[Senate Hearing 110-134]
[From the U.S. Government Publishing Office]
S. Hrg. 110-134
ALTERNATE ENERGY-RELATED USES ON THE OUTER CONTINENTAL SHELF
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
TO
RECEIVE TESTIMONY ON ALTERNATE ENERGY-RELATED USES ON THE OUTER
CONTINENTAL SHELF: OPPORTUNITIES, ISSUES, AND IMPLEMENTATION OF SECTION
388 OF THE ENERGY POLICY ACT OF 2005
__________
JUNE 7, 2007
Printed for the use of the
Committee on Energy and Natural Resources
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37-581 PDF WASHINGTON DC: 2007
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
DANIEL K. AKAKA, Hawaii PETE V. DOMENICI, New Mexico
BYRON L. DORGAN, North Dakota LARRY E. CRAIG, Idaho
RON WYDEN, Oregon CRAIG THOMAS, Wyoming *
TIM JOHNSON, South Dakota LISA MURKOWSKI, Alaska
MARY L. LANDRIEU, Louisiana RICHARD BURR, North Carolina
MARIA CANTWELL, Washington JIM DeMINT, South Carolina
KEN SALAZAR, Colorado BOB CORKER, Tennessee
ROBERT MENENDEZ, New Jersey JEFF SESSIONS, Alabama
BLANCHE L. LINCOLN, Arkansas GORDON H. SMITH, Oregon
BERNARD SANDERS, Vermont JIM BUNNING, Kentucky
JON TESTER, Montana MEL MARTINEZ, Florida
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
Frank Macchiarola, Republican Staff Director
Judith K. Pensabene, Republican Chief Counsel
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* Senator Thomas passed away on June 4, 2007.
C O N T E N T S
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STATEMENTS
Page
Allred, C. Stephen, Assistant Secretary for Land and Minerals
Management, Department of the Interior......................... 2
Bak, Jason, CEO, Finavera Renewables, Inc., Vancouver, British
Columbia....................................................... 28
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................ 1
Domenici, Hon. Pete V., U.S. Senator from New Mexico............. 8
Grainey, Michael W., Director, Oregon Department of Energy, on
Behalf of Governor Ted Kulongoski, Salem, OR................... 14
Robinson, J. Mark, Director, Office of Energy Projects, Federal
Energy Regulatory Commission................................... 9
Steve, Jaime, Legislative Director, American Wind Energy
Association.................................................... 36
APPENDIXES
Appendix I
Responses to additional questions................................ 41
Appendix II
Additional material submitted for the record..................... 45
ALTERNATE ENERGY-RELATED USES ON THE OUTER CONTINENTAL SHELF
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THURSDAY, JUNE 7, 2007
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:05 a.m., in
room SD-366, Dirksen Senate Office Building, Hon. Jeff
Bingaman, chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW
MEXICO
The Chairman. I think we'll go ahead and get started. I
believe Senator Domenici is on his way, and I know some of the
other Senators are, as well; but, unfortunately, we're going to
have some votes here in the next hour, I believe, on the Senate
floor, so we need to go ahead.
Today, the committee will hear testimony regarding the
opportunities for alternative energy on the Outer Continental
Shelf. I look forward to hearing about the role that
alternative energy generated on the Outer Continental Shelf can
play in meeting our Nation's energy needs.
One focus of the hearing will be the progress in
implementing Section 388 of EPAct 2005, which authorizes the
Secretary of Interior to issue leases, easements, and rights-
of-way for alternative energy projects and alternate uses on
the OCS.
Pursuant to that authority, the Minerals Management
Services is developing regulations and a programmatic
environmental impact statement for an alternative energy and
alternate-use program on the OCS. However, I understand that
the Federal Energy Regulatory Commission is also asserting
jurisdiction under the hydropower provisions of the Federal
Power Act for purposes of licensing ocean energy projects on
the OCS.
The MMS has filed formal protests to the assertion of
jurisdiction by FERC over these projects. MMS argues that the
hydroelectric licensing provisions are not appropriate for wave
energy projects. For example, MMS points out that a 30- to 50-
year license under the hydropower provisions is too long for
exclusive use by prototype projects with uncertain cumulative
impacts. It's unclear to me whether both agencies should play a
role with respect to authorizing these projects. One goal in
enacting Section 388 was to simplify the authorization process
for alternative energy projects. FERC's hydroelectric licensing
process has a history of being complex. I'm not certain that
applying the hydroelectric licensing process fits that well in
this context.
I understand that FERC and MMS have been working on a
memorandum of understanding on these jurisdictional issues, and
look forward to hearing from the Department of Interior, FERC,
the State of Oregon, and other witnesses on the topic.
Long-term potential for the generation of electricity off
the coasts of the United States is enormous. National Renewable
Energy Laboratory estimates there's a potential for 266
gigawatts of wind energy development on the OCS. According to
an Electrical Power Institute study, the estimated potential
for wave and current power from our oceans is over 350 billion
kilowatt hours per year. It's important that the process for
authorizing these projects facilitates production of this
energy, also that it ensures environmental protection and
appropriate siting.
So, I thank all the witnesses for being here. We have two
panels. Why don't we start with the first panel. We're very
pleased to have the Honorable Stephen Allred, who is the
Assistant Secretary for Land and Minerals Management in the
Department of Interior; J. Mark Robinson, who is the director
of the Office of Energy Projects for the Federal Energy
Regulatory Commission; and Michael W. Grainey, who is the
director with the Oregon Department of Energy, in Salem,
Oregon.
Thank you all for being here. Why don't we just have you
summarize your testimony in that order that I've introduced
you, and we'll have some questions.
So, Steve, thank you for being here.
STATEMENT OF C. STEPHEN ALLRED, ASSISTANT SECRETARY FOR LAND
AND MINERALS MANAGEMENT, DEPARTMENT OF THE INTERIOR
Mr. Allred. Thank you, Mr. Chairman, for giving us the
opportunity to discuss alternative energy. We continue to be
concerned, as I've talked with you before, about the imbalance
between our energy consumption in the United States and
domestic energy production. In the months since you've
confirmed me to this position, I've become acutely aware of
that issue and the challenges that we face as a Nation
regarding our energy needs. I've come to believe that there is
no silver bullet. We have to aggressively pursue all of the
energy opportunities that we have if we're to meet those needs.
Increasing the supply of renewable and alternative fuels is
imperative in that effort.
The Energy Information Administration's 2007 Annual Energy
Outlook estimates that, between 2007 and 2030, renewable energy
production will grow by 57 percent, and, by 2030, will account
for 10 percent of the domestic production and 7 percent of our
consumption. Interest in the Outer Continental Shelf-based
alternative energy development in the United States is growing
rapidly, particularly in the Northeast and along the West
Coast.
As you are probably aware, New York, Oregon, and
California, for example, have set specific targets for
renewable energy production. With the enactment of EPAct in
2005, Congress gave Interior new authorities for encouraging
and facilitating the development of these promising new energy
resources.
Today, I'll focus specifically on the Minerals Management
Services Outer Continental Shelf Alternative Energy Program.
Through Section 388 of EPAct, Congress recognized that
effective development and management of alternative energy
would require comprehensive authority to permit access in a
fair and equitable manner, to assure environmental and
operational compliance, and to achieve a fair return to the
Nation. Congress provided that authority to Interior for the
OCS.
While the Department's the lead agency for this program,
MMS continues to work with other agencies to make certain that
the unique role of each agency is considered and addressed
while providing for a single-point processing, to the extent
possible.
Questions have arisen, as you indicated, as to which
Federal agencies have authority to authorize certain OCS
projects. To address these questions, short of any legislative
action, MMS approached the Federal Energy Regulatory Commission
to seek the development of a memorandum of understanding to
resolve these issues specifically with regard to wave energy.
On June 5, after a number of meetings, the Department
provided a draft of a memorandum to FERC, which I understand
they are currently reviewing. While we believe that EPAct
established MMS as the lead agency with regard to the OCS, we
want to assure that FERC's concerns regarding the transmission
of electrical energy are addressed as part of our regulatory
program.
With regard to development of the OCS Renewable Energy
Program under EPAct, the Department and coastal States, with
which will receive, as you remember, 27 percent of the revenues
generated within the first 3 miles of the Federal waters off
their shores, share a common goal of promoting the development
of new alternative energy technologies in the marine
environment in a safe, orderly, and environmentally responsible
manner.
In developing this program, MMS has held ten scoping
meetings and nine public hearings on the draft programmatic
EIS, which was published on March 21 of this year. The public
comment period ended on May 21. We anticipate that the final
programmatic EIS will be issued in late summer.
To implement the proposed program, MMS also must draft
proposed rules, and, during that period of time, we have held
four regional stakeholder meetings in the Northwest, Northeast,
and the South, to discuss the Alternative Energy Program. That
program is now under internal review within the Department, and
we anticipate that we will have that proposed rule late this
summer.
There were two projects that you also gave us--responsible
for the legacy projects, both Cape Wind and the Long Island
Offshore Wind Project. Just a word about those.
For Cape Wind, we anticipate the publication of the draft
EIS in August of this year. We will be holding public hearings
in Massachusetts on the draft EIS this fall, and issuing a
record of decision early in the summer of 2008.
In June 2006, we conducted public scoping meetings in
preparation of the draft EIS for the Long Island Project. Since
that time, we have identified additional information that we
need in order to complete that EIS, and we are working with
Florida Power & Light and Long Island Power Authority to gather
that information.
Producing energy from alternative and renewable energy
resources is critical to the Nation's energy portfolio. We are
working to achieve a clear, efficient, and easily understood
regulatory program that will encourage the most rapid
development of that energy resource. We are committed to such a
program, and to working both with this committee and others to
assure that it is in place and operating efficiently.
Thank you for the opportunity to visit with you today.
[The prepared statement of Mr. Allred follows:]
Prepared Statement of C. Stephen Allred, Assistant Secretary for Land
and Minerals Management, Department of the Interior
Mr. Chairman and Members of the Committee, 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 Energy and 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 10 years--20 in
10. 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.
The Energy Information Administration's (EIA) 2007 Annual Energy
Outlook estimates that consumption of renewable energy will grow from
6.5 quadrillion British Thermal Units (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
EP Act. This is an increase of about 1 quadrillion BTUs more than EIA
estimated in its 2005 Annual Energy Outlook. The EIA currently
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, plays a significant role 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. The EP Act 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 proposed, 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. The Department of the Interior is regarded
as the Federal Government's primary ``land manager.'' 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 this Committee to include the
Administration's legislative proposal as part of the EP Act.
Section 388 of the EPAct amended the OSC 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 manage 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.
While the Department is the lead agency for this program, the MMS
continues to work with its sister agencies to make certain that the
unique role of each agency 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 public comment period for the
renewable energy and alternate use draft programmatic environmental
impact study (EIS), developed by the MMS, closed on May 21, and MMS is
reviewing the comments received. 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 discussing with the Federal Energy Regulatory Commission (FERC)
a Memorandum of Understanding (MOU) to coordinate Federal efforts in
reviewing and authorizing these exciting new proposals. The
Department's desire with regard to that memorandum is to assure that
FERC's interest and authorities with regard to the transmission of
electrical energy issues are considered as part of the regulatory
program for which we believe MMS has the lead responsibility on 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. We believe that this transparent process allows
those interested in developing projects, the states, Congress, and the
public to understand and provide their input into how that the program
is established. While we recognize that this creates some delay for
project proponents, we believe that potential delays and challenges
after the program is adopted will be minimized.
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.
The MMS is preparing rules to guide the development of the program
activities. At the same time, MMS's programmatic EIS will 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. The public comment period for the draft
programmatic EIS closed on May 21, 2007 and MMS held public hearings on
the document in April and May of 2007. The MMS is reviewing the
comments received and revising the programmatic EIS where appropriate.
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.
The 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.
The Chairman. Well, thank you very much.
Let me just, first, ask if Senator Domenici wanted to make
any kind of opening statement before we go on with these other
two witnesses.
Senator Domenici. I have a very brief one, and I'll just
put it in the record, Mr. Chairman. Thank you.
The Chairman. All right.
[The prepared statement of Senator Domenici follows:]
Prepared Statement of Hon. Pete V. Domenici, U.S. Senator From
New Mexico
Good Morning. I'd like to thank Senator Bingaman for calling this
hearing. I'd also like to add my thanks to our witnesses for being with
us today.
The purpose of today's hearing is to receive testimony on the
implementation of Section 388 of the Energy Policy Act of 2005. Section
388 represents a new Congressional policy designed to encourage the
development of alternate energy projects on the Outer Continental Shelf
such as offshore wind and ocean energy.
The potential energy production from these alternate projects is
significant. According to the Energy Department, offshore wind
resources could generate an additional 2,500 gigawatts (GW) of energy.
And FERC estimates that new power produced from ocean currents, tides,
and wave action could double the nation's existing 54 GW of hydropower
capacity. DOE calculates that one GW alone can power up to 800,000
households.
Under EPAct, Congress directed the Minerals Management Service, in
consultation with other relevant federal agencies, to issue the
necessary regulations for alternate energy production on the OCS within
9 months of the bill's enactment. We are still waiting for these
regulations to be issued.
I'm disappointed that it is taking so much time for the MMS to
develop its program and get it up and running. Almost two years after
the enactment of EPAct, we still don't have any offshore wind energy
projects in this country--far behind what Europe has already achieved.
We are now in a situation where the proposed Cape Wind project, which
has received all of the needed state permits, is in danger of having
those permits lapse before the MMS takes action. This is not what
Congress intended.
I also understand that there is an ongoing effort between the MMS
and FERC on a Memorandum of Understanding to govern how the two
agencies interact for those wave projects located wholly or partially
on the OCS. I encourage the Administration to resolve this interagency
dispute.
In my opinion, we should not be placing this promising, clean
energy on hold. The federal government must work to get the alternate
energy program for the OCS in place as soon as possible.
I look forward to today's testimony. Thank you.
The Chairman. Mr. Robinson, why don't you go ahead. Thank
you.
STATEMENT OF J. MARK ROBINSON, DIRECTOR, OFFICE OF ENERGY
PROJECTS, FEDERAL ENERGY REGULATORY COMMISSION
Mr. Robinson. Mr. Chairman, Senators, my name is Mark
Robinson and I am the director of the Office of Energy
Projects. We're responsible for the authorization of LNG
terminals, the certification of natural gas pipelines and
storage reservoirs, the permitting of transmission lines for--
under backstop licensing authority, and, more significant to
this hearing, the licensing of hydroelectric projects, to
include these new technologies that are before us now.
Specifically, by ``new technologies,'' I mean current energy,
wave energy, and tidal energy.
We've had a surge of activity at the Commission in this
area, and I'd just like to highlight a few of the things the
Commission has done.
First, we identified criteria that would allow these
experimental energy facilities to be tested using the Verdant
rule. The Verdant rule allows an entity that identifies a
project as an experiment of short duration and not affecting
the grid as being available to be constructed and operated
without a license from the Commission. That was used by the
Verdant people in the East River, New York, and we have several
other entities that are using that avenue to test these
projects.
Second, we initiated a policy statement, or a policy
inquiry, on how we could use preliminary permits to better
facilitate these facilities. One of the things that we did
immediately was to institute a strict-scrutiny policy on
preliminary permits to make sure no one was trying to site bank
areas, to lock up areas that would put them off limits for
other individuals, who are really trying to pursue projects, to
go out and develop those projects.
