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34-981 PDF 2007

RENEWABLE ENERGY OPPORTUNITIES AND ISSUES ON THE 

OUTER CONTINENTAL SHELF

JOINT OVERSIGHT HEARING

BEFORE THE

SUBCOMMITTEE ON FISHERIES, WILDLIFE 

AND OCEANS

JOINT WITH THE

SUBCOMMITTEE ON ENERGY AND 

MINERAL RESOURCES

OF THE

COMMITTEE ON NATURAL RESOURCES 

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

Tuesday, April 24, 2007

Serial No. 110-19

Printed for the use of the Committee on Natural Resources

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html 

or 

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

(II)

COMMITTEE ON NATURAL RESOURCES 

NICK J. RAHALL II, West Virginia, Chairman 

DON YOUNG, Alaska, Ranking Republican Member

Dale E. Kildee, Michigan 

Eni F.H. Faleomavaega, American Samoa 

Neil Abercrombie, Hawaii 

Solomon P. Ortiz, Texas 

Frank Pallone, Jr., New Jersey 

Donna M. Christensen, Virgin Islands 

Grace F. Napolitano, California 

Rush D. Holt, New Jersey 

Rau ́l M. Grijalva, Arizona 

Madeleine Z. Bordallo, Guam 

Jim Costa, California 

Dan Boren, Oklahoma 

John P. Sarbanes, Maryland 

George Miller, California 

Edward J. Markey, Massachusetts 

Peter A. DeFazio, Oregon 

Maurice D. Hinchey, New York 

Patrick J. Kennedy, Rhode Island 

Ron Kind, Wisconsin 

Lois Capps, California 

Jay Inslee, Washington 

Mark Udall, Colorado 

Joe Baca, California 

Hilda L. Solis, California 

Stephanie Herseth Sandlin, South Dakota 

Heath Shuler, North Carolina 

Jim Saxton, New Jersey 

Elton Gallegly, California 

John J. Duncan, Jr., Tennessee 

Wayne T. Gilchrest, Maryland 

Ken Calvert, California 

Chris Cannon, Utah 

Thomas G. Tancredo, Colorado 

Jeff Flake, Arizona 

Rick Renzi, Arizona 

Stevan Pearce, New Mexico 

Henry E. Brown, Jr., South Carolina 

Luis G. Fortun ̃ o, Puerto Rico 

Cathy McMorris Rodgers, Washington 

Bobby Jindal, Louisiana 

Louie Gohmert, Texas 

Tom Cole, Oklahoma 

Rob Bishop, Utah 

Bill Shuster, Pennsylvania 

Dean Heller, Nevada 

Bill Sali, Idaho 

Doug Lamborn, Colorado

James H. Zoia, Chief of Staff 

Jeffrey P. Petrich, Chief Counsel 

Lloyd Jones, Republican Staff Director 

Lisa Pittman, Republican Chief Counsel 

(III)

SUBCOMMITTEE ON FISHERIES, WILDLIFE AND OCEANS 

MADELEINE Z. BORDALLO, Guam, Chairwoman 

HENRY E. BROWN, JR., South Carolina, Ranking Republican Member

Dale E. Kildee, Michigan 

Eni F.H. Faleomavaega, American Samoa 

Neil Abercrombie, Hawaii 

Solomon P. Ortiz, Texas 

Frank Pallone, Jr., New Jersey 

Patrick J. Kennedy, Rhode Island 

Ron Kind, Wisconsin 

Lois Capps, California 

Nick J. Rahall II, West Virginia, ex officio 

Jim Saxton, New Jersey 

Wayne T. Gilchrest, Maryland 

Cathy McMorris Rodgers, Washington 

Bobby Jindal, Louisiana 

Tom Cole, Oklahoma 

Bill Sali, Idaho 

Don Young, Alaska, ex officio 

SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES 

JIM COSTA, California, Chairman 

STEVAN PEARCE, New Mexico, Ranking Republican Member

Eni F.H. Faleomavaega, American Samoa 

Solomon P. Ortiz, Texas 

Rush D. Holt, New Jersey 

Dan Boren, Oklahoma 

Maurice D. Hinchey, New York 

Patrick J. Kennedy, Rhode Island 

Hilda L. Solis, California 

Nick J. Rahall II, West Virginia, ex officio 

Bobby Jindal, Louisiana 

Louie Gohmert, Texas 

Bill Shuster, Pennsylvania 

Dean Heller, Nevada 

Bill Sali, Idaho 

Don Young, Alaska ex officio 

(V)

CONTENTS 

Page

Hearing held on Tuesday, April 24, 2007 .............................................................. 1

Statement of Members: 

Bordallo, Hon. Madeleine Z., a Delegate in Congress from Guam ............... 3

Brown, Hon. Henry E., Jr., a Representative in Congress from the State 

of South Carolina .......................................................................................... 4 

Costa, Hon. Jim, a Representative in Congress from the State of 

California ....................................................................................................... 2

Pallone, Hon. Frank, Jr., a Representative in Congress from the State 

of New Jersey ................................................................................................ 5 

Pearce, Hon. Stevan, a Representative in Congress from the State of 

New Mexico ................................................................................................... 3

Statement of Witnesses: 

Bak, Jason, Chief Executive Officer, Finavera Renewables ......................... 54

Prepared statement of ............................................................................... 56

Response to questions submitted for the record ..................................... 65

Diers, Ted, Program Manager, New Hampshire Coastal Program, New 

Hampshire Department of Environmental Services .................................. 28

Prepared statement of ............................................................................... 29

Response to questions submitted for the record ..................................... 34

Grader, W.F. ‘‘Zeke’’, Jr., Executive Director, Pacific Coast Federation 

of Fishermen’s Associations ......................................................................... 68

Prepared statement of ............................................................................... 69

Response to questions submitted for the record ..................................... 72

Hagerman, George M., Jr., Senior Research Associate, Virginia Tech 

Advanced Research Institute ....................................................................... 81

Prepared statement of ............................................................................... 83

Hoagland, Porter, Ph.D., Marine Policy Center, Woods Hole 

Oceanographic Institution ............................................................................ 86

Prepared statement of ............................................................................... 88

Keeney, Timothy R.E., Deputy Assistant Secretary for Oceans and 

Atmosphere, National Oceanic and Atmospheric Administration, U.S. 

Department of Commerce ............................................................................. 23

Prepared statement of ............................................................................... 25

Miles, Ann F., Director, Division of Hydropower Licensing, Federal 

Energy Regulatory Commission ................................................................... 16

Prepared statement of ............................................................................... 18

Olsen, Michael D., Deputy Assistant Secretary for Land and Minerals 

Management, U.S. Department of the Interior .......................................... 6

Prepared statement of ............................................................................... 8

Response to questions submitted for the record ..................................... 12

O’Neill, Sean, President, Ocean Renewable Energy Coalition ..................... 48

Prepared statement of ............................................................................... 50

Rader, Douglas N., Ph.D., Principal Scientist for Oceans and Estuaries, 

Environmental Defense ................................................................................ 76

Prepared statement of ............................................................................... 77

Additional materials supplied: 

Duff, John, J.D., LL.M., Assistant Professor, University of Massachusetts/

Boston, Letter and article submitted for the record .................................. 101

(1)

OVERSIGHT HEARING ON RENEWABLE 

ENERGY OPPORTUNITIES AND ISSUES ON 

THE OUTER CONTINENTAL SHELF 

Tuesday, April 24, 2007

U.S. House of Representatives 

Subcommittee on Fisheries, Wildlife and Oceans, joint with the 

Subcommittee on Energy and Mineral Resources 

Committee on Natural Resources 

Washington, D.C. 

The Subcommittees met, pursuant to call, at 3:18 p.m. in Room 

1324, Longworth House Office Building, Hon. Jim Costa, [Chairman of the Subcommittee on Energy and Mineral Resources] presiding. 

Present: Representatives Costa, Pearce, Brown and McMorris 

Rodgers, Bordallo, Pallone and Capps. 

Mr. COSTA. All right. The Subcommittee on Energy and Mineral 

Resources will now come to order. This is a joint hearing that we 

are now holding with the House Subcommittee on Fisheries, Wildlife and Oceans. 

We are very pleased that our colleagues from the Subcommittee 

on Fisheries, Wildlife and Oceans are here this afternoon and that 

we could be doing this together, Chairwoman Bordallo from the 

wonderful area of Guam, and certainly we have our other Members 

from both Subcommittees here. 

The efforts that we will look at today are on renewable energy 

opportunities and the issues surrounding those renewable energy 

opportunities on the Outer Continental Shelf. 

We are looking forward to hearing from our panels and to getting 

their perspective on the role that renewable energy opportunities 

may play and the issues that we may have to contend with as it 

relates to the Outer Continental Shelf. 

I want to apologize to the witnesses and those in the audience 

for our delay. We don’t have a schedule for when votes are cast on 

the House Floor, and unfortunately those votes were called and we 

had to make them and it just happened to coincide with a fire drill. 

I want you all to understand. We had nothing to do with the fire 

drill. We do have some fires around this area. This isn’t one we 

started. Anyway, as a result of all of that we are delayed about an 

hour and 15 minutes. 

It is the Chair’s intention to try to be focused. Customarily what 

we like to do is have each panel make their presentation. You are 

2

allotted five minutes. We go through the panel, and then we provide opportunities for questions among the Majority and Minority 

Members of the two Subcommittees. 

There will be an opportunity for me and my colleagues to make 

opening statements—the Subcommittee Chair on Fisheries, Wildlife and Oceans, as well as the Ranking Members on both Subcommittees. With that, we will get started. 

STATEMENT OF THE HONORABLE JIM COSTA, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. COSTA. As Sergeant Friday once said, and now I am dating 

myself, just the facts, ma’am. The Outer Continental Shelf, I think 

as most of us are aware, consists of submerged lands, subsoil and 

seabed that are seaward of our coastal lands throughout our coastal areas in the United States. 

The Outer Continental Shelf is otherwise referred to as the 

OCS—but, as some of you know, I don’t like using these acronyms. 

The Outer Continental Shelf begins roughly at three nautical miles 

from the shore and extends 200 nautical miles or more offshore 

from the U.S. coast. 

The Outer Continental Shelf, as we know, is important for its 

nonrenewable and renewable energy resources and for its important environmental and social values that involve fisheries, transportation and recreation, but not limited to these. 

About a quarter of the oil and gas production in the United 

States comes from offshore areas. The Minerals Management Service within the Department of Interior manages the energy and mineral resources on the Outer Continental Shelf, approximately some 

1.76 billion acres. There are over 8,500 oil and gas leases on 47 

million acres, and there are 4,000 production platforms that provide an important needed source of energy. 

The Subcommittee on Energy and Minerals and the Subcommittee on Fisheries, Wildlife and Oceans are conducting this 

hearing because we have shared interests. We have shared interests in renewable energy and how we do that in a way that is efficient, environmentally responsible and how we coordinate the various affected Federal agencies that have a role in that area, have 

a role as it relates to the issue of greenhouse gases, have a role as 

it relates to new technologies, as a role in terms of balancing the 

sources for domestic energy. 

The jurisdiction under which these two Subcommittees operate 

involve Section 388 of the Energy Policy Act of 2005. That Act provided an initiative to facilitate increased renewable production on 

the Outer Continental Shelf in several different ways that I believe 

most of you are familiar with. 

In addition to that, we will be talking this afternoon about wind, 

waves and ocean currents, among other potential sources of alternative energy, that may provide additional resources on our Outer 

Continental Shelf. 

There is estimated to be much wind potential. I am not talking 

about the wind here in Washington, but an estimated 900,000 

megawatts on our coasts. Currently there is U.S. electrical capacity 

that has been cited both by a combination of states as they do the 

due diligence and research. We also have technology in hand to 

3

capture approximately 10 percent of that potential energy in what 

we refer to as relatively shallow areas of the coastal plains. 

Not only do we have data showing offshore wind projects in Europe that currently provide 600 to 800 megawatts of power, but 

there are lots of larger scale projects that are proposed in the 

United States. As we know, none yet have been installed. 

Finally, we will have testimony as it relates to the potential technology of ocean and wave current energy technologies. These are 

still in the prototype developmental stages, but there is belief that 

they offer tremendous potential. 

One estimate suggests that harnessing one-fifth of the annual 

wave energy off the nation’s coast could—could if the technology 

proves feasible—provide up to maybe 50 percent of our energy. 

That would be comparable to all the hydropower of the dams in the 

United States. 

A lot of potential, a lot of focus, and that is what these two Subcommittees are attempting to do. I will now yield to my colleague, 

who is the Chairwoman of the Subcommittee on Fisheries, Wildlife 

and Oceans, the gentlewoman from Guam, Ms. Bordallo. 

STATEMENT OF THE HONORABLE MADELEINE Z. BORDALLO, 

A DELEGATE IN CONGRESS FROM GUAM 

Ms. BORDALLO. Thank you very much, Chairman Costa. It is a 

pleasure to hold this joint hearing between our committees, the 

Subcommittee on Fisheries, Wildlife and Oceans and the Subcommittee on Energy and Mineral Resources. 

Last week the Subcommittee on Fisheries, Wildlife and Oceans 

held a hearing on the impacts that climate change is having on our 

oceans and wildlife. We learned we can expect significant coral loss 

and more species extinctions unless we make significant changes. 

One partial response requires us to use cleaner fuels, including 

renewable energy technologies, capturing the energy from wind, 

waves and currents on our oceans. This is truly an exciting new 

field, especially in this country. 

There are no projects operating in Federal waters today. We have 

the opportunity to ensure that projects are planned appropriately 

and in a manner that promotes a sustainable use of our oceans. 

We also have a difficult challenge. We need to develop a regulatory climate that is workable for the industry. We must also address the impacts renewable energy products can have on marine 

mammals, endangered species, fisheries and other ocean resources. 

So it is my hope today that this hearing will shed light on what 

the Congress can do to encourage renewable energy projects that 

address environmental impacts in the exclusive economic zone. I do 

look forward to hearing the testimony from our many witnesses 

and appreciate their participation in today’s hearing. 

Mr. COSTA. Thank you for your statement. 

I will now defer to the Ranking Member, the gentleman from 

New Mexico, Mr. Pearce. 

STATEMENT OF THE HONORABLE STEVAN PEARCE, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF 

NEW MEXICO 

Mr. PEARCE. Thank you, Mr. Chairman. 

4

In one of our recent Energy Policy Act of 2005 hearings, we 

learned that increased natural gas prices have cost the American 

consumer $65 billion more per year for electricity than they paid 

in 2000. 

We also learned that because of higher natural gas prices we lost 

three million manufacturing jobs—that is 18 percent of our manufacturing jobs—since 2000. These are jobs that have left for China 

and India, and they are not coming back. 

Unfortunately, with our people and businesses starved for more 

natural gas, less than three percent of our Outer Continental Shelf 

is being leased for oil and gas production. This is true access 

denied to energy. 

Today’s hearing focuses on renewable energy opportunities on 

the Outer Continental Shelf. I welcome the hearing, and I welcome 

the opportunity to have renewable and alternative sources of 

energy play a larger role in our nation’s economy as I think our nation’s oceans are filled with untapped renewable energy resources. 

I hope that the purpose of this hearing is to make sure that access to these renewable energy sources is not also denied as we 

need a diverse supply of energy to keep our economy strong, keep 

our people safe and keep our way of life. 

Some of the technologies we will hear about today, like tidal 

energy and wave energy, are in the early stages of development 

and I suspect years from true large-scale commercialization. In contrast, other technologies like wind energy are known and nearly 

commercial in other areas of the world. 

The mission is for OCS renewable energy projects to become a reality in this country. The Federal government should not and cannot be the hang up. Rather, it should be the facilitator and the 

assistor. 

As lead agency pursuant to the Energy Policy Act of 2005, I expect the Department of Interior to work diligently to lease and regulate these projects in an environmentally sound way. I also expect 

the Department to work collaboratively and effectively with its sister agency, the Federal Energy Regulatory Commission, to regulate 

these projects. 

The policy objectives of these two agencies is to regulate and 

oversee energy industries in the economic, environmental and safety interests of the American public. Their mission is to make 

energy projects happen, and I am looking forward to seeing 

progress on OCS renewable energy projects. 

Again, I look forward to the testimony and discussion. I just ask 

that all things be put in perspective. Welcome to you all. Thank 

you very much for being here, and I thank you again, Mr. Chairman. 

Mr. COSTA. Thank you very much, Mr. Pearce. 

The Ranking Member from the Subcommittee on Fisheries, Wildlife and Oceans is the gentleman from South Carolina, Mr. Brown. 

STATEMENT OF THE HONORABLE HENRY E. BROWN, JR., A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF 

SOUTH CAROLINA 

Mr. BROWN. Thank you, Mr. Chairman, and good afternoon. 

5

As most of you know, I represent over 75 percent of the coastline 

of South Carolina. My district includes places such as Myrtle 

Beach, Charleston, Kiawah Island, and the tourist industry is a 

major part of my district’s economy, as well as a major part of the 

economy of the State of South Carolina. 

A major part of the tourism industry in South Carolina involves 

the recreational fishing and boating communities. I am very concerned about how underwater turbines, above water windmills and 

wave technology will affect the recreational fishing in border communities, as well as the commercial fishing industry. 

As you can imagine, offshore drilling is a very controversial subject in coastal South Carolina. I would never do anything that I 

thought would harm the tourism industry or my district or the 

beauty of coastal Carolina. 

With that being said, I am supportive of drilling off the Continental Shelf because I believe that it is the right thing to do. I believe that offshore drilling is an important part of the solution to 

fix the energy crisis that we are all facing today in America. 

It is also an important step to stop America’s dependency on foreign sources of energy. Becoming more energy self-sufficient is not 

only an economic issue, but also an issue of national security. We 

must examine measures that will wean this country from its dependency on foreign energy and establish a new level of independence by utilizing natural resources that we have here in America. 

In the last Congress I was fortunate to attend a Resource Committee field hearing on renewable ocean energy in Congresswoman 

Thelma Drake’s congressional district in Norfolk, Virginia. I was 

impressed with the potential of ocean wave and tide energy, but I 

am concerned at the cost and the practicality of using exclusive renewable ocean energy without incorporating natural gas development off the Continental Shelf into an overall national strategy for 

the future of energy development for our nation. 

I strongly believe the research and development of renewable 

energy is an important tool for our nation’s future energy needs. 

The problem is that currently the United States imports around 62 

percent of its energy from foreign and sometimes unfriendly 

sources. 

We must develop an energy plan similar to other nations such 

as Canada and Norway that utilizes all of their nation’s energy resources, including natural gas, as well as renewable sources of energy. 

I thank you all for being here today, and I look forward to hearing the testimony. 

Mr. COSTA. Thank you very much, Mr. Brown, for your comments. I believe we need to explore all of our options and alternatives. I think that is correct. 

Mr. Pallone, the gentleman from New Jersey, has a statement he 

would like to make. It is good to see you. 

STATEMENT OF THE HONORABLE FRANK PALLONE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF 

NEW JERSEY 

Mr. PALLONE. Thank you, and I apologize for going out of order, 

but because of the lateness and I have another meeting I have to 

6

go to, I was just going to ask you if I could take a minute. I thank 

both of you. 

I represent a portion of the New Jersey coastline that is heavily 

dependent on clean beaches and oceans to support a tourism economy that generates about $31 billion in spending and provides 

more than 836,000 jobs every year in the state. 

Coastal tourism is New Jersey’s second largest industry and is 

closely linked to the state of our marine and coastal environment. 

This is an environment that could be seriously impacted not only 

by industrial energy generation facilities of any type, but also by 

the continued effects of global warming. 

Given these effects, I have some concern about the regulatory 

framework being developed by MMS for nonextractive energy uses 

of the Outer Continental Shelf and for the lack of a clearly defined 

scope of use. While it is in everyone’s interest to promote clean 

energy solutions, siting regulations should be as protective as possible of the marine and coastal environment and recognize the potential economic impacts of industrial accidents or other pollution. 

In that light I have some questions that—I hope I will be here—

I can ask of the panel later, but just in the event I don’t have that 

opportunity, Mr. Chairman and Madam Chairwoman, I appreciate 

the opportunity to make a statement now. Thank you. 

Mr. COSTA. You are welcome, and we will be happy to allow you 

the opportunity to submit those questions for the record so that you 

can get responses back to them. 

We know about the New Jersey shores, and we appreciate your 

participation. You are always welcome. 

Let us begin now with our panel, our first panel. We have a 

group of folks that are going to be talking about their perspective. 

We will begin first with Mike Olsen. He is the Deputy Assistant 

Secretary for Land and Minerals Management within the Department. Mr. Olsen, it is good to have you here. 

STATEMENT OF THE HONORABLE MICHAEL D. OLSEN, DEPUTY ASSISTANT SECRETARY FOR LAND AND MINERALS 

MANAGEMENT, U.S. DEPARTMENT OF THE INTERIOR 

Mr. OLSEN. Thank you. It is good to be here, Mr. Chairman, 

Madam Chairwoman, Members of the Subcommittees. Thank you 

for this opportunity to appear here today to discuss with you the 

Minerals Management Service’s alternative energy and alternative 

use program. 

The Department of the Interior appreciates the leadership that 

the Committee on Natural Resources has demonstrated in looking 

to the Federal Outer Continental Shelf as a source of alternative 

energy and in providing the legislative means to allow the Nation 

to tap into that energy. 

The Administration believes that renewable and other alternative sources are integral components of our nation’s energy 

future. While the quantity of domestic energy produced from renewable resources is small in comparison to conventional resources, 

the growing cost of conventional energy resources and the need to 

diversify our energy portfolio has spurred an increased interest and 

growth in renewable energy development. 

7

The Energy Information Administration estimates that in 2030 

renewable energy will account for over 10 percent of our domestic 

energy production and about 7 percent of our consumption. The Department of the Interior, as the manager of over one-fifth of the nation’s land, has a significant role in play in this projected increase 

in domestic renewable energy production. 

The Administration first proposed legislation to establish an OCS 

alternative energy program in June of 2002, and the legislation 

was first introduced as H.R. 5156 in July of 2002. The bill represented 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. 

The legislation reflected the best efforts of the Administration to 

address the array of issues associated with permitting various OCS 

energy-related projects that were not covered under existing statutes. Those projects included wind, wave, ocean current and solar 

energy. 

After careful analysis of the mechanisms that were currently in 

place to handle requests for innovative, nontraditional, energy-related projects on the Federal offshore lands, it became clear that 

with limited exceptions there existed no clear authority within the 

Federal government to comprehensively review, permit and provide 

appropriate regulatory oversight for such projects. 

Since the proposed legislation pertained to the permitting and 

oversight of energy uses on offshore Federal lands, it was only logical that any new legislative authority that was enacted remain 

with the department already entrusted with the overall responsibility. 

Section 388 of the Energy Policy Act of 2005 amended the OCS 

Lands Act and granted the Department the discretionary authority 

to grant leases, easements or rights-of-way for activities on the 

OCS that produce or support production, transportation or transmission of energy from sources other than oil and gas. 

It is important to note that while the Department is a lead agency for this program, MMS continues to work with the sister agencies to ensure that the unique roles they each have are addressed 

in order to ensure that the Federal government’s myriad interests 

in such projects are fully considered and that the nation’s economic, environmental and land use interests are adequately protected. 

MMS is working diligently to develop a regulatory program to 

authorize offshore alternative energy proposals. The renewal 

energy and alternative use draft programmatic environmental impact statement developed by MMS is currently open for public comment. 

This document is a high level analysis of the potential impacts 

of the activities that could result in establishment of an OCS alternative energy and alternate use program and regulations under 

MMS’ new authority from initial site characterization through decommissioning. 

The EIS will form the foundation for the new alternative energy 

program and for future applications. The final programmatic EIS 

is on schedule for publication in late summer of 2007. MMS is also 

8

developing regulations to implement the new EPAct or Environmental Policy Act authority and expects to publish a proposed rule 

in late summer of 2007 and a final rule in early 2008. 

Producing energy from renewable and other alternative domestic 

resources is a critical component of the nation’s energy portfolio. 

Lands managed by the Department have a major role to play in the 

diversification of the nation’s energy sources. The Department 

stands ready to respond to the ever increasing need for energy development from the resources we manage on behalf of the nation. 

Thank you for the opportunity to highlight a few of the steps 

MMS has taken to encourage the development of renewable and 

other alternative energy resources on the OCS public lands. 

This concludes my testimony, and I would be happy to answer 

any of your questions. 

[The prepared statement of Mr. Olsen follows:]

Statement of Michael D. Olsen, Deputy Assistant Secretary for Land and 

Minerals Management, U.S. Department of the Interior 

Mr. Chairman and Members of the Subcommittees, thank you for the opportunity 

to appear here today to discuss with you the Minerals Management Service’s (MMS) 

alternative energy and alternate use program. 

The Department of the Interior appreciates the leadership that the Committee on 

Natural Resources has demonstrated in looking to the Federal Outer Continental 

Shelf (OCS) as a source of alternative energy and in providing the legislative means 

to allow the Nation to tap into that energy. The Administration first proposed legislation to establish an OCS alternative energy program in June 2002, and the legislation was first introduced as H.R. 5156 in July 2002. The Administration supported that bill and worked diligently with the Committee and others to bring the 

proposed legislation to fruition as part of the Energy Policy Act of 2005 (EPAct). 

Energy is vital to expanding our economy and enhancing Americans’ quality of 

life. However, the Administration continues to be concerned with the imbalance that 

exists between our energy consumption and domestic energy production, and has 

been working to find ways to narrow the gap between the amount of energy used 

and the amount domestically produced. In his State of the Union Message on 

January 23, 2007, President Bush asked Congress and America’s scientists, farmers, industry leaders, and entrepreneurs to join him in pursuing the goal of reducing 

U.S. gasoline usage by 20 percent in the next ten years—Twenty in Ten. One key 

component of the strategy to meet this goal is to increase the supply of renewable 

and alternative fuels. There is no single solution, but the Administration believes 

that renewable and other alternative sources are integral components of our Nation’s energy future. 

