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80-970 PS 2003

H.R. 5156, TO AMEND THE

OUTER CONTINENTAL SHELF

LANDS ACT TO PROTECT THE

ECONOMIC AND LAND USE

INTERESTS OF THE FEDERAL

GOVERNMENT

LEGISLATIVE HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY AND

MINERAL RESOURCES

OF THE

COMMITTEE ON RESOURCES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

July 25, 2002

Serial No. 107-148

Printed for the use of the Committee on Resources

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

or

Committee address: http://resourcescommittee.house.gov

(II)

COMMITTEE ON RESOURCES

JAMES V. HANSEN, Utah, Chairman

NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska,

Vice Chairman

W.J. ‘‘Billy’’ Tauzin, Louisiana

Jim Saxton, New Jersey

Elton Gallegly, California

John J. Duncan, Jr., Tennessee

Joel Hefley, Colorado

Wayne T. Gilchrest, Maryland

Ken Calvert, California

Scott McInnis, Colorado

Richard W. Pombo, California

Barbara Cubin, Wyoming

George Radanovich, California

Walter B. Jones, Jr., North Carolina

Mac Thornberry, Texas

Chris Cannon, Utah

John E. Peterson, Pennsylvania

Bob Schaffer, Colorado

Jim Gibbons, Nevada

Mark E. Souder, Indiana

Greg Walden, Oregon

Michael K. Simpson, Idaho

Thomas G. Tancredo, Colorado

J.D. Hayworth, Arizona

C.L. ‘‘Butch’’ Otter, Idaho

Tom Osborne, Nebraska

Jeff Flake, Arizona

Dennis R. Rehberg, Montana

George Miller, California

Edward J. Markey, Massachusetts

Dale E. Kildee, Michigan

Peter A. DeFazio, Oregon

Eni F.H. Faleomavaega, American Samoa

Neil Abercrombie, Hawaii

Solomon P. Ortiz, Texas

Frank Pallone, Jr., New Jersey

Calvin M. Dooley, California

Robert A. Underwood, Guam

Adam Smith, Washington

Donna M. Christensen, Virgin Islands

Ron Kind, Wisconsin

Jay Inslee, Washington

Grace F. Napolitano, California

Tom Udall, New Mexico

Mark Udall, Colorado

Rush D. Holt, New Jersey

Anibal Acevedo-Vila, Puerto Rico

Hilda L. Solis, California

Brad Carson, Oklahoma

Betty McCollum, Minnesota

Tim Holden, Pennsylvania

Tim Stewart, Chief of Staff

Lisa Pittman, Chief Counsel/Deputy Chief of Staff

Steven T. Petersen, Deputy Chief Counsel

Michael S. Twinchek, Chief Clerk

James H. Zoia, Democrat Staff Director

Jeffrey P. Petrich, Democrat Chief Counsel

SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

BARBARA CUBIN, Wyoming, Chairman

RON KIND, Wisconsin, Ranking Democrat Member

W.J. ‘‘Billy’’ Tauzin, Louisiana

Mac Thornberry, Texas

Chris Cannon, Utah

Jim Gibbons, Nevada,

Vice Chairman

Thomas G. Tancredo, Colorado

C.L. ‘‘Butch’’ Otter, Idaho

Jeff Flake, Arizona

Dennis R. Rehberg, Montana

Nick J. Rahall II, West Virginia

Edward J. Markey, Massachusetts

Solomon P. Ortiz, Texas

Calvin M. Dooley, California

Jay Inslee, Washington

Grace F. Napolitano, California

Brad Carson, Oklahoma

(III)

CONTENTS

Page

Hearing held on July 25, 2002 ............................................................................... 1

Statement of Members:

Cubin, Hon. Barbara, a Representative in Congress from the State of

Wyoming ........................................................................................................ 1

Prepared statement of ............................................................................... 2

Kind, Hon. Ron, a Representative in Congress from the State of

Wisconsin, Prepared statement of ............................................................... 12

Markey, Hon. Edward J., a Representative in Congress from the State

of Massachusetts, Prepared statement of ................................................... 13

Statement of Witnesses:

Burton, Johnnie, Director, Minerals Management Service, U.S.

Department of the Interior ........................................................................... 7

Prepared statement of ............................................................................... 9

Steve, Jaime, Legislative Director, American Wind Energy Association ..... 18

Prepared statement of ............................................................................... 19

Additional materials supplied:

Cape Wind Supporters, List of members submitted for the record .............. 40

Charter, Richard, Marine Conservation Advocate, Environmental

Defense, Letter submitted for the record .................................................... 4

Duffy, Dennis Vice President of Regulatory Affairs, Cape Wind

Associates, LLC, Statement submitted for the record ............................... 33

Genthner, Captain Wayne, Email communication submitted for the

record ............................................................................................................. 36

National Ocean Industries Association, et al., Letter submitted for the

record ............................................................................................................. 37

Yearley, Douglas, Executive Director, Alliance to Protect Nantucket

Sound, Statement submitted for the record ................................................ 28

(1)

LEGISLATIVE HEARING ON H.R. 5156, ′′TO

AMEND THE OUTER CONTINENTAL SHELF

LANDS ACT TO PROTECT THE ECONOMIC

AND LAND USE INTERESTS OF THE FEDERAL GOVERNMENT IN THE MANAGEMENT

OF OUTER CONTINENTAL SHELF LANDS

FOR ENERGY-RELATED AND CERTAIN

OTHER PURPOSES, AND FOR OTHER PURPOSES.′′

Thursday, July 25, 2002

U.S. House of Representatives

Subcommittee on Energy and Mineral Resources

Committee on Resources

Washington, DC

The Subcommittee met, pursuant to call, at 2 p.m., in room 1334,

Longworth House Office Building, Hon. Barbara Cubin [Chairman

of the Subcommittee] presiding.H.R. 5156

STATEMENT OF THE HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WYOMING

Mrs. CUBIN. The legislative hearing will come to order. The Subcommittee on Energy and Mineral Resources meets today to hear

testimony on H.R. 5156, legislation on energy-related uses of the

Outer Continental Shelf.

This bill addresses issues associated with permitting future nontraditional energy and energy-related projects on the Outer Continental Shelf (OCS). Such projects would include alternative energy

projects such as wind, wave, and solar power production, as well

as ancillary projects to oil and gas development on the Shelf, such

as emergency medical facilities and supply facilities that would

support deepwater exploration and development projects.

There is presently no statutory authority to permit such projects.

Earlier this year, I was contacted by the administration about the

need for legislation that would clarify the permitting process for

these innovative projects on the OCS. Working with the administration, I have introduced a bill that gives the Secretary of the Interior the authority to permit and oversee energy-related activities

under the OCS Lands Act.

2

This legislation is needed because no authority currently exists

to permit alternative energy projects and ancillary projects to support oil and gas development on the OCS. Clearly, our Nation faces

a growing energy supply and demand challenge that calls for innovative solutions.

Two innovative ways that will meet that challenge are through

increased production and the use of renewable energy and through

production of oil and gas in deep water. H.R. 5156 facilitates both

of these solutions. The bill clarifies the jurisdiction for these

projects so that private sector entities wanting to develop alternative energy resources offshore will know which agencies to approach for permitting. It is crucial for the development of any alternative or traditional energy project to have certainty in the permitting and regulatory process that this bill provides. This bill also ensures that future projects on the OCS will be performed in a safe

and environmentally sensitive manner, and that a proper abandonment in the site clearance process will exist for each project.

H.R. 5156 enables the Department of Interior to inform and

work with other relevant Federal agencies that will be involved in

the project permitting process. It is my understanding that the legislative language in H.R. 5156 has gone through an extensive discussion and approval process amongst all Federal agencies that

have an interest in the OCS, and the legislative language has been

agreed to by those agencies and the OMB. This bill will not supersede or modify any exiting authority of any other agency responsible for permitting or regulating offshore energy projects. It is designed to complement existing statutes and ensure that all innovative offshore energy projects have a clear permitting process.

The President’s National Energy Plan called for the simplification of permitting for energy production in an environmentally sensitive manner. It also called on the Secretaries of Interior and Energy to evaluate access limitations to Federal lands in order to increase renewable energy production. This legislation helps to address both of these goals.

It is my understanding that offshore wind energy projects are

now being developed in Northern Europe and numerous projects

with significant generation capacity are on the drawing board. This

appears to be sound use of public resources for energy production.

We need innovative alternative and traditional energy solutions in

order to meet our future energy needs. I believe this bill will facilitate these solutions.

[The prepared statement of Mrs. Cubin follows:]

Statement of Hon. Barbara Cubin, Chairman, Subcommittee on Energy &

Mineral Resources

The Subcommittee on Energy and Mineral Resources meets today to hear testimony about H.R. 5156, legislation on energy related uses of the Outer Continental

Shelf. This bill addresses issues associated with permitting future non-traditional

energy and energy-related projects on the OCS. Such projects would include alternative energy projects—such as wind, wave and solar power production—as well as

ancillary projects to oil and gas development on the Shelf—such as emergency medical facilities and supply facilities that would support deepwater exploration and development projects.

There is presently no statutory authority to permit such projects. Earlier this

year, I was contacted by the Administration about the need for legislation that

would clarify the permitting process for these innovative projects on the OCS. Working with the Administration, I have introduced a bill that gives the Secretary of the

3

Interior the authority to permit and oversee energy related activities under the OCS

Lands Act.

This legislation is needed because no authority currently exists to permit alternative energy projects and ancillary projects to support oil and gas development on

the OCS. Clearly our nation faces a growing energy supply and demand challenge

that calls for innovative solutions.

Two innovative ways that we will meet that challenge are through increased production and use of renewable energy and through production of oil and gas in deep

water. H.R. 5156 facilitates both of these solutions. The bill clarifies the jurisdiction

for these projects so that private sector entities, wanting to develop alternative energy resources offshore will know which agencies to approach for permitting. It is

crucial for the development of any alternative or traditional energy project to have

certainty in the permitting and regulatory process. This bill would provide such certainty. It also ensures that future projects on the OCS will be performed in a safe

and environmentally sensitive manner and that a proper abandonment and site

clearance process will exist for each project.

H.R. 5156 enables the Department of Interior to inform and work with other relevant Federal agencies that will be involved in the project permitting process. It is

my understanding that the legislative language in H.R. 5156 has gone through an

extensive discussion and approval process amongst all Federal agencies that have

an interest in the OCS, and that the legislative language has been agreed to by

those agencies and the OMB. This bill will not supercede or modify any existing authority of any other agency responsible for permitting or regulating offshore energy

projects. It is designed to complement existing statutes and ensure that all innovative offshore energy projects have a clear permitting process.

The President’s National Energy Plan called for the simplification of permitting

for energy production in an environmentally-sensitive manner. It also called on the

Secretaries of the Interior and Energy to evaluate access limitations to federal lands

in order to increase renewable energy production. This legislation helps to address

both of these goals.

It is my understanding that offshore wind energy projects are now being developed in Northern Europe and numerous projects with significant generation capacity are on the drawing board. This appears to be sound use of public resources for

energy production. We need innovative alternative and traditional energy solutions

in order to meet our future energy needs. I believe this bill will help to facilitate

these solutions.

Mrs. CUBIN. I have been asked to submit for the record written

testimony for Environmental Defense. And since there is no one

here to object, I so order.

[The information referred to follows:]

4

5

6

Mrs. CUBIN. This testimony opposes H.R. 5156. Environmental

Defense asserts that the purpose of this bill is to enact a shortterm mechanism—or, excuse me—a shortcut mechanism for permitting liquefied natural gas facilities that sidesteps environmental

review. These assertions, however, are absolutely incorrect. In fact,

the language in H.R. 5156 excludes activities authorized in the

Deepwater Ports Act.

The Port Security Bill, which is currently in conference, would

amend the Deepwater Ports Act to give the Transportation Department jurisdiction over LNG facilities. I understand that the administration supports those amendments, but we will specifically ask

our administration witnesses to testify about that.

So, without further delay, I would like to recognize Panel Number One, Ms. Johnnie Burton, the Director of the Minerals Management Service of the U.S. Department of Interior, a longtime friend

and a former colleague in the Wyoming State legislature. I can

honestly tell you Johnnie Burton is the most knowledgeable person

I know about mineral development and severance taxes, royalties,

the whole thing. She was the Director of Revenue at the Department in the State of Wyoming. And we are very, very blessed to

have her as the Director.

Mrs. CUBIN. So, without other delay, the witness is recognized to

testify.

7

STATEMENT OF JOHNNIE BURTON, DIRECTOR, MINERALS

MANAGEMENT SERVICE, U.S. DEPARTMENT OF THE INTERIOR

Ms. BURTON. Thank you very much, Madam Chairman. I appreciate the opportunity to appear before you today to discuss the administration’s legislative proposal to facilitate energy-related uses

on the Outer Continental Shelf (OCS). Madam Chairman, I would

also like to take this opportunity to thank you personally for introducing the administration proposal as H.R. 5156. We look forward

to working with you and members of your Subcommittee and others to begin to consider both the need and the merits of this bill.

