Memorandum of Understanding signed April 9,2009

On April 9, 2009, Commissioner Wellinghoff of FERC and Secretary Salazar of DOI signed a Memorandum of Understanding to clarify “jurisdictional understandings” regarding renewable energy projects in waters on the OCS. Salient features of the MOU along with my comments are listed below.

1.  Acknowledgment of Jurisdiction:  The MOU acknowledges that MMS has exclusive jurisdiction to issue leases on the OCS for all renewables, including hydrokinetic, and that FERC has exclusive jurisdiction to issue licenses and exemptions for hydrokinetic projects on the OCS.

2.  FERC will not issue preliminary permits for projects on the OCS.

Presumably, this feature is intended to avoid the type of claim jumping issue caused by the Grays’ Harbor project.  At the same time, we recognize that some OREC members will be disappointed by the loss of the ability to file a preliminary permit so as to conduct studies and maintain site priority.  It may be that the only mechanism to preserve priority for a site is to obtain lease rights.

3.  MMS will conduct NEPA analysis for issuance of leases while FERC will conduct NEPA analysis for licenses.  Each agency may choose to become a cooperating agency in the other’s process.

This requirement is a bit troubling because it suggests that there will be two NEPA processes – one for the lease and one for the license, rather than a uniform NEPA process.  OREC is already working separately on measures to develop a single joint, uniform license process and we will continue to so.  We would appreciate additional member input on this matter.

4.  FERC will not issue a license until an applicant has first obtained a lease.

This provision is a logical consequence of having both FERC and MMS on the OCS.  However, a lease is not a prerequisite to filing a license application, only to its issuance.  In the interim, if a company files for a license and does not have a lease, it seems that a competitor apply for a lease for lands that are within the scope of the license application.  Of course, there are ways to prevent this – for example, to bar MMS from issuing a lease for a site covered by a pending license application.  But as currently drafted, the MOU does not contain this protection.

5.  Other issues:

FERC and MMS will cooperate to determine how to handle hybrid (wind/wave) operations and projects that straddle the OCS and state lands.

6.  Annual Charges/royalties

There is not discussion as to how FERC and MMS will handle annual charges and royalties.  MMS intends to assess royalties for leases while FERC assesses annual charges under Section 10 of the FPA for hydrokinetic projects.  Will developers wind up paying both?

This summary is necessarily cursory as we prepare for the Global Marine Renewable Energy Project next week.  We can continue discussion of the MOU at that time.

You can find the entire Memorandum Of Understanding here or it can be found on our Resources page under FERC and MMS Regulatory Orders.