Siting Ocean and Tidal Energy Projects

1. Siting Ocean and Tidal Energy Projects Cherise M. OramSTOEL RIVES LLP Oregon Law Institute Going Green: Advising Clients in the New World of Sustainability April 25, 2008

2. New Hydro Technologies Wave Ocean Current Tidal Current In-Stream Could double U.S. hydropower production from just below 10% to close to 20% of national supply. • Hydroelectric Infrastructure Technical Conference, Docket No. AD06-13-000 (Dec. 6, 2006), transcript 12; 22 (testimony of George Hagerman).

3. Issues raised by ocean and tidal project siting: installation impacts shipping and navigation crabbing and fishing endangered species marine mammals migratory birds electromagnetic field recreation and public safety Envt’l Laws Implicated: Clean Water Act Endangered Species Act Magnuson-Stevens Fishery Conservation and Management Act Marine Mammal Protection Act Coastal Zone Management Act National Historic Preservation Act Migratory Bird Treaty Act National Environmental Policy Act Oregon Revised Statute (“ORS”) chapter 543 (water right) ORS 196.805 (Removal-Fill Permit) ORS 274.040 (Ocean Energy Facility Lease) ORS 390 (Ocean Shore Permit) Oregon Coastal Management Plan Oregon Territorial Sea Plan Regulatory Issues

4. Federal Energy Regulatory Commission (FERC) • Jurisdiction under Federal Power Act (FPA) • License required: • navigable waters • connected to grid • License not required: • experimental technology • power not transmitted into, and does not displace power from, national energy grid. • Must obtain other necessary federal and states approvals

5. FERC Licensing Process • Extensive and complicated; framework for all other environmental approvals • 3+ years of pre-application studies, consultations • Must perform reasonable studies requested by federal and state agencies, other stakeholders • Post-application, 2+ years to license • “Pilot Project” process designed to take 6 months post-application • For demonstration projects up to 5 MW • Timing doesn’t account for other agency permitting • Up to 50-year licenses; 5 year Pilot Project licenses • One license (Pilot Project) issued for Finavera’s Makah Bay Wave Project

6. FERC Preliminary Permits • Optional, three-year permits • Maintain priority for a site • Use time to determine project feasibility, consult with stakeholders, perform baseline studies, develop license application. • 113 issued (7 wave, 8 ocean current, 35 tidal current, 63 in-river) • 77 pending

7. Minerals Management Service (MMS) (Dep’t of Interior) • Leases on outer continental shelf (OCS) • OCS = beyond 3 nm off of coastal shorelines; 9 nm off Texas, Florida • Claims jurisdiction over “alternative energy” • Wind, wave, solar, underwater current, generation of hydrogen

8. MMS’s “Alternative Energy and Alternative Use” Program • AEAU program will govern leasing • Notice of Proposed Rulemaking (NOPR) due later this year • Hopes to complete rulemaking by late 2008 • MMS Interim Policy: identified five priority testing sites • New Jersey, Delaware, Georgia, Florida and California. • Includes wind, ocean current, wave • Temporary leases for data collection, technology testing • No commercial energy production • If competitive interest, will hold competitive sale

9. FERC vs. MMS • EPAct 2005 granted MMS authority to lease, but didn’t change other federal law (ie., FPA). • Attempt at MOU recently suspended • Projects need MMS lease and FERC license • Preliminary permit or license from FERC does not guarantee winning lease from MMS in competitive bidding process

10. Other Relevant Federal/Tribal Stakeholders • U.S. Army Corps of Engineers • U.S. Coast Guard • National Marine Fisheries Service • U.S. Fish and Wildlife Service • Federal land owner agencies (USFS, NPS, etc.) • Affected Tribes

11. Relevant State Agencies • State agency administering Coastal Zone Management Act (“CZMA”) • State agency administering Clean Water Act (“CWA”) section 401 water quality • certification • State lands manager • State fish and wildlife agency • State water resources manager • State and Tribal historic preservation offices • State energy facility siting council

12. State and Local Law • FPA preempts state and local laws concerning hydroelectric licensing • Exceptions • proprietary water rights • state approvals required by federal law (e.g. 401 Certification; CZMA Concurrence) • FERC may require compliance with state and local requirements that do not make compliance with FERC’s license impossible or unduly difficult. • Despite preemption, FERC must consider state and local concerns.

13. FERC & Oregon MOU • Effective March 26, 2008 • Covers ocean energy development in Oregon’s Territorial Sea • Agree to coordinate federal and state processes to expedite licensing • FERC will consider whether projects are consistent with state Territorial Sea Plan • Oregon intends to revise Territorial Sea Plan to designate (limit) areas for ocean energy development • FERC interested in reaching MOUs with other states

14. Local and Non-governmental Stakeholders • County commissions • Local governments • Ports • Non-governmental interest groups (environmental, fishing, recreational) • Public utility districts and Investor-owned utilities • Private landowners • Cable committee • 22 federal, state, tribal, local, NGO stakeholders or categories of stakeholders: Begin consultation early!

15. Resolving Uncertainties • Initial projects: robust studies, adaptive management • Settlement agreements are tool in FERC process • resolve all known issues • agree on studies • create committees or technical teams to adaptively manage • FERC incorporates as conditions of project license • Must have sufficient analysis, description of known impacts or potential impacts, rationale for studies, to pass muster under FPA, NEPA, ESA, CWA 401, CZMA, etc. • Rely on best available data, best professional judgment, adaptive management to address uncertainties.

16. Looking Forward • All components of regulatory framework are still developing • Well intended policies may complicate rather than streamline • Leading project proponents can help shape regulatory policies, ensure they fit industry • Goal is to move toward commercially viable (long term) projects

17. Cherise M. Oram(206) 386-7622 cmoram@stoel.com