The administration strongly supports enactment of H.R. 5156.

We believe that this legislation is both timely and necessary, and

has the potential to encourage innovative energy projects on the

OCS. The bill directly supports the President’s National Energy

Policy initiative to simplify permitting for energy production in an

environmentally sensitive manner, and also supports the Secretary

of the Interior’s goal of facilitating renewable energy projects on

the OCS. Hopefully, my testimony today will help shed some light

on several parts of the bill and on the goals of the administration,

and why the Department of the Interior is given the lead role in

this particular issue.

Over the past 18 months, we have been approached at the Department of the Interior by both the oil and gas industry and other

segments of the private sector concerning ideas and plans for various initiative energy-related projects offshore. In an effort to help

address the issues raised by the private sector, we began to examine the authorities and mechanisms currently in place to permit

such projects. What we found is that, generally speaking, there currently exists no clear authority for the Federal Government to comprehensively review, permit, and provide appropriate regulatory

oversight of those projects, with a few exceptions. The exceptions

are minerals activity, which the Department of the Interior manages and oversees; the oil terminals, which are under the Deepwater Ports Act and are implemented by the Department of Transportation; and then the projects that would be permitted under the

Ocean Thermal Energy Conversion Act under the Department of

Commerce, although there are no such projects at this time.

This means that a diverse array of OCS energy-related projects

that either are contemplated or may be contemplated in the future

by the private sector have no clearly defined permitting process. Instead, various Federal agencies with different responsibilities are

responsible for different parts of the permitting process. We think

that there are drawbacks to this. It is fragmented—and this process because it is fragmented—cannot ensure that the Federal Government’s myriad of interests are fully considered. We would like

to ensure that the land use management interests of the Federal

Government are well protected.

The second drawback to the current situation is that the private

sector, which must make the tough investment decisions concerning whether to proceed or not with those energy-related

projects, is now forced to go to many agencies and to find out on

their own where they should go, what they should do, and hope

they don’t miss something. That is because down the road it could

8

have a negative impact on their project, something they didn’t plan

for, didn’t know they had to plan for.

So, clearly, this situation as it exists today in our mind and in

the mind of the Secretary of the Interior does not encourage innovation in the energy arena. In fact, it might be a deterrent.

H.R. 5156 is designed to rectify those problems. It will provide

the Secretary of the Interior with the authority to grant an easement or right-of-way for various energy-related activity on the

OCS, and that would include renewable energy projects such as

wave energy, wind energy, solar energy, perhaps even biomass. We

are not sure what is going to come out there in the future.

It will also include a project to support the existing production

and exploration of oil and gas and various minerals on the OCS.

It will also help us understand how you can convert something that

is there today and may have to be decommissioned because of, let’s

say, an oil platform. And the fuel becomes exhausted. And technically today we have to tell the owner of that platform, which is

the recordholder of the lease, that he has 1 year to get everything

out of there. Well, what if another use can be found for that platform? We need to have somebody have the authority to review the

application and decide whether or not it makes sense and be able

to do it. Right now, we can’t.

So we want to protect the public’s interest to capture the fair

value for the use of the Federal OCS by authorizing the Secretary

to require an appropriate form of payment for use of those lands,

and this bill would give the Secretary this authority.

It would also grant the Secretary the authority to issue easements or rights-of-way, either on a competitive or non-competitive

basis, as appropriately determined by the Secretary.

It will give the Secretary the authority to oversee all activities

associated with a project through regulation and inspection activities to ensure safety, the safety of people, the safety of the environment. Right now, there is nothing comprehensive on this front.

It will also grant the Secretary the authority to pursue appropriate enforcement actions if they are needed.

And finally, and maybe very importantly, it will require—it will

give the Secretary the authority to require some kind of financial

surety, to make sure that when those facilities are no longer needed there is money there to decommission them.

It appears to the administration that there should be a regulatory regime that gives the tools for the Department to act as a

land manager with respect to these projects. So this would help ensure that the full array of Federal interests in the permitting of offshore energy-related uses can be addressed, and also give the private sector certainty. They know where to go, they know what to

do. There is no question. And that would help them make their decisions.

Another important aspect of the legislation is that one Federal

agency is given the lead role in administering the provisions of the

bill. There ought to be one place where people can go and get all

the answers. Although these answers may come from different departments eventually, but you need someone to coordinate. The administration determined that this new authority contained in H.R.

5156 should be vested in the Department of the Interior, since hisVerDate 11-MAY-2000 09:50 May 20, 2003 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6602 J:\DOCS\80970.TXT HRESOUR2 PsN: HRESOUR2
9

torically that Department has been the Federal Government’s land

manager and is the primary agency to oversee energy development

on Federal land through its various bureaus—BLM onshore and

various other bureaus. MMS has been doing it for mineral exploration offshore. So we have quite a bit of experience in dealing with

submerged lands.

It is important to note, however, that while the bill gives the Department the lead role in coordinating the permitting of energy-related uses on the OCS, it also specifically recognizes the important

role of other Federal agencies in the permitting process. In fact, the

bill makes it clear that this legislation does not supercede or modify the current authority of any other Federal or State agency

under existing Federal law. Nothing else will change.

Within the Department of the Interior, as you know, MMS has

many years of experience in overseeing oil, gas, and mineral activities on the OCS. It is this experience that led the task force of Federal agencies to the conclusion that the primary responsibility for

offshore energy-related activities should be invested in the Department of the Interior.

To summarize the experience that we have acquired over the

years, I would like to tell you some of the areas that it covers:

Environmental expertise. Research which is used to make informed decisions with regard to leasing and operations on the offshore.

Engineering expertise. Research regarding emerging offshore

technologies used to develop oil/gas resources and various safety

issues associated with those activities.

Regulatory expertise in overseeing OCS oil and gas activities to

ensure human safety and environmental protection.

And, finally, a trained offshore inspection work force. In addition

to enforcing MMS regulations, this work force today conducts offshore inspections both for the Coast Guard and for the EPA. We

work together with other agencies, but we have the expertise. It is

resident within the Department of the Interior.

In closing, Madam Chairman, I would again like to thank you for

your interest in this important legislation. The administration

firmly believes that this bill will provide numerous and immediate

benefits, and it has the potential to expand both our sources and

supplies of energy that will be so critical to our Nation in the future.

The administration feels strongly that we must encourage new

and innovative technologies to help our Nation meet its increasing

need for energy. Enactment of this legislation will be one important

step in getting us ready to support and manage the development

and the new energy sources that might come up on the OCS.

Madam Chairman, this concludes my oral testimony. However, I

would be pleased to answer questions you have.

[The prepared statement of Ms. Burton follows:]

Statement of Johnnie Burton, Director, Minerals Management Service, U.S.

Department of the Interior

Madam Chairman, thank you for the opportunity to appear before the Subcommittee today to discuss the Administration’s legislative proposal to help facilitate energy-related uses on the Outer Continental Shelf (OCS). The Department is

excited about H.R. 5156 and its potential to encourage innovative energy projects

10

on the OCS. Furthermore, the legislation directly supports the President’s National

Energy Policy initiative to simplify permitting for energy production in an environmentally sensitive manner and also supports the Secretary of the Interior’s goal of

facilitating renewable energy projects. We look forward to working closely with the

Committee as it further considers both the need for and merits of this proposal.

Hopefully, my testimony today will help shed additional light on why the Administration submitted a legislative proposal; some highlights of H.R. 5156; and why the

Department of the Interior is given the lead role in this legislative initiative.

As you are aware, this legislative proposal was officially transmitted to Congress

on June 20, 2002, and introduced by Chairman Cubin, as H.R. 5156. The Bill represents the results of more than six months of extensive discussions and collaboration with all Federal agencies having permitting responsibilities on the OCS, as well

as the President’s Task Force on Energy Project Streamlining. More important, H.R.

5156 was developed in a consensus with our sister agencies and reflects the best

efforts of the Administration to address the array of issues associated with permitting various OCS energy-related projects that are not currently covered under existing statutes.

These projects include renewable energy projects such as wind, wave and solar

energy. In addition, the oil and gas industry is contemplating ancillary projects offshore that would directly support OCS oil and gas development, particularly in the

deep water areas of the OCS. These projects include developing offshore staging facilities, emergency medical facilities, and supply facilities. Since there currently is

no legal authority to permit these types of projects, H.R. 5156 would give the Secretary of the Interior the authority to permit and oversee energy-related activities

in the OCS under the OCS Lands Act.

Why New Legislative Authority is Needed

Centralizing the overall responsibility for permitting energy-related uses under

one statute and within one agency will have two significant benefits. First, it will

clarify the regulatory process considerably. When the private sector initiates a specific project, it will know where to start the permitting process, and in turn, the Department would inform the applicant of other Federal permits that may be required.

Likewise, the Department will be able to inform other relevant Federal agencies of

the proposal, thus better facilitating its timely review and consideration. This approach has worked well for OCS oil and gas activities, in which MMS serves as the

one-stop starting point for a coordinated review and approval process.

Second, it will clearly provide one agency within the Federal government with the

full array of tools needed to comprehensively manage non-traditional OCS energyrelated uses. In short, it will give the Department the ability to act as a ‘‘land manager’’ with respect to the permitting and oversight of energy-related uses of Federal

submerged lands.

In considering the Administration’s proposal, a logical question to ask is whether

legislation is necessary to site and oversee energy-related uses on the OCS, or can

it be handled under existing authorities. In fact, we asked ourselves that same question as we began to consider how to best address issues associated with the siting

of such uses. After careful analysis of the mechanisms currently in place to handle

requests for innovative, non-traditional energy-related projects on the Federal offshore lands, it became clear to us that—with limited exceptions—currently there exists no clear authority within the Federal government to comprehensively review,

permit, and provide appropriate regulatory oversight for such projects. The exceptions to this general rule include oil, gas and other mineral activities permitted

under the OCS Lands Act (43 U.S.C. 1301 et seq., Department of the Interior); offshore oil terminals permitted under the Deep Water Ports Act (33 U.S.C. 1501 et

seq., Department of Transportation); and projects permitted under the Ocean Thermal Energy Conversion Act (42 U.S.C. 9101 et seq., Department of Commerce).

This means that the vast majority of OCS alternate energy-related projects that

are or may be contemplated in the future by the private sector have no clearly defined permitting process. There is no single agency with an overarching role to coordinate that process. Instead, various Federal agencies with different responsibilities are responsible for permitting a specific part of a proposed project.

There are two obvious drawbacks to the current situation. First, this fragmented

process cannot ensure that the Federal government’s myriads of interests in such

projects are fully considered nor can it ensure that its economic and land use interests are adequately protected. This obstacle can be best overcome by giving a single

Federal agency the overall authority to coordinate and permit these projects—while

acknowledging the important role that other Federal agencies play (and will continue to play) with respect to the permitting process. The proposed legislation does

just this by investing in the Department of the Interior the primary regulatory reVerDate 11-MAY-2000 09:50 May 20, 2003 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6621 J:\DOCS\80970.TXT HRESOUR2 PsN: HRESOUR2
11

sponsibility while explicitly noting that the legislation will not supercede or modify

the current authority of any other Federal or State agency under existing Federal

law.

A second drawback to the current situation is that the private sector, which must

make the tough investment decisions regarding whether to proceed with new energy-related projects—is now forced to ‘‘agency shop’’ in an attempt to identify an

authority that will allow them to move forward on a creative new venture. Otherwise, their only alternatives are to wait for clarified authority before proceeding, or

to proceed—with the possibility that a new statute will establish new authority with

new restrictions. Clearly, this situation stifles innovation in the energy arena and,

in fact, acts as a deterrent to critical investment decisions associated with offshore

energy-related projects.

Already, the oil and gas industry has expressed interest in developing offshore

projects that support OCS oil and gas operations in the Gulf of Mexico, such as offshore staging areas and hospitals, and has approached the Department and others

to discuss these ideas. However, to date, they have not proceeded with such plans

due, in part, to a lack of clear authority on the Federal level. In another case, the

private sector is actively pursuing a proposed wind energy project offshore Massachusetts. This proposal is being coordinated by the Army Corps of Engineers (COE)

under its authority under the Rivers and Harbors Act since one of the permits the

project must receive is a COE section 10 permit certifying that it will not be a hazard to navigation.

In sum, due to the absence of clear statutory authority for permitting the range

of various energy-related uses currently being proposed or that may be proposed in

the future for areas offshore, the Administration is firmly convinced that new legislation is needed in order to provide a clear and predictable regulatory regime and

to fully protect the Federal government’s interests in such projects.

