provisions in the Energy Policy Act of 
2005, where state sovereignty was preempted by the Federal Energy 
Regulatory Commission (FERC). In the Energy Policy Act, FERC was given 
``exclusive authority'' to approve or deny permits for the siting of 
LNG facilities. Congress also included a saving clause for states' 
authority of the Coastal Zone Management Act, which should have 
required that FERC be consistent with state enforceable policy in the 
coastal zone. Unfortunately, federal courts are reading the law to say 
states cannot explicitly place conditions on the siting of LNG 
facilities. Under this interpretation, local communities' voices and 
opinions concerning the siting of LNG facilities in their neighborhoods 
have largely been silenced. The states believe that local communities 
deserve to be heard on these issues. The Governors recently reiterated 
their support of maintaining state sovereignty in decisions regarding 
energy siting when they passed their Ocean and Coastal Policy (NR-10) 
at their Winter meeting in February of this year. I would request that 
this policy be incorporated into the record.
II. Much more information is needed for thoughtful management of the 
        OCS.
    When I go to work in the morning, and an issue comes up regarding 
the siting of any type of facility on the land, I can sit down at my 
computer and have immediate access to dozens of map products, hundreds 
of environmental monitoring datasets, and detailed photography and 
visualization tools. That allows for informed decision-making. As soon 
as a similar issue leaves the shoreline, those dozens of map products 
are reduced to a handful, the datasets can be measured in dozens, and I 
have precious few ways to visualize offshore resources. Last Tuesday, 
the Federal Energy Regulatory Commission (FERC) approved two 
preliminary permits for tidal energy turbines in New Hampshire waters. 
There is great interest in tidal energy in the Piscataqua River, which 
has some of the fastest currents of any river in America. However, we 
lack much of the necessary information to make a thoughtful decision, 
especially as it pertains to natural resources and how they are 
impacted by new technology. We do not know if these turbines are a 
largely benign source of consistent, dependable energy, or have the 
potential to create a puree out of migrating fish. While this is not an 
OCS application, the point is that we do not have the information for 
project siting adjacent to shore; the difficulties 100 miles offshore 
are much greater.
    The key components of the information needs for OCS management 
include--mapping, observation, technology and assessment. These 
components are discussed below:
Mapping
    There is a strong need for proactive thinking and resolution of 
spatial planning, especially as it pertains to jurisdictions. I note 
that the Minerals Management Service (MMS) has started a marine 
cadastre initiative as a requirement under the Energy Policy Act of 
2005. It is defined as ``a system to enable the boundaries of marine 
rights and interests, to be recorded, spatially managed, and physically 
defined in relationship to the boundaries of other neighboring or 
underlying rights and interests'', with the goal of the 
``Identification of OCS locations of Federally permitted activities; 
obstructions to navigation; submerged cultural resources; undersea 
cables; offshore aquaculture projects; and any area designated for the 
purpose of safety, national security, environmental protection, or 
conservation and management of living marine resources.'' See http://
www.mms.gov/ld/PDFs/Mapping
Initiative.pdf. This is critical and should be given the resources to 
be competed quickly.
    As Dr. Robert Ballard, the deep sea explorer, has stated many 
times, ``We have better maps of Mars than we do of the Pacific Ocean.'' 
As renewable energy projects in the OCS begin to take shape, we need a 
great deal more information to inform the siting and decision-making 
process.
    The Minerals Management Service has been mapping the OCS for many 
decades. However, that mapping has been focused on the extraction of 
minerals and fuel products. In addition, the intensity and accuracy of 
mapping is greatest in those areas which currently have production. We 
need planning that is not solely focused on one type of natural 
resource.
    There are numerous national efforts to conduct mapping of our 
oceans. One such effort is the Gulf of Maine Mapping Initiative 
(GOMMI), a U.S.-Canadian partnership of government and nongovernment 
organizations to conduct comprehensive seafloor imaging, mapping, and 
biological and geological surveys. GOMMI grew out of a mapping workshop 
in October 2001 that was sponsored by the Gulf of Maine Council on the 
Marine Environment and the National Oceanic and Atmospheric 
Administration. The Gulf of Maine Council endorses GOMMI, and the GOMMI 
Steering Committee is a subcommittee of the Council. Currently, GOMMI 
is working to secure funding and conduct a mapping program of areas in 
the Gulf of Maine not already mapped by multibeam sonar surveys. The 
key data products that will emerge from GOMMI are habitat maps that 
interpret biological and geological data to show types of sediment and 
animals in a particular area. These data products have already resulted 
in some victories, such as the successful routing of an underwater 
cable to avoid key aquatic habitats off the coast of Massachusetts--a 
result that is good for the environment and good for commerce. And it 
all started with good information
Observation
    Mapping refers to data about things that change relatively slowly 
or not at all. Observation refers to the condition of those things and 
about changes over time. As you are well aware, the science of 
observation has and is changing rapidly. From satellites to buoys to 
volunteer water quality monitoring, our ability to monitor the 
environment is improving rapidly. One such area is the Integrated Ocean 
Observation System (IOOS). IOOS, once completed, will be a ``system of 
systems'' that routinely and continuously provides quality controlled 
data and information on current and future states of the oceans and 
Great Lakes from the global scale of ocean basins to local scales of 
coastal ecosystems. It is a multidisciplinary system designed to 
provide data in forms and at rates required by decision makers to 
address seven societal goals, which are:
    1.  Improve predictions of climate change and weather and their 
effects on coastal communities and the nation;
    2.  Improve the safety and efficiency of maritime operations;
    3.  Mitigate the effects of natural hazards more effectively;
    4.  Improve national and homeland security;
    5.  Reduce public health risks;
    6.  Protect and restore healthy coastal ecosystems more 
effectively; and
    7.  Enable the sustained use of ocean and coastal resources. 
(Source: www.ocean.us)
    The real point of the IOOS is not to float a bunch of buoys around 
in the ocean, rather it is to make sense of all the mapping and 
observation data that is collected from a variety of sources. I am a 
user of IOOS data, as delivered by the Gulf of Maine Ocean Observing 
System (GOMOOS). Last week as our coast was beaten by a significant 
Nor'easter, my first stop to look at the storm was the GOMOOS website 
to look at the current ocean conditions. What the buoys showed were 30 
foot waves. GOMOOS makes sense of that data relative to other data, 
such as barometric pressure, which was as intense as in a hurricane. 
Based on that information, we knew that this storm was going to do a 
number of our shoreline. And it did.
Technology
    One of the reasons we are all gathered here today is because 
technology is progressing faster than policy. The point is not to slow 
down the technology but to create policy that can keep up with it.
    We need more information on new and changing technologies. Wind is 
a good example. Most of you are probably familiar with the proposed 
Cape Wind project in the waters south of Massachusetts. In the more 
than 5 years it has taken for Cape Wind to get through the state 
regulatory process, technology advancements have allowed them to reduce 
the number of towers, shrink the height and increase energy output. 
Much of the controversy around this project is because the towers are 
to be located in relatively shallow water. Getting information about 
new technologies is also tricky, as many of the new ocean-based 
renewable energy technologies are either in preliminary development or 
are continually being refined. We are told that deep water wind 
technology is still years away, but how many years? Will we have the 
time to create a better regulatory regime before those applications 
come streaming in?
    Finally, there are technologies that we can barely imagine that 
could end up in the ocean. It should be clear from the rapid changes in 
the past decade that future ocean energy technologies may look very 
different than the structures we are discussing today. And, the 
regulatory regime needs to be adaptable to that uncertainty.
Assessment
    Mapping, observation and understanding technology is meaningless 
without translating that information into understandable assessments of 
ocean resources. One key method for that is Ecosystem Based Management 
(EBM), a management approach that:
      Integrates ecological, social, and economic goals and 
recognizes humans as key components of the ecosystem.
      Considers ecological--not just political--boundaries.
      Addresses the complexity of natural processes and social 
systems and uses an adaptive management approach in the face of 
resulting uncertainties.
      Engages multiple stakeholders in a collaborative process 
to define problems and find solutions.
      Incorporates understanding of ecosystem processes and how 
ecosystems respond to environmental perturbations.
      Is concerned with the ecological integrity of coastal-
marine systems and the sustainability of both human and ecological 
systems. (Source: www.ebmtools.org)
    Ecosystem Based Management should be a component of any ocean 
management regime. However, it requires excellent information and 
analysis to make it work. One suggestion for moving the ideals of EBM 
forward was made in the U.S. Ocean Commission report.
    Recommendation 5-5 from that report calls on the National Oceanic 
and Atmospheric Administration (NOAA) and the U.S. Environmental 
Protection Agency (EPA), working with other appropriate federal and 
regional entities, to coordinate the development of regional ecosystem 
assessments. These assessments would be invaluable for comprehensive 
OCS resource planning.
    Good information will allow us to be proactive and get ahead of the 
curve, instead of simply reacting to a permit when it comes in the 
door. I urge to you to take these recommendations under serious 
consideration as you ponder the future of the OCS. Good mapping, 
observational data and assessment is absolutely critical to the long-
term health of our managed ocean ecosystems.
III. A new management regime for the OCS is needed.
    As your Subcommittees take up the issue of OCS development, I would 
ask that you also take a step back and fit the program into a broader 
framework. As the U.S. Ocean Commission recognized in its final report, 
a coordinated, integrated management regime for our oceans is sorely 
needed. (See Recommendations 6-1 and 6-2), and alternative energy needs 
to be part of that regime (Recommendation 24-5). Currently, the uses of 
our ocean are all regulated separately, fisheries in one agency, energy 
in another, sediment management in another, shipping and maritime 
activities in another. No government agency or body is charged with 
looking across the stovepipes of programs to see how all of the 
different uses of our oceans fit together. This needs to change.
    To improve coordination and management of the nation's ocean 
resources, the U.S. Ocean Commission recommended a framework for 
regional ocean governance (See Chapter 5). The states have taken up the 
challenge and are leading the way in trying to improve the coordination 
of government activities in our marine waters. Don't take our word for 
it; The Joint Ocean Commission Initiative's Report Card issued in 
January of 2007 gave the states and regional efforts the highest grade: 
an A minus.
    Since the release of the Commission report, the Governors of the 
five Gulf of Mexico states have released a plan to improve the health 
and resilience of the Gulf coast, The three West Coast Governors of 
California, Oregon and Washington, have signed the West Coast Governors 
Agreement for Ocean Health and plan to have an action plan completed by 
the end of this year. The Great Lakes have developed the Great Lakes 
Regional Collaboration Strategy, which involved hundred of stakeholders 
from around the region. In my home region, the Northeast Governors have 
created the Northeast Regional Ocean Council. NROC will work to 
harmonize sub-regional ocean initiatives, identify shared priorities, 
promote regional solutions and to raise ocean awareness. NROC 
identified four core ocean management areas for a regional management:
      Ocean energy resource planning and management
      Ocean and coastal ecosystem health
      Maritime security
      Coastal hazard response and resiliency
    New Hampshire is hosting a Regional Ocean Congress in May. At that 
meeting we will be to define our priorities within each those core 
management areas. Similarly the West Coast Governor's Agreement also 
names energy siting and renewable development as one of their seven 
priorities. The regional councils are learning from each other as they 
move forward.
    The states believe that federal legislation would be helpful to 
advance these regional efforts. Such legislation should codify these 
regional efforts as coordinating bodies that are supported with federal 
resources. The coastal states have specific recommendations concerning 
principles and provisions that we believe should be included in 
regional legislation and many of them are outlined in the National 
Governors Association's Ocean and Coastal Policy I referenced earlier. 
NOAA should be one of the lead federal agencies in all of these 
regional governance efforts.
    I would like to end by focusing on one of the recommendations from 
the U.S. Ocean Commission Report. Recommendation 24-5 states that 
Congress, with input from the National Ocean Council, should enact 
legislation providing for the comprehensive management of offshore 
renewable energy development as part of a coordinated offshore 
management regime. Specifically, this legislation should:
      be based on the premise that the oceans are a public 
resource.
      streamline the process for licensing, leasing, and 
permitting renewable energy facilities in U.S. waters.
      subsume existing statutes, such as the Ocean Thermal 
Energy Conversion Act.
      ensure that the public receives a fair return from the 
use of the resource and that development rights are allocated through 
an open, transparent process that considers state, local, and public 
concerns.
    And if I may add one more bullet to that list, to involve states 
and regional interests as full partners in the discussion. While this 
ends my testimony, I hope it will be a starting point for your 
deliberation.
                                 ______
                                 

            Response to questions submitted for the record 
               by Ted Diers, Coastal States Organization

Questions from Chairman Costa:
 Your testimony makes the excellent point that we need good information 
        to make good decisions. You note that the Energy Policy Act of 
        2005 directed the Minerals Management Service to undertake a 
        mapping exercise to guide our federal permitting activities on 
        the Outer Continental Shelf, to gain increased awareness of key 
        marine habitat and aquaculture projects, among other 
        information. Two questions:
 Would you recommend a different mapping approach, something similar to 
        the Gulf of Maine mapping project that you mention?
    More mapping is critically needed, particularly bottom habitat 
mapping. There really should be a partnership between federal agencies, 
states and NGOs, and federal funds should be made available for 
coordinated efforts like the Gulf of Maine Mapping Initiative (GOMMI) 
to help move mapping along more efficiently. The GOMMI is a good model 
for getting those types of maps, but what is also needed is 
interpretation of the maps into map products that can be used by a 
variety of constituent groups. This interpretation/translation step is 
often missed when creating mapping initiatives. Also, cadastral mapping 
that is currently being conducted by MMS is part of the needed 
approach.
 Do you think we should slow progress toward renewable energy 
        development on the Outer Continental Shelf until that mapping 
        endeavor is further advanced, or we have better baseline data--
        or should we in other ways try to ensure that better mapping is 
        factored into siting, review, permitting/management decisions?
    I do not think that we should slow progress on renewable 
development, rather we should rapidly increase the pace of mapping. 
Moving forward, sites (lease blocks) proposed for leases should be 
mapped and inventoried but this should not hold up projects already in 
application stage. In addition, until we have a better documentation of 
the undersea resources, experts at NOAA, the states and regional 
entities need to have a higher profile in the siting process.
 Your testimony looks ahead to the likely time when technologies are 
        advancing even more quickly for ocean-based renewable 
        technologies, and you underscore that our federal policies will 
        need to be able to keep up with those rapid changes. How would 
        you recommend that we make our regulatory regime adaptable to 
        such change and uncertainty?
    We need more formalized governance structures for federal and state 
interagency efforts so alternative energy projects can be looked at 
with all the other competing uses on the outer continental shelf. We 
also need an information revolution for our coastal and offshore waters 
so we can eventually be proactive in the siting of these projects 
instead of simply reacting to each individual permit.
    Other ideas include close coordination with the industry and states 
to help track technological advances. The regulatory structure should 
have a route for smaller scale pilot or test projects of new technology 
to enable further testing in situ and an opportunity to identify the 
potential environmental impacts in large scale deployments.
                                 ______
                                 
