Wave energy regulatory war brews

By Susan Chambers, Staff Writer
Sunday, October 19, 2008
Two federal agencies battle for jurisdiction over ocean projects
COOS BAY — There’s a renewed fight brewing over wave energy, but it’s not between the fishing industry and developers.


This time, it’s between two federal agencies.

The Federal Energy Regulatory Commission has assumed it has jurisdiction over projects within state waters, out to three nautical miles — and that’s generally been accepted as the case. The Minerals Management Service has assumed jurisdiction over alternative energy projects in the outer continental shelf, federal waters, beyond three miles.

That changed — maybe — on Thursday.

FERC decided to flex its muscles and assert its jurisdiction over hydroelectric projects in federal waters.

The decision specifically applied to a couple of projects in California and on the East Coast, but in a broader sense, its decision-making power also would apply to any projects for which developers applied in federal waters in other states.

“I am confident today’s decision puts to rest any questions about FERC’s jurisdiction over hydroelectric projects on the OCS,” FERC Chairman Joseph T. Kelliher said in a press release.

For example, Ocean Power Technologies, which is planning wave energy projects in Reedsport and near Coos Bay, planned for a project off of Newport as well. That project overlaps the three-mile line and juts into federal waters. OPT applied for a FERC permit in 2006.

Consequently, MMS, an agency under the U.S. Department of the Interior more accustomed to dealing with offshore oil and gas, disputed FERC’s authority to issue permits or licenses for hydroelectric projects that may be located in whole or in part on the outer continental shelf.

MMS said it has federal regulatory authority for those kinds of projects under the Energy Policy Act of 2005. As a result, it’s spent two years establishing an Alternative Energy and Alternate Use program designed to manage potential wave, tide or current energy activities. It also has been developing a programmatic environmental impact statement to examine the potential environmental consequences of implementing the program.

FERC, in Thursday’s notice, claims jurisdiction in federal waters under the Federal Power Act.

The agency also said it has proposed a memorandum of understanding with MMS that would clearly delineate the roles of the two agencies. At the same time, FERC spokeswoman Celeste Miller said the memorandum could not be released because it had not been signed.

Blossom Robinson, a spokeswoman for Minerals Management, said as of Thursday she had not seen the MOU or even heard about FERC’s new stance.

Local impacts

It’s a wave new world out there — and regulatory uncertainty is just a part of it, said Lincoln County Assistant County Counsel Rob Bovett.

Bovett’s been involved with wave energy for several years, ever since the county began considering alternative energy possibilities and began working with fishermen, Oregon State University and energy developers.

He sees MMS as having jurisdiction over projects outside of three miles but also recognizes there are problems with that — both for developers and fishermen potentially affected by buoy farms.

The minerals service is not accustomed to energy regulation, Bovett said. And if MMS continues to have jurisdiction, it will add more confusion and more paperwork for developers and the fishing industry.

But perhaps the greatest issue is the three-mile line itself.

“If we create this artificial line, it may force some projects nearer to shore or farther offshore,” Bovett said.

That could generate problems for more than one sector of the fishing industry.

Crabbers, for example, generally use the nearshore sandy areas as their fishing grounds. The trawlers’ realm is deeper water, typically offshore.

If FERC’s assertion of regulatory authority holds up — and some fishermen and developers hope it will — it could have unintended consequences.

“If FERC was in charge of licensing and permitting outside of three miles, and (wave energy) technology supported it, it would take some of the pressure off some of the soft, sandy bottom that is favored for crabbing,” Oregon Dungeness Crab Commission Executive Director Nick Furman said.

On the other hand, it could create more problems for trawlers and he doesn’t want to see one part of the fishing industry pitted against the other.

OPT has adopted a wait-and-see attitude.

“We don’t have an opinion,” said OPT’s vice president of business development and marketing, Herb Nock.

For now, OPT is aggressively pursuing its Reedsport and Coos Bay projects, both of which are sited in state waters. The Newport project is on the back burner.

“Over time, I think we’d like to see this resolved,” Nock said. “In the meantime, we have plenty to do within the three-mile limit.”

Bovett said there are some advantages to the energy regulatory commission being in charge, in addition to having a seamless transition between inshore and offshore waters.

“I think the industry would rather deal with FERC … because FERC already is a regulatory entity,” he said.

Cumulative effects

FERC considers each wave energy project on a case-by-case basis, one project at a time. It doesn’t take into account whether another project is placed within a couple miles of an earlier one or what effect the total number of projects would have on other ocean users.

It’s a situation the fishing industry has complained about. Fishermen in Coos Bay could be affected by a project off the northern Oregon Coast if that is where they set their crab gear. Fishermen in all three states could be affected by the sheer numbers of wave energy farms, if established, but FERC does not consider multiple buoy farms as a whole.

“There’s no advance siting, no comprehensive siting,” Bovett said. “There’s no cumulative effects analysis.”

FERC is a regulatory agency, not a planning agency, he added.

A benefit to the Minerals Management Service having regulatory authority outside of three miles is the programmatic environmental impact statement. That process considers cumulative impacts of several projects on users and the environment and creates a general framework under which developers could apply for permits or licenses.

Also, the FERC licensing process for hydrokinetic energy — government-speak for wave, current or tidal energy projects — is based on the hydropower energy model for dams on rivers. It doesn’t work for ocean projects, Bovett said.

“On one hand, I strongly support FERC having regulatory authority,” he said, “but on the other hand, the government hasn’t given them the right tools.”
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Tax credits for wave energy

Ocean Power Technologies, the company planning to develop wave energy farms near Reedsport and Coos Bay, said it expects to benefit from the Energy Improvement and Extension Act of 2008, signed by President George W. Bush on Oct. 3.

The act will enable owners of wave energy projects to receive federal tax credits” a boon to developers trying to establish wave energy facilities. Developing the technology is cost-intensive, developers say.

“This is the first time wave power has received U.S. federal tax credits and it is a significant step forward for the industry and for OPT,” Taylor said in a press release.

It expands the definition of qualifying facilities for the production tax credit to include those that generate power from marine renewables, including wave and tidal, the press release said. The tax credit is allowed for electricity produced and sold from marine renewable energy facilities of at least 150 kilowatts after Oct. 3. The credit rate for marine renewables is $0.01 per kilowatt hour. The duration of the credit will be 10 years after the facility is placed into service.

OPT could receive up to $15 million in credits over a 10-year period from a 50-megawatt wave energy farm, OPT Chief Executive Officer George W. Taylor said.

“We believe this will help utilities and independent power producers enhance the near-term benefits from OPT’s technology as an option to meet the ever-increasing need for renewable power.”

Staff Writer Susan Chambers

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