Highlights of the Administration’s Legislative Proposal

In general, the Administration’s legislative proposal sets up a comprehensive

framework for permitting energy-related uses on the OCS not already covered by

existing statutes by amending the OCS Lands Act—specifically, it will add a new

subsection (p) to section 8 of the Act. Placing this authority under the OCS Lands

Act, which already provides the regulatory framework for OCS oil, gas, and mineral

activities, will allow the Department to build on many of the regulatory provisions

already embodied in that Act while still allowing us the flexibility to tailor those

provisions to more non-traditional energy-related uses.

Specifically, the proposed legislation would grant the Secretary of the Interior the

authority to—

• Grant an easement or right-of-way for energy-related activities on the OCS including renewable energy projects, such as wave, wind, or solar projects;

projects ancillary to OCS oil and gas operations, such as offshore staging areas;

and energy or non-energy related uses of existing OCS facilities previously permitted under the OCS Lands Act;

• Protect the public’s interest to capture fair value for the use of the Federal OCS

by authorizing the Secretary to require an appropriate form of payment such as

a fee, rental, or other payment for use of the seabed;

• Issue the easement or right-of-way on either a competitive or non-competitive

basis, as appropriate and determined by the Secretary;

• Oversee all activities associated with a project through regulations and inspection activities to ensure safety and environmental protection;

• Pursue appropriate enforcement actions in the event that violations occur; and

• Require financial surety to ensure that any facilities constructed are properly

removed at the end of their economic life.

Rationale for Designating the Department of the Interior as ‘‘Lead’’ Permitting Agency

As the Administration began to actively consider the best approach for addressing

issues associated with siting energy-related uses on the OCS, it became clear early

on that the Department of the Interior should be given the lead role in the permitting of such projects and the proposed legislation reflects that consensus. While

there are numerous Federal agencies with permitting responsibilities on the OCS,

historically the Department has been the Federal government’s ‘‘land manager.’’ The

Department manages more than 500 million surface acres of land, with the MMS

managing approximately 1.76 billion acres of offshore Federal lands and mineral estate. BLM manages 262 million surface acres and more than 700 million subsurface

acres of Federal mineral estate.

12

In this role, the Department has demonstrated unparalleled experience in multiple-use land management and routinely makes decisions to balance economic activities with the need to protect the environment. For this reason, the proposed legislation fits well with the Department’s core missions.

Also, the Department is the primary agency in the Federal government to oversee

development of our Nation’s energy resources’through BLM (onshore) and MMS (offshore). Since the proposed legislation pertains to the permitting and oversight of energy uses on offshore Federal lands, it is only logical that any new legislative authority that may be enacted remains with the Department already entrusted with

that overall responsibility.

Within the Department, MMS has many years of experience in overseeing oil, gas

and mineral activities on offshore Federal lands. This experience covers many areas

such as:

• Environmental expertise and research which are used to make informed decisions with regard to leasing and operations;

• Engineering expertise and research regarding emerging offshore technologies

used to develop oil and gas resources and the various safety issues associated

with these activities;

• Regulatory expertise in overseeing OCS oil and gas activities to ensure human

safety and environmental protection; and

• A trained offshore inspection workforce that, in addition to enforcing MMS regulations, also conducts offshore inspections for the Coast Guard and EPA.

• Established working relationships with international regulators to coordinate

and share information and experience on regulation of offshore energy projects

to ensure safety of workers and protection of the environment.

In closing, I would again like to thank the Subcommittee for its interest in this

issue and express our sincere desire to work with you on this important legislation.

The Administration firmly believes that this bill will provide numerous and immediate benefits. First, it will provide for the sound management of offshore public

lands by ensuring that principles of safety, environmental protection, multiple use,

fair compensation, and conservation of resources are all addressed before a project

is initiated. It will also provide the private sector, which desires to invest in offshore

energy-related projects with certainty and predictability. Finally, the bill has the potential to help increase both our sources and supplies of energy that will be so critical to our Nation in the future. We have already seen that interest and expect to

see more once a statutory framework is in place.

The Department believes strongly that we must encourage new and innovative

technologies to help us meet our increasing energy needs enactment of this legislation will be one important step in helping us meet those needs.

This concludes my written testimony. However, I would be pleased to respond to

any questions from Members of the Subcommittee.

Mrs. CUBIN. Thank you, Director Burton. And, Deborah—is it

correct—that there are statements that the Minority has that now

will be ordered to be entered into the record.

[The prepared statement of Mr. Kind follows:]

Statement of Hon. Ron Kind, a Representative in Congress from the State

of Wisconsin

I recognize the short-term need to increase environmentally sound, domestic fossil

fuel production. But in the long term we should be focusing on the development of

renewable energy sources such as wind, solar and biomass. That makes sense for

both economic and national security reasons: the United States has only 3 percent

of the world’s remaining oil reserves, but consumes nearly 25 percent.

Constructive ways to boost more domestic alternative energy sources so that we

can break oil dependency from unstable regions of the world should be encouraged.

Therefore, I was initially heartened by the Administration’s announcement that

they were transmitting legislation, incorporated in H.R. 5156, to specify that alternate energy projects may be permitted by the Minerals Management Service on the

Outer Continental Shelf of the United States.

Unfortunately, while H.R. 5156 would grant this authority to MMS, the bill would

also expand DOI’s authority to permit the siting of Liquefied Natural Gas - LNG

- terminals, conversion plants and pipelines, in the OCS. The prospect of LNG facilities off the coastlines of States like California, Florida, New Jersey or North Carolina, is controversial in those States to say the least.

13

Further, as you may know, the Bush Administration has recently published an

advance notice of proposed rulemaking under the Coastal Zone Management Act

that could greatly diminish the authority of coastal States to assert that Federal

consistency applies to ‘‘far offshore’’ federal projects affecting their coastal zones.

Should H.R. 5156, as introduced, become law, and should NOAA proceed to complete its ill-advised rulemaking, permitting LNG facilities in the OCS would not be

subject to the consistency provisions of the Coastal Zone Management Act.

This possibility alone will make it very difficult to gain the necessary support

from Members representing coastal states, which include Great Lakes States, to

pass this bill.

H.R. 5156 will require a good deal more consideration before it should be brought

to a vote in Subcommittee. I would hope that the Subcommittee hold at least one

more hearing on this bill so that we may hear from representatives of coastal states

as well as others with a vested interest in the bill. We have a number of other questions and concerns about the bill that will be addressed in our questions to the witnesses.

In conclusion, while we appreciate the stated intent to facilitate the development

of alternative energy projects in the OCS, the bill would have to significantly rewritten to limit its scope to that end. As it stands, the bill would give MMS the authority to permit just about anything on the OCS, and that is unacceptable.

[The prepared statement of Mr. Markey follows:]

Statement of Hon. Edward J. Markey, a Representative in Congress from

the State of Massachusetts

Thank you, Madam Chairwoman. I appreciate your calling this hearing today.

Proper management of the Outer Continental Shelf is extremely important for our

country—a country with over 12,000 miles of coastline. It is especially important to

Massachusetts’’ economic vitality. Many of our industries—from fishing to shipping

to tourism—depend on the health and management of the outer continental shelf

and coastal areas. I agree with the chairwoman that the current gaps in federal

laws need to be filled and that if there are jurisdictional issues, they need to be

solved as well.

I am concerned, however, that the legislation before us is too broad. If it is passed

in its current form, OCS would no longer stand for ‘‘Outer Continental Shelf.’’ Instead, OCS would stand for ‘‘Open to Corporate Sale.’’ Just asserting the jurisdiction

of the federal government, without a sound policy to guide the use of federal lands

and a commitment to a clear process by which innovative individual proposals will

be judged will not solve our current problems. That clear policy is lacking in H.R.

5156. Specifically, I am concerned that there is no explicit protection of the States’’

right to consistency review as established under the Coastal Zone Management Act.

I cannot support legislation that does not maintain the rights of states to review

projects that impact the health and safety of their people and economy.

I am disappointed that this hearing does not include a broader spectrum of panelists. I think the National Oceans and Atmospheric Administration would have valuable insight to add to this policy discussions, in particular comments from the Commission on Oceans Policy on this legislation would be greatly appreciated. Recently

my colleague, Rep. Delahunt, has asked them to comment on this bill, which could

seriously affect his district, and I hope that their comments will be considered before

HR 5156 moves forward.

Furthermore, I would like to hear from other industries about their current and

future proposals for new ways of using the outer continental shelf. What plans does

the aquaculture industry have? Or the liquefied natural gas industry? We will hear

from a portion of the renewable industry today but I believe we need to be better

informed about possible types of projects in order to develop a sound policy about

how to deal with their use of federal waters.

The frontier days are over. We can no longer just hand over public land for industry to use. We must carefully balance the economic and environmental impacts of

all energy projects anywhere on federal land or water, without usurping the right

of States to comment on federal projects that impact them.

Mrs. CUBIN. I want to start out by making a statement. Ranking

Member Kind has been very active in this Subcommittee and has

rarely missed a Subcommittee hearing. And also this is a very busy

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time of the year for us. We are trying to get through all of the bills

that we need to get through before we take our August district

work period. But I have to—and I understand that, and I am sure

that Mr. Kind is at some place that is very important.

I want to respond—I want to make an observation, though, about

the rest of the Committee. I have heard nothing but harping about

the President’s energy plan from the other side, that it does nothing to protect the environment, or it doesn’t do enough to protect

the environment, and that renewables, renewables, renewables, renewables is the only answer. And I have to express my deep disappointment that there is no one on the other side here to work

with us in bringing forward this bill that will enable the development of renewable energy sources in the short term as opposed to

having to postpone it and postpone it and postpone it.

So it is very disappointing that no one sees fit to be here for

what they have been denouncing the administration for not providing. I can’t help but think that there could be a political reason

that they are not here. I could be wrong, but it is the way it appears to me.

So the first question I want to ask you, Director Burton, is would

you agree with me that this bill is all about protecting the environment?

Ms. BURTON. Absolutely, Madam Chairman. If we don’t have the

comprehensive regulatory regime in place, we have no way to see

and make sure that all the safeguards are observed, and that whatever industry does is designed in such a way that is as safe as possible to the marine environment. We have a lot of scientists on our

staff that do nothing but study marine environment and make sure

that what is done on the OCS is as sensitive as it can be to that

environment.

So this would ensure that there is a thorough, complete review

of the environmental issues before anything is permitted.

Mrs. CUBIN. Recently I had the opportunity to go out on a platform, producing platform 100 miles out in the Gulf, and then we

came back into a 30-mile-out platform that was a drilling platform

and a production platform. And in both places, I asked about the

MMS and their enforcement of the regulations and how well they

regulated, and all of the workers—I didn’t ask the bosses of the

companies, the people who were taking us on the tour. I asked the

people who were working on the platforms, I asked the workmen,

the laborers on the platform how MMS—how important MMS was.

And to a person, they said that MMS is very knowledgeable. And

they come out and they make inspections and they are very picky

in their inspections, which they consider to be good because it is

about their safety and about the safety of the environment. So I

don’t think there is anyone that could argue the point that the

MMS is far and away the most qualified agency to deal with environmental issues on the Outer Continental Shelf.

You did discuss this in your testimony, but would you like to expand in any way on how MMS recognized the need for this legislative language, and why we are pursuing the legislation?

Ms. BURTON. Certainly, Madam Chairman. You know, one of the

initiatives of the President’s National Energy Policy was to find a

way to simplify and to streamline the regulatory review process for

15

future energy projects. This legislative proposal was the offshoot, if

you will, of the work that the Department of the Interior wants to

do to support the President’s agenda. We viewed this as a way to

streamline, to simplify, but also a way to make sure that the Federal Government’s interests were protected and well managed. So

that was one of the reasons this legislation came to be.

The other reason was what we heard. And, like you, I went offshore after I took this job because I wanted to see what we were

doing out there and how well our people were working with industry to regulate them and to manage what they do.

I heard some interesting things. Such as, when we are drilling

in ultra deep water—and as you know, we are drilling more and

more in ultra deep water, which means 100, 150 miles away from

shore. For example, if we have an accident, either a work-related

or medical accident to some of the staff, by the time they fly to

shore, which may be a 2-hour flight by helicopter, plus an ambulance ride, it may be too late to save somebody’s life. And they were

talking to me about the possibility of building medical facilities offshore that would be just a few miles from various platforms, and

they could all use it and they would be a few minutes by helicopter

ride. I thought that was a wonderful idea. But right now, no one

has authority to permit and regulate such an activity. It is to support the oil and gas industry, but it is not directly drilling or production, and so the OCSLA does not cover that. So that would be

helpful.

Then we have the wind project off Nantucket Sound that folks

were looking to see how to work. Right now they are working with

the Corps Of Engineers. But, again, the Corps of Engineers is trying to cover a lot of ground it is not used to covering, because no

one seems to be the point agency.

