MMS-FERC Jurisdictional Smackdown!

Ever since the enactment of the Energy Policy Act of 2005, which amended Section 8(p) of the Outer Continental Shelf Lands Act to authorize the Department of Interior/Mineral Management Service to issue leases for development of alternative energy sources on the OCS, I wondered how long it would take for MMS to fully establish its exclusive primacy over the OCS.  It wasn't long after EPAct 2005 that MMS first flexed its jurisdictional muscle, not just by taking over as lead agency for the Cape Wind permit process, but also refusing to rely on the Corps' voluminous draft Environmental Impact Statement (EIS) and instead, preparing its own EIS.   And earlier this month, MMS finally made clear in these recent comments (filed by MMS at FERC) that it wasn't going to stand for encroachment on its powers over wave and tidal projects on the OCS by the Federal Energy Regulatory Commission   (FERC).
 

Here's the back story on the MMS-FERC brawl.  Back in 2003, relying on tenuous reasoning, FERC asserted jurisdiction over wave and tidal projects on the OCS with its decision in AquaEnergy Group, 102 FERC para. 61242 (2003).  FERC found that AquaEnergy's proposed ocean project, which would use five buoys to capture the motion of waves and convert it to electricity, was a "hydroelectric project" within the meaning of the Federal Power Act.  FERC squeezed the AquaEnergy Project into the definition of a hydroelectric project (which under the statute includes features such as a dam, impoundment and powerhouse) by finding that the tiny project buoy operated as a powerhouse, because it housed a generator.  FERC also found that the project, located three miles offshore in a Marine Sanctuary was in navigable waters over which FERC had licensing authority.   Moreover, FERC held that the scope of its power over wave and tidal power went beyond the traditional 3 mile limit of navigable waters applied by other agencies (such as the Corps of Engineers) and extended a full twelve miles out, to the limits of the territorial sea. 

Now back in 2003, no one, including FERC paid much attention to the AquaEnergy decision, figuring that wave energy technology was just another crazy idea.  At the same time, over on the East Coast, Cape Wind was struggling with its offshore wind proposal.  In an effort to resolve concerns over Cape Wind's ability to site a large project on the OCS without paying rental fees, Congress authorized MMS to issue leases and assess royalty payments for use of lands to develop renewable energy resources on the OCS.   But when Congress passed EPAct in 2005, it did not know that FERC, by its own regulatory order, had already staked a claim to the OCS for wave and tidal projects.

As a result, EPAct 2005 gives rise to a system of dual jurisdiction on the OCS.  Other federal agencies, such as the Corps, have authority to issue permits for structures on the OCS, but the Corps does not apply the same comprehensive development analysis as FERC and MMS.  Both MMS and FERC seek to be the lead agencies for licensing projects, but each plan a different scheme for evaluating competing applications, determining appropriate terms and conditions for inclusion in the license and overseeing project operation.  Thus, MMS and FERC jurisdiction overlap and potentially conflict; by contrast, the Corps' Section 10 authority is not as robust and thus, can be more easily subsumed within the MMS process.

So why don't one of the agencies - either MMS or FERC - simply bow out?  Well, that's not possible for MMS.  In order to obtain sufficient property rights to site a wave or tidal project on the OCS, a developer must obtain a lease from MMS.  FERC acknowledges MMS' power, but has maintained that tiny wave and tidal developers can simply comply with both regimes:  first, obtain a lease from MMS and subsequently a license from FERC. 

MMS' authority stops at the three mile limit, so for projects located less than three miles from shore (or ten miles in the case of Texas and the Gulf Coast of Florida), FERC will have power to license wave and tidal projects.  And right now, that's where most wave and tidal developers are proposing projects - both to keep transmission costs down, but also to eliminate the possibility of dual jurisdiction. 

In my view, MMS and FERC ought to split the buoy, so to speak, and do it quickly to resolve regulatory uncertainty.  MMS can take the lead on projects on the OCS, and FERC maintain regulatory authority over projects on state submerged lands.  This solution also matches the traditional scope of navigable waters which are typically defined by statute as extending three miles out.  For that reason, in fact, the Corps of Engineers lacked the power to issue Section 10 Rivers and Harbors permits on the OCS until Section 4(d) of the OCSLA extended the Corps' authority beyond the three mile limit to the OCS.  Unlike the Corps, FERC has not received comparable statutory authorization to exceed the three mile limit in its licensing jurisdiction, which has always been analogous in scope to the Corps' aurhority under Section 10 of the Rivers and Harborts Act.

I find it odd that MMS and FERC are tussling over jurisdiction, when neither has been moving very rapidly towards expediting permitting of wave and tidal projects.  Evidently, both agencies recognize the enormous potential of the marine renewables industry, as shown by the jurisdictional spat.  Yet neither regards these projects as significant enough to make them a priority now.