NOTE: The following discussion focuses on the leasing process for commercial-scale hydrokinetic projects on the Outer Continental Shelf and how it relates to FERC standard licensing procedures. Please refer to the DOI/FERC Guidance on Regulation of Hydrokinetic Energy Projects on the OCS, Guidelines for the OCS Renewable Energy Framework , and the Memorandum of Understanding between the U.S. Department of Interior and the Federal Energy Regulatory Commission for detailed information about renewable energy activities on the OCS.
Certain hydrokinetic projects, such as ocean wave- or current-energy conversion facilities, may be sited on the Outer Continental Shelf (OCS), which encompasses all submerged lands between the seaward extent of state waters (typically 3nm from shore) and the seaward extent of U.S. jurisdiction (approximately 200 nautical miles from shore). Hydrokinetic projects located partially or wholly on the OCS require authorization for use of the submerged lands on which project activities occur.
Lead Agency Use of submerged lands on the OCS for renewable energy activities is managed by the Bureau of Ocean Energy Management (BOEM), a bureau in the U.S. Department of the Interior (DOI) that manages the nation's natural gas, oil, and other mineral resources on the OCS. Under authority delegated to it by the Secretary of the Interior, BOEM is the lead agency for renewable energy leases on the OCS; within BOEM, the Offshore Energy and Minerals Management (OEMM) manages renewable energy activities, including hydrokinetic development. Most renewable energy projects on the OCS are authorized by a lease; however, some situations may require a “grant” for access to and use of the OCS. Please see OCS Grants for details about these types of authorizations.
In addition to a lease from BOEM, construction and operation of hydrokinetic projects on the OCS also require a license from FERC; therefore, hydrokinetic projects on the OCS will be authorized by a lease from BOEMBOEM in conjunction with a Federal Energy Regulatory Commission (FERC) License. Unlike projects located in state waters, FERC will not issue Preliminary Permits for projects on the OCS, as the hydrokinetic lease will provide site priority. It is important to note that FERC will not issue a license until BOEM has issued a lease for the project; likewise, construction and operation of a hydrokinetic project on the OCS cannot commence without a FERC license, even if a lease has been issued. However, certain cases may allow hydrokinetic developers to conduct some technology testing under a commercial lease prior to receiving a FERC license (see Verdant Power, 111 FERC ¶ 61,024, clarified at 112 FERC ¶ 61,143).
Types of Leases BOEM may authorize renewable energy activities on the OCS through two types of leases:
· A Limited Lease, typically issued for a 5-year term, authorizes activities such as site assessment and technology testing. A limited lease does not authorize long-term or large-scale operations, and it cannot be converted into a commercial lease. In addition, if a FERC license would be required at any point in the project life, BOEM will not issue a limited lease for the project; as such, it is expected that most hydrokinetic developers will pursue commercial leases. For that reason, this section focuses on the Commercial Hydrokinetic Lease.
· A Commercial Lease conveys access and operational rights to produce, sell, and deliver renewable energy, as well as the right to one or more project easements for the purpose of installing transmission cables and other needed facilities. Generally issued for a 30-year term, a commercial lease includes an initial 5-year site-assessment term and a 25-year construction and operations term. However, longer lease terms may be negotiated to correspond with the operations term in a FERC license or to accommodate pilot-project relicensing.
o In certain circumstances, a lessee may conduct limited testing under its commercial lease prior to receiving a FERC license if: (1) the technology in question is experimental; (2) the proposed facilities are to be utilized for a short period for the purpose of conducting studies necessary to prepare a license application; and (3) power generated from the test project would not be transmitted into or displaced from the interstate electric grid and would therefore not constitute “developing electric power” for purposes of the Federal Power Act (FPA) (See Verdant Power, 111 FERC ¶ 61,024, clarified at, 112 FERC ¶ 61,143 (2005)).
In addition to issuing renewable energy leases, BOEM may issue leases and OCS grants to Federal agencies and States for testing offshore renewable energy technologies (§ 285.238.). This type of authorization, commonly referred to as a Research Lease, may be issued after giving public notice, determining that there is no competitive interest in the area, and ensuring compliance with all relevant Federal authorizations. For hydrokinetic technology testing, BOEM may issue a research lease or grant to a Federal agency or State only if FERC determines that the proposed hydrokinetic research activities on the OCS will not require a license or exemption. The purposes, issue process, and terms of this kind of lease or grant may be established by BOEM and a Federal agency or a State on a case-by-case basis, or pursuant to a framework established by a Memorandum of Agreement. Leases and grants issued to a Federal agency and a State for research activities are different from the limited leases issued for renewable energy activities.