So all of these things put together brought the administration to

the conclusion that they needed to propose some scheme that would

take care of this regulation and this management issue, and that

is how this came about.

Mrs. CUBIN. I have had conversations with other Members specifically about the wind project that is proposed for the Nantucket

area. And it was expressed to me that hurricanes come along the

eastern coast, and that there are times when that area is hit by

hurricanes. And their concern was that if it was not built far

enough out—basically, they didn’t want it to be built at all. But the

reason they were opposing it was they said if a hurricane comes

and one of those wind farms is there and the hurricane blows it

down, then, you know, people wouldn’t be safe there on the land.

And could you respond to that? Like, I am not asking you—because I think it requires some study—I am not asking for your

opinion on it. But wouldn’t the MMS in their studies have to take

that into consideration, those sorts of things, before they could permit under this bill, before they could permit that wind farm to be

built?

Ms. BURTON. Absolutely. These are the issues that would come

up on a case-by-case basis, depending on what the project is. We

don’t have any involvement in that project at this point. So you are

correct; I can’t answer this question specifically. But this is what

the agency does whenever a project comes to the point where they

16

have to ask for permits; then we do a very comprehensive review

of all the aspects of a project, and that would be studied also. I am

not sure anybody is studying that right now. I am not sure anybody is watching this particular issue.

Mrs. CUBIN. You covered in your testimony that MMS has approached other agencies about the jurisdictional details of permitting alternative energy projects. Have the concerns of those agencies been met in this language?

Ms. BURTON. I believe so, Madam Chairman. We worked with

other agencies for about 6 months and went through—you know,

we have a collaborative process with a lot of agencies. For example,

we work very closely with the Coast Guard, we work very closely

with the EPA, with the Defense Department, with the Navy, et

cetera. We have taken this language and have modified it as we

met with all of those agencies, and the end result is that we had

the support of all of those agencies for us to bring this language

forward. So everyone has been contacted.

Mrs. CUBIN. The submitted testimony from Environmental Defense asserts that the primary purpose of this bill is to grant MMS

unprecedented jurisdiction over LNG terminals. How do you respond to that?

Ms. BURTON. Well, unless I am mistaken, Madam Chairman, the

LNG terminal language is not at all in this bill; it is in the Deepwater Port Act and it is under the Department of Transportation’s

jurisdiction at this point. And we are perfectly satisfied with that.

This bill says very clearly that it will not address any activity that

is already covered in other Federal statutes. So, if LNG is in the

transportation bill, that is who is going to take care of it, and we

won’t have a thing to do with it.

Mrs. CUBIN. I think that is obvious if one reads the bill, but I

wanted to have that on the record very, very clearly.

If this bill should be enacted, how will the jurisdictions, requirements, and industry standards be defined for projects that are covered by the bill?

Ms. BURTON. At this point, Madam Chairman, it is hard for me

to answer that question because I don’t think one size fits all. I

think that every project that will come along in new—particularly

renewable energy, so new technologies will have to be studied on

their own merit. Again, we are used to undertaking a very collaborative process in order to arrive at all the standards we require for

various projects. We will continue to do that. So we will consult

with an awful lot of people before we arrive at setting standards

for a particular project.

Mrs. CUBIN. Another thing that I think is extremely important

is the role of the adjacent coastal States addressed in this bill. And

what role will the States play?

Ms. BURTON. The role of the States is not really addressed in this

bill per se, because this bill doesn’t change any existing scheme

that exists for States as well as Federal statutes today. Nothing is

going to abridge or change or modify the role of the States. We consult the States now for anything of the OCS that may have an impact on their coastal zone. We will continue to do that regardless

of what the project is. So that does not impact them.

17

Mrs. CUBIN. Another assertion that was made in the Environmental Defense testimony is that the purpose of this bill is really

to derail emergent new renewable energy resources through escalating royalties. Would you comment on that?

Ms. BURTON. My comment on that is that the bill doesn’t give us

any such authority. We do not contemplate any kind of royalty regime at this point. We are concerned with how we protect the environment and how we manage the submerged lands that are our responsibility. The MMS basically is charged within the Department

of the Interior to take care of 1.76 billion acres of land. But in

order to take care of that, we have to have the tools. Right now we

have tools that are limited to only mineral production. We need to

make sure those tools can apply to ancillary types of projects to

support that production and to renewable energy projects.

Renewable energy is one of the priorities of this Secretary. She

has worked diligently with the Department of Energy to put together a conference, I believe it was last October or November, I

am not sure exactly when, I was still in Wyoming. It had a very

good attendance. And BLM followed through in the winter, I think

January or February, with another conference. The report is going

to come out pretty shortly, put out by both Secretaries of Energy

and Interior, addressing renewables. She is very intent on doing

anything we can to foster renewable energies development. This

legislation is part of it.

Mrs. CUBIN. Under this legislation, what I am speaking of here

are rights of way. How would the MMS coordinate with FERC, another agency, to provide those rights of way for offshore energy development as well as the transmission of the energy that is produced?

Ms. BURTON. Well, today, we communicate with FERC quite a bit

on those issues, and we will continue to do so. And there won’t be

any change there. But we have to remember that MMS is only interested in managing the land, and that is the right of way, the

right of way on that land, not in managing the actual transmission

of energy.

Today, for example, we work with FERC on pipelines. We worry

about the right of way. But they monitor the pipeline, and they

regulate what is transmitted through those pipelines when there is

still regulation. We know this is largely deregulated today.

If there are lines that transmit energy, for example electricity—

it could be another form of energy besides oil and gas, obviously;

it could be electricity off the wind farm, for example—FERC keeps

its sole authority over the transmission line itself. We would only

be involved in the right of way. That is all. So that doesn’t change.

This is already in statute. It will be the same.

Mrs. CUBIN. Well, I thank you very much for your informative

testimony and answers to the questions. We will keep the record

open for—5 days—10 days for other members to submit questions

in writing, and would ask that you respond to those questions if

there are any forthcoming. And I want to thank you very much for

being here, and I look forward to seeing you again.

Ms. BURTON. Thank you very much for your time. And we would

be more than happy to answer any questions of any member of the

Committee. Thank you.

18

Mrs. CUBIN. Thank you.

Mrs. CUBIN. Now I would like to invite the second panel, Mr.

Jaime Steve, American Wind Energy Association.

STATEMENT OF JAIME STEVE, LEGISLATIVE DIRECTOR,

AMERICAN WIND ENERGY ASSOCIATION

Mr. STEVE. Thank you, Madam Chairman. My name is Jaime

Steve, and I am the Legislative Director for the American Wind

Energy Association based here in Washington D.C. Wind companies that I represent include GE Wind Power, FPL Energy, American Electric Power, PacifiCorp, Vestas American, Cape Wind, and

Arcadia Wind Power.

Increased use of clean, domestic wind energy on both private and

public lands is a bipartisan issue with broad support in the Congress and from the Bush administration. For example, in March of

this year, Congress extended the wind energy production tax credit

through the end of 2003. An additional extension of this tax credit

is contained in H.R. 4, the wide-ranging energy policy bill passed

by the House earlier this year, also passed by the Senate in different form, and under consideration in conference committee. This

provision was also contained in the Bush energy plan.

Let me give you a little background on wind energy on land before I jump over to the offshore. In the early 1980’s, wind energy

development was essentially a one-State business, California. That

was it. Today, utility-scale wind power facilities are in 29 States.

All these projects are either on private or Federal land. Currently,

there are no operating offshore wind developments in U.S. waters.

This is in contrast to Europe, where at least 10 offshore projects

are operating in shallow waters offshore in waters near Denmark,

Sweden, England, and the Netherlands. Europe has already moved

to offshore development because of the scarcity of land. Here in the

U.S., we have lots of available land particularly in the West. There,

heavy population, not a lot of open land, that is why they moved

to offshore.

The earliest European offshore project was built in 1990, and it

is off the Swedish coast. These European projects range in size

from .25 megawatts to as large as 40 megawatts in capacity. That

is a lot of power. Together these European projects total over 90

megawatts of capacity, and the distance from shoreline of these

projects ranges from about five-eighths of a mile to about 6 miles.

Near term, there are currently 18 new offshore projects planned

throughout Europe totaling 1,500 megawatts of energy capacity.

Long term, Germany alone is looking at 25,000 megawatts of

power. That is a significant amount of power just for one country.

While it is somewhat more expensive to develop wind offshore,

there are some simple reasons for doing so.

The first reason is to gain access to much higher, more sustained

winds. Therefore, your wind turbines are operating a greater percentage of time and you are producing more power.

The second reason is that these projects can be located closer to

population centers, therefore reducing the need to transmit power

long distances over transmission lines. And that raises questions if

you lose some of the power the further you have to transmit it. And

also in some areas of the U.S., we don’t have the existing transVerDate 11-MAY-2000 09:50 May 20, 2003 Jkt 000000 PO 00000 Frm 00022 Fmt 6633 Sfmt 6602 J:\DOCS\80970.TXT HRESOUR2 PsN: HRESOUR2
19

mission capacity to move the power from where it is to where it

is needed.

I would like to address two specific issues involving H.R. 5156

and the ability to develop wind along the Outer Continental Shelf.

No. 1 is what we call transitional issues. The industry asks that

any rules that may flow from this legislation be sensitive to the financial investments and potential—of potential offshore projects

made prior to enactment of the legislation. Specifically, we are concerned that companies now working to develop sites offshore Massachusetts, which we spoke about just recently, and offshore Long

Island as well, are not disadvantaged by new rules. Essentially, we

feel these projects should not be unnecessarily delayed by requiring

developers who have already put in significant amounts of money,

time, and effort over the last 2 to 3 years. We don’t want those

folks to have to go back to square No. 1 under a new process and

start all over again.

Next is interconnection. And again, I think we were just discussing the fact that this is really more of an issue for the Federal

Energy Regulatory Commission than it is for the Department of Interior. But that is important to us as well. We are concerned that

if a current or future project gains approval and begins construction, we want to be sure that there is an orderly process to ensure

that the project can actually connect to the mainland; otherwise,

there is no sense in building the project in the first place. And that

is a concern, because those that want to stop a project, if they don’t

win on stopping the project itself, they can then block the transmission access. And that is another way to stop a development.

In conclusion, I just want to say that offshore wind may be a new

concept here in America, but the Europeans have been at it for

more than 10 years with numerous projects. Expanding U.S. wind

development into appropriate parts of the Outer Continental Shelf

will allow environmentally responsible development and help our

country meet its pressing energy needs with a clean, nonpolluting,

domestically produced source that creates high-tech jobs while also

paying significant revenues either to individuals; but, if we are offshore, we are assuming that there would be some level of revenue

paid to the Federal Government as well.

Thank you, Madam Chairman.

[The prepared statement of Mr. Steve follows:]

Statement of Jaime Steve, Legislative Director, American Wind Energy

Association

Chairman Cubin and members of the subcommittee, my name is Jaime Steve. I

am Legislative Director for the American Wind Energy Association based here in

Washington, D.C. Wind energy companies that I represent include GE Wind Power,

FPL Energy, Inc., AEP (American Electric Power) based in Cincinnati, Ohio,

PacifiCorp, Vestas American, Cape Wind and Arcadia Windpower.

Increased use of clean, domestic wind energy on both private and public lands is

a bipartisan issue with broad support in Congress and from the Bush Administration. For example, in March of this year Congress extended the wind energy Production Tax Credit (PTC) through the end of 2003. This item was contained within the

Job Creation and Worker Assistance Act of 2002 (H.R. 3090, P.L. 107–104). An additional three-year extension of this tax credit is contained in H.R. 4, the wide-ranging

energy policy bill passed by the House earlier this year and currently under consideration in conference. This provision was also contained in the Bush–Cheney energy

plan.

20

The wind tax credit, coupled with more than 80 percent reductions in wind power

costs since the 1980’s has enabled wind to compete almost head-to-head with conventional energy sources in regions with good wind resources. In 2001 alone, Texas

saw more than 900 megawatts (MW) of wind power come on line. This translates

into more than $1 billion in economic activity and roughly the amount of electricity

needed to power 200,000 homes. At the same time, hard-pressed Texas farmers and

ranchers leasing small portions of their land for wind development are gaining annual payments of about $3,000 per windmill, per year, for at least twenty years. In

addition, these wind developments are contributing to the tax base of local governments. The simple point is that wind energy is real and it is spurring significant

economic development in rural America.

In the early 1980’s wind energy development was essentially in only one state—

California. Today, utility-scale wind power facilities are in 29 states. All these

projects are on either private or federal land. Currently, there are no operating offshore wind developments within U.S. waters. This is in contrast to Europe, where

at least ten offshore projects are operating in shallow waters near Denmark, Sweden, England and the Netherlands. Europe has already moved to offshore development because of the scarcity of available land.

