RenewablesOffshore

What's Up With the Finavera License: My Play by Play Predictions

I've handled more than two dozen appeals, several with great success, before the venerable D.C. Circuit, so I know my way around the court. But like most appellate lawyers, I'm loathe to try to predict the outcome of D.C. Circuit cases and wind up looking foolish when I'm (inevitably) wrong. Nevertheless, I'm willing to make some predictions about the State of Washington's petition for review of FERC's order issuing a license to Finavera for the Makah Project (docketed as State of Washington Dept. of Ecology v. FERC
No. 08-1191 (D.C. Cir. filed 5/15/2008) because I've seen some misconceptions about the issues in the case online and because I think it's a fairly easy call that Finavera keeps the license. (Full disclosure - years ago, I worked on a matter for AquaEnergy unrelated to this appeal and I now hold stock in Finavera). My detailed analysis follows after the jump.

Preliminary Permit Filing Watch

Ever since FERC announced its strict scrutiny policy for preliminary permit applications, it seemed as if much of the site grabbing activity that provoked the policy to begin with had died down. But Pacman companies i.e., those that gobble up wave and tidal sites, remain at large, still gobbling up sites as quickly as they can file preliminary permit applications. This matrix shows the most recent activity.

Now, I'm not saying that developers should be limited to filing a preliminary permit just one site. Companies need some flexibility to move forward at several sites since some may not prove optimal for development, while delays due to a need for extra studies or opposition from opponents may stall progress at other sites. And, it's often less expensive to conduct preliminary studies for several sites at a time.

Still, it's one thing to propose studying four or six or even ten sites at a time, and quite another to pursue dozens of permits at a time. Once a site is under permit, it's off limits to any other developer for three years - which means that responsible companies that spend time developing technology before applying for permits - can potentially be boxed out, effectively penalized for diligence. In addition, filing multiple permits can alarm the public and create backlash against the marine renewables industry. After all, no one wants to see an entire river or ocean packed full of buoys or turbines, no matter how benign they may be. And even when developers hastily file multiple permits and then surrender them, it can give the impression that the industry isn't yet ready for prime time.

To be clear, I'm not advocating limits on the number of preliminary permits that a company should be allowed to file. And I do believe that FERC's strict scrutiny policy, over time, will help knock off the worst of the Pacmen. But it wouldn't hurt for developers to consider the impact that their strategies have not just for their own investors but for the industry as a whole. After all, to paraphrase a famous quote, a rising marine renewables industry will lift all buoys (or turbines).

MMS and FERC, Both Busy

In the past month, both FERC and MMS have issued initiatives relating to marine renewables. In April 2008, FERC issued this Whitepaper that offers guidance on its pilot license process, through a series of FAQs. And also around that time, MMS issued this notice of the nominations that it received in response to its November request for nominations. The notice lists sixteen sites off the coast of New Jersey, Delaware, Georgia, Florida and California. The bulk of the sites are for offshore wind, with the exception of California which is for wave energy projects and Florida, for several current projects.

Conditional Licenses: How Helpful Are They?

Ever since FERC announced that it would issue conditional licenses for marine renewables projects, I've grappled with whether the policy makes sense for the industry. For those unfamiliar with the concept, a conditional license is issued following a full environmental review by FERC as well as a finding that the project would serve the public interest. But in contrast to a full license where an applicant can begin development right away, a conditional license makes project construction contigent on receipt of necessary authorizations from other state and federal agencies, such as a Section 401 water quality certificate or a CZMA certification. In FERC's view, issuing a conditional license would enable a developer to commence work on other requirements under the license (such as preparing various monitoring plans) and would facilitate financing. And many developers support the conditional license for similar reasons.

FERC and Oregon Sign MOU

On March 27, 2008, FERC announced the execution of a Memorandum of Understanding between FERC and the State of Oregon to coordinate procedures and schedules for review of wave energy projects located in state and federal waters comprising the Territorial Seas, i.e., waters up to twelve miles off the coast of Oregon. There's much to like about the MOU, particularly the efforts to coordinate state and federal permitting efforts. However, as I discuss below, it's difficult to fully celebrate the MOU because one critical player - MMS - either wasn't invited or declined to attend the party.