While the quantity of domestic energy produced from renewable resources is small 

in comparison to conventional resources, the growing cost of conventional energy resources and the need to diversify our Nation’s energy portfolio has spurred an increased interest and growth in renewable energy development. The Energy Information Administration’s (EIA) 2007 Annual Energy Outlook estimates that consumption of renewable fuels will grow from 6.5 quadrillion BTUs in 2005 to 10.2 quadrillion BTUs in 2030. This growth will be a result of advancements in renewable 

energy technologies, higher fossil fuel prices, state requirements to produce renewable energy, and incentives provided under EPAct. This is an increase of about 1 

quadrillion BTUs more than EIA estimated in its 2005 Annual Energy Outlook. The 

EIA estimates that in 2030, renewable energy will account for over ten percent of 

our domestic energy production and about seven percent of our consumption. 

The EPAct encourages the development of renewable energy resources as part of 

an overall strategy to develop a diverse portfolio of domestic energy supplies for our 

future. In fact, according to EIA’s 2007 Annual Energy Outlook, public and private 

wind and other renewable energy generating sectors of our economy are the fastest 

growing energy sources in the United States. 

The quantity of domestic renewable energy produced on Federal lands is small in 

comparison to conventional resources. However, the growing cost of conventional 

energy resources and the need to diversify our energy portfolio has spurred an increased interest in renewable energy development on federal lands both onshore and 

offshore. 

9

The Department of the Interior (Department), as the manager of over one fifth 

of the Nation’s land, has a significant role to play in this projected increase in domestic renewable energy production. Lands managed by the Bureau of Land Management (BLM) currently supply almost half of the nation’s geothermal generation 

and approximately 4 percent of domestically installed wind capacity. EPAct gave the 

Department’s bureaus, specifically the Minerals Management Service (MMS), the 

BLM, and the United States Geological Survey (USGS), new authorities for encouraging and facilitating the development of promising new energy sources such as onshore and offshore wind, solar, and biomass energy and to assist in ensuring these 

technologies are developed in an environmentally responsible manner. 

Today, you have requested that I discuss with you the MMS’s OCS Alternative 

Energy Program. The Administration first proposed legislation to establish an OCS 

alternative energy program in June 2002, and the legislation was first introduced 

as H.R. 5156 in July 2002. That bill represented 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, the legislation was developed in a 

consensus with MMS’ sister agencies and reflected the best efforts of the Administration to address the array of issues associated with permitting various OCS 

energy-related projects that were not currently covered under existing statutes. 

Those projects included renewable energy projects such as wind, wave, ocean current and solar energy. 

After careful analysis of the mechanisms that were currently in place to handle 

requests for innovative, non-traditional energy-related projects on the Federal offshore lands, it became clear that—with limited exceptions—there existed 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 included 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 meant that the vast majority of OCS alternate energy-related projects that 

were being, or which may be contemplated in the future, by the private sector had 

no clearly defined permitting process. There was no single agency with an overarching role to coordinate that process. Instead, various Federal agencies with different responsibilities were responsible for permitting a specific part of a proposed 

project. As the Federal Government’s ‘‘land manager’’ and since the proposed legislation pertained to the permitting and oversight of energy uses on offshore Federal 

lands, it was only logical that any new legislative authority that was enacted remain with the Department already entrusted with that overall responsibility. 

Congress recognized that management of alternative energy and alternate use activities would require comprehensive authority to permit access in a fair and equitable manner, to ensure environmental and operational compliance, and to achieve 

a fair return to the Nation. The Administration worked closely with the Committee 

to include the Administration’s legislative proposal as part of the Energy Policy Act 

of 2005 (EPAct). 

Section 388 of the EPAct amended the OCS Lands Act, and granted the Department discretionary authority to grant leases, easements or rights-of-way for activities on the OCS that produce or support production, transportation, or transmission 

of energy from sources other than oil and gas. Simply put, the new authorities 

under EPAct gave the Department the ability to explore the future development of 

promising new ocean energy sources in the OCS such as wind, wave, ocean current, 

and solar energy. Additionally, the Department was given the authority to grant 

leases, easements, or rights-of-way for other OCS activities that make alternate use 

of existing OCS facilities. These other uses would be limited to energy-related and 

authorized marine-related purposes, such as offshore research, recreation and support for offshore operations to the extent that those activities are not authorized by 

other applicable law. 

It is important to note that while the Department is the lead agency for this program, the MMS continues to work with its sister agencies to ensure that the unique 

roles they each have is considered and addressed in order to ensure that the Federal 

Government’s myriad interests in such projects are fully considered and that the 

Nation’s economic, environmental and land use interests are adequately protected. 

The Department’s new EPAct jurisdiction does not supersede or modify existing 

Federal authority; all activities permitted must adhere to existing Federal law, including the National Environmental Policy, Coastal Zone Management, Endangered 

10

Species, Marine Mammal Protection, Magnuson-Stevens Fishery Conservation and 

Management, and the Migratory Bird Treaty Acts. 

The MMS is working diligently to develop a regulatory program to authorize offshore alternative energy proposals, such as wind, solar, wave, and ocean current 

technologies. The renewable energy and alternate use draft programmatic environmental impact study (EIS), developed by the MMS, is currently open for public comment. The EIS will form the foundation for the new alternative energy program and 

for future applications. The MMS is developing regulations to implement the new 

EPAct authority and expects to publish a proposed rule in late summer of 2007 and 

a final rule in early 2008. 

Interest in OCS-based alternative energy development in the United States is 

growing, particularly in the Northeast and along the West Coast. Many of these 

coastal states have put in place renewable energy portfolio standards (RPS) requiring utilities to substantially increase their reliance on renewable energy sources. For 

example, in the Northeast, New York has set a goal for public utilities to achieve 

a 25% share by 2013, one of the most aggressive targets in the country. In the Pacific West, Oregon has instituted a plan that calls for renewable energy to account 

for a 25% share, approximately 1,600 megawatts (MW) by 2025, while California 

has codified a renewable energy target of 20%, approximately 5,500 MW, by 2010. 

To put this into perspective, according to the Edison Electric Institute, based on 

2005 average annual usage by U.S. residential customers, one megawatt of electricity powered roughly 790 homes. The OCS can provide clean sources of energy 

and has a role in helping states and the Federal Government meet their renewable 

energy targets. 

Government resource estimates and industry interest indicate that the OCS provides several significant sources of alternative energy. According to estimates provided to the MMS by the Department of Energy (DOE), the potential offshore wind 

resource, excluding Alaska and Hawaii, is 2,500 gigawatts (GW), ocean waves 240 

GW, ocean tides 7.5 GW, and ocean currents 2.5 GW. Since the enactment of EPAct, 

the MMS has spoken to several companies and become aware of dozens of potential 

development proposals involving offshore wind off the east coast from Virginia, 

north to Massachusetts. 

The strongest wave energy resources are located on the West Coast, where there 

is already substantial interest in wave energy development, particularly offshore 

Northern California and Oregon. Currently, the MMS is working with the Federal 

Energy Regulatory Commission (FERC) on a Memorandum of Understanding 

(MOU) to coordinate Federal efforts in reviewing and authorizing these exciting new 

proposals. The goal of this MOU will be to provide an efficient and effective process 

for reviewing and overseeing wave and current energy proposals in the OCS. 

Alternative Energy and Alternate Use on the Outer Continental Shelf 

The Department and MMS decided that to facilitate the orderly development of 

the new programmatic responsibilities and associated rulemaking, we would not entertain for review any new applications relating to alternative energy or alternate 

use on the OCS until the program is in place. 

As the first step in the rulemaking and program development process, the MMS 

on December 30, 2005, published an Advance Notice of Proposed Rulemaking 

(ANPR) to solicit comments from all interested and affected parties. The ANPR 

sought comments on five major program areas: (1) access to OCS lands and resources; (2) environmental information, management, and compliance; (3) operations; (4) payments and revenues; and (5) coordination and consultation. We received a total of 149 comments originating from 26 states and the District of Columbia. These comments were submitted by private citizens, alternative energy industries and associations, environmental organizations, State and local governments, 

Federal agencies, nongovernmental organizations, universities, Members of Congress, small business, and the oil and gas industry. In general, the ANPR comments 

were supportive of renewable/alternative energy developments on the OCS and 

reuse of existing OCS facilities. Some comments received advised the MMS to proceed with caution as it develops the program and supporting regulations and advocated early stakeholder involvement with both the program and the individual 

project permitting. Many commenters who were familiar with the MMS OCS oil and 

gas program suggested that MMS use the offshore program as a model for consultation and environmental compliance. The renewable energy industry and environmental groups suggested that MMS establish a structured, rigid process, citing the 

need for predictability and for compliance and timeliness in reviews. Others, noting 

the up-and-coming nature of the renewables industry, advocated that MMS remain 

flexible in our program approach and address each project on a case-by-case basis. 

11

A majority of comments identified preparation of a programmatic environmental impact statement as a first step. 

Currently, the MMS is preparing rules to guide the development of the program 

activities. At the same time, MMS is accepting comments on a draft programmatic 

EIS to examine the potential environmental consequences of implementing the program. However, the innovative and evolving nature of the offshore renewable technologies; the nascent industry; the need to acquire environmental and economic 

baseline information; and, the location of the promising resources in OCS frontier 

areas have all presented challenges to the program’s regulatory development. 

Despite these challenges, the MMS is proceeding in a deliberate and diligent manner in developing this important new regulatory program. The Agency has been 

working with many of the same agencies involved in activities already authorized 

under the OCS Lands Act, such as the Army Corps of Engineers, the National Oceanic and Atmospheric Administration, the Environmental Protection Agency, the 

U.S. Coast Guard, and the Fish and Wildlife Service, to establish new ‘‘renewable 

energy’’ interfaces with each agency’s existing Federal statutory requirements and 

responsibilities. The MMS has also begun to forge new partnerships with the DOE 

and FERC and we are actively working on agreements with each agency. 

On March 21, 2007, the MMS announced the availability of the draft programmatic EIS and the opportunity for public comment. This document is a high 

level analysis of the potential impacts of the activities that could result from establishment of an OCS alternative energy and alternate use program and regulations 

under MMS’ new authority, from initial site characterization through decommissioning. The analysis looks at three alternatives: (1) establishment of a nationwide 

OCS program and regulations (the proposed action); (2) case-by-case authorization 

of activities; and (3) no authorization of activities authorized under section 388. The 

programmatic EIS does not evaluate specific sites on the OCS as to their suitability 

for alternative energy activities. Thus, MMS will analyze siting issues as it considers specific project proposals. Written comments on the draft programmatic EIS 

will be accepted through May 21, 2007 and MMS will hold public hearings on the 

document in April and May of 2007. The final programmatic EIS is on schedule for 

publication in late summer 2007. 

Currently the proposed rule is undergoing internal Departmental review in accordance with Departmental and the Office of Management and Budget guidelines. 

Major components of the alternative energy portion of the rule include, but are not 

limited to what rights will be associated with leases, rights-of-way, rights-of-use and 

easements; financial terms such as financial assurance (bonding); rentals before production begins and operating fees when production commences; process for site assessment, construction and operation plans; environmental and safety management, 

inspections and facility assessments; and, end of life decommissioning. 

The EPAct requires the Department to grant a lease, easement, or right-of-way 

on a competitive basis unless, after public notice, it is determined that there is no 

competitive interest. If there is no competitive interest, many of these initial applications may be issued noncompetitively, requiring the applicant to bear the cost of 

proposal-specific studies. However, based on the state-initiated renewable energy 

portfolio standards and interest from industry, it is expected that MMS will offer 

a competitive lease sale in the next 3 to 5 years most likely in the North Atlantic 

or the North Pacific. 

MMS recently conducted a series of regional stakeholder meetings in several 

coastal states to assist in preparing the new rule. The purpose of these meetings 

was to identify and explore stakeholder issues and concerns; to discuss the various 

ocean energy technologies and economics; and, to identify state energy profiles and 

renewable energy portfolio standards. 

Several coastal states (i.e., New Jersey, California, Washington, and Oregon) have 

approached MMS about partnering to efficiently evaluate and offer prospective OCS 

areas for lease on a regional basis. The U.S. Commission on Ocean Policy, the Pew 

Oceans Commission, and the Joint Ocean Commission Initiative, made similar recommendations concerning federal-state partnering to improve ocean governance in 

general. To promote such cooperation and coordination, the MMS proposes to establish federal/state task forces—a concept that has been used successfully in MMS’s 

Marine Minerals Program—and to begin assessing potential development and environmental implications. 

Cape Wind and Long Island Offshore Wind Projects 

The EPAct also gave the Department and MMS responsibility for two existing offshore alternative energy proposals, the Cape Wind Energy and the Long Island Offshore Wind Park projects. The MMS is reviewing each proposal and supporting information, and is preparing project-specific environmental analyses. 

12

Cape Wind Associates has proposed to construct an offshore wind facility located 

on Horseshoe Shoal in Nantucket Sound covering 24 square miles in federal waters 

and located 4.7 miles offshore Massachusetts. The proposal entails 130 offshore 

wind turbine generators to produce about 460 MW of electricity. The MMS anticipates publishing the draft EIS in late summer 2007. Because offshore wind is a new 

resource and technology for the Nation and Cape Wind is one of the first OCS alternative energy projects under review by MMS, the agency is proceeding with the review of the proposal and associated EIS in an appropriately deliberate and diligent 

manner. 

The Long Island Power Authority and Florida Power and Light Energy have proposed an offshore wind project covering eight square miles in Federal waters, located between three and four miles off the south shore of Long Island, New York. 

The proposed wind project would entail installation of 40 offshore wind turbine generators with a capacity of 140 MW of electricity for use in Long Island communities. 

The timeline for the project is being revised and should be available in the near 

future. 

Conclusion 

In conclusion, energy is vital to expanding our economy and enhancing Americans’ 

quality of life. Producing energy from renewable and other alternative domestic resources is a critical component of the Nation’s energy portfolio. Lands managed by 

the Department have a major role to play in the diversification of the Nation’s 

energy sources. The Department has been working with other agencies and has 

taken steps in a variety of scientific endeavors to understand renewable and other 

alternative energy resources and to help bring them to a place where they may contribute to the energy mix of the country in an environmentally friendly way. The 

MMS has been working on a variety of fronts, both onshore and offshore, to meet 

the demand for renewable and other alternative sources of energy. We stand ready 

to respond to the ever-increasing need for energy development from the resources 

we manage on behalf of the Nation. 

Thank you for the opportunity to highlight a few of the steps MMS has taken to 

encourage the development of renewable and other alternative energy resources on 

the OCS public lands. This concludes my testimony. I would be happy to answer 

any questions you have. 

Response to questions submitted for the record by Mike Olsen,

Minerals Management Service, DOI 

Questions from Chairwoman Bordallo (Subcommittee on Fisheries, Wildlife 

and Oceans): 

NOAA’s Role. What role, if any, do you envision the National Oceanic and 

Atmospheric Administration (NOAA) will play with respect to renewable 

energy projects on the Outer Continental Shelf? For example, do you expect NOAA to be the lead agency responsible for coordinating and preparing the documentation for the environmental impact analysis required 

by the National Environmental Policy Act (NEPA) prior to permitting individual renewable energy projects? 

Answer: The Department of the Interior, and by delegation the Minerals Management Service (MMS), is the lead agency for alternative energy projects on the 

Outer Continental Shelf (OCS) and will therefore coordinate the National Environmental Policy Act (NEPA) analysis work. Many agencies, including NOAA, have 

unique roles that must be considered and addressed to ensure that the Federal Government’s myriad interests in such projects are fully considered and that the Nation’s economic, environmental and land use interests are adequately protected. 

These agencies have been, and will continue to have the opportunity to be engaged 

as cooperating agencies under the NEPA in the development of any proposal to 

produce alternative energy from the OCS. NOAA will continue to implement other 

required review processes such as the Federal consistency reviews under the Coastal 

Zone Management Act (CZMA) essential fish habitat consultations under the Magnuson-Stevens Fishery Conservation and Management Act, fish passage needs 

under the Federal Power Act, endangered species consultations under the Endangered Species Act (ESA) and consultations under the National Marine Sanctuaries 

Act. 

13

Sensitive Marine Habitats. There are currently 14 National Marine Sanctuaries and one National Marine Monument which cover over 200,000 sq. 

nautical miles of the U.S. Exclusive Economic Zone (EEZ). Does the MMS 

intend to prohibit the development of alternative energy projects in these 

nationally-significant marine environments? What about other Federal, 

State or local marine protected areas set aside in the EEZ or State waters 

to protect important natural and cultural submerged resources? 

Answer: The MMS has no authority to allow any alternative energy development 

in these specially-designated areas. Authorities granted by Section 388 of the 

Energy Policy Act of 2005 EPAct do not apply to any area within the exterior boundaries of a National Park, National Wildlife Refuge, National Marine Sanctuary, or 

National Monument. Nor does the MMS have authority over state waters. 

In areas where alternative energy projects may be permitted, MMS will conduct 

a NEPA review of each proposed alternative energy project under its jurisdiction in 

coordination with other Federal, state, and local agencies and the public. The review 

will include an assessment of alternative locations for the proposed action and will 

identify appropriate mitigation measures to protect sensitive marine habitats. 

State Role. The Coastal Zone Management Act (CZMA) recognizes the authority and primacy of the States with regard to activities in coastal areas. 

Mr. Diers recommended that the Federal permit for a project include approval from the affected state. What is your reaction to his recommendation? How will you coordinate the States’ interests during the project approval process? 

Answer: The Administration does not believe there is a need for changes to the 

CZMA review process for alternative energy projects on the OCS. Any EPAct section 

388-authorized activity will comply with the Federal consistency provisions of the 

CZMA. As provided by the CZMA, coastal states can review alternative energy 

project plans and permits for consistency with its coastal management plan’s enforceable policies. Over the years, the MMS has established a close working relationship with many of the coastal state governments. To develop working partnerships 

with coastal states such as New York, Oregon, Washington, Massachusetts, and 

New Jersey, the MMS hosted a series of stakeholders meetings to further its understanding about each locality’s unique alternative energy issues, needs and concerns. 

In addition, we envision convening Federal/State task forces, which have been successfully used in the marine mineral program (i.e. the sand and gravel program), 

to assist in any phase of the OCS Alternative Energy Program from preliminary 

studies and lease sale formulation through site assessment and construction to decommissioning. 

National Academy study requirement Section of 1833 of the Energy Policy 

Act of 2005 required MMS, within 90 days, to contract with the National 

Academy of Sciences (NAS) to conduct a study of the alternative energy potential in the outer continental shelf; assess federal laws—including environmental laws—that would relate to the development of those resources; 

and to recommend statutory and regulatory mechanisms for developing 

those resources. 

What is the status of that study and recommendations by NAS? If it was 

never started, please explain why not? 

Answer: The study called for in Section 1833 of EPAct was unfunded by the legislation. The study was to look at renewable energy issues on Federal lands both onshore and offshore. Following several informal staff-to-staff discussions, the NAS 

submitted a proposal to the Department at an estimated cost of $875,000. The study 

would have required 20 months of work through the formation of a 16-member committee. The committee would have been comprised of a mix of public and private 

sector expertise in renewable energy technologies. However, the Department suggested to NAS that a regulatory review of other agencies with offshore jurisdiction, 

and possible overlap of jurisdiction or conflicts, would be useful. NAS declined due 

to what it considered to be too modest a scope for an NAS study. 

Given current budget constraints, prioritization of needs, and a review of the information already available in Bureau of Land Management and MMS, the NAS 

study proposal would have been duplicative and provided little, if any, new information. 

14

Mapping. The MMS has been mapping the oceans for years. But this mapping has focused on mineral and fuel extraction products. Do you plan to 

develop maps showing good wind sites, or other attributes applicable to 

the renewable energy industry? Does the MMS have the capability to do 

this work? 

Answer: The MMS is leading an interagency cooperative effort with NOAA, Fish 

and Wildlife Service, Federal Communications Commission, National Park Service 

and, to the extent possible, Department of Defense and Department of Homeland 

Security to develop the Multipurpose Marine Cadastre (MMC). The MMC is a digital mapping viewer which utilizes geographic information systems (GIS) technology 

to display the location and pertinent data related to uses and physical attributes 

of the OCS (e.g., navigation and shipping lanes, whale migration routes, essential 

fish habitat, oil and gas platforms, pipelines, sand borrow sites, trans-Atlantic communication cables, topographic features, hazardous waste sites, weather buoys, bathymetry/water depth). 

While the MMS does not contemplate classifying offshore areas based on alternative/renewable energy attributes, given the broad spectrum of potential activities, 

the MMC will provide a single location where managers (without GIS training or 

software) can go to view all existing activities and infrastructure features needed 

for decision making in any U.S. OCS area. The digital mapping viewer is expected 

to be available online in FY 08 pending availability of resources. The MMS plans 

to incorporate additional data layers from other Federal and state agencies and private parties that meet Federal Geographic Data Committee (FGDC) metadata 

standards as they become available. For example, there are individual private and 

joint private/public ventures underway, such as those underway at the Department 

of Energy, to gather OCS wind and wave data. MMS will work to incorporate that 

information into the Multipurpose Marine Cadastre. MMS has meteorologists and 

physical oceanographers on staff who can interpret that data to understand its applicability to energy development. Additionally where there is interest, MMS is 

partnering with coastal states such as California, Oregon, Washington, and New 

Jersey to work together to understand the environmental implications of and to assess the potential for renewable energy resource technology testing and development 

to meet the needs of those states. 

Migratory Birds. How are we going to make sure that the Migratory Bird 

Treaty Act is enforced and that migratory birds are not incidentally caught 

in offshore wind farms? What role will the U.S. Fish and Wildlife Service 

(FWS) have in the permitting of offshore wind energy facilities? 

Answer: The MMS’s authorities under EPAct 2005 do not supersede the statutory responsibilities of any Federal agency, including those of the U.S. Fish and 

Wildlife Service (FWS). All OCS alternative energy proposals must comply with relevant Federal statutes including the Migratory Bird Act and the Endangered Species Act. Currently, the FWS is a cooperating agency on the Cape Wind Energy and 

the Long Island Offshore Wind Park proposals providing MMS with expertise on 

avian issues involving both protected and migratory species and helping us to identify potential mitigation measures. The MMS will continue to work cooperatively 

with FWS on migratory bird issues to minimize risks to populations. 

Birds. Many species of pelagic birds depend on isolated, unpopulated rock 

outcroppings and small islands, such as along the coast of Maine, for rookeries vital to their successful reproduction. Does the MMS intend to prohibit the development of alternative energy projects at areas where migratory birds congregate or seasonally utilize these habitats? 

Answer: The siting of alternative energy projects is a key factor in providing 

mitigation and protection to avian resources. An assessment of environmental impacts associated with an OCS alternative energy proposal would be a critical element in understanding potential effects to birds and in MMS decision-making. The 

assessment would describe how the area surrounding the proposed site is used by 

resident and migratory birds, would evaluate whether the birds’ movement patterns 

would put their populations at risk, and identify stipulations or conditions to minimize any potential adverse impact. 

15

Questions from Chairman Costa 

Please describe how you are ensuring that adequate planning occurs to accomplish the goals of increasing our supply of off-shore renewable energy 

while also avoiding sensitive areas or other permitting challenges, such as 

those facing the Cape Wind Energy project. 

Are you proactively identifying off-shore areas that may present thorny environmental or social issues for renewable project siting (or areas where 

conflicting interests are minimal)? 

Answer: As part of the development of a new program for OCS alternative energy, the MMS is preparing a programmatic Environmental Impact Statement 

(EIS). The programmatic EIS generally identifies the potentially affected environmental resources on the OCS and describes generic impacts that could result from 

each of the alternative energy technologies (e.g., wind, wave, ocean current). MMS 

will continue to work on these issues on a regional basis as we move forward with 

the new program. 

The goal of the OCS Mapping Initiative (also referred to as the Multipurpose Marine Cadastre) is the identification of OCS locations of Federally-permitted activities; obstructions to navigation; submerged cultural resources; undersea cables; offshore aquaculture projects; and any area designated for the purpose of safety, national security, environmental protection, or conservation and management of living 

marine resources. The Multipurpose Marine Cadastre web viewer, which is currently under development, will provide the user the ability to view the official data 

provided by the agency of responsibility associated with the themes to assist in decision making related to alternative energy uses on the OCS. 

How are you assessing and integrating information about the on-shore infrastructure necessary to transport energy with any analysis of potential 

areas or projects for renewable generation on the OCS? 

Answer: The MMS will assess onshore infrastructure information on a regional 

and/or a project-specific basis as we move forward with the new program. 

Your written testimony mentions that MMS might establish federal/state 

task forces to promote coordination and cooperation. When might these 

task forces be up and running, and how would you describe their specific 

goals? Will they help with improved planning? 

Answer: Over the years, the MMS has established a close working relationship 

with many of the coastal states governments. To develop working partnerships with 

coastal states like New York, Oregon, Washington, Massachusetts, and New Jersey, 

the MMS hosted a series of stakeholder meetings to further its understanding about 

each locality’s unique alternative energy issues, needs and concerns. In addition, we 

envision convening Federal/State task forces, which have been successfully used in 

the marine mineral program (sand), to assist in any phase of the OCS Alternative 

Energy Program from preliminary studies and lease sale formulation through site 

assessment and construction to decommissioning. As an example, the MMS has recently supported participation in a joint Federal - Tri-State Task Force with California, Oregon, and Washington to address regional ocean planning issues related 

to the OCS Alternative Energy program on the West Coast. This task force should 

be up and running this fall. 

The MMS was directed to prepare a marine cadastre—an integrated submerged lands mapping analysis—-as a requirement under the Energy Policy Act of 2005. What is the status of this initiative? When might the results 

be available to inform renewable energy development and related issues on 

the OCS? 

Answer: To accomplish the directives of EPAct, the MMS and NOAA are taking 

the lead to create an online interactive map that will utilize web map services from 

Agencies of Responsibility (AOR’s) for the various offshore features to be mapped. 

These agencies will include MMS, National Oceanic and Atmospheric Administration (NOAA), Department of Defense (DOD), National Park Service (NPS), Federal 

Communications Commission (FCC), Department of Homeland Security (DHS), and 

others. This service will provide a single location where managers (without GIS 

training or software) can go to view all existing activities and infrastructure features needed for decision making in any U.S. OCS area. 

The Marine Boundary Working Group (MBWG), a subcommittee of the Federal 

Geographic Data Committee, co-chaired by MMS and NOAA, is developing and implementing the Multipurpose Marine Cadastre (MMC). A subset of the MBWG has 

agreed to take the next steps in defining the Web interface and Internet mapping 

16

component of the multi-purpose marine cadastre. As part of the FY 07 work plan, 

the MBWG is in the process of: 

1. Developing a comprehensive list of marine boundary data, restrictions and encumbrances, agencies of responsibility, and associated legislation and regulations. 