Lease Acquisition In accordance with the OCS Lands Act, BOEM must issue leases competitively unless, after public notice, it determines that no competitive interest exists. When offering leases on areas of the OCS, BOEM will first publish a Request for Interest (RFI) in the Federal Register (FR). A public comment period will follow publication of the RFI in the FR. Any interested or affected party may respond to the RFI with information about the proposed leasing activities and existing conditions in the area of interest. Parties interested in obtaining a lease in the RFI area should respond with an indication of interest. A response of interest should include 1) a description of the project objectives and proposed facilities, devices, and infrastructure; 2) anticipated power production and likely purchasers; 3) a general schedule of activities; 4) any relevant environmental or energy resource data available; 5) a statement that the proposed activity conforms to state and local energy planning requirements, initiatives, or guidance; and 6) documentation that the applicant is qualified to hold a lease. After the comment period, BOEM will review the responses to determine whether competitive interest exists.
· If multiple parties submit responses of interest for an area, then BOEM will proceed with the Competitive Lease Process.
· If only one response of interest is received, then BOEM may offer a lease through the Non-Competitive Lease Process.
In addition to responding to an RFI, developers may submit a lease request to BOEM at any time. If BOEM receives an Unsolicited Lease Request (i.e., not in response to an RFI), then it may offer a lease through the Non-Competitive Lease Process. It is expected that initial leasing for hydrokinetic project sites on the OCS will be driven by unsolicited requests.
Competitive Lease Process
· After determining that competitive interest does exist, BOEM will publish a Call for Information and Nominations (Call) in the FR. Prospective lessees must submit a lease application within 45 days of publication of the Call. Any interested or affected party may also respond to the call with information about the proposed leasing activities and existing conditions in the area of interest.
· After reviewing responses to the Call, BOEM will perform a NEPA review of the area of interest. Once the NEPA review and documentation are complete, BOEM will publish a Proposed Sale Notice in the FR. This notice includes information about the lease area, lease provisions and conditions, auction details, bid evaluation criteria, award and appeal procedures, and lease execution procedures. The Proposed Sale Notice will also include a request for public comment on the proposed lease sale, and BOEM will provide a 60-day comment period (30 CFR § 285.216).
· All comments received will be considered in developing the final lease sale terms and conditions, which will be specified in the Final Sale Notice. Once the Final Sale Notice is published, prospective lessees will submit their bid packages according to the auction format specified. (Multiple auction formats and bidding systems are available, as described in 30 CFR §§ 285.220-221.)
· Upon receiving the required payments and properly executed lease forms, BOEM will issue a lease to the successful bidder.
In the competitive lease process, a six-month preliminary term commences at lease issuance. During this time the successful bidder must submit a Site Assessment Plan (SAP) describing the overall project and the existing environment, including activities the applicant plans to perform for the Site Characterization Phase of its lease and the results of physical characterization surveys and baseline environmental surveys. Applicants are expected to conduct physical characterization and baseline environmental surveys prior to the submission of the SAP and include the results of those surveys in the SAP. If more time is needed to conduct the surveys/assessments, the lessee may request a lease suspension (30 CFR §285.416(c)).
*Note: Activities associated with conducting physical characterization and baseline environmental surveys for the preparation of a SAP do not require authorization from BOEM, even if they occur prior to lease issuance; these activities may be authorized by the Army Corps of Engineers, often through a Nationwide Permit.
BOEM will conduct environmental and technical reviews. For competitively issued leases, BOEM will prepare a consistency determination that covers the lease sale and the site assessment activities. (If actions proposed in the SAP are significantly different from activities covered in the environmental reviews complete for the lease sale and SAP, then further reviews would be required.)
Non-Competitive Lease Process
· After determining that no competitive interest exists or receiving an unsolicited lease request, BOEM will publish a Notice of Determination of No Competitive Interest in the FR.
· Within 60 days of publication of this notice, the applicant must submit a Site Assessment Plan (SAP) describing the overall project and the existing environment, including activities the applicant plans to perform for the Site Characterization Phase of its lease and the results of physical characterization and baseline environmental surveys. *Applicants are expected to conduct physical characterization and baseline environmental surveys prior to the submission of the SAP and include the results of those surveys in the SAP. If more time is needed to conduct the surveys/assessments, the lessee may request a lease suspension (30 CFR §285.416(c)).
*Note: Activities associated with conducting physical characterization and baseline environmental surveys for the preparation of a SAP do not require authorization from BOEM, even if they occur prior to lease issuance; these activities may be authorized by the Army Corps of Engineers, often through a Nationwide Permit.
· Once the applicant submits a SAP, BOEM will review it and perform the necessary environmental reviews (e.g., NEPA, WQC). Once the environmental analyses and documentation are complete, BOEM will decide whether to approve the SAP and issue the lease. In the noncompetitive lease process, SAP approval and lease issuance occur simultaneously.
Technical & Environmental Reviews
The point at which a developer submits its SAP depends on whether the lease process is competitive or noncompetitive, but the review criteria are the same. BOEM will review the SAP to ensure it contains all the necessary information, and coordinate and consult with federal, state, and local agencies regarding information and data related to the proposed activities. In the SAP, applicants must include information needed to assist BOEM in the preparation of environmental compliance documents. BOEM will fund the preparation of the NEPA document for the SAP. The Section 307 CZMA Consistency Determination for the SAP may be prepared by either BOEM or the applicant.