Third, we have issued 38 preliminary permits for these
types of facilities, these new technologies, from Alaska to
California, and from Florida to Maine. There is a lot of
activity going on right now for real projects.
Fourth, we had our first license filing from Makah Bay.
Makah Bay is a project--a wave energy project--that's proposed
for off the shore of Washington. There, the application came in
November. Seven months later, we issued our environmental
assessment. If we get the cooperation that we think we will
from the National Marine Fisheries Services under the
Endangered Species Act, and from the State of Washington under
the Coastal Zone Management Act, we feel like we'll have that
project ready for Commission action within 1 year of its having
filed its application.
Then, fifth, we have been working with the MMS on an MOU,
and I'd like to make two points on that before I go on and
describe what we've been doing--or how our licensing process
can work for these new technologies.
First, the evidence we have indicates that the majority of
the work that we will be doing in this area will not occur in
the OCS. As an example, we have 21 pending preliminary permits
right now; only three of those even straddle the OCS, one is
fully within OCS, and 17 are inside the OCS. So, we think most
of our work is certainly going to be inside. It only stands to
reason; it's cheaper, the closer you are, in terms of these
particular facilities. Right now, testing these facilities has
a lot to do with how much they cost and how much it takes to
get them in the ocean.
The other point that I'd like to make is, in working on
this MOU we are trying very hard--and I think we're making
great progress, and we still have an early summer timeframe for
trying to complete this--for the MOU to effectively weave our
two systems into one, so that there would be no redundancies
and the industry would have a known path for how to work with
both agencies when there would be a project in the OCS.
Now on to the licensing process very quickly. It's three
phases. First, the preliminary permits that I mentioned
earlier--that allows an individual to do studies on the
economic, the engineering, and the financial feasibility of
projects during a period when they have reserved that site. It
authorizes no construction, but it just allows someone to take
a look over a 3-year period.
Second is licensing. There, it's a process of shared
decisionmaking. Licensing a facility--almost any kind of
infrastructure that I mentioned earlier is an exercise in
sharing that decisionmaking authority with other agencies,
State and Federal, who have decisional authority. Here, as an
example, in the Federal Power Act, section 4(e) would allow an
agency, like Minerals Management Service, to provide 4(e)
conditions that would be mandatory on the Commission, with no
opportunity for change. Whatever they required would have to go
into any license issued.
The Coastal Zone Management Act allows the State agency to
provide conditions on how a facility should be operated in
State waters, and also to deny a CZMA if they don't think it's
compatible with their coastal zone purposes.
Then, the State would also have, under 10(j), the
opportunity to provide conditions to protect fish and wildlife.
Unless the Commission found those to be inappropriate or
inconsistent with law, we have to accept them.
We've shown remarkable, I think, flexibility in the
existing processes to handle these projects. As I mentioned, in
Makah Bay, we set up a program of licensing that allowed the
NEPA process to be coincident with the application preparation.
For Verdant, we found a way to allow them to test that project,
even with the Federal Power Act and the provisions that it has
on needing a license to operate a hydropower project.
In closing, I'd just like to say that the Commission is
committed to encouraging this new technology. We feel like we
are uniquely positioned to ensure that the developmental and
nondevelopmental values associated with the development of any
infrastructure is adequately considered through our very
transparent and cooperative licensing process that includes the
States, includes the Feds, the national--the NGO's, the
natives--tribal concerns. Everyone has a role at the table, and
everybody can be very effective in helping us license these
projects in the public interest.
Thank you very much.
[The prepared statement of Mr. Robinson follows:]
Prepared Statement of J. Mark Robinson, Director, Office of Energy
Projects, Federal Energy Regulatory Commission
introduction
Mr. Chairman and Members of the Committee:
My name is J. Mark Robinson and I am the Director of the 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. I use the term ``new technologies'' to mean mechanisms
that produce hydropower from ocean currents, tides, and wave action,
without the use of a dam. 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.
The Commission regulates over 1,600 hydroelectric projects at over
2,500 dams pursuant to Part I of the Federal Power Act (FPA). Together,
these projects represent 54 gigawatts of hydroelectric capacity, more
than half of all the hydropower 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 nine 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, perhaps one day doubling our total hydropower
generation.
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.
Before I present the Commission's regulatory program for new
technology projects in more detail, I want to make two specific points
regarding how these projects may affect the Outer. Continental Shelf
(or OCS). First, we expect that the majority of new technology projects
will be located in state waters, not on the OCS. Of the 21 preliminary
permit applications for ocean projects pending at the Commission as of
May 31, 2007, three propose boundaries straddling the state-OCS line
and only one would be located entirely on the OCS. The other 17
applications are for sites within state waters. This distribution of
proposals reflects the cumulative costs of development, which include
the costs associated with purchasing and installing transmission cable
needed to bring project power onshore, making it advantageous to locate
projects nearer to the shore. Second, for those projects located wholly
or partially on the OCS, the Commission will work closely with the
Minerals Management Service of the U.S. Department of the Interior
(MMS), which has the responsibility to issue leases for these projects.
Currently, in the spirit of cooperation and good government, we are
working on a Memorandum of Understanding with MMS to weave the MMS and
FERC processes together and eliminate redundancy for the benefit of
applicants, other stakeholders, and the two agencies.
In my testimony I will describe 1) the strengths of the
Commission's existing program and its compatibility with the new
technologies, 2) the flexibility the Commission has exercised and
alterations the Commission is making to its processes to address the
concerns of stakeholders about specific aspects of that compatibility,
and 3) the Commission's efforts to work with the MMS to establish an
efficient program for new technology projects to be located outside
state waters on the OCS.
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 license to construct and operate a
hydropower project. (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 responded to a surge in applications
for preliminary permits for the new technologies, including over 40
applications in 2006 alone. As of May 31, 2007, the Commission has
issued 38 preliminary permits for new technology projects and requested
further information regarding many of the others that are pending. None
of the four issued wave permits fall on the OCS, nor of course do the
26 tidal energy permits. All eight preliminary permits issued for ocean
current energy projects are proposed for the OCS. Unlike wave and tidal
efforts, this energy source has not yet reached the prototype phase.
The Commission received the first license application for a wave
energy hydropower project from AquaEnergy, Inc., now Finavera
Renewables, in November 2006 and issued its environmental assessment in
May 2007. The Makah Bay Offshore Wave Energy Project is proposed for
Makah Bay in Clallam County, Washington. The project would consist of
four buoys, which together would generate up to 1 megawatt (MW).
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 200 free-flowing
turbine generator units (about 10 MW total), located below the water
surface in the East River in Queens County, New York.
Similarly, Commission staff has been working with Reedsport OPT
Wave Park LLC and other stakeholders as they prepare a license
application for a proposed wave energy project in Douglas County,
Oregon. The proposal is for up to 200 buoys generating up to 50 MW.
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.
Ultimately, we seek to 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. We
have improved our licensing process to include early engagement with
the applicant and other stakeholders, earlier and more predictable
study requirements, more certain time frames, 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, Native American tribes, and 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. The National Marine Fisheries Service (NMFS), within
the National Oceanic and Atmospheric Administration of the U.S.
Department of Commerce, is one federal agency that has been actively
involved in the Commission's licensing process for conventional
hydropower projects and we expect would be similarly involved in new
technology projects.
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 and
tribes in the preparation of a license application. 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 agencies that will extend to the new technologies.
flexibility to adapt commission processes to accommodate the
new technologies
While the Commission has a strong foundation for overseeing the
orderly development of these new technologies, we also recognize the
need to tailor the program to the characteristics of these new
technologies. Within our established process, significant flexibility
exists to apply 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) the development of much of the National
Environmental Policy Act information in parallel with the project's
license application development. In the Roosevelt Island case, the
process may also encourage negotiation of a settlement.
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.
In the case of experimental pilot projects the Commission has shown
flexibility in the application of 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. Staff continues to
explore new ways to accommodate experimental pilot projects within the
maximum flexibility allowed by statute.
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 set 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. Alternatives to the
strict scrutiny policy include: (1) continuing 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) declining to issue any preliminary permits for
projects involving new technology, in which case applicants could only
pursue such projects directly through the licensing process. Based on
the comments received, the Commission is now deciding which of these
options is in the public interest.
In the meantime, under the interim policy, the Commission is
ensuring 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 also
is processing 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.
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 while considering environmental, recreational, cultural, and
other uses of the resource. To address concerns about overlapping
jurisdiction of the Commission and the MMS, both staff and Chairman
Kelliher have met with representatives of the Department of the
Interior. The two agencies have agreed to work together to develop a
Memorandum of Understanding that will apply the best resources and
authorities of both agencies to develop an efficient and effective
program for regulating the development of hydropower in all offshore
areas, including the OCS.
As we have learned in our MOU discussions, the Commission and the
MMS bring complementary strengths to developing such a program. The
Commission offers an existing and adaptable hydropower licensing
program with the goal of ensuring that any project licensed will be
best adapted to a comprehensive plan for development of the water
resource in the public interest. This program would provide consistency
across hydropower generation projects in state and federal waters
including providing federal oversight for transmission of power from
the project site to the electric grid. MMS offers an established set of
tools for comprehensive planning for the development of the OCS and
extensive leasing experience as a land management agency. Efficient use
of the considerable resources of the two agencies could work to the
benefit of all parties.
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.
The Chairman. Thank you very much.
Mr. Grainey, go right ahead.
STATEMENT OF MICHAEL W. GRAINEY, DIRECTOR, OREGON DEPARTMENT OF
ENERGY, ON BEHALF OF GOVERNOR TED KULONGOSKI, SALEM, OR
Mr. Grainey. Thank you. Good morning, Mr. Chairman, members
of the committee. Thank you for the opportunity to speak for
Oregon Governor Ted Kulongowski.
Wave energy is a promising renewable resource, and Oregon
has some of the best sites in the country. It is essential that
the process for siting ocean resources be fair and timely.
Let me turn to the two questions I've been asked to
address.
First, should the U.S. Minerals Management Service, MMS, or
the Federal Energy Regulatory Commission, FERC, approve ocean
energy? Regardless of which agency is involved, the Federal
role in ocean energy should be limited in scope and time,
should recognize that ocean energy is different from dams and
other instream hydroelectric facilities. The Federal role
should not interfere with the State's traditional power to
determine power plant siting. Rather than choose between
agencies, we believe that any Federal agency Congress chooses
should follow these principles. For example, Section 388(e) of
the Energy Policy Act, which you mentioned previously, reversed
State jurisdiction and other rights over submerged lands,
subject to MMS's review. We support section 388(e), and similar
language should apply to FERC for any role Congress provides
FERC on ocean energy.
FERC has interpreted the Federal Power Act to include ocean
and other wave energy projects as hydroelectric facilities
under its jurisdiction, as you have heard. However, ocean
energy facilities are not comparable to dams and other instream
structures. They do not present navigability and other issues
that instream structures raise. For example, Oregon law treats
ocean energy different from hydroelectric facilities for State
tax credits.
Nevertheless, we have worked with FERC staff to cooperate
and coordinate our State review with FERC. We are willing to
work in a similar fashion with MMS.
FERC held a workshop last year on wave energy. We commend
FERC for publicly examining what its role should be, and for
some initial steps it has proposed from that workshop. If
Congress decides that FERC should play the lead role in ocean
energy, we urge you to clearly provide that FERC should not
treat ocean energy like dams. Instead, FERC's role should be
consistent with the principles listed above, and State siting
authority should be preserved.
This brings me to the second question: ``What role should
the States play in ocean energy facilities?''. We believe that
States should have the authority to decide whether to site
ocean energy facilities within their territorial waters.
Traditionally, States, not the Federal Government, have made
the siting decisions on power plants. Ocean energy facilities
are power plants. Ocean energy facilities are not instream
dams, and do not present Federal Power Act issues raised by
instream structures.
The State can address siting and environmental issues in a
more timely fashion than either Federal agency, with less cost
and expense to the developer and with more meaningful
involvement by the public. Even with an expedited process, it
could take up to 3 years or more for a Federal agency to make a
final decision on an ocean energy application for full
commercial operation on a large scale.
In contrast, Oregon's centralized process for siting large
energy facilities takes less than 1 year from receipt of a
complete application. Our process has sited thousands of
megawatts of power plants, hundreds of miles of transmission
lines, natural gas pipelines, and natural gas storage
facilities with a public process which is accessible and
convenient for our citizens. Our process has also denied energy
projects which failed to meet Oregon's strict environmental
standards.
Finally, our experience with the recent preemption of the
State in siting liquified natural gas, or LNG, facilities has
been that it has taken more time, not less, to reach a
decision, with a process which is more difficult for our
citizens. I urge you not to take that path for ocean energy.
In conclusion, our beaches are public property, and Oregon
law provides public access to all beaches to our citizens. The
State has a fundamental interest in the use of the Oregon
coast, and should make the primary decision on on whether, and
where, ocean energy power plants are sited on our coast. I've
provided more details in my written statement on our process.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Grainey follows:]
Prepared Statement of Michael W. Grainey, Director, Oregon Department
of Energy, on Behalf of Governor Ted Kulongoski, Salem, OR
Good morning, Chairman Bingaman, members of the Committee. Thank
you for the opportunity to present this testimony on behalf of Governor
Ted Kulongoski.
The Oregon Department of Energy is responsible for siting large
energy facilities, including power plants, transmission lines, natural
gas pipelines and natural gas storage facilities. The Department is
also responsible for implementing the state's energy policy of
promoting energy efficiency and renewable energy.
In 2005, Governor Kulongoski adopted a Renewable Energy Action
Plan, to guide Oregon's energy future. The Plan contains more than 130
recommendations to increase the use and development of renewable energy
in Oregon, including wave energy. These involve federal and state
legislation, as well as actions agencies, businesses and individuals
can take. Governor Kulongoski sent to the current session of the Oregon
Legislature a comprehensive legislative package to implement that Plan,
including over twenty measures in five bills. I have attached a summary
of the Governor's legislative package for your information.
A key part of that policy is the recent adoption by our Legislature
of Governor Kulongoski's Renewable Portfolio Standard, Senate Bill 838.
That standard is one of the most aggressive in the nation. It requires
that 25% of Oregon's total load come from new renewable energy by the
year 2025. This means that virtually all of Oregon's load growth must
be met by renewable energy.
This is a commitment the state is eager to make. But to do so we
must have renewable resources that are available and can be sited
efficiently. Wave energy is an emerging renewable technology and Oregon
has some of the most promising sites in the entire country. Oregon has
unique sites especially favorable for wave energy development based on
its wave resource and access to coastal transmission. It is essential
that the process for siting ocean resources be fair and timely.
Interest in wave energy in Oregon is high and is favorable in
coastal communities, so long as development is done carefully and in a
way that avoids adverse impacts on fishing, scenic vistas and
recreational uses. Oregon has worked with industry, local officials,
marine resource users such as crabbers and fishers, environmental
groups and the general public, to create a consensus roadmap for
developing wave energy.
Already four leading wave energy developers have received
preliminary permits at several locations off the Oregon coast. Three
more sites have permits pending. In addition, Oregon is a world leader
in wave energy research, with the team led by Doctor Annette Von
Jouanne at Oregon State University. Their research is helping to move
wave energy from a promising technology to a commercially viable source
of energy. As part of this work, Oregon State University has proposed
to develop a National Wave Energy Center off the Oregon coast to test
innovative wave energy devices. In fact, Oregon State is in the process
of deploying a test device this summer off the coast of Newport.