But let's start on a positive note with the most promising features of the MOU. Most importantly, FERC and Oregon agree to coordinate their respective license review processes and to develop and adhere to a schedule. And they will also designate management contacts so that developers and other stakeholders have a direct contact to address procedural questions. Without doubt, these measures will facilitate the licensing process for all involved.

FERC Gives the Green Light to Makah Pilot Wave Project

When we last checked in on the status of the the first ever conditional license issued by FERC for a wave energy project (Finavera's 1.4 MW, 4 buoy Makah Bay Offshore Wave Pilot), several parties had challenged FERC's decision. Two Washington state agencies argued that FERC lacked the power to issue a license without a Section 401 water quality certificate (WQC) and a Coastal Zone Management Act (CZMA) certification from the state authorizing the project. And the Makah Tribe challenged FERC's finding that the Olympia Coast Marine Sanctuary is a reservation which would give NOAA mandatory conditioning authority under Section 4(e) of the Federal Power Act.

Typically, FERC can take up to a year to resolve rehearing requests, but here, FERC resolved the parties' challenges in just two months with the issuance of this order. Accounting for FERC's quick action is the fact that the state agencies eventually issued a WQC and CZMA certification during the pendency of their appeal, thereby rendering their challenges moot.

First Wave Energy License in the U.S. Subject to Rehearing

I guess I spoke too soon in my original post blogging the Finavera conditional license where I implied that the FERC'ss issuance of the license represented an important step forward for marine renewables. Yes, it is an important step forward, but we'll have to step back first and wait. That's because both the Makah Tribe and the State of Washington Department of Ecology have filed rehearing requests of FERC's order issuing a conditional license to Finavera (links are to rehearing requests). And while the delay and uncertainty created by the rehearing requests is unfortunately, at the same time, both of the rehearing requests do raise important issues that need to be resolved at some point. Here's a quick summary of both pleadings, below the jump.

Regulatory Updates

Both FERC and MMS have been busy, busy, busy. No, they're not doing much to play nicely in the submerged sand[box], but since our last update, MMS has moved forward with its Interim Policy, while FERC has dispose of challenges to its Policy Statement on conditional licenses. More discussion follows.

Finavera Wins FERC License

On December 21, 2007, the Federal Energy Regulatory Commission issued its first ever conditioned original license for a wave energy project to Finavera Renewables for the 1 MW, 4 buoy Makah Bay Offshore Wave Pilot Project that will be located in the Pacific Ocean in Makah Bay, 1.9 nautical miles offshore Clallam County, Washington. (See CNN Report) According to a FERC Press Release, Commissioner Moeller desribed the FERC's action as an historic moment, "the first time that we allow the harnessing of electricity from wave energy-power that results from the gravitational pull of the moon."

OK, so maybe the moon reference smacks a touch of hyperbole -- made me think, "one small stroke for Finavera, one giant splash for mankind. But to be fair, FERC deserves kudos for granting the license and taking seriously its statutory obligation to promote development of water power, make best comprehensive use of the water way and balance energy and environmental concerns.

OREC Updates: Senate Energy Bill, FERC Conditional Licenses

Last week brought some important wave and tidal developments from the nation's capital. As discussed in this post at the Ocean Renewable Energy Coalition (OREC) website, President Bush signed into law the Energy Bill of 2007, with some important R&D benefits for marine renewables. Unfortunately, the bill doesn't extend the production tax credit (PTC) beyond its present December 31, 2008 expiration date, or expand the PTC to apply to marine renewables. (for more information on the new law, see this post from Renewable Energy Law Blog).

On the regulatory side, the Federal Energy Regulatory Commission issued a Policy Statement announcing FERC's intent to issue conditional licenses for marine renewables projects. For more details about the policy, as well as a copy of the comments that I filed on behalf of OREC, visit this link.