2. Making data and information accessible through the Web and the E-Gov 

Geospatial One-Stop Portal. 

3. Coordinating with the Marine Protected Areas (MPA) Initiative to ensure that 

marine boundary source data are accessible through their inventory. 

4. Developing minimum requirements for accessible data. 

5. Developing and implementing a project plan for the digital mapping component 

of the multipurpose marine cadastre initiative. 

Presently, a prototype web site has been developed at NOAA Coastal Services 

Center. This website is a concept evaluation, using a limited set of data layers from 

participating partners. During the next few months, we will be testing and evaluating the website, as well as soliciting input from agencies that could potentially 

participate, which will be vital to building the project. In the future, we envision 

a more robust version of the viewer, with GIS analysis tools. We also will include 

more data download options, such as exporting KML files for Google Earth viewing. 

Permanent hosting, as well as staffing, will need to be identified. More partners will 

be encouraged to participate as the project grows. 

Please describe the needs you envision in terms of new staff, technical expertise, and internal systems to support the permitting and review process 

for off-shore renewable energy development in the next two-three years. 

Answer: The MMS is comprised of multi-disciplined staffs of marine and coastal 

scientists, geologists, geophysicists, engineers, economists, social scientists, and inspectors who conduct environmental and engineering evaluations of hundreds of offshore oil and gas activity plans. The agency’s expertise and experience gained in 

managing such complex marine-based energy operations will serve the Nation well 

in managing and regulating alternative energy opportunities on the OCS. Depending upon industry’s level of interest in acquiring OCS lands for renewable energy 

development and coastal states’ interest in partnering with us, MMS may require 

additional funding in the future to augment its staff and studies program. If appropriate, MMS will include any such additional resources in its future budget requests 

to Congress. 

Mr. COSTA. Thank you very much, Mr. Olsen. You were actually 

ahead of time by 19 seconds. You will get a good mark. 

Mr. OLSEN. Thank you very much. 

Mr. COSTA. Yes. Well, we want to encourage people to do the 

right thing. 

Our next witness is Ann F. Miles, who is the Director of the Division of Hydropower Licensing for the Office of Energy Projects for 

the Federal Energy Regulatory Commission, otherwise known as 

FERC, but I like the Federal Energy Regulatory Commission. 

Ms. Miles, would you please open? 

STATEMENT OF ANN F. MILES, DIRECTOR, DIVISION OF 

HYDROPOWER LICENSING, OFFICE OF ENERGY PROJECTS, 

FEDERAL ENERGY REGULATORY COMMISSION 

Ms. MILES. Thank you, Mr. Chairman, Madam Chairwoman and 

Members of the committee. I hope I can meet Mike Olsen’s——

Mr. COSTA. We hope you can too. 

Ms. MILES. I appreciate the opportunity to appear before you 

today to discuss ocean energy on the Outer Continental Shelf. 

Before addressing your questions, I would like to make some 

introductory comments. 

First, we expect at least initially the majority of the new technology projects will be located in state waters rather than on the 

OCS. Of the 23 preliminary permit applications for ocean energy 

17

projects that are pending at the Commission, only four would be located on the OCS. 

This distribution of proposals reflects the fact that the cumulative cost of development, including the cost of the transmission 

cable needed to bring power on shore, make it advantageous to locate projects nearer to shore. 

For those projects located wholly or partially on the OCS, the 

Commission will actively work with the Minerals Management 

Service, which has the responsibility to issue leases for these 

projects. 

Second, the Commission has seen a surge in applications for preliminary permits for these ocean technologies. Preliminary permits 

give application priority to permittees while they study the technological, economic and environmental feasibility of a project. They do 

not give any authority to construct any facilities. 

Before 2004, the Commission had received no preliminary permits for ocean energy projects. In 2004 and 2005, the Commission 

received 11 permits and in 2006 over 40. Since 2005, the Commission has issued 32 permits, 21 for tidal projects, eight for ocean 

current projects and three for wave projects. 

The Commission has received one license application for an 

ocean energy project. It is for the one megawatt Makah Bay wave 

energy project proposed to be located off Washington state. 

Besides responding to filed applications, the Commission has also 

been proactive in addressing issues related to processing ocean 

energy projects. In July 2005, the Commission issued an order that 

allowed the Verdant Project to install a six turbine demonstration 

project in the East River without holding a FERC license. 

In December 2006, the Commission hosted a technical conference 

to discuss the status of ocean technologies and to explore the environmental, financial and regulatory issues pertaining to their development. The Commission has adapted its approach to handling 

preliminary permits in response to comments from conference participants. 

Now let me turn to your questions. You first asked what Congress should do to clarify the Federal government’s role, particularly the authority of the MMS and FERC. I do not believe that 

clarification of the government’s role is necessary. The Commission 

is committed to achieving a fair and predictable regulatory program that allows orderly development of hydropower projects to be 

located on the OCS while considering existing uses and resources. 

In fact, we are already working cooperatively on a memorandum 

of understanding with MMS and have offered creative ideas on how 

to weave the MMS and FERC processes together for the benefit of 

applicants, stakeholders and the two agencies. 

The Commission’s licensing process is transparent. It provides a 

timely review of projects and affords applicants, agencies, Native 

American tribes, nongovernmental organizations and members of 

the public numerous opportunities to participate and represent 

their interests. Both we and MMS have experience and expertise 

to offer in an ocean energy program that will undoubtedly cover 

both state waters and the OCS. 

Your second question was what role, if any, should the National 

Oceanic and Atmospheric Administration play in reviewing renewVerDate 0ct 09 2002 10:56 Oct 04, 2007 Jkt 098700 PO 00000 Frm 00023 Fmt 6633 Sfmt 6602 L:\DOCS\34981.TXT Hresour1 PsN: KATHY
18

able energy proposals on the OCS. The National Marine Fisheries 

Service with NOAA is one of the Federal agencies that has been 

actively involved in the Commission’s licensing process for conventional hydropower projects, and we expect they would be similarly 

involved in the ocean. 

They bring considerable expertise and experience to review of 

ocean energy projects and have a strong role to play in the protection of ocean resources, including their authorities under the Endangered Species Act, Marine Mammal Protection Act, MagnusonStevens Fisheries Act and the administration of the Coastal Zone 

Management Program. 

Your third question was what role, if any, should the states have 

in planning for renewable energy projects, and how could the Federal government improve that role. The state and Federal agencies 

play a central role in the Commission’s existing hydropower licensing process. This role will continue to be essential as we address 

ocean projects. 

The Commission has several licensing processes, including our 

most recent integrated licensing process, which requires involvement of Commission staff in discussions with all stakeholders to 

projects. The process was developed collaboratively with all hydro 

licensing stakeholders, including state and Federal agencies, and 

includes the opportunity for consulting with agencies to determine 

the studies needed for an environmental analysis of the proposed 

project. 

The Commission’s licensing process and supporting analysis incorporates other statutes in which Congress has given important 

authority to states such as the Coastal Zone Management Act and 

National Historic Preservation Act. 

Your last question was how should the Congress address environmental impacts associated with renewable energy projects on 

the OCS. The existing laws, including the National Environmental 

Policy Act and the Commission’s regulations, provide ample opportunity to address environmental effects, and the Commission staff 

has many years of experience doing so. I believe this is a good foundation to adequately address the environmental effects. 

In summary, we are committed to working with the MMS to develop a program for the OCS that makes the best and most efficient use of our respective resources and provides a thorough analysis of environmental impacts, and we will continue to cooperate 

and consult with Federal agencies and individual states in licensing ocean projects. 

This concludes my remarks, and I would be pleased to answer 

questions. 

[The prepared statement of Ms. Miles follows:]

Statement of Ann F. Miles, Director, Division of Hydropower Licensing, 

Federal Energy Regulatory Commission 

Madame Chairwoman, Mr. Chairman, and Members of the Committee: 

INTRODUCTION 

My name is Ann Miles and I am the Director of the Division of Hydropower Licensing, Office of Energy Projects at the Federal Energy Regulatory Commission 

(Commission). I appreciate the opportunity to appear before you to discuss the Commission’s growing involvement with hydropower using new technologies and to respond to your questions. I use the term ‘‘new technologies’’ to mean mechanisms to 

19

produce hydropower from ocean currents, tides, and wave action, without the use 

of a dam. Today I will speak mainly about energy derived from waves in the ocean, 

as your focus is the Outer Continental Shelf (OCS), but I will also include some of 

our experience with ocean currents and tidal rivers projects, as applications before 

the Commission cover these areas. As a member of the Commission’s staff, the 

views I express in this testimony are my own, and not those of the Commission or 

of any individual Commissioner. 

Before I present the Commission’s regulatory program for new technology projects 

in general, I want to make several specific points regarding how these projects may 

affect the OCS. First, we expect that the majority of new technology projects will 

not be located on the OCS, but in State waters. Of the 23 preliminary permit applications currently pending at the Commission and proposing projects to be located 

in the ocean, only four would be located on the OCS. This distribution of proposals 

reflects the fact that the cumulative costs of development which include the costs 

associated with purchasing and installing transmission cable needed to bring project 

power onshore, make it advantageous to locate projects nearer to the shore. Second, 

for those projects located wholly or partially on the OCS, the Commission will actively work with the Minerals Management Service of the U.S. Department of the 

Interior (MMS) which has the responsibility to issue leases for these projects. Third, 

we are already working cooperatively on a Memorandum of Agreement with MMS 

and have offered creative ideas on how to weave the MMS and FERC processes together for the benefit of applicants, other stakeholders, and the two agencies. I will 

discuss our interactions with MMS in more detail, later in my testimony. Now I will 

turn to the Commission’s regulatory program for new technology projects. 

The Commission regulates over 1,600 hydroelectric projects at over 2,000 dams 

pursuant to Part I of the Federal Power Act (FPA). Together, these projects represent 57 gigawatts of hydroelectric capacity, more than half of all the hydropower 

in the United States, and over five percent of all electric generating capacity in the 

United States. Hydropower is an essential part of the Nation’s energy mix and offers the benefits of an emission-free, renewable, domestic energy source with public 

and private capacity together totaling about ten percent of U.S. capacity. Today we 

are looking at development of a new source of hydropower that has the potential 

to add a substantial amount of power to the nation’s generation capacity, particularly in the area of renewable energy. 

The Commission’s existing procedures are well established and well suited to address this expansion of conventional hydropower with new technologies, and we are 

prepared to learn from experience in this rapidly evolving area and to make whatever regulatory adjustments are appropriate in order to help realize the potential 

of this renewable energy resource. 

First, I will give you some background on the industry in general and describe 

the level of application activity that the Commission has seen. Then I will describe 

1) the compatibility of the Commission’s existing program with the new technologies, 2) alterations the Commission is making to address the concerns of stakeholders about specific aspects of that compatibility, 3) the Commission’s efforts to 

work with the MMS to weave together an efficient program for new technology 

projects to be located outside state waters on the OCS, and 4) the Commission’s coordination and cooperation with federal and state agencies in the licensing process. 

Ocean-Based Hydropower Technology 

In the past, efficient and reliable conversion of kinetic energy from water has 

proven elusive, but with recent advances in technology, rising fuel cost, and a growing demand for renewable energy, the potential for hydropower using new technologies is on the rise. An Electrical Power Research Institute (EPRI) study estimated the potential for wave and current power in our nation’s oceans to be over 

350 billion kilowatt hours per year, which would equal the output of traditional hydropower in its most productive years. In other words, ocean-based hydropower 

using new technologies could double hydropower production going from 10% to 20% 

of the national total. At present, however, the development and commercialization 

of the new technologies are just beginning. 

The wave energy technologies include a range of designs including buoys, bargelike devices, and small floating reservoirs. Designs for harnessing tidal and current 

energy generally are variations on traditional turbines, often using underwater ‘‘propellers.’’ In both cases, the energy of the moving water or wave is converted into 

electricity within each unit, making each device a small powerhouse. The current 

stage of technological development ranges from concept sketches to pilot demonstration projects. 

Wave energy can be harnessed in locations that range from at the shoreline to 

many miles off shore, while tidal energy is limited to tidal rivers and narrows assoVerDate 0ct 09 2002 10:56 Oct 04, 2007 Jkt 098700 PO 00000 Frm 00025 Fmt 6633 Sfmt 6621 L:\DOCS\34981.TXT Hresour1 PsN: KATHY
20

ciated with coastal bays and estuaries, and ocean currents are located mainly in offshore locations such as the Gulf Stream. Tidal power has substantial hourly variations during the day but the pattern tends to be very predictable across seasons 

and years, while wave power is much steadier on an hourly basis but shows more 

seasonal variation. 

Ultimately, whether the source is wave, tide, or current, it likely will take clusters 

or fields of devices to generate utility-scale power from the new technologies. The 

electricity from the devices will in most cases be connected by an underwater cable 

to the shore and then continue onshore to connect with the interstate transmission 

grid. 

OCEAN ENERGY ACTIVITY BEFORE THE COMMISSION 

Applications for ocean-based hydropower projects can potentially go through three 

stages at the Commission. First, developers can apply for preliminary permits. Preliminary permits maintain priority of application for license for a site for up to three 

years while a developer researches site feasibility and makes financial arrangements. Second, developers can apply for a hydropower license. (A preliminary permit 

is not required prior to applying for a license.) By statute the Commission can issue 

a license for a term of up to 50 years. Third, if licensed, the developer must operate 

the project in compliance with the terms of the Commission’s license order. 

Throughout the term of the license, the Commission monitors the project to assure 

compliance with the license. 

Recently, the Commission has seen a surge in applications for preliminary permits for the new technologies. Before 2004, the Commission had received no recent 

preliminary permit applications for projects using ocean technologies. We received 

11 permit applications in calendar years 2004 and 2005 combined and over 40 permit applications in 2006 alone. We have received four more permit applications so 

far in 2007. In 2005 and 2006, the Commission issued 11 preliminary permits, three 

for proposed tidal energy projects, and eight for proposed ocean current energy 

projects. So far in 2007, the Commission issued 19 permits, 16 for proposed tidal 

energy projects and three for proposed ocean wave energy projects. 

The Commission received the first license application for a wave energy hydropower project from AquaEnergy, Inc. in November 2006. The Makah Bay Offshore 

Wave Energy Project is proposed for Makah Bay in Clallam County, Washington. 

Part of the project would be located on lands of the Makah Nation Indian Reservation. The project would consist of four buoys moored 3.2 nautical miles offshore in 

the Olympic Coast National Marine Sanctuary. Together, the buoys would generate 

up to 1 megawatt (MW), with an average of about 200 kilowatts (kW), through relative motion created by waves, which drives an internal pump that would force 

pressurized water through a closed-loop hose and a turbine. 

In the tidal hydropower arena, Commission staff has been working with Verdant 

Power, LLC, a permit holder seeking to develop a license application for the Roosevelt Island Tidal Energy Hydropower Project. The project ultimately would consist 

of as many as 494 free-flowing turbine generator units (about 10.3 MW total), located below the water surface in the East River in Queens County, New York. 

In addition, the Commission has been proactive in addressing the new issues 

unique to this nascent industry. In 2005, as activity in the field of new hydropower 

technologies began to increase, the Commission’s Office of Energy Projects formed 

a committee of technical and legal staff to initiate research on the regulatory, environmental, and developmental aspects of these new technologies. On December 6, 

2006, the Commission hosted a technical conference to discuss the status of new 

technologies in hydroelectric generation from ocean waves, tides, and currents and 

from free-flowing rivers, and to explore the environmental, financial, and regulatory 

issues pertaining to the development of these technologies. Conference participants 

included ocean energy developers and consultants, trade associations, representatives from state and federal agencies, non-governmental organizations, and members of the public. Following the conference, the Commission solicited and received 

written comments from the participants. 

COMPATIBILITY OF THE COMMISSION’S EXISTING PROCESS WITH 

THE NEW TECHNOLOGIES 

Projects using new technologies are compatible with the Commission’s well-tested 

regulatory process that has been refined continuously since the original passage of 

the Federal Water Power Act of 1920. Regulating the development of power generation from the nation’s waters is a primary role of the Commission. We analyze developers’ proposals for energy generation from navigable and Commerce Clause waters, along with interests expressed by other stakeholders, and comprehensively balance the benefit of power generation with environmental protection and other values 

21

as directed by statute. After years of collaboration with other agencies and parties 

we have achieved a high level of regulatory efficiency. Over the years, we have improved our licensing process to include early engagement with the applicant and 

other stakeholders, earlier and more predictable study requirements, more certain 

timeframes, and overall reduced processing time. 

In reviewing a license application for a project, the Commission integrates and 

weighs the concerns of the licensee, federal and state resource agencies, tribes, and 

other members of the public. We do so through an information-gathering process 

and technical analysis that enables a fully informed Commission decision while complying with the mandates of the Federal Power Act, the National Environmental 

Policy Act, the Endangered Species Act, and other applicable laws. 

Within our established process, significant flexibility exists to implement innovative approaches when appropriate. For instance, in the Makah Bay and Roosevelt 

Island cases, Commission staff has allowed the use of different license processes 

that better fit the applicants’ needs. This flexibility has enabled 1) the inclusion of 

Commission staff and stakeholders in the study development and implementation 

and 2) for much of the National Environmental Policy Act information to be developed parallel to the project’s license application development. In the Roosevelt Island case, the process may also encourage negotiation of a settlement. 

CHANGES IN COMMISSION PROCESSES TO IMPROVE COMPATIBILITY 

WITH THE NEW TECHNOLOGIES 

Where the needs of the industry have raised new issues, not within the scope of 

our standard procedures, the Commission has shown the maximum flexibility allowed by the statute. For example, the Commission determined that Verdant Power 

could install its six-turbine demonstration project in the East River without applying for a Commission license. In a July 27, 2005, Order on Clarification, the Commission concluded that Verdant’s activities effectively would have no net impact on 

the interstate electric power grid or on interstate commerce. This determination established a policy that allows experimentation without a license when 1) the technology in question is experimental; 2) the proposed facilities are to be used for a 

short period and for the purpose of developing a hydropower license application; and 

3) power generated from the test project will not be transmitted into, or displaced 

from, the national electric energy grid. In addition to testing power generation, Verdant will carry out extensive monitoring of fishery impacts as part of the experimental deployment. Although not required to be licensed during its testing phase, 

Verdant was of course obligated to obtain necessary approvals under other existing 

state and federal statutes. 

In order to respond to industry concerns about the applicability of the existing 

preliminary permit system to new technology projects, the filing of a large number 

of recent applications for preliminary permits using ‘‘new technology’’, and to follow 

up on the Hydroelectric Infrastructure Technical Conference, the Commission on 

March 1, 2007, issued a notice in the Federal Register seeking comments on how 

the Commission should treat applications for and regulate preliminary permits for 

hydropower projects involving wave, current, and instream technologies. The notice 

sets an interim policy for reviewing such applications, proposing to scrutinize them 

strictly by imposing requirements on any permits issued, such as the submission of 

progress reports, the development of study plans, and the establishment of deadlines to file a subsequent license application. Alternative policies would either: (1) 

continue the standard policy for processing applications for hydropower permits, by 

not subjecting them to extensive scrutiny and not imposing additional requirements 

on permit holders; or (2) decline to issue any preliminary permits for projects involving new technology, in which case applicants could only pursue such projects directly through the licensing process. Comments on the Notice of Inquiry are due by 

April 30, 2007. 

In applying the interim policy, the Commission will ensure that permit holders 

are actively pursuing studies and consultations that may lead to development of a 

license application in hopes of preventing site-banking, the practice of reserving potential project sites without intent to develop projects. The Commission will carefully scrutinize the reports that permit holders are required to file on a semi-annual 

basis, and will, where sufficient progress is not shown, consider canceling the permit. Stricter scrutiny will entail requirements such as reports on public outreach 

and agency consultation, development of study plans, and deadlines for initiating 

the formal license application process. The Commission will process preliminary permit applications with a view toward limiting the boundaries of the permits. This approach should provide a disincentive for developers to seek permits for projects that 

they are not ready to pursue. 

22

In the area of licensing, the Commission staff considers our well-tested existing 

procedures to work well, yet to be sufficiently flexible to address the licensing of 

projects using the new technologies. Where appropriate, Commission staff will investigate making improvements to the current process to the extent consistent with existing law. We will continue to use our substantial experience and expertise in 

bringing other agencies together in determining appropriate studies and complying 

with all existing statutes and to make the regulatory process for agencies, applicants, and parties as efficient as possible. To address a concern about a lack of information about the environmental effects of these technologies, Commission staff has 

been gathering information and studies on the environmental effects of ocean energy 

and, in coordination with other agencies, will be making this information available 

as a service to developers as well as using it to accelerate our reviews. We also plan 

to provide outreach on our program to clarify our process for the industry and stakeholders, many of whom are new to it. 

WORKING WITH THE MINERALS MANAGEMENT SERVICE ON THE OCS 

The Commission is committed to achieving a fair and predictable regulatory program that allows orderly development of new technology projects to be located on 

the OCS while considering environmental, recreational, cultural, and other uses of 

the resource. To this end, both staff and Chairman Kelliher have met with representatives of the Department of the Interior. I am happy to report that the two 

agencies are working together to develop a Memorandum of Agreement that will 

apply the best resources and authorities of both agencies to develop an efficient and 

effective program for promoting and regulating the development of hydropower in 

all offshore areas, including the OCS. We believe that the Commission brings several resources to the negotiating table. First, the Commission is uniquely positioned 

under the FPA and its regulations to give equal consideration to developmental and 

non-developmental resources and to assure that any project licensed will be best 

adapted to a comprehensive plan for development of the water resource in the public 

interest. Second, the Commission has many years experience in hydropower licensing. The Commission’s licensing process is transparent, provides timely review of 

projects, and affords applicants, agencies, Native American Tribes, Non-governmental organizations and members of the public numerous opportunities to effectively participate and represent their interests. 

COOPERATION AND CONSULTATION WITH STATE AND FEDERAL 

AGENCIES 

State and other federal agencies (agencies) play a central role in the Commission’s 

existing hydropower licensing process. This role will continue to be essential as we 

address the new hydropower technologies. The National Marine Fisheries Service 

(NMFS) within the National Oceanic and Atmospheric Administration of the U.S. 

Department of Commerce is one of the federal agencies that has been actively involved in the Commission’s licensing process for conventional hydropower projects 

and we expect that they would be similarly involved in new technology projects. The 

Commission staff works closely with the agencies to address their interests and concerns and to tap their expertise with ‘‘on the ground’’ management of the resource. 

Cooperation and consultation with the agencies begins early in application development and continues throughout the licensing process. 

The Commission requires that applicants consult with agencies in the process of 

preparing an application. The application must include the results of this consultation with a description of agency recommendations and the applicant’s response to 

the recommendations. The Commission’s Integrated Licensing Process regulations 

require early involvement of Commission staff in pre-application phase discussions 

with agencies and the applicant. The process includes a formal procedure for consulting with the agencies to determine the studies needed for licensing and includes 

both an informal and formal dispute resolution process. Under the Federal Power 

Act, Congress assigned the state and federal fish and wildlife agencies specific authority in hydropower licensing. Essentially, the Commission is to accept state and 

federal fish and wildlife agency recommendations unless they clearly are in conflict 

with another part of the statute. These recommendations contribute to the comprehensive balancing of energy development and the protection of fish, wildlife, 

recreation, and other resources. Finally, the Commission’s licensing process and supporting analysis incorporates other statutes in which Congress has given important 

authorities to the states such as the Coastal Zone Management Act of 1972 and the 

National Historic Preservation Act of 1966. Together, these statutory, regulatory, 

and informal relationships have supported good coordination and cooperation with 

the states that will extend to the new technologies. 

23

In addition, Section 10(a)(2)(A) of the FPA authorizes states and federal agencies 

to file Comprehensive Plans that address one or more beneficial uses of a waterway. 

The Commission takes these Comprehensive Plans into account when determining 

whether and under what conditions a project should be licensed. These plans enable 

state and federal agencies to have a substantial role in the Commission’s public interest determination. 

Finally, I would suggest that the Commission’s many years of experience in analyzing the environmental effects of hydropower projects under existing statutes, including NEPA, and implementing regulations provide an ample foundation to adequately address the environmental effects of new technology projects. 

CONCLUSION 

In closing, the Commissioners have stated publicly their interest in promoting the 

development of this potentially important source of renewable energy. They also 

have expressed their desire to reduce regulatory barriers to the development of new 

technologies, where possible. 

We are confident that under the Commission’s statutory structure, refined over 

almost a century, hydropower resources using new technologies can be developed in 

an orderly way while protecting other beneficial public uses, such as fish and wildlife, and meeting the requirements of other federal statutes and state interests. As 

experience is gained in the area of new hydropower technologies, we will make appropriate regulatory adjustments as we have in response to other technology 

changes in the past. We will work with the Minerals Management Service to develop a program for the OCS that makes the best and most efficient use of our respective resources and provides thorough analysis of environmental impacts, and we 

will continue to cooperate and consult with other federal agencies, including NMFS, 

and individual states in the licensing of new technology projects. We look forward 

to continuing to carry out the Congressional mandate in the Federal Power Act and 

performing our regulatory duties fairly, openly, and efficiently to realize the potential of this promising renewable energy resource. 

That concludes my remarks and I would be pleased to answer any questions you 

may have. 

Mr. COSTA. Thank you very much, Ms. Miles. I am sorry. A 

minute 40 over. I can’t give you the mark you were looking for. 

Ms. MILES. Sorry. 

Mr. COSTA. Well, we are being patient here today. 

Our next witness is Mr. Tim Keeney. He is the Deputy Assistant 

Secretary for Oceans and Atmosphere with the National Oceanic 

and Atmospheric Administration within the Department of Commerce. 

We are very interested in hearing your comments, especially 

queued off the last comments of the previous witness. 

See if you can stay within the five minutes. 

STATEMENT OF TIMOTHY R.E. KEENEY, DEPUTY ASSISTANT 

SECRETARY FOR OCEANS AND ATMOSPHERE, NATIONAL 

OCEANIC AND ATMOSPHERIC ADMINISTRATION, U.S. 