Governor Kulongoski has made a commitment to ensure that Oregon
leads the nation in the research and commercialization of wave energy
development in the United States. In addition to the Renewable
Portfolio Standard, initiatives of Governor Kulongoski on wave energy
include:
Creation of a new non-profit entity, the Oregon Wave Energy
Trust, to spearhead efforts to develop a wave energy sector in
Oregon, including a statewide environmental assessment, assist
in streamlining the regulatory process, fund R&D efforts, and
provide input for coastwide planning for wave energy sites
supported by coastal communities.
Designation of an Oregon Solutions project for the proposed
project off the coast of Reedsport. That designation provides
high priority involvement by the Governor's staff in a
collaborative process involving all stakeholders, including
affected citizens, local governments, interested industry,
utilities, state agencies and others. The project goal is to
develop consensus support for the first commercial wave energy
project in the United States.
$5.2 million in the Governor's budget for the 2007-2009
biennium for additional research and development of wave
energy.
Expansion of the state's business energy tax credit to 50%
on up to $20 million investment. The tax credit applies both to
wave energy generation projects as well as manufacture of
technology and equipment used for wave energy devices.
With that context, let me turn to the two questions I have been
asked to address.
Question 1. Should the US Minerals Management Service (MMS) or the
Federal Energy Regulatory Commission (FERC) Have Federal Authority Over
Ocean Facilities?
Answer. Regardless of which federal agency is involved, we believe
that the federal role in ocean energy facilities should be limited in
scope, complexity and timing. The federal role should be flexible,
recognize the unique nature of ocean projects as compared to
traditional river hydroelectric facilities, appropriately consider
state standards, adequately address state interests, and be
expeditious.
The federal role should not interfere with the state's traditional
power to determine power plant siting, including within the state's
territorial sea. The federal role should also not be duplicative of the
state review and it should not interfere with the state review. Rather
than choose between agencies, we believe that any agency Congress
assigns responsibilities for a federal role in ocean energy facilities
should follow these principles.
For example, Section 388(e) of the Energy Policy Act of 2005, which
provides authority to MMS to grant proprietary authorizations (leases,
easements and rights-of-way) for energy-related uses on the outer
Continental Shelf (beyond the three-mile limit), explicitly recognizes
and preserves state jurisdiction and other rights over any submerged
lands subject to MMS's review. We support Section 388(e). Similar
language should be included for any responsibility Congress gives FERC.
FERC has interpreted the Federal Power Act to include wave and
other ocean energy projects as hydroelectric facilities under its
jurisdiction, including those within the three-mile limit. These
facilities are not comparable to dams and other in-stream structures.
Nevertheless, we have engaged constructively with FERC staff to try to
coordinate state reviews with FERC's asserted role. We are willing to
work in a similar fashion with MMS for any duties Congress assigns to
that agency.
FERC recognizes that ocean energy facilities present different
issues than in stream hydroelectric facilities and held a workshop last
December to examine these issues. We commend FERC for taking the
initiative to publicly examine what its role would be and ways to
address the unique nature of these ocean sites. Attached is the
testimony I provided to FERC at that time.*
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* Document has been retained in committee files.
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We are also pleased with some initial steps FERC has proposed in
response to that workshop and we encourage FERC to act favorably on
more of the suggestions made at that workshop. If Congress decides that
FERC should play a role in ocean energy, we urge Congress to clearly
direct that FERC should develop a process for ocean sites that
recognizes the differences between ocean wave facilities and river
hydroelectric facilities, particularly within the three-mile limit. In
addition, FERC's scope of review and process should be consistent with
the principles listed above.
Question 2. What role should the states play in ocean energy
facilities?
Answer. States should have the authority to decide whether to site
ocean energy facilities within their territorial waters. Traditionally,
states, not the federal government, have made the siting decisions on
power plants located in their states.
Ocean energy facilities are not like dams and other structures
which may restrict navigation on navigable rivers. Ocean energy
facilities are power plants, which use mechanical energy to generate
electricity, and states should be allowed to apply their own
coordination process to address any localized impacts of these
facilities.
Section 388 of the Energy Policy Act of 2005, in providing MMS lead
responsibility for federal leasing decisions, does not preempt the
traditional role of the states in siting power plants. Instead, Section
388(e) explicitly preserves state authority to make siting and state
leasing decisions. For example, Section 388(e) preserves not only
Oregon's siting authority but also the authority of our Department of
State Lands to issue state leases for activity on state property. We
believe this approach makes sense, where federal and state agencies
focus on their respective areas. Under Section 388(e) MMS makes leasing
decisions outside of the three-mile limit, and the State makes power
plant siting decisions and leasing decisions for state property.
If Congress agrees with FERC's assertion of jurisdiction over ocean
energy facilities, we urge Congress to add language similar to Section
388(e) to apply to FERC.
The State can address siting and environmental issues in a more
timely fashion than either FERC or MMS can, with less cost and expense
to the developer and to the general public. Even with an expedited
process it would probably take either federal agency up to three years
to make a final decision on an ocean energy application for large scale
commercial operation.
In contrast, Oregon's process for siting large energy facilities
takes less than one year from receipt of a complete application. For
large energy facilities, Oregon has a centralized state siting process
in which the licensing decision is made by the state Energy Facility
Siting Council. The Siting Council's review covers issues normally
reviewed by other state and local agencies. The Siting Council's
decision must be made in less than one year from the time a complete
application is filed.
Oregon's process has successfully sited thousands of megawatts of
power plants, hundreds of miles of transmission lines, natural gas
pipelines and natural gas storage facilities, while providing a public
process which is accessible and convenient for interested citizen. Our
process has also denied applications for energy facilities which failed
to meet Oregon's strict environmental standards. Oregon's process for
siting large energy facilities works effectively for a wide variety of
energy facilities. That process provides meaningful public input while
resulting in a final decision in a timely manner.
For small energy facilities (less than 25 megawatts), Oregon has
also established a process to coordinate review among state and local
agencies called the Oregon Solutions process mentioned previously. The
Oregon Solutions process operates parallel to state and local licensing
and can shorten the licensing process by resolving issues early. It has
been used successfully on a number of important environmental and
energy issues in the last four years.
As mentioned previously, Governor Kulongoski has designated the
Reedsport Wave Energy Project an Oregon Solutions project. That
designation provides high priority involvement by the Governor's staff
in a collaborative process involving all stakeholders, including
affected citizens, local governments, interested industry, utilities,
state agencies and others. This process allows the State to act more
quickly and more flexibly than FERC to resolve issues for small ocean
resources.
Our Legislature also recently passed House Bill 2925, which
simplifies the process of siting test and research wave facilities,
which are not generating electricity for sale to utilities.
Finally, our experience with federal preemption of the state in
licensing liquefied natural gas facilities (LNG) is that the Energy
Policy Act of 2005 has not shortened the process of reaching decisions.
The state had nearly finished the first phase of its review of two LNG
facilities when the state's coordinated siting process was preempted by
other sections of the Energy Policy Act of 2005. The result caused
confusion and delay to everyone involved. The record of LNG facilities
and of hydro licensing shows that preemption of state siting is not
necessarily the way to expedite decisions to site ocean energy.
conclusion
Ocean energy facilities should be treated in the same way as other
power plants that are reviewed through a coordinated state process. The
federal role should be limited, streamlined and should not displace or
preempt the State role. Section 388(e) of the Energy Policy Act
provides a good approach that should apply to any federal agency
involved in ocean energy facilities.
Oregon, along with other states, has a fundamental interest in the
use of the territorial sea, as well as in the development of renewable
energy resources. Oregon has a fair and efficient process ready to
apply to siting ocean energy facilities, and there is no compelling
reason why that system should not apply to ocean energy facilities.
Thank you very much.
Attachment.--Energy Legislative Package for 2007
Provided below are summaries of Governor Kulongoski's energy
legislative package.
senate bill 838--renewable portfolio standard (rps)
Establishes a Renewable Portfolio Standard (RPS) for electricity.
The bill requires that 25% of Oregon's electric load come from new
renewable energy by 2025. The bill includes the following provisions:
1. The RPS requirement of 25% by 2025 applies to electric
utilities and any electricity service suppliers that serve at
least 3% of Oregon's electric load. This covers Oregon's three
largest electric utilities with over 75% of Oregon's electric
load. Depending on load growth, this will likely cover most of
the new resources needed to meet these utilities' new load.
2. The RPS sets interim targets of 5% by 2011, 15% by 2015
and 20% by 2020.
3. Oregon's 31 smallest consumer-owned utilities that serve
less than 1.5% of Oregon's electric load are exempt from the
25% standard but must meet 5% of their load from new renewable
energy by 2025. Utilities which serve between 1.5% and 3% of
Oregon's load must meet 10% of their load from new renewable
energy by 2025.
4. Eligible renewable resources include wind, solar, ocean,
geothermal, biomass, hydropower and other renewable resources
that were operational after January 1, 1995. Eligible
generating facilities do not have to be located in Oregon but
at least 80% of the electricity from these resources must serve
Oregon loads.
5. No utility will be required to give up access to low-cost
firm power from BPA or low-cost hydro contracts with the Mid-
Columbia dams owned by Washington PUDs.
6. The RPS is not expected to increase rates; but a cost cap
is built in as a backstop to limit any possible cost impact.
7. Compliance with the RPS can occur by owning eligible
resources, by buying the output of resources developed by
others, or by acquiring a limited number of unbundled Renewable
Energy Certificates.
8. The public purpose charge is extended through 2025. Use of
the renewable energy portion of the public purpose charge is
limited to small-scale renewable energy projects 20 megawatts
or less to encourage a diversity of the types of renewable
energy resources developed.
9. There is a non-binding goal that one-third of the
renewable energy resources will be small-scale renewable energy
projects.
house bill 2210--biofuels fuels package
Provides a package of measures to encourage greater development,
distribution and use of agricultural and forest material for biofuels,
for electricity and for other forms of biomass energy use. The bill
includes the following provisions:
1. Expands property tax incentives for biofuel and certain
fuel additive production facilities.
2. Establishes a new tax credit for producers and collectors
of biofuel raw materials, based on BTU content of feedstock.
3. Establishes a Renewable Fuel Standard for biodiesel and
ethanol based on in-state production.
4. Prohibits the sale of gasoline that contains MTBE and
certain other additives.
5. Provides mandate on State agencies regarding biodiesel for
backup power generation.
6. Creates an income tax credit for consumer use of biofuel.
7. Modifies the site certificate exemption criteria for
ethanol and biodiesel production facilities to preclude coal-
fueled facilities.
8. Maintains exclusive farm use (EFU) status for on-farm
biofuel production facilities.
house bill 2211--business energy tax credit (betc) changes
The Business Energy Tax Credit is amended to provide greater
incentives for renewable energy including the following:
1. Increases credit for renewable energy systems installed by
businesses from 35% to 50% and increases the project cost limit
from $10 million to $20 million.
2. Provides that the costs of constructing facilities to
manufacture renewable energy systems and components are
eligible for the increased tax credit for renewable energy.
3. Repeals the offset for federal tax credits for BETC
projects that also receive a federal credit.
4. Provides an incentive to builders of high performance
homes that reduce purchased energy use to near zero on an
annual basis.
5. Make combined heat and power projects (CHP) eligible for
the increased tax credit.
6. Increases the size of hydro projects eligible for BETC
from 1 megawatt to 10 megawatts for hydro projects meeting
state and federal requirements for fish and wildlife.
7. Makes homebuilders eligible for installation of renewable
energy systems in new homes but at the value of the Residential
Energy Tax Credit.
8. Applies to projects receiving final certification after 1/
1/07.
house bill 2212--residential energy tax credit (retc) changes
Makes the incentives for renewable energy more effective the
following changes:
1. Allows use of the RETC for more than one qualifying item
in the same year, e.g. for a solar water heater and for a solar
electric system, and/or for multiple energy-efficient
appliances.
2. Increases the maximum tax credit for fuel cells and for
wind generation, similar to the increase in solar electric
systems passed in 2005, from $1,500 to $6,000 over four years.
3. Effective date is 1/1/07.
The Chairman. Thank you all very much.
Let me just ask a question or two, and then defer to
Senator Domenici and Senator Craig.
First, Steve, let me ask you--you indicated that there's a
process in place between your agency and FERC to try to have a
memorandum of understanding as to who's responsible for what.
Do you have a clear idea that you could explain to me as to
what you see your job as, versus what you think FERC's job
should be? What are you trying to ensure has been considered
before you sign off on one of these projects? What do you
believe FERC needs to be sure has been considered?
Mr. Allred. Mr. Chairman, I would be glad to.
The things that we are concerned about with regard to the
OCS, that we assure, as we go forward on alternative energy
projects, are very similar to those that we would be concerned
about as we look at oil and gas development. These are large
structures. They are anchored to the floor of the ocean. If you
remember, a significant amount of the damage during Katrina
occurred when these structures broke loose. So, the anchoring
and the engineering that goes into those structures is very
important to us, to make sure that we have standards, and that
it's done correctly.
The Chairman. That is for the safety of the people who use
the high seas? It's a little different, in the sense that there
is not going to be any escape of wind, like there would be of
oil or gas, if you had some kind of a hurricane come through
and upend a facility.
Mr. Allred. Mr. Chairman, a lot of it will depend on how
these structures are constructed. They're engineered, of
course, but the safety I'm talking about is when one of them
breaks loose, and they are like a guided missile, as we saw in
Katrina. Most of the areas where these will occur are areas for
example, in wind, where there are high winds. That's the reason
for them.
The second concern we have is marine mammals. Again, when
we go offshore, it is the agency's concern, and mine, that we
not affect marine mammals, and that we do these things in an
environmentally sound manner. I think that's worked out well on
the oil and gas, in the standards that we have there.
The other issue we have to deal with, with FERC, is, while
they issue a preliminary permit, as you remember, the law you
passed requires us to provide leasing opportunities on a
competitive basis. So, we have to deal with the situation where
someone who may be spending lots of effort and lots of money in
developing one of these projects may not be the one, under a
competitive process, who ends up with the lease.
So, we've got to provide a mechanism on the OCS where our
processes, and those of FERC, align so that we are not putting
people at risk of spending lots of money, and then not being
able to proceed. That can be done, I'm confident.
We have no desire to develop electrical transmission
capability within Minerals Management Service, and that's where
we believe that FERC, in whatever role, has to play a part.
The Chairman. Mr. Robinson, let me ask you if you could,
sort of, answer the same question. How do you see the division
of jurisdiction, or the separation of concerns, maybe, is what
I'm trying to understand a little better. Are there things that
you are focused on, related to the electric grid, that are
distinct from what MMS has to do, or do you do some of the same
things that they're doing? Or how do you see that?
Mr. Robinson. I think we share a lot of the same concerns.
Certainly, we've placed over 1,400 miles of pipeline offshore,
over $3.3 billion worth of investment; and there, we have the
same concerns with mammals, transportation safety, navigation.
We work very closely with all the agencies that also share
those concerns, including mitigative measures and
authorizations to ensure protection of all those resources.
Specifically with MMS, there's a three-step process that
they go through: their leasing, their studies, and their
authorization to construct. What we're trying to do through
that MOU is to make sure that, as the Assistant Secretary said,
we don't overlap each other, or overburden each other. As an
example, one of the discussions we're having is, in that first
phase of their process, when they're doing the leasing, does it
really make sense for the Commission to issue preliminary
permits under those kinds of conditions? One of the things that
might come out of an MOU is the deferral of the preliminary
permit process to the leasing process. But that's only one
phase. We have very specific administrative things to work out
in all three phases.