The earliest European offshore project was built in 1990 (Norgersund off the

Swedish coast). The European projects range in size from 0.25 MW to 40 MW in

capacity. Together these European projects total over 90 MW. The distance from

shoreline ranges from 5/8 of a mile to 6 miles. Near term, there are currently 18

new offshore projects planned throughout Europe totaling 1,500 MW. Long term,

Germany alone is planning for 25,000 MW of offshore wind power by the year 2025.

While it is somewhat more expensive to develop offshore wind, there are some

simple reasons for doing so. The first reason is to gain access to higher, more sustained winds, producing up to 40 percent more energy per wind turbine. The second

reason it that these projects can be located closer to population centers where the

power is needed, therefore reducing the need to build new long-distance power

transmission lines to get the power to customers.

I would like to address two issues specifically involving H.R. 5156 and the ability

to develop wind along the outer continental shelf (OCS).

Transitional issues

The industry asks that any rules that may flow from passage of H.R. 5156 be sensitive to the financial investments in potential offshore projects made prior to enactment of the legislation. Specifically, we are concerned that companies now working

to develop sites offshore Massachusetts and New York’s Long Island are not disadvantaged by new rules and requirements. Essentially, we feel that these projects

should not be unnecessarily delayed by requiring developers—who have already put

in years of preparation—to start all over again under a new application process.

Interconnection

We are also concerned that if a current or future project gains approval and begins construction that there be an orderly process to ensure the project can connect

to electric substations and distribution lines on the mainland. Simply stated, there

is little point in constructing an offshore wind farm if it becomes too expensive or

difficult to transmit power from the wind turbines to the users on land.

Conclusion

Offshore wind may be a new concept in America, but the Europeans have more

than ten years of experience with these projects. Expanding U.S. wind development

into appropriate parts of the outer continental shelf will allow environmentally responsible development and help our country meet its pressing energy needs with a

clean, non-polluting, domestically produced resource that creates new high-tech jobs

while also generating revenue for the federal government. Thank you.

Mrs. CUBIN. Thank you, Mr. Steve. In your testimony you describe the offshore wind farms in Europe. Is offshore wind energy

beginning to make a significant contribution? Now, you said it is

25—.

Mr. STEVE. Twenty-five thousand megawatts is planned for Germany.

Mrs. CUBIN. Oh, it is planned. OK. So it is beginning, then, to

make a major contribution to the electricity needs of Europe.

Mr. STEVE. Right. Yeah.

21

Mrs. CUBIN. Are you hearing of increased interest from energy

companies about offshore projects in the United States?

Mr. STEVE. Definitely.

Mrs. CUBIN. Other than the Nantucket?

Mr. STEVE. Right now, the only two that are under consideration

are the one offshore Nantucket Sound and one offshore Long Island

as well. The Long Island Power Authority is looking into this. Part

of the problem is, it is kind of a practical issue to deal with here.

It is very difficult in the New York area to get power to Long Island. Again, we come to this transmission issue. And if you can develop an offshore wind farm, then you don’t have to run the power

all the way through Manhattan or from Connecticut, you know,

from other areas into Long Island. You can have it right there at

Long Island, and then you are just running essentially a giant extension cord from the wind power facility directly to the mainland

on Long Island.

Mrs. CUBIN. You made a point that I think is really significant.

That is how, as energy, as the electrons travel through the wire or

the fiber or whatever, they diminish.

Mr. STEVE. Right.

Mrs. CUBIN. And so placing them in places like off of Long Island

and Nantucket would certainly prove to serve electricity to a lot of

people. And what I am thinking about right now is that not-in-mybackyard stuff.

Mr. STEVE. Yes.

Mrs. CUBIN. So what kind of unique challenges have you had, or

do you know of those kinds of challenges in Europe? And how did

they deal with those? How did they get more public acceptance of

that?

Mr. STEVE. I think you are referring to what most people call

NIMBY. Right? Not In My Backyard. But the best one I have heard

recently is NOPE, N-O-P-E, which stands for Not On Planet Earth.

Mrs. CUBIN. Right.

Mr. STEVE. Don’t do it anywhere on Planet Earth.

Here is one way to deal with that. In Europe—I don’t know if everyone can see the image up here; I passed out some copies. I don’t

have enough copies for everybody else, for the press. But the image

here is of a wind farm offshore Denmark. And a couple members

of the Subcommittee and the full Committee were there recently

last summer, and I was fortunate enough to go there myself, as

well.

But what you see here is about 5 miles off the coast of Denmark,

of Copenhagen, are these windmills. Most days, you can’t even see

them, No. 1. It is very shallow water, so it is not a shipping channel. But interestingly, what the developer did in that case was they

allowed folks who lived along the coastline to actually invest in the

project. They received some revenue. The objections kind of melted

away at that point.

Mrs. CUBIN. Funny how that happens.

Mr. STEVE. Yeah. I mean, there are always going to be some

folks who—you know, some folks like windmills; there are always

going to be some folks that don’t. What we are finding is that most

folks do, because it is a clean power source; there is no pollution.

And one of the great things about wind power, which is unlike fosVerDate 11-MAY-2000 09:50 May 20, 2003 Jkt 000000 PO 00000 Frm 00025 Fmt 6633 Sfmt 6602 J:\DOCS\80970.TXT HRESOUR2 PsN: HRESOUR2
22

sil fuels, is that with wind power or other renewables as well, you

sign a 20-year contract with the utility for the power. What you are

paying at the beginning of the 20-year contract is the exact same

price you are paying at the end of the 20-year contract because

there is no fuel cost; the wind is free. All your costs are up front.

And you levelize those costs over the 20 years.

So we can come in at a rate of, say, 5, 6 cents per kilowatt hour,

whereas natural gas may currently be in the range—it may be

cheaper than us right now, but I think anybody in the room who

has—Mr. Inslee—anybody in the room who has an electric bill or

has a home powered by natural gas saw some pretty significant

price spikes about a year and a half ago. And what wind brings

and other renewables bring is this kind of price stability.

Mrs. CUBIN. I consider the potential offshore wind farms in the

United States, Nantucket, the incentive that occurred in Europe to

share in the revenues. Nantucket might not be quite as good a

partner in that, since the area that we are talking about is—you

know, a place where probably the people in the top 1 percent of income in the country live there—and so they might not have the financial needs to offset having to look at what they would consider

to be an offensive wind farm. But I think we have to keep looking

for ways to get the public to buy into this. Certainly in my opinion,

the fact that it is clean, consistent, predictable, renewable, ought

to be enough; but obviously there are other things that have to be

dealt with.

What other unique challenges are there that offshore wind energy producers face?

Mr. STEVE. Producing wind energy offshore is somewhat more extensive than doing it on land. Just the process itself, the specialized cranes that you need to get these facilities placed. And essentially the way this is done is with large concrete pads. Again, we

are operating in shallow water, so you will have a concrete pad

which is filled with sand as well, and then kind of sinks right into

the—below the surface of the water. So all these processes create

a higher expense, but that is balanced out by the fact that you can

actually put a larger windmill or wind turbine offshore—and we

are talking in the range of—the biggest ones on land right now

would be considered 1.5, say, to maybe 2 megawatts. And these get

very big. I mean, to the tip of the blade, we are talking about higher than the Capitol building. That is pretty tall. But you can do a

3-megawatt machine offshore, which you couldn’t do on land. It is

kind of difficult. So in addition to that, so the cost is going up; however, at the same time, you have, as we said before, a much more

sustained wind, stronger winds as well, so you can actually produce

more power out of each windmill, meaning you need fewer of them.

Mrs. CUBIN. How important is certainty to the industry in permitting other—in permitting and other regulatory issues that developers face?

Mr. STEVE. That is very good question. The certainty is absolutely vital. A developer needs to know as much as they can about

the requirements, both environmental and safety as well, when

they are going into this up front, because it can change the whole

economics of a project later on. So it is very important to know that

up front. And it also goes to the issue—which I didn’t delve into

23

too much. But the wind energy tax credit is another issue where

we are always looking for certainty, because investors want to

know, if I put my money down today, is that tax credit going to

be there to help me out a year and a half from now?

We are already facing it. We just got extended for 2 years, and

we are already facing another deadline coming up. So we are hoping that the energy bill passes and that it contains an additional

3-year extension of that provision. Certainty is crucial.

Mrs. CUBIN. Just overall in terms of acceptance of the wind energy industry in the United States and financial capabilities, bonding, just in general, what is the state of the wind energy industry

in the United States?

Mr. STEVE. I would say we are doing pretty darn well right now.

What we are seeing is, as I said before, in the early 1980’s, it was

in one State and today we are in 29 States, to varying degrees. But

the best thing that we are seeing is that throughout the whole Midwest there is significant development.

One of the most important things that happened to spur wind

energy development was when President Bush was Governor of

Texas, he signed a renewable energy requirement called the Renewable Energy Portfolio Standard into law in the State of Texas.

That, coupled with the existing tax credit, has resulted in a significant increase in wind energy development in Texas. Last year,

Texas alone saw over 900 megawatts—915 megawatts, to be

exact—of brand-new wind power going in. That is over 1 billion—

with a B—$1 billion of economic investment in the State of Texas.

Mrs. CUBIN. Pretty good.

Mr. STEVE. Yeah.

Mrs. CUBIN. Are you working with the Interior Department to

develop a process to facilitate onshore wind energy projects on Federal lands?

Mr. STEVE. Yes. Actually, we have been working very closely

with the Bureau of Land Management, who—most people come to

Washington and they criticize the government. I can tell you that

our developers have been working very closely with folks at the Bureau of Land Management who have been terrific to work with.

And that doesn’t mean that they roll over and do what we ask

them to do; it means that they are looking for what—if we do this,

what is the practical effect of it? So that folks don’t have to come

back later and change rules because somebody did something that

doesn’t work out in reality.

It is a very good process. And what we are finding is that the

give and take of information has resulted—is resulting in better

rules which will probably be proposed for development on Federal

lands. And that is, again, something that the Secretary put forward, Secretary Norton put forward, and folks in the Department

are acting on expeditiously.

Mrs. CUBIN. So, other than the obvious issues, like birds nesting

and the Endangered Species Act and all of those things, what sort

of regulations are you expecting to have applied to the industry in

siting?

Mr. STEVE. Specifically, two things. The first one is, you want to

avoid something that happened. You remember when all these

Internet Web sites were coming up and people were buying up—

24

speculators were buying up the names of Internet Web sites, and

then they would sell them later on for large amounts of money? We

don’t want the same thing to happen with parcels of Federal land,

where nobody who has no serious interest in developing wind

power on Federal land buys up all these sites and then sells them

at a very high cost to developers. We want to pay what is reasonable for them, but we don’t essentially want to pay ransom.

So essentially what is happening is that the Bureau of Land

Management is setting up the process where they say, stage one

is you pay a fee to actually monitor the winds on the land. You

don’t have the rights to develop on that land yet, but you are paying a reasonable fee for that.

Second, if you decide you want to gain access to those lands, you

have to pay a fee which is higher, perhaps something in the range

of $2,000 per parcel per year, and it may be higher.

In addition to that, once a project goes in, the Federal Government would gain revenues by not just payments for access to the

land, but also by essentially getting a cut of the production of the

energy as well.

Mrs. CUBIN. One last question. What about decommissioning

these farms? Are you talking about bonding? Do you think that will

happen? I mean, what is the status on that?

Mr. STEVE. Yeah. I think the Bureau of Land Management for

on-land development is looking at those kind of issues, the bonding

issues. Because certainly you don’t—you wouldn’t want a developer

to walk away from a property and then leave it looking scarred. I

mean, one would have to remove the bases or whatnot. So that is

an important consideration as well.

But what we usually find in the industry is people don’t walk

away from the property, and they take very good care of it. And

essentially where you have older machines, what ends up happening is people are knocking down the older, smaller machines

and replacing them with maybe one newer machine where there

had been 12 existing. So for those that don’t like the windmills, you

are kind of reducing that visual aspect as well.

Mrs. CUBIN. And as Director Burton testified, the decommissioning of—or, this bill covers decommissioning of any project that

might be put out there as well.

Mr. STEVE. Right. And we look forward to the same kind of process with the Minerals Management Service that we have been

going through with BLM, Bureau of Land Management.

Mrs. CUBIN. Well, thank you very much, Mr. Steve. I now would

like to recognize Mr. Inslee for questioning.

Mr. INSLEE. Thank you very much. I want to show my appreciation to the Chairwoman for holding this hearing. I really appreciate

her leadership and looking into this issue. So thank you very much.

I look forward to working with you on this.

It is great to see you here, and I am very happy to see your continued success and am very excited about moving forward on wind

throughout the country. And you may have talked about some of

these—I came in late; my apologies if I missed a couple things. But

why don’t you brag a little bit about what is happening in the State

of Washington just for a minute?

Mr. STEVE. Certainly.

25

Mr. INSLEE. Just so everybody will know.