    Mr. Costa. Thank you very much, Mr. Diers. How many states 
are included in your organization?
    Mr. Diers. Thirty-five states and territories, sir.
    Mr. Costa. OK. That is a lot of coastline.
    Mr. Diers. That is a lot of coastline, sir.
    Mr. Costa. Mr. Olsen, you talked about this process that 
you have been engaged in now with regards to developing the 
various efforts for the progress on the programmatic EIS for 
the renewable energy on the Outer Shelf.
    I thought you referenced a timetable on the rules and the 
final environmental impact statement, but could you restate 
them for me?
    Mr. Olsen. Sure. Let me just make sure that I get my facts 
straight here. The numbers that I gave you are the final 
programmatic EIS is on schedule for publication toward the end 
of this summer of 2007, and then we are also----
    Mr. Costa. August? September?
    Mr. Olsen. I would say August probably.
    Mr. Costa. OK.
    Mr. Olsen. We are also developing regulations to implement 
the new Environmental Policy Act authority.
    Mr. Costa. That will go through the timelines through the 
Federal Register and be published for comments and all of that?
    Mr. Olsen. Exactly.
    Mr. Costa. OK.
    Mr. Olsen. Yes, sir.
    Mr. Costa. So based on that timeframe, when do you expect 
to begin issuing permits for some of these projects on the 
Outer Continental Shelf?
    Mr. Olsen. Well, I don't know. I don't know.
    Mr. Costa. That is sort of an answer. You don't know, 
meaning I suspect there will be applications?
    Mr. Olsen. It depends on the applications. It depends on 
the applications that we have. Based on the rough timeline, we 
would hope to be issuing them as soon as possible.
    Mr. Costa. The end of this year? Next year?
    Mr. Olsen. I don't have----
    Mr. Costa. I mean, do you have an idea of how long that 
time process will take once the first permits are applied for?
    Mr. Olsen. Off the top of my head I don't.
    Mr. Costa. OK. Do you envision any new staff for support? I 
mean, let us say you get 50 or 100 of these permits for wind or 
some efforts on pilot projects on wave projects.
    Mr. Olsen. In terms of staffing, I would say that we would 
do the best with the resources that we have. If there are a 
number of applications and there is a workload that comes in 
that requires additional staff then we would certainly look at 
putting on more staff.
    Mr. Costa. My concern is that you are being anticipatory in 
this effort. I mean, I appreciate your candidness that you 
don't have answers, but it seems to me that what you are saying 
is that based upon what happens later this year or next year 
you may come to us and say we have all of a sudden 100 or 200 
permits, and we don't have enough people. It will take us two 
and a half years to process them. You don't know?
    Mr. Olsen. I don't know.
    Mr. Costa. OK. Duly noted.
    Ms. Miles, you talked about the flexible approach, and you 
used as your pilot project those in Makah Bay and Roosevelt 
Island. Those are interesting I think, and maybe they serve as 
a good starting point.
    Can you provide some examples on how FERC, the Federal 
Energy Regulatory Commission, may establish additional 
flexibility and creativity regarding the new technologies for 
both hydropower as you deal with your cooperation or your 
collaboration, I should say, with the other agencies?
    Ms. Miles. Well, I think we have already established our 
flexibility in seeking out comments from all state and Federal 
agencies and all stakeholders about----
    Mr. Costa. The states? Have all 35 states commented?
    Ms. Miles. No. No, not all states participated in our 
conference, but they all had the opportunity to participate.
    Mr. Costa. Could you for the record give us an indication 
of those who actually did participate, please?
    Ms. Miles. Yes, I would be happy to do that.
    Mr. Costa. Thank you.
    Ms. Miles. As a result of comments that we received, we 
have changed our preliminary permit program to provide stricter 
scrutiny and to actually issue a policy of inquiry--comments 
are due by the end of this week--to solicit more input on how 
that could be adapted better for ocean energy projects.
    Mr. Costa. OK. My time is running out. Mr. Keeney, with the 
scope of the committee's jurisdiction here can you summarize 
your concerns regarding the expected process for the siting and 
regulating of these various projects on the Outer Continental 
Shelf?
    Mr. Keeney. Mr. Chairman, we comment through the licensing 
agency on areas of natural resources.
    Mr. Costa. And so your criteria is based upon ecosystem 
functionality and assessment, monitoring and those kinds of 
things?
    Mr. Keeney. Yes. It all depends on to what extent the 
resources----
    Mr. Costa. Have you developed that criteria?
    Mr. Keeney. The criteria for review?
    Mr. Costa. Yes.
    Mr. Keeney. We have been involved in it for years.
    Mr. Costa. And so you know precisely where you are going to 
focus on your assessment and your monitoring?
    Mr. Keeney. Well, assuming we have investigated the area 
that is being impacted, which again assumes that we have a 
model.
    Mr. Costa. It is safe to assume?
    Mr. Keeney. I think it is fairly safe. We have a pretty 
good idea. If it is a marine sanctuary, if it is an estuarine 
research reserve, we have a pretty good idea what is in there.
    Mr. Costa. All right. My time has expired, and I will 
recognize the gentleman from New Mexico, Mr. Pearce.
    Mr. Pearce. Thank you, Mr. Chairman.
    Ms. Miles, we have heard some of the problems that existed 
between MMS and FERC. Now it is my understanding from the 
testimony that you all probably have resolved those in trying 
to coordinate. You basically have the memorandum of 
understanding as described by Mr. Olsen. Is that correct?
    Ms. Miles. We are in the process of working out a 
memorandum of understanding. It is going quite well right now 
from our perspective, and we expect something in the near term.
    Mr. Pearce. OK. Now, Mr. Diers has commented that states 
and other stakeholders are not involved in your process. Do you 
take comments from all the stakeholders?
    Ms. Miles. In both the licensing and the natural gas LNG 
process, all stakeholders have several opportunities to comment 
both before the application is filed and afterwards.
    Mr. Pearce. How would you rate your agency, Ms. Miles, as 
far as getting the permits done? In other words, not to get 
them accomplished, but to give an answer yes, they are 
suitable, or, no, there are problems to the environment. How do 
you rate your agency?
    Ms. Miles. I think we are doing an excellent job right now. 
We were a bit slow on hydropower probably four or five years 
ago. We have done a number of things to try to get at those 
issues which we had, which was not enough information in the 
application when it was filed, and coordination with the other 
Federal and state agencies that have to issue permits.
    Our new process has everybody at the table at the 
beginning, and it is working very well. We expect that we will 
be processing applications in 18 months.
    Mr. Pearce. Thank you.
    Mr. Keeney, you refer to the OTEC. Do you perceive that the 
OTEC is in conflict with the Energy Policy Act as far as 
describing the agency of jurisdiction? How do you all perceive 
that as far as energy projects?
    Mr. Keeney. We don't perceive any conflict there.
    Mr. Pearce. In other words, you are an agency of record. I 
am not sure if I am using the right terminology, but under the 
OTEC you are the agency?
    Mr. Keeney. We are the permitting agency under the OTEC.
    Mr. Pearce. But you are not the permitting agency under the 
Energy Policy Act, and you don't find that to be a conflict?
    Mr. Keeney. No, we don't.
    Mr. Pearce. I was curious because you described that not 
many projects have occurred under OTEC since the 1980s, page 
four of your testimony.
    Mr. Keeney. Right.
    Mr. Pearce. And yet when I hear Ms. Miles, she describes 20 
and 30 and 40 and 11, you know, so I feel the sense of a flurry 
of activity from Ms. Miles.
    Do these projects have any similarity at all? In other 
words, yours involve energy production from the ocean and so 
what is the difference there that she describes a flurry of 
activity and you describe almost no activity?
    Mr. Keeney. Well, what I said was that we have had no 
applications before us yet, even though we have had regulations 
that we put in place years ago, which are no longer current, by 
the way.
    There is an application I understand that is developing in 
the Pacific, but we have yet to see it.
    Mr. Pearce. But you heard the testimony of Ms. Miles. It 
sounded like several, 11 one year, 44 in another two-year 
period. Are these comparable? Am I hearing different things?
    Ms. Miles, would you like to address that?
    Ms. Miles. The projects that we have before us recently are 
the wave energy projects, primarily tidal. That technology is 
somewhat more developed than the wave energy itself. I can't 
comment on the disparity.
    Mr. Pearce. OK.
    Ms. Miles. I can only tell you what we do.
    Mr. Pearce. That is fine.
    Mr. Keeney, in your testimony on page 4 again you declare 
that the reason that you don't have many projects is the low 
price of fossil fuels now.
    In 2003, the price began to move toward $70, and I will 
tell you if anything is going to be economic, it is going to 
get economic at $70 a barrel of oil. What do you think is the 
impediment at this point?
    Mr. Keeney. I think there is a science part of it with 
regards to actually how do you produce the energy. Price 
obviously is a factor.
    Mr. Pearce. OK.
    Mr. Keeney. But also experience is another one.
    Mr. Pearce. So we are quite a ways away, in other words? 
The technology doesn't exist to draw much energy from these?
    There is a lot of potential or kinetic--I don't remember 
exactly; I didn't study that part of science class very well--
which has a lot of action going on out there, but not much way 
to convert it. Is that it?
    Mr. Keeney. Right. There has been talk about it for about 
35 years.
    Mr. Pearce. OK.
    Mr. Keeney. There has been more talk recently, but it is 
still talk.
    Mr. Pearce. OK. Thank you, Mr. Chairman. I see my time has 
elapsed. Madam Chair. Excuse me.
    Ms. Bordallo. [Presiding.] Thank you very much, Mr. Pearce.
    I would like to just state that the Co-Chair here had a 
meeting to attend to, so Mr. Costa will be out for some time 
and I will take over.
    Mr. Pearce. The improvement is obvious from the beginning, 
Madam Chair.
    Ms. Bordallo. Mr. Mike Olsen, I have a question for you. 
The Energy Policy Act of 2005 gave the Minerals Management 
Service the authority to regulate marine related activities 
authorized by Congress.
    Now, the draft environmental impact analysis released by 
MMS has a large section discussing aquaculture. Is MMS planning 
on developing an aquaculture program?
    Mr. Olsen. The authority given to the Department of the 
Interior through the Energy Policy Act, Section 388 of the 
Energy Policy Act, deals with not only alternative energy, but 
alternative uses of existing energy facilities, rigs, things 
that are already in place.
    One of the programs that we contemplate as being looked at 
as part of that would be the examination of aquaculture type 
projects.
    Ms. Bordallo. Aquaculture. Is the Commerce Department doing 
much the same?
    Mr. Keeney. I can answer for that, Madam Chair.
    Ms. Bordallo. Yes? Please.
    Mr. Keeney. We are very much involved with aquaculture and 
very interested in using offshore facilities to support 
aquaculture and have been in discussion with your counsel's 
office and other regulatory folks within MMS about that very 
subject so that NOAA and MMS are working together on this. We 
are not working against each other.
    Ms. Bordallo. You wouldn't say it is a duplication?
    Mr. Keeney. Not at all.
    Ms. Bordallo. All right. The next question I have is for 
Mr. Keeney.
    NOAA's role. Of all the agencies at the witness table 
today, NOAA is the clear leader in terms of marine resource 
expertise. How are we going to ensure that NOAA's expertise is 
considered during the project approval process?
    What role do you envision for NOAA to ensure compliance 
with the Endangered Species Act, the Marine Mammal Protection 
Act and the Magnuson-Stevens Act and other marine laws? Has 
NOAA discussed with MMS how the conservation requirements of 
living resources will be addressed, and what do you 
contemplate?
    Mr. Keeney. NOAA reviews projects to help minimize impacts 
on living marine resources and their habitats. Since the year 
2002, we have also been involved with wind and LNG; since 2004, 
hydrokinetics; since 2005 with the alternative energy uses on 
the OCS.
    NOAA's habitat programs give substantial attention to 
ocean, coastal and marine energy development. All NOAA programs 
work together to develop consistent and integrated messages.
    We have had no problem at all in our consultation role. 
However, NOAA is not in approving or denying OCS proposals. I 
mean, that is not our function, but it is really one of 
conducting consultation with the licensing agencies to ensure 
that NOAA entrusted resources are conserved.
    We believe that the lines of communication there are open. 
We have good abilities to discuss with our licensing agencies 
and co-agencies, the Federal agencies who have the 
responsibility to provide the license. We have open lines of 
communication with regards to providing our concerns, and our 
job is to make sure that they be addressed in the balance of 
trying to determine how to go forward.
    Ms. Bordallo. Do you feel they are going to be active?
    Mr. Keeney. We are very active, yes. In fact, I daresay we 
are probably the most active of all the agencies providing 
consultation, consultative services.
    Ms. Bordallo. Good. I would like to also comment on Mr. Ted 
Diers' Coastal States Organization.
    I was very pleased that you mentioned states and 
territories. You know, it is very seldom in the U.S. Congress 
when they mention the states they ever mention territories, and 
we are very much a part of the U.S. family.
    I am curious. Your Coastal States Organization, what 
territories belong?
    Mr. Diers. We have American Samoa, Hawaii. Well, Hawaii is 
a state. Sorry. I was just thinking Pacific. We have the North 
Marianas, of course Guam, Puerto Rico and the Virgin Islands I 
believe rounds out the group.
    Ms. Bordallo. You have made my day. That is all of them.
    Mr. Diers. Thank you.
    Ms. Bordallo. Thank you very much.
    I would like now to recognize Mr. Frank Pallone, the 
gentleman from New Jersey and to remind him that Committee Rule 
3[c] imposes a five minute limit on questions.
    Mr. Pallone. Thank you, Madam Chairwoman.
    I wanted to ask Mr. Olsen my questions just because I only 
have the five minutes. These alternate energy-related uses 
being considered for the Outer Continental Shelf involve the 
installation of industrial facilities in many cases.
    You know, there is particularly concern in New Jersey over 
the windmills; that they might provide clean power, but if they 
are large, stationary, moving parts, you have lubricants, oil, 
other substances that might pollute the environment.
    First of all, when you talk about alternate energy-related 
uses what kinds of industrial facilities or structures would 
that entail? If you could tell me briefly what kinds of things? 
I know windmills, but what else?
    Mr. Olsen. Now, do you mean alternate use, or are we 
talking alternative energy structures?
    Mr. Pallone. Alternative energy structures.
    Mr. Olsen. Structures. Well, windmills of course. There are 
devices that go out offshore--I don't know how best to explain 
it--that capture wave motion. There are turbines that go out 
underneath the water, under the surface of the water, that turn 
and capture the motion of the ocean current.
    Mr. Pallone. What do we know about the impacts of those 
facilities on marine life in the OCS region? Has any work been 
done on that, or is that what you are working on right now?
    Mr. Olsen. That is what we are looking at now with our 
programmatic EIS, as well as our examination of the broad 
program or looking at the environmental stuff, as well as the 
promulgation of our rules.
    Mr. Pallone. Are there any plans to study how the 
facilities would affect fisheries and how fisheries management 
processes should adapt?
    Mr. Olsen. Are there studies being done?
    Mr. Pallone. What you are looking at now.
    Mr. Olsen. Yes.
    Mr. Pallone. To what extent would they look at the impact 
on fisheries?
    Mr. Olsen. I don't know. I don't have a specific number or 
figure for you, but I know that the scope of the EIS is quite 
broad, looking at everything from environmental effects to 
socioeconomic effects to effects on view sheds, everything 
from----
    Mr. Pallone. Can I ask Mr. Keeney of NOAA? Would you be 
able to answer that or give me more specifics?
    Mr. Keeney. Well, I am not sure about the specifics, but I 
can tell you that the NOAA terms and conditions that are 
provided address monitoring for marine mammal, seabird, marine 
debris entanglement, anchoring system, transmission cable 
integrity and seabed impacts and initial measurement of noise 
levels and electromagnetic fields with monitoring required if 
known disturbance levels were exceeded.
    A unique aspect of this project, and I am talking about the 
Makah project here, the Finavera Aqua Energy Project, which is 
the one that we are looking at right now. The unique aspect of 
this project is the absence of precedent and environmental 
assessment from other wave energy or similar projects.
    Mr. Pallone. Let me ask you this, because I know I don't 
have much time. Going back to Mr. Olsen, do you have any 
application pending from off the coast of New Jersey? I know 
there is at least one out that has been pending from other 
states. Is there anything from New Jersey?
    Mr. Olsen. Let me see. No, not that I am aware of.
    Mr. Pallone. OK. What about the CZMA Act that gives the 
coastal states authority and primacy with regard to activities, 
the consistency determination?
    Mr. Diers recommended that the Federal permit for 
alternative energy projects include approval from the affected 
state. What is your reaction to that recommendation, or how 
would you coordinate with states to approve a project?
    Mr. Olsen. Well, currently as we go through this process of 
promulgating regulations and working on this programmatic EIS 
we have been working quite extensively with the coastal states, 
participating in meetings and----
    Mr. Pallone. But I mean in terms of the approval process, 
because my time is running out. Will the states have the 
ability to veto it? What would be their role in terms of 
approving a project?
    Mr. Olsen. I think that would depend on what we come up 
with in terms of regulations. I don't think we have come to 
that. I don't think we have made that determination at this 
point.
    Mr. Pallone. So the consistency determination under the 
CZMA, would that kick in for like an offshore windmill, for 
example?
    Mr. Olsen. I am not an expert on the CZMA. I am not.
    Mr. Pallone. Sure. If you want to answer?
    Ms. Miles. I can speak to it for a hydropower project. It 
would be necessary before we could issue any kind of a license 
would be a determination under the Coastal Zone Management Act 
of consistency with----
    Mr. Pallone. Do you think that would be true of a windmill 
too?
    Ms. Miles. I don't know about windmills. No.
    Mr. Pallone. But it might be for some of these industrial 
uses, for some of these industrial facilities possibly. All 
right. Thank you.
    Ms. Bordallo. Thank you. Thank you very much.
    The Chair now recognizes the gentleman from Washington, Mr. 
Inslee.
    Mr. Inslee. Thank you. Madam Chair, thank you for allowing 
me to participate.
    I just want to note that we will be introducing today the 
Marine and Hydrokinetic Renewable Energy Promotion Act of 2007, 
which is going to help this industry get going in a variety of 
ways with some tax credits and the like, so we are very 
interested in the regulatory structure to allow that to 
blossom. I believe there is a real future off our coastlines, 
and I look forward to working with any of you to try to see 
that come to fruition.
    Just a first question to those on the panel. Can you give 
us some just broad brush what assessment you have of the 
potential off of our coastline for wave and/or tidal energy or 
current energy? Can you give us any assessment at all?
    Ms. Miles. I can give you a percent. I think the EPRI, 
Electric Power Research Institute, has done a number of studies 
and with some expectation that over time as the technology 
becomes more developed that there is the potential to double 
the existing hydropower, which is a little under 10 percent, so 
to double it to say 20 percent.
    Mr. Inslee. So do you mean that off our coastlines we have 
a potential to have 20 percent of our electric needs then?
    Ms. Miles. That is a rough estimate that is done as people 
are looking at what is possible out there.
    Mr. Inslee. Right.
    Ms. Miles. Now, the technology is evolving so that that 
could change over time with more knowledge.
    Mr. Inslee. Would anyone else like to address that issue?
    Mr. Olsen. I have some numbers, Congressman. This is in our 
written testimony as well.
    According to estimates provided by the Department of 
Energy, the potential offshore, and you had asked I think 
specifically about wave. Across the board I will give you the 
numbers. For offshore wind resource, excluding Alaska and 
Hawaii, is 2,500 gigawatts; ocean waves is approximately 240; 
ocean tides, 7.5; and ocean currents, 2.5.
    Mr. Inslee. Do you know how that works out in a percentage 
number? I should, but I don't.
    Mr. Olsen. I don't do math. I don't know, but we can 
certainly get that back to you if you would like.
    Mr. Inslee. Well, it is kind of a rhetorical question. It 
appears to me like there is very significant energy potential 
off of our coastlines, and I for one, and this is why we are 
introducing this bill, believe that we ought to put the pedal 
to the metal to try to expand the horizon of this.
    I look at this industry like where wind was maybe 20 years 
ago. They both involve moving currents of liquid in this case 
rather than gas, but a liquid has somewhere between 800 and 
1,000 times more energy per volume than moving wind, so we have 
the most concentrated energy possible to tap into.
    I mention that because I hope frankly that you all take 
into your personal kind of goals to try to help this industry 
develop, and I hope you become as excited about it as they are 
and I am because I think you have in your responsibilities a 
significant part of the potential to deal with global warming.
    I have been sitting in quite a number of hearings, and 
there has not been a table who are as important to the 
development, to our response to global warming as you four 
sitting there right now and your ability to help this industry 
become fully mature. I just hope that you will look at that 
with the same level of enthusiasm that some of us do in 
discharging your responsibilities.
    Question. Is there anything you would suggest to us as far 
as coordinating your respective agencies' regulatory response 
to the development of this industry? Are there any glitches 
that need to be ironed out? Is there any conflict between your 
respective responsibilities that need to be resolved?
    Mr. Olsen. I will go ahead and weigh in here. One of the 
things that Ms. Miles and I had talked about is the 
relationship between the responsibilities of the Federal Energy 
Regulatory Commission and the Minerals Management Service and I 
guess our respective roles in permitting and oversight 
regulation of these types of projects.
    As I mentioned in my testimony, the Department of the 
Interior feels that MMS plays a lead or the lead role in these 
projects, but at the same time we take seriously the expertise 
and responsibility missions of other agencies, including FERC 
and NOAA, and currently we are working with FERC to put 
together a memorandum of understanding that would resolve any 
outstanding issues with respect to regulation and oversight 
permitting of these types of projects.
    Ms. Miles. The only thing I would add to that is that what 
we are looking at is how we can have a simple, nonredundant 
process so it serves the needs of all the stakeholders, 
applicants and others for good government. That is what we are 
after.
    Mr. Keeney. I would just like to add that as many of these 
technologies are in their early stages of development, Congress 
should consider mechanisms to broaden the understanding of how 
new ocean energy technologies can be developed in an 
environmentally sound manner.
    NOAA would benefit from increased research on the 
environmental impacts of these technologies. However, in the 
meantime an adaptable management approach for the permitting 
and licensing of both prototype and full-scale energy 
production projects is necessary so that existing uses and 
natural resources are not compromised.
    Such an approach would allow OCS renewable energy efforts 
to proceed in a precautionary fashion.
    Mr. Diers. If I could just add one thing from the states' 
perspective is that essentially all of the answers that you get 
are essentially reactive answers. Something comes up. You react 
to it.
    I think from the states' perspective one of the things we 
would like to see is a little bit more advanced planning. Where 
are the best areas for these sorts of things? What are the real 
opportunities out there? Let us look at a comprehensive 
management regime. Let us look at what are the resources and 
observations needed in order to make those kinds of 
determinations.
    I think that that is one of the issues that really needs to 
be taken up in any kind of new legislation is figuring that out 
not just from a reactive mode, but from a proactive mode 
because I think that that will help us to move forward better.
    Mr. Inslee. We will work on that. I just wanted to welcome 
Alla Weinstein and Jason Bak from my neck of the woods with 
Finavera. I may not get to hear your testimony because I am 
going over to Ways and Means to try to get a tax break for this 
industry. Thank you.
    Ms. Bordallo. I thank the gentleman from Washington, Mr. 
Inslee, and now the Chair recognizes the gentlelady from 
California, Mrs. Capps.
    Mrs. Capps. Thank you, Madam Chair, for having this hearing 
and to our witnesses for your testimony.
    I noticed that our Chairwoman brought up the issue of 
artificial reefs and mariculture during your questioning. I 
want to follow along that line and turn to you, Mr. Olsen, with 
a question regarding the draft PEIS, which states that MMS 
considers an artificial reef an alternate use of energy 
platforms.
    My question is does the Department plan to change its 
current regulations that require platforms to be removed or 
decommissioned after they stop producing oil and gas so that 
they can be turned into artificial reefs? In other words, are 
you going to change the existing policy?
    Mr. Olsen. I am not aware that we are changing an existing 
policy. We are looking at though as the authority that we have 
been given under the Energy Policy Act to use, for example, an 
existing platform as something as an alternate use for 
recreation, for----
    Mrs. Capps. Let me ask it a different way.
    Mr. Olsen. OK.
    Mrs. Capps. I don't mean to interrupt you, but I am mindful 
of the clock ticking.
    Does the Energy Policy Act gives MMS the authority to 
change its current decommissioning regulations? That is another 
way of asking that question.
    Mr. Olsen. I am not certain.
    Mrs. Capps. You are not certain about this?
    Mr. Olsen. I don't know for sure, but MMS is and has been 
an agency that will permit and regulate and decommission 
projects. It is a cradle to the grave approach.
    In terms of decommissioning, when a facility has come to 
the end of its life we will continue in our role as an agency 
that will decommission that particular facility.
    Mrs. Capps. All right. I just want to go along this line. I 
would love to have time to ask other people to comment.
    The current regulations stipulate that MMS can grant an 
exemption from its platform removal requirements if the 
structure becomes part of a state rigs to reef program. Isn't 
that correct?
    Only a few states have such programs, however. My home 
state, California, has remained adamantly opposed, and so again 
my question. Is MMS planning to create a Federal rig 
abandonment program that would preempt state rigs to reefs 
programs?
    Mr. Olsen. I honestly couldn't tell you whether we are or 
not, but we will certainly take that and provide you an answer.
    Mrs. Capps. All right. I would like to have that in 
writing. I would request it because if a state has no rig 
abandonment program such as California, my question remains 
will MMS allow for the disposal of old energy platforms at sea.
    Mr. Olsen. OK
    Ms. Bordallo. No objection.
    Mrs. Capps. All right. I will turn to you briefly, but I 
have something I want to make sure is on the record. Go ahead, 
Mr. Keeney.
    Mr. Keeney. I just wanted to mention that I have been 
involved in this personally for several years, and NOAA's 
involvement is because of the potential value of the habitat.
    Mrs. Capps. Yes.
    Mr. Keeney. The existing habitat on those reefs, 
particularly with regards to depleted stocks of like, for 
instance, rockfish.
    Mrs. Capps. Right.
    Mr. Keeney. So we have been investigating the importance of 
the existing habitat on those reefs, and we have been working 
with MMS, and that would require an amendment to their 
regulations----
    Mrs. Capps. I hear you.
    Mr. Keeney.--to allow for subsequent ownership.
    Mrs. Capps. I would like to share with you if I could the 
way this appears to us in California, at least on the central 
coast where we have 20 platforms in the Santa Barbara Channel 
producing oil and gas right off my congressional district, 
though oil and gas industries have been trying to avoid its 
legal obligations to remove platforms and restore marine 
environment for years.
    These platforms that I referred to, many of them are 
nearing the end of production. My state has repeatedly, as I 
said, rejected proposed legislation that would allow oil 
platforms to be left in the ocean. As part of their contract, 
it is stipulated that they remove them after they cease 
production. That is my understanding.
    A blue ribbon panel of University of California scientists 
has concluded that oil platforms do not provide fish habitat, 
and I believe NOAA reached the same conclusion in response to a 
proposal to designate platforms as essential fish habitat.
    Leaving platforms in the ocean for my constituents present 
significant risks to human health and the environment with all 
of the pollution that is at their base. I hope the Department 
will consider these comments as it considers programs dealing 
with rig abandonment.
    If I have a little bit of time left, Mr. Diers, I wanted to 
ask a question regarding CZMA because we came to terms with 
that in an LNG siting proposal just a couple weeks ago. I just 
want to ask if it is not helpful to all stakeholders to have 
certainty on location, project specifics, early in the process 
and how you feel CZMA has a role to play there.
    Mr. Diers. My perspective on that is that CZMA is an 
excellent tool for helping to coordinate the various opinions 
of all the agencies that are associated with the project. That 
is the way we use it in my state, and that is the way I think a 
lot of people use it. We use it as our ticket to the dance.
    Mrs. Capps. Yes.
    Mr. Diers. And so when we are able to go in and then be 
able to facilitate a discussion about how does this particular 
project meet with both the laws, as well as the intent of the 
laws within our jurisdictions as they pertain to these Federal 
permits.
    I think it is a fairly good process. There are very few 
times when it doesn't work, and I think that that is probably 
testimony to this is a good model to be used for ironing out 
these differences before they get too far down the road.
    Mrs. Capps. Exactly. As I said, we have been through this 
process just in the last few weeks of siting an applicant, 
bringing an application for an LNG facility right off our 
coastline.
    The CZMA provided the only way for local constituents to 
have a say to what would be so directly affecting their air 
quality, their quality of life in so many years.
    I have run the time. I am sorry, but I appreciate all the 
testimony that all of you have brought to us, and I would 
appreciate hearing back from the Department of the Interior.
    Mr. Olsen. Certainly.
    Mrs. Capps. Thank you.
    Ms. Bordallo. I thank the gentlelady from California, and 
now the Chair would recognize for the second round of 
questioning Mr. Pearce from New Mexico.
    Mr. Pearce. Thank you, Madam Chair.
    Ms. Miles, in following up on Mr. Inslee's question about 
the potential size of input for this wave energy and offshore 
energy, so we get a number of about 20 percent maybe.
    Can you give us a timeline on about when we could expect 
that scientifically?
    Ms. Miles. It is very hard to tell, but it----
    Mr. Pearce. Is your mic on?
    Ms. Miles. I am sorry. Thank you. It is hard to tell 
because the technologies are at different stages of development 
with the closer in tidal being more developed and the potential 
to be on-line with that earlier.
    The greater potential, however, is in the waves, and that 
technology is not as sophisticated yet. It hasn't been tested 
quite as much as the other. I have heard said 15 to 20 years 
out. It is really a hard thing to tell at this point.
    Mr. Pearce. It surely is. It is a long way away and then 
somewhat unpredictable. Economics could change or whatever.
    If we are looking at the cost per kW to build either kind 
of plant, and I have a list of costs. A coal plant costs about 
$1,290 per kW, a hydropower plant about $1,500 per kW to build 
it. A photovoltaic is $4,751 per kW.
    Do you have any ideas on wave energy, about how much per kW 
those things will run, or is it still way too early?
    Ms. Miles. It is way too early.
    Mr. Pearce. OK.
    Ms. Miles. Again, I have heard some numbers. They were 
along the lines of wave from 10 to 32 cents per kilowatt hour.
    Mr. Pearce. All right.
    Ms. Miles. And tidal from four to 12 cents per kilowatt 
hour.
    Mr. Pearce. Right.
    Ms. Miles. But those are estimates that people are making. 
They are not anything that we are aware of at this time.
    Mr. Pearce. Still modeling and predicting and predicting 
without much conversion?
    Ms. Miles. Yes.
    Mr. Pearce. OK. If you could hold that chart up there?
    These structures that we are decommissioning offshore, what 
if someone came to FERC and said we would like to use this 
platform? In other words, it costs about $1 billion to build, 
and rather than destroy and take it loose they are saying would 
you just let us use it free of charge and if we got concession 
from the oil companies to do that.
    Is that something that you all would approve in order to 
hasten the move to the market, some of these technologies that 
are really in the developmental phase? Is that something? How 
would you all deal with that request?
    Ms. Miles. Is your question would this be valuable in the 
wave----
    Mr. Pearce. No. It is not is it valuable. It is if someone 
found a value and said we would like to keep that up, it is 
decommissioned from oil and gas use, but rather than destroy it 
let us use it.
    It will save us about $1 billion in investment, and we 
could get to market sooner with a lower cost of energy. It 
would allow us to do a lot of projects. Is that something that 
you all would consider?
    Ms. Miles. It is not something that I have thought about, 
so I would like to get back to you on that.
    Mr. Pearce. If you could, because, as a business guy will 
tell you, any time you see assets that are paid for and about 
to be disrupted or destroyed it makes sense that if someone 
else can use it free before it is torn up.
    Mr. Keeney, do you have an opinion on this?
    Mr. Keeney. It depends on what you want to use it for. 
Again, the interest that NOAA has is the benefit that it 
provides to the marine environment.
    There is an awful lot of soft corals and algae and other 
things that have built up on those rigs over the 30 years they 
have been there that we believe have some value to the marine 
environment.
    Mr. Pearce. OK. Mr. Diers, you had mentioned that you feel 
that states should become full partners. Does that mean that 
states should be able to--you can put the poster down now--
invalidate or void a project, just keep it from moving forward? 
Is that what you mean by full partner?
    Mr. Diers. Well, sir, I think that it would really depend 
on the direct impacts of that project to the coast.
    Mr. Pearce. OK.
    Mr. Diers. That I think is the ultimate measure to the 
states is are there direct impacts and how do we evaluate that 
and can we make sure that those aren't going to be detrimental 
to the long-term health of our coast, so I guess my answer is 
it depends.
    Mr. Pearce. OK. You are somewhat critical of the process. 
Would you favor another bureaucracy that would handle the 
permitting of these kinds of projects?
    Mr. Diers. I am not sure I would favor any new 
bureaucracies.
    Mr. Pearce. Thank you. Thank you, Madam Chair.
    Ms. Bordallo. I thank the gentleman, and I do thank the 
witnesses for their valuable testimony and the Members for 
their questions.
    The Members of the Subcommittee may have some additional 
questions for the witnesses, and we will ask you to respond to 
these in writing. The hearing record will be open for 10 days 
for these responses.
    I would like now to recognize the second panel of 
witnesses, and the Chair would like to announce that we are in 
the process of having two votes, five minutes each, but I am 
going to keep the committee hearing going since I don't have 
the privilege of voting except in the committee of the whole.
    At this time I would like to recognize the second panel of 
witnesses, Mr. Sean O'Neill, president of the Ocean Renewable 
Energy Coalition; Mr. Jason Bak, Chief Executive Officer of 
Finavera Renewables; Zeke Grader, Pacific Coast Federation of 
Fishermen's Associations;
    Dr. Doug Rader, Principal Scientist for Oceans and 
Estuaries, Environmental Defense; George Hagerman, Senior 
Research Associate, Virginia Tech Advanced Research Institute; 
and Dr. Porter Hoagland, Research Specialist, Woods Hole 
Oceanographic Institute.
    The Chair now recognizes Mr. Sean O'Neill to testify for 
five minutes. The timing lights on the table will indicate when 
your time is concluded.
    All witness statements will be submitted for the hearing 
record.

             STATEMENT OF SEAN O'NEILL, PRESIDENT, 
                OCEAN RENEWABLE ENERGY COALITION

    Mr. O'Neill. Thank you, Madam Chairman. Is the mic on here?
    I thank you and your colleagues for devoting your time and 
resources to this topic. It is a topic near and dear to the 
members of the Ocean Renewable Coalition, the national trade 
association for ocean renewables, including wave, tidal, 
offshore, wind and the potential for offshore biomass and other 
new technologies as they come down the pike.
    We are made up of 32 companies ranging from technology and 
project developers, including Finavera Renewables, represented 
today by Mr. Bak to my left. We also have large investment 
firms, investor owned utilities, public owned utilities, legal 
and other firms located in the United States, Canada, Scotland, 
Denmark and Ireland.
    Our number one goal in talking with you today is to 
emphasize the importance of clarifying and expediting the 
permitting process for marine renewables if this industry is to 
grow and prosper in the United States.
    A permitting process for marine renewables must take into 
account the principles of proportionality and fairness, while 
encouraging innovation to address our common environmental and 
energy goals. Moreover, the industry needs funding for R&D 
demonstration projects, and it needs tax incentives.
    Is the resource there? Yes, and you will hear from others 
on this, but 252 million megawatt hours of wave resources 
alone, resources located near highly populated areas on the 
coast placing fewer demands on already burdened transmission 
infrastructure.
    Is the resource cost competitive? Not yet, but every 
indication suggests a much shorter time to commercial viability 
than experienced by many other renewable technologies.
    Is the resource environmentally friendly? Once again, early 
indications show that ocean renewables represent some of the 
most environmentally benign energy technologies available 
today. No air emissions, no fuel costs, no fuel transportation 
costs or related environmental effects.
    Moreover, we anticipate that proper siting, environmental 
assessment and incorporating the principles of adaptive 
management will minimize the effects on the marine environment.
    In this regard, we note that the approach Congressman 
Inslee has taken in his bill will go a long way toward 
promoting marine renewables and generating data on 
environmental effects. Congressman Inslee's leadership in 
marine renewables goes back some time, and his understanding of 
the adaptive management program and funding for environmental 
studies under this program will help the industry gather the 
data necessary for building greater confidence in these 
resources.
    We wholeheartedly support Congressman Inslee's bill and 
thank him and all the Members of Congress who have offered 
their support. Congressman Inslee's legislation will address 
the funding needs that have limited the growth of this 
industry, as well as encourage local communities, tribes and 
stakeholders to take part in the process.
    At the same time, we need a regulatory environment that 
will complement new investment. Today the marine renewables 
industry faces two obstacles on the OCS. First, MMS needs to 
issue regulations for siting renewables on the Outer 
Continental Shelf. In the absence of regulations, offshore 
developers can't even place wind monitoring devices or acoustic 
doppler equipment on the Outer Continental Shelf to study the 
potential sites.
    We appreciate all of the good work that MMS and FERC have 
done to date, including the completion of a draft EIS. At a 
minimum, in the case of MMS we urge them to adopt interim 
regulations so that renewable development can proceed.
    Second, wave and tidal developers face the potential of 
dual MMS and FERC regulation in projects located on the OCS or 
which straddle the OCS and state waters. Dual regulation will 
pose additional regulatory burdens for developers and must be 
avoided. We urge MMS and FERC to resolve the jurisdictional 
dispute expeditiously and avoid dual regulation at all costs.
    Ocean renewables can help us diversify our energy portfolio 
and improve our environment. With the proper support, these 
resources will become a robust part of a reliable, affordable, 
clean electric supply portfolio. The worst outcome before us is 
to leave continued ambiguity on these issues of permitting and 
jurisdiction.
    Thank you very much.
    [The prepared statement of Mr. O'Neill follows:]

                 Statement of Sean O'Neill, President, 
                    Ocean Renewable Energy Coalition