The Chairman. So, your thought is, perhaps, at least, it
would be appropriate, first, for a person to go to MMS and get
a lease, and then come to you to get a permit, or to do the
permit--the study--preliminary study.
Mr. Robinson. That's certainly one model, where the lease
is taken care of, and then we go into the authorization to
construct, and the Commission would have a role there.
The Chairman. OK.
Senator Domenici.
Senator Domenici. Mr. Robinson, FERC has issued 38
preliminary permits for these new ocean wave technology
projects. To what extent, if any, is NOAA involved? How is FERC
coordinating with the States?
Mr. Robinson. NOAA is very deeply involved in everything
we're doing here, for obvious reasons. They have statutory
authority under the Endangered Species Act, and so we work with
them very closely. In fact, we've just initiated some
discussions with NOAA about how we can work with them in a
fashion to allow experimental projects to go forward more
quickly and not necessarily have to go through the entire
licensing process. As far as the States go, the same applies.
We work with the States, from the very beginning when we're
informed of a project, to see what the State concerns are, and
issues, and to try to get them to initiate their own permitting
and authorization processes, which we depend on. So, we work
very closely with both National Marine Fishery Service and the
State in these projects.
Senator Domenici. Mr. Chairman, I believe I'll save my
questions for the next panel.
The Chairman. All right.
Senator Salazar.
Senator Salazar. Thank you very much, Senator Bingaman.
I have a question to Assistant Secretary Allred, and to
Mark Robinson.
The potential for wind energy in the off-coast areas of the
U.S. is obviously great, from the information that we have
received. When you look at the statistics about how much wind
energy is being produced offshore in places like Denmark, they
are way, way ahead of the United States of America. What is
your view of what we are doing that might accelerate what we do
with respect to wind energy offshore?
Mr. Allred. Mr. Chairman, Senator, I think there's a huge
potential, as you have indicated, to develop these projects
offshore. There are a lot of technical challenges in doing
that, as you can imagine. These will not be without
controversy. The first two projects, what I call the legacy
projects that you asked us to proceed on under EPAct, are
tremendously controversial.
Senator Salazar. But are the controversial issues relating
to the esthetics, or are there environmental issues associated
with the controversy? What's the problem?
Mr. Allred. These are not simple questions, but I think the
biggest concern is that there's a visual impact. There is a
concern about their impact on wildlife, on birds. There also
have been a number of things enunciated by those who are
opposed to those projects. That being said, we will work
through that, just like we do with projects onshore. I think
there's tremendous potential. I think there are some tweaks
probably required with the Act. One of them has to do with
putting out met towers. The Act, as it was written, didn't
contemplate an ability to put out a short-term met tower in
order to gather data, for example. We think--and we've been
working with the committee staff--there needs to be a change,
perhaps, there to make that much easier so someone can gather
data very quickly.
Senator Salazar. Are there any regulatory or legal changes
to the 2005 EPAct that might make it easier to develop the wind
energy resources offshore?
Mr. Allred. In our discussions, Senator, with the committee
staff, we have identified that specific one, I think, that
would be best handled by an addition or a technical amendment
to the Act. It's really only a technical amendment, it has very
little impact. But it would quickly accelerate the ability to
go out and find out where the best spots are.
Senator Salazar. Mr. Robinson.
Mr. Robinson. Senator, we don't have any statutory
authority for the siting of wind energy, and so we really don't
have a role in that area.
Senator Salazar. OK.
Mr. Allred, the question related, then, to wave energy--and
I don't know if some of the other witnesses could comment on
that--how--what is the potential of that? We see the energy
that comes through waves in our oceans. How far along is the
technology, in terms of being able to capture wave energy?
Mr. Allred. Senator, I--just given the amount of interest
that has been generated, for example, over the issue of
jurisdiction--certainly think that we're going to see
applications and projects. Now, obviously, the economics of
those with respect to other power sources will determine,
really, whether they go forward. But we certainly are going to
be prepared to go forward and to do what we can to accelerate
any of these technologies, along with the other agencies.
Senator Salazar. Michael Grainey--from your point of view
in Oregon, as the director of the Department of Energy for
Oregon--what do you see the potential for both wind and wave
energy?
Mr. Grainey. Senator, they're both very great. Wind energy
is commercially viable now in Oregon. We have operating over
500 megawatts of wind power, another 1,000 megawatts have been
approved, and another 1,000 megawatts are pending in our siting
process. None of those are offshore. We've had no interest, by
developers, in offshore wind, and I think that's because we
have such good sites inland, in rural farming areas, where
they've been readily accepted, with no controversy.
Senator Salazar. So, there hasn't been controversy with
these 1,000 megawatts of development on wind energy?
Mr. Grainey. Not at all. There's only one site, recently,
that was applied for, a small site, that's near a sensitive--
visually sensitive area, that's raised some controversy.
Senator Salazar. How about wave energy? Anything going down
there?
Mr. Grainey. For wave energy, again, the potential is very
large. We estimate that nearly 5,000 megawatts of wave energy
could be developed off the Oregon coast. That's as much as our
entire electric load. Now, that will take time, and the costs
for wave energy are still significantly higher than other
energy. But, as we saw with wind energy, those costs can come
down quickly, and the technology is improving. I think, within
10 years or less, we will see significant commercial
development off the Oregon coast.
Senator Salazar. Thank you very much, Mr. Grainey.
Thank you all.
The Chairman. Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman.
Well, it's good to hear the general level of enthusiasm for
ocean energy. We've got about one-fifth of the coastline of the
United States up north, and we think that there is enormous
potential for ocean energy, tidal energy. We've got a couple of
different projects that are being looked at, and we believe
that there's great opportunity there.
I apologize if I ask a question that has already been
answered prior to my arrival here at committee this morning,
but this is directed to you, Secretary Allred, and to you, Mr.
Robinson. In your written testimony, you both say that FERC and
MMS are making progress in working out this memorandum of
understanding to share the authority, but I want to know
whether, in fact, that is truly the case, or whether we need
to, by statute, clarify EPAct. I know that when EPAct was
before us, and I voted for it, I intended to give MMS some
ability to provide for the comprehensive planning so that the
oil and gas leasing in OCS would not be negatively impacted by
the siting of other energy projects. But I didn't intend to
have FERC cut out of the reviewing, and, being the approving
agency for wind and ocean energy, electric projects,
particularly since FERC has shown its ability to approve these
projects in a relatively timely manner.
So, my question to you is whether or not Congress needs to
revisit this issue.
Secretary Allred.
Mr. Allred. Senator, just my own personal philosophy is
that you ought to make your laws as clear as they possibly can
be; but----
Senator Murkowski. We would agree.
Mr. Allred [continuing]. But, saying that, when I became
Assistant Secretary and saw what was going on, on this issue,
and the controversy that was happening, that was
counterproductive to both agencies. So, I decided to approach
FERC about sitting down and working out a way where we combine
our processes, and make it simple to carry out our
responsibilities. I think we're getting there. The last
version--it may be the first that we've traded, I don't know
how many have been passed back and forth--but we recently
provided a draft to FERC. I personally reviewed that, and I
think it's something that will work, and I look forward to
their response. The last thing I want is two Federal agencies
competing in a way that makes the development of this resource
undesirable or uncompetitive. But I also want to make sure that
we don't duplicate responsibilities. We have no intention, at
Interior, of developing the kinds of expertise that FERC has on
the electrical transmission side, and we believe that we bring
to it, because of the vast experience that we have in the OCS
and other energy sources, a tremendous amount of knowledge on
how to site and design these facilities, and on how to protect
the marine environment. We, for example, spent over $780
million in oceanographic and environmental studies on the OCS.
That's critical, I think, to having that knowledge, and to
combining the knowledge into a single process. We cannot afford
two separate processes.
Senator Murkowski. Mr. Robinson, what do you think, do we
need a statutory clarification?
Mr. Robinson. Not at this time, Senator. I think that we
are making good progress on the MOU. At FERC, we're very used
to working with a number of agencies in a shared decisionmaking
mode. I think that, as our experience in that area becomes more
apparent to MMS, a lot of the issues that we have right now
that still remain will be ironed out. We still are hopeful for
an early summer MOU to make this all happen.
One of the point, as I said earlier, the majority of this
type of work will probably occur inside the OCS, in any case.
The vast majority of our permits, and the one license that
we're working on, are all in the first 3 miles outside of the
OCS. I think that experience that we're gaining right now in
licensing projects will ultimately serve the purposes of both
FERC and MMS as we move into the OCS.
Senator Murkowski. Well, if progress with the MOU falls
apart, we'd like to know about it. So, thank you for your
answer.
The Chairman. Senator Craig.
Senator Craig. Thank you very much, Mr. Chairman.
In all of our wisdom, sometimes we paint in gray. Now,
having done that, Mr. Chairman, in EPAct, I find myself in the
very interesting situation--you've heard the old phrase,
``Steve is a friend, and Mark is a friend, and I'm for my
friends''? It is very clear to me that both FERC and MMS have
unique talents and unique specialties, and neither one should
develop the others.
So, carry the discussion on, if you would, Steve and Mark,
of the kind that you were having with the Senator from Alaska
as to where we get in memorandums of understanding that clearly
lay out a process and a procedure and a relationship that does
not deter, slow down, or bureaucratize the process at hand.
When I look at this, and I see MMS's jurisdiction in oil and
gas resource production, and all of the talents there, and FERC
clearly has jurisdiction in licensing of power and hydro, and
now we're taking that out into the ocean, it seems to me
there's some common ground for both, and that we shouldn't
shift full responsibility and unique talents from one to the
other, or vice versa.
So, carry us forward in the next iteration of, and how far
along are you, and if this is a truly cooperative environment
that you are now working in.
Mr. Allred. Senator Craig, we don't have comments back on
the first draft that we have, but, at least our desire within
MMS, and I believe that in FERC, is to find a way to solve this
issue and to, more importantly, come up with a process that
does not add delays, and hopefully will shorten the time by
which we can develop these energy resources.
There are always turf issues. I'm realistic, particularly
here in Washington, DC, in understanding that. We have to work
through them, and we're committed to do it.
Senator Craig. Mark.
Mr. Robinson. If you look at this--and we've had about a
month and a half of discussion now, and there has been an
exchange of a number of ideas on how we can coordinate our
processes. There's really three steps involved:
First is the leasing step. We have no expertise there, and
we have no desire to get involved with that.
The second is the studies step. The winner of the lease,
the leaseholder, is responsible for doing studies in the OCS to
determine what the impacts might be of any kind of placement.
There, I think that in our discussions it's clear that MMS
would take a lead there, we would support, in that second
phase.
The third phase is the authorization to construct. That's
where we do have a lot of expertise, in terms of conditioning
the construction, the operation, the maintenance of facilities.
Then, we inspect those facilities and have the ability to
penalize if somebody violates a condition that we place in that
authorization. I think that's where we bring a lot of
expertise, and we would like to work with MMS on how we can do
that third phase, after they've conducted the first, we've
cooperated on the second, and then we need to cooperate on the
third to get projects built and constructed in the right way.
That's more or less where we stand right now.
Senator Craig. Are either of you suggesting or proposing or
thinking that Congress ought to clarify or in some way
reproscribe? Both of you.
Steve.
Mr. Allred. Well, again, let me go back and qualify my
answer by the fact that my personal philosophy is, to the best
we can, things shouldn't be gray, because it's not the Federal
agencies that will take advantage of those, it is those who
want to oppose a project. Having said that, we were--before
this issue came before you--already proceeding to try to work
this out. As you know, these kinds of questions occur a lot,
and have occurred a lot. My attitude is, they should not get in
the way of doing our job. Given your decision, whether you
choose to take additional legislative action or not, we will
find a way to work with it. We were on the path, given the
current grayness, as you call it, to make sure that we have
that path--that clear path forward.
So, if you choose to clarify this issue, we'll work with
FERC. If you choose that we work it out by ourselves, we will
do it. I think it'll work well. The only issue that I caution
you on is that when the questions come up, it won't be between
Federal agencies, it'll be someone, probably, in the court
system, as you know, that, if there were any difficulty in that
grayness, that that's where we'll see it.
Mr. Robinson. Senator, I don't think so. We work with the
Forest Service in siting hydroelectric projects on Forest
Service lands. We work with the Bureau of Reclamation in siting
hydroelectric projects on their land. We even work with the
Corps of Engineers in siting hydroelectric projects on their
dams. So, we have a lot of experience working with other
agencies that have a significant regulatory role in the
facilities that we authorize. So, I don't think we need new
legislation. I think we just need to work with a new partner,
and that's going--I believe--in the right direction.
Senator Craig. Mr. Chairman, thank you for the time. Let me
ask one last question, then.
If the statute is gray, but you're coming together to
establish a memorandum of understanding that develops certain
specificities as to who's on first, who's on second, if you
will, do you then, Steve, see that as a risk in the courts, or
have memorandums of understanding and relationships developed
by memorandums of understanding been clear enough to withstand
those--the tests that you're concerned about?
Mr. Allred. Senator, we need to make sure that we do that,
to the extent that we can. No matter what we do, there's a risk
in the courts, as you know.
Senator Craig. With anything we do----
[Laughter.]
Mr. Allred. With anything that you do.
Senator Craig [continuing]. Let alone what you do.
Mr. Allred. So, we have that risk, and I think that the
more we can do to clarify that, either as participants in a
memorandum of understanding, which I think we contemplate would
be reflected in rules, perhaps joint rules, in order to try to
deal more with this issue.
But this is a new technology and a new application as we go
offshore, and there will be tests. We need to prepare for them.
Senator Craig. Thank you both. Mr. Grainey, thank you.
The Chairman. Let me ask a question, and then--Senator
Landrieu hasn't had a chance to ask her questions.
But, let me, first, just confess that when we did EPAct, it
never occurred to me that FERC had authority as to the siting
of these projects in the OCS. It wasn't something that I was
aware of. I believe, Mr. Robinson, you said that FERC has no
jurisdiction as to the siting of any wind project in the OCS.
You do have siting, as you read the law, or authority over
siting, of hydroelectric projects because of the hydroelectric
licensing authority that you have, generally. I don't really
understand why it's very logical for us to say to FERC, ``You
don't have authority with regard to siting of wind projects in
the OCS, you do have authority with regard to siting of
hydroelectric projects in the OCS.'' It would make more sense,
it seems to me, just as a matter of logic, to say, ``Look, the
siting issues will be determined by MMS. The question about,
you know, the hooking it up to the grid and compliance with all
of those factors, that's something that FERC is clearly capable
of, and expert on, and ought to be involved in.'' What's your
thought as to that?
Mr. Robinson. Well, Senator, it wasn't that EPAct said the
Commission has no authority in siting wind in the OCS. It's
that the Federal Power Act always gave the Commission authority
to site hydroelectric projects in navigable waters that--where
Commerce Clause--or Commerce Clause waters, where they're
connected to the grid. Under that definition, which has been
there since 1920, these projects are hydroelectric projects--
they produce electricity using hydropower--they fall under the
Federal Power Act. There are exclusions that were specifically
laid out in EPAct 2005 on the authorities of MMS to site energy
projects in the OCS which allowed the Commission to maintain
that authority, which it's always had, for siting hydropower
projects in the OCS or in waters 12 miles and in.
I think the first tidal power project that I worked on at
the Commission was back in the early 1980s. This is not
something--when there was a thought, back then, that maybe
tidal power was an economic way to generate electricity. That
died off at that time, and we're revisiting it now, but we've
had that authority since 1920.
