A longstanding skirmish regarding jurisdiction over renewable energy development in the Outer Continental Shelf (OCS) may have been laid to rest. Last Thursday, the Federal Energy Regulatory Commission (FERC) and the Department of the Interior signed a Memorandum of Understanding (MOU) further clarifying each agency's respective jurisdictional authority over offshore renewable energy projects. The MOU applies to wind, solar and hydrokinetic energy projects, including wave, tidal and ocean current initiatives. The MOU, which is intended to facilitate the development of alternative energy on the OCS, clearly divides the agencies' authorities.

First, the agencies recognize that Interior's Minerals Management Service (MMS) has "exclusive jurisdiction" over the production, transportation and transmission of energy from non-hydrokinetic renewable energy projects on the OCS, including wind power projects. The agencies do not recognize any role for FERC in the MOU for non-hydrokinetic projects, effectively closing FERC out of regulation in this area of renewable energy development, including, apparently, the transmission of electricity from such projects.

The agencies also agree in the MOU that FERC has exclusive jurisdiction to issue licenses for the construction and operation of hydrokinetic projects on the OCS, pursuant to the Federal Power Act, as well as exemptions for those projects (although the applicability of the referenced exemptions is questionable). In a significant reversal, however, FERC will not issue preliminary permits for hydrokinetic projects located on the OCS. Previously, FERC has stated that it would apply its process for hydroelectric licenses to hydrokinetic projects on the OCS, including the preliminary permit process, which generally allows potential developers to secure sites for projects on an initial basis without a comprehensive National Environmental Policy Act review. This change necessarily will impact several project developers who already have filed applications for preliminary permits with FERC. The agencies thus far have given no indication of how they will treat those existing preliminary applications that were filed in reliance on FERC's existing regulations and policies.

MMS will retain a significant role in the consideration of hydrokinetic projects. Specifically, consistent with MMS' historical authority, the MOU states that MMS has exclusive jurisdiction to issue leases, easements and rights-of-way regarding OCS lands for hydrokinetic projects. In addition, MMS has the authority to attach terms and conditions to these contracts, which FERC must include in any license or exemption it issues. Moreover, FERC cannot issue a license for a hydrokinetic project unless the applicant already has obtained the appropriate lease, easement or right-of-way from MMS. This places significant power in the hands of MMS and could negatively impact hydrokinetic project proponents who have filed with FERC for a site for which there is also a competing wind power project application pending at MMS.

FERC and Interior agree in the MOU to work together to develop policies and regulations regarding OCS hydrokinetic projects including processes to address hybrid projects and projects that straddle the boundaries between state and the OCS. This is a critically important piece that has yet to be fleshed out, as many renewable power developers believe that hybrid projects incorporating both hydrokinetic and wind power represent the most economically viable projects.

Although the MOU adds important detail to the agencies' respective jurisdictions, significant gaps remain. It is unclear whether this Solomon-like division of authority actually will result in a more streamlined, efficient consideration of offshore renewable energy projects. Finally, it also remains to be seen whether members of Congress who have strongly advocated for the development of offshore renewable energy will agree with this new framework. In particular, Senators Bingaman and Murkowski expressed some concern at a recent hearing of the Senate Committee on Energy and Natural Resources regarding the agencies’ proposed division of jurisdiction.

While the MOU provides a broad outline of jurisdiction, Interior Secretary Salazar has stated that MMS will be issuing in the coming months the specific regulations establishing a regulatory regime for such offshore renewable energy projects. For the development of hydrokinetic projects, FERC will use existing statutes and regulations to govern these projects. Thus, the potential exists that hydrokinetic projects could move forward more quickly and efficiently under the existing framework. Regardless, project proponents must remain flexible in their approach to their projects and the regulatory and legal processes applicable to them.