Mr. STEVE. Well, we just had our biggest convention, actually,

annual convention. Over 2,000 people, believe it or not, showed up

for a wind convention. Unfortunately, it was in Portland, Oregon,

but it wasn’t in Washington.

Mr. INSLEE. We were close.

Mr. STEVE. What we did do, though, is a lot of folks ended up

getting on buses and driving to the Columbia River Gorge where

the largest wind development really in the world is taking place

along the Columbia River Gorge. And it is referred to as the State

Line Project. Very profitable not only for wind energy developers,

but for landowners as well. Landowners are getting in the range

of 2- to $3,000 of rental payments from developers per windmill per

year for about 20 years. So a lot of folks say—farmers ranchers—

they say wait a minute, this is a giant 401(k) on my property.

Mr. INSLEE. We need those right now.

Mr. STEVE. Yeah. I did hear somebody last night who said

401(k)s have turned into 201(k)s. But essentially this is a real economic development tool for rural America and it provides clean energy as well. There is very little downside, except for the few folks

who are going to say, hey, I just don’t like them.

Mr. INSLEE. Tell me your thoughts about the necessity of a specific legislative piece such as this bill that brings us here today, as

opposed to using existing statutory permitting systems, existing

statutory frame works. Do we need for sure another piece to allow

this to move forward? And, if so, what are the most important aspects of that?

Mr. STEVE. The two folks that are looking to do development currently are working under existing law. But as we heard earlier

from Minerals Management Service, it is hard to jump into a new

area. Essentially, this is a new animal, offshore windmills, and

folks haven’t looked at this before, so I think it is important for the

Federal Government to have some kind of outline for how they are

going to deal with these issues.

The one thing that we ask that I mentioned in my testimony,

please don’t prejudice the folks who have been working on this for

2, 3 years already, so if we have new requirements and rules we

don’t send them back to square one after years and many dollars

investment. That is our biggest concern.

Mr. INSLEE. There has been some thoughts expressed, or concerns, about this legislation, that if we do move forward with a separate piece, that we need to flush this out quite a bit more in a

variety of issues. Privatization of siting I think is one issue we

need to talk about on a national basis; ability of input of local citizens. There are visual issues, of course. People want some aspect

of concern about fisheries issues that probably at least need to be

addressed.

Have you got any thought of how to put that in this legislation

specifically, or are we that far along yet?

Mr. STEVE. I am not sure we are quite that far along, but you

put your finger on things that I hope all come up within the process with the Minerals Management Service or whichever agency

ends up gaining authority over this area. I had described the situation where we are currently working with the Bureau of Land

26

Management and we are finding that to be a very good process.

And they are not giving us everything we want. We didn’t expect

that. But they are being very reasonable with us and they are

being sensitive to kind of learn our industry and learn our concerns. So I am hoping to see the same thing in this other agency.

I am confident that we will.

Mrs. CUBIN. Will the gentleman yield? I would like to follow that

because I agree those are very important issues. I would like to

have a follow-up question. Do you think that the legislation needs

to reflect dealing with those issues, or should those issues be dealt

with better by the MMS or by the agency that this legislation

would grant jurisdiction to?

Mr. STEVE. If I understand you, are you asking specifically about

the concern about the transitional issues for existing companies or

the other issues as well?

Mrs. CUBIN. No, the issues Mr. Inslee just discussed, which all

are very legitimate concerns. In your opinion, would it be better to

address those concerns in the legislation or to have those concerns

be dealt with by the MMS as they are now in the Outer Continental Shelf, and by the BLM as they are now on land?

Mr. STEVE. I think my gut reaction would be—I will see what the

poll of my folks—but my gut reaction is I think we are better off

going through the process with the Agency so we can kind of educate them as to what our concerns are, the same way we have been

doing with the Bureau of Land Management.

Mrs. CUBIN. Thank you, Mr. Inslee, for yielding. Please proceed.

Mr. INSLEE. By the way, this is kind of an editorial comment. I

just want to tell you how much I appreciate in general what your

industry is doing. And the reason is, in the last year—in fact we

were on one research project in this regard—I saw such a need for

development of this resource where we have this huge drought in

the West that is associated or could be associated with global

warming. We have tundra melting in the Arctic. We have research

showing that the glaciers are retreating in Alaska twice as fast as

anybody thought. The glaciers in Glacier National Park may be

gone in 100 to 150 years.

We have a real global warming issue, and I just want to thank

you for the leadership your industry is showing in finding one piece

of the puzzle in how to do that. I want to give you encouragement

in this regard, and that is why I think this is important legislation

to deal with.

Just one last question. As far as new breakthroughs in technology in your industry, what are we looking at? Incremental

changes? Is there another plateau to hit?

Mr. STEVE. There is definitely another plateau. What we have

seen is the cost of wind power come down by almost 90 percent

since the early 1980’s, to the point where at one point it was about

45 cents a unit of energy a kilowatt hour. Now we are in the range,

with the production tax credit of, say, 5 to 6 cents per kilowatt

hour, even less at the better wind sites. So what we are constantly

doing is we are constantly trying to bring down the cost of that

power even further, working with the Department of Energy to do

that. So that is why research and development dollars are really

important.

27

The one most important thing we are working on with the Department of Energy is this concept of a lower-speed wind turbine.

Sounds kind of wonky, but the idea is if you can put windmills or

wind turbines in areas that aren’t the highest wind speed areas,

what you can do is you can certainly get to other parts of the country and you can get closer to where the power is needed.

Right now, for example, the States of North Dakota and South

Dakota, tremendous potential to produce wind energy, tremendous

potential. North Dakota—the top 20 States for wind power potential, North Dakota is number 1, Texas is number 2, South Dakota

number 3. Why is it happening in Texas and not North Dakota and

South Dakota? Because of what President Bush did as Governor

with the renewable portfolio standard in the State that really busted open the market in Texas, plus the tax credit. North Dakota and

South Dakota don’t have the transmission capability to move the

power where it is, or where it can be generated, to where it is needed. If you can do a lower wind speed turbine, you can get into other

areas that are closer to what they call ′′load centers′′ or essentially

where the power is needed— .

Mr. INSLEE. Is it the transmission cost or just the lack of previously developed transmission capacity?

Mr. STEVE. Lack of transmission capacity. And that is a problem

not just for wind, but for all generation—coal, nuclear, demand

keeps growing.

Mr. INSLEE. Where are we in potential big wind development in

the Dakotas where the big new distribution system coupled with it?

Is anybody really thinking in those terms or not.

Mr. STEVE. There are a lot of folks thinking about it and starting

to work on it now, but this is not something that is going to have

a 6- or 12-month fix. This is going to be a multiyear fix because

it affects everybody. And talk about ′′not in my back yard,′′ people

like windmills a heck of a lot more then they like giant transmission lines. So there is other technology involved there. 3M is experimenting with—they have a product actually which is a highertech transmission line. Essentially you can get more water through

the hose so you can restring existing lines, but this is not in wide

use today. So it is a partial fix, but you still have to do more building of lines as well. It is a long-term problem but a lot of folks are

working on it.

Mr. INSLEE. Thank you very much. Thank you, Madam Chair.

Mrs. CUBIN. Thank you. Another thing I think is really essential

that we are going to need to do as leaders is figure out how we can

convince one another and our constituents to limit consumption as

well, because as we face all of these problems like, you know, we

are talking about not in my back yard, transmission lines, turbines

and whatnot, our consumption is excessive as well. So that is another part of the educational process we have to take.

Mr. Steve, thank you for your testimony and answers to your

questions. And thank you, Mr. Inslee, for being here. Before you arrived, I expressed my disappointment that no one from your side

was here. So I appreciate your participation.

So, since there is no more business in front of the Subcommittee,

the Subcommittee on Energy and Minerals is adjourned.

[Whereupon, at 3:10 p.m., the Subcommittee was adjourned.]

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[Additional statements submitted for the record follow:]

Statement of Douglas Yearley, Executive Director on Behalf of The Alliance

to Protect Nantucket Sound

Ms. CHAIRWOMAN. Thank you for the opportunity to submit these comments on H.R. 5156. I am

Douglas Yearley, Executive Director of the Alliance to Protect Nantucket Sound, a

recently-formed coalition with the objective of protecting the important environmental, scenic, cultural and economic values of Nantucket Sound. The Sound includes offshore areas owned both by the Commonwealth of Massachusetts and the

federal government. The Alliance is composed of a diverse mix of business, local government, fishing, environmental and other interests, with the common purpose of

ensuring that development does not occur in the Sound that would destroy the

unique values and natural beauty of this national treasure. Indeed, the Sound is

a designated ‘‘marine protected area’’ under Massachusetts law and the Executive

Order issued by President Clinton, and subsequently endorsed by President Bush.

The Cape Wind Project

While the interests of the Alliance are long-term and broad-based, an immediate

threat has galvanized our organization. Specifically, this is the Cape Wind Project,

which proposes to construct what would be the largest wind energy plant in the

world in the middle of the Nantucket Sound. It is important for this Committee to

have a sense of the scale of this project and how serious its impacts will be. Cape

Wind’s industrial facility would consume 28 square miles of the outer continental

shelf (OCS) in Nantucket Sound. The project would include 170 wind towers, each

of which would be 425 feet tall. We believe this project has significant potential to

cause serious damage to the most basic values of the Sound. This includes adverse

affects on endangered species, migrating birds, marine mammals, and commercially

valuable fish; creates threats to navigation and air traffic, including national security flights; threatens significant declines in property values, tourism, and tax revenue; and harms recreational activities and scenic values. All of these adverse impacts would be caused by a project for which there is no clear energy demand in

the region, and for which a variety of public subsides would be required.

While the Alliance, and the diverse interests and individuals who support it,

share the public policy goal of increasing alternative and renewable energy as a part

of our total energy supply, this general goal simply does not offset or justify the negative impacts of a project on this scale and in this location. Nor, as I shall explain,

does it in any way legitimize the rush to develop this site, without adequate consideration of other, more suitable locations, and in the absence of any federal law providing the authority even to build the project.

This proposed project intersects with H.R. 5156 in the following way. The Administration and the Chairwoman of this subcommittee have correctly recognized that

no legal authority exists to convey the federal property rights which are mandatory

to allow this project to be developed. Equally important is the complete lack of a

comprehensive federal program to articulate standards for decision making, to set

environmental rules, to impose rent, or even to designate a lead agency. In the

meantime, in addition to Cape Wind, other wind energy projects are being proposed

in this region. Thus, the need for Congressional guidance is clear.

Despite this absence of legal authority, Cape Wind is proceeding to move the

project forward with the assistance of one federal agency in particular, the Army

Corps of Engineers (COE). Cape Wind intends to build this huge energy project in

an offshore area owned by the federal government simply on the basis of two permits under Section 10 of the Rivers and Harbors Act, which has the important but

narrow role of permitting potential obstructions to navigation. One permit application is for a single scientific data gathering tower, and a second permit application,

believe it or not, is for the entire 170-tower wind energy project.

Remarkably, even with the admitted knowledge that no federal authority exists

to build the project on the federal OCS, and that a Section 10 permit conveys no

property rights whatsoever, the COE has moved expeditiously to process the permits, including undertaking the preparation of a major environmental impact statement under NEPA for the 170-tower project. The COE explanation, conveyed directly to me and other Alliance representatives is, to paraphrase - ‘‘We get a permit

application; we process it.’’ Such a single-minded approach by the COE ignores the

larger and more difficult issues that are presented by the lack of legal authority,

or the existence of any federal program, for such a huge energy project in our valuable offshore waters. While the COE has expressed its own doubts about processing

the permits (at the recent hearings of the U.S. Commission on Ocean Policy), and

29

makes clear that no property rights whatever are conveyed in a Section 10 permit,

it nonetheless overcame its institutional misgivings, and undertook a full EIS process for 170 wind towers, despite the fact that the federal government has no authority for this project.

The Need for a Comprehensive Program and a Moratorium

Those larger questions of law and policy have now been framed even more vividly

by the appearance of numerous additional wind energy projects that are proposed

for the OCS off the southwest coast of Nantucket Island. If the COE follows its narrow ‘‘receive a permit; process a permit’’ approach for one or more additional

projects, which cannot be built under present law, it will have contributed to the

creation of an ‘‘open to entry’’ approach to the use of federal offshore resources for

energy development. And it will have done so without adequate review, without

meaningful standards, and without revenue return to the federal government.