The Chairman. OK.
Senator Landrieu.
Senator Landrieu. I'm going to pass with questions, but I
thank the chairman for calling this hearing, because it is
something that we need to resolve and move forward, because I
think the potential and opportunities in our waters are very
significant. So, I will submit questions later, but I'm just
here to listen.
Thank you.
The Chairman. Thank you.
We have two votes, starting in about 5 minutes. I guess I
would be inclined to go ahead and dismiss this panel and bring
the second panel forward, unless, Senator Smith, you wanted to
ask some questions before we do that.
Senator Smith. Just to welcome Mr. Grainey and I appreciate
your coming here.
Mr. Grainey. Thank you, Senator.
Senator Smith. I'll submit a question for the record, Mr.
Chairman.
The Chairman. All right, thank you.
The Chairman. Thank you all for testifying. Why don't we
ask the second panel to come forward, and maybe we can get
their testimony in before we have to run to do these two votes.
We have two statements for the record that I'm just going
to include. One is from Nathanael Greene, the senior policy
analyst with the Natural Resources Defense Council, and the
other is by Diane Regas, who is the managing director of the
Oceans Program for Environmental Defense. Both of those
statements will be included as part of our committee record.
The Chairman. Why don't we start--Jason Bak is the CEO of
Finavera--is that the correct pronunciation?
Mr. Bak. Finavera.
The Chairman. Finavera--Finavera Renewables, Inc., in
Vancouver, British Columbia; Jamie Steve is the legislative
director for the American Wind Energy Association, here in
Washington.
We thank you both for being here. Jason, why don't you
start, and then Mr. Steve.
STATEMENT OF JASON BAK, CEO, FINAVERA RENEWABLES, INC.,
VANCOUVER, BRITISH COLUMBIA
Mr. Bak. Thank you, Mr. Chairman and members of the
committee, for inviting me to testify.
Let me, again, start by thanking you, once again, and the
specific members who have been champions of renewable energy
for many, many years, Senator Murkowski, Senator Smith, all of
whom have provided great leadership for the renewable energy
industry, and we're very grateful for your support.
Although I'm here in my role as CEO of Finavera Renewables,
I can tell you that we've spoken with a number of the other
leading wave energy developers in America, and they share some
of our concerns that I'm going to outline today.
We're very concerned about the negative effects of the
dispute between FERC and MMS, and the over-regulation of wave,
current, and tidal energy projects within the Federal Outer
Continental Shelf. Our industry will simply not develop
projects on the OCS until the dispute is resolved. Even then,
if the resolution to the dispute leads to a duplicate of
burdensome and inefficient Federal decisionmaking process, we
will not use the OCS for our projects. Projects there will
simply be too difficult to finance with that risk.
We will be compelled to stay in State waters, which hold a
fantastic promise for wave energy, but will not tap potentially
valuable renewable energy resources in the Federal waters. User
conflicts will become more likely because we're constrained to
a smaller space. Any hope for Federal royalties or fees will
not materialize.
One of the worst cases that we envision is if Congress were
to do anything to cast uncertainty on FERC's licensing
authority, since we and others are actively pursuing projects
right now pursuant to the Federal Power Act process. We urge
you to reinforce the Commission's authority.
In saying that, we don't believe that we're asking you to
weaken MMS's authority or ability to carry out its mission,
under section 388 or otherwise. MMS is the landlord and has
clear power to set lease terms. Moreover, as I understand it,
the Interior Department has authority to set conditions on
Federal hydropower licenses.
I suspect that MMS may not be as familiar with the process
as the Fish and Wildlife Service, but that doesn't mean that
that authority is unavailable to them, and it certainly doesn't
justify the creation of any redundant licensing regime. I think
myself and the others who have testified so far have said,
``Keep it simple.''
In other words, we think this dispute is unnecessary. We
know it's destructive. We hope that it can be addressed
promptly.
I'd like to respond to the testimony from our good friends
at the State of Oregon. I mean it. Oregon has been a tremendous
ally to the wave energy industry. My written testimony outlines
the many steps that Oregon has taken to attract the jobs and
the investment dollars that our industry can provide as we grow
and succeed, and we're taking international funds and domestic
funds, and funneling them into Oregon to really push the
industry forward. That comes with the creation of jobs and a
number of other benefits for the State.
We respect and understand the Governor's call to let the
State carry primary responsibility for licensing projects in
State waters. We share the Governor's desire to apply a simple,
efficient process to project licensing. Yet, we do not want to
make the ideal the enemy of the good by inviting a
constitutional dispute between Federal and State governments.
In our view, FERC should administer its integrated
licensing process in a way that rewards and encourages those
States that step forward, as Oregon has done, to take
responsibility for the hard work of stakeholder engagement,
issue identification, and problem solving required to develop a
renewable energy project or program with broad public support.
We see no reason why FERC cannot, under its existing
authority, grant broad deference to license applications
developed through State-led procedures that are inclusive,
transparent, and comprehensive. In fact, we view FERC's style
and level of involvement in our Oregon projects, and the others
that we follow, to represent exactly that kind of flexible
approach.
We believe that State-level initiatives in FERC--the FERC
process can actually complement each other to the benefit of
our industry and the public interests in offshore developments.
Thank you for giving me a chance to appear here today. I
would ask that my full statement be included in the record, and
I'm happy to respond to any questions.
[The prepared statement of Mr. Bak follows:]
Prepared Statement of Jason Bak, CEO, Finavera Renewables, Inc.,
Vancouver, British Columbia
Mr. Chairman and Members of the Committee, thank you for the
privilege of allowing me to testify before you.
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 real projects. United States steelworkers are at work today
constructing our prototype wave energy buoy, which we are going to
install off the coast of Newport, Oregon this summer. Our Makah Bay
project is the first, and so far only, wave energy project to apply for
a federal operating license. We are leaders in an industry that is
already creating jobs and is poised to bring clean electricity,
desalination, and, in time, hydrogen fuel to the American economy.
I wish to begin by thanking the Chairman and the members of this
Committee who have been champions of renewable energy for many years. I
would also like to thank Senator Cantwell, Senator Smith, Senator
Wyden, and Senator Murkowski who have provided important leadership for
the ocean wave, tidal and current energy industry.
My purpose in testifying today is to describe two problems in
existing law that create substantial regulatory risk for the ocean wave
energy industry. Each problem is rooted in disagreement over the
Federal Energy Regulatory Commission's authority under the Federal
Power Act to license ocean wave, tidal, or current energy projects, but
they have been brought into focus by disputes over the meaning of
Section 388 of the Energy Policy Act.
To begin, there is disagreement on the question whether FERC's
hydropower licensing authority is confined to traditional in-river,
freshwater hydropower projects or whether it also extends to non-
traditional hydropower projects, such as wave, tidal or current energy
projects, located in marine areas.
This question first arose in 2001, when Aqua Energy, a company that
Finavera acquired last year, proposed the Makah Bay wave energy
project. Our position at the time was that FERC's authority did not
extend to our project. FERC, NOAA and other parties disagreed.
Aqua Energy ultimately acquiesced to FERC's assertion of
jurisdiction and, in fact, we have been extremely pleased with the
process and FERC's use of its authority.
The legal issue has been dormant; it has not been litigated or
otherwise vigorously tested. It is, nevertheless, a latent uncertainty
that presents real regulatory and litigation risk. It is an important
enough matter that the legislature of the State of Oregon, which is
moving aggressively to promote wave energy development and investment,
recently petitioned Congress to address the issue by affirming FERC's
authority. I have attached a copy of that petition to my testimony for
your consideration.*
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* Document retained in committee files.
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The second matter of concern arises because the Minerals Management
Service of the Department of the Interior has asserted that, while FERC
may or may not have authority under the Federal Power Act to license
non-traditional hydropower projects located in state jurisdictional
ocean areas, it lacks authority over projects located on the federal
outer continental shelf (``OCS''). MMS contends that Section 388 of the
Energy Policy Act of 2005 gave MMS exclusive authority to regulate
wave, tidal, or current energy projects on the OCS. This point of
disagreement was created by the particular language of Section 388,
which grants MMS broad leasing and other authorities for renewable
energy projects on the OCS, but includes ``savings'' provisions for
existing law and agency authorities. MMS's position is, essentially,
that FERC had no authority under the Federal Power Act to license
projects on the OCS, so no such authority was ``saved'' by the savings
clauses. FERC and others disagree.
This dispute over OCS jurisdiction is a matter of particular
concern to the ocean wave energy industry because our technologies are
well suited for offshore areas, including the OCS, while tidal and
current energy projects are, for the time being at least, likely to be
located closer to shore.
To boil it down, the question facing us is whether FERC's Federal
Power Act hydropower licensing authority extends offshore and, if it
does, whether the authority ends at the boundary of the OCS.
This Committee has jurisdiction over every relevant aspect of the
problem.
The Federal Power Act and Section 388 can be read--and we believe
they should be read--in a way that avoids conflict.
In our view, the proper interpretation of existing law, and the
proper resolution of the current disagreement, would place FERC
squarely in the lead for the purpose of licensing our projects wherever
located. And MMS would have clear authority to convey leases or other
proprietary rights on the OCS, just as states have authority to issue
leases or other proprietary rights in state waters. FERC should be the
principal regulator, and MMS should be the federal landlord. As we see
it, the agencies both play very substantial, complementary roles with
regard to use of the OCS. Neither agency's mission need be subordinated
to that of the other.
We do not mean to oversimplify the relationship; we understand that
the boundary dividing the two sets of responsibilities is not absolute.
The agencies' respective roles are inextricably intertwined. For
example, under the Federal Power Act, the Interior Department (along
with other federal agencies, states, tribes, and stakeholders) has
substantial rights to participate in FERC license proceedings and to
set conditions for the projects. The agencies must cooperate.
Rather than ask the Committee to approach this issue purely as a
matter of statutory interpretation, we urge you also to take into
account four key policy concerns and to act to clarify existing law
with these policy considerations in mind.
First, the ocean hydropower industry is already heavily invested in
the FERC hydropower licensing process. Finavera and other companies
have literally built major components of our U.S. business models
around the substantive and procedural characteristics of the FERC
licensing process. We have also spent millions of dollars, and are
poised to spend many millions more, on the studies, consultations,
analyses, monitoring and other efforts dictated by the FERC procedures.
It is important to emphasize our view that FERC's licensing
process, especially the new integrated licensing process, provides an
appropriately comprehensive, yet flexible mechanism for identifying and
addressing the public values potentially implicated by ocean wave
energy projects, including environmental concerns and use conflicts.
There is empirical evidence for this position. When we filed our
application for a FERC license for the Makah Bay project, literally
dozens of stakeholder parties filed comments. Every commentor supported
the project, provided we develop and implement a strong monitoring and
evaluation program, which we will do. In other words, the FERC process
works well enough to resolve the stakeholder interests, and the
developer's interests, in a first-ever ocean energy project sited in a
marine sanctuary adjacent to fiercely protected natural areas. We
expect to receive a license within the year.
Second, it would be truly devastating to our existing projects and
the prospects for our industry if Congress were to remove FERC from its
role as ocean hydropower regulator. There is no other federal agency
with a regulatory system in place that can substitute for the FERC
system. Under the best of circumstances, it will take years for MMS or
any other agency to promulgate rules adequate to the task. The
practical effect of any move to install another federal agency as
regulator on state and federal waters would be to put our industry on
hold for years--which means that we will close our doors in the United
States. Real jobs will be lost here, and an important new energy
resource left untapped.
Third, if Congress were to remove FERC from its role as hydropower
regulator on the OCS, it would leave the industry and stakeholders with
the prospect of having to work through two or more different regulatory
systems applicable to otherwise identical projects with identical
impacts using the same waves. It would make no sense.
Fourth and finally, please recognize that the status quo,
particularly the assertion of project regulatory authority by MMS, is
already producing results that are not in the public interest or
consistent with Congressional intent.
Section 388 was, at its root, meant to signal that Congress hopes
to stimulate renewable energy development on the OCS. The vision behind
Section 388 was one of jobs, clean energy, new investments and, in
time, fees from the OCS for the federal treasury.
Today, however, no sensible developer will consider placing a wave,
tidal or current energy project on the OCS. We will all stay away from
the OCS so long as the regulatory authority is unclear, contradictory,
or unduly burdensome. This means that valuable sites under federal
jurisdiction will not be developed. There will be no clean power and no
rents from the OCS. In addition, the potential for user conflicts,
particularly conflicts with the commercial fishing industry, is
significantly increased if the ocean hydropower industry is forced to
develop its projects entirely within the three-mile band of state
waters. It is an artificial and unnecessary constraint.
Mr. Chairman, we believe that current law can be interpreted in a
way that avoids conflict. However, the unresolved dispute between the
federal agencies highlights the regulatory and potential litigation
risk we face today. Our view is that current law should be clarified
and we urge this Committee to provide that clarification in amendments
to the energy and climate related legislation soon to be considered by
the full Senate.
In late April, Finavera testified before the House Committee on
Natural Resources alongside environmental groups, scientists, coastal
state leaders, and commercial fishermen to urge Congress to help
promote ocean renewable energy, while assuring protection for
environmental and other stakeholder interests. I have attached for your
reference a copy of my testimony and answers to written questions.*
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* Documents retained in committee files.
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There is strong momentum within industry and among the stakeholder
groups to bring this new energy resource on line. Please help us move
forward by removing unwarranted jurisdictional uncertainty from the
law.
We would be pleased to work with you, Committee members and staff
to refine potential legislative language so that Congress can send an
unequivocal signal in support of responsible development of ocean
renewable energy.
Thank you for the opportunity to testify.
Attachment.--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.onus/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/Blexemp.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/Blexemp.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., MP.
Following are the details of the incentives promulgated in the 2007
Budget.
Accelerated Capital Cost Allowance for Clean Energy
Generation
A 50-per-cent 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 tigation 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 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.
The Chairman. Thank you very much.
Mr. Steve, go right ahead.
STATEMENT OF JAIME STEVE, LEGISLATIVE DIRECTOR, AMERICAN WIND
ENERGY ASSOCIATION
Mr. Steve. Certainly. Mr. Chairman, I do intend to truncate
my already short statement.
The Chairman. You might want to push that button so
everyone can hear your truncated statement.
Mr. Steve. All right. It will be brief.
Thank you for the opportunity to testify. Appreciate this.
Mr. Chairman, today's typical wind turbine can generate as
much as 2 megawatts of power of electricity, or enough
electricity to provide for the homes of about 540 households.
A couple of interesting things to note:
Texas today is the No. 1 State for wind energy production,
having surpassed California, which held that title for about 20
years.
The Statue of Liberty's torch is powered by a purchase of
wind power.
Starbucks, Safeway, and Staples are all purchasing
electricity produced by wind power.
Examples of jobs created by the wind industry are: 500
workers building towers for wind turbines in--at Beaird
Industries, in Shreveport, Louisiana; 350 workers also
producing towers in North Dakota, as well. There are a lot of
jobs in this new industry.
Wind developers also pay roughly $5,000 royalty payments
per wind turbine, per year, for a period of 20 years. Let me
repeat that one. About $5,000 to landowners--ranchers,
farmers--per wind turbine per year for 20 years. A lot of folks
say, ``Hey, I can put my kids through college now. I can keep
farming, where I couldn't do that before.'' Significant rural
economic development.
We can do even more with offshore development of wind
turbines; because the turbines are larger, they can produce
more power, as well.
But I do want to stress that there are currently no
existing offshore wind turbine projects in the United States.