DEPARTMENT OF COMMERCE 

Mr. KEENEY. Mr. Chairman, Madam Chairwoman, Members of 

the committee, thank you for inviting me to appear before you 

today. I am Tim Keeney, Deputy Assistant Secretary for Oceans 

and Atmosphere at NOAA. I am pleased to be here to discuss 

NOAA’s interest and role in alternate energy and related uses in 

the Outer Continental Shelf. 

NOAA takes our stewardship responsibilities very seriously and 

recognizes the need for a safe and environmentally sound supply 

of energy. Section 388 of the Energy Policy Act places jurisdiction 

over alternate energy related uses on the Outer Continental Shelf 

with the Minerals Management Service, Department of Interior. 

24

As you have already heard from Mr. Mike Olsen, MMS is currently in the midst of mapping out a regulatory process in consultation with the Department of Commerce and other agencies and 

state governments. MMS has recently published a draft programmatic environmental impact statement or DEIS which is currently out for public review and comment. NOAA’s National Marine 

Fisheries Service and National Ocean Service are in the process of 

reviewing the DEIS and will be providing comments in the near 

future. 

Section 388 also referenced the Deepwater Port Act and the 

Ocean Thermal Energy Conversion Act. I would like to highlight 

the active role NOAA has played in each of these two regulatory 

schemes. 

The Deepwater Port Act allows for the licensing of deepwater 

ports in EEZ along our maritime coasts. Numerous energy corporations have submitted applications or have announced their intentions to apply for deepwater port licenses primarily for liquefied 

natural gas. 

In 2004, consistent with Executive Order 13212 and cooperation 

necessary by the DPA, NOAA joined other Federal agencies with 

regulatory responsibilities relevant to deepwater ports in developing and signing an MOU. The MOU is designed to expedite actions on pending and future applications for licensing deepwater 

ports. 

NOAA’s National Marine Fisheries Service is responsible for a 

variety of activities and marine and coastal ecosystems as mandated by several statutes and authorities. These activities include 

managing protected species, managing commercial and recreational 

fisheries, protecting marine and coastal habitats. 

These activities are conducted pursuant to a number of environmental laws, including the Endangered Species Act, Marine Mammal Protection Act, Magnuson-Stevens Fisheries Conservation and 

Management Act and the Fish and Wildlife Coordination Act. 

Deepwater port construction and operation may overlap with several NOAA responsibilities depending on the location and type of 

project proposed. Federal agencies authorizing activities that may 

affect any of these resources are required to consult with NMFS regarding adverse effects to these resources and habitats upon which 

they depend. 

NOS is responsible for various coastal and ocean programs that 

may be relevant to deepwater ports, Coastal Zone Management Act 

or CZMA. NOS provides and works with states to implement comprehensive coastal zone management programs and national estuarine research reserves and mediates disputes regarding CZMA 

issues. 

Under the Coastal Zone Management Act, affected states must 

concur with consistency certifications submitted with deepwater 

port applications before Federal agencies can issue permits. NOS 

also manages designated national marine sanctuaries, as well as 

provides for coastal protection and restoration activities. 

While oil and gas activities are mostly prohibited within the 

sanctuaries under the National Marine Sanctuaries Act, Federal 

actions near the sanctuaries may require consultation with the Secretary of Commerce. 

25

NOS also provides technical assistance related to nautical charts, 

coastal observing stations, geographical information systems capabilities and tide and current information. 

The DPA sets forth the criteria that the Secretary of Transportation should use to permit a facility located in the EEZ and includes a requirement to consult with NOAA on the potential environmental impacts. 

The environmental stewardship statutes referenced above required Federal departments to consult with NOAA on Federal actions that could affect protected species and resources. The purpose 

of these laws is to ensure that the proper balance is given to issues 

such as energy security, economic matters, navigational safety and 

protection of trust resources and environment. 

In this interagency process, NOAA makes recommendations and 

provides comments on potential effects to protected resources and 

possible mitigation measures and works closely with the Department of Transportation’s Maritime Administration and the Coast 

Guard to develop measures the applicant must adopt in order to 

mitigate potential effects on protected species and resources. 

In the late 1970s, there was also a period of interest in alternate 

energy sources. One of these alternatives, ocean thermal energy 

conversion or OTEC, is a process that uses the heat energy stored 

in the warm surface waters and through a temperature differential 

can produce electricity and other energy intensive products. 

The Ocean Thermal Energy Conversion Act gave NOAA lead responsibility for licensing the construction, ownership, location and 

commercial operations of OTEC plants. Following NOAA’s initial 

environmental studies and implementation of a licensing program, 

NOAA has yet to receive a license application for OTEC facilities 

or plantships. 

NOAA has a well established history of working with agency 

partners. I look forward to continuing our close collaboration with 

MMS and other participating Federal agencies in developing this 

process. 

Thank you for your time and consideration. I would be happy to 

answer any questions you might have. 

[The prepared statement of Mr. Keeney follows:]

Statement of Timothy R.E. Keeney, Deputy Assistant Secretary for Oceans 

and Atmosphere, National Oceanic and Atmospheric Administration, U.S. 

Department of Commerce 

Madam Chairwoman and Members of the Committee, thank you for inviting me 

to appear before you today. I am Timothy Keeney, Deputy Assistant Secretary for 

Oceans and Atmosphere at the National Oceanic and Atmospheric Administration 

(NOAA), in the Department of Commerce. I am pleased to be here today to discuss 

with you NOAA’s interest and roles in alternate energy and related uses in the 

outer continental shelf (OCS). NOAA and the Department of Commerce take our 

stewardship responsibilities very seriously, and we also recognize the need for an 

environmentally safe supply of energy. Per Executive Order 13212, it is Administration policy for agencies to ‘‘take appropriate actions, to the extent consistent with 

applicable law, to expedite projects that will increase the production, transmission, 

or conservation of energy.’’

Energy Policy Act of 2005, Section 388: 

As you are aware, Section 388 of the Energy Policy Act of 2005 (EPAct) placed 

jurisdiction over ‘‘Alternate Energy-Related Uses of the Outer Continental Shelf’’ 

with the Minerals Management Service (MMS) of the Department of Interior. As 

you have heard [will hear] from my friend from the Department of the Interior, 

26

MMS is currently in the process of mapping out a regulatory process, in consultation with the Department of Commerce and other agencies and state governments. 

MMS has recently published in the Federal Register a Draft Programmatic Environmental Impact Statement (DEIS), which is currently out for public review and comment. NOAA’s National Marine Fisheries Service (NMFS) and National Ocean Service (NOS) are in the process of reviewing the DEIS and will be providing comments 

in the near future. NOAA also is an ex officio member of the MMS Outer Continental Shelf Policy Committee, and its Alternate Use of the OCS Subcommittee, so 

we are in close consultation with our colleagues at MMS as they develop a regulatory scheme for alternate energy and related use of the OCS. 

To illustrate NOAA’s important role in the regulation of offshore activities, it may 

be useful to describe existing interagency efforts. Section 388 of EPAct, referred to 

above, gave the Secretary of the Interior discretionary authority over energy-related 

and other authorized marine-related activities not otherwise authorized in the OCS 

Lands Act, the Deepwater Ports Act of 1974 (DPA), or the Ocean Thermal Energy 

Conversion Act of 1980 (OTEC). As I will outline in my testimony, NOAA has an 

active role in each of these two regulatory schemes. 

Deepwater Ports Act of 1974: 

The DPA allows for the licensing of deepwater ports in the Exclusive Economic 

Zone (EEZ) along all maritime coasts of the United States. Numerous energy corporations have submitted applications or have announced their intentions to apply 

for deepwater port licenses, primarily for liquefied natural gas. In 2004, consistent 

with Executive Order 13212 and cooperation necessitated by the DPA, NOAA joined 

other agencies with regulatory responsibilities relevant to deepwater ports in developing and signing an MOU to expedite actions on pending and future applications 

for licensing deepwater ports. 

To describe NOAA’s regulatory interests in deepwater facilities, I will very briefly 

discuss some of the authorities NOAA is charged with executing. NMFS is responsible for a variety of activities in marine and coastal ecosystems as mandated by 

several statutes and authorities. These activities include managing protected species, managing commercial and recreational fisheries, and protecting marine and 

coastal habitats. These activities are conducted pursuant to a number of environmental laws including the Endangered Species Act, Marine Mammal Protection Act, 

Magnuson-Stevens Fishery Conservation and Management Act, and the Fish and 

Wildlife Coordination Act. Deepwater port construction and operation in coastal and/

or ocean areas may overlap with several NOAA responsibilities depending on the 

location and type of project proposed. Federal agencies authorizing activities that 

may affect any of these resources are required to consult with NOAA Fisheries regarding adverse affects to these resources and habitats upon which they depend. 

NOS is responsible for various coastal and ocean programs that may be relevant 

to deepwater ports. NOS administers the Coastal Zone Management Act (CZMA) 

and approves and works with states to implement comprehensive Coastal Management Programs and National Estuarine Research Reserves and mediates disputes 

regarding CZMA issues. Under CZMA Section 307(c)(3)(A), affected states must concur with consistency certifications submitted with deepwater port applications before federal agencies can issue their permits. NOS also manages designated National Marine Sanctuaries (NMS) and coastal protection and restoration activities. 

While oil and gas activities are mostly prohibited within NMS, pursuant to Section 

304(d) of the National Marine Sanctuaries Act, federal actions near NMS may require consultation with the Secretary of Commerce. NOS also may be able to provide technical assistance related to nautical charts, coastal observing stations, geographic information systems capabilities, and tide and current information. 

The DPA sets forth the criteria that the Secretary of Transportation should use 

to permit a facility located in the EEZ, and includes a requirement to consult with 

NOAA on the potential environmental impacts. Additionally, the environmental 

stewardship statutes referenced above require federal departments to consult with 

NOAA on federal actions that could impact protected species and resources. The 

purpose of these laws is to ensure that proper balance is given to issues such as 

energy security and regional and national economic matters and issues such as 

navigational safety and the protection of trust resources and the environment. 

In this interagency process, NOAA makes recommendations and provides comments on potential effects to protected resources, as well as possible mitigation 

measures. The Department of Transportation, through the Maritime Administration 

(MARAD), has the policy and legal discretion to give appropriate weight to the environmental recommendations of NOAA and to permit the facility when the Secretary 

‘‘determines that the construction and operation of the deepwater port will be in the 

27

national interest and consistent with national security and other national policy 

goals and objectives, including energy sufficiency and environmental quality.’’

NOAA works closely with MARAD and the U.S. Coast Guard to develop measures 

the applicant must adopt in order to mitigate potential effects on protected species 

and resources. This interagency process is fairly new, and is not without challenges, 

but it is a process that provides some illumination to the various and often complex 

statutes taken into consideration when licensing new offshore activities. 

Ocean Thermal Energy Conversion Act of 1980: 

In the late seventies, there was also a period of interest in alternative energy 

sources. One of those alternatives—ocean thermal energy conversion (OTEC)—is a 

process that uses the heat energy stored in the warm surface waters of the world’s 

oceans to produce electricity or other energy-intensive products. The Ocean Thermal 

Energy Conversion Act of 1980 (OTEC Act), gave NOAA lead responsibility for licensing the construction, ownership, location and commercial operation of OTEC 

plants. 

The OTEC Act directed the administrator of NOAA to establish a stable legal regime to foster commercial development of OTEC. In addition, the OTEC Act directed 

the secretary of the department in which the U.S. Coast Guard is operating to promote safety of life and property at sea for OTEC operations, prevent pollution of 

the marine environment, clean up any discharged pollutants, and prevent or minimize any adverse impacts from the construction and operation of OTEC plants. In 

addition, the Act was designed to ensure that the thermal plume of an OTEC 

plantship does not unreasonably impinge on, and thus degrade, the thermal gradient used by any other OTEC plantship or facility, the territorial sea, or an area 

of national resource jurisdiction of any other nation. An exception would be made, 

however, if the Secretary of State had approved such an impingement after consultation with a nation. The OTEC Act also assigns responsibilities to the Secretary 

of State and the Secretary of Energy regarding OTEC plants. 

There has been a low level of activity under the OTEC Act since its passage in 

1980. Following NOAA’s initial environmental studies and implementation of a licensing program, NOAA has not received any license applications for OTEC facilities or plantships. The availability and the relatively low prices of fossil fuels, coupled with the risks to potential investors, have limited the interest in commercial 

development of OTEC projects. The need to protect the environmental quality of 

ocean resources and ecosystems may outweigh the benefits of constructing OTEC facilities in certain areas. Moreover, OTEC projects have offered an unclear return on 

a significant investment. (Source: Year of the Ocean Discussion Papers, 1998) 

Conclusion 

NOAA has a well-established history of working with agency partners to ensure 

our ocean and coastal resources receive due consideration in the development of regulatory regimes for emerging and existing technologies that are in our nation’s best 

interest. I look forward to continuing our close collaboration with MMS and other 

participating federal agencies in developing this process. Thank you for your time 

and consideration. I would be happy to answer any questions you might have. 

Mr. COSTA. Thank you very much, Mr. Keeney, for your testimony. We will be looking forward to asking questions. You did go 

a little over your time though. 

Without objection, the Chair, the Chairs I should say, would like 

to ask unanimous consent to allow Mr. Inslee, the gentleman from 

Washington, to sit in the two Subcommittees. He is a Member of 

the Natural Resources Committee, but not on either of these two 

Subcommittees. We are pleased to have you here. 

[No response.] 

Mr. COSTA. Hearing no objection, all right. 

Our last witness on this panel is Mr. Ted Diers, who represents 

Coastal States Organization. 

As we know, our states have responsibilities within three miles 

of the coastal line there for states throughout the coastal perimeter, so I suspect that that is the perspective we will get from Mr. 

Diers, and we will look forward to your testimony. 

28

STATEMENT OF TED DIERS, COASTAL STATES ORGANIZATION 

Mr. DIERS. Thank you very much, Chairman and Madam Chairwoman. Thank you very much for allowing me to be here today. 

My name is Ted Diers, and I am the program manager of the 

New Hampshire Coastal Program, but today I am serving in my capacity as Vice Chair of the Coastal States Organization. The Coastal States Organization serves as a voice in Washington and elsewhere for the states and of course the territories. 

My testimony today will cover three points, and those are 1) that 

the states, territories and tribes should be partners with the Federal government in relation to Outer Continental Shelf issues; 2) 

that much more information is needed as we approach thoughtful 

management of the Outer Continental Shelf; and 3) that we really 

need to contemplate the big picture of how we are doing management of our marine waters. 

So in terms of states and territories being partners with the Federal government, I would like to highlight three reasons why a 

strong partnership is needed from the states’ perspective. The first 

is the dynamic nature of the ocean and coasts. There are lots of 

things that interact between the OCS and within the state waters. 

Second of all, there is infrastructure issues. Whatever energy is 

created on the Outer Continental Shelf has to get onto the land 

somehow, so there is infrastructure issues. 

One interesting example that we are going through right now in 

New England, and this is not necessarily a renewable energy example, but with liquefied natural gas. There is an application in 

downeast Maine, which is some 200 miles away from New Hampshire, yet in order to get that gas to the market which exists in 

Massachusetts and Connecticut additional pipeline capacity is 

going to have to be built through our coastal zone, so there are a 

lot of interrelated issues when it comes to infrastructure with offshore projects. 

Finally, affected states and local communities that are involved 

with siting of different structures really ought to have a voice in 

these decisions. The Energy Policy Act of 2005, there were some 

preemptions that were made in that Act as they related to liquefied 

natural gas. I think that the loud cry from the states is that we 

would really prefer not to see any more preemptions in this area. 

In fact, the National Governors Association has a policy out, and 

I have that here which can be entered into the record, Policy NR10, which is relative to ocean and coastal zone management. 

My second point today is that a lot more information is really 

needed for thoughtful management of the Outer Continental Shelf. 

First of all, mapping and observation I think are really key. As you 

have probably heard Dr. Robert Ballard, the undersea explorer, 

say, we have better maps of Mars than we have of the bottom of 

the Pacific Ocean. 

We need to really be thinking about how we do our mapping. The 

MMS has already started a cadastre map. This is a mapping of the 

locations of boundaries and overlapping jurisdictions. That needs to 

be funded. 

We need additional mapping such as some of the regional mapping that is going on through the Gulf of Maine Mapping Initiative 

and others like it which have already showed their importance in 

29

helping with siting decisions, especially in the area of cables. If it 

can work for cables, it can work for other things. 

Observation. You have probably heard about the Integrated 

Ocean Observation System, the IOOS. We are trying to make use 

of the IOOS by trying to get that data. In fact, last week we had 

a serious nor’easter in New England, and I was immediately onto 

the website for those buoys that were off our shore looking at what 

the wave heights were, looking at what the barometric pressures 

were. It told us we were going to have a doozie, and we did. We 

had massive destruction last week. 

All the mapping and observation needs to come together in assessments. The Ocean Commission report calls on NOAA and EPA 

to develop a system of ecosystem assessment. We feel that that is 

an excellent approach to be able to guide some of its siting decisions that will happen. 

My final point is that really a new management regime needs to 

be examined. You will hear on Thursday at a hearing about the advances in regional ocean governance. The coastal states are committed to regional ocean governance. We are pulling it together 

with our Federal partners, and we are making these efforts work. 

The West Coast has an effort, the Gulf of Mexico of course, the 

Great Lakes and now the northeast with the Northeast Regional 

Ocean Council. Energy issues are high among the priorities 

amongst those regional organizations. 

Finally, at the end I would just like to make one recommendation, and that is to look at Recommendation 24-5 of the U.S. Ocean 

Commission report which calls for a new comprehensive management regime looking at the oceans are a public resource, that we 

streamline the process for licensing and permitting, that we subsume some of the existing statutes to make it simpler and that we 

ensure that the public receives fair return on the use of the resources. 

If I could add one more bullet to that list that came from the 

ocean report it would be that the states and territories be full partners and that regional interests be taken into consideration as 

these move forward. 

Thank you very much for your time and the opportunity to speak 

here today. 

[The prepared statement of Mr. Diers follows:]

Statement of Ted Diers, Program Manager, New Hampshire Coastal 

Program, New Hampshire Department of Environmental Services 

Representatives Bordallo and Costa, and Members of the Subcommittee on Fisheries, Wildlife and Oceans and Subcommittee on Energy and Mineral Resources; 

thank you for the opportunity to appear before you today to discuss renewable 

energy opportunities and issues on the outer continental shelf (OCS). 

My name is Ted Diers, I am the program manager of the New Hampshire Coastal 

Program in the Department of Environmental Services. I am here today on behalf 

of the Coastal States Organization, where I serve as vice-chair. My comments here 

today reflect both the New Hampshire experience with renewable energy as well as 

the experience in many other states. As such, I will identify issues on which there 

is broad national consensus from coastal zone managers. Before I begin, I request 

that my written testimony be included in the record. 

This testimony will cover three main points: 

1. States and territories should be partners with the federal government; 

2. Much more information is needed for thoughtful management of OCS; and 

3. A new management regime for our nation’s marine waters is needed. 

30

First of all, I would like to thank you for taking the issues of ocean energy and 

global climate change to heart. It is gratifying to see the policies needed to create 

a climate of change beginning to take shape. 

Energy and reducing greenhouse gas emissions are both critical national needs, 

which make the possibilities of alternative energy so promising. This is a local and 

state phenomenon as well as a federal one. The State of New Hampshire is taking 

this issue seriously. At this Spring’s town meetings, 157 towns passed resolutions. 

That resolution is as follows: 

‘‘New Hampshire Climate Change Resolution

To see if the town will go on record in support of effective actions by the 

President and the Congress to address the issue of climate change which 

is increasingly harmful to the environment and economy of New Hampshire 

and to the future well being of the people of our town. These actions include:

1. Establishment of a national program requiring reductions of U.S. greenhouse gas emissions while protecting the U.S. economy.

2. Creation of a major national research initiative to foster rapid development of sustainable energy technologies thereby stimulating new jobs 

and investment.

In addition, our town encourages New Hampshire citizens to work for emission reductions within their communities, and we ask our Selectmen to consider the appointment of a voluntary energy committee to recommend local 

steps to save energy and reduce emissions.’’

This resolution and much of Congress’ work on climate change is focused on reducing greenhouse gases, which is a critical thing to do. I urge you to also include 

the issues of adaptation and mitigation in your legislative deliberations. Even if all 

greenhouses gases emissions were stopped tomorrow, the effects of climate change 

would continue for decades. Coastal states are literally on the front lines of sea level 

rise and we need more resources and tools to conduct assessments and develop models of the potential future impacts; develop adaptation and response strategies; and 

increase the resilience of coastal communities. 

Concerning greenhouse gas reduction at the state level, Governor John Lynch has 

endorsed the ‘‘25 by 25’’ initiative—that is 25% of our energy will be produced from 

renewable sources by 2025. New Hampshire already obtains 14% of its energy from 

renewable sources. We will accomplish the 25% goal in a variety of ways, some of 

which are already well underway. Given that our state is 80% forested, wood power 

is a viable source of energy, and a new facility was just build on our shore. Last 

week, the Town of Salem planning board approved the first in the state biofuel 

plant. The first land-based wind power facility is likely to be constructed this year. 

And, importantly, Renewable Portfolio Standards for the state are working their 

way through the Legislature. This will require all power producers to include a certain percentage of renewables to make up energy portfolio. Finally, New Hampshire 

exports about twice as much power as we use so energy is an important commodity 

to the state. 

We may be able to achieve our 25% renewable target within the bounds of our 

small state, however, it is clear that achieving that sort of goal on the national scale 

will likely require a significant ocean based component. And, the likely place for 

that power generation is the last frontier for America—the outer continental shelf. 

However, alternative energy development on the OCS needs to be done thoughtfully and in coordination with other programs, activities and resources. The U.S. 

Ocean Commission report, ‘‘An Ocean Blueprint for the 21st Century,’’ has a number of recommendations that are germane to this subject. I will refer often to that 

report because, as the report titles itself, it is a blueprint for moving forward. 

I hope that this hearing will be the start of an intense process to act on those 

relevant recommendations. As mentioned above, I will cover three main points as 

they relate to creation of a comprehensive policy for renewable energy on the OCS. 

I. States and territories should be partners with the federal government. 

As Congress determines the regulatory structure for alternative energy and other 

development on the OCS, it is imperative that the states have a meaningful voice 

in how these decisions are made. I would like to highlight three reasons for a strong 

partnership between the states and the federal government regarding activities in 

the OCS. 

First, what happens on the OCS can impact state resources. As you are all well 

aware the ocean is a dynamic place where species can travel over long distances and 

the currents and tides can carry things hundreds of miles, often coming to rest onshore in a state. Given the dynamic nature of the ocean and coast, we strongly recVerDate 0ct 09 2002 10:56 Oct 04, 2007 Jkt 098700 PO 00000 Frm 00036 Fmt 6633 Sfmt 6621 L:\DOCS\34981.TXT Hresour1 PsN: KATHY
31

ommend that Congress consider all potential impacts and not just impacts to an individual site. With the knowledge of their coastal waters, the states can aid the federal government in ensuring that all potential impacts are taken into account. 

A second reason for ensuring a strong state partnership is that eventually the 

coastal states will have to address the impacts of infrastructure that will deliver the 

energy onshore. If the federal government sites facilities on the OCS without having 

considered the entire scope of all infrastructure then unintended consequences could 

result, such as the applicant encountering difficulties in obtaining the necessary 

state permits even with their federal permits in hand. An example from New Hampshire illustrated how infrastructure issues can be quite complicated. The recent application of the LNG facility in Quoddy Bay in downeast Maine may provide needed 

natural gas to New England. However, Quoddy Bay is a long way from the people 

who need the gas down in Massachusetts and Connecticut. Thus, the gas must be 

piped across four states, including New Hampshire. So, additional pipeline capacity 

with all of its accompanying impacts will be installed through our coastal communities. Any alternative energy development on the OCS should require that the 

land-based component be included in the federal permit and that state approval is 

necessary for portions of the project in the state or potentially affecting state resources. 

Third, we believe that affected states and local communities should be involved 

and have a voice in these decisions. The coastal states do not want to see a repeat 

of the provisions in the Energy Policy Act of 2005, where state sovereignty was preempted by the Federal Energy Regulatory Commission (FERC). In the Energy Policy 

Act, FERC was given ‘‘exclusive authority’’ to approve or deny permits for the siting 

of LNG facilities. Congress also included a saving clause for states’ authority of the 

Coastal Zone Management Act, which should have required that FERC be consistent with state enforceable policy in the coastal zone. Unfortunately, federal 

courts are reading the law to say states cannot explicitly place conditions on the 

siting of LNG facilities. Under this interpretation, local communities’ voices and 

opinions concerning the siting of LNG facilities in their neighborhoods have largely 

been silenced. The states believe that local communities deserve to be heard on 

these issues. The Governors recently reiterated their support of maintaining state 

sovereignty in decisions regarding energy siting when they passed their Ocean and 

Coastal Policy (NR-10) at their Winter meeting in February of this year. I would 

request that this policy be incorporated into the record. 

II. Much more information is needed for thoughtful management of the 

OCS. 

When I go to work in the morning, and an issue comes up regarding the siting 

of any type of facility on the land, I can sit down at my computer and have immediate access to dozens of map products, hundreds of environmental monitoring 

datasets, and detailed photography and visualization tools. That allows for informed 

decision-making. As soon as a similar issue leaves the shoreline, those dozens of 

map products are reduced to a handful, the datasets can be measured in dozens, 

and I have precious few ways to visualize offshore resources. Last Tuesday, the Federal Energy Regulatory Commission (FERC) approved two preliminary permits for 

tidal energy turbines in New Hampshire waters. There is great interest in tidal 

energy in the Piscataqua River, which has some of the fastest currents of any river 

in America. However, we lack much of the necessary information to make a thoughtful decision, especially as it pertains to natural resources and how they are impacted by new technology. We do not know if these turbines are a largely benign 

source of consistent, dependable energy, or have the potential to create a puree out 

of migrating fish. While this is not an OCS application, the point is that we do not 

have the information for project siting adjacent to shore; the difficulties 100 miles 

offshore are much greater. 

