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The Energy Policy Act of 2005 and Ocean Renewable Energy: Fresh or False Start?

The Energy Policy Act of 2005 and Ocean Renewable Energy: Fresh or False Start?. Carolyn Elefant, Esq. Law Offices of Carolyn Elefant, Wash. DC www.his.com/israel/loce 202-297-6100 Ocean Renewable Energy Coalition www.oceanrenewable.com. Overview. The OTEC Act of 1980: A False Start

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The Energy Policy Act of 2005 and Ocean Renewable Energy: Fresh or False Start?

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  1. The Energy Policy Act of 2005 and Ocean Renewable Energy: Fresh or False Start? Carolyn Elefant, Esq. Law Offices of Carolyn Elefant, Wash. DC www.his.com/israel/loce 202-297-6100 Ocean Renewable Energy Coalition www.oceanrenewable.com

  2. Overview • The OTEC Act of 1980: A False Start • Review of provisions of the Energy Policy Act of 2005 relating to ocean energy • Proposed actions to ensure that the EPAct provides a fresh start for ocean energy development

  3. OTEC Act of 1980: False Start Not yet ready for prime time technology Overly complex licensing regime Declining oil prices Small government administration Energy Policy Act of 2005 ? False v. Fresh

  4. The Energy Policy Act • Three components for ocean energy: • Federal recognition as a renewable resource • Financial incentives for development • Regulation of leases on the Outer Continental Shelf for offshore renewable development

  5. Federal Recognition • Section 201 of Energy Policy Act • Secretary of DOE must include ocean energy resources in its assessment of US renewable resources • Section 203 of Energy Policy Act • Ocean energy identified as an eligible renewable that can be used by federal government to meet mandatory purchase requirements (3% beginning in 2007)

  6. Financial Incentives • Section 202: Renewable Energy Production Incentive (REPI) • The REPI provides credit in lieu of tax credits to state, municipal and public entities that develop renewable projects • Public power developers of ocean projects can qualify for the REPI payments of 1.5 cents/kwh • $3 million in appropriations expected for REPI program in FY 2006

  7. Financial Incentives • Section 209: Rural and Remote Community Electrification Grants • Authorizes local governments to apply for grants to use renewable energy, including wave power, for energy efficiency • $20 million authorized for FY06-FY12 for programs to be administered by Rural Utilities Services • Do grants apply only to wave power or to other ocean energy technologies like tidal or current, arguably derivative from wave?

  8. Financial Incentives • Section 931: Renewable Demo Grants • Ocean energy eligible for DOE grants for development, demonstration and commercial application projects • Program purpose: decrease cost of renewables and promote diversity of energy supply • $632 million authorized for FY07, $734 million for FY08 and $852 million for FY09

  9. Financial Incentives • Insular Areas Energy Security • $6 million for each fiscal year beginning in 2006 for projects, including wave energy, which will reduce dependence on foreign oil • Technology Demo Projects • DOE and State Department authorized to plan demo renewable projects such as wave for eligible countries

  10. Senate Version of Energy Policy Act: Contained PTC (production tax credit) of 1.9 cents/kwh for wave, tidal and current technologies in oceans, lakes and rivers Final Version of the Energy Policy Act No PTC for ocean Why? PTC only extended through 2007 when first ocean projects come on line so no real financial benefits from PTC What’s Missing?

  11. Leasing of OCS • What is the OCS? • Submerged lands between 3 and 200 miles seaward, subject to federal control • Submerged lands from shore up through 3 miles are state submerged lands • Exception: due to prior sovereign claims, Texas and Florida hold title to submerged lands 10 miles from shore in Gulf of Mexico

  12. State Submerged Lands Up to 3 miles from shore Up to 10 miles off TX and FL Gulf coast Up through Canadian border on Great Lakes Federal Submerged Lands 3 to 200 miles from shore Federally controlled marine sanctuaries Summary

  13. Former Legislation Secretary DOI can lease OCS only for “oil and gas” but not for renewables Companies like Cape Wind can get a permit to use OCS from Corps of Engineers under Section 4(e) of OCSLA Sec. 388, EPAct Authorizes DOI to lease OCS for alternative energy development and other non-oil and gas uses OCS Regulation

  14. OCS Regulation • Key Features of Section 388 • DOI must issue rules for leasing OCS within 270 days of enactment of EPAct • DOI can assess royalties for OCS uses • DOI will issue leases on a competitive basis • Does not preempt or replace other license requirements like Corps or FERC

  15. OCS Regulation • Current Status • DOI assigns MMS rulemaking responsibilities • MMS Task force formed to develop rules • Some Katrina related delays • Some arguments emerging that MMS must not undertake any leasing until it conducts programmatic assessment of potential uses for OCS lands

  16. Additional Action • FOLLOW THE MONEY • Make sure that at least some of the significant appropriations authorized for renewable energy projects under EPAct flow to ocean energy technologies

  17. Additional Action • DON’T GIVE UP ON THE PTC • The EPAct extends the PTC for just 2 years, so it may be revisited in 2007. Ocean developers should start pressing the issue now. • Even if PTC is not widely used, it gives private investors confidence in ocean technologies

  18. Additional Action • PARTICIPATE IN OCS RULEMAKING • Ocean energy industry is nascent but policies on leasing OCS are being made now and may irreparably impact ocean and offshore wind developers • Alternative energy is not only OCS use; others will compete • Excessive royalty payments, limits on siting and system which does not screen out “fake” companies will all harm committed ocean and offshore wind developers

  19. False Start Failure to take advantage of appropriated funds to advance technology Implementation of complex and costly regulation on OCS Hyping of projects and deals with no substance behind them Fresh Start Work with agencies and congressional delegation to use funds allocated (use them or lose them) Fight for PTC and additional benefits to secure equal footing with other renewables Ensure that OCS regulations encourage, not hinder, offshore renewable development Use federal recognition in EPAct as credibility for attracting private capital False Start v. Fresh Start

  20. Beyond EPAct • More Work: • Promote programs to streamline permitting of pilot and demo projects • Gather information on marine baseline and project impacts from existing sources • Educate agencies, legislature and public on viability and benefits of offshore renewables

  21. Beyond EPAct • Ocean Renewable Energy Coalition (OREC) • Newly formed trade association to promote commercialization of offshore renewables • Helped secure benefits for ocean in EPAct • Hopes to continue to promote ocean industry through future action – but needs industry and public support • www.oceanrenewable.com

  22. Conclusion • Let’s ensure that the Energy Policy Act of 2005 is a fresh start for ocean energy starting now! • For more information on OREC, contact soneill@symmetrix.biz or visit our website at www.oceanrenewable.com

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