Meanwhile, Europe has been doing this for well over 10 years.
So, the issues are not technological, they're siting issues.
The other point I want to make is that the vast majority of
wind development in the United States is going to be on land. I
would say probably 90, 99 percent of development will be on
land. We have a lot more land here to develop for wind than
they do in Europe. Europe moved to offshore because,
essentially, they ran out of available land.
The bottom line for our testimony is that we've been
working with the Minerals Management Service--we think that's
the correct place--for offshore--development of offshore rules
for wind development; however, we'd like to see them move
faster. The difficulty is that a lot of the folks who are
trying to develop projects on the Outer Continental Shelf in
the United States are being significantly slowed down by a slow
process at MMS. They're good folks. I think they're a little
overburdened over there. But we'd like to see 'em move faster.
Thank you.
[The prepared statement of Mr. Steve follows:]
Prepared Statement of Jaime Steve, Legislative Director, American Wind
Energy Association
Chairman Bingaman and members of the committee, my name is Jaime
Steve and I serve as Legislative Director for the American Wind Energy
Association (AWEA) based here in Washington, D.C.
Mr. Chairman, today's typical wind turbine can generate as much as
two megawatts of electricity, or enough power to meet the needs of
about 540 households. It is also interesting to note that:
Texas is now the No. 1 wind-producing State in the nation,
having recently surpassed California which held that claim for
over 20 years.
The Statue of Liberty's torch is powered through a purchase
of wind energy.
Starbucks, Safeway, and Staples are all purchasing wind-
generated electricity.
Examples of wind energy jobs include 500 workers building
towers at Beaird Industries in Shreveport, LA and another 350
workers building towers at DMI Industries in West Fargo, ND.
Wind developers pay about $5,000 per turbine, per year for
20 years in lease payments to hard-pressed farmers, ranchers
and other land owners from Maple Ridge, NY to Abilene, TX. Wind
projects also make significant contributions to the local tax
base of many rural communities.
A single wind turbine avoids the same amount of carbon
dioxide as is emitted by about 4,800 cars. Larger, offshore
wind turbines can produce even more energy and offset even
greater amounts of carbon dioxide.
These examples show that supporting wind energy means creating
jobs, spurring rural economic development, stemming global warming, and
enhancing our national energy security.
Land-based U.S. wind energy production has grown more than 22%
annually over the last five years. Currently, there are no existing
U.S. offshore wind energy projects, only a small number of proposals.
Meanwhile, in Europe hundreds of megawatts of wind turbines have been
operating for over ten years in waters near Denmark and the United
Kingdom. If the U.S. is to move forward and follow the European
example, we must have a coherent, timely, set of rules available so
that project proposals are not significantly delayed.
In April of this year the Minerals Management Service (MMS)
announced a delay in writing Congressionally-mandated regulations for
offshore renewable energy installations on the Outer Continental Shelf.
The MMS announced that the target date for the rulemaking--initially
set by Congress for fall 2007--then slipped to fall 2008, adding a full
year to projects already on hold until the rulemaking is complete.
While the original 270-day time frame may have been unworkable for the
agency, this delay is equally unworkable for the offshore wind energy
industry.
Offshore wind energy projects that were working under an already-
long permitting process are now pushed back an additional year. AWEA
urges the Minerals Management Service to move ahead as expeditiously as
possible to complete these important regulations so that clean,
renewable energy technologies can be deployed on a small part of our
nation's ocean resources.
Early indications from MMS documents, including the draft
Programmatic Environmental Impact Statement published on March 16,
2007, found most environmental impacts from potential offshore wind
energy projects to be negligible to minor. Offshore wind projects in
Europe have been intensively studied and have reached similar
conclusions, but we can't verify that here in the U.S. until projects
actually move forward. That can only happen when the MMS finishes its
work. We hope that work can be completed with haste and we stand ready,
willing and able to assist those efforts.
Thank you.
The Chairman. Thank you very much.
Senator Landrieu had a question.
Senator Landrieu. Just two questions.
One--and I'm glad you raised it because I was going to--the
burdens at MMS, and the backlog and paperwork, what would be
your No. 1 or No. 2 recommendations, as a seeker of licenses?
Is it a question of personnel--quality, quantity, or both, or
training, or--what would you suggest for us, to break through
this logjam?
Mr. Steve. Yeah. I don't want to be presumptuous as to the
inner workings of MMS. We've worked very well with Walter
Cruikshank over there, who I think is a very dedicated public
servant on this issue. I do get the sense that they may be
overburdened. They may need a little bit more, in terms of----
Senator Landrieu. Staffing issues.
Mr. Steve [continuing]. Staff analysis, right.
Senator Landrieu. Secondly--and I thank the Chair--I'm very
interested, of course, in this royalty-sharing issue. We
finally got to some fairness in the minerals management
offshore, as you know, which was a great breakthrough for the
Gulf Coast States, in terms of sharing royalties from
traditional sources of energy. But these new sources, you said
you have the $5,000 per wind turbine for landowners on land.
What would be your suggestion for offshore placements? Is some
sort of sharing routine in Europe, or is there any sort of
industry standard that we should be looking at, in terms of
between Federal, State, and local?
Mr. Steve. Yes, good question. I think the best answer
there is going to be found in some work that was already done
previously by the Bureau of Land Management with regard to the
placement of wind turbines on Federal lands. I think that's a
good place to start out. And they did do a payment regime
there, as well.
Senator Landrieu. Do you recall what that is, for the
record? I can look.
Mr. Steve. I'm going into the way-back machine here of the
Energy Policy Act, so I'd want to double-check my numbers. As I
recall, I believe the payment was somewhere in the range of
plus or minus $2,000----
Senator Landrieu. Per turbine.
Mr. Steve [continuing]. Per megawatt.
Senator Landrieu. Per megawatt.
Mr. Steve. Per megawatt, yes. But I'd just double-check
that.
Senator Landrieu. Thank you.
The Chairman. Senator Murkowski, did you have a question?
Senator Murkowski. I do, thank you.
The Chairman. They have started a vote. I'd just point that
out.
Senator Murkowski. I'll be very brief, Mr. Chairman, thank
you.
Mr. Bak, I mentioned, when I was speaking to Secretary
Allred and Mr. Robinson, that Alaska has a great deal of
interest in wave energy, ocean energy projects. In dozens of
small coastal communities that are looking at this, they view
this as an opportunity to get themselves off diesel-powered
generation, which is what they're all on right now. If we are
able to take care of the jurisdictional issues that you
mentioned here--and they're included in your written
testimony--and we pass the other pieces of legislation that I
and some of my other colleagues have been working on, when do
you figure a company like Finavera could be in a State like
Alaska, working on some of our projects?
Mr. Bak. We have looked at Alaska already, and you'll be
happy to know, and I'm sure you're aware, that Alaska actually
has the best wave energy resource in the country, even
exceeding Oregon's, but not to pit one State against the other.
Senator Murkowski. But they're starting ahead of us.
Mr. Bak. Exactly. There is fantastic opportunity with the
off-grid communities in Alaska, because they pay such high
prices for the diesel that they're importing. So, I see wave
energy at first being a significant supplement to these
communities, and then being expanded with economies of scale
thereafter, so that you could actually have 20- to 100-megawatt
power plants at some point in the near future. For single
devices, we'd have to look at our economic modeling, but I
believe that that is achievable between 2010 and 2013, and
we're planning to ramp up the installation of our technology
following the Makah Bay installation, which is targeted for
2010.
Senator Murkowski. Good.
Then, one last question, and that's on fisheries. Of
course, we want to make sure that if we do move to something
like an ocean energy, wave energy, that it's not a disturbance
to the fisheries in the area. Can you speak a little bit to
that aspect of the compatibility?
Mr. Bak. Certainly. I live in a small fishing community. My
brother-in-law is a fisherman. I'm very aware, personally and
also through the stakeholder processes that we've run as a
company, of a number of those issues.
Our goal and our optimum zone in time is to move farther
offshore. So, initially we're going to occupy some areas that
are closer to shore, and, with involvement of the stakeholders
in the licensing process, we will work with all of them to
ensure that their concerns are addressed. We anticipate that,
in time, as our technology becomes cheaper, as the scale of
deployment becomes larger, the project financing, the structure
of finance, the economics of the project, will allow us to move
farther offshore into the OCS, and eventually beyond, so that
we can have large-scale power plants that aren't interfering
with near-shore fishing. So, that's our end goal.
Senator Murkowski. How much of a deterrent is that,
currently, in putting any of your projects in place, whether
they be in Oregon, Washington, or in Alaska?
Mr. Bak. All of the projects that we are working on right
now are within the 3-mile limit. We would like to go beyond
that. But, because of these existing issues, we can't. There's
a fantastic resource that needs to be captured, and we can
generate revenue from that resource, but, until this licensing
issue--or the agency issue--is sorted out, we have too much
risk; a bank won't come near these projects. So, it is an
impediment.
Senator Murkowski. Thank you, Mr. Chairman.
The Chairman. Senator Smith.
Senator Smith. Thank you, Mr. Chairman. I'll be brief.
My questions are not unlike Senator Murkowski's. Is it fair
to say, Mr. Bak, that, but for the regulatory uncertainty, the
risks that you see, you would already be investing in Federal
OCS in Oregon, but, because of that, you're not?
Mr. Bak. Correct. Our initial site straddled the boundary.
The optimal site that we picked did straddle the 3-mile-and-
beyond limit, and we reined ourselves in. So, because of this
licensing dispute, because of the lack of clarity, we had to do
that, simply because we want to have a bankable project in the
near term, rather than later. Our key focus is bringing the
bank finance to that project.
Senator Smith. I wasn't here for Mike Grainey's testimony,
but I'm familiar with it and, obviously, the concern the States
have in this issue. Obviously, you don't believe that FERC
should yield to the States. Is that a fair statement?
Mr. Bak. I think, as an entrepreneur and a CEO, we just
want to see the most simple and straightforward process when it
comes to de-risking the development of wave energy projects.
So, I wouldn't put myself in the middle of it, other than
saying that we have a fantastic relationship with FERC. They
have helped us a lot in Makah Bay, and we'd like to work with
them in the future.
Senator Smith. Is there any State which you are working
with where there's a model that seems to be better than others?
Mr. Bak. Again, the relationship we have with FERC through
the Makah Bay project in Washington is excellent, with the
incentives that Oregon has bent over backward to provide the
industry and really stimulate what can be a huge revenue
generator. We see a lot of focus being spent on Oregon in the
future.
Senator Smith. So, we need to clarify the regulatory
scheme, or else this just isn't going to happen.
Mr. Bak. Exactly. Our goal, as a commercial company, is to
provide the returns for our investors, and we simply want to do
it as quick as we can.
Senator Smith. Thank you.
The Chairman. Well, thank you both very much for your
testimony. I think it's been very useful.
That will conclude our hearing.
[Whereupon, at 11:12 a.m., the hearing was adjourned.]
APPENDIXES
----------
Appendix I
Responses to Additional Questions
----------
Responses of J. Mark Robinson to Questions From Senator Bingaman
Question 1a. If the Commission applies its hydroelectric licensing
process to ocean energy projects on the OCS, how would this process be
coordinated with MMS=s authorization process for renewable energy
projects under section 388 of the Energy Policy Act of 2005?
Answer. Through our ongoing MOU negotiations, the Commission and
MMS intend to achieve a coordinated program for the orderly development
of wave and current energy on the OCS that avoids redundancy and makes
use of the complementary resources of both agencies. Those
complementary resources include the MMS's planning experience and
knowledge on the OCS and the Commission's established hydropower
licensing experience. Although the details are still under discussion,
our objective is to craft an efficient program for the benefit of all
stakeholders.
Question 1b. Do you think that the Federal Power Act provides
authority for MMS to provide mandatory conditions under section 4(e) of
the Federal Power Act? Please provide any legal analysis that supports
your conclusion.
Answer. Yes. Section 4(e) provides that, where the Commission
issues licenses ``within any reservation'' of the United States, the
license must include ``such conditions as the Secretary of the
department under whose supervision such reservation falls shall deem
necessary for the adequate protection and utilization of such
reservation.'' Section 3(2) of the Federal Power Act defines
``reservation'' as ``national forest, tribal lands embraced within
Indian reservations, military reservations, and other lands and
interests in lands owned by the United States, and withdrawn, reserved,
or withheld from private appropriation and disposal under the public
land laws; also lands and interests in lands acquired and held for any
public purpose; but shall not include national monuments or national
parks[.]'' In consequence, the United States' interest in the Outer
Continental Shelf appears to give the Secretary of the Interior the
authority to impose section 4(e) conditions on licenses issued for
projects in that area.
Question 2a. What responsibilities does the FERC have with respect
to transmission of electricity generated on the OCS?
Answer. Section 23(b) of the Federal Power Act makes it unlawful
for ``any person, State, municipality, for the purpose of developing
electric power, to construct, operate, or maintain any dam, water,
conduit, reservoir, power house, or other works incidental thereto
across, along, or in any of the navigable waters of the United States,
or upon any part of the public lands or reservations of the United
States . . . except under and in accordance with the terms of . . . a
license granted pursuant to this Act.'' Section 2(11) of the Federal
Power Act defines ``project'' as including ``the primary line or lines
transmitting power [from a project] to the point of junction with the
distribution system or with the interconnected primary transmission
system . . .''. If a hydropower project located on the outer
continental shelf included a primary transmission line, that line would
have to be licensed by the Commission. The Commission would not have
responsibilities with respect to transmission lines from other sources
of generation, such as wind or thermal energy, absent an appropriate
invocation of the Commission's supplemental authority to site electric
transmission facilities under section 1221(b) of the Energy policy Act
of 2005.
Question 2b. Please describe how any regulatory activities with
respect to transmission would be coordinated with the project approval
or licensing process.
Answer. The Commission authorizes primary transmission lines, along
with other project works, as part of the project licensing process.
Question 3. What do you think should be the respective
jurisdictions of (1) the MMS; (2) the FERC; and (3) the coastal states,
in authorizing ocean renewable energy projects?
Answer. Under the Outer Continental Shelf Lands Act, as amended by
the Energy Policy Act of 2005, MMS generally has jurisdiction to issue
leases, easements or rights-of-way on the Outer Continental Shelf
related to production, transportation, or transmission of energy from
sources other than oil and gas (although not within any National Park,
National Wildlife Refuge, National Marine Sanctuary, or National
Monument). The Outer Continental Shelf includes all submerged lands
lying seaward and outside of State offshore waters, which are located
within three nautical miles of state coastlines (three marine leagues
for Texas and the Gulf Coast of Florida). As noted above, the
Commission has jurisdiction over hydropower projects located in the
navigable waters of the United States or on federal lands. This
allocation of federal jurisdiction between the Commission and MMS seems
appropriate. Coastal states have authority over ocean renewable energy
projects to the extent authorized by federal law, such as the Coastal
Zone Management Act. This authority, which applies within state waters
(and thus not to the Outer Continental Shelf or to waters beyond the
three-mile state limit) also seems appropriate. I note, in addition,
that regardless of whether states have specific regulatory authority
over particular projects, the Commission remains committed to working
collaboratively with states in our licensing proceedings.
Question 4. Under the FERC process, license applicants can obtain
preliminary permits for up to three years. What gives the FERC
jurisdiction to issue permits for the use of the submerged lands on the
OCS? What is the effect of these preliminary permits?
Answer. Section 4(f) of the Federal Power Act authorizes the
Commission to issue preliminary permits for the purposes of securing
data and performing studies necessary to support a license application.