The key components of the information needs for OCS management include—

mapping, observation, technology and assessment. These components are discussed 

below: 

Mapping 

There is a strong need for proactive thinking and resolution of spatial planning, 

especially as it pertains to jurisdictions. I note that the Minerals Management Service (MMS) has started a marine cadastre initiative as a requirement under the 

Energy Policy Act of 2005. It is defined as ‘‘a system to enable the boundaries of 

marine rights and interests, to be recorded, spatially managed, and physically defined in relationship to the boundaries of other neighboring or underlying rights and 

interests’’, with the goal of the ‘‘Identification of OCS locations of Federally permitted activities; obstructions to navigation; submerged cultural resources; undersea 

32

cables; offshore aquaculture projects; and any area designated for the purpose of 

safety, national security, environmental protection, or conservation and management of living marine resources.’’ See http://www.mms.gov/ld/PDFs/Mapping

Initiative.pdf. This is critical and should be given the resources to be competed 

quickly. 

As Dr. Robert Ballard, the deep sea explorer, has stated many times, ‘‘We have 

better maps of Mars than we do of the Pacific Ocean.’’ As renewable energy projects 

in the OCS begin to take shape, we need a great deal more information to inform 

the siting and decision-making process. 

The Minerals Management Service has been mapping the OCS for many decades. 

However, that mapping has been focused on the extraction of minerals and fuel 

products. In addition, the intensity and accuracy of mapping is greatest in those 

areas which currently have production. We need planning that is not solely focused 

on one type of natural resource. 

There are numerous national efforts to conduct mapping of our oceans. One such 

effort is the Gulf of Maine Mapping Initiative (GOMMI), a U.S.-Canadian partnership of government and nongovernment organizations to conduct comprehensive 

seafloor imaging, mapping, and biological and geological surveys. GOMMI grew out 

of a mapping workshop in October 2001 that was sponsored by the Gulf of Maine 

Council on the Marine Environment and the National Oceanic and Atmospheric Administration. The Gulf of Maine Council endorses GOMMI, and the GOMMI Steering Committee is a subcommittee of the Council. Currently, GOMMI is working to 

secure funding and conduct a mapping program of areas in the Gulf of Maine not 

already mapped by multibeam sonar surveys. The key data products that will 

emerge from GOMMI are habitat maps that interpret biological and geological data 

to show types of sediment and animals in a particular area. These data products 

have already resulted in some victories, such as the successful routing of an underwater cable to avoid key aquatic habitats off the coast of Massachusetts—a result 

that is good for the environment and good for commerce. And it all started with 

good information 

Observation 

Mapping refers to data about things that change relatively slowly or not at all. 

Observation refers to the condition of those things and about changes over time. As 

you are well aware, the science of observation has and is changing rapidly. From 

satellites to buoys to volunteer water quality monitoring, our ability to monitor the 

environment is improving rapidly. One such area is the Integrated Ocean Observation System (IOOS). IOOS, once completed, will be a ‘‘system of systems’’ that routinely and continuously provides quality controlled data and information on current 

and future states of the oceans and Great Lakes from the global scale of ocean basins to local scales of coastal ecosystems. It is a multidisciplinary system designed 

to provide data in forms and at rates required by decision makers to address seven 

societal goals, which are: 

1. Improve predictions of climate change and weather and their effects on coastal 

communities and the nation; 

2. Improve the safety and efficiency of maritime operations; 

3. Mitigate the effects of natural hazards more effectively; 

4. Improve national and homeland security; 

5. Reduce public health risks; 

6. Protect and restore healthy coastal ecosystems more effectively; and 

7. Enable the sustained use of ocean and coastal resources. (Source: 

www.ocean.us) 

The real point of the IOOS is not to float a bunch of buoys around in the ocean, 

rather it is to make sense of all the mapping and observation data that is collected 

from a variety of sources. I am a user of IOOS data, as delivered by the Gulf of 

Maine Ocean Observing System (GOMOOS). Last week as our coast was beaten by 

a significant Nor’easter, my first stop to look at the storm was the GOMOOS 

website to look at the current ocean conditions. What the buoys showed were 30 foot 

waves. GOMOOS makes sense of that data relative to other data, such as barometric pressure, which was as intense as in a hurricane. Based on that information, 

we knew that this storm was going to do a number of our shoreline. And it did. 

Technology 

One of the reasons we are all gathered here today is because technology is progressing faster than policy. The point is not to slow down the technology but to create policy that can keep up with it. 

We need more information on new and changing technologies. Wind is a good example. Most of you are probably familiar with the proposed Cape Wind project in 

33

the waters south of Massachusetts. In the more than 5 years it has taken for Cape 

Wind to get through the state regulatory process, technology advancements have allowed them to reduce the number of towers, shrink the height and increase energy 

output. Much of the controversy around this project is because the towers are to be 

located in relatively shallow water. Getting information about new technologies is 

also tricky, as many of the new ocean-based renewable energy technologies are either in preliminary development or are continually being refined. We are told that 

deep water wind technology is still years away, but how many years? Will we have 

the time to create a better regulatory regime before those applications come streaming in? 

Finally, there are technologies that we can barely imagine that could end up in 

the ocean. It should be clear from the rapid changes in the past decade that future 

ocean energy technologies may look very different than the structures we are discussing today. And, the regulatory regime needs to be adaptable to that uncertainty. 

Assessment 

Mapping, observation and understanding technology is meaningless without 

translating that information into understandable assessments of ocean resources. 

One key method for that is Ecosystem Based Management (EBM), a management 

approach that: 

• Integrates ecological, social, and economic goals and recognizes humans as key 

components of the ecosystem. 

• Considers ecological—not just political—boundaries. 

• Addresses the complexity of natural processes and social systems and uses an 

adaptive management approach in the face of resulting uncertainties. 

• Engages multiple stakeholders in a collaborative process to define problems and 

find solutions. 

• Incorporates understanding of ecosystem processes and how ecosystems respond 

to environmental perturbations. 

• Is concerned with the ecological integrity of coastal-marine systems and the sustainability of both human and ecological systems. (Source: www.ebmtools.org) 

Ecosystem Based Management should be a component of any ocean management 

regime. However, it requires excellent information and analysis to make it work. 

One suggestion for moving the ideals of EBM forward was made in the U.S. Ocean 

Commission report. 

Recommendation 5-5 from that report calls on the National Oceanic and Atmospheric Administration (NOAA) and the U.S. Environmental Protection Agency 

(EPA), working with other appropriate federal and regional entities, to coordinate 

the development of regional ecosystem assessments. These assessments would be invaluable for comprehensive OCS resource planning. 

Good information will allow us to be proactive and get ahead of the curve, instead 

of simply reacting to a permit when it comes in the door. I urge to you to take these 

recommendations under serious consideration as you ponder the future of the OCS. 

Good mapping, observational data and assessment is absolutely critical to the longterm health of our managed ocean ecosystems. 

III. A new management regime for the OCS is needed. 

As your Subcommittees take up the issue of OCS development, I would ask that 

you also take a step back and fit the program into a broader framework. As the U.S. 

Ocean Commission recognized in its final report, a coordinated, integrated management regime for our oceans is sorely needed. (See Recommendations 6-1 and 6-2), 

and alternative energy needs to be part of that regime (Recommendation 24-5). Currently, the uses of our ocean are all regulated separately, fisheries in one agency, 

energy in another, sediment management in another, shipping and maritime activities in another. No government agency or body is charged with looking across the 

stovepipes of programs to see how all of the different uses of our oceans fit together. 

This needs to change. 

To improve coordination and management of the nation’s ocean resources, the 

U.S. Ocean Commission recommended a framework for regional ocean governance 

(See Chapter 5). The states have taken up the challenge and are leading the way 

in trying to improve the coordination of government activities in our marine waters. 

Don’t take our word for it; The Joint Ocean Commission Initiative’s Report Card 

issued in January of 2007 gave the states and regional efforts the highest grade: 

an A minus. 

Since the release of the Commission report, the Governors of the five Gulf of Mexico states have released a plan to improve the health and resilience of the Gulf 

coast, The three West Coast Governors of California, Oregon and Washington, have 

signed the West Coast Governors Agreement for Ocean Health and plan to have an 

34

action plan completed by the end of this year. The Great Lakes have developed the 

Great Lakes Regional Collaboration Strategy, which involved hundred of stakeholders from around the region. In my home region, the Northeast Governors have 

created the Northeast Regional Ocean Council. NROC will work to harmonize subregional ocean initiatives, identify shared priorities, promote regional solutions and 

to raise ocean awareness. NROC identified four core ocean management areas for 

a regional management: 

• Ocean energy resource planning and management 

• Ocean and coastal ecosystem health 

• Maritime security 

• Coastal hazard response and resiliency 

New Hampshire is hosting a Regional Ocean Congress in May. At that meeting 

we will be to define our priorities within each those core management areas. Similarly the West Coast Governor’s Agreement also names energy siting and renewable 

development as one of their seven priorities. The regional councils are learning from 

each other as they move forward. 

The states believe that federal legislation would be helpful to advance these regional efforts. Such legislation should codify these regional efforts as coordinating 

bodies that are supported with federal resources. The coastal states have specific 

recommendations concerning principles and provisions that we believe should be included in regional legislation and many of them are outlined in the National Governors Association’s Ocean and Coastal Policy I referenced earlier. NOAA should be 

one of the lead federal agencies in all of these regional governance efforts. 

I would like to end by focusing on one of the recommendations from the U.S. 

Ocean Commission Report. Recommendation 24-5 states that Congress, with input 

from the National Ocean Council, should enact legislation providing for the comprehensive management of offshore renewable energy development as part of a coordinated offshore management regime. Specifically, this legislation should: 

• be based on the premise that the oceans are a public resource. 

• streamline the process for licensing, leasing, and permitting renewable energy 

facilities in U.S. waters. 

• subsume existing statutes, such as the Ocean Thermal Energy Conversion Act. 

• ensure that the public receives a fair return from the use of the resource and 

that development rights are allocated through an open, transparent process that 

considers state, local, and public concerns. 

And if I may add one more bullet to that list, to involve states and regional interests as full partners in the discussion. While this ends my testimony, I hope it will 

be a starting point for your deliberation. 

Response to questions submitted for the record

by Ted Diers, Coastal States Organization 

Questions from Chairman Costa: 

Your testimony makes the excellent point that we need good information 

to make good decisions. You note that the Energy Policy Act of 2005 directed the Minerals Management Service to undertake a mapping exercise 

to guide our federal permitting activities on the Outer Continental Shelf, 

to gain increased awareness of key marine habitat and aquaculture 

projects, among other information. Two questions: 

Would you recommend a different mapping approach, something similar to 

the Gulf of Maine mapping project that you mention? 

More mapping is critically needed, particularly bottom habitat mapping. There 

really should be a partnership between federal agencies, states and NGOs, and federal funds should be made available for coordinated efforts like the Gulf of Maine 

Mapping Initiative (GOMMI) to help move mapping along more efficiently. The 

GOMMI is a good model for getting those types of maps, but what is also needed 

is interpretation of the maps into map products that can be used by a variety of 

constituent groups. This interpretation/translation step is often missed when creating mapping initiatives. Also, cadastral mapping that is currently being conducted 

by MMS is part of the needed approach. 

35

Do you think we should slow progress toward renewable energy development on the Outer Continental Shelf until that mapping endeavor is 

further advanced, or we have better baseline data—or should we in other 

ways try to ensure that better mapping is factored into siting, review, 

permitting/management decisions? 

I do not think that we should slow progress on renewable development, rather we 

should rapidly increase the pace of mapping. Moving forward, sites (lease blocks) 

proposed for leases should be mapped and inventoried but this should not hold up 

projects already in application stage. In addition, until we have a better documentation of the undersea resources, experts at NOAA, the states and regional entities 

need to have a higher profile in the siting process. 

Your testimony looks ahead to the likely time when technologies are 

advancing even more quickly for ocean-based renewable technologies, and 

you underscore that our federal policies will need to be able to keep up 

with those rapid changes. How would you recommend that we make our 

regulatory regime adaptable to such change and uncertainty? 

We need more formalized governance structures for federal and state interagency 

efforts so alternative energy projects can be looked at with all the other competing 

uses on the outer continental shelf. We also need an information revolution for our 

coastal and offshore waters so we can eventually be proactive in the siting of these 

projects instead of simply reacting to each individual permit. 

Other ideas include close coordination with the industry and states to help track 

technological advances. The regulatory structure should have a route for smaller 

scale pilot or test projects of new technology to enable further testing in situ and 

an opportunity to identify the potential environmental impacts in large scale deployments. 

Mr. COSTA. Thank you very much, Mr. Diers. How many states 

are included in your organization? 

Mr. DIERS. Thirty-five states and territories, sir. 

Mr. COSTA. OK. That is a lot of coastline. 

Mr. DIERS. That is a lot of coastline, sir. 

Mr. COSTA. Mr. Olsen, you talked about this process that you 

have been engaged in now with regards to developing the various 

efforts for the progress on the programmatic EIS for the renewable 

energy on the Outer Shelf. 

I thought you referenced a timetable on the rules and the final 

environmental impact statement, but could you restate them for 

me? 

Mr. OLSEN. Sure. Let me just make sure that I get my facts 

straight here. The numbers that I gave you are the final programmatic EIS is on schedule for publication toward the end of 

this summer of 2007, and then we are also——

Mr. COSTA. August? September? 

Mr. OLSEN. I would say August probably. 

Mr. COSTA. OK. 

Mr. OLSEN. We are also developing regulations to implement the 

new Environmental Policy Act authority. 

Mr. COSTA. That will go through the timelines through the Federal Register and be published for comments and all of that? 

Mr. OLSEN. Exactly. 

Mr. COSTA. OK. 

Mr. OLSEN. Yes, sir. 

Mr. COSTA. So based on that timeframe, when do you expect to 

begin issuing permits for some of these projects on the Outer Continental Shelf? 

Mr. OLSEN. Well, I don’t know. I don’t know. 

36

Mr. COSTA. That is sort of an answer. You don’t know, meaning 

I suspect there will be applications? 

Mr. OLSEN. It depends on the applications. It depends on the applications that we have. Based on the rough timeline, we would 

hope to be issuing them as soon as possible. 

Mr. COSTA. The end of this year? Next year? 

Mr. OLSEN. I don’t have——

Mr. COSTA. I mean, do you have an idea of how long that time 

process will take once the first permits are applied for? 

Mr. OLSEN. Off the top of my head I don’t. 

Mr. COSTA. OK. Do you envision any new staff for support? I 

mean, let us say you get 50 or 100 of these permits for wind or 

some efforts on pilot projects on wave projects. 

Mr. OLSEN. In terms of staffing, I would say that we would do 

the best with the resources that we have. If there are a number 

of applications and there is a workload that comes in that requires 

additional staff then we would certainly look at putting on more 

staff. 

Mr. COSTA. My concern is that you are being anticipatory in this 

effort. I mean, I appreciate your candidness that you don’t have answers, but it seems to me that what you are saying is that based 

upon what happens later this year or next year you may come to 

us and say we have all of a sudden 100 or 200 permits, and we 

don’t have enough people. It will take us two and a half years to 

process them. You don’t know? 

Mr. OLSEN. I don’t know. 

Mr. COSTA. OK. Duly noted. 

Ms. Miles, you talked about the flexible approach, and you used 

as your pilot project those in Makah Bay and Roosevelt Island. 

Those are interesting I think, and maybe they serve as a good 

starting point. 

Can you provide some examples on how FERC, the Federal 

Energy Regulatory Commission, may establish additional flexibility 

and creativity regarding the new technologies for both hydropower 

as you deal with your cooperation or your collaboration, I should 

say, with the other agencies? 

Ms. MILES. Well, I think we have already established our flexibility in seeking out comments from all state and Federal agencies 

and all stakeholders about——

Mr. COSTA. The states? Have all 35 states commented? 

Ms. MILES. No. No, not all states participated in our conference, 

but they all had the opportunity to participate. 

Mr. COSTA. Could you for the record give us an indication of 

those who actually did participate, please? 

Ms. MILES. Yes, I would be happy to do that. 

Mr. COSTA. Thank you. 

Ms. MILES. As a result of comments that we received, we have 

changed our preliminary permit program to provide stricter scrutiny and to actually issue a policy of inquiry—comments are due 

by the end of this week—to solicit more input on how that could 

be adapted better for ocean energy projects. 

Mr. COSTA. OK. My time is running out. Mr. Keeney, with the 

scope of the committee’s jurisdiction here can you summarize your 

37

concerns regarding the expected process for the siting and regulating of these various projects on the Outer Continental Shelf? 

Mr. KEENEY. Mr. Chairman, we comment through the licensing 

agency on areas of natural resources. 

Mr. COSTA. And so your criteria is based upon ecosystem 

functionality and assessment, monitoring and those kinds of 

things? 

Mr. KEENEY. Yes. It all depends on to what extent the resources——

Mr. COSTA. Have you developed that criteria? 

Mr. KEENEY. The criteria for review? 

Mr. COSTA. Yes. 

Mr. KEENEY. We have been involved in it for years. 

Mr. COSTA. And so you know precisely where you are going to 

focus on your assessment and your monitoring? 

Mr. KEENEY. Well, assuming we have investigated the area that 

is being impacted, which again assumes that we have a model. 

Mr. COSTA. It is safe to assume? 

Mr. KEENEY. I think it is fairly safe. We have a pretty good idea. 

If it is a marine sanctuary, if it is an estuarine research reserve, 

we have a pretty good idea what is in there. 

Mr. COSTA. All right. My time has expired, and I will recognize 

the gentleman from New Mexico, Mr. Pearce. 

Mr. PEARCE. Thank you, Mr. Chairman. 

Ms. Miles, we have heard some of the problems that existed between MMS and FERC. Now it is my understanding from the testimony that you all probably have resolved those in trying to coordinate. You basically have the memorandum of understanding as described by Mr. Olsen. Is that correct? 

Ms. MILES. We are in the process of working out a memorandum 

of understanding. It is going quite well right now from our perspective, and we expect something in the near term. 

Mr. PEARCE. OK. Now, Mr. Diers has commented that states and 

other stakeholders are not involved in your process. Do you take 

comments from all the stakeholders? 

Ms. MILES. In both the licensing and the natural gas LNG process, all stakeholders have several opportunities to comment both 

before the application is filed and afterwards. 

Mr. PEARCE. How would you rate your agency, Ms. Miles, as far 

as getting the permits done? In other words, not to get them accomplished, but to give an answer yes, they are suitable, or, no, 

there are problems to the environment. How do you rate your agency? 

Ms. MILES. I think we are doing an excellent job right now. We 

were a bit slow on hydropower probably four or five years ago. We 

have done a number of things to try to get at those issues which 

we had, which was not enough information in the application when 

it was filed, and coordination with the other Federal and state 

agencies that have to issue permits. 

Our new process has everybody at the table at the beginning, 

and it is working very well. We expect that we will be processing 

applications in 18 months. 

Mr. PEARCE. Thank you. 

38

Mr. Keeney, you refer to the OTEC. Do you perceive that the 

OTEC is in conflict with the Energy Policy Act as far as describing 

the agency of jurisdiction? How do you all perceive that as far as 

energy projects? 

Mr. KEENEY. We don’t perceive any conflict there. 

Mr. PEARCE. In other words, you are an agency of record. I am 

not sure if I am using the right terminology, but under the OTEC 

you are the agency? 

Mr. KEENEY. We are the permitting agency under the OTEC. 

Mr. PEARCE. But you are not the permitting agency under the 

Energy Policy Act, and you don’t find that to be a conflict? 

Mr. KEENEY. No, we don’t. 

Mr. PEARCE. I was curious because you described that not many 

projects have occurred under OTEC since the 1980s, page four of 

your testimony. 

Mr. KEENEY. Right. 

Mr. PEARCE. And yet when I hear Ms. Miles, she describes 20 

and 30 and 40 and 11, you know, so I feel the sense of a flurry of 

activity from Ms. Miles. 

Do these projects have any similarity at all? In other words, 

yours involve energy production from the ocean and so what is the 

difference there that she describes a flurry of activity and you describe almost no activity? 

Mr. KEENEY. Well, what I said was that we have had no applications before us yet, even though we have had regulations that we 

put in place years ago, which are no longer current, by the way. 

There is an application I understand that is developing in the 

Pacific, but we have yet to see it. 

Mr. PEARCE. But you heard the testimony of Ms. Miles. It sounded like several, 11 one year, 44 in another two-year period. Are 

these comparable? Am I hearing different things? 

Ms. Miles, would you like to address that? 

Ms. MILES. The projects that we have before us recently are the 

wave energy projects, primarily tidal. That technology is somewhat 

more developed than the wave energy itself. I can’t comment on the 

disparity. 

Mr. PEARCE. OK. 

Ms. MILES. I can only tell you what we do. 

Mr. PEARCE. That is fine. 

Mr. Keeney, in your testimony on page 4 again you declare that 

the reason that you don’t have many projects is the low price of fossil fuels now. 

In 2003, the price began to move toward $70, and I will tell you 

if anything is going to be economic, it is going to get economic at 

$70 a barrel of oil. What do you think is the impediment at this 

point? 

Mr. KEENEY. I think there is a science part of it with regards to 

actually how do you produce the energy. Price obviously is a factor. 

Mr. PEARCE. OK. 

Mr. KEENEY. But also experience is another one. 

Mr. PEARCE. So we are quite a ways away, in other words? The 

technology doesn’t exist to draw much energy from these? 

There is a lot of potential or kinetic—I don’t remember exactly; 

I didn’t study that part of science class very well—which has a lot 

39

of action going on out there, but not much way to convert it. Is that 

it? 

Mr. KEENEY. Right. There has been talk about it for about 35 

years. 

Mr. PEARCE. OK. 

Mr. KEENEY. There has been more talk recently, but it is still 

talk. 

Mr. PEARCE. OK. Thank you, Mr. Chairman. I see my time has 

elapsed. Madam Chair. Excuse me. 

Ms. BORDALLO. [Presiding.] Thank you very much, Mr. Pearce. 

I would like to just state that the Co-Chair here had a meeting 

to attend to, so Mr. Costa will be out for some time and I will take 

over. 

Mr. PEARCE. The improvement is obvious from the beginning, 

Madam Chair. 

Ms. BORDALLO. Mr. Mike Olsen, I have a question for you. The 

Energy Policy Act of 2005 gave the Minerals Management Service 

the authority to regulate marine related activities authorized by 

Congress. 

Now, the draft environmental impact analysis released by MMS 

has a large section discussing aquaculture. Is MMS planning on developing an aquaculture program? 

Mr. OLSEN. The authority given to the Department of the Interior through the Energy Policy Act, Section 388 of the Energy Policy Act, deals with not only alternative energy, but alternative uses 

of existing energy facilities, rigs, things that are already in place. 

One of the programs that we contemplate as being looked at as 

part of that would be the examination of aquaculture type projects. 

Ms. BORDALLO. Aquaculture. Is the Commerce Department doing 

much the same? 

Mr. KEENEY. I can answer for that, Madam Chair. 

Ms. BORDALLO. Yes? Please. 

Mr. KEENEY. We are very much involved with aquaculture and 

very interested in using offshore facilities to support aquaculture 

and have been in discussion with your counsel’s office and other 

regulatory folks within MMS about that very subject so that NOAA 

and MMS are working together on this. We are not working 

against each other. 

Ms. BORDALLO. You wouldn’t say it is a duplication? 

Mr. KEENEY. Not at all. 

Ms. BORDALLO. All right. The next question I have is for Mr. 

Keeney. 

NOAA’s role. Of all the agencies at the witness table today, 

NOAA is the clear leader in terms of marine resource expertise. 

How are we going to ensure that NOAA’s expertise is considered 

during the project approval process? 

What role do you envision for NOAA to ensure compliance with 

the Endangered Species Act, the Marine Mammal Protection Act 

and the Magnuson-Stevens Act and other marine laws? Has NOAA 

discussed with MMS how the conservation requirements of living 

resources will be addressed, and what do you contemplate? 

Mr. KEENEY. NOAA reviews projects to help minimize impacts on 

living marine resources and their habitats. Since the year 2002, we 

have also been involved with wind and LNG; since 2004, 

40

hydrokinetics; since 2005 with the alternative energy uses on the 

OCS. 

NOAA’s habitat programs give substantial attention to ocean, 

coastal and marine energy development. All NOAA programs work 

together to develop consistent and integrated messages. 

We have had no problem at all in our consultation role. However, 

NOAA is not in approving or denying OCS proposals. I mean, that 

is not our function, but it is really one of conducting consultation 

with the licensing agencies to ensure that NOAA entrusted resources are conserved. 

We believe that the lines of communication there are open. We 

have good abilities to discuss with our licensing agencies and coagencies, the Federal agencies who have the responsibility to provide the license. We have open lines of communication with regards 

to providing our concerns, and our job is to make sure that they 

be addressed in the balance of trying to determine how to go forward. 

Ms. BORDALLO. Do you feel they are going to be active? 

Mr. KEENEY. We are very active, yes. In fact, I daresay we are 

probably the most active of all the agencies providing consultation, 

consultative services. 

Ms. BORDALLO. Good. I would like to also comment on Mr. Ted 

Diers’ Coastal States Organization. 

I was very pleased that you mentioned states and territories. You 

know, it is very seldom in the U.S. Congress when they mention 

the states they ever mention territories, and we are very much a 

part of the U.S. family. 

I am curious. Your Coastal States Organization, what territories 

belong? 

Mr. DIERS. We have American Samoa, Hawaii. Well, Hawaii is 

a state. Sorry. I was just thinking Pacific. We have the North Marianas, of course Guam, Puerto Rico and the Virgin Islands I believe 

rounds out the group. 

Ms. BORDALLO. You have made my day. That is all of them. 

Mr. DIERS. Thank you. 

Ms. BORDALLO. Thank you very much. 

I would like now to recognize Mr. Frank Pallone, the gentleman 

from New Jersey and to remind him that Committee Rule 3[c] imposes a five minute limit on questions. 

Mr. PALLONE. Thank you, Madam Chairwoman. 

I wanted to ask Mr. Olsen my questions just because I only have 

the five minutes. These alternate energy-related uses being considered for the Outer Continental Shelf involve the installation of industrial facilities in many cases. 

You know, there is particularly concern in New Jersey over the 

windmills; that they might provide clean power, but if they are 

large, stationary, moving parts, you have lubricants, oil, other substances that might pollute the environment. 

First of all, when you talk about alternate energy-related uses 

what kinds of industrial facilities or structures would that entail? 

If you could tell me briefly what kinds of things? I know windmills, 

but what else? 