Such an applicant-driven program, called an ‘‘over-the-counter’’ program in some

states, puts the federal government, the adjacent state, and all affected interests,

including local and regional regulatory bodies already strapped for resources, in the

position of always responding to the initiative and pressures of a project sponsor,

one at a time. Such sponsors relentlessly press for quick decisions on a specific location of their choice which, as in the case of Nantucket Sound, may not be an appropriate place to develop such a project at all. This ‘‘open-to-entry’’ pressure is just

what is happening with Cape Wind. Such project-driven programs to commit public

land or other resources to private development may work for selected, unique, and

smaller projects, like a single offshore platform for a support function, or a right

of way for an underwater transmission line. Congress has recognized previously,

however, that such a ‘‘permit on demand’’ approach does not work for larger nationwide programs like geothermal or oil and gas, which require vast tracts, in different

regions, and which, because of the presence of rich resources in certain locations,

should involve competition for a site. Clearly, the permit by permit approach is the

wrong one for the large-scale wind energy projects which are proliferating. A comprehensive federal program is essential, rather than an open to entry land rush.

A comprehensive program for developing federal resources or for using federal offshore tracts is proactive, positive, and best protects the public interest. A good program should, among other purposes, encourage wise and needed energy development, guarantee a fair return for the taxpayers, set uniform standards for environmental protection, and provide extensive state, local and public participation in the

process. Moreover, because of the importance of these public policy objectives, there

is a real need to put a hold on all such development until a comprehensive program

is enacted. If this is not done, important resources, such as Nantucket Sound, could

be sacrificed.

We recognize and appreciate that H.R. 5156 addresses the reality that no authorization now exists under which any federal agency may grant and condition legal

rights to develop resources on the OCS, other than those already authorized under

the Outer Continental Shelf Lands Act (OCSLA). The new offshore uses which are

being proposed are currently without federal legal authorization, despite their extensive and significant impacts, and the value of the taxpayer owned resources they

will use. These unauthorized uses include not only the wind energy projects I described, but also the construction of platforms and transmission systems for liquid

natural gas (LNG) gasification projects, electric transmission lines, pipelines and cables, oil storage platforms, and other offshore industrial facilities. Without a doubt,

such intensive uses of the federal OCS call for a comprehensive and thoughtful program. Specifically, there should be a leasing program for certain uses, for which the

best general model available in our current system of laws is the OCSLA itself.

H.R. 5156 and the OCSLA Model

For these reasons, the Alliance applauds the intent of H.R. 5156 to provide much

needed authority for new energy-related uses of the federal OCS. The Alliance cannot, however, support passage of the bill unless it is substantially amended to provide for the sort of overall program and standards that are included in the OCSLA

and its legislative history. The OSCLA is a law that has evolved since 1953 to provide a balanced federal program intended to encourage the development of federal

oil and gas, and mineral resources on the OCS. Because of the OCSLA, this development has proceeded on terms that ensure the balanced protection of the public interest, affected local governments, and the significant participation of states, which,

after all, are the owners of offshore land up to three miles from shore. As introduced, H.R. 5156 amends only Section 8 (43 U.S.C. § 1337) of the Outer Continental

Shelf Lands Act. Beyond this, H.R. 5156 makes no reference to the OCSLA, almost

as if the application of the OCSLA principles is being avoided. To the contrary, H.R.

30

5156 would be a significantly more credible bill if it included many OCSLA provisions.

Respect for the role of states runs throughout OCSLA, and other laws regulating

the use of outer continental shelf, such as the Coastal Zone Management Act. Federal laws for offshore and marine resources reflect this respect by recognizing that

the three mile limit of state ownership must be regarded with flexibility so that

states, localities and federal agencies can work together to provide the best management of the resources.

While H.R. 5156 is well intended in its creation of authority for the Secretary of

Interior, the problem is that, because of the generality of the delegation of authority

in the bill as introduced, the Secretary is given too little guidance as to the details

of the program to be created. In addition, H.R. 5156 fails to give a proper role to

agencies with responsibility over marine resources, such as the National Oceanic

and Atmospheric Administration.

The following specific areas must be addressed if H.R. 5156 is to provide a credible foundation for new offshore energy development, as it appears intended to do.

Recommendations

Although this testimony does not include specific language for amendments to

H.R. 5156, the following points should be covered by amendments if the legislation

is to provide a level of authority, guidance and protection of the public interest,

similar to the OCSLA.

First, it is essential that any new authorization, such as H.R. 5156, that would

allow a broad range of new, energy uses on the OCS, is based, at least in large part,

on a programmatic approach relying on leases, rather than a permit-to-permit,

‘‘open-to-entry’’ approach to the commitment of federal property interests for project

development. Where 28 square miles, or more, of the OCS is committed to intensive

permanent energy development, the federal government should not be permitting

one project at a time. Rather, it must develop a serious and comprehensive program

that applies to all projects.

Descriptions of such a program are scattered throughout the OCSLA and other

federal laws, but the central description of the OCS program is in 43 U.S.C. § 1344.

Section 1344 directs the Secretary to prepare, periodically revise, and maintain a

leasing program for offshore oil and gas, and minerals that implements the policies

set out in the Act. The program is specified to be conducted in a manner that considers economic, social and environmental values of both renewable and non-renewable resources contained in the OCS, as well as the potential impact of oil and gas

exploration on other resource values including the marine, coastal and human environments. The program is based on a broad range of existing information regarding

developmental benefits and environmental risks among regions of the country, so

that the risks and benefits may be equitably shared. The program must also fully

consider other uses of the sea and seabed, including conservation, fisheries, and

navigation.

Such a programmatic approach can give full and fair attention to corporate project

sponsors by comprehensively studying various areas for the significance of their resources, including wind resources, and seeking nominations for those areas that are

most favored by industry. It also should allow for certain areas to be excluded,

where for a variety of reasons, development would not be appropriate. Any nominations can be balanced against other factors that would include competing resource

and economic values in the area, the nature of federal or state protection of the marine resources in the area, the opinions of the adjacent state and local governments,

and other factors. Such a process is intended ultimately to make available for development those areas which have high potential for energy production, but which

present few conflicts for enabling the development to occur. This is exactly the sort

of program that has evolved with respect to offshore oil and gas development. It is

also the sort of program that led to the decision not to lease and develop some areas

off of Alaska, Florida, California and New England, despite the industry’s belief,

that promising resources were there. It is essential that a similar program be instituted for the new offshore energy uses authorized by H.R. 5156.

Second, this program should not be vested exclusively in the Department of the

Interior. These projects will dramatically affect marine resources, and joint authority should be shared with the Department of Commerce through NOAA.

Third, such a program must have respect for, and provide for the substantive involvement of states, local governments and the public, in each area for which new

offshore energy development is proposed. Among other provisions, 43 U.S.C. § 1344

and § 1345 set out important standards directing that the federal program be fully

cooperative with adjacent states. These provisions include not only coastal zone

management planning, but also involve the states in the federal offshore developVerDate 11-MAY-2000 09:50 May 20, 2003 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6621 J:\DOCS\80970.TXT HRESOUR2 PsN: HRESOUR2
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ment planning process. They establish the right of states to submit recommendations to the Secretary regarding the size, timing or location of a proposed project

or lease sale. The Act also permits a state to recommend areas that should not be

eligible for leasing. In essence, much of the success of the offshore oil and gas leasing program is due to the fact that the consultative process eliminates areas where

state-federal conflict is likely to forestall development, even if leases are issued.

H.R. 5156, in contrast, provides only general direction for state consultation and

fails to detail a role for states, local governments or the public.

The legislation also must authorize an ongoing program of environmental studies

to identify areas where alternative energy resources, like wind, are greatest. The

studies must also assess the environmental effects of developing those resources.

Such a program, as directed in 43 U.S.C. § 1346, has been established and maintained for many years with respect to offshore oil and gas. The same type of program, specifically modified to address alternative energy development, could serve

as a basis for an alternative energy environmental studies program. The goal is a

successful long-term approach to alternative energy development, not a rush to get

the first project expedited on any terms.

Fourth, a fair return for taxpayers is addressed only in the most general terms

in H.R. 5156. The bill, as introduced, directs the Secretary only to establish ‘‘reasonable forms of annual or one-time payments for any easement or right-of-way granted.’’ It also authorizes negotiated arrangements with the party to whom the easement or right-of-way is granted. The one-time payment and negotiated arrangement

approach is typical of right-of-way and easement grants, for single facilities or for

very defined and limited land-uses. Such a one-time fee payment approach is, however, totally unsatisfactory for large projects that consume a great deal of land or

resources, and for which the taxpayers deserve a market value return and a marketplace approach. In contrast, under the OCSLA, federal leases are sold competitively

to the highest bidder, an approach which is made possible by the fact that leasing

of tracts occurs only after a plan has been developed that identifies high priority

areas in which more than one bidder will be interested. This is far preferable to a

‘‘first come, first served, let’s make a deal’’ approach. 43 U.S.C. § 1337. A fair return

for taxpayers can be accomplished for alternative energy development, but not

under the open-to-entry approach that H.R. 5156 presents. At the very minimum,

H.R. 5156, or any bill intending to provide authorization for new energy-related uses

of the OCS, should direct that competitive bidding be treated as a preferred approach to be used, unless there is justification not to do so. High resource value

areas, either for industrial wind projects or pipeline rights of way, should be competitive where possible. Otherwise, public resources will be negotiated away, and

sold for single payments at levels that do not return to the taxpayers the fair market value of the valuable resource rights that are conferred. The development of alternative or renewable energy resources is a good objective, but not at any price,

particularly considering the other subsidies that are provided.

Neither Cape Wind, nor other alternative energy proposals, are ‘‘public service

projects’’ undertaken by non-profit organizations. The project may provide cleaner

electric generation, but the projects are private, for-profit enterprises by corporations; they create other environmental impacts, and they are based on the use of

taxpayer-owned resources, just like oil and gas. This is precisely what is happening

now in Nantucket Sound and is another reason that an immediate moratorium must

be imposed on the permit speculators until authority and standards are established

by Congress.

Fifth, H.R. 5156 fails to provide for specific environmental standards. As the Cape

Wind Project demonstrates, these projects have the potential to be very damaging

to the environment. Any authorization for such a program must establish detailed

standards for environmental review, including prohibitions on locating any such

project in areas designated as sanctuaries or protected zones under state or federal

law.

Other issues that must be resolved in any bill establishing new authority for alternative energy uses for the OCS include the following:

• The authorization should contain provisions, such as those in 43 U.S.C. § 1347,

providing for safety and health regulations including the use of best available

and safest economically feasible technologies. No such provision exists in H.R.

5156, in spite of the potential for such problems in LNG operations, oil storage

and even wind energy facilities.

• The authorization should incorporate 43 U.S.C. § 1349, to provide rules for citizen suits challenging program decisions and dealing with significant jurisdictional issues. No such provision exists in H.R. 5156.

• The issue of separating leasing and development decisions, as OCSLA does with

respect to OCS oil and gas, should be fully considered and applied where approVerDate 11-MAY-2000 09:50 May 20, 2003 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6621 J:\DOCS\80970.TXT HRESOUR2 PsN: HRESOUR2
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priate. H.R. 5156 contains no such provisions, and in the limited hearings afforded to this legislation, there was no way in which this option could be explored. The point is that the separation of leasing and development into two

phases makes sense in certain situations, and it affords states an added opportunity to review the specific plans for development before it proceeds.

There are numerous other features of the OCSLA that would be desirable for inclusion in a bill authorizing alternative energy uses on the OCS. These features include the requirement of annual program reports, as well as regular reports on

human and budgetary resources needed to carry out a credible program that will

make a contribution to the nation’s energy supply, while protecting the environment

and other significant interests.

Perhaps no element of the OCSLA demonstrates the differences between the approach of H.R. 5156, and the approach taken by the Congress for the offshore oil

and gas program than does 43 U.S.C. § 1332. This section is an impressive declaration of policy by the Congress with regard to petroleum and mineral development

on the federal OCS, and confirms that it will occur only in balance with other significant interests, including environmental protection and state and local government involvement. It is unclear why H.R. 5156 did not incorporate such a declaration of policy or reference Section 1332 at all.

Comments on Other Testimony

In addition to the points made above supporting comprehensive legislation to authorize the new alternative energy uses proposed on the OCS, it is also necessary

that we comment on some elements of the testimony given on behalf of the American Wind Energy Association.

First, this testimony asks that any rules that may flow from passage of H.R. 5156

‘‘be sensitive’’ to the financial investments in potential offshore projects made prior

to enactment of the legislation. The Association is concerned, as it said, about

projects that have already begun being ‘‘disadvantaged by new rules and requirements’’ or ‘‘unnecessarily delayed’’ by whatever system Congress ultimately chooses

to put in place to manage these new uses of the outer continental shelf.

This position essentially stands reason on its head. It asks that the speculative

corporate developers who proceeded to invest in and force consideration of projects,

in a legal setting that clearly does not provide authority for such projects, should

actually be rewarded for the attempt. Just the opposite is called for; not only should

such ‘‘transitional relief’’ not be granted to those who were presumptuous enough

to assume that they could begin these developments without legal authorization, but

a moratorium should be placed on all federal agencies from processing such permits

to avoid creating even a suggestion of such grandfathered rights to proceed free of

the constraints of a new program.