Introduction
    Ocean Renewable Energy Coalition (OREC) is the national trade 
association for marine and hydrokinetic renewable energy dedicated to 
promoting energy technologies from clean, renewable ocean resources 
including wave, tidal, offshore wind and marine biomass. 
Coincidentally, OREC celebrates its second anniversary the same week as 
this hearing, and during this time, we have grown from a handful of 
developers to 36 members from all over the world. OREC is working with 
industry, academia, and interested organizations NGO's to encourage 
commercial development of ocean renewable technologies and raise 
awareness of their substantial, potential contribution to an 
affordable, reliable, environmentally friendly energy future.
    We seek a legislative and regulatory regime in the United States 
that fosters the development of ocean renewable technologies, their 
commercial development, and allows for capturing the rich energy 
potential of our oceans. While other countries have already funded and 
deployed viable, operating, power generating projects using the 
emission-free power of ocean waves, currents, and tidal forces, the 
U.S. is only beginning to acknowledge the importance these 
technologies.
    Ocean energy can play a significant role in our nation's renewable 
energy portfolio. With the right support, the United States ocean 
energy industry can be competitive internationally. With the right 
encouragement, ocean renewable energy technologies can help us reduce 
our reliance on foreign oil--fossil fuels, in general--and provide 
clean energy alternatives to conventional power generating systems. And 
with the right public awareness, our coastline communities can use 
ocean renewables as a springboard for coastal planning that reflects 
the principles of marine biodiversity.
    Today, OREC will address the steps that we must take to realize the 
promise and potential of ocean renewables.
    Is the resource there? Yes, and the resource is located near highly 
populated areas on the coast, placing fewer demands on already taxed 
transmission infrastructure.
    Is the resource cost competitive? Not yet, but indications suggest 
a much shorter time to commercial viability than experienced by many 
other renewable technologies.
    Is the resource environmentally friendly? Yes. Ocean renewables 
present some of the most potentially environmentally benign energy 
technologies available today--no air emissions, no fuel costs or 
associated mining or drilling effects, no fuel transportation costs or 
related environmental effects, and, with proper siting and technology, 
minimal marine or fisheries effects. Unfortunately, there is very 
little data to support this last claim, yet the data that does exist 
suggests minimal impacts with proper technology and siting.
BACKGROUND
A. Types of Technology
    Before we describe the benefits that ocean renewables offer, we 
take a step back and offer a description of the different technologies. 
Ocean energy refers to a range of technologies that utilize the oceans 
or ocean resources to generate electricity. Many ocean technologies are 
also adaptable to non-impoundment uses in other water bodies such as 
lakes or rivers. These technologies are can be separated into three 
main categories:
    Wave Energy Converters: These systems extract the power of ocean 
waves and convert it into electricity. Typically, these systems use 
either a water column or some type of surface or just-below-surface 
buoy to capture the wave power. In addition to oceans, some lakes may 
offer sufficient wave activity to support wave energy converter 
technology.
    Tidal/Current: These systems capture the energy of ocean currents 
below the wave surface and convert them into electricity. Typically, 
these systems rely on underwater turbines, either horizontal or 
vertical, which rotate in either the ocean current or changing tide 
(either one way or bi-directionally), almost like an underwater 
windmill. These technologies can be sized or adapted for ocean or for 
use in lakes or non-impounded river sites.
    Ocean Thermal Energy Conversion (OTEC): OTEC generates electricity 
through the temperature differential in warmer surface water and colder 
deep water. Of ocean technologies, OTEC has the most limited 
applicability in the United States because it requires a 40-degree 
temperature differential that is typically available in locations like 
Hawaii and other more tropical climates.
    Offshore Wind: Offshore wind projects take advantage of the vast 
wind resources available across oceans and large water bodies. Out at 
sea, winds blow freely, unobstructed by any buildings or other 
structures. Moreover, winds over oceans are stronger than most onshore, 
thus allowing for wind projects with capacity factors of as much as 65 
percent, in contrast to the 35-40 percent achieved onshore.
    Other: Marine biomass to generate fuel from marine plants or other 
organic materials, hydrogen generated from a variety of ocean 
renewables and marine geothermal power. There are also opportunities 
for hybrid projects, such as combination offshore wind and wave or even 
wind and natural gas.
B. The status of U.S. wave, current and tidal projects
    At present, prototype offshore renewable projects are moving 
forward in the United States. These include the following:
    New Jersey based Ocean Power Technologies (OPT) has operated a test 
wave energy buoy off the coast of Hawaii for the U.S. Navy. It has also 
operated a buoy off the coast of New Jersey funded by Board of Public 
Utilities since 2005 and in February 2007received a preliminary permit 
to study the feasibility of a 50 MW commercial wave farm at Reedsport, 
off the coast of Oregon.
    Finavera Renewables, Inc., has proposed a 1 MW pilot project for 
the Makah Bay off the coast of Washington state. In November 2006, 
Finavera completed a four year permitting process and submitted a 
license application and draft Environmental Assessment to the Federal 
Energy Regulatory Commission which is pending review.
    New York based Verdant Power is undergoing licensing at FERC and 
deployed two of six units of a tidal/current project located in the 
East River of New York in December 2006. Verdant Power, Inc is in the 
process of deploying 4 more turbines scheduled for completion early May 
of 2007. One of the units is already delivering power to a commercial 
customer on Roosevelt Island.
    Australian based Energetech has formed a subsidiary in Rhode Island 
which has received funding from the Massachusetts Trust Collaborative 
and has planned a 750 kw project for Port Judith Rhode Island. 
Permitting has not yet commenced.
    Ocean Renewable Power Company of North Miami, Florida recently 
secured preliminary FERC permits for two sites in Alaska
    Multiple permits for sites in Maine, California, Oregon, Alaska and 
Florida have been filed with the Federal Energy Regulatory Commission.
    The Mineral Management Service (MMS) now has authority to lease 
lands for offshore wind projects on the Outer Continental Shelf. MMS 
has conducted environmental review of the proposed 420 MW Cape Wind 
Farm off the coast of Nantucket, MA and LIPA/FPL 100 MW project off the 
coast of Long Island, NY.
C. Overseas
    In Europe, projects are moving ahead. Europe has already installed 
587 MW of offshore wind in Denmark, Holland, Scotland, England and UK. 
See http://www.bwea.com/offshore/worldwide.html. Two near shore wave 
projects, are operating in Scotland and Isle of Azores. Pelamis of OPD 
in Scotland is deploying the world's first commercial wind farm off the 
coast of Portugal and Marine Current Turbines has operated a prototype 
tidal project for 2 years.
D. Commercial Viability of Ocean Renewables
    Offshore wind costs range from 3-8 cents per kWh compared to 2.5-7 
cents onshore. (World Renewable Energy Report 2002-2007, Renewable UK). 
These figures have been derived based on operating experiences in 
Europe and reflect operating experience. Costs for offshore wind 
increase as projects move further offshore, necessitating more costly 
mooring systems and larger turbines.
    As for wave and tidal, we have general parameters on cost, but they 
remain subject to further refinement. The World Renewable Energy Report 
estimates the cost of wave energy at an average of 9 cents/kWh and 
tidal and current an average of 8 cents/kWh.
    Recent EPRI reports have found that, presently, the cost of power 
from ocean technologies ranges from 7 cents to 16 cents/kw in a low 
case scenario. For tidal, the May 2006 EPRI report found that the cost 
is driven by the resource, a strong resource can yield power at prices 
as low as 6 cents/kwh. Plus, similarities between tidal and offshore 
wind bring costs down.
    And, the costs of offshore wind or wave are stable. Whereas natural 
gas and oil have fluctuated over the years (with natural gas now higher 
than ever), offshore wind and wave energy costs are stable, since the 
cost of renewable power sources like wind or wave are free. The analogy 
here is that renewable energy financing functions more like a fixed-
rate mortgage as opposed to a variable rate mortgage associated with 
the use of finite fossil fuel resources.
    Also, costs are expected to decline as the industry matures and as 
economies of scale make ocean projects less costly. To compare, back in 
1978 wind energy cost 25 cents/kwh to produce--but now costs between 
4.5 and 6 cents/kwh. Wave is already less costly than wind was in its 
early stages. Moreover, the EPRI report found that if wave had obtained 
the same government subsidies as wind, it would be a far more advanced 
technology than at present. As the offshore wind industry makes 
advancements on mooring systems, turbine durability and other issues 
that bear on the cost of marine projects, these advancements will help 
bring down the cost of ocean energy. In addition, if we can gain a 
better assessment of our resources, we can target the most powerful 
sites first and learn from our experience in these locations to bring 
costs down further.
    In addition, ocean renewable energy offers other economic benefits. 
Development of a robust offshore renewables industry can:
      Reduce reliance on foreign oil
      Rely upon ocean terrain for power generation as opposed 
to onshore land resources
      Revitalize shipyards, coastal industrial parks and 
shuttered naval bases
      Create jobs in coastal communities
      Allow the U.S. to transfer technology to other countries, 
just as a country like Scotland is exporting its marine renewables 
know-how
      Provide low cost power for niche or distributed uses like 
desalination plants, aquaculture, naval and military bases, powering 
stations for hybrid vehicles and for offshore oil and gas platforms
      Provide use for decommissioned oil platforms through 
``rigs to reefs program''
      Promote coastal planning that reflects the goals of bio-
diversity, that maximize best comprehensive use of resources and 
capitalizes on synergies between offshore industries
II. WHAT THE INDUSTRY NEEDS TO ACHIEVE OUR GOALS
    What will it take for the ocean renewable industry to move from 
where it is now to achieve its potential? OREC recommends the following 
actions:
    --More funding for R&D and technology development: Wind energy has 
benefited from substantial government investment. Thirty years ago, 
wind cost 30 cents/kWH to generate; today, that cost stands at 3 to 7 
cents/kWH. And even today, DOE continues to invest in wind. Just a few 
months ago, DOE announced a $27 million partnership with GE to develop 
large-scale turbines and also issued a $750,000 SBIR to Northern Power 
for offshore wind technology development.
    Private developers have borne the costs of bringing the ocean 
energy technology forward for the past thirty years, but they need 
government support. Government funding will also give confidence to 
private investors and help attract private capital.
    --Resource Assessment: At present, we do not even know the full 
potential of offshore renewables, because no agency has ever mapped the 
resource comprehensively. The Energy Policy Act of 2005 directed the 
Secretary of DOE to inventory our renewable resources but that work has 
never been funded. And even as MMS moves forward with a rulemaking for 
offshore renewables on the OCS, it has not received funding to map the 
resource.
    Preliminary studies done by EPRI and private companies show that we 
have substantial ocean resources. But we will not know the full scope 
without further mapping and study.
    --Incentives for Private Investment: Offshore renewables are 
compatible with other large industries in our country, such as oil and 
maritime industry. These industries, with the right tax incentives, can 
provide substantial support to offshore renewable development. 
Incentives could include investment tax credits for investment in 
offshore renewables and incentive to use abandoned shipyards and 
decommissioned platforms for prototypes and demonstration projects.
    --Incentives for coastal communities: Coastal municipalities stand 
to gain tremendously from installation of offshore renewables. They 
need to be stakeholders in the process with a voice in development that 
takes place off their shores. Congress can support this by continuing 
to authorize Clean Renewable Energy Bonds (CREBS) and the Renewable 
Energy Portfolio Incentives (REPI) for coastal projects.
    --Reduced regulatory barriers: Until companies get projects in the 
water, we will not learn about the environmental impacts or true costs 
of offshore renewables. Unfortunately, developers face onerous barriers 
to siting small, experimental projects. We should establish streamlined 
regulation and permitting for offshore renewables, with maximum 
cooperation between state and federal agencies. A system to coordinate 
joint authorities could be established up front, either through MOUs, a 
Joint Office or liaison system, so there is one place that coordinates 
and integrates the lead agency process with other state and federal 
permits. Agencies will establish clear lines of responsibility and 
coordination and adhere to firm deadlines.
    To minimize duplication of effort and develop expertise with 
hydrokinetic and offshore renewable technologies, each agency could 
dedicate teams of responsible parties from their respective agency that 
can coordinate on applications. The same team can learn the new 
technology, the new permitting and licensing process, and can more 
efficiently process all applications.
    Another option is to create a Joint Hydrokinetic and Marine 
Renewables Office, staffed with key personnel from relevant agencies. 
Working through a joint office will increase accountability and enhance 
efficiency and information sharing. In the Energy Policy Act, Congress 
provided for creation of a joint renewables office within BLM.
III. Principles of Adaptive Management
    In particular, we need a streamlined system that will allow for 
deployment of pilot projects to demonstrate technological viability and 
allow for study of environmental effects. Right now, pilot projects, 
few of which will ever generate significant revenues, remain subject to 
the same permitting requirements as conventional projects. In fact, 
environmental studies and regulatory costs account for as much as forty 
percent of the cost of wave and tidal projects. Agencies should be 
encouraged to minimize upfront review and extensive study of smaller, 
demonstration and pilot projects, and instead, incorporate principles 
of adaptive management that allow for study and mitigation on an ``as 
you go'' basis.
    The concept of adaptive management allows for modification of 
project operation to accommodate newly discovered affects. For nascent 
technologies, adaptive management is preferable to a front loaded 
process, because it allows continued collection of data and ongoing 
monitoring after the project is deployed. Information gleaned from 
adaptive management is therefore, more accurate about affects than pre-
deployment studies and projections. Adaptive management also allows for 
proportionality--the actions taken should be proportional to the 
adverse impacts identified. This concept is critical to the development 
of this industry.
IV. Dual Regulation Stifles Innovation, is Anti-Competitive, and 
        Wasteful
    OREC opposes any jurisdictional overlap between MMS and FERC for 
projects on the OCS. Dual regulation will give rise to duplication of 
effort and unduly burden developers. Moreover, such duplication would 
unnecessarily waste taxpayer dollars.
    In addition, dual regulation will place wave energy developers on 
the OCS at a competitive disadvantage to developers of other 
alternative technology (like offshore wind) because these technologies 
are not subject to FERC's licensing requirements. Wave developers would 
also face additional costs, because MMS intends to charge royalties for 
use of public lands, while FERC assesses annual charges for costs 
associated with administration of the Federal Power Act.
    Moreover, MMS must move expeditiously to devise regulations for 
issuing licenses and permits on the OCS. While we laud MMS' extensive 
work to date in developing rules for alternative energy development on 
the OCS, at the same time, the deadline imposed on MMS by Congress in 
the Energy Policy Act to issue regulations for siting alternate energy 
projects on the OCS have long passed. As a result, developers are still 
without guidance for licensing on the OCS at this critical juncture 
that wave, tidal and offshore wind technologies are building momentum.
    It is essential that the Federal Government deals with the 
licensing process for this industry is to move forward.
V. Conclusion
    Both the Federal Energy Regulatory Commission and the Minerals 
Management Service were established decades ago with responsibility 
over large scale energy development. With the resurgence of 
hydrokinetic and marine renewables, both of these agencies have 
undertaken the enormous task of interpreting their mission, as defined 
by law, in the regulation and permitting of these new and emerging 
technologies. I applaud their efforts and encourage them to achieve a 
timely, fair, and realistic approach.
    It is essential that a licensing process for new and emerging 
renewable technologies take into account the principles of 
proportionality and fairness while encouraging innovation to address 
our common environmental and energy goals.
    Is the resource there? Yes, and the resource is located near highly 
populated areas on the coast, placing fewer demands on already taxed 
transmission infrastructure.
    Is the resource cost competitive? Not yet, but indications suggest 
a much shorter time to commercial viability than experienced by many 
other renewable technologies.
    Is the resource environmentally friendly? Yes. Ocean renewables 
present some of the most potentially environmentally benign energy 
technologies available today--no air emissions, no fuel costs or 
associated mining or drilling effects, no fuel transportation costs or 
related environmental effects, and, with proper siting and technology, 
minimal marine or fisheries effects. Unfortunately, there is very 
little data to support this last claim, yet the data that does exist 
suggests minimal impacts with proper technology and siting.
    Ocean renewables can help diversify our energy portfolio and 
improve our environment. With the proper support, these resources will 
become a robust part of a reliable, affordable, clean electric supply 
portfolio.
                                 ______
                                 
    Ms. Bordallo. Thank you, Mr. O'Neill.
    Our next witness is Mr. Jason Bak, Chief Executive Officer 
of Finavera Renewables.

   STATEMENT OF JASON BAK, CHIEF EXECUTIVE OFFICER, FINAVERA 
                           RENEWABLES

    Mr. Bak. Chairwoman Bordallo and Members of the 
Subcommittees, thank you for your invitation to appear before 
you today. I am Jason Bak, the CEO of Finavera Renewables.
    We are an energy company focused solely on development, 
ownership and operation of renewable energy projects around the 
world. Although we are developing up to 1,500 megawatts of wind 
energy in Canada and Ireland, my company is represented here 
today because we are the cutting edge of ocean wave energy in 
the United States through our U.S. subsidiary, Finavera 
Renewables Ocean Energy.
    We have three wave energy projects under development in 
California, Oregon and Washington, and we are developing others 
outside of America. These are not just paper projects. We are 
literally weeks away from issuing contracts that will put U.S. 
steelworkers to work constructing our second generation wave 
energy buoy, which we are going to install off the coast of 
Newport, Oregon, this summer.
    I am joined today by my colleague, Alla Weinstein, who 
leads Finavera's ocean energy technology team. Alla is a true 
pioneer in this field. The company that Alla co-founded, 
AquaEnergy Group, Ltd., became part of Finavera in 2006 when, 
after looking closely at every other type of wave energy 
generation and concept, we determined that the technology that 
Alla and her team developed had by far the highest potential to 
deliver environmentally sound, market competitive electricity 
to the American power grid.
    The technology that we have works like this: Our buoy, 
which we call the AquaBuOY, converts the up and down motion of 
waves into a pressurized water flow, effectively creating the 
equivalent of a 650 foot waterfall. The pressurized water spins 
a turbine that generates electricity just like a conventional 
hydropower plant, but with no dam and no reservoir.
    Unlike other ocean energy technologies, the AquaBuOY 
doesn't use petroleum hydraulic fluids nor does it require 
dredging to anchor it to the ocean floor. It is safer for the 
environment, and of course with wave energy there is no 
greenhouse gas emissions.
    My message to you and the committee today is simple. Ocean 
renewable energy's time has come. It is not just pie in the 
sky. We are already turning ideas into jobs here in the U.S. 
Now we are about to turn blueprints into tons of carefully 
engineered American made steel.
    Ocean energy has a huge potential resource. The amount of 
energy available for us to convert into clean electric power 
just off the West Coast is about equal to 1.5 times all of the 
existing hydropower in the U.S. Add Alaska, the east coast and 
the Gulf, and that is still more potential.
    While the potential is great, regulations are not maturing 
rapidly enough. In many cases, the government hasn't begun to 
figure out how to take advantage of what we offer in terms of 
helping solve the climate crisis.
    But that is not true everywhere. The State of Oregon has 
embraced wave energy. Our tribal and state partners in 
Washington state and local Federal officials are working hard 
with us to license our Makah Bay project.
    The Government of Canada has adopted tax policies aimed 
specifically at boosting private investment in wave energy, and 
within the U.S. Government the Federal Energy Regulatory 
Commission is using its hydropower licensing authority in a 
very, very helpful way.
    I would like to make two requests here today, but also 
would like to make two commitments. First are the requests. I 
would like to ask Congress to assure equitable tax treatment 
for ocean energy alongside of other renewable energies. No 
special treatment, just let us compete on a level playing field 
with our clean energy peers such as wind power.
    Second, I would ask that Congress clarify the current 
regulatory system. Section 388 of the Energy Policy Act was a 
step in the right direction, but it left many questions 
unanswered and created a few new ones.
    Here are my commitments. First, I commit to Congress that 
Finavera will, if given a rational regulatory environment, 
deliver very large amounts of clean energy free of climate 
changing emissions in an environmentally sustainable way at 
competitive prices. We want the chance to help you solve the 
climate challenge by developing the new energy economy.
    Second, I commit to my fellow panelists and other ocean 
stakeholders that my company is devoted to preventing the ocean 
energy equivalent of what Altamont Pass represented in the wind 
energy industry. We want to get it right the first time.
    Finavera is the leader in this space. Finavera's Makah Bay 
project is the first and only wave energy project to enter the 
Federal licensing process. We understand and embrace our 
responsibility to engage collaboratively with conservationists, 
with fishermen, scientists, regulators and others so that we do 
get it right.
    I would just like to finish by saying that this should be 
the beginning of a search for solutions. We need to keep 
talking. My fellow stakeholders here will play a key role in 
this process, and I would like to propose that we continue our 
dialogue.
    In fact, I would love to host a meeting maybe in California 
to focus on discussion and building on the progress that we 
have made so far. If stakeholders are interested, we would be 
more than happy to organize this type of meeting and begin 
discussing this at an early stage.
    Thank you for this opportunity to testify. I would be happy 
to respond to any questions and request that my full written 
statement be included in the record.
    [The prepared statement of Mr. Bak follows:]

               Statement of Jason Bak, CEO and Founder, 
                       Finavera Renewables, Inc.

    Chairman Costa, Chairwoman Bordallo and Members of the 
Subcommittees, thank you for your invitation to appear before you 
today.
    I am the CEO of Finavera Renewables. We are an energy company 
focused solely on development, ownership and operation of renewable 
energy projects around the world. Although we are developing 1500 
megawatts of wind energy in Canada and Ireland, my company is 
represented here today because we are at the cutting edge of ocean wave 
energy in the United States through our U.S. subsidiary, Finavera 
Renewables Ocean Energy.
    We have three wave energy projects under development in California, 
Oregon, and Washington, and we are in discussions about others. These 
are not just paper projects. We are literally weeks away from issuing 
contracts that will put U.S. steelworkers to work constructing our 
prototype wave energy buoy, which we are going to install off the coast 
of Newport, Oregon this summer.
    I am joined today by my colleague Alla Weinstein who leads 
Finavera's ocean energy team. Alla is a true pioneer in this field. The 
company that Alla co-founded, AquaEnergy Group Ltd., became part of 
Finavera in 2006 when, after looking closely at every other engineering 
concept for wave energy, we determined that the technology Alla and her 
team developed has by far the highest potential to deliver 
environmentally sound, market-competitive electricity to the American 
power grid.
    The technology works like this: Our buoy, which we call the 
AquaBuOY, converts the up-and-down motion of waves into a pressurized 
water flow, effectively creating the equivalent of a 650-foot 
waterfall. The pressurized water spins a turbine that generates 
electricity, just like a conventional hydropower plant, but with no dam 
and no reservoir. And unlike other ocean energy technologies, the 
AquaBuOY does not use petroleum hydraulic fluids, so it's safer for the 
environment. And, of course, there are no greenhouse gas emissions.
    My message to you today is simple: Ocean renewable energy's time 
has come. This is not pie in the sky. We are already turning ideas into 
jobs here in the US. Now, we're about to turn blueprints into tons of 
carefully engineered American-made steel. And that steel, in the form 
of our buoys floating off the West Coast, will soon demonstrate our 
ability to convert the virtually limitless supply of Pacific Ocean 
waves into megawatts of clean electricity.
    It is a huge potential resource. The amount of energy available for 
us to convert into clean electrical power off just the West Coast is 
equal to about one and one-half times all the hydropower in the US. The 
East Coast and Gulf offer still more potential.
    But while our time may have come, we have to acknowledge that our 
technology and ambitions are maturing at roughly the same time that 
most federal, state, tribal and local governments are first becoming 
aware of us. In many cases, government hasn't begun to figure out how 
to take advantage of what we offer in terms of helping solve the 
climate crisis.
    That is not true everywhere. The State of Oregon has embraced wave 
energy. Our tribal and state partners in Washington State, and local 
federal officials, are working hard with us to license our Makah Bay 
project. The Government of Canada has adopted tax policies aimed 
specifically at boosting private investment in wave energy. And within 
U.S. government, the Federal Energy Regulatory Commission is using its 
hydropower licensing authorities in a helpful way.
    If we had to, we could continue forward with our business under the 
current laws. But if you believe, as Alla and I do, that ocean energy 
should be an integral, important part of the United States' response to 
climate change, then the current system is not good enough.
    I have a two-part request of you. I also have two commitments to 
make, one to Congress and the second to my co-panelists who are 
stakeholders with Finavera in the management and conservation of the 
ocean.
    Here are my requests:
    First, I would ask that Congress assure equitable tax treatment for 
ocean energy alongside other renewables. No special treatment, just let 
us compete on a level playing field with our clean energy peers, such 
as wind power.
    Second, I would ask that Congress clarify the current regulatory 
system. Section 388 of the Energy Policy Act was a step in the right 
direction, but it left many questions unanswered and created a few new 
ones.
    Here are my commitments:
    First, I commit to Congress that Finavera will, if given a rational 
regulatory environment, deliver very large amounts of clean energy, 
free of climate changing emissions, in an environmentally sustainable 
way, at competitive prices. We want the chance to help you solve the 
climate challenge.
    Second, I commit to my fellow panelists and other ocean 
stakeholders that my company is devoted to preventing the ocean energy 
equivalent of what Altamont Pass represents in the history of wind 
development. We want to get it right the first time.
    We are the leaders. Finavera's Makah Bay project is the first--and 
only--wave energy project to enter the federal licensing process. We 
understand and embrace our responsibility to engage collaboratively 
with conservationists, fishermen, scientists, regulators and others--so 
that we do get it right.
Detailed Description of Finavera's Wave Energy Projects
    Finavera is actively pursuing development of a number of wave 
energy projects, including two in Oregon (one of which is intended to 
be a demonstration project in 2007, the other ultimately a true 
commercial project), a pilot 1 MW installation in Washington, and a 
commercial plant project in California. All projects are proposed for 
locations within a few miles of shore, mostly within state waters and 
not on the federal OCS, because, first, transmission cables are very 
expensive and a limiting factor in project location and, second, so as 
not become involved the apparent regulatory conflict between FERC and 
MMS over jurisdiction in the zone between three and twelve miles off 
shore.
    In addition, the company has projects under development in 
Portugal, South Africa and Canada. While the regulatory and 
jurisdictional aspects of those projects do not relate to the subject 
matter of this hearing, it is worth noting that various stakeholders in 
the European Union have been active, and remain quite supportive, in 
creating incentives for development of renewable ocean energy 
technologies. The forms of support have included research grants 
administered by the European Commission, feed-in tariffs specifically 
designed for ocean energy in UK and Portugal, and concentrated effort 
of bringing together the European ocean energy community with a goal to 
reach commercialization as soon as possible. There is also considerable 
interest in using the technology to serve isolated, energy-poor coastal 
regions around the world.
Oregon Projects--Coos County and Newport
    Finavera has applied for, but not yet received a preliminary permit 
from FERC for the proposed 100 MW Coos County Offshore Wave Energy 
Plant in Oregon (FERC Docket P-12752). The company is also pursuing a 
demonstration project off Newport, Oregon, for which Finavera is in the 
process of obtaining the required state and U.S. Army Corps of 
Engineers permits. A FERC permit is not necessary for Newport project 
because it will not be connected to the power grid.
    Finavera will be manufacturing prototype buoys at Oregon Iron Works 
over the next few months, and intends to install a single test buoy at 
Newport during the summer of 2007. The demonstration tests will be 
completed by October 2007. Finavera anticipates that test results will 
be positive, such that the company will be in a position to develop the 
projects into full utility scale. If so, the company will need to seek 
project licenses from FERC, and various other federal and state 
approvals.
  Washington Project--Makah Bay
    Finavera has applied to FERC for a project license for its proposed 
Makah Bay project off the northwest tip of Washington's Olympic 
Peninsula. This is the first and only application to FERC for a license 
to construct an offshore wave energy plant. The company recently 
completed a comprehensive environmental assessment under NEPA that 
concluded that the proposed project would have no significant adverse 
effects. The FERC licensing process for the Makah Bay project (FERC 
Docket P-12751) is expected to be completed by the end of 2007. The 
Makah Bay project, when built, will be relatively small, four buoys 
generating a total of 1MW, a scale that is a reflection of the very 
limited onshore grid capacity at the site.
    The Makah Bay project is a true pilot, both in the traditional 
engineering sense, but also in a different way. There simply was no 
applicable comprehensive regulatory system in existence at the time of 
project inception by AquaEnergy (now part of Finavera) in 2001. Nobody 
in the private sector, academia or government--federal, state or 
tribal--had ever been required to think through what issues, concerns, 
or questions would need to be addressed in order to properly site an 
ocean wave energy project.
    The project team did the right thing. Rather than try to take 
advantage of the regulatory uncertainty to evade scrutiny of its plans, 
the company launched a comprehensive outreach effort to all 
stakeholders. With the inception of the Makah Bay project in 2001, 
Finavera pioneered a collaborative approach to wave energy project 
development by involving commercial and recreational fishermen, 
environmental groups, park users, government stakeholders, public 
utilities, and universities in the company's planning. This approach 
ultimately resulted in a very high level of consensus among 
stakeholders, and paved the way for the FERC licensing process.
    We note with particular gratification that the stakeholder advisory 
council for the Olympic Coast National Marine Sanctuary, in its 
comments to FERC regarding our license application, has not expressed 
opposition to our project, but has quite reasonably called for a 
sophisticated and continuing monitoring and evaluation program, 
involving sustained stakeholder communications and collaboration. The 
Makah Tribe is working closely with Finavera on this project as a true 
partner. The Department of the Interior and NOAA Fisheries and Marine 
Sanctuary Programs, as well as various Washington State resource 
agencies are not opposing our efforts, and have worked well with us to 
identify appropriate environmental protections and monitoring 
protocols.
    To our knowledge, no party is opposing issuance of a FERC license 
for the Makah Bay project, which marks a considerable achievement for 
any energy project, let alone a first-of-a-kind project sited in an 
environmentally sensitive marine environment within the boundaries of a 
national marine sanctuary. We see no reason that the Makah Bay project 
will not be licensed, built and put into operation in a manner that 
meets our interests as project developers while satisfying the concerns 
of all stakeholders.
  California Projects--Humboldt County
    Finavera is working aggressively with California utilities to 
launch wave energy development in that state. The company has applied 
for a preliminary permit from FERC for a project near Humboldt County, 
along the north coast ( FERC Docket P-12753). Among other things, 
Finavera is currently negotiating a ``bankable'' power purchase 
agreement (PPA) with one utility for a significantly sized wave power 
project using the company's AquaBuOY technology off the coast of 
California. The company looks to finance the project through 
conventional commercial debt. Permitting and associated project 
development activities are on-going.
Explanation of Finavera's AquaBuOY * Technology
---------------------------------------------------------------------------
    \*\ The unorthodox capitalization in the name AquaBuOY honors the 
memory of AquaEnergy's chief technologist, Bengt-Olov Sjostrom (B-O), 
and company co-founder, Yury Avrutin (Y), who died together in December 
2001 when their plane crashed while investigating potential wave energy 
sites along the Oregon Coast.
---------------------------------------------------------------------------
    Finavera's offshore power plants consist of patented wave energy 
converters that are based on proven, survivable buoy technology. 
Clusters of these small, modular devices called AquaBuOYs are moored 
several miles offshore where the wave resource is the greatest. The 
power plants are scalable from hundreds of kilowatts to hundreds of 
megawatts.
    The AquaBuOY is a floating buoy structure that converts the kinetic 
energy of the vertical motion of oncoming waves into electricity. The 
AquaBuOY is categorized as a point absorber, defined as having a small 
dimension in relation to the longer wave length in which it is 
operating. It utilizes a cylindrical buoy as the displacer and the 
reactor is a large water mass enclosed by a long vertical tube 
underneath the buoy. The system is comprised of components that have 
been proven in other marine industries for decades.
    The AquaBuOY consists of four elements:
      Buoy
      Acceleration Tube
      Piston
      Hose Pump
    The acceleration tube is a vertical, hollow cylinder rigidly 
mounted under the body of the buoy. The tube is open in both ends so 
seawater can pass unimpeded back and forth, forcing the piston to move, 
and in turn extend or compress the hose pumps. Positioned at the 
midpoint of the acceleration tube is the piston, a broad, neutrally 
buoyant disk. When the buoy is at rest, the piston is held at the 
midpoint by the balanced tension of two hose pumps that are attached to 
opposite sides of the piston and extend to the top and bottom of the 
acceleration tube, respectively. When the buoy rides the waves, the 
acceleration tube moves in relation to the piston, and in turn extends 
or compresses each hose pump in tandem.
    The hose-pump is a steel reinforced rubber hose whose internal 
volume is reduced when the hose is stretched, thereby acting as a pump. 
The pressurized sea water is subsequently expelled into a high-pressure 
accumulator, and in turn fed to a turbine which drives a generator. 
Generated electricity is brought to shore via a standard submarine 
cable.
    A cluster of AquaBuOYs would have a low silhouette in the water. 
Located several miles offshore, the power plant arrays would be visible 
to allow for safe navigation and no more noticeable than small fishing 
boats or pilot lights.
    Any offshore system must survive the harsh ocean environment. 
AquaBuOYs are similar to navigational buoys that have been known to 
survive for many decades. Safely positioned offshore, AquaBuOYs are 
designed for 100-year storms by riding atop the extreme waves at sea, 
rather than experiencing catastrophic damage, as during tsunami, from 
the breaking waves onshore. AquaBuOYs are moored with advanced 
anchoring and mooring technology.
    Because the AquaBuOY power plant systems are modular, it is easy to 
scale projects to meet growing power demand. Additionally, the system's 
modularity provides a more consistent flow of power during maintenance 
cycles, since individual buoys can be taken off-line, while others 
remain in operation. The simplicity of the AquaBuOY system makes it an 
ideal choice for sourcing local suppliers, construction, and 
maintenance. Most components are readily available from domestic 
suppliers and the job skills required for fabrication and maintenance 
are present in most coastal communities.
Observations on Current U.S. Regulatory Approach
  Direct Subsidies are Unnecessary
    Finavera believes, based on our success attracting private capital, 
that the ocean wave energy industry does not need direct subsidies. We 
do, however, believe it would be in the general public interest, and 
supportive of our industry, for Congress to provide adequate funding to 
the Department of Energy, including the National Renewable Energy 
Laboratories, to support independent assessment of ocean energy 
potential and advanced R&D work.
  Taxation Should Be Equitable
    Ocean energy should be treated under the Tax Code on a par with 
other important renewable technologies, such as wind power. We do not 
need favorable treatment, just a level playing field. There are 
numerous legislative proposals under development today that would amend 
the Code to promote renewable energy. We urge Congress to ensure that 
ocean renewable energy is given fair treatment in such legislation.
    In the longer term, we would call to Congress's attention the tax 
policies adopted by the Government of Canada and the State of Oregon 
designed to promote renewable energy technology such as ours, 
particularly the flow-through tax credits provided under both schemes. 
Descriptions of those approaches are provided in an attachment to my 
testimony.
  Federal Agency Authorities Need Clarification Based on Clear 
        Goals and Principles
    The February 20, 2007 Report from Congressional Research Service, 
Issues Affecting Tidal, Wave, and In-Stream Generation Projects, 
provides an excellent overview of the current regulatory system. We 
would also draw to your attention the March 7, 2007 CRS report, Wind 
Energy: Offshore Permitting, which provides a very useful complement to 
the earlier report, especially in its discussion of Coastal Zone 
Management Act and state jurisdictional matters.
    As can be seen from Finavera's experience with the Makah Bay 
project, we have found a way to work within the current regulatory 
system. Moreover, there are federal agency officials at FERC, NOAA, the 
Interior Department, Corps of Engineers, Coast Guard, and elsewhere who 
are doing their very best to make the current system work in a way that 
supports development of ocean renewable energy in a way that meets 
environmental, safety, navigation, fishery access, and other legitimate 
public concerns.
    That said, the current system is not optimal. There are too many 
uncertainties about the respective authorities of federal agencies. 
Equally important, there are many questions about the relative powers 
of federal, state, and tribal levels of governments.
    We understand the general temptation to focus on this situation by 
asking the question: Who should be in charge?
    But, in Finavera's view, that is the wrong question at this time. 
We believe the better question is: What do we want to achieve?
    Congress should focus on goals and objectives before wrestling with 
the question of who should carry out the mission.
    You will not be surprised that we believe Congress should adopt an 
affirmative, enthusiastic policy to promote development of ocean 
renewable energy. We also believe that pursuit of that goal should be 
governed by the following principles:
    1.  Ocean renewable energy technologies and projects should be held 
to the highest standards of environmental performance. Blue energy has 
to be green.
    2.  The relative business success of different ocean energy 
technologies should be decided by private markets, not government. Let 
us compete to find out which technologies do the best job of meeting 
power market needs. Investors will embrace the most promising 
technologies, and utilities will buy from the most reliable and 
affordable sources. We believe that the quality of Finavera's 
technology will make us brothers-in-arms with the most demanding and 
prescient investors. Our competitors must feel the same way about their 
prospects--there is no need for government to pick winners or losers.
    3.  The States should be encouraged to provide timely leadership in 
identifying coastal areas that will be suitable, from a public policy 
standpoint, for ocean energy. We do not want to find ourselves pursuing 
federal approvals for projects that are not welcomed by the adjacent 
States in whose waters we may be located and on whose shores we must 
interconnect our projects.
    4.  Federal agencies should collaborate to study on a programmatic 
level certain environmental and other issues that likely are associated 
with all forms of offshore renewable energy in most locations. For 
example, it does not make sense to study on solely a case-by-case basis 
the potential impacts of ocean energy projects on marine mammal 
migration. Another example of a ``generic'' issue would be the impact 
of energy projects on sand and sediment deposition.
    5.  Rents, royalties, and other financial terms pertaining to use 
of the seabed should be established in a manner that promotes, and does 
not discourage, ocean renewable energy, especially during the decade or 
more that will be needed to bring the industry to relative maturity. 
The many comments submitted to MMS from offshore wind interests during 
the course of that agency's rulemaking on Section 388 offer useful 
perspective on this key financial matter.
    6.  Projects currently under development should not be interrupted 
or delayed while Congress works to enact new law. And, once new rules 
have been established, those projects that have made meaningful 
progress under the existing regulatory system should not be forced to 
re-start the regulatory process. We need to keep moving forward to 
develop ocean energy sources while making the transition to a more 
straightforward regulatory environment.
    Thank you for this opportunity to testify. I would be happy to 
respond to any questions, and request that my full written statement be 
included in the record.

