Wave, Tidal, and In-Stream Energy Projects: Which Federal Agency Has the Lead?

Wave, Tidal, and In-Stream Energy Projects: Which Federal Agency Has the Lead?

Order Code RS22721
Updated November 26, 2008
Wave, Tidal, and In-Stream Energy Projects:
Which Federal Agency Has the Lead?
Nic Lane
Analyst in Natural Resources Policy
Resources, Science, and Industry Division
Summary
Developments in wave, tidal, and in-stream energy generation technologies — also
referred to as hydrokinetic or marine energy — are beginning to gain momentum. At
the same time, their regulatory status is still evolving, as shown by recent changes in law
aimed at clarifying the federal role in ocean wave and renewable energy. Two federal
agencies currently appear to have a lead role in offshore renewable energy projects.
The Department of the Interior’s Minerals Management Service (MMS) indicates
that the Energy Policy Act of 2005, § 388, gave it authority as the lead agency for
projects proposed on the Outer Continental Shelf (OCS). MMS is developing a
regulatory framework and is not accepting applications for hydrokinetic (and other
alternative energy) projects until its rulemaking process is complete.
The Federal Energy Regulatory Commission (FERC) has issued preliminary
permits and accepted license applications for hydrokinetic projects on the OCS and in
the near-shore ocean environment. Also, FERC is developing a licensing process
specific to hydrokinetic projects. The issue of which agency has final regulatory
authority over hydrokinetic projects that are partially or completely on the OCS is
unresolved and may affect project development in this burgeoning industry.
Background
Electric generation projects that are designed to harness the power of waves, tides,
or river currents — without a dam or impoundment — are known as hydrokinetic or
marine energy projects. While the technology to harness this energy is still in the
developmental stage, interest has increased in exploring this potential source of electric
power. For example, projects are being considered in a number of states, including
Alaska, California, Hawaii, Louisiana, Maine, New York, New Jersey, Oregon, Rhode
Island, and Washington. A special temporary license exemption was issued for a
prototype tidal energy project in New York’s East River, and a Federal Energy Regulatory
Commission (FERC) hydropower license, the first for this type of project, is pending for
a wave energy project in Washington. As project developers have begun to explore

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opportunities in this sector, Congress has introduced legislation to support and regulate
this nascent industry.
EPACT
The 109th Congress considered legislation related to hydrokinetic power. In
particular, the Energy Policy Act of 2005 (EPACT)1 addresses wave, tidal, and in-stream
energy directly or indirectly in a number of ways. EPACT addresses federal jurisdiction
over, and development of, alternative energy sources. Title II contains provisions for
assessing and reporting on renewable energy resources by the Department of Energy. It
also establishes incentives for renewable energy production, specifies benchmarks for
renewable energy purchases by federal facilities, and authorizes grants supporting rural
electrification, with preference given to renewable energy facilities. Section 931 directs
the Secretary of Energy to establish R&D programs for ocean energy, including wave
energy, and kinetic hydro projects. Section 388 amends § 8 of the Outer Continental
Shelf Lands Act2 to grant authority to the Secretary of the Interior, through the Minerals
Management Service (MMS), to grant leases on the Outer Continental Shelf (OCS) for
producing energy from sources other than oil and gas.
Legislation
P.L. 110-140 authorized $50 million annually from FY2008 through FY2012 for the
creation of at least one national ocean energy research center. The 110th Congress also
approved funding for hydrokinetic energy development in FY2008 appropriations
legislation. Under P.L. 110-161, approximately $10 million was provided for water
power R&D, which includes hydrokinetic generation. The Emergency Economic
Stabilization Act of 2008 (P.L. 110-343) authorized a production tax credit applicable to
hydrokinetic projects having a nameplate capacity of 150 kilowatts or greater and
producing power by January 1, 2012.
Who Has Primary Authority over Hydrokinetic Energy Projects?
In addition to technological and resource uncertainties, one of the principal
uncertainties facing hydrokinetic energy developers is that of the primary regulatory
agency for their industry. Presently, two federal agencies have asserted a lead role in the
oversight of wave, tidal, and in-stream energy projects: FERC and MMS.3
Minerals Management Service (MMS). The Department of the Interior’s MMS
manages the nation’s Outer Continental Shelf (OCS)4 oil, natural gas, and other mineral
resources. The agency is responsible for more than $8 billion in annual revenues from
1 P.L. 109-58.
2 43 U.S.C. § 1337.
3 For more information on broader issues related to hydrokinetic project development, see CRS
Report RL33883, Issues Affecting Tidal, Wave, and In-Stream Generation Projects, by Nic Lane.
4 The OCS is composed of the submerged lands, subsoil, and sea bed lying between the seaward
extent of the states’ jurisdiction and the seaward extent of federal jurisdiction. Typically, this
is the area between 3 and 200 nautical miles.