Mr. OLSEN. Now, do you mean alternate use, or are we talking 

alternative energy structures? 

41

Mr. PALLONE. Alternative energy structures. 

Mr. OLSEN. Structures. Well, windmills of course. There are devices that go out offshore—I don’t know how best to explain it—

that capture wave motion. There are turbines that go out underneath the water, under the surface of the water, that turn and capture the motion of the ocean current. 

Mr. PALLONE. What do we know about the impacts of those facilities on marine life in the OCS region? Has any work been done on 

that, or is that what you are working on right now? 

Mr. OLSEN. That is what we are looking at now with our programmatic EIS, as well as our examination of the broad program 

or looking at the environmental stuff, as well as the promulgation 

of our rules. 

Mr. PALLONE. Are there any plans to study how the facilities 

would affect fisheries and how fisheries management processes 

should adapt? 

Mr. OLSEN. Are there studies being done? 

Mr. PALLONE. What you are looking at now. 

Mr. OLSEN. Yes. 

Mr. PALLONE. To what extent would they look at the impact on 

fisheries? 

Mr. OLSEN. I don’t know. I don’t have a specific number or figure 

for you, but I know that the scope of the EIS is quite broad, looking 

at everything from environmental effects to socioeconomic effects to 

effects on view sheds, everything from——

Mr. PALLONE. Can I ask Mr. Keeney of NOAA? Would you be 

able to answer that or give me more specifics? 

Mr. KEENEY. Well, I am not sure about the specifics, but I can 

tell you that the NOAA terms and conditions that are provided address monitoring for marine mammal, seabird, marine debris entanglement, anchoring system, transmission cable integrity and 

seabed impacts and initial measurement of noise levels and electromagnetic fields with monitoring required if known disturbance levels were exceeded. 

A unique aspect of this project, and I am talking about the 

Makah project here, the Finavera Aqua Energy Project, which is 

the one that we are looking at right now. The unique aspect of this 

project is the absence of precedent and environmental assessment 

from other wave energy or similar projects. 

Mr. PALLONE. Let me ask you this, because I know I don’t have 

much time. Going back to Mr. Olsen, do you have any application 

pending from off the coast of New Jersey? I know there is at least 

one out that has been pending from other states. Is there anything 

from New Jersey? 

Mr. OLSEN. Let me see. No, not that I am aware of. 

Mr. PALLONE. OK. What about the CZMA Act that gives the 

coastal states authority and primacy with regard to activities, the 

consistency determination? 

Mr. Diers recommended that the Federal permit for alternative 

energy projects include approval from the affected state. What is 

your reaction to that recommendation, or how would you coordinate 

with states to approve a project? 

Mr. OLSEN. Well, currently as we go through this process of promulgating regulations and working on this programmatic EIS we 

42

have been working quite extensively with the coastal states, participating in meetings and——

Mr. PALLONE. But I mean in terms of the approval process, because my time is running out. Will the states have the ability to 

veto it? What would be their role in terms of approving a project? 

Mr. OLSEN. I think that would depend on what we come up with 

in terms of regulations. I don’t think we have come to that. I don’t 

think we have made that determination at this point. 

Mr. PALLONE. So the consistency determination under the CZMA, 

would that kick in for like an offshore windmill, for example? 

Mr. OLSEN. I am not an expert on the CZMA. I am not. 

Mr. PALLONE. Sure. If you want to answer? 

Ms. MILES. I can speak to it for a hydropower project. It would 

be necessary before we could issue any kind of a license would be 

a determination under the Coastal Zone Management Act of consistency with——

Mr. PALLONE. Do you think that would be true of a windmill too? 

Ms. MILES. I don’t know about windmills. No. 

Mr. PALLONE. But it might be for some of these industrial uses, 

for some of these industrial facilities possibly. All right. Thank you. 

Ms. BORDALLO. Thank you. Thank you very much. 

The Chair now recognizes the gentleman from Washington, Mr. 

Inslee. 

Mr. INSLEE. Thank you. Madam Chair, thank you for allowing 

me to participate. 

I just want to note that we will be introducing today the Marine 

and Hydrokinetic Renewable Energy Promotion Act of 2007, which 

is going to help this industry get going in a variety of ways with 

some tax credits and the like, so we are very interested in the regulatory structure to allow that to blossom. I believe there is a real 

future off our coastlines, and I look forward to working with any 

of you to try to see that come to fruition. 

Just a first question to those on the panel. Can you give us some 

just broad brush what assessment you have of the potential off of 

our coastline for wave and/or tidal energy or current energy? Can 

you give us any assessment at all? 

Ms. MILES. I can give you a percent. I think the EPRI, Electric 

Power Research Institute, has done a number of studies and with 

some expectation that over time as the technology becomes more 

developed that there is the potential to double the existing hydropower, which is a little under 10 percent, so to double it to say 20 

percent. 

Mr. INSLEE. So do you mean that off our coastlines we have a potential to have 20 percent of our electric needs then? 

Ms. MILES. That is a rough estimate that is done as people are 

looking at what is possible out there. 

Mr. INSLEE. Right. 

Ms. MILES. Now, the technology is evolving so that that could 

change over time with more knowledge. 

Mr. INSLEE. Would anyone else like to address that issue? 

Mr. OLSEN. I have some numbers, Congressman. This is in our 

written testimony as well. 

According to estimates provided by the Department of Energy, 

the potential offshore, and you had asked I think specifically about 

43

wave. Across the board I will give you the numbers. For offshore 

wind resource, excluding Alaska and Hawaii, is 2,500 gigawatts; 

ocean waves is approximately 240; ocean tides, 7.5; and ocean currents, 2.5. 

Mr. INSLEE. Do you know how that works out in a percentage 

number? I should, but I don’t. 

Mr. OLSEN. I don’t do math. I don’t know, but we can certainly 

get that back to you if you would like. 

Mr. INSLEE. Well, it is kind of a rhetorical question. It appears 

to me like there is very significant energy potential off of our coastlines, and I for one, and this is why we are introducing this bill, 

believe that we ought to put the pedal to the metal to try to expand 

the horizon of this. 

I look at this industry like where wind was maybe 20 years ago. 

They both involve moving currents of liquid in this case rather 

than gas, but a liquid has somewhere between 800 and 1,000 times 

more energy per volume than moving wind, so we have the most 

concentrated energy possible to tap into. 

I mention that because I hope frankly that you all take into your 

personal kind of goals to try to help this industry develop, and I 

hope you become as excited about it as they are and I am because 

I think you have in your responsibilities a significant part of the 

potential to deal with global warming. 

I have been sitting in quite a number of hearings, and there has 

not been a table who are as important to the development, to our 

response to global warming as you four sitting there right now and 

your ability to help this industry become fully mature. I just hope 

that you will look at that with the same level of enthusiasm that 

some of us do in discharging your responsibilities. 

Question. Is there anything you would suggest to us as far as coordinating your respective agencies’ regulatory response to the development of this industry? Are there any glitches that need to be 

ironed out? Is there any conflict between your respective responsibilities that need to be resolved? 

Mr. OLSEN. I will go ahead and weigh in here. One of the things 

that Ms. Miles and I had talked about is the relationship between 

the responsibilities of the Federal Energy Regulatory Commission 

and the Minerals Management Service and I guess our respective 

roles in permitting and oversight regulation of these types of 

projects. 

As I mentioned in my testimony, the Department of the Interior 

feels that MMS plays a lead or the lead role in these projects, but 

at the same time we take seriously the expertise and responsibility 

missions of other agencies, including FERC and NOAA, and currently we are working with FERC to put together a memorandum 

of understanding that would resolve any outstanding issues with 

respect to regulation and oversight permitting of these types of 

projects. 

Ms. MILES. The only thing I would add to that is that what we 

are looking at is how we can have a simple, nonredundant process 

so it serves the needs of all the stakeholders, applicants and others 

for good government. That is what we are after. 

Mr. KEENEY. I would just like to add that as many of these technologies are in their early stages of development, Congress should 

44

consider mechanisms to broaden the understanding of how new 

ocean energy technologies can be developed in an environmentally 

sound manner. 

NOAA would benefit from increased research on the environmental impacts of these technologies. However, in the meantime an 

adaptable management approach for the permitting and licensing 

of both prototype and full-scale energy production projects is necessary so that existing uses and natural resources are not compromised. 

Such an approach would allow OCS renewable energy efforts to 

proceed in a precautionary fashion. 

Mr. DIERS. If I could just add one thing from the states’ perspective is that essentially all of the answers that you get are essentially reactive answers. Something comes up. You react to it. 

I think from the states’ perspective one of the things we would 

like to see is a little bit more advanced planning. Where are the 

best areas for these sorts of things? What are the real opportunities 

out there? Let us look at a comprehensive management regime. Let 

us look at what are the resources and observations needed in order 

to make those kinds of determinations. 

I think that that is one of the issues that really needs to be 

taken up in any kind of new legislation is figuring that out not just 

from a reactive mode, but from a proactive mode because I think 

that that will help us to move forward better. 

Mr. INSLEE. We will work on that. I just wanted to welcome Alla 

Weinstein and Jason Bak from my neck of the woods with 

Finavera. I may not get to hear your testimony because I am going 

over to Ways and Means to try to get a tax break for this industry. 

Thank you. 

Ms. BORDALLO. I thank the gentleman from Washington, Mr. 

Inslee, and now the Chair recognizes the gentlelady from California, Mrs. Capps. 

Mrs. CAPPS. Thank you, Madam Chair, for having this hearing 

and to our witnesses for your testimony. 

I noticed that our Chairwoman brought up the issue of artificial 

reefs and mariculture during your questioning. I want to follow 

along that line and turn to you, Mr. Olsen, with a question regarding the draft PEIS, which states that MMS considers an artificial 

reef an alternate use of energy platforms. 

My question is does the Department plan to change its current 

regulations that require platforms to be removed or decommissioned after they stop producing oil and gas so that they can be 

turned into artificial reefs? In other words, are you going to change 

the existing policy? 

Mr. OLSEN. I am not aware that we are changing an existing policy. We are looking at though as the authority that we have been 

given under the Energy Policy Act to use, for example, an existing 

platform as something as an alternate use for recreation, for——

Mrs. CAPPS. Let me ask it a different way. 

Mr. OLSEN. OK. 

Mrs. CAPPS. I don’t mean to interrupt you, but I am mindful of 

the clock ticking. 

45

Does the Energy Policy Act gives MMS the authority to change 

its current decommissioning regulations? That is another way of 

asking that question. 

Mr. OLSEN. I am not certain. 

Mrs. CAPPS. You are not certain about this? 

Mr. OLSEN. I don’t know for sure, but MMS is and has been an 

agency that will permit and regulate and decommission projects. It 

is a cradle to the grave approach. 

In terms of decommissioning, when a facility has come to the end 

of its life we will continue in our role as an agency that will decommission that particular facility. 

Mrs. CAPPS. All right. I just want to go along this line. I would 

love to have time to ask other people to comment. 

The current regulations stipulate that MMS can grant an exemption from its platform removal requirements if the structure becomes part of a state rigs to reef program. Isn’t that correct? 

Only a few states have such programs, however. My home state, 

California, has remained adamantly opposed, and so again my 

question. Is MMS planning to create a Federal rig abandonment 

program that would preempt state rigs to reefs programs? 

Mr. OLSEN. I honestly couldn’t tell you whether we are or not, 

but we will certainly take that and provide you an answer. 

Mrs. CAPPS. All right. I would like to have that in writing. I 

would request it because if a state has no rig abandonment program such as California, my question remains will MMS allow for 

the disposal of old energy platforms at sea. 

Mr. OLSEN. OK 

Ms. BORDALLO. No objection. 

Mrs. CAPPS. All right. I will turn to you briefly, but I have something I want to make sure is on the record. Go ahead, Mr. Keeney. 

Mr. KEENEY. I just wanted to mention that I have been involved 

in this personally for several years, and NOAA’s involvement is because of the potential value of the habitat. 

Mrs. CAPPS. Yes. 

Mr. KEENEY. The existing habitat on those reefs, particularly 

with regards to depleted stocks of like, for instance, rockfish. 

Mrs. CAPPS. Right. 

Mr. KEENEY. So we have been investigating the importance of 

the existing habitat on those reefs, and we have been working with 

MMS, and that would require an amendment to their regulations——

Mrs. CAPPS. I hear you. 

Mr. KEENEY.—to allow for subsequent ownership. 

Mrs. CAPPS. I would like to share with you if I could the way this 

appears to us in California, at least on the central coast where we 

have 20 platforms in the Santa Barbara Channel producing oil and 

gas right off my congressional district, though oil and gas industries have been trying to avoid its legal obligations to remove platforms and restore marine environment for years. 

These platforms that I referred to, many of them are nearing the 

end of production. My state has repeatedly, as I said, rejected proposed legislation that would allow oil platforms to be left in the 

ocean. As part of their contract, it is stipulated that they remove 

them after they cease production. That is my understanding. 

46

A blue ribbon panel of University of California scientists has concluded that oil platforms do not provide fish habitat, and I believe 

NOAA reached the same conclusion in response to a proposal to 

designate platforms as essential fish habitat. 

Leaving platforms in the ocean for my constituents present significant risks to human health and the environment with all of the 

pollution that is at their base. I hope the Department will consider 

these comments as it considers programs dealing with rig abandonment. 

If I have a little bit of time left, Mr. Diers, I wanted to ask a 

question regarding CZMA because we came to terms with that in 

an LNG siting proposal just a couple weeks ago. I just want to ask 

if it is not helpful to all stakeholders to have certainty on location, 

project specifics, early in the process and how you feel CZMA has 

a role to play there. 

Mr. DIERS. My perspective on that is that CZMA is an excellent 

tool for helping to coordinate the various opinions of all the agencies that are associated with the project. That is the way we use 

it in my state, and that is the way I think a lot of people use it. 

We use it as our ticket to the dance. 

Mrs. CAPPS. Yes. 

Mr. DIERS. And so when we are able to go in and then be able 

to facilitate a discussion about how does this particular project 

meet with both the laws, as well as the intent of the laws within 

our jurisdictions as they pertain to these Federal permits. 

I think it is a fairly good process. There are very few times when 

it doesn’t work, and I think that that is probably testimony to this 

is a good model to be used for ironing out these differences before 

they get too far down the road. 

Mrs. CAPPS. Exactly. As I said, we have been through this process just in the last few weeks of siting an applicant, bringing an 

application for an LNG facility right off our coastline. 

The CZMA provided the only way for local constituents to have 

a say to what would be so directly affecting their air quality, their 

quality of life in so many years. 

I have run the time. I am sorry, but I appreciate all the testimony that all of you have brought to us, and I would appreciate 

hearing back from the Department of the Interior. 

Mr. OLSEN. Certainly. 

Mrs. CAPPS. Thank you. 

Ms. BORDALLO. I thank the gentlelady from California, and now 

the Chair would recognize for the second round of questioning Mr. 

Pearce from New Mexico. 

Mr. PEARCE. Thank you, Madam Chair. 

Ms. Miles, in following up on Mr. Inslee’s question about the potential size of input for this wave energy and offshore energy, so 

we get a number of about 20 percent maybe. 

Can you give us a timeline on about when we could expect that 

scientifically? 

Ms. MILES. It is very hard to tell, but it——

Mr. PEARCE. Is your mic on? 

Ms. MILES. I am sorry. Thank you. It is hard to tell because the 

technologies are at different stages of development with the closer 

47

in tidal being more developed and the potential to be on-line with 

that earlier. 

The greater potential, however, is in the waves, and that technology is not as sophisticated yet. It hasn’t been tested quite as 

much as the other. I have heard said 15 to 20 years out. It is really 

a hard thing to tell at this point. 

Mr. PEARCE. It surely is. It is a long way away and then somewhat unpredictable. Economics could change or whatever. 

If we are looking at the cost per kW to build either kind of plant, 

and I have a list of costs. A coal plant costs about $1,290 per kW, 

a hydropower plant about $1,500 per kW to build it. A photovoltaic 

is $4,751 per kW. 

Do you have any ideas on wave energy, about how much per kW 

those things will run, or is it still way too early? 

Ms. MILES. It is way too early. 

Mr. PEARCE. OK. 

Ms. MILES. Again, I have heard some numbers. They were along 

the lines of wave from 10 to 32 cents per kilowatt hour. 

Mr. PEARCE. All right. 

Ms. MILES. And tidal from four to 12 cents per kilowatt hour. 

Mr. PEARCE. Right. 

Ms. MILES. But those are estimates that people are making. They 

are not anything that we are aware of at this time. 

Mr. PEARCE. Still modeling and predicting and predicting without much conversion? 

Ms. MILES. Yes. 

Mr. PEARCE. OK. If you could hold that chart up there? 

These structures that we are decommissioning offshore, what if 

someone came to FERC and said we would like to use this platform? In other words, it costs about $1 billion to build, and rather 

than destroy and take it loose they are saying would you just let 

us use it free of charge and if we got concession from the oil companies to do that. 

Is that something that you all would approve in order to hasten 

the move to the market, some of these technologies that are really 

in the developmental phase? Is that something? How would you all 

deal with that request? 

Ms. MILES. Is your question would this be valuable in the 

wave——

Mr. PEARCE. No. It is not is it valuable. It is if someone found 

a value and said we would like to keep that up, it is decommissioned from oil and gas use, but rather than destroy it let us use 

it. 

It will save us about $1 billion in investment, and we could get 

to market sooner with a lower cost of energy. It would allow us to 

do a lot of projects. Is that something that you all would consider? 

Ms. MILES. It is not something that I have thought about, so I 

would like to get back to you on that. 

Mr. PEARCE. If you could, because, as a business guy will tell 

you, any time you see assets that are paid for and about to be disrupted or destroyed it makes sense that if someone else can use it 

free before it is torn up. 

Mr. Keeney, do you have an opinion on this? 

48

Mr. KEENEY. It depends on what you want to use it for. Again, 

the interest that NOAA has is the benefit that it provides to the 

marine environment. 

There is an awful lot of soft corals and algae and other things 

that have built up on those rigs over the 30 years they have been 

there that we believe have some value to the marine environment. 

Mr. PEARCE. OK. Mr. Diers, you had mentioned that you feel 

that states should become full partners. Does that mean that states 

should be able to—you can put the poster down now—invalidate or 

void a project, just keep it from moving forward? Is that what you 

mean by full partner? 

Mr. DIERS. Well, sir, I think that it would really depend on the 

direct impacts of that project to the coast. 

Mr. PEARCE. OK. 

Mr. DIERS. That I think is the ultimate measure to the states is 

are there direct impacts and how do we evaluate that and can we 

make sure that those aren’t going to be detrimental to the longterm health of our coast, so I guess my answer is it depends. 

Mr. PEARCE. OK. You are somewhat critical of the process. 

Would you favor another bureaucracy that would handle the permitting of these kinds of projects? 

Mr. DIERS. I am not sure I would favor any new bureaucracies. 

Mr. PEARCE. Thank you. Thank you, Madam Chair. 

Ms. BORDALLO. I thank the gentleman, and I do thank the witnesses for their valuable testimony and the Members for their 

questions. 

The Members of the Subcommittee may have some additional 

questions for the witnesses, and we will ask you to respond to 

these in writing. The hearing record will be open for 10 days for 

these responses. 

I would like now to recognize the second panel of witnesses, and 

the Chair would like to announce that we are in the process of having two votes, five minutes each, but I am going to keep the committee hearing going since I don’t have the privilege of voting except in the committee of the whole. 

At this time I would like to recognize the second panel of witnesses, Mr. Sean O’Neill, president of the Ocean Renewable Energy 

Coalition; Mr. Jason Bak, Chief Executive Officer of Finavera Renewables; Zeke Grader, Pacific Coast Federation of Fishermen’s Associations; 

Dr. Doug Rader, Principal Scientist for Oceans and Estuaries, 

Environmental Defense; George Hagerman, Senior Research Associate, Virginia Tech Advanced Research Institute; and Dr. Porter 

Hoagland, Research Specialist, Woods Hole Oceanographic Institute. 

The Chair now recognizes Mr. Sean O’Neill to testify for five 

minutes. The timing lights on the table will indicate when your 

time is concluded. 

All witness statements will be submitted for the hearing record. 

STATEMENT OF SEAN O’NEILL, PRESIDENT,

OCEAN RENEWABLE ENERGY COALITION 

Mr. O’NEILL. Thank you, Madam Chairman. Is the mic on here? 

49

I thank you and your colleagues for devoting your time and resources to this topic. It is a topic near and dear to the members 

of the Ocean Renewable Coalition, the national trade association 

for ocean renewables, including wave, tidal, offshore, wind and the 

potential for offshore biomass and other new technologies as they 

come down the pike. 

We are made up of 32 companies ranging from technology and 

project developers, including Finavera Renewables, represented 

today by Mr. Bak to my left. We also have large investment firms, 

investor owned utilities, public owned utilities, legal and other 

firms located in the United States, Canada, Scotland, Denmark and 

Ireland. 

Our number one goal in talking with you today is to emphasize 

the importance of clarifying and expediting the permitting process 

for marine renewables if this industry is to grow and prosper in the 

United States. 

A permitting process for marine renewables must take into account the principles of proportionality and fairness, while encouraging innovation to address our common environmental and energy 

goals. Moreover, the industry needs funding for R&D demonstration projects, and it needs tax incentives. 

Is the resource there? Yes, and you will hear from others on this, 

but 252 million megawatt hours of wave resources alone, resources 

located near highly populated areas on the coast placing fewer demands on already burdened transmission infrastructure. 

Is the resource cost competitive? Not yet, but every indication 

suggests a much shorter time to commercial viability than experienced by many other renewable technologies. 

Is the resource environmentally friendly? Once again, early indications show that ocean renewables represent some of the most environmentally benign energy technologies available today. No air 

emissions, no fuel costs, no fuel transportation costs or related environmental effects. 

Moreover, we anticipate that proper siting, environmental assessment and incorporating the principles of adaptive management will 

minimize the effects on the marine environment. 

In this regard, we note that the approach Congressman Inslee 

has taken in his bill will go a long way toward promoting marine 

renewables and generating data on environmental effects. Congressman Inslee’s leadership in marine renewables goes back some 

time, and his understanding of the adaptive management program 

and funding for environmental studies under this program will 

help the industry gather the data necessary for building greater 

confidence in these resources. 

We wholeheartedly support Congressman Inslee’s bill and thank 

him and all the Members of Congress who have offered their support. Congressman Inslee’s legislation will address the funding 

needs that have limited the growth of this industry, as well as encourage local communities, tribes and stakeholders to take part in 

the process. 

At the same time, we need a regulatory environment that will 

complement new investment. Today the marine renewables industry faces two obstacles on the OCS. First, MMS needs to issue regulations for siting renewables on the Outer Continental Shelf. In 

50

the absence of regulations, offshore developers can’t even place 

wind monitoring devices or acoustic doppler equipment on the 

Outer Continental Shelf to study the potential sites. 

We appreciate all of the good work that MMS and FERC have 

done to date, including the completion of a draft EIS. At a minimum, in the case of MMS we urge them to adopt interim regulations so that renewable development can proceed. 

Second, wave and tidal developers face the potential of dual 

MMS and FERC regulation in projects located on the OCS or which 

straddle the OCS and state waters. Dual regulation will pose additional regulatory burdens for developers and must be avoided. We 

urge MMS and FERC to resolve the jurisdictional dispute expeditiously and avoid dual regulation at all costs. 

Ocean renewables can help us diversify our energy portfolio and 

improve our environment. With the proper support, these resources 

will become a robust part of a reliable, affordable, clean electric 

supply portfolio. The worst outcome before us is to leave continued 

ambiguity on these issues of permitting and jurisdiction. 

Thank you very much. 

[The prepared statement of Mr. O’Neill follows:]

Statement of Sean O’Neill, President,

Ocean Renewable Energy Coalition 

Introduction 

Ocean Renewable Energy Coalition (OREC) is the national trade association for 

marine and hydrokinetic renewable energy dedicated to promoting energy technologies from clean, renewable ocean resources including wave, tidal, offshore wind 

and marine biomass. Coincidentally, OREC celebrates its second anniversary the 

same week as this hearing, and during this time, we have grown from a handful 

of developers to 36 members from all over the world. OREC is working with industry, academia, and interested organizations NGO’s to encourage commercial development of ocean renewable technologies and raise awareness of their substantial, potential contribution to an affordable, reliable, environmentally friendly energy 

future. 

We seek a legislative and regulatory regime in the United States that fosters the 

development of ocean renewable technologies, their commercial development, and allows for capturing the rich energy potential of our oceans. While other countries 

have already funded and deployed viable, operating, power generating projects using 

the emission-free power of ocean waves, currents, and tidal forces, the U.S. is only 

beginning to acknowledge the importance these technologies. 

Ocean energy can play a significant role in our nation’s renewable energy portfolio. With the right support, the United States ocean energy industry can be competitive internationally. With the right encouragement, ocean renewable energy 

technologies can help us reduce our reliance on foreign oil—fossil fuels, in general—

and provide clean energy alternatives to conventional power generating systems. 

And with the right public awareness, our coastline communities can use ocean renewables as a springboard for coastal planning that reflects the principles of marine 

biodiversity. 

Today, OREC will address the steps that we must take to realize the promise and 

potential of ocean renewables. 

Is the resource there? Yes, and the resource is located near highly populated areas 

on the coast, placing fewer demands on already taxed transmission infrastructure. 

Is the resource cost competitive? Not yet, but indications suggest a much shorter 

time to commercial viability than experienced by many other renewable technologies. 

Is the resource environmentally friendly? Yes. Ocean renewables present some of 

the most potentially environmentally benign energy technologies available today—

no air emissions, no fuel costs or associated mining or drilling effects, no fuel transportation costs or related environmental effects, and, with proper siting and technology, minimal marine or fisheries effects. Unfortunately, there is very little data 

to support this last claim, yet the data that does exist suggests minimal impacts 

with proper technology and siting. 

51

BACKGROUND 

A. Types of Technology 

Before we describe the benefits that ocean renewables offer, we take a step back 

and offer a description of the different technologies. Ocean energy refers to a range 

of technologies that utilize the oceans or ocean resources to generate electricity. 

Many ocean technologies are also adaptable to non-impoundment uses in other 

water bodies such as lakes or rivers. These technologies are can be separated into 

three main categories: 

Wave Energy Converters: These systems extract the power of ocean waves and 

convert it into electricity. Typically, these systems use either a water column or 

some type of surface or just-below-surface buoy to capture the wave power. In addition to oceans, some lakes may offer sufficient wave activity to support wave energy 

converter technology. 