                  Attachment to Testimony of Jason Bak

      Examples of Tax and Other Incentives from Oregon and Canada

Oregon's Approach
    Oregon has adopted a collection of programs designed to create 
incentives for private investment in renewable energy sources, 
including ocean wave energy.
  Business Energy Tax Credit
    The Oregon Business Energy Tax Credit (BETC) is valued at 35% of 
``eligible costs'' for any particular project. The manufacturing of 
renewable energy devices qualifies for the BETC. The maximum eligible 
cost is $10 million, resulting in a $3.5 million tax credit. The credit 
is a dollar for dollar credit against State of Oregon Business taxes 
owed. In addition, there is a ``pass-through'' option that converts the 
tax credit to a cash payment upon project completion. A pass through 
partner is identified (with assistance from ODOE) and takes the credit 
on one's behalf in exchange for a 25.5% cash payment based on eligible 
costs. Details, contact persons and applications can be found at http:/
/www.energy.state.or.us/bus/tax/taxcdt.htm
  Energy Loan Program
    The Oregon Energy Loan Program (also known as SELP) promotes energy 
conservation and renewable energy resource development. The program 
offers low-interest loans for projects that: save energy; produce 
energy from renewable resources such as water, geothermal, solar, 
biomass, biofuels, waste materials or waste heat; use recycled 
materials to create products; or use alternative fuels. The costs of 
designing and building an Oregon wave energy equipment manufacturing 
plant is eligible for a loan from Oregon's Energy Loan Program. 
Likewise, the costs of planning, designing and building a wave energy 
facility in Oregon is eligible for an energy loan. It appears that both 
a manufacturing plant and a wave energy facility would qualify for 
lower-rate loans resulting from tax-exempt bonds. Projects must be in 
sited Oregon. http://www.energy.state.or.us/loan/selphme.htm
  Enterprise Zone Exemption (ORS 285C.055)
    Through a short-term tax exemption, an Oregon enterprise zone 
induces eligible businesses of all sizes to make additional investments 
that will improve employment opportunities, spur economic growth and 
diversify business activity. Qualifying new plant & equipment in a zone 
receives a total exemption for at least three and--in some cases--up to 
five consecutive years from the local assessment of ad valorem property 
taxes, which can otherwise have a deterring effect on private investors 
seeking to start or enlarge operations with a substantial capital 
outlay. Enterprise zone property (except hotel/resorts and utilities) 
also is exempt for up to two years while it is being constructed or 
installed. http://www.econ.state.or.us/enterthezones/whatare.htm
  Construction-in-Process (C-i-P)
    For up to two years, all structures and heavy equipment are exempt 
from taxation. This exemption is available for each year, in which on 
January 1 the facility has been neither placed in service nor used or 
occupied for intended, commercial operations. http://
www.econ.state.or.us/BIexemp.htm
  Strategic Reserve Fund
    The Strategic Reserve Fund (SRF) was established by the Oregon 
Legislative Assembly to support economic and community development in 
Oregon. SRF projects must be approved for funding by the Governor. With 
the SRF, Oregon supports cost effective projects that create, expand 
and preserve the principal traded-sector industries of Oregon. The fund 
encourages diversification and preservation of regional economies. 
Administered by the Oregon Economic and Community Development 
Department (OECDD), the SRF is used to invest in time-sensitive 
economic opportunities statewide. Awards from the fund must be directly 
approved by the Governor of Oregon and are most often in the form of a 
forgivable loan.
  Research Tax Credit
    The credit applies to research activity or investments during the 
tax year. It equals 5 percent of the increase in research expenses over 
a base amount for the taxable year. Alternatively, the credit is 5 
percent of qualified research expenses that exceed 10 percent of Oregon 
sales for the year (capped at $10,000 for each percentage point in 
excess). The annual maximum credit allowed per taxpayer is $2 million. 
This credit is based on the federal R&D credit and available only to 
corporate taxpayers. http://www.oregon.gov/DOR/BUS/docs/102-694-9.pdf
  Strategic Investment Program (SIP)
    The Strategic Investment Program (SIP) was authorized by the 1993 
Legislature to increase Oregon's ability to attract and retain capital-
intensive industry and jobs, particularly in high-technology industry. 
Under the SIP, traded-sector companies making large investments in new 
real and personal property are subject to fewer taxes, with the aim of 
fostering economic growth and improving employment opportunities in the 
state. Projects approved for the SIP must pay full property taxes on 
the first $25 million or $100 million invested, a threshold that 
increases 3 percent each year; all value above this threshold is exempt 
from taxation. An annual Community Service Fee equal to 25 percent of 
abated taxes, up to $500,000 or $2 million, must also be paid. 
Additional fees can be negotiated, as part of the local approval 
process with the county and city government. http://
www.econ.state.or.us/BIexemp.htm
  Workforce Training Funds
    The Employer Workforce Training Fund (EWTF) provides a resource for 
training Oregon's private sector workforce. The emphasis of the funds 
is to upgrade skills of the workforce in order to increase 
productivity, keep Oregon businesses viable and competitive, and to 
offer new skills and opportunities to Oregon's workers. Particular 
emphasis will be placed on investments that assist labor, businesses 
and industries with cost effective training projects that retain and 
expand jobs in traded-sector clusters that are economically important 
to the state's regional economies and the state as a whole.
    After the company has been in operation for at least 120 days, it 
can be eligible for workforce training assistance. Application must be 
made for such grants and issuance of the grants cannot be guaranteed by 
the State. However, the State and the local partners shall make best 
efforts to secure grants for training to meet the company's needs and 
in accordance with state laws and regulations. http://
www.econ.state.or.us/BIAworkforce.htm
Canadian Approach
    Canada, and in particular British Columbia (where Finavera's head 
office is located) is a favorable region in which to set up a 
technology venture, because of generous research and development tax 
credits. These incentives include federal government incentives (New 
``flow through of expenses'' regime and SRED), and provincial 
incentives.
  New Federal Government ``Flow-Through'' and accelerated CCR 
        incentives
    In its recently-announced 2007 Budget, the federal government made 
ocean energy eligible for the Canadian Renewable and Conservation 
Expense (``Flow Through'') and the Accelerated Capital Cost Allowance 
regime.
    The new tax credits will help ocean energy companies raise money 
for development work. The ``flow through'' tax credit--which currently 
available for mineral and wind resource development--encourages 
investment in exploration by offering tax incentives to investors.
    On April 18, 2007 The Honorable Gary Lunn, P.C., M.P., Canada's 
Minister of Natural Resources, wrote Finavera the following letter:

        Dear Mr. Bak:

        Thank you for your letter of March 26, 2007, regarding tax 
        treatment to ocean energy.

        On March 19, 2007, our government displayed its commitment to 
        the environment and renewable energy by announcing the 
        extension of the accelerated capital cost allowance and 
        Canadian Renewable and Conservation Expense (CRCE) to ocean 
        energy and other renewables. As active proponents of this 
        amendment, Finavera Renewables helped to successfully 
        illustrate to government the utility of these market driven tax 
        incentives to support Canada technology and domestic industry.

        Through the implementation of these important tax incentives, 
        the Government of Canada is investing in technologies that 
        contribute to reductions in greenhouse gas emissions, improved 
        air quality, that promote the diversification of the energy 
        supply and a competitive economy. We will support the ocean 
        energy sector and its Canadian developers and technology 
        leaders such as Finavera.

        Again, thank you for writing on this important matter.

        Yours sincerely,

        The Honourable Gary Lunn, P.C., M.P.

    Following are the details of the incentives promulgated in the 2007 
Budget.
Accelerated Capital Cost Allowance for Clean Energy Generation
    A 50-percent accelerated capital cost allowance (CCA) is provided 
under Class 43.2 of Schedule II to the Income Tax Regulations for 
specified energy generation equipment.
    Eligible equipment must generate either (1) heat for use in an 
industrial process or (2) electricity, by:
      using a renewable energy source (e.g. wind, solar, small 
hydro),
      using waste fuel (e.g. landfill gas, manure, wood waste), 
or
      making efficient use of fossil fuels (e.g. high 
efficiency cogeneration systems).
    Class 43.2 was introduced in 2005 and is currently available for 
assets acquired on or after February 23, 2005 and before 2012. For 
assets acquired before February 23, 2005, accelerated CCA is provided 
under Class 43.1 (30 per cent). The eligibility criteria for these 
classes are generally the same except that cogeneration systems that 
use fossil fuels must meet a higher efficiency standard for Class 43.2 
than that for Class 43.1. Systems that only meet the lower efficiency 
standard continue to be eligible for Class 43.1.
    Where the majority of the tangible property in a project is 
eligible for Class 43.1 or Class 43.2, certain project start-up 
expenses (e.g. feasibility studies, engineering and design work) 
qualify as Canadian Renewable and Conservation Expenses (CRCE). They 
may be deducted in full in the year incurred, carried forward 
indefinitely for use in future years, or transferred to investors using 
flow-through shares.
    The Government continues to review Class 43.2 on an ongoing basis 
to ensure inclusion of appropriate energy generation technologies that 
have the potential to contribute to energy efficiency and the use of 
alternative energy sources.
    The Federal Budget 2007 proposes to extend eligibility to an 
emerging source of renewable energy--wave and tidal energy--and to a 
broader range of applications involving active solar heating, 
photovoltaics, stationary fuel cells, production of biogas from organic 
waste, and pulp and paper waste fuels. The Federal Budget 2007 also 
proposes to extend eligibility for Class 43.2 to assets acquired before 
2020.
    By encouraging investment in these technologies, these changes will 
contribute to a reduction in greenhouse gas emissions, improve air 
quality and promote the diversification of the energy supply.
Wave and Tidal Energy Equipment
    The 2007 Federal Budget proposes to extend eligibility for Class 
43.1 and Class 43.2 to include equipment that generates electricity 
using wave or tidal energy, provided they do not do so by means of a 
barrage or other dam-like structure. Eligible equipment will include 
support structures, control, conditioning and battery storage 
equipment, subsea cables and related transmission equipment, but will 
not include buildings, distribution equipment or auxiliary electrical 
generating equipment and any other property not used primarily for the 
purpose of the wave- or tidal-energy system. The change will apply to 
eligible assets acquired on or after March 19, 2007.
  Federal Government SRED Program
    The Canadian government provides over $1.5 billion of incentives 
each year to companies and other taxpayers who do research and 
development work. This program is known as the Scientific Research and 
Experimental Development Program (SRED). Current information on the 
program is available on the Canada Customs and Revenue Agency (CCRA) 
web site at http://www.rc.gc.ca/sred/. The CCRA is responsible for 
administering the SRED program, while the Department of Finance, an 
executive branch of the federal government, is responsible for the 
legislation that governs it.
What is SRED?
    SRED is designed and administered as a federal tax incentive 
program to encourage Canadian businesses of all sizes and in all 
sectors to conduct scientific research and experimental development 
(SR&ED) in Canada. The aim is to encourage and, indirectly, finance 
new, improved, or technologically advanced products or processes. SRED 
is the largest single source of federal government support for 
industrial research and development. SRED claimants can apply for SRED 
investment tax credits for expenditures such as wages, materials, 
machinery, equipment, some overhead, and SRED contracts.
Who qualifies for SRED?
    Generally, a Canadian-controlled private corporation (CCPC) can 
earn an investment tax credit (ITC) of 35% up to the first $2 million 
of qualified expenditures for SR&ED carried out in Canada, and 20% on 
any excess amount. Other Canadian corporations, proprietorships, 
partnerships, and trusts can earn an ITC of 20% of qualified 
expenditures for SR&ED carried out in Canada. Generally, a CCPC with a 
taxable income in the immediately preceding year that does not exceed 
the business limit may receive a portion of the ITC earned as a refund, 
after applying these tax credits against taxes payable. The ITC earned 
by a Canadian corporation that is not a CCPC is non-refundable, but may 
be used to reduce any taxes payable. The ITC earned by a proprietorship 
or certain trusts may be partially refunded after applying these tax 
credits against taxes payable.
What kind of projects qualify for SRED?
    To qualify for the SRED program, work must advance the 
understanding of scientific relations or technologies, address 
scientific or technological uncertainty, and incorporate a systematic 
investigation by qualified personnel. Work that qualifies for SRED tax 
credits includes:
      experimental development to achieve technological 
advancement to create new materials, devices, products, or processes, 
or improve existing ones;
      applied research to advance scientific knowledge with a 
specific practical application in view;
      basic research to advance scientific knowledge without a 
specific practical application in view; and
      support work in engineering, design, operations research, 
mathematical analysis, computer programming, data collection, testing, 
or psychological research, but only if the work is commensurate with, 
and directly supports, the eligible experimental development, or 
applied or basic research.
How the SRED program financially assists companies--examples
    Even if a claimant has no revenue, or has revenue but is not yet 
profitable, it can receive the SRED credits in cash. The federal 
government will send such a claimant a check. In British Columbia, that 
can amount to as much as 68 cents back on every incremental SR&ED 
dollar spent by the claimant.
    Generally, Canadian-controlled private corporations (CCPCs) with 
less than $200,000 in taxable income can receive a refundable 
investment tax credit (ITC) of 35% (68% after the gross up--see below) 
of qualifying SR&ED expenditures, to a maximum of $2 million of 
expenditures. Most other Canadian corporations, proprietorships, 
partnerships, and trusts can receive an investment tax credit of 20% of 
qualifying SR&ED expenditures.
    So, for every $1.00 the company spends on research and development 
including an overhead allowance, it may be eligible to receive up to 
$.35 back in either cash or a tax credit from the federal government. 
From a corporate finance point of view, this is similar to having a 35% 
equity infusion into the business. Public companies and non-CCPCs, such 
as foreign controlled corporations, are limited to a 20% grant.
    The federal government also allows claimants to claim overhead on 
their SR&ED expenditures. For companies that have a dedicated R&D 
facility this is easy to do, but if the R&D is part of the company's 
overall operation the calculation of overhead can be cumbersome. 
Therefore, the government permits claimants to claim an overhead 
``proxy'' which amounts to 65% of their direct cost. Example: a company 
hires an R&D employee and pays her $100K during the fiscal year. The 
company can actually claim the 35% SRED grant on its total ``deemed'' 
cost of $165K (i.e. $100K x 1.65).
  British Columbia (BC) and other provincial SRED incentives
    Certain provinces, such as British Columbia, also provide a 
provincial SRED credit. In the case of BC, the Province provides an 
additional 10% SRED credit. So, for every incremental SR&ED dollar 
spent, a total of $.68 can be recovered by way of SRED credits--taking 
into account the provincial and federal SRED credits on the ``overhead 
topped-up'' direct R&D cost.
                                 ______
                                 

            Response to questions submitted for the record 
                   by Jason Bak, Finavera Renewables