As set forth in section 5 of the Federal Power Act, preliminary permits
are issued ``for the sole purpose of maintaining priority of
application for a license . . . for [a] period . . . not exceeding a
total of three years . . . ''. Thus, a preliminary permit does not give
the permit holder the authority to engage in construction or other
ground-disturbing activity, or to acquire lands.
Section 4(e) of the Federal Power Act gives the Commission
authority to issue licenses for project works ``for the development,
transmission, and utilization of power across, along, from or in any of
the streams or other bodies of water over which Congress has
jurisdiction under its authority to regulate commerce with foreign
nations and among the several States, or upon any part of the public
lands or reservations of the United States . . . ''. Thus, the
Commission has authority to issue licenses (or preliminary permits) for
project works located in offshore waters subject to Congress' Commerce
Clause jurisdiction, and on the submerged lands of the Outer
Continental Shelf, which are lands of the United States.
Response of J. Mark Robinson to Question From Senator Domenici
Question 1. Isn't it true that a state can stop any project in
state waters--be it a wind, solar, or LNG project--by denying any state
permits or authorization?
Answer. I note that the Commission has no jurisdiction over wind or
solar projects. However, it is the case with respect to any project
that requires a federal permit (including LNG projects, natural gas
pipeline projects, and hydropower projects), that a state may be able
to stop the project, if it traverses state waters, by denying
authorization required by federal law, such as the Coastal Zone
Management Act.
Responses of J. Mark Robinson to Questions From Senator Smith
Question 1. Is FERC going to be able license these new wave and
ocean energy facilities in a way that is not cost prohibitive for the
developers, since these facilities, at least initially, will produce a
relatively small amount of power compared to large hydroelectric dams?
Answer. Yes. The Commission's conventional hydropower review
process has been refined over almost a century to be flexible and
efficient while maintaining safety, public health, and environmental
protection and ensuring the comprehensive development of hydropower
resources consistent with the Federal Power Act and related statutes.
Efficiencies existing in the Commission's process include coordination
of most of the statutory requirements faced by developers into one
review and one environmental document, early involvement of Commission
staff, and firm timelines for both stakeholders and staff.
In order to accommodate the unique characteristics of new
hydropower technologies, we are adapting our existing licensing process
to accommodate experimental deployments and reforming our policies on
issuing and overseeing preliminary permits. These steps are intended to
minimize the cost and time to develop these important, renewable
resources while ensuring appropriate oversight.
Question 2. Last year, there were press reports that plans for a
wave-energy facility off of Narragansett had been put on hold. One
reason was the high cost of the FERC licensing process. Another reason
cited was FERC's ``utility displacement condition,'' meaning that the
developer was going to have to pay the incumbent utility for the
$200,000 worth of electricity the test generator was going to displace.
Can you explain this in more detail?
Answer. I am not familiar with the specific press reports you
mention. However, I believe you are referring to interest by Energetech
America, LLC (Energetech) in developing a demonstration project (the
Green Wave Tidal Energy Project) to be located in tidal waters about
1.2 miles from Point Judith, Rhode Island. I assume that the ``utility
displacement condition'' that you reference relates to the Commission's
holdings in the Verdant case. Energetech would be subject to these
holdings. As noted above, section 23(b) of the Federal Power Act makes
it unlawful for any person to construct hydropower project work on
navigable waters or federal lands ``for the purpose of developing
electric power'' without a Commission license. The Act contains no
exception for electric generation for test projects or for limited
periods of time.
In the Verdant case, the Commission was presented with an instance
where the project developer wanted to test new technology for a project
in New York's East River without first obtaining a Commission license.
The test included generating electricity and supplying that electricity
to the interstate electric power grid. The Commission, in an effort to
support the development of new energy sources, interpreted section
23(b) in a creative manner, by holding that the short-term testing of
new technology in order to perform studies necessary to development of
a license application would not constitute ``developing electric
power,'' even where the test project technically did produce power,
provided that the power did not displace power from the interstate
electric power grid or otherwise affect interstate commerce. The
project proponents in Verdant wanted to connect to the grid in order to
test their project, but agreed to make the test ``grid-neutral'' by
paying the utility whose power was displaced by the test power for the
amount of revenues that the utility lost of a result of displacement by
project power. The Commission concluded that, under these terms, the
test project would not require a Commission license (although it would
require all federal, state, and local environmental and other
applicable approvals).
Based on past meetings with Energetech, Commission staff
understands that Energetech wishes to test the Green Wave Tidal Project
by displacing power from the grid, but does not want to repay the
affected utility for the costs of displaced power sales. Such a case--
where the project proponent would put power into the grid, receive
revenue for the power, and displace power from another generator,
thereby affecting interstate commerce--would go beyond the limited
circumstances in Verdant in which the Commission found itself able to
conclude that a test project would not be ``developing electric
power.'' Energetech, or any similar project proponent, might be able to
avoid the necessity of a license by testing its project through
connection to an electrical system that is not connected to the grid or
by compensating any generator that loses sales as a result of
interconnection to the grid as Verdant did. Commission staff is always
available to work with project proponents to determine if there is a
solution to their concerns.
Question 3. Is this utility displacement condition an
administrative policy of FERC, or would Congress have to address this
in legislation?
Answer. The Commission's holding in Verdant represents its
interpretation of the Federal Power Act.
Question 4. What is the status of the MOA between FERC and MMS?
Answer. The MMS and the Commission have exchanged several drafts of
an MOU. It is my hope that we will have a document to sign by early
summer. I am confident that together we will develop an efficient
program that makes use of the complementary resources of the two
agencies without redundancy.
______
Responses of Michael W. Grainey to Questions From Senator Bingaman
Question 1. Are any of the proposed projects off the Oregon coast
located on the OCS?
Answer. Yes, only one of the seven projects proposed off the Oregon
coast is located on the Outer Continental Shelf (OCS). This project is
FERC Filing P-12750
Newport OPT Wave Park
Lincoln County, Oregon
The project site is situated both within and outside of the state
boundary and straddles the OCS. The site is in the open ocean extending
from about 3 to 6 miles offshore.
The other six projects are all within the state three mile limit.
In part this is because of the cost of underwater cables you raise in
question 2 and because the intensity of the waves seems most promising
less than three miles from shore. Most wave energy projects in the
foreseeable future will also likely be less than three miles from shore
for the same reasons. This underscores the need for states to have the
same power plant siting authority with respect to FERC for less than
three miles off shore that Section 388(e) of the Energy Policy Act of
2005 provides to states in regard to MMS on the OCS.
Question 2. I understand that underwater power cables can be quite
expensive--approximately $1 million a mile. How is the State addressing
this cost issue?
Answer. Oregon provides incentives to assist developers of
renewable energy, including not only the turbine, but also related
infrastructure such as transmission lines and underwater cables. Oregon
provides a 35% tax credit and a low interest loan for financing the
capital cost of renewable energy facilities. A project, including
underwater cables, can qualify for both the tax credit and loan for the
same project.
The current session of the Oregon Legislature has increased the
limit of the Energy Loan Program by $25 million to help finance these
type of projects. Current state legislation will also increase the
state energy tax credit from 35% to 50% of renewable energy project
costs.
Wave developers are also considering creating a public wave hub or
universal interconnection platform where various wave energy projects
could ``plug in.'' This could be part of Oregon State University's
National Wave Energy Research and Demonstration Center.
I hope this information is responsive to your questions. Please
contact me if I can provide additional information. Again, thank you
for the opportunity to present information to the Committee.
Appendix II
Additional Material Submitted for the Record
----------
Statement of Diane Regas, J.D., Managing Director, Oceans Program,
Environmental Defense
Thank you Chairman Bingaman, Ranking Member Domenici, and Members
of the Committee for the opportunity to provide written comments on
behalf of Environmental Defense on renewable ocean energy development
in the United States.
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.
``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.
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).
Ocean energy development should occur under the following guiding
principles:
1. National Oceans Policy.--Ocean energy development should
be based on clearly defined standards and criteria, and
consistent with a national policy of protecting and restoring
healthy ocean ecosystems, including minimizing cumulative
impacts.
2. Public Interest.--The public should benefit from the use
of public resources, and appropriate incentives should be in
place to encourage green energy development.
3. Public Participation.--Decision processes should encourage
public engagement, and meet the highest standards of
transparency.
4. Science and Technology Advancements.--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 consistent with sustainable oceans.
5. Investment.--The federal government should invest in the
science needed to manage marine ecosystems effectively;
government decisions should be based on 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
manageable environmental impacts. Even so, our decision-making
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
ecosystem 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 likely have lower environmental impacts than the
damming of an estuary to construct a tidal energy installation.
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, 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
The United States 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. Much
of the information available on deepwater ecosystems has been developed
directly by private project proponents. Improving our understanding of
habitat function and oceanographic processes that support habitats and
biodiversity is critical to effectively avoiding impacts on important
habitats, and mitigating for unavoidable impacts. Similarly
understanding the array of prospective technologies, and their likely
implications for marine ecosystems, will provide an important
foundation 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 and
standards for ocean energy development that transcend individual
projects while conserving coastal landscapes and seascapes. Certainly,
states, 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.
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.
defining a regulatory framework
Establishing a transparent and robust regulatory framework for
alternative ocean energy can help development of clean energy
technologies as well as strengthen public confidence and buy-in
regarding decisions. Industry can benefit from regulatory certainty.
The public interest can be promoted with rational decision-making.
This requires establishing both a national policy for protecting
ocean and coastal ecosystems (including consideration of cumulative
impacts) and a lead federal agency. Currently both Minerals Management
Service (MMS) and Federal Energy Regulatory Commission (FERC) have
authority regarding licensing and permitting of ocean energy
technologies. Pursuant to the Federal Power Act (FPA), FERC holds
licensing authority for hydroelectric plants on navigable waters.
Pursuant to the Outer Continental Shelf Lands Act (OSCLA) MMS
authorizes the leasing of the seabed of the Outer Continental Shelf
(OCS) and as amended by the Energy Policy Act of 2005 may lease for
alternative energy technologies. The dissonancy of federal governance
necessitates a clarification of jurisdictional authority.
The FERC licensing process is designed to accomplish these goals
through a comprehensive review that provides for public comment and has
an adjudicative process, including a trial-type hearing for issues of
material fact, ensuring transparency. However, FERC should not be the
sole agency in the licensing process, especially as it lacks expertise
in the science and management of ocean ecosystems and resources
necessary for ocean conservation. In addition, all ocean projects
should be held to a strong national ocean policy.
Ensuring that appropriate wildlife agencies, including NOAA, put
necessary conditions for avoiding or mitigating ocean and coastal
impacts on licenses is critical. The FPA has provisions allowing for
mandatory conditions imposed on a FERC license where the hydroelectric
plants are sited on land reservations under the jurisdiction of another
agency. This ensures that lands under the control of Department of
Interior or Department of Commerce (including NOAA) play ``the major
role in determining what conditions would be included in the license in
order to protect the resources under their respective jurisdictions.''
In addition, Section 10(j) of the FPA provides for consideration of
fish and wildlife impacts when considering license conditions. Section
18 of the FPA requires the construction of fishways as prescribed by
the Secretaries of Commerce or Interior. It is essential that agencies
with marine ecology expertise have power to establish appropriate
conservation conditions.
We urge the Committee to examine whether classifying the OCS as a
reservation under the FPA would allow for mandatory fish and wildlife
safeguards to be imposed within the licensing process led by FERC.
Allowing FERC to lead the licensing process, with inclusion of
mandatory conditions on the license from relevant wildlife agencies
(including NOAA), would strengthen the decision-making process.
Thank you for the opportunity to provide written testimony. I am
happy to answer any questions in writing.
______
Statement of Nathanael Greene, Senior Policy Analyst, Natural Resources
Defense Council
summary
General
Carve-out federal research and development (R&D) dollars for
independent studies of environmental impacts to 1) understand
the cumulative impacts of large scale deployment of ocean and
marine energy technologies, 2) avoid early black-eyes that will
set the industry back years, and 3) support an open and
transparent permitting and regulatory process by building
consensus among regulators, the public, and industry around the
environmental benefits and impacts of real concern.
Look at regions with resources that have high energy
production potential and build baseline data on nature of the
resource and the ecosystems in place that surround the
resources.
Use the baseline data and analogous technologies to narrow
and bound unknowable potential environmental impacts.
Focus ``lessons learned'' studies on the areas of greatest
environmental uncertainty.
Use these studies to inform adaptive management strategies
so that projects can proceed in the face of the real
uncertainty surrounding some impacts and also still be eligible
for private sector financing.
Consider a federal fund to support the more extensive
potential adaptive management options including removal for the
first few projects.
Utilize early successes in this approach as test cases for
future, more large-scale deployment initiatives.
Focus federal R&D dollars on studies of a few regions with
high resource potential, study other manmade installations in
oceans and marine areas in order to anticipate impacts of
alternative energy technologies, and prioritize post-
installation lessons' learned studies.
Require access for independent pre- and post-installation
environmental studies as part of eligibility for any federal
subsidies.
Ensure that studies address the cumulative impact of
multiple projects and of multiple installations within one
project.
Exclude offshore wind from the Marine Renewable Energy
Research and Development Act of 2007 except to study offshore
wind projects to learn lessons that may inform other projects
and as part of regional cumulative impact analyses.
FERC should work with state and federal natural resource
management agencies to do a programmatic environmental impact
statement for the licensing of new hydrokinetic technologies.
Regional studies should help build consensus around areas
that are best suited for early development and those that
should be avoided at least until the potential impacts of the
technologies are much better understood.
introduction
Thank you for the opportunity to share my views on Outer
Continental Shelf alternative energy technologies. My name is Nathanael
Greene. I'm a senior policy analyst for the Natural Resources Defense
Council (NRDC) and one of our main experts on renewable energy
technologies. NRDC is a national, nonprofit organization of scientists,
lawyers and environmental specialists dedicated to protecting public
health and the environment. Founded in 1970, NRDC has more than 1.2
million members and online activists nationwide, served from offices in
New York, Washington, Los Angeles and San Francisco.
Mr. Chairman and esteemed members of this committee, as you know,
U.S. energy policy needs to address three major challenges: reducing
global warming pollution, providing affordable energy services that
sustain a robust economy, and increasing our energy security. Renewable
energy technologies in Outer Continental Shelf areas such as wind, wave
and hydrokinetic energy can play a critical role in meeting these
goals, and these technologies have the potential for dramatically
increased deployment over the coming decades. These sources of energy
can be used to produce electricity with little or no global warming
pollution or local or regional air pollution, and they draw on domestic
energy sources that are naturally replenished and do not vary in cost.
By using these technologies we avoid burning fossil fuels, particularly
coal and natural gas and to a lesser degree oil. The heat-trapping
gases released when we bum these fuels make the power sector the
largest single source of global warming pollution. These funds are also
responsible for other significant environmental and public health
impacts during mining, drilling, processing, and combustion, and they
expose our economy to price volatility and energy insecurity.