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federal offshore mineral leases (as well as onshore mineral leases on federal and Indian
lands). EPACT 2005 granted MMS additional authority to act as the lead federal agency
for offshore renewable energy projects. MMS views its primary authorities under EPACT
§ 388 to be (1) granting leases, easements, and rights-of-way for renewable energy-related
uses on federal OCS lands; (2) acting as the lead agency for coordinating the permitting
process with other federal agencies; and (3) monitoring and regulating facilities used for
renewable energy production and energy support services.5
MMS has issued a final programmatic environmental impact statement (PEIS)
analyzing the environmental impact of a program to develop hydrokinetic energy projects
on the OCS. It anticipates issuing a final rule on the process of lease application and
energy project development in the fall of 2008.6 MMS will not issue decisions on
hydrokinetic energy projects until a final rule is established,7 but indicates that in advance
of a final rule it has established an interim process that includes limited-term leases to
allow data collection and technology testing — but no commercial-scale project
development.8 MMS has received over 40 nominations for these limited use leases.9
Additionally, MMS has released proposed rules for alternative energy projects on the
OCS with a 60-day comment period.10 The proposed rules indicate that two types of
leases may be available for project sponsors: commercial and limited. Commercial leases
would have a term up to 25 years and allow full commercial energy production. Limited
leases would have a shorter five-year term and are intended for site assessment,
technology testing, and other pre-commercial activities.11
EPACT § 388 stipulates that MMS authority does not supercede the existing
authority of any other agency for hydrokinetic project permitting, so it is possible that a
wave or tidal energy project on the OCS may also require a FERC license to operate,
although leasing and environmental review would be conducted by MMS.12 MMS
indicates that it intends to finalize its rulemaking process by December 2008.13
Federal Energy Regulatory Commission (FERC). The Federal Power Act
(FPA)14 authorized FERC to be the agency responsible for licensing almost all nonfederal
5 See [http://www.mms.gov/offshore/RenewableEnergy/RenewableEnergyAndAlternateUses.
pdf].
6 See [http://www.mms.gov/offshore/CIAP/PDFs/Visio-3timelines040207A.pdf].
7 See [http://www.mms.gov/offshore/RenewableEnergy/OCSPolicyCmteMtg022107.pdf].
8 72 Fed. Reg. 214, November 6, 2007.
9 73 Fed. Reg. 76, April 18, 2008.
10 73 72 Fed. Reg. 132, July 9, 2008.
11 Ibid.
12 Personal communication with Ms. Julie Fleming, Legislative Specialist, Minerals Management
Service, Washington, DC, January 22, 2007.
13 See [http://www.mms.gov/ooc/press/2008/press0708.htm].
14 16 U.S.C. § 817(1).

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hydropower projects.15 There has been no debate about FERC’s jurisdiction over
hydrokinetic projects in rivers and inland waters, but there may be some question about
its authority over these projects in the ocean.
FERC has asserted that its authority includes hydrokinetic projects in the ocean up
to 12 miles from shore.16 FERC supports this statement with citations to the FPA17 and
Presidential Proclamation 5928,18 which extended the territorial sea,19 and thus, FERC
asserts, its jurisdiction, to 12 nautical miles.
Further, FERC has indicated that project features such as undersea anchors or
transmission lines leading to a grid connection on the shore would occupy land under
federal jurisdiction, thereby requiring the project to have a FERC license. In addition,
FERC has stated that it considers hydrokinetic energy facilities to be “powerhouses” as
defined by the FPA licensing provision,20 and has indicated that it considers wave and
tidal projects that connect to the electric grid to be affecting interstate commerce, thus
requiring a FERC license.21
FERC had issued over 100 preliminary permits for developers to study hydrokinetic
project sites, and dozens more preliminary permit applications are pending approval.22
A preliminary permit is not a license to construct and operate a project, but rather grants
the applicant the right to study an area for suitability of project development prior to a
formal license application. Additionally, FERC has finalized the first license for a
hydrokinetic project under a new “conditional” license program (see “MMS-FERC
Conflict,” below).23
MMS-FERC Conflict. In response to FERC’s acceptance of several preliminary
permit applications for hydrokinetic energy projects on the OCS off the coasts of
California and Oregon, MMS filed formal protests with FERC citing specific points of
contention. MMS indicated that it believes FERC jurisdiction does not extend to the OCS
for three reasons and requested that the agency reject the application in question and stop
15 There are limited circumstances when a FERC license, or FERC-granted license exemption,
is not required for a hydropower project. For instance, projects operating under a valid
congressional permit issued before 1920 would not be subject to FERC jurisdiction.
16 102 FERC ¶61,242.
17 16 U.S.C. § 796 (8).
18 54 Federal Register 777, December 27, 1988.
19 Under international law, every coastal nation has sovereign rights over the air space, water
column, sea bed, and anything beneath it, within its territorial sea. In 1988, President Reagan
proclaimed that the United States’ territorial sea extended 12 nautical miles seaward from the
coast.
20 16 U.S.C. § 817 (1).
21 102 FERC ¶61,242.
22 See [http://www.ferc.gov/industries/hydropower/indus-act/hydrokinetics/permits-issued.asp].
23 122 FERC ¶61,248.

