The guidance matches the Minerals Management Service’s recently promulgated rules for developing offshore wind and solar facilities on the Outer Continental Shelf.

The Federal Energy Regulatory Commission (FERC) and the U.S. Department of Interior Minerals Management Service (MMS) issued guidance on August 4, 2009, providing information on the leasing and licensing requirements applicable to the development of hydrokinetic energy projects on the Outer Continental Shelf (OCS). Hydrokinetic energy is derived from waves, tides and ocean currents. OCS generally refers to the ocean territory between three and 200 miles from the coast of the United States.

This guidance matches the MMS’s recently promulgated rules for developing offshore wind and solar facilities on the OCS.

In the Energy Policy Act of 2005, Congress endowed the MMS with jurisdiction over the development of renewable energy production on the OCS. While this grant settled jurisdictional uncertainty related to the MMS’s authority to approve renewable energy projects on the OCS, it did not resolve many subsidiary questions. For instance, it remained unclear whether this grant displaced FERC’s jurisdiction under Part 1 of the Federal Power Act over hydroelectric energy, which, in FERC’s view, included offshore hydrokinetic facilities. Also unclear was which agency would regulate the actual sale of power from an offshore renewables project.

These questions were largely answered in April 2009 when FERC and the MMS issued a Memorandum of Understanding (MOU). The MOU clarified that FERC would have licensing authority over hydrokinetic facilities, while the MMS would be responsible for issuing leases for the OCS area in which such facilities would operate. Also, the MOU clarified that FERC would retain jurisdiction over the sale of power from facilities located on the OCS.

On April 22, 2009, the MMS issued final regulations governing the development of wave and solar projects on the OCS. For more information, see McDermott Will & Emery On the Subject “DOI Releases Final Rule Regarding Renewable Energy Generation on the Outer Continental Shelf.”

The most recent issuance by FERC and the MMS provides prospective developers and stakeholders guidance in the form of answers to frequently asked questions (FAQs). Notably, it appears that FERC intends to license hydrokinetic facilities under Parts 4 and 5 of its existing regulations, which until now have been used almost exclusively for traditional hydroelectric projects (i.e., dams). Thus, an issue to watch closely is whether (and, if so, how) FERC amends these regulations to fit the unique qualities of hydrokinetic projects.

The FAQs address a number of topics:

  • General requirements for hydrokinetic licenses and leases
  • Procedures for obtaining MMS leases and FERC licenses
  • Application of the license and lease scheme to entities deemed to be municipalities under the Federal Power Act
  • Competition for leases by rival developers
  • Duration of licenses and leases
  • Financial assurance requirements
  • Applicable fees
  • Application of the license and lease requirements to hybrid projects featuring, for example, wind and hydrokinetic facilities
  • Special considerations for projects straddling federal and state offshore territories