Questions from Chairwoman Bordallo:
Question 1. Memorandum of Agreement
 In its testimony, FERC advised that the Minerals and Management 
        Service and the Federal Energy Regulatory Commission are 
        devising a memorandum of agreement to assist the applicant in 
        the regulatory process. Would it be helpful to you if NOAA was 
        involved in this MOA so that you could know what will be 
        required of you in terms of compliance with the environmental 
        laws? Would it be helpful if one agency, instead of several, 
        were involved?
    Finavera Response: Finavera strongly supports those measures that 
would allow efficient and predictable coordination of effort among the 
various federal agencies involved in regulating ocean renewable energy. 
We take the same view of the importance of effective coordination 
between the federal agencies and the states.
    In an ideal world, the number of federal agencies involved in 
deciding whether and under what terms to allow the development ocean 
renewable energy projects would be a small one. There is, however, no 
agency that appears ready today to take exclusive responsibility for 
the full range of issues related to ocean renewable energy development. 
We fear that, were Congress to decide to assign exclusive 
responsibility to a single agency, we would face a very long period of 
regulatory inaction and confusion which would stop project development 
and devastate our industry.
    We understand that FERC and MMS need to resolve their different 
views of their respective jurisdictions over water-powered projects in 
the portion of the OCS between 3 and 12 nautical miles offshore. That 
is an important issue to overcome for the future of ocean renewable 
energy, but there are other regulatory and procedural issues of equal 
importance where NOAA's jurisdiction and expertise is implicated. We 
see no reason why NOAA should not be fully involved in development of 
an interagency agreement or protocol that would set out the federal 
agencies' roles and responsibilities.
    Interagency coordination is almost always hard to achieve and 
harder to maintain over time. The fact that the agencies are still 
struggling to come to terms on some initial matters suggests that the 
Administration has not made such coordination a priority in this case. 
We suggest that the Congress should take those actions that will prompt 
the Administration to move forward.
    As a starting point, we believe that MMS and FERC can, if suitably 
motivated, identify a set of legal concepts and procedural steps that 
would allow the agencies to fulfill their existing statutory mandates 
without undue conflict. For example, we do not perceive a fundamental 
conflict between an interpretation of existing law that would recognize 
clear authority in FERC to license wave, tidal and current energy 
projects in the U.S. Territorial Sea and clear authority in MMS to set 
the terms of leases, easements and rights of way to use the OCS within 
the EEZ. These are distinct tasks that can be coordinated responsibly. 
We would urge the Subcommittee to develop and support legislation, 
ideally as amendments to the energy legislation soon to be under full 
Committee review, that would help the agencies get past their threshold 
disagreements and move forward to set up a sensible regulatory approach 
under their respective statutory mandates. We would be happy to suggest 
potential language.
Questions from Chairman Costa:
 Question 1. You mention that your Makah Bay project is a true pilot 
        project in the sense that you had to conceive, with minimal 
        guidance, a comprehensive outreach effort to all stakeholders 
        and a collaborative approach to wave energy development at the 
        project's inception in 2001, to determine how to properly site 
        an ocean wave energy project. You note that a high level of 
        consensus resulted.
  I understand that that Finavera's project in Washington State 
        took about four years to permit, and I've heard that Verdant 
        Power's project in New York also took several years. Is that 
        appropriate?
    Finavera Response: The considerable amount of time required to 
bring the Makah Bay Project to its current status reflects the 
challenge inherent in any effort to develop a first-of-its-kind energy 
project at a location owned by the American public adjacent to some of 
the most beautiful and environmentally sensitive places in the country. 
We wish it could have been a quicker process, but we have no regrets. 
It was important to take the time required to build understanding and 
an adequate degree of trust among all the stakeholders.
    We do not believe that future projects will move so slowly, and we 
certainly hope they will not. The licensing of each project will 
probably make it incrementally easier to license the next one--assuming 
that project developers can demonstrate, through monitoring and 
evaluation, that project impacts are not problematic from the 
standpoint of public policy.
    Our greatest scheduling-related concern at this point stems from 
the unresolved jurisdictional debate between FERC and MMS. The 
agencies' inability to decide how to collaborate in meeting their 
duties has the potential to discourage project development, delay 
agency decision-making, interrupt licensing and leasing proceedings, 
and encourage litigation. We urge the Subcommittee to take this issue 
on directly and immediately.
    We would encourage the Subcommittees to recognize that the 
efficiency of any licensing process will be heavily influenced by the 
quality of engagement by the states. State governments have numerous 
authorities that are related to siting and operation of our projects. 
The states need to be true partners with the federal government in 
choosing the proper locations for projects, license conditions, and 
monitoring and evaluation procedures. The federal government should 
affirmatively encourage informed, coordinated engagement by the states 
in promotion and regulation of ocean renewable energy. We believe that 
proper use of the CZMA will be helpful in this regard, as will well-
run, inclusive NEPA procedures.
 Question 2. Your testimony says that a stakeholder group requested 
        that Finavera lead a sophisticated and continuing monitoring 
        and evaluation program. Please tell us more about that program.
 What challenges does Finavera face in leading a such a monitoring 
        program? What will that cost and over what time frame?
 Will your data and findings be made public?
    Finavera Response: The key challenge we face in designing the 
monitoring and evaluation program for the Makah Bay Project is the 
problem of scale. The Makah Bay Project is small, involving just 4 
devices that collectively have capacity to generate 1 megawatt of 
electricity. Though we intend to sell the electricity it generates, it 
is not a true commercial-scale project; it is a pilot demonstration 
project. Yet, because it is the first project to apply for a FERC 
license, there is considerable interest within the company and among 
stakeholders to use the project to learn all we can from it. We need to 
reach agreement with the stakeholders on a program that is extensive 
enough to address legitimate concerns, but is not so expensive that it 
renders the project economically infeasible.
    We do not know at this point what the likely cost will be. We can 
say with confidence, however, that we would welcome participation in 
the monitoring project from federal and other agencies in a manner that 
would expand resources in order to take advantage of the learning 
opportunity the project represents.
    We would expect that the results of a program negotiated with the 
Makah Bay Project stakeholder community to monitor and evaluate project 
impacts on public resources and values will be made public.
 Question 3. I understand from your testimony that Finavera believes 
        that direct subsidies to the ocean wave industry are 
        unnecessary.
 What are your thoughts on an access fee or royalties for renewable 
        projects like yours on the Outer Continental Shelf?
    Finavera Response: Finavera believes that it is appropriate, as a 
conceptual matter, for the federal government to charge a fee for use 
of the OCS by renewable energy projects, particularly to the extent the 
use precludes use of the same area by the general public. We do not, 
however, believe that a royalty is appropriate, since a renewable 
energy project does not use up a finite resource.
    We believe strongly that any fee applied by the federal government 
to renewable energy projects on the OCS should be tailored to 
acknowledge the financial realities of these projects and the national 
policy imperative of expanding renewable energy resources. For some 
time to come, ocean renewable energy projects of all kinds will be 
small and will not generate substantial revenues, let alone profits, 
for developers or owners. Fees should not discourage development of 
projects that hold the potential to contribute millions of megawatt 
hours of clean electricity to the nation's power system. The public 
will directly benefit from these projects. For the first phase of this 
new industry's life, the public interest will be fully and properly 
served by promoting the projects themselves. Once the industry becomes 
established, and the financial and regulatory risks are reduced to more 
conventional levels, use fees may become a reasonable component of the 
regulatory system.
 Question 4. You note that most ocean wave energy projects currently 
        are proposed for locations within a few miles of shore, mostly 
        within state waters and not on the federal OCS ``because, 
        first, transmission cables are very expensive and a limiting 
        factor in project location and, second, so as not become 
        involved in the apparent regulatory conflict between FERC and 
        MMS over jurisdiction in the zone between three and twelve 
        miles offshore.''
 Please tell us more about the cost of transmission cables and how we 
        might address that challenge in encouraging renewable energy 
        projects further off-shore.
    Finavera Response: Underwater power cables are expensive. They cost 
approximately $1 million per mile. This sort of expense is 
proportionally small for a large oil or gas platform that might cost $1 
billion or more and produce many billions of dollars worth of commodity 
products sold into global commercial markets. But for any renewable 
energy project at this stage in the industry's life, the cost of power 
cable is hugely disproportionate to the cost of other features of the 
project, including permitting, manufacturing, and operations, and can 
easily render a project unprofitable. As ocean renewable projects grow 
larger over time, the proportionate cost of cabling will diminish, and 
it is likely that some will be sited farther offshore, where the energy 
in waves is greatest.
    Although the cost of undersea cables is expensive, we are most 
concerned about the potential lack of capacity in the on-shore 
transmission system currently serving coastal areas throughout the 
country. Many coastal areas with potentially valuable wave, current or 
tidal energy sources are served by transmission lines that have no 
ability to carry significant additional amounts of electric energy. 
Finavera believes that the Congress should consider directing the 
Department of Energy and the relevant federal power marketing 
administrations to identify the parts of the coastal transmission 
system that will need expansion to carry the clean renewable energy 
that our industry hopes to bring ashore in the coming years. The nation 
will need to know where to steer new investments in transmission 
infrastructure and, given the many public issues related to 
transmission infrastructure, we will need a number of years to reach 
the point of making good decisions about the location and character of 
new construction.
 Question 5. Given the cost of transmission and other challenges 
        associated with projects further off-shore, in deeper waters, 
        how many years away do you realistically think we are from 
        commercial projects on the OCS?
    Finavera Response: The principal impediment today to location of 
ocean wave, tidal, or current energy project on the OCS is the 
unresolved jurisdictional dispute between FERC and MMS. Congress should 
expect that no developer will choose to risk becoming entangled in that 
argument, and all development will be planned for sites less than three 
miles offshore until it is clear which federal agency is responsible 
for what features of wave, tidal or current energy project development 
on the OCS.
    This is an unfortunate situation that hurts the public interest. It 
arbitrarily constrains project siting to a fairly narrow strip of 
ocean, thereby increasing the potential for user group conflict, 
reducing the potential size of the developable renewable energy 
resource, and increasing the regulatory risk associated with all 
projects.
    If the FERC-MMS dispute were resolved, especially if it were 
resolved with appropriate legislation, it is highly likely that each 
project under consideration by Finavera could be shifted or expanded to 
include areas on the OCS. We believe that other developers would react 
similarly. In other words, there will not be a delay in movement of 
energy projects onto the OCS once the federal agency jurisdiction 
problem is resolved (and assuming that transmission capacity 
constraints can be addressed).
                                 ______
                                 
    Ms. Bordallo. Thank you. Thank you very much, Mr. Bak. You 
get an A+. You are just three or four seconds over.
    I would like now to recognize Mr. Zeke Grader, Pacific 
Coast Federation of Fishermen's Associations. Mr. Grader?

     STATEMENT OF W.F. ``ZEKE'' GRADER, JR., PACIFIC COAST 
             FEDERATION OF FISHERMEN'S ASSOCIATIONS

    Mr. Grader. Thank you, Madam Chairman. My name is Zeke 
Grader, and I am the Executive Director for the Pacific Coast 
Federation of Fishermen's Associations, which represents 
working men and women in the West Coast commercial fishing 
fleet.
    We have been looking at wave energy. It was first brought 
to our attention between 25 and 30 years ago. We began looking 
at it from the standpoint of dual purpose facilities as far as 
using it for breakwater and then rather than doing rock and 
concrete basically being able to take the energy from the waves 
and then turn it into energy, so we have been intrigued with 
the concept for some time.
    The breakwater idea has never come together, but we have 
looked at wave energy, as well as wind and ocean current 
generation I think with a great deal of interest in terms of 
both looking for replacement renewable power, and keep in mind 
when you are looking for replacement power nowadays 
particularly in California it better be renewable.
    As a renewable source for hydro, taking out some antiquated 
fish killing hydro dams--whether they are on the Klamath River 
or on Battle Creek or even the Snake River--to be able to 
remove some of these dams that have been so destructive to our 
fisheries. But at the same time, we have to be able to identify 
a source of renewable replacement energy, so we have had a 
great deal of interest there.
    The second area we have been interested in has been from 
the standpoint of desalination. The west, as you know, has 
severe water problems, probably no place greater than 
California. Well, maybe Texas, but certainly California where 
most of our rivers are overdrafted. Our Bay-Delta system, as 
Mr. Costa can tell you, has got an annual deficit of about 1.6 
million acre feet.
    We have to reduce the demand on our rivers and this delta 
and find new reliable sources, and desalinization could be one 
particularly since most of our population is along the coast. 
We see wave energy or offshore wind as possibly a good source 
of renewable energy to perhaps not completely power 
desalination, but to help reduce its energy or to at least put 
in most of the energy use based on renewables. Again, we are 
very much intrigued with that.
    Moreover, I think as a fishing industry we are seeing what 
is happening right now with global warming, and particularly 
the thing that is most ominous, that scares us the most, is the 
acidification of our oceans because of carbon sequestration. We 
know that we all have to commit to find new sources of energy. 
We cannot continue dumping carbon into the atmosphere because a 
lot of that is ending up in our oceans and it is making them 
acidic.
    We understand those things. That said, however, there are 
some concerns. First of all, we are not really sure what the 
environmental/ecological impacts may be from these various 
types of energy. We will have to study that. I suspect it is 
probably not going to be as great as many other activities, but 
we don't know for sure.
    Probably the thing that is more troubling for us along the 
Pacific Coast in particular where our Continental Shelf is so 
narrow, that is the band where coastal fishermen can work is a 
fairly narrow band up and down the coast, is that all of that 
area is important, and right now it is being affected by 
movements afoot to try and create these so-called marine 
protected areas, which in fact are nothing more than no fishing 
zones at the current time, or the current closures that have 
been imposed, rightfully so, by our regional fishery council 
and the National Marine Fishery Service.
    We have to be concerned where riggings are going to be 
placed to make sure that they are not in the middle, for 
example, of key critical fishing grounds. That is our concern 
there.
    I think to try and help us work things out, and I 
appreciate Mr. Bak's offer that has been made here. I think it 
is going to be critical that, first of all, we require 
consultation, particularly as far as fisheries goes, 
consultation not with NOAA, but with the regional council 
themselves because we often find where, frankly, NOAA has sold 
our fisheries out, and I don't want to go chapter and verse of 
the examples of what they have done to us. We have had to 
continually sue them. I think certainly the councils should be 
given consultative authority.
    Moreover, I think we do need to have consistency. I think 
particularly on the West Coast with the states of Oregon, 
Washington and California, the three Governors have committed 
to work together. They have pledged to reduce greenhouse gases.
    I think, given the states' consistency, it is not going to 
hold up the development of this power, but it will just make 
sure it is done right because these three states want to reduce 
their carbon impact and want to look for renewable sources of 
energy.
    Thank you.
    [The prepared statement of Mr. Grader follows:]

      Statement of W.F. ``Zeke'' Grader, Jr., Executive Director, 
          Pacific Coast Federation of Fishermen's Associations

    Chairwoman Bordallo, Chairman Costa, members of the Subcommittees. 
Thank you for the opportunity to provide testimony here this morning.
    My name is Zeke Grader and I am the Executive Director for the 
Pacific Coast Federation of Fishermen's Associations (PCFFA). PCFFA 
represents working men and women in the U.S. west coast fishing fleet 
and is the largest fishermen's organization on the Pacific Coast. Our 
members are primarily owner/operators and crew aboard small to mid-size 
commercial fishing boats utilizing a variety of gears and engaged in 
numerous different fisheries. Our members can best be described as 
``family fishermen,'' as opposed to the large industrial fishing fleet 
operations.
    I have served as ED and counsel for PCFFA since 1976. Representing, 
among others, nearly all of California's organized commercial salmon 
fishermen, with members in Oregon and Washington as well, we have had 
to tackle numerous resource issues in our efforts to protect the 
fishery resource base our members depend upon for their livelihoods. 
That has included numerous land use issues, such as logging in salmon 
watersheds, water--as Mr. Costa knows--in terms of both quantity and 
quality, and fish passage on rivers, as well as ocean activities such 
as offshore oil development. We joked that at least we didn't have to 
worry about air pollution--at least not on the West Coast where we were 
spared acid rain. That was until recently. Now, however, we are 
beginning to understand the implication of decades of green gas house 
emissions and what that means for our oceans in terms of sea level 
rise, rising temperatures, currents, upwellings and acidification.
    Members of my organization understand clearly the relationship 
between the development of renewable energy sources--to reduce our 
``carbon footprint''--and the ecological and economic health of our 
fisheries. With regards to the development of renewable energy from 
wind, current and waves on the outer continental shelf, I think I can 
best describe our position as cautious and conditional. We understand 
the need for and potential benefits of this energy development, but we 
are wary, as well, of potential problems, including those for the 
environment.
Intriguing Potential
    My organization was first introduced to the idea of harnessing the 
energy of waves some 25 years ago. An outer breakwater was being 
considered for Noyo Harbor on the Mendocino Coast in Northern 
California. However, the president of our organization, a fisherman 
from that port, scoffed at the idea of a traditional rock or concrete 
barrier built by the Corps of Engineers to fight the waves to make 
entry into harbor safer.
    He suggested, instead, a series of buoys to capture the energy of 
the waves, rather than fight them like a breakwater. His vision was to 
take the energy of the waves captured by the up-and-down motion of 
buoys for the generation of electricity. The idea went further from 
there. The electricity would be used to produce hydrogen from seawater 
that in turn would be an energy source for powering fishing vessels. 
This was during one of a series of oil embargoes, and I think he saw 
this as a way of wresting this source--that he believed was our future 
for clean energy--from the oil companies before they seized its 
production and distribution. Most of us at that time equated hydrogen 
with the Hindenburg. The Corps was not interested in investing research 
into floating buoys that generated electricity when they had the rock 
and concrete technology down for ocean breakwaters.
    The idea of a dual purpose facility--that could both serve as a 
breakwater (making port entrances safer) and an energy generation 
facility has continued to intrigue some of us for the past quarter 
century. A dual purpose facility, however, is probably unsuitable for 
most locations. There are few ports around our nation's coasts where 
there is both the need for an outer breakwater and the conditions are 
conducive to a wave energy generation facility. Just the same, on the 
West Coast, anyway, I believe some wave energy generation facilities 
could help fishermen address other problems--other than global 
warming--they are faced with.
    PCFFA has been an advocate, along with some recreational fishing 
organizations, tribes, and conservation groups for the removal of fish-
killing dams, particularly antiquated ones with little hydropower or 
water storage value. One of the issues we have to deal with in the 
relicensing process for these dams--when we're proposing their 
removal--is identifying replacement power. Now days replacement means 
from a renewable power source. Along with solar and wind, wave 
generation is one of the renewables we'd like to have available to 
replace dam hydropower.
    In the west, particularly in California, we're also faced with a 
tremendous overdraft of most of our rivers, along with the San 
Francisco Bay/Sacramento-San Joaquin Delta system--where most of the 
salmon harvested offshore the three Pacific Coast states migrate 
between the Sierra spawning streams and the ocean. To the extent we can 
develop environmentally acceptable desalination facilities along our 
coast we have the potential for providing a reliable back-up water 
supply for coastal urban areas. This means less demand from urban 
sources on the water currently utilized by agriculture, but more 
importantly for fishermen this could allow for the restoration of flows 
to many rivers and help to meet a Delta outflow deficit of some 1.6 
million acre-feet.
    One of the major objections raised to desalination has been its 
energy requirements. A nearby wave generation facility, depending on 
location along the coast, could help to supply a portion of the energy 
requirements for a desalination operation.
    Thus from the view of fishermen looking for renewable replacement 
power for hydro dams or as a power source for desalination facilities 
to protect or restore flows to rivers and estuaries, the potential of 
wave energy, and to a certain extent offshore wind and ocean current 
energy generation, is intriguing.
Daunting Problems
    Now, having looked at some of the potential we see that could be 
had from wave energy and, perhaps, wind and current, let's look at some 
of the problems. The problems we see right off are operational. That is 
not to say that there may not be other physical or biological problems 
we may be faced with by some of these operations. We're simply not 
aware of them or at least to what extent there may be problems. The 
operational problems these facilities pose to fishermen are fairly 
straight forward. They are potential navigation hazards and preclusion 
of fishing grounds. Ocean current generation facilities may also pose a 
hazard to fish life through entrainment.
    Navigation Hazards. Large structures placed in the ocean, 
particularly those on, above, or just under the surface present 
obstacles for mariners to avoid. Wave generation, offshore wind 
facilities, and probably most generation facilities around ocean 
currents will be large, certainly in comparison to our vessels. They 
will require good marking and lighting. Most important, however, they 
will have to be located outside of shipping lanes and the courses set 
by fishermen between ports and fishing grounds.
    In addition to the placement of these facilities, some, such as 
various wave energy technologies that have been proposed, have the 
potential for getting loose in a major storm, as we witnessed with some 
of the offshore oil rigs during Hurricane Katrina, and if they're 
floating at or just below the surface--possibly undetected by radar--
they constitute a serious navigation threat to vessels at sea.
    Preclusion of Fishing Grounds. The other operational problem is 
preclusion of fishing grounds. Fishermen on the West Coast have already 
suffered the loss of access to large parts of the ocean for some of 
their fisheries due to conservation closures implemented by the Pacific 
Fishery Management Council. We're not questioning the need for these--
we hope most will only be temporary--but state it as one of the factors 
fishermen are dealing with.
    Moreover, in California the state is already moving ahead 
implementing a network of restricted or no fishing zones, 
euphemistically called marine protected areas (to date, they only 
regulate fishing, not pollution or any other factor affecting the 
marine environment), and the federal government is preparing to do the 
same in the EEZ. This will mean, most likely, the loss of some 
important fishing grounds. We cannot stand the additive impact of the 
loss of additional fishing grounds by energy generating facilities. For 
example, one of the areas viewed as having the most potential for a 
wave generation facility off Northern California is in an area between 
35 and 45 fathoms of depth offshore the port of Eureka. This just 
happens to be the prime Dungeness crab fishing ground.
    Thus, while we find the idea of wave energy, in particular, 
intriguing, we have to be mindful of the physical problems associated 
with the placement of these facilities and the danger and economic harm 
that can result if this is not done in a sensitive, thoughtful and 
careful manner.
Details and Process
    While we understand the need for development of renewable energy 
sources and can envision the possibilities wave energy could provide 
fishermen, we are not at all comfortable with the current governance of 
renewable energy generation on the OCS. The leasing authority, the 
Minerals Management Service (MMS) primary expertise is in offshore oil 
and gas. We have never found MMS to be sensitive to either fishing 
operations or the biological needs of fish or the marine ecosystem in 
our dealings with them in California--specifically in the Santa Barbara 
Channel.
    Consultation. At the very least, we need a requirement in law, that 
MMS be required to consult with the regional fishery management 
councils, the National Marine Fisheries Service and the coastal state 
fishery agencies over the placement of any renewable energy facility in 
the OCS where it will affect either state or federally managed 
fisheries.
    We also recommend MMS, if it is to remain the offshore leasing 
entity, be required to consult with affected fishing groups, that 
bonding be required to cover liability, and mitigation for economic 
losses suffered by any third party (e.g., fishermen) be required as a 
result of these energy operations.
    Consistency. Further, we recommend that any renewable energy 
generation facility located on the OCS be operated not only consistent 
with a state coastal management program, but also with regional fishery 
management council FMPs [fishery management plans] or, in the case of a 
state managed fishery, consistent with the statutes or regulations 
governing an affected fishery.
    State Management. Finally, with regards to the Federal Energy 
Regulatory Commission (FERC) authority, we recommend a change in law to 
ensure that FERC not preempt state statutes but that its licensing of 
such facilities be required to be consistent with state statutes and 
regulations as they may exist over such operations or for the 
protection of a state's coastal zone, water quality, and fisheries, 
among other resources.
Conclusion
    Thank you Madam Chairwoman and Mr. Chairman and Subcommittee 
members for this opportunity to comment. I apologize for a certain 
ambivalence on our part. I wish I could provide you with more details, 
more specificity, but we, too, are looking to learn more about a 
technology that we believe has some exciting potential. It certainly 
has promise, but in the words of a former Defense Secretary there are 
the ``unknown unknowns'' that we have to be mindful of. I'd be happy to 
attempt to answer any questions members may have.
                                 ______
                                 

     Response to questions submitted for the record by Zeke Grader

Questions from Chairwoman Bordallo:
1.  International Leaders: What nations are the leaders in investments 
        in ocean energy technologies? What should the United States do 
        to catch up with them?
    From my reading on the issue, it appears most of the investment is 
taking place in the UK right now with some investments taking place in 
other parts of Europe, such as Portugal. The one thing the U.S. should 
consider, I believe, to catch up or stay abreast of other nations would 
be to provide economic incentives for ocean energy technology research 
and development. Grants, tax incentives and other financial assistance 
should be encouraged, however, not at the expense of the environment or 
other traditional marine uses, such as fishing. A balanced approach 
then, would consist of tax and other financial incentives, but with 
additional oversight by the states, and other federal agencies, such as 
the National Marine Fisheries Service (including consultation with the 
Regional Fishery Councils), to ensure protection of the marine 
environment and other marine uses.
Questions from Mr. Brown:
1.  Do you or your organization receive funding from the Pew Charitable 
        Trust or the David and Lucille Packard Foundation?
    I represent two organizations. The first, the Pacific Coast 
Federation of Fishermen's Associations is a trade organization whose 
funding primarily comes from assessments on fishermen's catches that 
are voluntarily paid to their local marketing associations and a 
portion remitted to the PCFFA, the umbrella organization. While 
assessments have been the soul funding for PCFFA for most of its 
existence, it has received grants from the David & Lucile Packard 
Foundation over the past four years solely to pay for PCFFA's work in 
conservation, not its other activities. None of the funds PCFFA 
receives from Packard are related to the topic of this hearing, nor 
have I or anyone at PCFFA discussed ocean energy issues with anyone at 
the David & Lucile Packard Foundation. PCFFA does not receive any 
funding from the Pew Charitable Trust.
    The Institute for Fisheries Resources (IFR), the 501(c)(3), 
organized by PCFFA to conduct research, education and outreach (no 
lobbying), does receive government contracts and grants and grants from 
private foundations. The David & Lucile Packard Foundation has made 
grants to IFR in the past for outreach to fishermen to engage them in 
fishery management and conservation and IFR is now completing a Packard 
grant to assist in the formation of a national commercial fishermen's 
organization--the Commercial Fishermen of America, which will soon be 
opening its national office in Maryland. IFR receives grants from 
numerous other foundations for its work, as well as grants and 
contracts from state and federal agencies. It does not, nor has it ever 
received any funding from the Pew Charitable Trust, nor has it ever 
applied to the Pew Charitable Trust for funding.
    PCFFA and IFR's relationship with the Pew Charitable Trust has been 
through other entities. IFR's president Pietro Parravano was one of two 
commercial fishermen to be named to the Pew Oceans Commission and he 
still serves on the Joint Oceans Commission Initiative, although it no 
longer receives, to my knowledge, any financial support from Pew. We 
are also members of the Save Our Wild Salmon Coalition which does 
receive some funding from Pew. Finally, I sit on the executive 
committee of the Marine Fish Conservation Network which does receive 
some Pew funding. As with Packard, I have never been approached by the 
Pew Charitable Trust in regards to the ocean renewable energy issue, 
nor in regard to the testimony I prepared for this hearing.
2.  In answer to a question at the hearing, you said that ``NOAA has 
        sold our fisheries out...we've had to keep suing them...'' Are 
        you or your organization currently a party to any lawsuits 
        against any NOAA or any agency within the Department of 
        Commerce or the Department of the Interior? Please give the 
        details.
    I'd be happy to. The PCFFA is involved in a number of lawsuits 
against the Department of Commerce, NOAA and NMFS, in regards to the 
Department's and its agencies chronic failure to protect the salmon 
resources that most of our membership depends upon for its livelihoods.
    We are the lead plaintiff in a lawsuit against Commerce right now, 
PCFFA v. Gutierrez, having to do with NMFS' failure to prepare a 
biological opinion sufficient to protect ESA-listed salmon runs in the 
Sacramento River. Our members are prohibited from taking these fish 
(the incidental catch rates are set well below the numbers required for 
recovery under the ESA, so the fish are protected from fishing 
activity), and we have continually sought to ensure that other factors 
affecting the health and recovery of the listed fish, such as 
diversions and entrainments at pumps, do not endanger these runs. 
Moreover, the protections for the listed fish have benefited the runs 
of salmon commercial and recreational fishermen are allowed to harvest. 
In the above case, as a result of the suit, NMFS is now revising its 
biological opinion, we hope so the fish are protected.
    PCFFA was also the lead plaintiff on a case in the Klamath over 
NMFS' failure to establish a biological opinion sufficient to protect 
the fish. Shortly after the trial judge ruled against us in the spring 
of 2002, there was a massive die-off of juvenile salmon in the river--
we believe because of insufficient flows (flows we had asked for in the 
suit) and a massive fish kill late that summer of returning adult 
spawners. We appealed the trial court decision to the Ninth Circuit, 
which reversed the trial judge. The federal trial court judge 
subsequently found in our behalf and we are now awaiting a new 
biological opinion from NMFS. The damage, however, from the fish kills 
was done forcing major restrictions on our salmon fishery offshore 
California and Oregon in 2005 (when those juvenile fish would have been 
adults available in the catch) and a near total closure of the Oregon 
and California salmon fishery in 2006, along with the loss of the 
tribal and in-river sport fishery on the Klamath River. Congress 
recently passed disaster relief funds to help assist the communities 
affected by the salmon closures. For many, however, that relief will be 
too late.
    PCFFA did intervene on the side of the federal government when 
Klamath Basin growers attempted to sue the government for damages as a 
result of water cutbacks in 2001 that were necessitated by a severe 
drought in the basin and flows were needed to ensure survival of the 
listed fish. The Court of Claims ruled for the government, and PCFFA, 
in that case.
    PCFFA has also filed lawsuits against the Environmental Protection 
Agency, PCFFA v. Marcus, to force the development of TMDLs, under the 
Clean Water Act, on northern California salmon streams to protect water 
quality. PCFFA was a co-plaintiff in the lengthy litigation brought 
against the Department of Interior (Bureau of Reclamation) to restore 
fish flows to the San Joaquin River. PCFFA is also involved with a 
number of other fishing and conservation groups in litigation against 
federal agencies in regard to the protection of salmon runs in the 
Columbia River.
    PCFFA was not organized for the purpose of litigation, nor does it 
gain any financial remuneration for engaging in litigation. But when 
agencies flaunt the law as they have done in regard to the protection 
of Pacific Salmon from non-fishing impacts, then we've had no 
alternative but to seek redress in court. To have done less we would 
have failed the trust working fishing men and women have placed in us. 
Judging from our record on the lawsuits, nearly every federal judge and 
appeals court has agreed with us.
3.  Do you or your organization receive any grants from any agency 
        within either of those two departments? Do you serve on any 
        FACA committees under any agency within either of these 
        departments?
    Yes, we have in the past. We're sophisticated enough to know when 
to sue an agency, when its done wrong, and partner with them when 
they're doing something right for the fish. We received a NOAA 
restoration grant for some of the work we attempted at oyster 
restoration in San Francisco Bay. I no longer serve on any FACA 
committee within any agency in the two departments although I did serve 
on the Secretary of Commerce's Marine Fisheries Advisory Committee 
(MAFAC) during the Reagan and first Bush presidencies.
4.  You testify that your organization, when advocating for the removal 
        of a hydropower dam, will identify ``replacement power'' from 
        renewable power sources. Do you calculate the amount of energy 
        that will be lost from the dam and come up with an equal or 
        greater amount of energy from renewable sources? Do you also 
        calculate the cost of the energy produced from the dam and the 
        cost of the equal or greater amount of energy produced from the 
        renewable sources?
    Yes, we actually have brought on an economist who specializes in 
the valuation of hydropower and other energy production to assist us in 
finding replacement power equal or greater than that which we seek to 
remove. Today, replacement power is mainly from renewable sources. 
Unless we can identify viable replacement power, it is nearly 
impossible to make a case for dam removal to FERC.
5.  You testify that your organization was first introduced to the idea 
        of harnessing wave energy approximately 25 years ago. Yet this 
        type of technology is still considered by many to be in its 
        infancy. If it takes more than 25 years to develop the 
        technology and make this type of technology economic, how can 
        we replace the nation's oil/gas needs in the short term?
    First, let me say in regard to this question and the following, my 
expertise is in fishing, not development of ocean renewable energy 
technologies. We have an interest in this technology as far as it may 
benefit our fisheries and not adversely impact them. My responses thus 
to this and the following questions are not based on any expertise in 
this technology, but are offered from the perspective of a fishery 
trade organization that hopes to play a constructive role in the debate 
over development of ocean renewable energy sources.
    Second, from what I've seen this technology doesn't take 25 years 
to develop; what it took was 25 years to convince policy makers and 
business leaders that we needed to reduce our dependence of carbon-
based fuels. And a lot of them still don't get it. There is a lot of 
technology available now to reduce U.S. dependence on oil/gas. What's 
lacking is political will. And the other technologies we need--whether 
its wave, tidal, ocean current or offshore wind farms as renewable 
sources, or desalination and reuse facilities for addressing water 
needs, we could develop in a very short time, I believe, if we began 
now--if we stopped whining and started acting.
6.  Does the offshore wave technology buoy system that you describe 
        require some type of cable to relay the energy back to shore? 
        Does this raise potential conflicts with other users such as 
        fishing equipment that might touch the sea bottom? What types 
        of on-shore facility is needed to harness the energy created by 
        the buoys?
    A cable to shore will be required and with that, as well as the 
placement of the equipment in the ocean, there is a potential for 
conflict. That is why we believe stakeholders such as fishermen be 
brought in early in the planning process to work these types of issues 
out. As I said in my testimony, we see a lot of potential good coming 
from ocean renewable energy development, so we're not going to be 
throwing up roadblocks to its development, but just making sure it's 
compatible with fishing operations.
7.  Mr. Keeney testified that while the Ocean Thermal Energy Conversion 
        Act of 1980 was passed more than 20 years ago, ``There has been 
        a low level of activity under OTEC Act since its passage in 
        1980...NOAA has not received any license applications for OTEC 
        facilities or plantships.'' While much of the offshore 
        technology is interesting, how long will it be before it 
        becomes economic for the private sector to invest in?
    Now that there is finally a recognition of the need to reduce ``our 
carbon footprint'' through increased energy efficiency, decreased 
energy use where possible, and development of renewable energy sources, 
the climate for investment in offshore technology is the best it's ever 
been and should continue to improve. Apparently some investors are 
interested in getting into it now. Certainly Congress can help by 
creating financial incentives such as tax breaks for this type of 
energy development. Our one caution is that neither Congress nor the 
Administration attempt to short circuit the review and regulatory 
system needed to ensure this development does not harm the marine 
environment or other beneficial uses of our oceans and coasts.
8.  One of the concerns raised about underwater turbines is the effect 
        on fish. What is your view on underwater turbine technology?
    If the turbines are slow turning where fish can avoid them it 
should not be a problem. Fast turning blades, however, could literally 
grind up fish. I think we will have an opportunity soon to evaluate 
this technology with the project being sited in the East River in New 
York.
9.  You mention that siting new structures in the ocean might pose 
        navigation hazards. It has been suggested that new wind power 
        facilities could be placed on existing or decommissioned oil/
        gas platforms that are already sited in the offshore areas. How 
        do you feel about such proposals? Would you prefer that wind 
        power be required to construct new platforms for their 
        operations?
    Again, let me reiterate, my expertise is in fisheries, not in the 
development of this technology. From what I have seen the configuration 
of an offshore wind farm is different than the siting of oil platforms 
on the OCS. We have serious problems with proposals for dismantling the 
rigs in place and leaving them at their sites, or in a nearby ones, as 
a so-called artificial reefs. Our members in the Santa Barbara Channel 
who've worked around the rigs for 40 years, believe if they are to stay 
in place, a portion of the structure (e.g., first floor) should be left 
above the water line with proper navigational lighting. The big benefit 
from the rigs is the shade canopy they provide, not from scrap metal on 
the ocean floor. Thus, if rigs are suitable for wind farms, that should 
be explored--it is preferable to cutting them off below the waterline. 
However, any such use should not absolve oil companies from their 
clean-up responsibilities around the rigs, including the safe disposal 
of toxic sediments.
10.  You also testify that, while supportive of renewable energy 
        sources, you ``cannot stand the additive impact of the loss of 
        additional fishing grounds by energy generating facilities.'' 
        Does this mean that you would oppose any alternative energy 
        sources that might be proposed for anywhere your members fish? 
        Does that include facilities as well as cables necessary to 
        link production facilities to on-shore facilities?
    No. I was simply pointing out that along the west coast, the area 
for coastal fishing is limited by a narrow shelf. I would not being 
offering positive comments about ocean energy generation technology if 
we had taken a position of ``not in our backyard'' and decided to fight 
anything. In siting these facilities we have to be mindful of the 
limited fishing areas and try to pick the areas both for the location 
of the equipment and the cables to minimize fishing impacts. That is 
why it is so important that fishermen be consulted at the very 
beginning of the process in order to avoid conflicts later on that 
could either delay or stop a project.
11.  You mention that you think that offshore renewable energy 
        facilities be operated consistent with regional fishery 
        management council fishery management plans. These councils 
        have no authority over non-fishing activities. Do you think the 
        council authority should be extended to include the ability to 
        regulate non-fishing activities?
    I don't think the Regional Fishery Councils should regulate 
offshore energy, but we should require the licensing and permitting 
authorities, i.e., the Federal Energy Regulatory Commission and the 
Minerals Management Service to consult with the Regional Fishery 
Councils to prevent conflicts with those fisheries the councils have 
responsibility, i.e., fishery management plans, for.
12.  You mention the loss of fishing grounds to marine protected areas 
        has been a concern of your group. You also state that you think 
        the Minerals Management Service should be required to work 
        through the fishery management councils on any offshore energy 
        proposals that might affect fishing grounds. Do you also think 
        that other Federal actions such as additional closures of 
        fishing grounds due to changes in National Marine Sanctuary 
        designations or modifications should also go through the 
        council process?
    The National Marine Sanctuaries have not closed any fishing 
grounds, to date, on the west coast. They have rather, helped to 
protect some key fishing grounds from dumping, etc.
    The problem is, rather, with the designation of so-called marine 
protected areas (MPAs). I say so-called because most, if not all, have 
to date done nothing more than restrict or prohibit fishing. They have 
not addressed water quality, dumping or any number of other factors 
affecting marine life. While we believe they may play a role in 
conserving our ocean waters, they are a relatively minor tool in that 
effort compared to statutes protecting water quality, preserving 
wetlands, preventing overfishing, etc. Our fear is the process of 
establishing MPAs not run amok, closing important fishing grounds, 
while providing only marginal, at best, conservation benefits. MPAs 
have, unfortunately, become marine conservation on the cheap for a lot 
of groups--government and non-government alike--those who don't have 
the stomach for the hard work of protecting all of our ocean waters 
from all of the factors affecting our marine environment. For that 
reason I believe any MPA siting process--whether it be by the states, a 
national marine sanctuary, or the federal MPA program--that affects any 
federally managed fishery should be required to consult with the 
Regional Fishery Management Councils.
    Thank you for this opportunity to respond to your questions.
                                 ______
                                 