All energy technologies cause some environmental damage. Being
better than fossil fuels is a necessary condition, but hardly
sufficient. Independent research and development focused on the
environmental characteristics of these technologies is critical to
maintaining their positive impacts and avoiding, managing, and
mitigating the negative ones. Good R&D on the environmental impacts is
also critical to an open and transparent permitting process and in
building a constructive relationship between regulators, the public,
and the industry so that these technologies can be deployed in a manner
that is quick, efficient and responsible.
general comments
The environmental impacts of renewable technologies such as wind,
wave and hydrokinetic energy must be considered in the context of the
detrimental alternative outcomes if we choose to not actively deploy
these technologies. Most of the traditional energy sources (e.g. coal,
natural gas, oil) ensure a far different and potentially much more
devastating environmental future. Meeting our energy service needs
through improved energy efficiency is the fastest, cleanest, cheapest
option, but even the most efficient technologies require some energy to
operate. Outside of the transportation sector, if we're not using
renewable energy then chances are we're using coal, natural gas, or
nuclear power with some oil primarily for heating.
The consequences of not moving away from these traditional fuels to
energy efficiency and renewable energy are severe, and impact almost
every aspect of the environment and public health. However, none of
these consequences are ultimately more urgent than reducing global
warming. The recent Intergovernmental Panel on Climate Change report
concluded that there was at least a 90 percent chance that heat-
trapping pollution was the main cause of warming since 1950. The
science is clear: global warming is real, it's already occurring, and
we're responsible for it. We can avoid catastrophic damage, but only if
we start reducing our rate of pollution seriously within the next 10
years and achieve 60 to 80 percent reductions by 2050.
This is where renewable energy technologies such as wind, wave, and
hydrokinetic energy can be so beneficial. The heat-trapping gases
emitted during combustion of fossil fuels makes the power sector the
largest single source of global warming pollution. Developing wind,
wave, and hydrokinetic energy, as part of a renewable energy portfolio,
is a vital step towards replacing a significant amount of the fossil
fuel-generated power. Moreover there is a domestic argument as well.
The United States is the largest emitter of heat-trapping gases causing
25 percent of global warming despite having just 4 percent of the world
population. Wind, wave, and hydrokinetic energy are domestic renewable
energy sources that can reduce our carbon footprint globally, and
encourage other countries to do the same.
Of course, no energy technology is without environmental impacts,
and simply being better than fossil fuels is a little like being better
than a poke in the eye, it's a necessary but not sufficient aspect of a
truly sustainable energy mix. Studying the environmental
characteristics of renewables serves two critical purposes: 1) it
allows us to identify, avoid, manage, and mitigate the real
environmental impacts of renewable energy technologies; and 2) it
builds a constructive relationship between regulators, the public, and
industry that focuses on the real impacts and not ``red herring''
issues that have limited impact and can obstruct the deployment of
strong projects. Taken together these outcomes are needed to allow for
the best public review and permitting process.
Ocean energy is currently used to produce just a few megawatts of
energy in spite of the fact that it could easily be producing tens of
gigawatts within the next few decades. However, the relative infancy of
this technology presents two important challenges. First to understand
the real sustainability of this technology, it is insufficient to look
at the impacts from a single project. We must also study the cumulative
impact of this technology brought fully to scale, and lay out our
vision of what we want the industry to ultimately become. Second, ocean
technologies are particularly vulnerable to major setbacks that could
stifle growth if early projects become notorious environmental
failures.
In the context of federal energy legislation, we should focus on
two types of environmental risks to understand the cumulative impacts
and avoid early public black-eyes. The first type of risk involves
impacts that we can predict with increasing accuracy with greater
experience and data collection. An example of this type of risk would
be determining the chance of whales being hurt by the sounds of
construction. The more we learn about whales' habits in the region of
the project, the more we can quantify the probability of whales being
present during construction. The more we learn about whales' habits in
the region of the project, and what effective mitigation measures we
can take to avoid and minimize impacts on whales, the more we can
quantify the probability of whales being affected by project
construction.
The second type of risk is of impacts that we cannot predict
because they result from new types of interaction that simply have
never occurred before. An example would be how fish might adapt to
underwater turbines in the ocean. These would be first-of-a-kind
interactions and the probability of the possible impacts is
fundamentally unknowable
We can address the first kind of risk by building a detailed
understanding of the baseline conditions in the area of a potential
project. Unfortunately, given that many species may pass through a
given part of the ocean during certain seasons, developing this
database may significantly slow a proposed project. If, instead of
studying the baselines on a project-by-project basis, we identified a
few regions with high resource potential, and focused federal R&D
dollars on building the necessary baseline data in those areas, we
could facilitate the permitting of individual projects. This would help
us develop a better understanding of what the cumulative impacts might
be in a region where multiple projects are likely.
Research and development dollars can also help narrow and bound the
uncertainty associated with unknowable risks. For instance, if we were
considering a certain type of ocean technology, previously collected
baseline data would allow us to conclude that a project in that region
of the ocean would have a very low chance of interacting with
endangered or at-risk fish populations. Further study of similar
equipment coupled with modeling the worst-case scenarios might allow us
to conclude that even development of multiple projects would be very
unlikely to have any significant impacts of the fish populations. In
other words, even for unknowable risks associated with putting new
technologies into new conditions, federal R&D can help build consensus
around the issues of greatest potential concern and those that are very
unlikely to impose significant restraints.
Of course this type of work should be followed up with ``lessons
learned'' studies to help avoid, manage, and mitigate future impacts
and provide more information to help narrow and bound other unknowable
risks. Indeed, given the much higher level of uncertainty surrounding
these technologies, the lessons learned from each project during
operation should be used to update the management of future projects,
and the conditions of future permits, especially during the early
development stage of the each industry. In particular these studies
should be used to inform adaptive management requirements in permits.
Adaptive management requirements establish a process for changing a
project's operations and equipment configuration to avoid or reduce
environmental impacts that are larger than anticipated. This is a
critical tool for allowing projects to proceed when there is a level of
uncertainty around impacts that would be unacceptable if the projects'
management strategies are fixed over time.
Further research on the potential environmental impacts associated
with these nascent renewable technologies is needed to support adaptive
management permitting requirements. Given the limits on our ability to
establish baseline data and the unknowable risks associated with new
technologies in new conditions, regulators must be able to require
projects to adapt their management to address unacceptable levels of
impacts (that may not appear at present). The baseline data and studies
to narrow and bound unknowable risks will be critical to identifying
unacceptable levels of impacts (e.g. is the line crossed at one bird or
fish or one hundred?) and what alternative management options are
possible.
Making adaptive management work is not only important from the
environmental perspective; it is also critical to making projects
acceptable for private sector financing. Lenders and investors will not
support projects that face potentially significant costs or lost
capacity as a result of management being forced to avoid or manage an
unforeseen impact. Developing a clear, transparent permitting process,
that includes state and federal agency input in developing adaptive
management requirements, will also help attract private funding.
Indeed, given the importance of adaptive management to making some
first-of-a-kind projects acceptable from ecological and public health
risk perspective, and the challenge that some adaptive management
options might pose to a project's financing, the federal government
could play an important facilitating role in alternative energy
development in Outer Continental Shelf areas. The government could
create a fund that covers a portion of the costs associated with the
most extreme and expensive changes in management that might be
necessary for early projects.
recommendations
Carve-out federal R&D dollars for independent studies of
environmental impacts to 1) understand the cumulative impacts
of large scale deployment of these ocean and marine energy
technologies, 2) avoid early black-eyes that will set the
industry back years, and 3) build consensus among regulators,
the public, and industry around the environmental benefits and
impacts of real concern.
Look at regions with resources that have high energy
production potential and build baseline data on the nature of
the resource and the ecosystems in place that surround the
resources.
Use the baseline data and analogous technologies to narrow
and bound unknowable potential environmental impacts.
Focus ``lessons learned'' studies on the areas of greatest
environmental uncertainty.
Use these studies to inform adaptive management strategies
so that projects can proceed in the face of the real
uncertainty surrounding some impacts and also still be eligible
for private sector financing.
Consider a federal fund to support the more extensive
potential adaptive management options including removal for the
first few projects.
Utilize early successes in this approach as test cases for
future, more large-scale deployment initiatives.
ocean and hydrokinetic energy
There are three reasons that study of the environmental impacts of
ocean and hydrokinetic energy is particularly important: 1) the
technologies are in a nascent stage of development with only a few
pilot scale projects in operation around the world; 2) due to the
defuse nature of the energy resource in the ocean and moving water,
this family of technologies necessarily requires many pieces of
equipment spread out over great distances to capture traditional
electric utility-scale amounts of electricity; 3) the oceans are prized
for their open vistas, importance in the global ecosystem, and also
particularly vulnerable to global warming.
As recommended above, R&D looking at the environmental impacts of
this family of technologies should focus on a few regions with
especially high resource potential, ideally for multiple technologies.
Studying the ecosystems of oceans and marine areas is obviously a
complicated and time-consuming process. Furthermore because so much is
unknown about the interaction of wildlife with the various technologies
being developed to capture ocean and hydrokinetic energy, special
effort should be made to find other man-made infrastructure that can
give us insights into the potential impacts. The novelty of the
technologies makes post-installation studies of impacts and adaptive
management even more important.
Of course the novelty of the technologies also creates
understandable concerns from project developers about allowing
scientists access to proprietary information regarding system design.
However, these concerns should not be allowed to hinder pre- and post-
installation studies. Access for independent environmental research and
develop should be a prerequisite for any federal support.
The idea of cumulative impacts takes on even greater importance in
the context of ocean and hydrokinetic technologies. Not only should
studies consider the impacts associated with multiple projects,
initially, they should develop an understanding of the cumulative
impacts of the multiple pieces of equipment being installed within the
bounds of one project. Utility scale projects are likely to require
more than one hundred individual generators. In certain parts of the
ocean, the cumulative impacts of this many pieces of equipment could be
dramatically different than the impacts of just one or two generators.
The only exception to the newness of this family of technologies is
offshore wind energy. Given more mature nature of this technology it is
appropriate that offshore wind is generally not included in the Marine
Renewable Energy Research and Development Act of 2007. The only area
where offshore wind should be explicitly included is in lessons learned
studies and studies to build baseline data on regions with high ocean
energy resources. Offshore wind energy projects could be an important
source of information about energy project development and thus should
be considered as part of post-construction studies of impacts. Also to
the extent that regions are picked due to their having high resource
value, the environmental effects of wind power should be considered in
impact studies, as wind projects could contribute to the cumulative
impacts concept described above.
Lastly, federal R&D should recognize the unique nature of our
oceans and marine areas. They provide unique ecosystem services, they
are used differently than land from both a commercial and recreational
perspective, and they are extremely vulnerable to global warming. As a
result of these differences, the policies and procedures for access for
renewable energy projects are still being developed. The Minerals
Management Service has taken the important step of conducting a
programmatic environmental impact statement on its developing offshore
energy permitting process. The Federal Energy Regulatory Commission
should work with state and federal natural resource management agencies
to do the same with new hydrokinetic technologies. Ocean and
hydrokinetic energy may be too new for studies to offer anything other
than preliminary guidance, but that's an important first step and only
highlights the need to get started with environmental impact R&D now.
recommendations
Focus federal R&D dollars on studies of a few regions with
high resource potential, study other manmade installations in
oceans in order to anticipate impacts of ocean and hydrokinetic
technologies, and prioritize post-installation lessons' learned
studies.
Require access for independent pre- and post-installation
environmental studies as part of eligibility for any federal
subsidies.
Ensure that studies address the cumulative impact of
multiple projects and of multiple installations within one
project.
Exclude offshore wind from the Marine Renewable Energy
Research and Development Act of 2007 except to study offshore
wind projects to learn lessons that may inform other projects
and as part of regional cumulative impact analyses.
FERC should work with state and federal natural resource
management agencies to do a programmatic environmental impact
statement for the licensing of new hydrokinetic technologies.
Regional studies should help build consensus around areas
that are best suited for early development and those that
should be avoided at least until the potential impacts of the
technologies are much better understood.
______
Statement of Sean O'Neill, President, Ocean Renewable Energy Coalition
abstract
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,
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''. and
promote coastal planning that reflects the goals of bio-diversity that
maximize best comprehensive use of resources and capitalizes on
synergies between offshore industries.
The industry needs funding for research and development, pilot and
demonstration projects, resource assessments, and environmental
studies, as well as an appropriate regulatory regime that embraces the
concepts of adaptive management, proportionality, and common sense.
Without a regulatory environment that provides some certainty the
industry may not succeed. If subjected to dual regulatory regimes the
industry will be subjected to unfair barriers to market entry. And
without Federal Government support, the citizens of the United States,
our environment, and our energy security will be deprived of the
tremendous benefits that ocean renewable energy offers.
introduction
Ocean Renewable Energy Coalition is the national trade association
for marine and hydrokinetic renewable energy dedicated to promoting
energy technologies from clean, renewable ocean resources. The
coalition is working with industry leaders, academic scholars, and
other interested NGO's to encourage ocean renewable technologies and
raise awareness of their vast potential to help secure 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 0 in the race to capture the rich energy
potential of our oceans. While other countries have already 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? 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.
i. 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 electricity.), 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 July
2006, filed a preliminary permit for a 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. The
project is currently poised to complete a four-year permitting
process at the Federal Energy Regulatory Commission (FERC).
Most recently the Makah Bay Project received a finding of no
significant impact from FERC for their Makah Bay project.
New York based Verdant Power, Inc. is undergoing licensing
at FERC and deployed six units of a tidal/current project
located in the East River of New York in December 2006. These
units have supplied reliable power to two commercial, yet non-
paying due to FERC rules, customers on Roosevelt Island.
Continuous operation has yielded no fish strikes or adverse
marine impacts, to date.
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 Minerals 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. 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 appropriations 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. A Joint Renewables Office might
require congressional authorization and funding as provided under
section [need specifics]--whereby the Department of Interior has
established a similar program.
iii. principles of adaptive management
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 seeks resolution of any jurisdictional conflicts between MMS
and FERC for projects on the OCS. Above all, OREC seeks to avoid
duplicative regulation and potentially competing requirements by FERC
and MMS. Duplicative regulation will burden marine renewable developers
and unnecessarily waste taxpayer dollars. In addition, duplicative
regulation or lack of coordination between FERC and MMS could result in
marine energy developers paying annual charges associated with
administration of the Federal Power Act under Section 10(e) and royalty
payments required by Section 388 of the EPAct of 2005. OREC expresses
no preference to which agency should govern on the OCS, so long as the
eventual process adopted incorporates any other necessary procedures,
allows for one coordinated, simultaneous process rather than disparate
or consecutive procedures and above all, and does not create delays,
overlap or the potential for conflicting conditions.
To date, FERC and MMS have been negotiating a Memorandum of
Understanding (MOU) which would govern regulation of marine renewables
on the OCS, but an MOU has not yet issued. Consequently, some action is
required to resolve the ongoing FERC-MMS dispute which is perpetuating
regulatory uncertainty and stymieing development.
v. mms delay in rulemaking
Section 388 of the Energy Policy Act of 2005 directed MMS to issue
regulations for leasing lands on the OCS for alternate energy
development within 270 days of enactment of the statute, or August 9,
2005. The deadline for issuance of regulations has long passed.
Offshore wind and wave energy developers are eager to explore the
resources of the OCS and site test buoys or test towers to gather data,
but in the absence of any rules--even interim rules--none of this
testing can proceed. Since developers typically require at least one
year of test data prior to commencing project development, MMS failure
to enact rules has already set the industry back two years (both the
year needed for tests and the year delay in issuing the rules). MMS
must make provisions now to allow developers to proceed with test
facilities.
vi. conclusion
Both the Federal Energy Regulatory Commission and the Minerals
Management Service were established decades ago with responsibility
over large scale energy development. An ultimate siting decision would
trigger, in many cases, a final approval to impact expansive tracts of
land or marine terrain for energy production. 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? 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.