Tidal/Current: These systems capture the energy of ocean currents below the 

wave surface and convert them into electricity. Typically, these systems rely on underwater turbines, either horizontal or vertical, which rotate in either the ocean current or changing tide (either one way or bi-directionally), almost like an underwater 

windmill. These technologies can be sized or adapted for ocean or for use in lakes 

or non-impounded river sites. 

Ocean Thermal Energy Conversion (OTEC): OTEC generates electricity through 

the temperature differential in warmer surface water and colder deep water. Of 

ocean technologies, OTEC has the most limited applicability in the United States 

because it requires a 40-degree temperature differential that is typically available 

in locations like Hawaii and other more tropical climates. 

Offshore Wind: Offshore wind projects take advantage of the vast wind resources 

available across oceans and large water bodies. Out at sea, winds blow freely, unobstructed by any buildings or other structures. Moreover, winds over oceans are 

stronger than most onshore, thus allowing for wind projects with capacity factors 

of as much as 65 percent, in contrast to the 35-40 percent achieved onshore. 

Other: Marine biomass to generate fuel from marine plants or other organic materials, hydrogen generated from a variety of ocean renewables and marine geothermal power. There are also opportunities for hybrid projects, such as combination 

offshore wind and wave or even wind and natural gas. 

B. The status of U.S. wave, current and tidal projects 

At present, prototype offshore renewable projects are moving forward in the 

United States. These include the following: 

New Jersey based Ocean Power Technologies (OPT) has operated a test wave 

energy buoy off the coast of Hawaii for the U.S. Navy. It has also operated a buoy 

off the coast of New Jersey funded by Board of Public Utilities since 2005 and in 

February 2007received a preliminary permit to study the feasibility of a 50 MW 

commercial wave farm at Reedsport, off the coast of Oregon. 

Finavera Renewables, Inc., has proposed a 1 MW pilot project for the Makah Bay 

off the coast of Washington state. In November 2006, Finavera completed a four 

year permitting process and submitted a license application and draft Environmental Assessment to the Federal Energy Regulatory Commission which is pending 

review. 

New York based Verdant Power is undergoing licensing at FERC and deployed 

two of six units of a tidal/current project located in the East River of New York in 

December 2006. Verdant Power, Inc is in the process of deploying 4 more turbines 

scheduled for completion early May of 2007. One of the units is already delivering 

power to a commercial customer on Roosevelt Island. 

Australian based Energetech has formed a subsidiary in Rhode Island which has 

received funding from the Massachusetts Trust Collaborative and has planned a 750 

kw project for Port Judith Rhode Island. Permitting has not yet commenced. 

Ocean Renewable Power Company of North Miami, Florida recently secured preliminary FERC permits for two sites in Alaska 

Multiple permits for sites in Maine, California, Oregon, Alaska and Florida have 

been filed with the Federal Energy Regulatory Commission. 

The Mineral Management Service (MMS) now has authority to lease lands for offshore wind projects on the Outer Continental Shelf. MMS has conducted environmental review of the proposed 420 MW Cape Wind Farm off the coast of Nantucket, 

MA and LIPA/FPL 100 MW project off the coast of Long Island, NY. 

C. Overseas 

In Europe, projects are moving ahead. Europe has already installed 587 MW of 

offshore wind in Denmark, Holland, Scotland, England and UK. See http://

www.bwea.com/offshore/worldwide.html. Two near shore wave projects, are operVerDate 0ct 09 2002 10:56 Oct 04, 2007 Jkt 098700 PO 00000 Frm 00057 Fmt 6633 Sfmt 6621 L:\DOCS\34981.TXT Hresour1 PsN: KATHY
52

ating in Scotland and Isle of Azores. Pelamis of OPD in Scotland is deploying the 

world’s first commercial wind farm off the coast of Portugal and Marine Current 

Turbines has operated a prototype tidal project for 2 years. 

D. Commercial Viability of Ocean Renewables 

Offshore wind costs range from 3-8 cents per kWh compared to 2.5-7 cents onshore. (World Renewable Energy Report 2002-2007, Renewable UK). These figures 

have been derived based on operating experiences in Europe and reflect operating 

experience. Costs for offshore wind increase as projects move further offshore, necessitating more costly mooring systems and larger turbines. 

As for wave and tidal, we have general parameters on cost, but they remain subject to further refinement. The World Renewable Energy Report estimates the cost 

of wave energy at an average of 9 cents/kWh and tidal and current an average of 

8 cents/kWh. 

Recent EPRI reports have found that, presently, the cost of power from ocean 

technologies ranges from 7 cents to 16 cents/kw in a low case scenario. For tidal, 

the May 2006 EPRI report found that the cost is driven by the resource, a strong 

resource can yield power at prices as low as 6 cents/kwh. Plus, similarities between 

tidal and offshore wind bring costs down. 

And, the costs of offshore wind or wave are stable. Whereas natural gas and oil 

have fluctuated over the years (with natural gas now higher than ever), offshore 

wind and wave energy costs are stable, since the cost of renewable power sources 

like wind or wave are free. The analogy here is that renewable energy financing 

functions more like a fixed-rate mortgage as opposed to a variable rate mortgage 

associated with the use of finite fossil fuel resources. 

Also, costs are expected to decline as the industry matures and as economies of 

scale make ocean projects less costly. To compare, back in 1978 wind energy cost 

25 cents/kwh to produce—but now costs between 4.5 and 6 cents/kwh. Wave is already less costly than wind was in its early stages. Moreover, the EPRI report found 

that if wave had obtained the same government subsidies as wind, it would be a 

far more advanced technology than at present. As the offshore wind industry makes 

advancements on mooring systems, turbine durability and other issues that bear on 

the cost of marine projects, these advancements will help bring down the cost of 

ocean energy. In addition, if we can gain a better assessment of our resources, we 

can target the most powerful sites first and learn from our experience in these locations to bring costs down further. 

In addition, ocean renewable energy offers other economic benefits. Development 

of a robust offshore renewables industry can: 

• Reduce reliance on foreign oil 

• Rely upon ocean terrain for power generation as opposed to onshore land resources 

• Revitalize shipyards, coastal industrial parks and shuttered naval bases 

• Create jobs in coastal communities 

• Allow the U.S. to transfer technology to other countries, just as a country like 

Scotland is exporting its marine renewables know-how 

• Provide low cost power for niche or distributed uses like desalination plants, 

aquaculture, naval and military bases, powering stations for hybrid vehicles 

and for offshore oil and gas platforms 

• Provide use for decommissioned oil platforms through ‘‘rigs to reefs program’’

• Promote coastal planning that reflects the goals of bio-diversity, that maximize 

best comprehensive use of resources and capitalizes on synergies between offshore industries 

II. WHAT THE INDUSTRY NEEDS TO ACHIEVE OUR GOALS 

What will it take for the ocean renewable industry to move from where it is now 

to achieve its potential? OREC recommends the following actions: 

—More funding for R&D and technology development: Wind energy has benefited 

from substantial government investment. Thirty years ago, wind cost 30 cents/kWH 

to generate; today, that cost stands at 3 to 7 cents/kWH. And even today, DOE continues to invest in wind. Just a few months ago, DOE announced a $27 million partnership with GE to develop large-scale turbines and also issued a $750,000 SBIR 

to Northern Power for offshore wind technology development. 

Private developers have borne the costs of bringing the ocean energy technology 

forward for the past thirty years, but they need government support. Government 

funding will also give confidence to private investors and help attract private capital. 

—Resource Assessment: At present, we do not even know the full potential of offshore renewables, because no agency has ever mapped the resource comprehenVerDate 0ct 09 2002 10:56 Oct 04, 2007 Jkt 098700 PO 00000 Frm 00058 Fmt 6633 Sfmt 6621 L:\DOCS\34981.TXT Hresour1 PsN: KATHY
53

sively. The Energy Policy Act of 2005 directed the Secretary of DOE to inventory 

our renewable resources but that work has never been funded. And even as MMS 

moves forward with a rulemaking for offshore renewables on the OCS, it has not 

received funding to map the resource. 

Preliminary studies done by EPRI and private companies show that we have substantial ocean resources. But we will not know the full scope without further mapping and study. 

—Incentives for Private Investment: Offshore renewables are compatible with 

other large industries in our country, such as oil and maritime industry. These industries, with the right tax incentives, can provide substantial support to offshore 

renewable development. Incentives could include investment tax credits for investment in offshore renewables and incentive to use abandoned shipyards and decommissioned platforms for prototypes and demonstration projects. 

—Incentives for coastal communities: Coastal municipalities stand to gain tremendously from installation of offshore renewables. They need to be stakeholders in the 

process with a voice in development that takes place off their shores. Congress can 

support this by continuing to authorize Clean Renewable Energy Bonds (CREBS) 

and the Renewable Energy Portfolio Incentives (REPI) for coastal projects. 

—Reduced regulatory barriers: Until companies get projects in the water, we will 

not learn about the environmental impacts or true costs of offshore renewables. Unfortunately, developers face onerous barriers to siting small, experimental projects. 

We should establish streamlined regulation and permitting for offshore renewables, 

with maximum cooperation between state and federal agencies. A system to coordinate joint authorities could be established up front, either through MOUs, a Joint 

Office or liaison system, so there is one place that coordinates and integrates the 

lead agency process with other state and federal permits. Agencies will establish 

clear lines of responsibility and coordination and adhere to firm deadlines. 

To minimize duplication of effort and develop expertise with hydrokinetic and offshore renewable technologies, each agency could dedicate teams of responsible parties from their respective agency that can coordinate on applications. The same 

team can learn the new technology, the new permitting and licensing process, and 

can more efficiently process all applications. 

Another option is to create a Joint Hydrokinetic and Marine Renewables Office, 

staffed with key personnel from relevant agencies. Working through a joint office 

will increase accountability and enhance efficiency and information sharing. In the 

Energy Policy Act, Congress provided for creation of a joint renewables office within 

BLM. 

III. Principles of Adaptive Management 

In particular, we need a streamlined system that will allow for deployment of 

pilot projects to demonstrate technological viability and allow for study of environmental effects. Right now, pilot projects, few of which will ever generate significant 

revenues, remain subject to the same permitting requirements as conventional 

projects. In fact, environmental studies and regulatory costs account for as much as 

forty percent of the cost of wave and tidal projects. Agencies should be encouraged 

to minimize upfront review and extensive study of smaller, demonstration and pilot 

projects, and instead, incorporate principles of adaptive management that allow for 

study and mitigation on an ‘‘as you go’’ basis. 

The concept of adaptive management allows for modification of project operation 

to accommodate newly discovered affects. For nascent technologies, adaptive management is preferable to a front loaded process, because it allows continued collection of data and ongoing monitoring after the project is deployed. Information 

gleaned from adaptive management is therefore, more accurate about affects than 

pre-deployment studies and projections. Adaptive management also allows for proportionality—the actions taken should be proportional to the adverse impacts identified. This concept is critical to the development of this industry. 

IV. Dual Regulation Stifles Innovation, is Anti-Competitive, and Wasteful 

OREC opposes any jurisdictional overlap between MMS and FERC for projects on 

the OCS. Dual regulation will give rise to duplication of effort and unduly burden 

developers. Moreover, such duplication would unnecessarily waste taxpayer dollars. 

In addition, dual regulation will place wave energy developers on the OCS at a 

competitive disadvantage to developers of other alternative technology (like offshore 

wind) because these technologies are not subject to FERC’s licensing requirements. 

Wave developers would also face additional costs, because MMS intends to charge 

royalties for use of public lands, while FERC assesses annual charges for costs associated with administration of the Federal Power Act. 

54

Moreover, MMS must move expeditiously to devise regulations for issuing licenses 

and permits on the OCS. While we laud MMS’ extensive work to date in developing 

rules for alternative energy development on the OCS, at the same time, the deadline 

imposed on MMS by Congress in the Energy Policy Act to issue regulations for 

siting alternate energy projects on the OCS have long passed. As a result, developers are still without guidance for licensing on the OCS at this critical juncture 

that wave, tidal and offshore wind technologies are building momentum. 

It is essential that the Federal Government deals with the licensing process for 

this industry is to move forward. 

V. Conclusion 

Both the Federal Energy Regulatory Commission and the Minerals Management 

Service were established decades ago with responsibility over large scale energy development. With the resurgence of hydrokinetic and marine renewables, both of 

these agencies have undertaken the enormous task of interpreting their mission, as 

defined by law, in the regulation and permitting of these new and emerging technologies. I applaud their efforts and encourage them to achieve a timely, fair, and 

realistic approach. 

It is essential that a licensing process for new and emerging renewable technologies take into account the principles of proportionality and fairness while encouraging innovation to address our common environmental and energy goals. 

Is the resource there? Yes, and the resource is located near highly populated areas 

on the coast, placing fewer demands on already taxed transmission infrastructure. 

Is the resource cost competitive? Not yet, but indications suggest a much shorter 

time to commercial viability than experienced by many other renewable technologies. 

Is the resource environmentally friendly? Yes. Ocean renewables present some of 

the most potentially environmentally benign energy technologies available today—

no air emissions, no fuel costs or associated mining or drilling effects, no fuel transportation costs or related environmental effects, and, with proper siting and technology, minimal marine or fisheries effects. Unfortunately, there is very little data 

to support this last claim, yet the data that does exist suggests minimal impacts 

with proper technology and siting. 

Ocean renewables can help diversify our energy portfolio and improve our environment. With the proper support, these resources will become a robust part of a 

reliable, affordable, clean electric supply portfolio. 

Ms. BORDALLO. Thank you, Mr. O’Neill. 

Our next witness is Mr. Jason Bak, Chief Executive Officer of 

Finavera Renewables. 

STATEMENT OF JASON BAK, CHIEF EXECUTIVE OFFICER, 

FINAVERA RENEWABLES 

Mr. BAK. Chairwoman Bordallo and Members of the Subcommittees, thank you for your invitation to appear before you today. I am 

Jason Bak, the CEO of Finavera Renewables. 

We are an energy company focused solely on development, ownership and operation of renewable energy projects around the 

world. Although we are developing up to 1,500 megawatts of wind 

energy in Canada and Ireland, my company is represented here 

today because we are the cutting edge of ocean wave energy in the 

United States through our U.S. subsidiary, Finavera Renewables 

Ocean Energy. 

We have three wave energy projects under development in California, Oregon and Washington, and we are developing others outside of America. These are not just paper projects. We are literally 

weeks away from issuing contracts that will put U.S. steelworkers 

to work constructing our second generation wave energy buoy, 

which we are going to install off the coast of Newport, Oregon, this 

summer. 

55

I am joined today by my colleague, Alla Weinstein, who leads 

Finavera’s ocean energy technology team. Alla is a true pioneer in 

this field. The company that Alla co-founded, AquaEnergy Group, 

Ltd., became part of Finavera in 2006 when, after looking closely 

at every other type of wave energy generation and concept, we determined that the technology that Alla and her team developed had 

by far the highest potential to deliver environmentally sound, market competitive electricity to the American power grid. 

The technology that we have works like this: Our buoy, which we 

call the AquaBuOY, converts the up and down motion of waves into 

a pressurized water flow, effectively creating the equivalent of a 

650 foot waterfall. The pressurized water spins a turbine that generates electricity just like a conventional hydropower plant, but 

with no dam and no reservoir. 

Unlike other ocean energy technologies, the AquaBuOY doesn’t 

use petroleum hydraulic fluids nor does it require dredging to anchor it to the ocean floor. It is safer for the environment, and of 

course with wave energy there is no greenhouse gas emissions. 

My message to you and the committee today is simple. Ocean 

renewable energy’s time has come. It is not just pie in the sky. We 

are already turning ideas into jobs here in the U.S. Now we are 

about to turn blueprints into tons of carefully engineered American 

made steel. 

Ocean energy has a huge potential resource. The amount of 

energy available for us to convert into clean electric power just off 

the West Coast is about equal to 1.5 times all of the existing hydropower in the U.S. Add Alaska, the east coast and the Gulf, and 

that is still more potential. 

While the potential is great, regulations are not maturing rapidly 

enough. In many cases, the government hasn’t begun to figure out 

how to take advantage of what we offer in terms of helping solve 

the climate crisis. 

But that is not true everywhere. The State of Oregon has embraced wave energy. Our tribal and state partners in Washington 

state and local Federal officials are working hard with us to license 

our Makah Bay project. 

The Government of Canada has adopted tax policies aimed specifically at boosting private investment in wave energy, and within 

the U.S. Government the Federal Energy Regulatory Commission 

is using its hydropower licensing authority in a very, very helpful 

way. 

I would like to make two requests here today, but also would like 

to make two commitments. First are the requests. I would like to 

ask Congress to assure equitable tax treatment for ocean energy 

alongside of other renewable energies. No special treatment, just 

let us compete on a level playing field with our clean energy peers 

such as wind power. 

Second, I would ask that Congress clarify the current regulatory 

system. Section 388 of the Energy Policy Act was a step in the 

right direction, but it left many questions unanswered and created 

a few new ones. 

Here are my commitments. First, I commit to Congress that 

Finavera will, if given a rational regulatory environment, deliver 

very large amounts of clean energy free of climate changing 

56

emissions in an environmentally sustainable way at competitive 

prices. We want the chance to help you solve the climate challenge 

by developing the new energy economy. 

Second, I commit to my fellow panelists and other ocean stakeholders that my company is devoted to preventing the ocean energy 

equivalent of what Altamont Pass represented in the wind energy 

industry. We want to get it right the first time. 

Finavera is the leader in this space. Finavera’s Makah Bay 

project is the first and only wave energy project to enter the Federal licensing process. We understand and embrace our responsibility to engage collaboratively with conservationists, with fishermen, scientists, regulators and others so that we do get it right. 

I would just like to finish by saying that this should be the beginning of a search for solutions. We need to keep talking. My fellow stakeholders here will play a key role in this process, and I 

would like to propose that we continue our dialogue. 

In fact, I would love to host a meeting maybe in California to 

focus on discussion and building on the progress that we have 

made so far. If stakeholders are interested, we would be more than 

happy to organize this type of meeting and begin discussing this 

at an early stage. 

Thank you for this opportunity to testify. I would be happy to respond to any questions and request that my full written statement 

be included in the record. 

[The prepared statement of Mr. Bak follows:]

Statement of Jason Bak, CEO and Founder,

Finavera Renewables, Inc. 

Chairman Costa, Chairwoman Bordallo and Members of the Subcommittees, 

thank you for your invitation to appear before you today. 

I am the CEO of Finavera Renewables. We are an energy company focused solely 

on development, ownership and operation of renewable energy projects around the 

world. Although we are developing 1500 megawatts of wind energy in Canada and 

Ireland, my company is represented here today because we are at the cutting edge 

of ocean wave energy in the United States through our U.S. subsidiary, Finavera 

Renewables Ocean Energy. 

We have three wave energy projects under development in California, Oregon, and 

Washington, and we are in discussions about others. These are not just paper 

projects. We are literally weeks away from issuing contracts that will put U.S. steelworkers to work constructing our prototype wave energy buoy, which we are going 

to install off the coast of Newport, Oregon this summer. 

I am joined today by my colleague Alla Weinstein who leads Finavera’s ocean 

energy team. Alla is a true pioneer in this field. The company that Alla co-founded, 

AquaEnergy Group Ltd., became part of Finavera in 2006 when, after looking closely at every other engineering concept for wave energy, we determined that the technology Alla and her team developed has by far the highest potential to deliver environmentally sound, market-competitive electricity to the American power grid. 

The technology works like this: Our buoy, which we call the AquaBuOY, converts 

the up-and-down motion of waves into a pressurized water flow, effectively creating 

the equivalent of a 650-foot waterfall. The pressurized water spins a turbine that 

generates electricity, just like a conventional hydropower plant, but with no dam 

and no reservoir. And unlike other ocean energy technologies, the AquaBuOY does 

not use petroleum hydraulic fluids, so it’s safer for the environment. And, of course, 

there are no greenhouse gas emissions. 

My message to you today is simple: Ocean renewable energy’s time has come. This 

is not pie in the sky. We are already turning ideas into jobs here in the US. Now, 

we’re about to turn blueprints into tons of carefully engineered American-made 

steel. And that steel, in the form of our buoys floating off the West Coast, will soon 

demonstrate our ability to convert the virtually limitless supply of Pacific Ocean 

waves into megawatts of clean electricity. 

57

It is a huge potential resource. The amount of energy available for us to convert 

into clean electrical power off just the West Coast is equal to about one and onehalf times all the hydropower in the US. The East Coast and Gulf offer still more 

potential. 

But while our time may have come, we have to acknowledge that our technology 

and ambitions are maturing at roughly the same time that most federal, state, tribal and local governments are first becoming aware of us. In many cases, government 

hasn’t begun to figure out how to take advantage of what we offer in terms of helping solve the climate crisis. 

That is not true everywhere. The State of Oregon has embraced wave energy. Our 

tribal and state partners in Washington State, and local federal officials, are working hard with us to license our Makah Bay project. The Government of Canada has 

adopted tax policies aimed specifically at boosting private investment in wave energy. And within U.S. government, the Federal Energy Regulatory Commission is 

using its hydropower licensing authorities in a helpful way. 

If we had to, we could continue forward with our business under the current laws. 

But if you believe, as Alla and I do, that ocean energy should be an integral, important part of the United States’ response to climate change, then the current system 

is not good enough. 

I have a two-part request of you. I also have two commitments to make, one to 

Congress and the second to my co-panelists who are stakeholders with Finavera in 

the management and conservation of the ocean. 

Here are my requests: 

First, I would ask that Congress assure equitable tax treatment for ocean energy 

alongside other renewables. No special treatment, just let us compete on a level 

playing field with our clean energy peers, such as wind power. 

Second, I would ask that Congress clarify the current regulatory system. Section 

388 of the Energy Policy Act was a step in the right direction, but it left many questions unanswered and created a few new ones. 

Here are my commitments: 

First, I commit to Congress that Finavera will, if given a rational regulatory environment, deliver very large amounts of clean energy, free of climate changing 

emissions, in an environmentally sustainable way, at competitive prices. We want 

the chance to help you solve the climate challenge. 

Second, I commit to my fellow panelists and other ocean stakeholders that my 

company is devoted to preventing the ocean energy equivalent of what Altamont 

Pass represents in the history of wind development. We want to get it right the first 

time. 

We are the leaders. Finavera’s Makah Bay project is the first—and only—wave 

energy project to enter the federal licensing process. We understand and embrace 

our responsibility to engage collaboratively with conservationists, fishermen, scientists, regulators and others—so that we do get it right. 

Detailed Description of Finavera’s Wave Energy Projects 

Finavera is actively pursuing development of a number of wave energy projects, 

including two in Oregon (one of which is intended to be a demonstration project in 

2007, the other ultimately a true commercial project), a pilot 1 MW installation in 

Washington, and a commercial plant project in California. All projects are proposed 

for locations within a few miles of shore, mostly within state waters and not on the 

federal OCS, because, first, transmission cables are very expensive and a limiting 

factor in project location and, second, so as not become involved the apparent regulatory conflict between FERC and MMS over jurisdiction in the zone between three 

and twelve miles off shore. 

In addition, the company has projects under development in Portugal, South Africa and Canada. While the regulatory and jurisdictional aspects of those projects do 

not relate to the subject matter of this hearing, it is worth noting that various 

stakeholders in the European Union have been active, and remain quite supportive, 

in creating incentives for development of renewable ocean energy technologies. The 

forms of support have included research grants administered by the European Commission, feed-in tariffs specifically designed for ocean energy in UK and Portugal, 

and concentrated effort of bringing together the European ocean energy community 

with a goal to reach commercialization as soon as possible. There is also considerable interest in using the technology to serve isolated, energy-poor coastal regions 

around the world. 

Oregon Projects—Coos County and Newport 

Finavera has applied for, but not yet received a preliminary permit from FERC 

for the proposed 100 MW Coos County Offshore Wave Energy Plant in Oregon 

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(FERC Docket P-12752). The company is also pursuing a demonstration project off 

Newport, Oregon, for which Finavera is in the process of obtaining the required 

state and U.S. Army Corps of Engineers permits. A FERC permit is not necessary 

for Newport project because it will not be connected to the power grid. 

Finavera will be manufacturing prototype buoys at Oregon Iron Works over the 

next few months, and intends to install a single test buoy at Newport during the 

summer of 2007. The demonstration tests will be completed by October 2007. 

Finavera anticipates that test results will be positive, such that the company will 

be in a position to develop the projects into full utility scale. If so, the company will 

need to seek project licenses from FERC, and various other federal and state approvals. 

• Washington Project—Makah Bay 

Finavera has applied to FERC for a project license for its proposed Makah Bay 

project off the northwest tip of Washington’s Olympic Peninsula. This is the first 

and only application to FERC for a license to construct an offshore wave energy 

plant. The company recently completed a comprehensive environmental assessment 

under NEPA that concluded that the proposed project would have no significant adverse effects. The FERC licensing process for the Makah Bay project (FERC Docket 

P-12751) is expected to be completed by the end of 2007. The Makah Bay project, 

when built, will be relatively small, four buoys generating a total of 1MW, a scale 

that is a reflection of the very limited onshore grid capacity at the site. 

The Makah Bay project is a true pilot, both in the traditional engineering sense, 

but also in a different way. There simply was no applicable comprehensive regulatory system in existence at the time of project inception by AquaEnergy (now part 

of Finavera) in 2001. Nobody in the private sector, academia or government—federal, state or tribal—had ever been required to think through what issues, concerns, 

or questions would need to be addressed in order to properly site an ocean wave 

energy project. 

The project team did the right thing. Rather than try to take advantage of the 

regulatory uncertainty to evade scrutiny of its plans, the company launched a comprehensive outreach effort to all stakeholders. With the inception of the Makah Bay 

project in 2001, Finavera pioneered a collaborative approach to wave energy project 

development by involving commercial and recreational fishermen, environmental 

groups, park users, government stakeholders, public utilities, and universities in the 

company’s planning. This approach ultimately resulted in a very high level of consensus among stakeholders, and paved the way for the FERC licensing process. 