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processing preliminary permits for similar projects on the OCS.24 The three reasons MMS
cites are as follows:
! FPA-granted jurisdiction for FERC does not explicitly extend on to the
OCS. Further, MMS refutes FERC’s claim that Presidential Proclamation
5928 also extends FERC authority to 12 nautical miles. In support of this
point, MMS refers to Proclamation language indicating that “Nothing in
this Proclamation: (a) extends or otherwise alters existing Federal or
State law or any jurisdiction, rights, legal interests, or obligations derived
therefrom....”25
! MMS stresses that § 388 of EPACT specifically grants it authority for
renewable energy projects on the OCS.
! MMS says that FERC’s existing hydropower permitting and licensing
process is inappropriate for hydrokinetic energy projects on the OCS
because preliminary permits may reserve large areas of potential
development to the first applicant rather than to the best applicant. Also,
MMS says that a 30- to 50-year license is too long for prototype projects.
At least one preliminary permit applicant in the instance cited above subsequently
submitted additional information for its permit application, reconfiguring to a project area
located in state waters within three nautical miles of shore, thus avoiding the OCS and any
issue of MMS jurisdiction.26 FERC issued a preliminary permit for the project reflecting
the modified footprint of the site provided by the applicant.27
FERC has since posted a Notice of Inquiry soliciting comments on its preliminary
permitting procedure and outlining its interim policy on the issue. The agency has
received numerous comments from project proponents, state agencies, and tribal entities.
Pending final resolution, it will continue to issue preliminary permits for hydrokinetic
projects under a “stricter scrutiny” policy. FERC states that preliminary permits will be
issued with more limited project boundaries and that required project progress reports will
be given closer review.28 Although CRS has found no public FERC response to the MMS
protests, it appears that for a period of approximately one year following the protests,
none of the preliminary permits issued were for projects that reach onto the OCS.
However, in March 2008, FERC issued preliminary permits for projects that include
24 MMS, Protest of the United States Minerals Management Service, FERC Docket P-12752-000
(January 30, 2007); MMS, Protest of the United States Minerals Management Service, FERC
Docket P-12750-000 (February 20, 2007); and MMS, Protest of the United States Minerals
Management Service, FERC Docket P-12753-000 (March 2, 2007).
25 54 Federal Register 777, December 27, 1988.
26 FERC, AquaEnergy Group, Ltd submits additional information that reduces the project
boundary & more accurately represents the footprint of the proposed project under P-12752,
Docket Number P-12752-000 (February 6, 2007).
27 FERC, Order issuing preliminary permit re AquaEnergy Group Ltd under P-12752, Docket
Number P-12752-000 (April 26, 2007).
28 FERC, Notice of Inquiry, Docket Number RM07-08-000 (February 15, 2007).

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portions of the OCS off of California. The Department of the Interior has filed a request
for rehearing of the FERC order issuing those permits.29 FERC has since reasserted its
authority over projects on the OCS and denied the Department of the Interior’s request
for rehearing.30
FERC has developed a modified license for hydrokinetic pilot projects. This process
is available immediately for interested parties, though the agency is accepting comments
on the process in order to refine it. FERC held a technical conference on October 2, 2007,
to seek feedback from stakeholders on the new license. The goal of the hydrokinetic
license is to eliminate barriers to development by reducing processing time to as little as
six months, allowing installation of test equipment, and allowing power generation to the
grid. The license requires that projects have a size of five megawatts or less, be easily
removed or deactivated, and be installed for no longer than a five-year term. There are
additional provisions for site decommissioning and project changes or equipment removal
if unexpected environmental impacts arise.31
Further, FERC has also developed a conditional license. Unlike the pilot license
program, this is a full project operating license that allows applicants to begin non-
construction activities while some permitting processes — such as water quality
certification — are still pending.
FERC and MMS are on separate tracks to develop regulatory processes for energy
projects in the ocean. However, the issue of ultimate regulatory authority for projects
entirely or partially on the OCS remains. The uncertainty over lead regulatory status on
the OCS is an important issue that may discourage investors in this developing industry.
Under the current regulatory framework, project owners may be reluctant to develop
sites beyond three nautical miles to avoid the possibility of regulatory duplication. The
final configuration of each agency’s regulatory framework could have a major impact on
project-siting decisions. Developers may decide to site projects completely on one side
of the three-mile OCS boundary, depending on which regulatory process they deem to be
more favorable. This type of approach could distort the industry’s development or leave
otherwise promising sites undeveloped.
29 FERC, Request for Rehearing of U.S. Department of the Interior under P-12779-000 and
P-12781.Docket Numbers P-12779-000 and P-12781-000 (April 14, 2008).
30 125 FERC ¶61,045.
31 See [http://www.ferc.gov/industries/hydropower/indus-act/hydrokinetics/energy-pilot.asp].