    Ms. Bordallo. Thank you very much, Mr. Grader.
    The Chair now recognizes Dr. Doug Rader.

 STATEMENT OF DOUGLAS N. RADER, Ph.D., PRINCIPAL SCIENTIST FOR 
          OCEANS AND ESTUARIES, ENVIRONMENTAL DEFENSE

    Mr. Rader. I am staggered by Mr. Grader's adherence to 
time.
    Thank you, Madam Chairman, for the opportunity to present 
the views of Environmental Defense on developing 
environmentally responsible low emissions energy from America's 
seas.
    As I hope you know, Environmental Defense is a global 
nongovernmental organization working to develop solutions to 
environmental problems that are robust because they are 
grounded in science, law and economics. We are known for 
finding the ways that work.
    In terms of full disclosure, you should know I also chair 
the Habitat Environmental Protection Advisory Panel for the 
South Atlantic Fishery Management Council, which encompasses 
Federal fisheries management from North Carolina to Florida.
    The upswing in interest in U.S. ocean waters for uses other 
than fishing is truly remarkable in renewable energy, but also 
deepwater fossil fuels, deepwater mining, marine aquaculture, 
carbon storage and sequestration and others. Remarkable.
    Some of these proposed activities are more compatible than 
others with ocean health. Regardless, the future looks to us to 
be multiple use in the sea. A new day is dawning in the sea.
    The growing consensus that global warming threatens the 
biosphere, including our oceans and their living resources, is 
obviously fueling the push for energy conservation, for 
developing green, low carbon energy sources and now for 
environmentally responsible blue energy from the sea.
    Such development in the oceans must be done carefully with 
strong science, properly aligned incentives to ensure the 
sustainable ocean future we all desire, but the simple truth is 
that the current ocean management system is unprepared for the 
complex array of challenges and opportunities facing America's 
seas, both in terms of agency mission and agency capacity, yet 
the need for an updated integrated approach to management of 
regional seas, that need expressed clearly by the U.S. Ocean 
Commission and the Pew Oceans Commission is greater every day.
    Because the risks are real, particularly in moving from 
small scale pilots, as good as they may be, to anything 
approaching commercial scale, we offer four overarching 
principles that should govern that expansion.
    Number one, ocean energy development should be based on 
clearly defined criteria consistent with a national policy of 
protecting and restoring healthy ocean ecosystems, taking into 
account cumulative impacts.
    Number two, the government must support the research 
necessary to develop cutting edge green technologies so it can 
understand and mitigate their potential impacts, especially at 
commercial scales, and then to accelerate both as pilots and 
beyond the technologies that are the least pollution.
    Number three, the government must invest in the science 
needed to manage marine ecosystems effectively.
    Number four, the public must benefit from the conversion of 
public resources to private gain. Appropriate incentives should 
be put in place to encourage green energy development, and the 
public must be involved in charting our own ocean future as 
citizens.
    While the potential for blue ocean energy from U.S. waters 
seems very, very bright indeed, reaching that potential depends 
upon bold leadership from Congress to make sure that ocean 
energy development proceeds consistent with a broader vision 
for protecting and restoring America's seas.
    A key requirement for obtaining that bold future is in 
placing policies and decision making frameworks that instill 
confidence in citizens, but also in industry. Whether that 
evolution can occur with existing agencies remains to be seen.
    Finally, in addition to being a nerd scientist, I am also 
an amateur historian, and in my many hours in the North 
Carolina archives I found considerable evidence of the role of 
wind power on colonial landscapes.
    It seems clear to me personally that our future landscapes 
and our future seascapes must adapt to help produce green 
energy and blue energy in a fashion that contributes both to 
energy sufficiency and security and to ocean ecosystem 
integrity.
    Thank you much, and in closing I will second Mr. Bak's 
proposal, but suggest Guam as an alterative location.
    [The prepared statement of Mr. Rader follows:]

                 Statement of Douglas N. Rader, Ph.D., 
  Principal Scientist for Oceans and Estuaries, Environmental Defense

Introduction
    Madame Chairman, Mr. Chairman, and Members of the Committee, I am 
honored to appear before you today to present the recommendations of 
Environmental Defense on how to manage ocean energy resources 
effectively, to provide economic and global-warming benefits while 
protecting the health of ocean ecosystems.
    As many of you know, Environmental Defense is a worldwide, not-for-
profit organization, whose hallmark is ``finding the ways that work,'' 
environmentally, economically, and legally. Our organization is deeply 
committed to durable strategies that meet people's needs for energy 
while taking dramatic action to reduce global warming pollution. 
Achieving this goal will entail the use of a variety of tools including 
energy conservation and renewable energy production.
    I currently serve as Principal Scientist for Oceans and Estuaries 
for Environmental Defense. While my training is in marine and estuarine 
ecology, my work experience has focused on sustainable fisheries, and 
coastal resource and water quality protection. I have worked for 
Environmental Defense since 1988, with special attention to integrated 
and effective management of coastal and marine ecosystems; I helped 
form our Oceans Program in 1996. Prior to coming to Environmental 
Defense, I worked in state government in North Carolina, serving as 
director of the first National Estuary Program certified under the 
Clean Water Act of 1987, the Albemarle-Pamlico National Estuary 
Program.
    In addition, I have served as chair of the South Atlantic Fishery 
Management Council's Habitat and Environmental Protection Advisory 
Panel for most of the last decade. In that role, I have worked very 
closely with agency staff on policies to protect essential fish 
habitats (EFH) from energy development activities, on measures to 
protect both shallow and deep-water coral ecosystems, and on drafting 
one of the nation's first comprehensive Fishery Ecosystem Plans (FEP) 
for the U.S. Southeast region, which considers how non-fishing ocean 
uses, such as offshore energy, effect fish stocks.
    Today, I draw from these experiences, to recommend measures that 
Congress can take to ensure that as America begins in earnest to look 
to the sea for energy to light our cities and fuel our economy, a 
rational system that aligns incentives with conservation is in place to 
protect our priceless ocean legacy and the coastal communities that 
rely upon it.
``Blue'' Ocean Energy
    Meeting America's on-going energy needs while at the same time 
addressing the global warming challenge will require a new age of 
energy conservation, and the tapping of sustainable options for 
ecofriendly energy production. There is no doubt that firm limits on 
emissions of greenhouse gases, and increased energy conservation, are 
critical to slowing global warming. But it seems increasingly unlikely 
that conservation alone can meet the nation's energy demands. As the 
world turns to ``low carbon'' or ``clean'' energy sources that minimize 
contributions to global warming, it is increasingly likely that the sea 
will be a part of the ``greening'' (or, maybe more appropriately in 
this case, ``bluing'') of our energy-production portfolio.
    First, let me make clear that there are key ocean energy sources 
(like wind, tide, wave, and current) that are potentially sustainable, 
and that will help us address global warming, while others will not 
help us move closer to a sustainable future (for example, methane 
clathrates from the deepsea).
    In pursuing ocean energy sources that are better for the 
environment, I offer the following four key principles.
    1.  Ocean energy development should be based on clearly defined 
criteria, and consistent with a national policy of protecting and 
restoring healthy ocean ecosystems, including cumulative impacts.
    2.  The public should benefit from the use of public resources, and 
appropriate incentives should be in place to encourage green energy 
development; decision processes should encourage public engagement, and 
meet the highest standards of transparency.
    3.  The federal government should support the research needed to 
develop cutting-edge green technologies, to understand and mitigate 
their potential impacts, and to accelerate technologies that are less 
polluting, and more consistent with sustainable oceans.
    4.  The federal government should invest in the science needed to 
manage marine ecosystems effectively; government decisions should be 
based on the best peer-reviewed science.
Protecting Ocean Ecosystems
    Today, it appears that while some ocean energy technologies have 
unacceptable impacts on coastal ecosystems, many others may have fairly 
low and manageable environmental impacts. Even so, our decision 
processes are not currently adequate to distinguish among projects that 
are consistent with sustainable oceans and those that are not.
    To make the challenge even greater, many of the technologies 
available today have the very real potential for much greater 
cumulative impacts at larger scales. Little has been done to assess the 
consequences of commercial scale operations in the ocean, or to 
identify ways to minimize and mitigate those effects. For example, a 
small wave energy facility may have a negligible impact, but many such 
facilities or a very large scale facility could have adverse impacts on 
local circulation patterns that could be critical for maintaining 
transport of fish larvae, sediment and nutrient delivery, and other 
important ecological processes and services. Similarly, the way ocean 
energy projects are implemented, and the specific kind of technology 
employed, could have a large bearing on the size of their cumulative 
environmental impact. For example, slow-speed turbines that are phased 
in over time would be expected to have lower environmental impact than 
the damming of an estuary to construct a tidal barrage.
Incentives and Public Benefits
    The ocean is a vast common resource, presenting significant 
challenges for policy makers on how to avoid unsustainable use while 
encouraging appropriate development. Few ``use privileges'' or other 
conservation incentives exist in the sea that could institutionalize 
orderly and controlled development of marine resources. Environmental 
Defense has recently completed a study of approaches that have been 
used in this country to manage public trust resources, called 
``Sustaining America's Fisheries and Fishing Communities.'' We found 
that while granting use privileges is a common tool in resource 
management, the way those privileges are administered can achieve other 
social benefits.
    There is also a strong need for a new ``social contract'' with 
regard to ocean resource use similar to the evolution of natural 
resource policies on land, where emphasis has shifted through time from 
rapid extraction at all costs (``use-it-or-lose-it,'' with no economic 
rents) to sustainable use (appropriate regulation coupled to positive 
incentives, and including economic rents, e.g. auctions of 
electromagnetic spectrum).
Current Challenges
    Our Nation lags behind others in assessing, experimenting and 
investing in truly sustainable ocean energy technologies, and has 
fallen far short on investing in the science necessary to manage ocean 
ecosystems effectively. Basic information on the distribution, 
abundance and function of marine habitats is woefully inadequate. In 
fact, much of the information available on deepwater ecosystems has 
been developed directly by private project proponents. Until we 
properly understand habitat function and oceanographic processes that 
support habitats and biodiversity, we will remain unable to adequately 
avoid impacts on important habitats, and mitigate for unavoidable 
impacts. Until we adequately understand the array of perspective 
technologies available, and their likely implications for marine 
ecosystems, it will remain difficult to plan for sustainable ocean 
energy.
    Recent debates have centered on the risks and environmental dangers 
of specific installations, and on perceived impacts on coastal ways of 
life, rather than on defining broad science-driven criteria for ocean 
energy development that transcend individual projects while conserving 
coastal landscapes and seascapes. Certainly, coastal communities and 
other ocean resource users (e.g., fishermen) should have a voice in 
where development occurs. However, fully understanding the potential 
costs (such as habitat degradation) and benefits (including reducing 
the impacts of global warming) is critical to ensuring rational 
decision-making that is in the best interest of all. The ``Not in My 
Backyard!'' approach will not provide for the public interest.
    The prevailing ``thumb in the dike'' attitude is entirely 
understandable, given the complexity and disarray of federal 
institutions. Management authority for ocean uses is split among many 
agencies with unaligned legal requirements. There is neither a clearly 
defined approval process for ``blue'' energy development nor are there 
set conditions for decision-making. Getting past this fractured system 
of ocean governance will require the development and implementation of 
programs that people can trust to ensure that the coastal environments 
they hold dear will not be destroyed by industrial development for 
renewable energy production.
    It is very clear that we need updated governance systems that can 
guide ocean energy development consistent with maintaining high-quality 
marine and estuarine ecosystems. A key task for Congress is to update 
our governance systems in order to guide renewable ocean energy 
development consistent with maintaining high-quality marine and 
estuarine ecosystems.
    Few people recognize that widespread coastal renewable energy 
production is not new in the United States. In fact windmills used to 
be prolific in the Southeast. While scouring the North Carolina 
Archives for historic documents, I found maps from the 1700s showing 
the locations of many coastal windmills. In addition, there are many 
old photographs of windmills from the 19th and early 20th Centuries 
spread throughout the Southeast coastal plain.
    These past experiences, as well as those from around the world on 
ocean energy, hold important lessons for U.S. policymakers. It is clear 
that, despite being many years in the making, the expansion in 
technologies is still underway, and that--if properly understood and 
managed--America does not have to settle for damaging approaches to 
harness ``blue'' energy.
Effective Governmental Decision-making
    The lack of effective governance systems in the sea is effectively 
enumerated in the final reports of the U.S. Ocean Commission on Ocean 
Policy and the Pew Oceans Commission. All analyses of threats to the 
Nation's oceans place the fragmentation of management authority by 
topic and geography at or near the top of the list.
    We can ill-afford a continuation of ineffective governance. There 
is high potential for expansion of existing uses of our coastal and 
ocean waters and the Exclusive Economic Zone (EEZ) for mariculture, 
sand and gravel mining, phosphorite mining and others. In addition, a 
high potential exists for new uses including renewable ocean energy. It 
seems increasingly likely that the ocean of the near future will be far 
more complex than today.
    There is great urgency in fixing this key problem of dysfunctional 
ocean governance before the looming expansion in ocean uses makes it 
impossible. The compelling need for clean, renewable energy production 
raises the stakes dramatically.
    Unfortunately, the current morass of government programs competing 
for primacy in this area, and the apparent mission of decision agencies 
as primary advocates for energy production, compels coastal residents' 
skepticism. The complex mosaic of state and federal agencies with some 
responsibility for ocean energy management or regulation is daunting, 
with little organization in which potentially affected parties can have 
confidence.
    Each of the federal agencies that makes decisions relating to the 
oceans has significant shortages of capacity in key areas needed to 
make sound and efficient decisions. Some of the key capacity needs are 
as follows:
      Technical capacity to develop and apply standards to 
minimize impacts on valuable fisheries and key ecosystems
      Scientific capacity to identify how to minimize ecosystem 
impacts, and to develop new research in strategic leverage points in 
ocean ecosystem protection
      Regulatory capability to quickly evaluate, propose and 
finalize decisions about proposed projects, and to monitor and enforce 
compliance with those decisions
      Confidence of the public in the agency's unbiased 
decisions
    There is currently no one agency that has adequate capacity in each 
of these arenas. Rather than walk through the capabilities and 
drawbacks of the myriad agencies, I would like to point out a couple of 
positive developments in governance. None of these is adequate, and 
each of these has positive lessons the committee can draw upon as you 
move forward.
Positive Examples
    While developing slowly, and constrained by existing tools and 
authorities, there is important movement toward ecosystem-based 
management at the regional scale, with which comprehensive energy 
policy can be unified.
    In the U.S. Southeast by the South Atlantic Fishery Management 
Council (SAFMC) is creating an integrated ecosystem-based management 
plan, called the ``Fishery Ecosystem Plan,'' to protect and sustain the 
living marine resources of the region in the context of changing 
threats from both fishing and non-fishing activities. One small piece 
of that effort is a policy to protect essential fish habitats (EFH) 
from the potential impacts of energy development in the region, adopted 
in revised form by the SAFMC in 2006. The positive lesson from this 
effort is that an agency with an ecosystem mandate can identify the key 
habitats that need protection, and can establish approaches that 
emphasize science, transparency, inter-agency consultation and 
effective decision-making. While I remain concerned that the wind, wave 
and tidal sections of that policy need to be updated, and the 
approaches to elevate concerns about non-fishing threats are 
underutilized. The approach has proven effective in getting decisions 
on unacceptable impacts. I would suggest from this experience that 
regional fishery management councils can provide a helpful voice in 
shaping energy policy development when they are focused on their 
responsibility to fully protect EFH.
    Similarly, the States are playing an important role in building a 
more integrated approach to marine ecosystems. The California Marine 
Life Protection Act, and the North Carolina Marine Fisheries Reform Act 
provide excellent examples of forward-looking legal frameworks that 
build from existing foundations, but apply new authority to protect key 
marine and estuarine ecosystems.
    Now, many regions of the country are taking up the challenge that 
managing jointly held natural resources present. The Gulf of Mexico 
Coalition, the Great Lakes Regional Collaborative, and new interstate 
collaborations on the West Coast, the U.S. Southeast, and New England, 
represent important early strides toward the management of regional 
seas. In addition, important cross-state pollination is underway under 
the umbrella of the National Fish Habitat Plan, and its regional 
collaboratives.
Recommendations for Blue Energy
    An effective management system for blue ocean energy in the outer 
continental shelf (OCS) needs to address several key challenges, 
including:
    1.  A national ocean policy that brings together the many expanding 
offshore uses under a unified vision for healthy and sustainable 
oceans.
    2.  Clearly defined criteria for decision-making that align 
incentives to provide for clean (i.e. low-carbon), renewable ocean 
energy development and conservation of the ocean environment.
    3.  A lead regulatory entity (such as an agency or regional 
council) with an ecosystem-protection mission and substantial capacity 
(including knowledge, authority, and funding) on both energy and marine 
ecosystem health.
    4.  A transparent and robust project planning and evaluation 
process that includes integrating input from stakeholders, states and 
other agencies;
    5.  Long-term development plans that:
           meet the defined criteria for decision-making;
           project and address cumulative impacts;
           establish clear and efficient siting parameters for 
        specific installations;
           establish measurable objectives for evaluation;
           are compatible with regional ecosystem plans;
           are based on appropriate social and economic 
        incentives and strong science, including enhanced investments 
        in understanding and mapping benthic habitats;
           have strong accountability measures for 
        unanticipated adverse environmental impacts, such as 
        performance bonding.
    6.  Sustained funding for ocean and energy science and management.
Conclusion
    This generation must chart the course for a successful 
transformation from the wild-west mentality that characterizes our 
nation's marine frontiers to one of order and sustainable production of 
protein, minerals and energy in harmony with the protection of ocean 
ecosystems. It is inevitable that a sea-change will occur over the next 
few decades in uses of the territorial sea and the exclusive economic 
zone, from ad hoc fisheries and opportunistic energy and mining to a 
mixed use future. It will happen faster than anyone believes.
    The opportunity exists to lay the foundation for an organized and 
efficient use of natural resources that is both sustainable and 
sustaining of coastal and marine ecosystems and communities, but it 
will not happen unless bold leaders seize this opportunity. Civil 
society can step forward by creating positive models, and identifying 
decision approaches that take into account multiple perspectives. 
Congress can lead by setting a high bar before widespread permitting 
ensues.
                                 ______
                                 
    Ms. Bordallo. This is the second time you have made my day.
    The Chair now recognizes Mr. George Hagerman, Senior 
Research Associate, Virginia Tech Advanced Research Institute.

