By Daron Threet & Larry Eisenstat
On April 28th, 2010, the federal government approved the Cape Wind project after nine years of regulatory review. The significance of the Cape Wind approval cannot be overstated, as the project is now poised to become the first large-scale offshore renewable energy project operating in the United States (http://www.capewind.org). But, from a project planning, permitting, and development perspective, the exceedingly drawn-out, almost decade-long review of Cape Wind was simply too long, too uncertain, and too costly for most developers and investors to endure. Simply put: unless meaningful steps are taken to streamline review processes of offshore renewable projects, the regulatory risk going forward may be too high to support widespread growth in the industry.
This regulatory risk is perhaps even more evident for hydrokinetic projects (e.g., wave and tidal), which trail behind offshore wind from a technology perspective. Unlike offshore wind, the hydrokinetic industry does not have arrays of utility scale facilities like those found in Europe and elsewhere to provide, at the very least, a foundational understanding of the operational, environmental, and other impacts of these technologies to support the regulatory review and approval of new projects.
Recognizing the need to adopt policies to promote hydrokinetic project development, several states including Oregon, Washington, Maine and, most recently, California have entered into Memorandums of Understanding (MOUs) with the Federal Energy Regulatory Commission (FERC), the lead federal agency responsible for hydrokinetic permitting, to coordinate and expedite project reviews. Specifically, the MOUs seek to set up predictable, expedited review processes by outlining procedures to coordinate and consolidate federal and state project reviews.
Coordinated federal and state project review can be pivotal in facilitating an efficient and timely process given the complexity inherent in permitting any offshore energy project, which potentially involves dozens of federal and state agencies operating with differing and sometimes conflicting authorities, goals, missions, and timelines. For instance, on the federal side, numerous permits and approvals are required for hydrokinetic projects including the main project permit issued by FERC, as well as permits and approvals issued by the Army Corps of Engineers, the National Oceanic and Atmospheric Administration, and many others. In addition to federal approvals, states also have significant permitting authority over projects under the federal Coastal Zone Management Act, the Clean Water Act, and possibly under state and local regulations.
Most importantly, under the MOUs, the states have agreed to coordinate the environmental reviews of projects with FERC. Under federal law, FERC must conduct an extensive environmental review of each project under the National Environmental Policy Act (NEPA), typically resulting in a comprehensive, many thousand-page, Environmental Impact Statement (EIS), which, in most cases, is used by all federal agencies to support issuance of required permits and approvals. The EIS preparation process serves as a common platform for interagency comments, analysis, and an initial determination of mitigation measures imposed on a project. In short, it is the lens through which the federal government examines a project.
Though most offshore projects are subject to federal NEPA reviews, many states also have their own state-level NEPA equivalents, commonly referred to as “mini-NEPAs,” which require states to prepare similar analysis and reports to issue approvals. This review process can go in parallel with the federal process but, if it is not coordinated, can result in a significant duplication of efforts, delay, and potential jurisdictional disputes between state and federal agencies. Under the MOUs, the states agreed to utilize FERC’s EIS to support issuance of all federal and state permits in lieu of preparing their own state-level environmental documents. Coordinating and consolidating environmental reviews into a single process, culminating in a single environmental document, can significantly speed up permitting time, and can help ease burdens for developers in dealing with separate federal and state review processes including satisfying hosts of agency data requests, formulating common mitigation requirements, and other measures.
In addition to coordinating reviews, the states and FERC agreed under the MOUs to establish set schedules for project reviews, and to encourage all agencies to adhere to them. Although a set review schedule might seem routine, it is not uncommon for energy projects to enter into multi-year, multi-agency review processes without one. The lack of a schedule to push the myriad federal and state agencies toward the finish line can significantly frustrate project review, leading to added time, and often added costs for the developer. A good example illustrating the benefits of a set review schedule are federal and state reviews of offshore liquefied natural gas projects under the Deepwater Port Act (DWPA). Under the DWPA, each project review is required to be completed in 356 days. While slippage is common in meeting this accelerated review schedule, several projects have been approved in under 18 months, demonstrating that project reviews and, in particular, NEPA reviews under short timeframes are indeed possible.
Though the MOUs represent a significant step that will bring additional predictability to the hydrokinetic review process, not all states have such agreements with FERC. In the absence of a MOU, developers should consider requesting coordinated state and federal reviews as part of a project’s overall permitting strategy. In many cases, this should be “step one” in a developer’s play book for projects located in non-MOU states. The potential benefits can be leveraged in many ways, saving time and capital throughout the permitting process, as well as while implementing post-permitting requirements such as mitigation measures.
Daron Threet is counsel in Dickstein Shapiro LLP’s Energy Practice, and Larry Eisenstat is a partner at Dickstein Shapiro LLP and head of its Energy Practice.
Dickstein Shapiro LLP