· For competitively issued leases, BOEM will prepare the NEPA document and the CZMA Consistency Determination for the lease sale and the site assessment activities. If the action proposed under a competitively issued commercial lease does not change from that described in the environmental reviews conducted for the lease sale and site assessment activities, then no further environmental review would be required for the SAP. However, if BOEM determines that the action has changed to the extent that the previously conducted environmental reviews do not cover the activities, then BOEM would notify the applicant that additional information and reviews would be required.
· For noncompetitively issued leases, BOEM will prepare the NEPA document, but applicants are responsible for preparing the CZMA consistency determination, which must be submitted to the State CZM agency and BOEM concurrently.
The number of NEPA reviews will vary with each project. It is possible for developer to submit the SAP and FERC License application simultaneously, in which case only one NEPA review may be required. Whenever possible, each NEPA review will build on relevant information in the prior reviews, regardless of the lead agency. In most cases, however, two NEPA reviews will be required for commercial lease holders:
· For competitively issued leases, BOEM will perform one NEPA review for the lease sale and the SAP, and FERC will perform one NEPA review for the license application.
· For noncompetitively issued leases, BOEM will perform one NEPA review for the SAP, and FERC will perform one NEPA review for the license application.
Once the technical and environmental reviews are complete, BOEM may approve, approve with conditions, or disapprove the SAP:
· If BOEM approves the SAP and issues a lease for a hydrokinetic project, the lease will specify terms and conditions to be incorporated into the project’s FERC license.
· If BOEM disapproves the SAP, it will inform the lessee of the reasons and allow them to submit a revised plan. If appropriate, BOEM may suspend a lease to allow this revision to occur.
Following approval of the SAP and commencement of the Site Characterization Phase, renewable energy lessees are generally required to prepare a Construction and Operations Plan (COP). For hydrokinetic projects, however, the project’s FERC License Application replaces the COP (therefore, hydrokinetic lessees do not have to prepare and submit a COP).
Process Time Because renewable energy leasing on the OCS is such a new process, it is difficult to define the timeframes for issuing and approving a lease. In addition, project specific factors will influence the level of review required. At this point, it is expected to take approximately 3 years to issue a hydrokinetic lease if no competitive interest exists. For a competitively issued lease, the overall process is expected to take 6 – 8 years.
Note: For offshore wind development on the Atlantic OCS, the Smart From the Start Initiative is being implemented to facilitate environmentally responsible offshore wind development along the Atlantic OCS in the shortest time period possible.
Lease Fees BOEM requires an initial, one-time payment to obtain a lease, as well as on-going payments when the lease term commences. For a noncompetitively-issued lease, an “acquisition fee” is due when the applicant submits its noncompetitive lease request. Acquisition fees are typically $0.25/acre. For a competitively-issued lease, a “bid deposit” is due when the applicant files its bid package.
After the award of the lease, developers must also pay annual rental and operating fees, which are set by BOEM based on the lease terms. Annual rent for the project lease is assessed between the date of lease issuance and the date project operations commence; once commercial operations begin, the leaseholder begins paying annual operating fees. Developers will also be expected to post financial assurance to guarantee compliance with lease terms and conditions. Financial assurance of at least $100,000 will be required before lease issuance, and additional amounts will be required before the SAP, COP and facility installation are approved.
In addition to BOEM’s fees, annual rent for a project’s transmission-line easement becomes due once FERC issues a project license. While both BOEM and FERC are required to assess fees or annual charges, the agencies will coordinate to ensure that the overall fees for OCS hydrokinetic projects are fair and appropriate. Further, leaseholders may request that the BOEM reduce or waive rent or operating fee payments for a certain period of time (not to exceed 6 years) to encourage continued or additional activity.
Other Considerations
Phased Development is an approach in which a smaller, pilot-scale project is developed first, and then it is expanded to a larger, commercial scale operation. For phased hydrokinetic development on the OCS, a pilot-scale project could be authorized through the BOEM commercial lease process in conjunction with the FERC pilot license process. For example, the initial, test phase could be authorized through the BOEM commercial lease process and the FERC pilot license process. Once the project is ready to expand to a full commercial-scale, the developer could utilize FERC’s relicensing process to acquire a standard FERC license.
Hybrid Projects involve technologies that generate electricity from more than one form of renewable energy, one of which may be hydrokinetic (e.g., wind- and wave-generation under the same lease). Although a FERC license application replaces the COP for the hydrokinetic portion of hybrid project, developers must submit a COP for the non-hydrokinetic portion of their projects.
Straddle Projects are hydrokinetic projects that overlap the boundary dividing state waters and the OCS. Developers must obtain a lease from BOEM for the OCS portion of a straddle project. It is important to note that a developer who has licensed a project in state waters adjacent to the OCS does not have any priority to develop the neighboring site on the OCS.
Legal Authority Outer Continental Shelf Lands Act, 43 U.S.C. 1331 – 1356a; Renewable Energy Alternate Uses Of Existing Facilities On The Outer Continental Shelf, 30 C.F.R. Part 285; Energy Policy Act of 2005.
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