     STATEMENT OF GEORGE M. HAGERMAN, JR., SENIOR RESEARCH 
      ASSOCIATE, VIRGINIA TECH ADVANCED RESEARCH INSTITUTE

    Mr. Hagerman. Thank you, Madam Chairwoman. You have my 
written testimony. I won't read it. I instead am making this 
presentation. This will be an attachment. I think it will get 
some of the things across that would not come across otherwise.
    Basically I was asked in my invitation letter to discuss 
the energy resource potential from offshore wind, ocean wave 
and ocean current in the OCS, and I will present what we know 
of the overall energy estimates from those three locations and 
in fact answer an earlier question from Mr. Inslee.
    I am not going to be talking about some important resources 
for various reasons. Ocean thermal energy conservation or OTEC, 
which you have heard about, is a deepwater resource. It is off 
the Shelf and requires at least 500 to 1,000 meters access to 
the deep cold water. That does exist in EEZ, but not on our 
Continental Shelf.
    Tidal in-stream energy is an inshore resource and so is not 
relevant to Federal waters, and marine biofuels, which has a 
considerable research history, has not been asked to be 
discussed today, but it does have quite a bit of potential.
    [Slide.]
    Mr. Hagerman. This is going to be sort of my conclusion in 
terms of for the percentages, and you will be able to read this 
later, but basically the largest of the three resources I have 
been asked to present on is offshore wind.
    My written testimony has what NREL assumes for excluded 
areas to allow for commercial fishing and military uses and 
other potentially conflicting uses offshore. With those 
exclusions, you can see that the potential yield of energy in 
terawatt hours per year is comparable to in the 50 to 60 to 70 
percent range of U.S. electricity consumption, so it is a huge 
resource even with those exclusions.
    Offshore wave. You have heard this number before, 252 
terawatt hours per year. That is if 15 percent utilized.
    Ocean current. The really only ocean current in the Federal 
OCS is the Florida current between Miami and Bimini, and that 
is a very small resource in terms of the overall national 
scene.
    So this gives you a sense of the scale of these resources 
and so I am going to focus on offshore wind. I am not going to 
even really go through this slide. This is the essentials of 
offshore wind. It is the movement of solar energy from the 
equator to the poles in the form of nor'easters like we 
experienced last week.
    This shows the distribution of offshore wind. You can see 
the Mid-Atlantic is really where you have a resource that could 
be harnessed using technology that is commercially demonstrated 
off the coast of Europe now.
    This is a better graphic of that. The red is the Mid-
Atlantic, and you can see that there is considerable, in terms 
of installed capacity, gigawatts. The Mid-Atlantic really has a 
huge potential relative to the other regions. New England is 
also significant, as are the Great Lakes, in the zero to 30 
meter water depth range.
    You can see that in terms of Pacific versus Atlantic really 
the wind resource in the Pacific Northwest in California is 
onshore, and the opposite is true in the Mid-Atlantic. Indeed, 
if we look at Virginia as a Mid-Atlantic state, you can see the 
red, red and the purple, is high harnessable resources, and you 
can see that it is just the mountain ridges.
    These are often national park land, forest land, difficult 
to permit, whereas we only have one Federal regulatory 
authority in the OCS and so this really represents a much more 
attractive target for large scale development of renewable 
energy on the Mid-Atlantic.
    This is the technology that is used to harness the offshore 
winds in the zero to 30 meter depth range. In Virginia we could 
get 20 percent of our annual electricity demand by harnessing 
just a little over a quarter of the monopile base potential.
    This will go in the 30 to 60 meter depth range, so it has 
gotten beyond PowerPoint engineering. This is the Beatrice 
Project. This is technology we are keeping a close eye on 
because this is significant in the Mid-Atlantic as well.
    Offshore wave energy. You have heard about 252 terawatt 
hours a year, much more diverse. There are all kinds of 
terminators, attenuators, point absorbers. There has not yet 
been a convergence to a single best technical approach. Waves 
are governed by wind. They are higher offshore than onshore.
    This is the distribution of the resource. Now you can see 
it is opposite of the offshore wind. In the lower 48 it is 
really Washington, Oregon and northern and central California 
where you have the premiere wave resource, where you have the 
narrow Continental Shelf and so you don't have the reduction of 
the wave energy that you have off the east coast.
    Ocean current energy. This is some work that was done by 
DOE in 1980. They did a resource estimate in the Bimini 
Current. There are a lot of challenges there, and now you add 
to that the potential climate changing impact of potentially 
taking kinetic energy out of the gulfstream, and I think this 
is one that is not--I don't see this as being large on the 
horizon compared to offshore wind and wave.
    Recommendations for research and development. The data 
exists. NOAA has the National Data Buoy Center. Scripps has a 
wave measurement program. There is some good wave modeling by 
both the Corps of Engineers and the NOAA National Centers for 
Environmental Prediction.
    You need to map these potentially competing uses, so you 
need to involve the CZM program managers. Many of them have GIS 
layers already developed, and I can give examples if wanted. If 
I can add to this testimony later, I can give specific 
examples.
    You also need to look at the cumulative energy potential as 
a function of the market value of energy. In other words, if 
the market value of energy goes to 15 cents a kilowatt hour and 
becomes competitive then you are going to have a much bigger 
resource. You have to put that into the equation. I think the 
PERI feasibility study is a good model for developing that 
collaborative approach.
    Finally, you need to involve the utility, grid operators, 
their load flow modeling, grid constraints with the onshore 
interconnection points, and they need to be involved in this 
process as well, so it is not just the resource. You need to 
involve these other stakeholders.
    Thank you for extending my length of time.
    [The prepared statement of Mr. Hagerman follows:]

   Statement of George M. Hagerman, Jr., Senior Research Associate, 
     Virginia Tech Advanced Research Institute, Arlington, Virginia

    The following comments do not represent the position of Virginia 
Tech but represent my views as a citizen of Virginia and a research 
engineer with over 25 years experience in the field of renewable ocean 
energy conversion. This experience is summarized briefly, below, and my 
resume is included as an attachment to this testimony.
    From 1980 to 1985, I worked as a project engineer for Gibbs & Cox, 
Inc., a naval architecture firm in Arlington, Virginia, in support of 
the U.S. Department of Energy's ocean energy program, which at that 
time was focused primarily on ocean thermal energy conversion (OTEC).
    In 1986, I formed SEASUN Power Systems in Alexandria, Virginia, 
where I conducted regional wave energy resource and technology 
assessments for private utilities and state government organizations in 
California, Hawaii, Virginia, and North Carolina. With financial 
support from the U.S. National Science Foundation, Virginia's Center 
for Innovative Technology, and limited private funding, I also carried 
out extensive numerical and physical modeling of wave-powered 
desalination systems.
    In 1996-97, I was again hired by Gibbs & Cox, Inc. to manage a 
fully integrated feasibility study of a land-based OTEC plant for a 
commercial client in Puerto Rico, where I was responsible for direction 
of seven junior engineers and coordination of sub-contractor 
activities.
    In 1999, I was hired by Virginia Tech, where I am now a Senior 
Research Associate at the Advanced Research Institute in Arlington, 
Virginia. Recent ocean energy projects include evaluation of coastal 
wind data to estimate turbine output for a proposed wind energy project 
on Virginia's Eastern Shore, a preliminary assessment of the wave 
energy resource potential off southern New England, and potential 
project site characterizations for the U.S. Electric Power Research 
Institute's (EPRI's) offshore wave energy feasibility study for Hawaii, 
Oregon, Washington, Massachusetts, and Maine. Last spring EPRI 
completed a similar feasibility study of tidal in-stream energy 
conversion, with participation by and co-funding from Nova Scotia, New 
Brunswick, Maine, Massachusetts, Alaska, San Francisco, and utilities 
in the Puget Sound area of Washington. As with EPRI's offshore wave 
energy study, I was responsible for energy resource assessment and site 
characterization.
    The EPRI wave energy feasibility study was completed in 2004, and 
its tidal in-stream energy conversion study was completed in 2006. A 
comprehensive set of reports is freely available for public download at 
the EPRI ocean energy web site: http://www.epri.com/oceanenergy/.
    During the past eighteen months, I have been working closely with 
colleagues at four other state universities, as well as Virginia's 
maritime industry, to help launch the Virginia Coastal Energy Research 
Consortium (VCERC), which was created in the 2006 legislative session 
of the General Assembly and funded by budget amendment in the 2007 
legislative session. The Virginia Tech Advanced Research Institute was 
named as one of five founding members, in addition to Old Dominion 
University, the Virginia Institute of Marine Science, Norfolk State 
University, and James Madison University.
    VCERC was established to serve as an interdisciplinary research, 
study, and information resource for the Commonwealth of Virginia on its 
coastal energy resources, including offshore winds, offshore waves, 
marine biofuels, and seafloor methane hydrates. My main research 
activities for VCERC to date have been estimating the potential energy 
and economic benefits of offshore wind energy development on the Outer 
Continental Shelf (OCS) off Virginia, and I will present some 
preliminary results of this work today.
OCS Offshore Wind Energy Potential
    Much of the information presented here was developed by federal 
researchers at the National Renewable Energy Laboratory (NREL) in 
Golden, Colorado, under the leadership of Walt Musial. Their 
preliminary estimate of the offshore wind energy resource distribution 
of the mainland United States are presented in Figure 1, below.

[GRAPHIC] [TIFF OMITTED] T4981.001

    .epsFigure 1. Regional distribution of U.S. offshore wind energy 
resources out to 50 nautical miles (n.mi) offshore. Numbers are 
potential installed capacity (in gigawatts), assuming a wind turbine 
spacing density of 5 megawatts per square kilometer. To account for 
exclusions due to other uses of sea space (e.g., military exercise 
areas, shipping lanes, and commercial fishing grounds), NREL 
researchers assumed there would be no offshore wind energy development 
within 5 n.mi of shore (100% exclusion), and that only one-third of the 
available resource could be developed between 5 and 20 n.mi. offshore 
(67% exclusion), while two-thirds of the available resource could be 
developed between 20 and 50 m.mi offshore (33% exclusion).

    For the ``Lower 48'' states mapped in Figure 1, the total potential 
offshore wind capacity in the federal OCS across all regions and all 
depths is 908 gigawatts (GW). Assuming a 35% annual capacity factor 
(due to wind speed variability), this represents an electric generation 
potential of 2,780 terawatt-hours (TWh).
    The most immediately developable resource, using monopile 
foundations that have been commercially proven in European waters is in 
depths of 30 meters or less. As shown in Figure 2, below, such depths 
are most abundant in the mid-Atlantic region. The next most developable 
resource would be in depths of 30 to 60 meters, using trusswork 
foundations, which are now being demonstrated by the Talisman Project 
in the Beatrice Field of the North Sea. Again the mid-Atlantic leads 
the regions in having vast OCS areas in this depth range.

[GRAPHIC] [TIFF OMITTED] T4981.002


    .epsA significant concern for coastal utility grids interconnected 
with large amounts of offshore wind energy is the hour-to-hour 
variability of the resource, as well as its seasonal variability. 
Rather than relying on back-up fossil fuel power plants onshore, 
however, utilities may derive more benefits from deploying distributed 
solar-electric (photovoltaic) systems on commercial and institutional 
buildings on shore, which particularly addresses the seasonal 
variability question.
    Hourly variability may be addressed by on-shore batter y storage in 
plug-in hybrid electric vehicles, and/or storage of compressed hydrogen 
in the offshore tower structure. We are just starting to look at these 
options in Virginia.
    Hybrid offshore wind and offshore gas combustion turbine projects 
represent another promising alternative, which has many advantages. 
These include increased revenues derived from having a completely 
dispatchable baseload power supply, and the much lower environmental 
impact and greater security of submarine power cable vs. pipeline 
energy transmission to shore. Eclipse Energy's Ormonde project is an 
example of such a hybrid, combining 108 MW of offshore wind power 
capacity with 98 MW of natural gas generation. It is expected to be 
operating in 2008.
    Another renewable ocean energy resource that deserves consideration 
is marine biomass, which represents a sustainable source of offshore 
methane that can replace offshore fossil gas in hybrid wind-gas 
generation projects as described above, once the offshore fossil 
reserves are depleted.
OCS Offshore Wave Energy Potential
    One preliminary finding of the EPRI wave energy feasibility study 
is that extracting just 15% of the offshore wave energy flux into the 
federal OCS would yield 252 TWh annually. Although this is an order of 
magnitude smaller than the offshore wind generation potential estimated 
above, it is nevertheless comparable to all conventional hydro-electric 
generation in the U.S. (which was 258 TWh in 2004). Wave energy in the 
OCS is thus a substantial resource.

[GRAPHIC] [TIFF OMITTED] T4981.003


    .epsWave energy's contribution could be even greater if hybridized 
with deep-water wind turbines in a single floating system that would 
share common mooring hardware and electrical interconnection cables, 
thus improving system economics. The output of such a floating hybrid 
wind-wave system would also be more continuous, since ``yesterday's 
winds are today's waves.''
    Thank you for this opportunity to testify, and I would be happy to 
answer any questions or provide additional information.
                                 ______
                                 
    Ms. Bordallo. Thank you. Thank you very much, Mr. Hagerman.
    Now the Chair recognizes Dr. Porter Hoagland, Research 
Specialist, Woods Hole Oceanographic Institute.

STATEMENT OF PORTER HOAGLAND, Ph.D., RESEARCH SPECIALIST, WOODS 
                  HOLE OCEANOGRAPHIC INSTITUTE

    Mr. Hoagland. Thank you, Madam Chairwoman. My current 
understanding of the regulatory processes relating to EEZ 
renewable energy projects draws from my recent work with 
colleagues in the design of a national policy framework for the 
siting of coastal ocean wind power.
    The conclusions of our work are relevant to the siting of 
wave and current projects too. I will focus my remarks on your 
questions concerning the general need for addressing the 
impacts on the environment and other uses of the ocean.
    In the context of renewable energy, the relevant resource 
to be allocated is ocean space. The presence of quality 
differences across ocean areas implies that areas with the 
right qualities may be scarce, meaning that they have economic 
value.
    Further, ocean areas may have value for other human uses. 
It is necessary to determine which other uses are compatible 
with renewable energy and which are not. Further, it is 
important to quantify these respective values in order to 
appreciate fully the opportunity costs from decisions to 
allocate ocean areas for renewable energy.
    As part of the process of assessing environmental impacts, 
Congress should require that economic analyses be conducted of 
the opportunity costs of siting renewable energy, including the 
development of estimates of nonmarket or passive use damages.
    Until recently, the Federal permitting process has been 
based upon Section 10 of the 1899 Rivers and Harbors Act, which 
regulates obstructions to navigation. While navigational issues 
still are important, recent legislation finds that the 1899 Act 
is inadequate per se for making decisions about the use of the 
ocean for renewable energy.
    Section 388 of the Energy Policy Act assigns responsibility 
to MMS for the design and implementation of a policy framework 
for renewable energy in the ocean. MMS is now in the process of 
drafting regulations under the authority of the OCS Lands Act 
to grant leases, easements or rights-of-way for siting 
renewable energy facilities.
    Energy-related activities authorized under these new 
provisions are not to interfere with other reasonable uses of 
the EEZ. While this assignment of authority to MMS renders moot 
the question of the adequacy of the 1899 Act as a means for 
providing access, the issues that arise with coordinating 
responsible agencies will not disappear.
    Many permittings and environmental reviews must be 
undertaken by other agencies, and I have summarized these 
briefly in my written testimony.
    On the surface, the long list of review authorities may 
appear to be evidence of a lack of integration in marine 
policy. However, the multiple approval process cannot be 
circumvented without difficulty, and it cannot be easily 
harmonized by administrative reorganizations, calls for 
regional management, devolution of authority to coastal states 
or mandates for stakeholder involvement.
    What is critical here is that an agency is authorized to 
take a leadership role as a facilitator of a regulatory 
process. This is a key feature of the successful policy 
frameworks we studied. Clearly MMS has the experience and now 
the authority to assume the mantle of lead agency for siting 
renewable energy in the ocean.
    In order to improve our understanding of the value of ocean 
space as a resource renewable energy, Congress should mandate a 
nationwide effort to assess ocean space as a resource for 
renewable energy development. This resource assessment could 
complement emerging efforts to develop regional and national 
capacities and ocean observation systems.
    Further, Congress should encourage the undertaking of 
scientific research to design and evaluate the impacts of the 
first generation of renewable energy facilities as the siting 
of these facilities can be thought of as natural experiments.
    In general, subsidies at both the Federal and state levels 
encourage the development of renewable energy in the United 
States, but does it make sense to promote ocean wind, for 
example, with a production tax credit and accelerated 
depreciation on the one hand and to exact a royalty on the 
production of electricity on the other?
    This contradiction can be resolved by interpreting the 
financial terms as a sequential variable royalty comprising an 
initial subsidy while cashflows are negative, followed by the 
payment of royalties as cashflows turn positive.
    In practice, the precise details would need to be ironed 
out, and the nature of incentives thereby created would need to 
be scrutinized carefully. Congress should encourage innovation 
in the design of financial institutions that would achieve both 
a development of renewable energy in the ocean and a return for 
the use of the ocean as a public resource.
    Finally, one of the key recommendations of the U.S. 
Commission on Ocean Policy is the need to increase funding for 
oceanographic research, monitoring and the conservation and 
management of the marine environment.
    Following the precedence embodied in the use of the OCS 
revenues for the Land and Water Conservation Fund, the National 
Historic Preservation Fund and revenue sharing with coastal 
states, Congress should consider requiring that any remaining 
revenues from the siting of renewable energy facilities be 
applied toward the sustainable financing of ocean management.
    Thank you very much.
    [The prepared statement of Mr. Hoagland follows:]

      Statement of Porter Hoagland, Ph.D., Marine Policy Center, 
    Woods Hole Oceanographic Institution, Woods Hole, Massachusetts

    Thank-you Chairwoman Bordallo, Chairman Costa, and Subcommittee 
Members for the opportunity to testify before this joint hearing of the 
House Subcommittee on Fisheries, Wildlife and Oceans and the House 
Subcommittee on Energy and Mineral Resources on ``Renewable Energy 
Opportunities and Issues on the Outer Continental Shelf.'' My name is 
Porter Hoagland. I am employed as a Research Specialist at the Marine 
Policy Center, a social science research unit of the Woods Hole 
Oceanographic Institution in Woods Hole, Massachusetts. I have worked 
and studied as a marine policy analyst focusing on the economic and 
regulatory issues relating to the conservation and management of 
coastal and ocean resources for more than 25 years. This testimony 
represents my own views and not those of the Woods Hole Oceanographic 
Institution.
    I have been asked to discuss the current regulatory structure for 
offshore wind, wave and current projects, what Federal agencies are in 
charge, the role of States, and what Congress can do to clarify the 
existing regulatory structure. My current understanding of the 
regulatory structure relating to renewable energy projects on the U.S. 
Outer Continental Shelf (OCS) draws from my recent work with colleagues 
on the design of a national policy framework for the siting of coastal 
ocean wind power. Concerning this work and in portions of this 
testimony, I would like to acknowledge the help of my colleagues, Ms. 
Mary Schumacher and Dr. Hauke Kite-Powell at Woods Hole and Professor 
John Duff at the University of Massachusetts Boston. I would also like 
to acknowledge the sponsors of this research, including the 
Massachusetts Technology Collaborative, the Goldman Sachs Group, Inc., 
and the Johnson Endowment at the WHOI Marine Policy Center.
    Our recent work seeks to clarify the national, regional, and local 
decisions about the siting of wind power facilities in the U.S. coastal 
ocean. Its main conclusions are general enough to be of relevance to 
the siting of offshore wave and current projects as well. One of our 
main goals has been to identify and characterize the common features of 
a land and resource management system that are appropriate for the 
siting of wind power in the U.S. coastal ocean. In our full project 
report 1, which I would be happy to make available to the 
Subcommittees, we identify 16 common features of an ``access system'' 
for coastal ocean wind power, and we discuss their usefulness and 
efficiency. My testimony today will focus mainly on the findings of our 
study relating to those access system features that may help Congress 
clarify the regulatory structure.
---------------------------------------------------------------------------
    \1\ Hoagland, P., M.E. Schumacher, H.L. Kite-Powell and J.A. Duff. 
2006. Legal and regulatory framework for siting offshore wind energy 
facilities. Project No. 2004-OWEC-01. Westborough, Mass.: Offshore Wind 
Energy Collaborative Pilot Projects Grant Program, Massachusetts 
Technology Collaborative (30 June).
---------------------------------------------------------------------------
Ocean Space as the Relevant Resource
    In the context of renewable energy facilities, the relevant 
resource to be allocated is ocean space. With respect to ocean wind 
power, ocean space may be characterized by its average wind speed, wind 
consistency, distance from electrical transmission facilities, distance 
from electrical consumers, and exposure to adverse weather conditions, 
among other qualities. The existence of quality differences across 
ocean areas implies that, like good cropland, ocean space with the 
right qualities may be a scarce natural resource. As a consequence, 
ocean space useful for wind farming or other renewable energy 
production may have economic value. Further, ocean space may have value 
for other human uses, including commercial fishing, marine aquaculture, 
recreation, environmental conservation, shipping, among many others. 
Consequently, there may be significant opportunity costs from a 
decision to allocate ocean space for renewable energy development (or, 
alternatively, for other purposes).
    There is no private market for ocean space. Specialized 
institutions must be devised, if they do not yet exist, for allocating 
ocean space for renewable energy development. The existence of 
institutions to establish legal interests in ocean space and to provide 
a means for enforcement against any infringement of these interests is 
critical. Such legal interests are one key component of an ``access 
system'' for allocating ocean space that is needed to enable the 
development of renewable energy in the ocean as a productive industry. 
The features of an access system may influence the extent to which the 
siting of ocean renewable energy is economically efficient.
    The siting of renewable energy facilities does not involve an 
exclusive use of ocean space in all cases. It is necessary to determine 
which other uses are compatible with wind farming and which are 
excluded or diminished. For example, some types of aquaculture and 
recreational fishing may be compatible with wind farming, while certain 
kinds of commercial fishing (dragging the seafloor with trawl nets) and 
the aesthetic appearance of the seascape may not. In making decisions 
about exclusivity and compatibility, it is critical to quantify 
tradeoffs in economic terms, where feasible. Importantly, the economic 
concept of ``resource rent,'' representing the value of ocean space as 
a scarce resource, should be utilized in analyzing such tradeoffs.
    It is relatively straightforward to estimate resource rents 
associated with commercial activities and progressively more difficult 
to estimate the value of uses that are further removed from markets, 
such as recreation, aesthetics, or the benefits of environmental 
amenities. Consequently, the opportunity costs of allocating areas for 
specific uses or for specific combinations of uses can be uncertain. 
Similarly, there is uncertainty about the non-market values of 
modifications in seabird or subsea habitat when a renewable energy 
facility is sited. Even the opportunity costs of displacing commercial 
uses, such as shipping and fishing, can involve uncertainty in their 
calculations.
    It is important for a disinterested party to undertake economic 
studies, such as studies to estimate resource rents and non-market 
values. Although stakeholders, such as prospective developers or 
nongovernmental organizations, may wish to conduct or sponsor their own 
analyses, there is the clear possibility of bias built into assumptions 
and hidden in the results. Typically, the government would conduct 
policy analyses or contract for studies to be undertaken by independent 
analysts. Although arguably more credible than analyses conducted by 
stakeholders, the government, too, may not be a completely 
disinterested party. Therefore, the results of such analyses should be 
subject to a scientific peer-review.
Current Regulatory Structure, What Federal Agencies are in Charge, and 
        the Role of States
    The federal ``permitting'' process has until recently been based 
upon section 10 of the 1899 U.S. Rivers and Harbors Act (RHA), which 
assigns jurisdiction to the U.S. Army Corps of Engineers (ACoE) to 
regulate obstructions to navigation in the navigable waters of the 
United States and on its Outer Continental Shelf (OCS). While 
navigational issues still are paramount, recent legislative 
developments would seem to acknowledge that the RHA is inadequate for 
making decisions about the exclusive use of the ocean for permanent 
activities such as offshore wind power generation.
    Section 388 of the Energy Policy Act of 2005 [P.L. 109-58], which 
was signed into law by President George W. Bush on August 8, 2005, 
assigns responsibility for the design and implementation of an access 
system for siting ocean wind energy to the Minerals Management Service 
(MMS) in the U.S. Department of the Interior. MMS is now in the process 
of drafting interim regulations under the authority of the Outer 
Continental Shelf Lands Act Amendments of 1978 to grant leases, 
easements, or rights-of-way for siting facilities that produce, 
transport, or transmit energy from sources other than oil and gas, 
including ocean wind energy facilities. These rights are to be granted 
on a competitive basis, unless a determination of ``no competitive 
interest'' is made.
    Additional provisions of the Energy Policy Act require MMS to 
establish financial terms that ensure a fair return to the United 
States for the granting of these rights and to set up a revenue-sharing 
program with coastal states for grants within three nautical miles of a 
state's submerged lands, analogous to the existing 8(g) program for OCS 
mineral leasing. MMS is now to act as the lead agency in coordinating 
the actions of other agencies in siting decisions.
    Another important component in the development of MMS policy has 
been the drafting of offshore administrative lines from adjoining 
coastal states. These administrative lines will serve a number of 
important functions, such as helping MMS determine which states have 
prevailing interests in extended offshore areas because of the growing 
number of commercial activities on the federal OCS; providing a basis 
for accurate delineation of OCS planning areas; assisting in 
development and evaluation of ``affected State'' status under the 
Coastal Zone Management Act and the OCS Lands Act; assisting in the 
required comparative analysis by MMS to determine an equitable sharing 
of developmental benefits and environmental risks; and helping define 
appropriate consultation and information sharing between MMS and 
coastal states.
    While this assignment of authority to MMS renders moot the question 
of the adequacy of the RHA as a legal means for providing access, the 
issues that arise with coordinating responsible agencies will not 
disappear. In particular, an RHA Sec. 10 permit for potential 
obstructions to navigation will still be required among other approvals 
or reviews by numerous federal and state agencies. Further, there is 
now a requirement that energy-related activities authorized under these 
new provisions ``are carried out in a manner that provides 
for...prevention of interference with reasonable uses of the EEZ.'' The 
Secretary of the Interior is accorded discretion in determining what 
uses are to be classified as reasonable.
    Based upon our review of access systems in Europe and on the U.S. 
public lands, we find that an access system needs a lead agency that is 
responsible for resource assessments, area selections, and allocations 
for specific resources. A lead agency with a ``place-based'' 
orientation is more likely than one with a ``functional'' orientation 
to allocate access to and to manage an area under its jurisdiction 
within a framework of multiple-use planning that takes the opportunity 
costs of alternative uses (including non-uses) into account. At least 
in principle, such an agency is better suited to advance a complex mix 
of policy objectives, such as energy diversification, environmental 
protection, resource conservation, and a fair return to the public, 
among others.
    Because MMS now has primary responsibility for regulating offshore 
renewable energy development on the OCS, MMS also has lead agency 
responsibility under the National Environmental Policy Act (NEPA) for 
conducting environmental assessments and drafting environmental impact 
statements. Further, as lead agency, MMS has the responsibility for 
coordinating permitting and environmental review undertaken by other 
federal agencies under a wide variety of other laws and policies.
    At the federal level, such permitting and review includes, but may 
not be limited to the following: Section 7 consultations triggering 
potential biological assessments under the Endangered Species Act for 
interactions with protected species (NMFS); permits for harassments or 
incidental takes under the Marine Mammal Protection Act (NMFS); 
conservation assessments for potential impacts on essential fish 
habitat under provisions of the Magnuson-Stevens Fishery Conservation 
and Management Act (NMFS and the regional Fishery Management Councils); 
permits for dredge and fill activities under provisions of Section 103 
of the Ocean Dumping Act and Section 404 of the Clean Water Act (ACoE 
and EPA); taking into account under section 106 of the National 
Historic Preservation Act of any impacts on historic resources deemed 
eligible for listing on the National Register of Historic Places (NPS); 
and permits for private aids to navigation (USCG).
    Even when the proposed location for an offshore wind energy 
facility is in federal waters, a number of state agencies will also 
play some role in the siting process. Among other possible sources of 
state jurisdiction, state and tribal governments have standing as 
``stakeholders'' under the NEPA requirements for environmental impact 
review; and, under the Coastal Zone Management Act, most uses of 
coastal federal waters must be consistent with any affected state's 
definition and authorized uses of its ``coastal zone.''
    This long list of review authorities ostensibly may appear to be 
both confusing and evidence of a lack of integration in marine policy. 
Moreover, the amount of interagency coordination and the number of 
required approvals has been blamed for retarding the nascent industry's 
growth. Notwithstanding these concerns, to a large extent, the multiple 
approval process cannot be circumvented easily, and it cannot be easily 
harmonized further by administrative reorganizations, mandates for 
regional management, or devolution of authority to coastal states. What 
is critical is that a lead agency--here MMS--serves as a facilitator of 
this process, establishing a form of ``one-stop shopping'' in ocean-
space allocation decisions. At this juncture, this seems to be the 
direction that MMS is taking.
    The development of renewable energy facilities in the ocean, 
particularly wind power, also is influenced by a number of other public 
policies. These policies continue to be in a state of flux, thereby 
increasing the level of regulatory risk faced by entrepreneurs who are 
thinking about constructing a wind farm in the coastal ocean. Among 
these policies are the reinstatement of the federal production tax 
credit and the enactment by states of renewable portfolio standards.
Recommendations for Congressional Clarifications of Existing 
        Regulations
    In our study of the design of an appropriate access system for 
renewable energy in the ocean, we have analyzed the economic 
implications of 16 generic features of access systems. Among these 
features, the following issues stand out as candidates for 
Congressional clarification of regulations: multiple-use decision-
making; financial terms and subsidies; environmental monitoring I 
finish with a recommendation concerning sustainable financing of ocean 
management.
    Multiple-Use Decision-making. Most modern access systems 
incorporate methods of resolving existing or potential conflicts among 
alternative uses. All of the access systems in our database incorporate 
provisions for consideration, at some level of detail, of alternative 
uses of the ocean in areas where ocean renewable energy facilities 
might be sited. The need for methods of resolving multiple-use 
conflicts arises from the recognition that allocation decisions may 
result in opportunity costs in terms of displaced uses, including such 
``non-uses'' as habitat protection or the supply of ecosystem services. 
This need is a reflection also of the incompleteness of property rights 
for alternative uses of ocean space as a public resource and the 
absence of markets for allocating ocean space as a resource.
    Policy objectives for U.S. offshore renewable energy development, 
which relate to the prevention of interference with other 
``reasonable'' uses and the consideration of other uses of the sea and 
seabed, appear to require MMS to conduct multiple use decision-making 
with respect to the siting of renewable energy facilities. MMS appears 
to be moving in the direction of analyzing the economic opportunity 
costs of siting renewable energy facilities in the ocean, although 
there is no explicit mandate from Congress to do so.
    An important need is for the development of estimates of ``non-
market'' values. For example, the siting of an ocean renewable energy 
facility may involve a change in the seascape. Both coastal residents 
and tourists may benefit from an unimpeded view of the ocean, but this 
view is not a commodity that typically is traded in established 
markets. Environmental economists have developed methods for estimating 
non-market values, and these methods can be applied to estimate the 
economic losses (or gains) associated with changes in the aesthetic 
properties of seascapes. Areas where additional research is needed 
include the selection of the most appropriate analytical methods and 
the development of estimates of potential non-market damages from 
siting ocean renewable energy facilities.
    Notwithstanding the cumbersome nature of traditional non-integrated 
management, an access system should incorporate methods of resolving 
existing or potential conflicts among alternative uses. In practice, 
estimating the opportunity costs of allocating areas for specific uses 
or for specific combinations of uses can be very uncertain. 
Nevertheless, as part of the process of conflict resolution, Congress 
might specify that economic policy analysis be incorporated into an 
access system so that the government can begin to systematically 
integrate estimates of opportunity costs into its decisions about 
allocating ocean space. Such a comparison is needed especially where 
renewable energy has been selectively subsidized.
    Subsidies and Other Financial Terms. In general, exogenous 
subsidies encourage the development of ocean wind power in the United 
States. Within the maritime boundaries of coastal states, the federal 
production tax credit (PTC) and accelerated depreciation, state 
renewable portfolio standards policies, system benefits funds, and 
property and sales tax abatements can lower the relative costs of wind 
power construction and operation. Only the federal subsidies (PTC and 
accelerated depreciation) would appear to apply to developments in the 
U.S. exclusive economic zone, however.
    The rationale for such subsidies is to level the playing field for 
renewable power, with respect to electric utilities that rely upon 
fossil fuels. Fossil fuel burning plants receive implicit subsidies 
when they are not required to account for the external costs of 
pollution, such as through releases of carbon dioxide or other 
pollutants. Little work has been undertaken to estimate the scale of 
the subsidies enjoyed by fossil fuel burning plants and to understand 
the extent to which subsidies for renewable energy do, in fact, level 
the playing field. Congress might encourage the development of economic 
models and the compilation and analysis of data to understand whether 
the renewable energy subsidy appropriately levels the playing field.
    Policy discussions calling both for subsidies for renewable energy 
and charges (royalties or other) for the use of ocean areas are 
apparently inconsistent. Does it make sense both to promote ocean wind, 
for example, with a production tax credit and accelerated depreciation 
on the one hand and exact a royalty on the production of electricity 
from this same source on the other? This question also raises issues of 
the relative incentives faced by wind farm developers in choosing 
onshore versus offshore sites.
    This issue may be resolved, at least conceptually, by considering a 
sequencing of subsidy and royalty. In effect, we might consider one 
form of a variable royalty, known as a ``Brown tax.'' A Brown tax 
comprises an initial subsidy, while cash flows are negative (say, 
through the initial expenditures to characterize the relevant 
environmental parameters and to optimize the operations of a renewable 
energy facility), followed by the payment of royalties as cash flow 
turns positive. Because wind power is subsidized with a production tax 
credit and accelerated depreciation rules, these subsidies can be 
thought of as the ``negative'' royalties that apply during the early 
phases of ocean wind development. Over time, these subsidies may be 
phased out, and positive royalties could then be invoked.
    A potentially useful institution for implementing a variable 
royalty is known as a Townsend-Young ``evergreen lease.'' An evergreen 
lease is renegotiated after approximately one-half of the tenure has 
been completed: say, at ten years on a 20-year lease. Evergreen 
negotiations for a renewable energy lease might involve an increase in 
royalty payments, in line with the sequencing of a Brown tax. Although 
the precise details of a variable royalty/evergreen lease method would 
need to be ironed out, and the nature of incentives thereby created 
would need to be scrutinized carefully, this kind of an institution may 
make sense for both the government and energy producers where rents are 
expected to increase over time due to expansion in demands for both 
ocean space and electricity.
    As a further consideration, we might expect that many areas of the 
ocean initially will be provided to industry on a first-come, first-
serve basis for the siting of renewable energy facilities. As ocean 
space becomes increasingly scarce, however, methods of competitive 
bidding and allocation will come into play. Under an access system that 
mandates a competitive process for allocating ocean space for renewable 
energy development, prospective developers will bid away any subsidies 
as well as resource rents. The bidding away of subsidies implies that 
the economic efficiencies embodied in a competitive access system may 
defeat the purpose of other policy objectives that encourage the 
development of renewable energy through subsidies.
    The existence of these issues suggests that there is a need for 
Congress to encourage experimentation with innovative financial 
institutions that would achieve both the development of renewable 
energy in the ocean and a return for the use of ocean space as a public 
resource.
    Monitoring. A strong argument can be made for including provisions 
in an access system that promote the collection of environmental 
monitoring data prior to the allocation of legal interests. Such data 
can improve our understanding of the value of ocean space as a resource 
for the specific purpose of siting renewable energy facilities. 
Further, such data can help us to get a sense of the opportunity costs 
of siting renewable energy facilities in the ocean. Environmental 
monitoring data could be collected by the government and released 
publicly or through a permitting program for prospective wind farm 
developers. Alternatively, prospective developers might be encouraged 
to pool their resources to conduct environmental monitoring efforts in 
areas that show promise for wind power development. A policy to pool 
monitoring efforts would reduce the waste associated with duplicate 
monitoring efforts in the same location.
    Congress might usefully require the implementation of a national 
environmental monitoring effort to assess the characteristics of ocean 
space as a resource. This national effort could be integrated into 
complementary efforts on the development of regional and national 
capacities in ocean observation systems.
    The external effects of ocean renewable energy facilities are not 
normally a function of output (electricity) but instead of the 
placement of the structures. Once rock piles, towers, turbines, or 
floating facilities are in place, both the view and, potentially, the 
habitat have been altered. Short of removing the structures, there is 
little that can be done to mitigate adverse effects. As a consequence, 
relative to the more common types of pollution-generating facilities, 
there would appear to be a reduced need for the ongoing monitoring and 
enforcement of ocean renewable energy facilities.
    The siting of the first generation of wind farms in the ocean may 
be understood as a kind of scientific experiment. The understanding 
gained from these initial experiments undoubtedly would be of use in 
subsequent decisions about the location, scale, and patterns of ocean 
wind farm development. Congress might encourage the undertaking of 
research efforts to design and evaluate the results of these first-
generation experiments.
    Sustainable financing. I'd like to add one final word about the 
sustainable financing of ocean management. One of the key 
recommendations of the U.S. Commission on Ocean Policy was the need to 
assign returns to the public from the use of its marine resources, such 
as bonuses, rentals, and royalties for offshore oil and natural gas, to 
help fund oceanographic research, monitoring, and conservation and 
management of the marine environment. As I mentioned above, under the 
Energy Policy Act, MMS is to establish financial terms that ensure a 
fair return to the United States for the granting of rights to 
renewable energy development. Further MMS is to establish a revenue-
sharing program with coastal states for grants within three nautical 
miles of a state's submerged lands. Following this policy, and other 
precedent embodied in the use of OCS revenues for the Land and Water 
Conservation Fund and the National Historic Preservation Fund, Congress 
should require that remaining revenues from the siting of renewable 
energy facilities be used for sustainable financing of ocean 
management.
                                 ______
                                 