Similarly, in a short section entitled ‘‘Interconnection,’’ the Association expresses

its concern that if a current or future project gains approval and begins construction, that there be an ‘‘orderly process’’ to ensure the project can connect to electric

substations and distribution lines on the mainland. While no one can oppose an ‘‘orderly process,’’ and we do not, our concern is that this is ‘‘code’’ for the preemption

of legitimate state and local rights with respect to rights-of-way across state offshore

lands or local planning, zoning and utility location requirements. This would

amount to an extraordinary breach of the federalism concepts so long championed

by this Committee.

Essentially, what the Association appears to have in mind here is a totally federalized program for alternative energy projects that preempts legitimate state and

local prerogatives. That kind of federal overreaching should not be tolerated by this

Congress. In essence, any bill that is passed to establish a new program for granting

and conditioning rights for alternative energy development on the OCS should be

fully applicable to all proposals, whether underway or not, and should be deeply respectful of the prerogatives of state and local governments, avoiding federal preemption in all cases. Those who invest prior to the existence of such authority should

do so at their own risk.

Conclusion

The Alliance to Protect Nantucket Sound recognizes, as do the sponsors of H.R.

5156, that no authority currently exists for the federal government to grant property

rights for the OCS to develop alternative energy, or for other energy activities,

which are not already authorized by the OCSLA. We have already learned from the

emerging wind energy project proposals that these developments can be of immense

scale and impact. Fully recognizing the general and long-term value of alternative

or renewable energy, offshore projects of this type must be undertaken. But they

will be most successful if done through a comprehensive program incorporating virVerDate 11-MAY-2000 09:50 May 20, 2003 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6621 J:\DOCS\80970.TXT HRESOUR2 PsN: HRESOUR2
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tually all of the elements that are already delineated in the OCSLA. This is the approach, not the ‘‘give me my project now,’’ approach, that will truly get renewable

energy institutionalized over the long-term.

If the motivation for introducing H.R. 5156 at this late point in the 107th Congress is simply to get the issue on the table and to pave the way in the next Congress for the comprehensive committee consideration which is necessary to enact

such authority, then we applaud the sponsors for their foresight. However, if the

intent is to ask this Congress to pass hastily a very general authorization that allows these new uses of the OCS to occur without any of the safeguards and process

that are applied to federal oil and gas leasing and development, we think every

coastal state, local government, business or interest group should be concerned. The

Alliance clearly opposes such an approach. All who care about the manner in which

the offshore areas of our country are developed should oppose this legislation until

it is amended to cover the points that are outlined in this testimony. The Alliance

will work constructively with the Congress to achieve legislation that provides for

the development of new offshore energy resources in balance with all of the other

factors which are involved. We trust that such a program, properly administered,

is more likely than not, to determine that a site such as Nantucket Sound should

never be chosen for a project like Cape Wind. The outcome on this authorization

raises issues which go well beyond one project and one location. Thank you again

for this opportunity to submit comments.

Statement of Dennis J. Duffy, Vice President, Regulatory Affairs, Cape

Wind Associates, LLC

1. Introduction of Cape Wind.

Cape Wind Associates is developing the nation’s first offshore wind farm, which

will be located in waters subject to Federal jurisdiction some five miles off the coast

of Massachusetts. It will be capable of generating 420 mw of clean and renewable

energy. The Cape Wind project has been under development at considerable effort

and expense, and the applicable permit application under existing Federal law was

filed with the Army Corps of Engineers (ACE) last fall. A protocol for coordinated

review of the Project by Federal and State agencies has been agreed upon and a

comprehensive joint review process is now well underway. The project has received

strong support from the region’s leading environmental and ratepayer advocates (including MASSPIRG, Greenpeace, Union of Concerned Scientists, Cape Clean Air,

the Massachusetts Energy Consumers Alliance and the Massachusetts Climate Action Network), as well as endorsements from the editorial pages of The Boston

Globe, The Boston Herald, and The Providence Journal. (More comprehensive

project information is available on our website at www.capewind.org.) As other commentators on H.R. 5156 have noted, offshore wind energy represents a tremendous

potential for enhancing the Nation’s supply of clean and renewable energy, and we

welcome any initiative to streamline and expedite the necessary approval process.

2. General Comments on H.R. 5156.

We very much appreciate the initiative of the Minerals Management Services in

sponsoring legislation with the stated purpose of ‘‘to simplify permitting for energy

production in an environmentally sensitive manner’’ consistent with the Secretary

of Interior’s goal of facilitating renewable energy projects. We think that MMS could

add meaningful expertise and experience to the current regulatory process, and applaud all efforts to expedite clean energy projects. As noted below, however, we do

have several particular concerns with the Bill and thus propose revisions that would

preclude any potential for inadvertently adverse effects upon ongoing offshore renewable projects.

3. The Current Process for Permitting Offshore Wind Projects.

As an initial matter, consideration of H.R. 5156 requires a clear understanding

of the current regulatory treatment of renewable energy projects on the outer continental shelf (OCS), a matter on which there is often some confusion. Under current

International and Federal law, any such project requires the affirmative prior authorization of the United States. Such authorization is given in the form of a permit

from the Army Corps of Engineers under Section 10 of Rivers and Harbors Act. The

ACE’s powers under Section 10 have been held to constitute the ‘‘affirmative authorization’’ of proposed structures pursuant to delegated Congressional authority. Pursuant to such provisions, ongoing OCS wind energy projects are subjected to comprehensive review under the regulations of the ACE and require the preparation of

a Federal Environmental Impact Statement pursuant to the NEPA. Indeed, the folVerDate 11-MAY-2000 09:50 May 20, 2003 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6621 J:\DOCS\80970.TXT HRESOUR2 PsN: HRESOUR2
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lowing provisions of the ACE’s regulations (33 CFR § 325.3(c)) confirm the comprehensive scope of the currently required permit proceedings:

The decision whether to issue a permit will be based on an evaluation of

the probable impact including cumulative impacts of the proposed activity

on the public interest. That decision will reflect the national concern for

both protection and utilization of important resources. The benefits which

reasonably may be expected to accrue from the proposal must be balanced

against its reasonably foreseeable detriments. All factors which may be relevant to the proposal will be considered including the cumulative effects

thereof; among those are conservation, economics, aesthetics, general environmental concerns, wetlands, historic properties, fish and wildlife values,

flood hazards, floodplain values, land use, navigation, shoreline erosion and

accretion, recreation, water supply and conservation, water quality, energy

needs, safety, food and fiber production, mineral needs, considerations of

property ownership and, in general, the needs and welfare of the people.

(Emphasis added.)

Id. The recently issued scoping order of the Massachusetts Secretary of Environmental Affairs confirms the comprehensive range of issues now under review in

Cape Wind’s ongoing permit proceeding, and such order concludes that ‘‘Cape Wind

holds out the prospect of making Massachusetts a worldwide leader in renewable

energy production’’ and that ‘‘the project represents the hope for a cleaner and more

sustainable energy supply through application of innovative and simple technology.

There is, however, no express provision under current law for the payment of royalties or other fees to the Federal government in connection with non-extractive renewable energy projects on the OCS. In contrast, in the case of the extraction of

undersea oil, gas and minerals, the Outer Continental Shelf Lands Act (OCSLA)

provides for royalty payments to the Federal government pursuant to ‘‘mineral

leases’’ for the extraction, purchase and sale of submerged deposits. In this regard,

current law treats offshore wind energy projects in a manner more comparable to

the treatment of offshore thermal energy projects. In recognition of the special policy

benefits and challenges of developing new renewable energy sources, the Ocean

Thermal Energy Conversion Act (42 USC 9101) provides for the Federal permitting

of thermal energy projects on the OCS, but does not require any lease payments or

royalties to the Federal government. To the contrary, such act makes available certain financial assistance for the construction and operation of ocean thermal energy

facilities.

4. This Bill Should Include Transitional Recognition of Pre–Enactment Offshore Investment.

While we support the initiative to streamline the current process, we are concerned that, in its current form, the proposed amendment to the OCSLA could introduce uncertainty and inadvertently delay the development and financing of those

ongoing renewable energy projects that have already made major investments and

that have permit applications pending in compliance with current law. Accordingly,

we believe that the legislation should include some provision for the recognition and

transitional treatment of such ongoing projects so as to avoid the possibility of such

an unintended adverse result. Federal and international law have in the past afforded recognition and transitional treatment of investment in offshore developments undertaken prior to the effective date of new regulatory and legislative regimes. For example, when the United Nations Law of the Sea Conference adopted

new protocols for minerals mining operations beneath the high seas, it included specific transitional protections for ‘‘preparatory investment in pioneer activities,’’ i.e.,

development activities undertaken prior to the effectiveness of the new protocols.

See, UNCLOS, Art. 308, Sec. 5. Further, when Congress adopted corresponding provisions in the Deep Seabed Hard Mineral Resources Act (P.L. 96–283, 30 U.S.C.

1401, et seq., the ‘‘Act’’), it similarly included specific recognition of offshore developments and investments that had been undertaken by United States citizens, and articulated the following Federal policy objective of assuring the ‘‘security of tenure’’

of such pre-enactment activities:

It is the intent of Congress [that]...any international agreement to which

the United States becomes a party should, in addition to promoting other

national oceans objectives—,...provide security of tenure by recognizing the

rights of United States citizens who have undertaken exploration or commercial recovery under title 1 [30 U.S.C. §§ 1411, et seq.] before such agreement enters into force with respect to the United States, to continue their

operations under terms, conditions, and restrictions which do not impose

significant new economic burdens upon such citizens with respect to such

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operations with the effect of preventing the continuation of such operations

on a viable economic basis...

30 U.S.C. 1441 (emphasis added).

Pursuant to such statutory provisions, the National Oceanic and Atmospheric Administration (‘‘NOAA’’) subsequently adopted regulations that provide transitional

protections and ‘‘priorities of right’’ for offshore projects commenced before the effective date of the Act. See, 15 CFR Part 970, Subpart C (‘‘Procedures for Applications

Based on Exploration Commenced Before June 28, 1980’’). Such regulations established a procedure whereby a United States citizen who had engaged in substantial

offshore mineral development before the effective date of the Act ‘‘qualifies as a preenactment explorer’’ and is thereby allowed to continue to engage in such exploration, with procedures ‘‘to receive a pre-enactment explorer priority of right’’ for the

issuance of a mining license pursuant to the Act. See, Id. at § 970.301. Such regulations also provided a specific window within which pre-enactment developers are afforded a ‘‘priority of right’’ to the area of such development, as follows:

Effect on Priority for New Entrants. (1) A pre-enactment explorer is entitled to a priority of right over a new entrant for any area in which the preenactment explorer has engaged in exploration prior to June 28, 1980 if,

with respect to that area, the pre-enactment explorer files an application

in accordance with this part on or after January 25, 1982 and on or before

the closing date for pre-enactment explorer applications established under

§ 970.301(b).

15 CFR § 907.302(m). The rationale for such transitional provisions applies with

equal force to any proposed amendment of the OCSLA under H.R. 5156 respecting

renewable energy projects. The addition of comparable transitional provisions to

H.R. 5156 would also avoid potential delays and financial uncertainties and thus be

consistent with Federal policy as reflected in Executive Order 13212, ‘‘Actions to Expedite Energy–Related Projects,’’ as well as the general charge of the White House

Task Force for Energy Project Streamlining.

5. If New Fees and Charges for Wind Energy Projects are Assessed Pursuant to H.R.

5156, They Should Not be so Large as to Counteract Current Economic Incentives for Renewable Energy Projects.

We also think it very important that, if any new fees for wind energy projects are

to be payable to the government under H.R. 5156, they should not be set so high

as to discourage investment in this new and developing industry, which still has levels of introductory risk and uncertainty that do not exist in the well-established oil

and gas industries. It would also seem reasonable to assure that any new fees do

not unduly offset the economic incentives provided by the production tax credit and

other current programs, and do not put offshore wind at a disadvantage to other

generating technologies. As noted above the Ocean Thermal Energy Conversion Act

provides for the Federal permitting and financial assistance of offshore facilities

without the requirement of royalties or fees.

6. Conclusion.

For the foregoing reasons, we applaud initiatives to expedite and facilitate offshore renewable energy in areas of the OCS that are subject to the jurisdictions of

the United States. It is important, however, that any proposed legislation contain

provisions for the recognition and transitional treatment of pre-enactment investments undertaken pursuant to current law, with particular emphasis on avoiding

any cloud of uncertainty that could impede project financing. Finally, if new fees are

to be assessed to ongoing OCS renewable energy projects pursuant to some legislative change, it is critical that the amount be (i) determinable as soon as possible

and (ii) not so large as to offset the currently effective economic incentives for the

developing offshore renewable energy industry.

Thank you for your consideration and please feel free to call if you should have

any questions or comments.

[An Email communication from Captain Wayne Genther follows:]

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