    Ms. Bordallo. The Chair thanks Dr. Hoagland and all of the 
witnesses that appeared here this afternoon.
    I do have a few questions for Mr. Jason Bak. You spoke 
about royalties. You testified that rents and royalties for 
seabed use should promote ocean renewable energy, not 
discourage it.
    Can you please elaborate on what you mean by that? How 
could the royalties promote renewable energy development?
    Mr. Bak. Sure. What we have seen in various other 
jurisdictions in relation to wind energy is that these 
royalties are phased in over time in order to have an up front 
royalty free stage that would allow the developer to have 
slightly higher returns than it would otherwise.
    So in British Columbia, for example, in the wind energy 
industry we see that there is a 10-year rent free period that 
helps stimulate developers to get into development or, in this 
case, get in the water, and then in time when the technology is 
more robust, when you start seeing those near commercial 
returns, then apply a reasonable type royalty.
    So the stimulation would be the lack of a royalty for a 
fixed period so that the project can get to an economy of scale 
or a certain level of development and then phase in a royalty.
    Ms. Bordallo. Thank you.
    I have another question for Mr. Grader, Mr. Zeke Grader. In 
your testimony you discuss your interest in ensuring that 
renewable energy projects are operated in a manner that is 
consistent with regional fishery management plans.
    Fishery management plans are developed regularly, and 
energy projects will have a much longer duration. How do you 
envision the two could be coordinated?
    Mr. Grader. I think basically requiring that the energy or 
the agency, for example, if it is Minerals Management Service, 
require that there be a consultation with the regional councils 
to make sure that, for example, we are not placing these 
facilities down in areas that are prime fishing grounds. For 
example, one of the areas being looked at off of Eureka is 
between 25 and 35 fathoms offshore. Well, that happens to be 
right in the middle of a prime fishing grounds.
    If we might relocate that someplace else, these are the 
types of things I think that could be dealt with if there was 
the early on discussion and requirement for consistency in this 
to make sure that it is not one activity or the other, but that 
in fact we coordinate them so we can have both and both can 
operate successfully.
    That is my concern because we have had to operate with the 
Minerals Management Service off of Santa Barbara, our fishermen 
there, for 40 years now, and it has not always been the 
happiest of experiences.
    We just think that looking forward to this new type of 
energy, which we are excited about and see the need for, we 
just want to make sure that it is done in a way that is 
consistent with the fishing activities and other types of 
existing activities.
    Ms. Bordallo. Thank you. Thank you very much.
    Dr. Hoagland, the use of revenues. The last sentence in 
your written testimony I noticed recommends that Congress 
require that revenues obtained from renewable energy projects 
on the OCS be used to sustain the financing of ocean 
management.
    Can you elaborate on this? What would the revenue support? 
For example, do you envision monitoring or mitigation programs?
    Mr. Hoagland. I don't have specific recommendations in that 
regard, but I think monitoring and mitigation would fall under 
that, as well as the administration of the program.
    I think if you go back to the Ocean Commission's report, 
that is one of their key recommendations. They probably have a 
long list in there of how they envision the money would be 
spent.
    I might add that we probably would expect that any revenues 
in addition to those that would go into those other revenue 
sharing arrangements might be small in the foreseeable future, 
but that should be incorporated into the law.
    Ms. Bordallo. So you do envision then monitoring or 
mitigation programs?
    Mr. Hoagland. I think that could fit under it, yes.
    Ms. Bordallo. Yes. The Chair now would like to thank Mr. 
Inslee from Washington for returning after voting. We have been 
holding the hearing right through the voting process, and the 
Chair now recognizes Mr. Inslee for any questions he may have.
    Mr. Inslee. Thank you.
    Mr. Grader, I thought your comments about ocean 
acidification--I didn't hear them, but my staff told me about 
them. I was just thinking. You kind of have the ying and yang 
of this industry because I am very concerned about 
acidification potentially affecting the whole food chain. If 
the phytoplankton collapse, you know, your industry is in 
pretty big trouble.
    So here is an industry that can help on that, zero 
CO2 emitting to deal with acidification, but at the 
same time if it is at a place that is causing you difficulty it 
is kind of a ying and yang kind of situation.
    Here is a question I guess. Do you think there is a 
possibility and have you talked to any of the Federal agencies 
about going to the more proactive? The gentleman from the 
coastline commission, Mr. Diers, had talked about trying to go 
to a more proactive siting plan.
    In other words, should we be giving thought to the Federal 
agencies actually identifying areas that will be energy zones, 
if you will, in advance of specific permit applications from 
the industry? Would that be helpful?
    Mr. Grader. I think that makes a great deal of sense. In 
fact, I wish we were doing that in some more activities right 
now. For example, we are going through in California placement 
of these marine protected areas, and we haven't seen any 
coordination, for example, with the Federal council as far as 
where their existing conservation zones were.
    I think we do need to have much more coordination here. I 
think it would be useful. I think the states could participate 
as well as the coastal management authorities. Keep in mind, 
this energy is different than LNG. It is different than 
offshore oil, which we had real problems with and we fought 
with.
    We understand the need for renewable energy. We can see 
some real benefits from it. It is just a matter, as you 
described, of the ying and the yang, you know, making sure it 
is placed there correctly.
    I think this type of coordination, proactive activity of 
doing this planning, would be extremely helpful. It is 
something we have never seen, frankly.
    Mr. Inslee. Maybe I could ask folks from the industry. Does 
it make sense to try to have a new regime where we charge the 
Federal government to go out and identify areas we could call 
energy zones that are almost prepermitted? Is that something we 
should be thinking about?
    Mr. Bak. I think that could be useful in incentivizing 
developers, project developers along with technology 
developers, to actually finding economic zones.
    If there are groups who would do the symmetry, the 
measuring of the profile of the sea floor, who would help do 
some of the prepermitting on the environmental side that would 
be very, very valuable because it removes that up front cost. 
Yes, I think that would help.
    Mr. Hagerman. In NOAA, when NOAA was given charge of the 
OTEC program in the early 1980s one of the outcomes of that was 
to identify certain zones that were used to characterize both 
the resource, as well as the environmental effects.
    These were kind of like reference study zones where 
developers could then go in and say gee, if I put my technology 
here it would cost this, so there is also some precedent in 
doing that at least with OTEC. You could have a zone that 
everybody would agree OK, here is the baseline data.
    Of course, the identification of the zone would have to 
involve the other stakeholders to make sure that there are 
minimal conflicts there, but then once you have that zone that 
could also be a reference point to see how well the technology 
is doing as it goes through generation after generation.
    Mr. Hoagland. As I mentioned in my testimony, the idea of a 
resource assessment, a national resource assessment, is 
important, and an important example of that is the OCS program 
itself where the U.S. Geological Survey and MMS are involved in 
a resource assessment of the oil and gas resources offshore.
    There also is precedent in that program for the pooling of 
industry activities in mapping the resource, which could reduce 
duplication, so that is another thing that should be 
considered.
    Mr. Rader. Congressman, I think you are exactly right. The 
choice of place will be essential to getting this right both on 
the front end and the back, and what we need to learn from 
pilots can be maximized by choosing those places where both the 
ecological and technological questions can be answered in the 
long term as commercialization proceeds to minimize conflicts 
between existing users, including commercial fishermen and 
recreational fishermen and these new uses of the exclusive 
economic zone.
    Mr. Inslee. So let me get to potentially the biggest 
problem we have with this--the surfers. My son is a surfer, and 
his fellows have been asking him is this going to affect the 
surfing, which is the make or break issue, of course, in the 
nation.
    I have told him no, it will not. It will be an 
infinitesimal impact on surfing waves. Is that correct?
    Mr. Grader. There has been a big protest right now off of 
Scotland. I didn't know you could surf Scotland, but apparently 
you can, and there has been a protest there. The surfers are 
claiming that this will reduce the wave heights by 10 feet.
    How valid that is I don't know, but certainly the surfers 
are going to have to be considered in all this planning effort.
    Mr. Bak. I can definitely speak to that. The simple physics 
of it, using our device, a point absorber, means that you have 
to attenuate a lot of mass, a lot of water movement, with your 
actual device in order to make a measurable impact on the wave 
energy.
    It is very, very, very difficult to attenuate the waves and 
actually reduce the height of the waves for surfers. I think it 
is a fear of the unknown. I think you need to engage the 
stakeholders very, very early on. We did that successfully with 
surfers in Makah Bay.
    It is just telling people so they are not afraid or unsure 
of what the result may be, but physically it would be 
difficult.
    Mr. Inslee. So the technical response to the surfer inquiry 
would be then chill out, dude? Would that be the response?
    Mr. Bak. Exactly.
    Mr. Inslee. Do any of you have any comments about the 
legislation that I have introduced? Hopefully some positive, 
but if there are any ideas for constructive criticisms, we 
would love to hear it.
    Mr. O'Neill. Yes. Actually, Congressman Inslee, I was very 
heartened by the first panel and the second panel in terms of 
the comments made by NOAA and the comments made by the 
gentleman representing the different states.
    NOAA actually asked specifically for adaptive management 
and embracing the adaptive management principles. Additionally, 
the gentleman representing the different states was looking for 
a programmatic environmental impact statement.
    I think that programmatic environmental impact statement 
could also go a long way to providing some of the environmental 
studies that have been suggested by the panelists on this 
second panel today.
    Mr. Rader. Congressman, Environmental Defense looks forward 
to working with you to get this key issue right, and we also 
side with Mr. Diers in suggesting that blending in an 
appropriate dose of ecosystems into the great technological 
proposals and management proposal that you have put on the 
table would go a long way toward meeting all of our objectives.
    Mr. Bak. I would like to thank you as well, Congressman, 
for the help that you have given us over the last few years 
throughout the permitting of the Makah Bay project and the help 
that your office has given us.
    It has helped us trailblaze in wave energy, and I think the 
bill that you have introduced is fantastic for that push to get 
this industry growing. We definitely believe in a number of the 
items that you have included in that bill and would like to 
stress that we would like to be a part of that process in 
offering any information that we can going forward.
    Again, thank you very much for your continual help.
    Mr. Grader. Let me just add I think one thing. Part of a 
bigger issue beyond your bill, but other legislation, is I 
think the example of trying to plan for this wave energy and do 
it in a successful way really gets at the point of our need for 
a national ocean policy because then we could really begin 
planning all these activities in our ocean in a coherent way, 
which we have not done to date.
    Mr. Inslee. Thank you.
    Ms. Bordallo. I thank the gentleman from Washington.
    The Co-Chair, Mr. Costa, has returned and so he probably 
has some questions for the witnesses and will close off the 
hearing, but before he does I would like to invite all of you 
on the panel to take a look at Guam and the oceans around the 
territory for new wind and wave technology. Will you do that?
    Mr. O'Neill. Absolutely.
    Ms. Bordallo. Thank you.
    Mr. Chairman?
    Mr. Costa. [Presiding.] Thank you, Madam Chairwoman. I 
appreciate your solid efforts. I unfortunately had a conference 
call, and then we had some votes. I know that this panel did a 
good job. I read your testimony last night.
    Mr. Grader, long time no see.
    Mr. Grader. Yes, it has been, Mr. Chairman.
    Mr. Costa. How are our fisheries doing?
    Mr. Grader. It is a mixed bag.
    Mr. Costa. Yes, I know.
    Mr. Grader. Yes.
    Mr. Costa. The efforts to try to deal with renewable 
sources of energy, both as it relates to wave action, and I 
appreciate the conversation, the exchange between the gentleman 
from Washington state. I, too, have a relative who seems to be 
an aggressive surfer, and I know how intense they can be.
    I am just wondering. Has your association that has been 
long active in water-related issues in California taken the 
time to examine the potential impact as it relates to both wind 
action and wind power, as well as wave power?
    I know these are prototypes and they haven't yet been 
implemented, but given the interest and the potential it seems 
to me we need to understand the impacts on fisheries.
    Mr. Grader. I think we are just beginning to understand 
this. Like I said in my testimony, I think we are intrigued 
with this for obvious reasons, and one thing that obviously you 
would be concerned with is we see these as a mechanism for 
perhaps powering desal plants, which could help take some 
pressure off of water use, free up water for agriculture. Of 
course, we see it as freeing up water for in-stream and doing 
that.
    The biggest issue here is other than what potential impacts 
it may have on the environment, and, like I said, I think those 
will probably be minimal will be my suspicion, but I think the 
issue is just one of space. Can we place these in areas where 
they don't interfere with fishing either from the standpoint of 
preclusion to fishing grounds or creating navigation hazards?
    I think what Mr. Inslee had mentioned was the idea of some 
proactive planning could perhaps do that, so people are not 
simply going to be where there is a fisherman, a recreational 
fisherman or whoever or a coastal community reacting to these 
type of things.
    If you bring them all together initially and start planning 
for it, it seems to me it would make a lot more sense and 
perhaps make this go faster, make it less expensive and do it 
with much less controversy and chaos.
    Mr. Costa. Let me just ask one other quick question. I know 
that artificial reefs have been an effort that we have tried to 
pursue in California and elsewhere with some mixed success. Do 
you think these have any potential for habitat purposes?
    Mr. Grader. Mostly not. I think they are overblown mostly 
by some people that just want to leave their debris in the 
ocean. I mean, I suspect you could probably make a case for 
plastics in the ocean, the fact that things are----
    Mr. Costa. I am not making that case, Mr. Grader. You and I 
go back a long way.
    Mr. Grader. Yes. Yes.
    Mr. Costa. I have supported a lot of fishery restoration 
efforts over the years, as you know.
    Mr. Grader. No, I know that, and we appreciate that. I 
think I am a little bit nervous about people proposing----
    Mr. Costa. No. I just asked the question. I understand.
    Mr. Grader.--steel archipelagos or any other type of 
archipelago out there.
    Mr. Costa. Mr. Bak, I wasn't here to hear your testimony, 
but I did read it. I wanted to ask you specifically how far 
away are we from the establishment, and Mr. Inslee--I am sorry 
he left--talked about his bill, but where we can really begin 
to get a handle through a number of prototype efforts on the 
potential power, the challenges we face, how we deal with the 
application process and so forth. I mean, are we talking about 
a year? Two years? Where do you think we are?
    Mr. Bak. This summer we will be installing one of our 
devices with Oregon State University off of Newport, Oregon. 
The following year we are going to upgrade the device using the 
data from the year that we have collected it being in the 
water, and then the following year, in 2009, we are going to 
install our first megawatts of devices producing power 
connected to the grid in Washington state.
    Mr. Costa. Where else in the country or in the world? Are 
we at the cutting edge, or are there other places we should be 
looking at?
    Mr. Bak. In the world right now there is not a cumulative 
megawatt of wave energy installed anywhere, so we are planning 
for the----
    Mr. Costa. We are at the cutting edge?
    Mr. Bak. Exactly, and we are planning for this to----
    Mr. Costa. And jobs that could be created? Do you have any 
perspective?
    Mr. Bak. Right now we are bringing in foreign investment to 
build our device in Oregon with Oregon Iron Works and SAIC. 
During that process we are going to employ 10 to 20 people who 
are actually turning and bending steel, and that is for one 
device, in addition to a number of technical consultants.
    If we were to build a 100 megawatt array we are looking at 
somewhere close to 100 people for the construction and 
fabrication process and then maybe 20 to 30 on an ongoing basis 
to manage and maintain the array, so this does create jobs. 
This does bring in foreign investment, and this is part of the 
new energy economy.
    If we can find a way to streamline the process for us to 
spend our money getting devices in the water, we will create 
jobs.
    Mr. Costa. So comparable to the embryonic effort with wind 
power that many of us witnessed back in the 1970s and in the 
1980s, do you see a similar type of progression with regards to 
wave power if successful or more accelerated?
    Mr. Bak. I would say with wave energy I see it as being 
somewhere where wind was in the 1990s. We are at the stage now 
where we are coming close to competing with offshore wind in 
level of technical development.
    Right now wind projects still find it difficult to be 
financed by banks offshore. We are at the stage where we can 
get bank involvement in our technology, meaning we can borrow 
other people's money and use it to build out our technology 
aggressively, so I can see the wave energy industry moving 
toward commercial projects in the next three to five years, and 
that is what we intend.
    Mr. Costa. The one facility that you are talking about in 
Washington, I was looking at the different schematics here. 
Which plan are you looking at for the one megawatt?
    Mr. Bak. It is using the AquaBuOY technology.
    Mr. Costa. The AquaBuOY. OK. And I guess best science has 
yet to determine which of the different technologies. I mean, 
that is why you have prototypes which is ultimately going to 
provide the most amount of energy, the least amount of impact 
and the best bang for your buck.
    Mr. Bak. And it has to do as well with the financing of 
this technology. There is a little financial push that is 
needed to really move this industry to the next level to get 
the same attention as ethanol, as wind, et cetera.
    The financing of the technology and providing a level 
playing field for them to compete is something that we are very 
keen on seeing happen through various bills, et cetera.
    Mr. Costa. And I suspect you added whatever other comments 
you wished during your testimony about what we need to be 
considering here to try to encourage the efforts?
    Mr. Bak. Yes. If I can stress one aspect of our written 
testimony is that I think investor tax incentives right now 
would be very, very useful for the market to bring capital into 
this space, and then the market and the investors can determine 
which technologies succeed based on their performance, based on 
their environmental impact, based on many factors.
    This again is an incentive that was used in Denmark in 
conjunction with a feed-in tariff in the 1980s that grew a 
whole wind energy industry that still today has a dominant 
market share, and even GE can't knock the Danish wind turbines 
out of having that market share, so there is that same 
opportunity here in America.
    Mr. Costa. Tax incentives. Why didn't I think of that?
    Mr. Bak. You can use them initially and scale them back.
    Mr. Costa. No. You don't have to belabor that.
    Mr. Bak. I am a big, big, big fan.
    Mr. Costa. Right. Everybody seems to discover them at some 
point.
    Anyway, I have belabored this committee enough. I have 
certainly exceeded my time. I hope I haven't exceeded the 
patience of my fellow Co-Chair of this Subcommittee.
    We appreciated the Subcommittee on Fisheries, Wildlife and 
Oceans taking the time to do this with us. I think it was a 
good collaborative effort, and we will continue to look at more 
efforts when we can do this. It saves time, saves staff time. 
We appreciate the staff's effort on this as well.
    I believe at this point, Madam Chairwoman, unless you have 
something else you would like to say, we are going to ask 
unanimous consent to allow for the submission of questions for 
the record. We ask all the witnesses to respond to those 
questions within 10 days.
    Without any further ado, we will wrap up this important 
hearing. I want to thank all the witnesses, and we will follow 
your efforts closely. Thank you.
    [Whereupon, at 5:39 p.m. the Subcommittees were adjourned.]

    [A letter submitted for the record by John Alton Duff, 
J.D., LL.M., Environmental, Earth and Ocean Sciences 
Department, University of Massachusetts/Boston, follows:]
April 24, 2007

Dear Chairwoman Bordallo, Chairman Costa, and Subcommittee Members:

    Thank you for the invitation to submit testimony to this joint 
hearing of the House Subcommittee on Fisheries, Wildlife and Oceans and 
the House Subcommittee on Energy and Mineral Resources on ``Renewable 
Energy Opportunities and Issues on the Outer Continental Shelf.'' While 
I am not able to appear personally, I submit for your consideration the 
article Offshore Management Considerations: Law and Policy Questions 
Related to Fish, Oil and Wind, published in Volume 31 of the Boston 
College Environmental Affairs Law Review at pages 385-402 in 2004.

Sincerely,

John Duff, J.D., LL.M.
Assistant Professor
University of Massachusetts/Boston
100 Morrissey Blvd.
Boston, MA 02125-3393
(617) 287-7445
[email protected]

]NOTE: The article has been retained in the Committee's official 
files.]

                                 
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