We note with particular gratification that the stakeholder advisory council for the 

Olympic Coast National Marine Sanctuary, in its comments to FERC regarding our 

license application, has not expressed opposition to our project, but has quite reasonably called for a sophisticated and continuing monitoring and evaluation program, involving sustained stakeholder communications and collaboration. The 

Makah Tribe is working closely with Finavera on this project as a true partner. The 

Department of the Interior and NOAA Fisheries and Marine Sanctuary Programs, 

as well as various Washington State resource agencies are not opposing our efforts, 

and have worked well with us to identify appropriate environmental protections and 

monitoring protocols. 

To our knowledge, no party is opposing issuance of a FERC license for the Makah 

Bay project, which marks a considerable achievement for any energy project, let 

alone a first-of-a-kind project sited in an environmentally sensitive marine environment within the boundaries of a national marine sanctuary. We see no reason that 

the Makah Bay project will not be licensed, built and put into operation in a manner 

that meets our interests as project developers while satisfying the concerns of all 

stakeholders. 

• California Projects—Humboldt County 

Finavera is working aggressively with California utilities to launch wave energy 

development in that state. The company has applied for a preliminary permit from 

FERC for a project near Humboldt County, along the north coast ( FERC Docket 

P-12753). Among other things, Finavera is currently negotiating a ‘‘bankable’’ power 

purchase agreement (PPA) with one utility for a significantly sized wave power 

project using the company’s AquaBuOY technology off the coast of California. The 

company looks to finance the project through conventional commercial debt. Permitting and associated project development activities are on-going. 

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*The unorthodox capitalization in the name AquaBuOY honors the memory of AquaEnergy’s 

chief technologist, Bengt-Olov Sjostrom (B-O), and company co-founder, Yury Avrutin (Y), who 

died together in December 2001 when their plane crashed while investigating potential wave 

energy sites along the Oregon Coast. 

Explanation of Finavera’s AquaBuOY * Technology 

Finavera’s offshore power plants consist of patented wave energy converters that 

are based on proven, survivable buoy technology. Clusters of these small, modular 

devices called AquaBuOYs are moored several miles offshore where the wave resource is the greatest. The power plants are scalable from hundreds of kilowatts to 

hundreds of megawatts. 

The AquaBuOY is a floating buoy structure that converts the kinetic energy of 

the vertical motion of oncoming waves into electricity. The AquaBuOY is categorized 

as a point absorber, defined as having a small dimension in relation to the longer 

wave length in which it is operating. It utilizes a cylindrical buoy as the displacer 

and the reactor is a large water mass enclosed by a long vertical tube underneath 

the buoy. The system is comprised of components that have been proven in other 

marine industries for decades. 

The AquaBuOY consists of four elements: 

• Buoy • Acceleration Tube • Piston • Hose Pump 

The acceleration tube is a vertical, hollow cylinder rigidly mounted under the body 

of the buoy. The tube is open in both ends so seawater can pass unimpeded back 

and forth, forcing the piston to move, and in turn extend or compress the hose 

pumps. Positioned at the midpoint of the acceleration tube is the piston, a broad, 

neutrally buoyant disk. When the buoy is at rest, the piston is held at the midpoint 

by the balanced tension of two hose pumps that are attached to opposite sides of 

the piston and extend to the top and bottom of the acceleration tube, respectively. 

When the buoy rides the waves, the acceleration tube moves in relation to the piston, and in turn extends or compresses each hose pump in tandem. 

The hose-pump is a steel reinforced rubber hose whose internal volume is reduced 

when the hose is stretched, thereby acting as a pump. The pressurized sea water 

is subsequently expelled into a high-pressure accumulator, and in turn fed to a turbine which drives a generator. Generated electricity is brought to shore via a standard submarine cable. 

A cluster of AquaBuOYs would have a low silhouette in the water. Located several miles offshore, the power plant arrays would be visible to allow for safe navigation and no more noticeable than small fishing boats or pilot lights. 

Any offshore system must survive the harsh ocean environment. AquaBuOYs are 

similar to navigational buoys that have been known to survive for many decades. 

Safely positioned offshore, AquaBuOYs are designed for 100-year storms by riding 

atop the extreme waves at sea, rather than experiencing catastrophic damage, as 

during tsunami, from the breaking waves onshore. AquaBuOYs are moored with advanced anchoring and mooring technology. 

Because the AquaBuOY power plant systems are modular, it is easy to scale 

projects to meet growing power demand. Additionally, the system’s modularity provides a more consistent flow of power during maintenance cycles, since individual 

buoys can be taken off-line, while others remain in operation. The simplicity of the 

AquaBuOY system makes it an ideal choice for sourcing local suppliers, construction, and maintenance. Most components are readily available from domestic suppliers and the job skills required for fabrication and maintenance are present in 

most coastal communities. 

Observations on Current U.S. Regulatory Approach 

• Direct Subsidies are Unnecessary 

Finavera believes, based on our success attracting private capital, that the ocean 

wave energy industry does not need direct subsidies. We do, however, believe it 

would be in the general public interest, and supportive of our industry, for Congress 

to provide adequate funding to the Department of Energy, including the National 

Renewable Energy Laboratories, to support independent assessment of ocean energy 

potential and advanced R&D work. 

• Taxation Should Be Equitable 

Ocean energy should be treated under the Tax Code on a par with other important renewable technologies, such as wind power. We do not need favorable treatment, just a level playing field. There are numerous legislative proposals under deVerDate 0ct 09 2002 10:56 Oct 04, 2007 Jkt 098700 PO 00000 Frm 00065 Fmt 6633 Sfmt 6621 L:\DOCS\34981.TXT Hresour1 PsN: KATHY
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velopment today that would amend the Code to promote renewable energy. We urge 

Congress to ensure that ocean renewable energy is given fair treatment in such legislation. 

In the longer term, we would call to Congress’s attention the tax policies adopted 

by the Government of Canada and the State of Oregon designed to promote renewable energy technology such as ours, particularly the flow-through tax credits provided under both schemes. Descriptions of those approaches are provided in an attachment to my testimony. 

• Federal Agency Authorities Need Clarification Based on Clear Goals and 

Principles 

The February 20, 2007 Report from Congressional Research Service, Issues Affecting Tidal, Wave, and In-Stream Generation Projects, provides an excellent overview 

of the current regulatory system. We would also draw to your attention the March 

7, 2007 CRS report, Wind Energy: Offshore Permitting, which provides a very useful 

complement to the earlier report, especially in its discussion of Coastal Zone Management Act and state jurisdictional matters. 

As can be seen from Finavera’s experience with the Makah Bay project, we have 

found a way to work within the current regulatory system. Moreover, there are federal agency officials at FERC, NOAA, the Interior Department, Corps of Engineers, 

Coast Guard, and elsewhere who are doing their very best to make the current system work in a way that supports development of ocean renewable energy in a way 

that meets environmental, safety, navigation, fishery access, and other legitimate 

public concerns. 

That said, the current system is not optimal. There are too many uncertainties 

about the respective authorities of federal agencies. Equally important, there are 

many questions about the relative powers of federal, state, and tribal levels of governments. 

We understand the general temptation to focus on this situation by asking the 

question: Who should be in charge? 

But, in Finavera’s view, that is the wrong question at this time. We believe the 

better question is: What do we want to achieve? 

Congress should focus on goals and objectives before wrestling with the question 

of who should carry out the mission. 

You will not be surprised that we believe Congress should adopt an affirmative, 

enthusiastic policy to promote development of ocean renewable energy. We also believe that pursuit of that goal should be governed by the following principles: 

1. Ocean renewable energy technologies and projects should be held to the highest standards of environmental performance. Blue energy has to be green. 

2. The relative business success of different ocean energy technologies should be 

decided by private markets, not government. Let us compete to find out which 

technologies do the best job of meeting power market needs. Investors will embrace the most promising technologies, and utilities will buy from the most reliable and affordable sources. We believe that the quality of Finavera’s technology will make us brothers-in-arms with the most demanding and prescient 

investors. Our competitors must feel the same way about their prospects—

there is no need for government to pick winners or losers. 

3. The States should be encouraged to provide timely leadership in identifying 

coastal areas that will be suitable, from a public policy standpoint, for ocean 

energy. We do not want to find ourselves pursuing federal approvals for 

projects that are not welcomed by the adjacent States in whose waters we may 

be located and on whose shores we must interconnect our projects. 

4. Federal agencies should collaborate to study on a programmatic level certain 

environmental and other issues that likely are associated with all forms of offshore renewable energy in most locations. For example, it does not make sense 

to study on solely a case-by-case basis the potential impacts of ocean energy 

projects on marine mammal migration. Another example of a ‘‘generic’’ issue 

would be the impact of energy projects on sand and sediment deposition. 

5. Rents, royalties, and other financial terms pertaining to use of the seabed 

should be established in a manner that promotes, and does not discourage, 

ocean renewable energy, especially during the decade or more that will be 

needed to bring the industry to relative maturity. The many comments submitted to MMS from offshore wind interests during the course of that agency’s 

rulemaking on Section 388 offer useful perspective on this key financial matter. 

6. Projects currently under development should not be interrupted or delayed 

while Congress works to enact new law. And, once new rules have been established, those projects that have made meaningful progress under the existing 

61

regulatory system should not be forced to re-start the regulatory process. We 

need to keep moving forward to develop ocean energy sources while making the 

transition to a more straightforward regulatory environment. 

Thank you for this opportunity to testify. I would be happy to respond to any 

questions, and request that my full written statement be included in the record. 

Attachment to Testimony of Jason Bak

Examples of Tax and Other Incentives from Oregon and Canada 

Oregon’s Approach 

Oregon has adopted a collection of programs designed to create incentives for private investment in renewable energy sources, including ocean wave energy. 

• Business Energy Tax Credit 

The Oregon Business Energy Tax Credit (BETC) is valued at 35% of ‘‘eligible 

costs’’ for any particular project. The manufacturing of renewable energy devices 

qualifies for the BETC. The maximum eligible cost is $10 million, resulting in a $3.5 

million tax credit. The credit is a dollar for dollar credit against State of Oregon 

Business taxes owed. In addition, there is a ‘‘pass-through’’ option that converts the 

tax credit to a cash payment upon project completion. A pass through partner is 

identified (with assistance from ODOE) and takes the credit on one’s behalf in exchange for a 25.5% cash payment based on eligible costs. Details, contact persons 

and applications can be found at http://www.energy.state.or.us/bus/tax/taxcdt.htm 

• Energy Loan Program 

The Oregon Energy Loan Program (also known as SELP) promotes energy conservation and renewable energy resource development. The program offers low-interest loans for projects that: save energy; produce energy from renewable resources 

such as water, geothermal, solar, biomass, biofuels, waste materials or waste heat; 

use recycled materials to create products; or use alternative fuels. The costs of designing and building an Oregon wave energy equipment manufacturing plant is eligible for a loan from Oregon’s Energy Loan Program. Likewise, the costs of planning, designing and building a wave energy facility in Oregon is eligible for an 

energy loan. It appears that both a manufacturing plant and a wave energy facility 

would qualify for lower-rate loans resulting from tax-exempt bonds. Projects must 

be in sited Oregon. http://www.energy.state.or.us/loan/selphme.htm 

• Enterprise Zone Exemption (ORS 285C.055) 

Through a short-term tax exemption, an Oregon enterprise zone induces eligible 

businesses of all sizes to make additional investments that will improve employment 

opportunities, spur economic growth and diversify business activity. Qualifying new 

plant & equipment in a zone receives a total exemption for at least three and—in 

some cases—up to five consecutive years from the local assessment of ad valorem 

property taxes, which can otherwise have a deterring effect on private investors 

seeking to start or enlarge operations with a substantial capital outlay. Enterprise 

zone property (except hotel/resorts and utilities) also is exempt for up to two years 

while it is being constructed or installed. http://www.econ.state.or.us/enterthezones/

whatare.htm 

• Construction-in-Process (C-i-P) 

For up to two years, all structures and heavy equipment are exempt from taxation. This exemption is available for each year, in which on January 1 the facility 

has been neither placed in service nor used or occupied for intended, commercial operations. http://www.econ.state.or.us/BIexemp.htm 

• Strategic Reserve Fund 

The Strategic Reserve Fund (SRF) was established by the Oregon Legislative Assembly to support economic and community development in Oregon. SRF projects 

must be approved for funding by the Governor. With the SRF, Oregon supports cost 

effective projects that create, expand and preserve the principal traded-sector industries of Oregon. The fund encourages diversification and preservation of regional 

economies. Administered by the Oregon Economic and Community Development Department (OECDD), the SRF is used to invest in time-sensitive economic opportunities statewide. Awards from the fund must be directly approved by the Governor 

of Oregon and are most often in the form of a forgivable loan. 

• Research Tax Credit 

The credit applies to research activity or investments during the tax year. It 

equals 5 percent of the increase in research expenses over a base amount for the 

62

taxable year. Alternatively, the credit is 5 percent of qualified research expenses 

that exceed 10 percent of Oregon sales for the year (capped at $10,000 for each percentage point in excess). The annual maximum credit allowed per taxpayer is $2 

million. This credit is based on the federal R&D credit and available only to corporate taxpayers. http://www.oregon.gov/DOR/BUS/docs/102-694-9.pdf 

• Strategic Investment Program (SIP) 

The Strategic Investment Program (SIP) was authorized by the 1993 Legislature 

to increase Oregon’s ability to attract and retain capital-intensive industry and jobs, 

particularly in high-technology industry. Under the SIP, traded-sector companies 

making large investments in new real and personal property are subject to fewer 

taxes, with the aim of fostering economic growth and improving employment opportunities in the state. Projects approved for the SIP must pay full property taxes on 

the first $25 million or $100 million invested, a threshold that increases 3 percent 

each year; all value above this threshold is exempt from taxation. An annual Community Service Fee equal to 25 percent of abated taxes, up to $500,000 or $2 million, must also be paid. Additional fees can be negotiated, as part of the local approval process with the county and city government. http://www.econ.state.or.us/

BIexemp.htm 

• Workforce Training Funds 

The Employer Workforce Training Fund (EWTF) provides a resource for training 

Oregon’s private sector workforce. The emphasis of the funds is to upgrade skills 

of the workforce in order to increase productivity, keep Oregon businesses viable 

and competitive, and to offer new skills and opportunities to Oregon’s workers. Particular emphasis will be placed on investments that assist labor, businesses and industries with cost effective training projects that retain and expand jobs in tradedsector clusters that are economically important to the state’s regional economies and 

the state as a whole. 

After the company has been in operation for at least 120 days, it can be eligible 

for workforce training assistance. Application must be made for such grants and 

issuance of the grants cannot be guaranteed by the State. However, the State and 

the local partners shall make best efforts to secure grants for training to meet the 

company’s needs and in accordance with state laws and regulations. http://

www.econ.state.or.us/BIAworkforce.htm 

Canadian Approach 

Canada, and in particular British Columbia (where Finavera’s head office is located) is a favorable region in which to set up a technology venture, because of generous research and development tax credits. These incentives include federal government incentives (New ‘‘flow through of expenses’’ regime and SRED), and provincial incentives. 

• New Federal Government ‘‘Flow-Through’’ and accelerated CCR 

incentives 

In its recently-announced 2007 Budget, the federal government made ocean 

energy eligible for the Canadian Renewable and Conservation Expense (‘‘Flow 

Through’’) and the Accelerated Capital Cost Allowance regime. 

The new tax credits will help ocean energy companies raise money for development work. The ‘‘flow through’’ tax credit—which currently available for mineral 

and wind resource development—encourages investment in exploration by offering 

tax incentives to investors. 

On April 18, 2007 The Honorable Gary Lunn, P.C., M.P., Canada’s Minister of 

Natural Resources, wrote Finavera the following letter:

Dear Mr. Bak:

Thank you for your letter of March 26, 2007, regarding tax treatment to 

ocean energy.

On March 19, 2007, our government displayed its commitment to the environment and renewable energy by announcing the extension of the accelerated capital cost allowance and Canadian Renewable and Conservation Expense (CRCE) to ocean energy and other renewables. As active proponents 

of this amendment, Finavera Renewables helped to successfully illustrate to 

government the utility of these market driven tax incentives to support Canada technology and domestic industry.

Through the implementation of these important tax incentives, the Government of Canada is investing in technologies that contribute to reductions in 

greenhouse gas emissions, improved air quality, that promote the diversificaVerDate 0ct 09 2002 10:56 Oct 04, 2007 Jkt 098700 PO 00000 Frm 00068 Fmt 6633 Sfmt 6621 L:\DOCS\34981.TXT Hresour1 PsN: KATHY
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tion of the energy supply and a competitive economy. We will support the 

ocean energy sector and its Canadian developers and technology leaders 

such as Finavera.

Again, thank you for writing on this important matter.

Yours sincerely,

The Honourable Gary Lunn, P.C., M.P.

Following are the details of the incentives promulgated in the 2007 Budget. 

Accelerated Capital Cost Allowance for Clean Energy Generation 

A 50-percent accelerated capital cost allowance (CCA) is provided under Class 

43.2 of Schedule II to the Income Tax Regulations for specified energy generation 

equipment. 

Eligible equipment must generate either (1) heat for use in an industrial process 

or (2) electricity, by: 

• using a renewable energy source (e.g. wind, solar, small hydro), 

• using waste fuel (e.g. landfill gas, manure, wood waste), or 

• making efficient use of fossil fuels (e.g. high efficiency cogeneration systems). 

Class 43.2 was introduced in 2005 and is currently available for assets acquired 

on or after February 23, 2005 and before 2012. For assets acquired before February 

23, 2005, accelerated CCA is provided under Class 43.1 (30 per cent). The eligibility 

criteria for these classes are generally the same except that cogeneration systems 

that use fossil fuels must meet a higher efficiency standard for Class 43.2 than that 

for Class 43.1. Systems that only meet the lower efficiency standard continue to be 

eligible for Class 43.1. 

Where the majority of the tangible property in a project is eligible for Class 43.1 

or Class 43.2, certain project start-up expenses (e.g. feasibility studies, engineering 

and design work) qualify as Canadian Renewable and Conservation Expenses 

(CRCE). They may be deducted in full in the year incurred, carried forward indefinitely for use in future years, or transferred to investors using flow-through shares. 

The Government continues to review Class 43.2 on an ongoing basis to ensure inclusion of appropriate energy generation technologies that have the potential to contribute to energy efficiency and the use of alternative energy sources. 

The Federal Budget 2007 proposes to extend eligibility to an emerging source of 

renewable energy—wave and tidal energy—and to a broader range of applications 

involving active solar heating, photovoltaics, stationary fuel cells, production of 

biogas from organic waste, and pulp and paper waste fuels. The Federal Budget 

2007 also proposes to extend eligibility for Class 43.2 to assets acquired before 2020. 

By encouraging investment in these technologies, these changes will contribute to 

a reduction in greenhouse gas emissions, improve air quality and promote the diversification of the energy supply. 

Wave and Tidal Energy Equipment 

The 2007 Federal Budget proposes to extend eligibility for Class 43.1 and Class 

43.2 to include equipment that generates electricity using wave or tidal energy, provided they do not do so by means of a barrage or other dam-like structure. Eligible 

equipment will include support structures, control, conditioning and battery storage 

equipment, subsea cables and related transmission equipment, but will not include 

buildings, distribution equipment or auxiliary electrical generating equipment and 

any other property not used primarily for the purpose of the wave- or tidal-energy 

system. The change will apply to eligible assets acquired on or after March 19, 2007. 

• Federal Government SRED Program 

The Canadian government provides over $1.5 billion of incentives each year to 

companies and other taxpayers who do research and development work. This program is known as the Scientific Research and Experimental Development Program 

(SRED). Current information on the program is available on the Canada Customs 

and Revenue Agency (CCRA) web site at http://www.rc.gc.ca/sred/. The CCRA is responsible for administering the SRED program, while the Department of Finance, 

an executive branch of the federal government, is responsible for the legislation that 

governs it. 

What is SRED? 

SRED is designed and administered as a federal tax incentive program to encourage Canadian businesses of all sizes and in all sectors to conduct scientific research 

and experimental development (SR&ED) in Canada. The aim is to encourage and, 

indirectly, finance new, improved, or technologically advanced products or processes. 

SRED is the largest single source of federal government support for industrial reVerDate 0ct 09 2002 10:56 Oct 04, 2007 Jkt 098700 PO 00000 Frm 00069 Fmt 6633 Sfmt 6621 L:\DOCS\34981.TXT Hresour1 PsN: KATHY
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search and development. SRED claimants can apply for SRED investment tax credits for expenditures such as wages, materials, machinery, equipment, some overhead, and SRED contracts. 

Who qualifies for SRED? 

Generally, a Canadian-controlled private corporation (CCPC) can earn an investment tax credit (ITC) of 35% up to the first $2 million of qualified expenditures for 

SR&ED carried out in Canada, and 20% on any excess amount. Other Canadian corporations, proprietorships, partnerships, and trusts can earn an ITC of 20% of qualified expenditures for SR&ED carried out in Canada. Generally, a CCPC with a taxable income in the immediately preceding year that does not exceed the business 

limit may receive a portion of the ITC earned as a refund, after applying these tax 

credits against taxes payable. The ITC earned by a Canadian corporation that is not 

a CCPC is non-refundable, but may be used to reduce any taxes payable. The ITC 

earned by a proprietorship or certain trusts may be partially refunded after applying these tax credits against taxes payable. 

What kind of projects qualify for SRED? 

To qualify for the SRED program, work must advance the understanding of scientific relations or technologies, address scientific or technological uncertainty, and 

incorporate a systematic investigation by qualified personnel. Work that qualifies 

for SRED tax credits includes: 

• experimental development to achieve technological advancement to create new 

materials, devices, products, or processes, or improve existing ones; 

• applied research to advance scientific knowledge with a specific practical application in view; 

• basic research to advance scientific knowledge without a specific practical application in view; and 

• support work in engineering, design, operations research, mathematical analysis, computer programming, data collection, testing, or psychological research, 

but only if the work is commensurate with, and directly supports, the eligible 

experimental development, or applied or basic research. 

How the SRED program financially assists companies—examples 

Even if a claimant has no revenue, or has revenue but is not yet profitable, it 

can receive the SRED credits in cash. The federal government will send such a 

claimant a check. In British Columbia, that can amount to as much as 68 cents back 

on every incremental SR&ED dollar spent by the claimant. 

Generally, Canadian-controlled private corporations (CCPCs) with less than 

$200,000 in taxable income can receive a refundable investment tax credit (ITC) of 

35% (68% after the gross up—see below) of qualifying SR&ED expenditures, to a 

maximum of $2 million of expenditures. Most other Canadian corporations, proprietorships, partnerships, and trusts can receive an investment tax credit of 20% of 

qualifying SR&ED expenditures. 

So, for every $1.00 the company spends on research and development including 

an overhead allowance, it may be eligible to receive up to $.35 back in either cash 

or a tax credit from the federal government. From a corporate finance point of view, 

this is similar to having a 35% equity infusion into the business. Public companies 

and non-CCPCs, such as foreign controlled corporations, are limited to a 20% grant. 

The federal government also allows claimants to claim overhead on their SR&ED 

expenditures. For companies that have a dedicated R&D facility this is easy to do, 

but if the R&D is part of the company’s overall operation the calculation of overhead 

can be cumbersome. Therefore, the government permits claimants to claim an overhead ‘‘proxy’’ which amounts to 65% of their direct cost. Example: a company hires 

an R&D employee and pays her $100K during the fiscal year. The company can actually claim the 35% SRED grant on its total ‘‘deemed’’ cost of $165K (i.e. $100K 

x 1.65). 

• British Columbia (BC) and other provincial SRED incentives 

Certain provinces, such as British Columbia, also provide a provincial SRED credit. In the case of BC, the Province provides an additional 10% SRED credit. So, for 

every incremental SR&ED dollar spent, a total of $.68 can be recovered by way of 

SRED credits—taking into account the provincial and federal SRED credits on the 

‘‘overhead topped-up’’ direct R&D cost. 

65

Response to questions submitted for the record

by Jason Bak, Finavera Renewables 

Questions from Chairwoman Bordallo: 

Question 1. Memorandum of Agreement 

In its testimony, FERC advised that the Minerals and Management Service 

and the Federal Energy Regulatory Commission are devising a memorandum of agreement to assist the applicant in the regulatory process. 

Would it be helpful to you if NOAA was involved in this MOA so that you 

could know what will be required of you in terms of compliance with the 

environmental laws? Would it be helpful if one agency, instead of several, 

were involved? 

Finavera Response: Finavera strongly supports those measures that would 

allow efficient and predictable coordination of effort among the various federal agencies involved in regulating ocean renewable energy. We take the same view of the 

importance of effective coordination between the federal agencies and the states. 

In an ideal world, the number of federal agencies involved in deciding whether 

and under what terms to allow the development ocean renewable energy projects 

would be a small one. There is, however, no agency that appears ready today to take 

exclusive responsibility for the full range of issues related to ocean renewable 

energy development. We fear that, were Congress to decide to assign exclusive responsibility to a single agency, we would face a very long period of regulatory inaction and confusion which would stop project development and devastate our 

industry. 

We understand that FERC and MMS need to resolve their different views of their 

respective jurisdictions over water-powered projects in the portion of the OCS between 3 and 12 nautical miles offshore. That is an important issue to overcome for 

the future of ocean renewable energy, but there are other regulatory and procedural 

issues of equal importance where NOAA’s jurisdiction and expertise is implicated. 

We see no reason why NOAA should not be fully involved in development of an 

interagency agreement or protocol that would set out the federal agencies’ roles and 

responsibilities. 

Interagency coordination is almost always hard to achieve and harder to maintain 

over time. The fact that the agencies are still struggling to come to terms on some 

initial matters suggests that the Administration has not made such coordination a 

priority in this case. We suggest that the Congress should take those actions that 

will prompt the Administration to move forward. 

As a starting point, we believe that MMS and FERC can, if suitably motivated, 

identify a set of legal concepts and procedural steps that would allow the agencies 

to fulfill their existing statutory mandates without undue conflict. For example, we 

do not perceive a fundamental conflict between an interpretation of existing law 

that would recognize clear authority in FERC to license wave, tidal and current 

energy projects in the U.S. Territorial Sea and clear authority in MMS to set the 

terms of leases, easements and rights of way to use the OCS within the EEZ. These 

are distinct tasks that can be coordinated responsibly. We would urge the Subcommittee to develop and support legislation, ideally as amendments to the energy 

legislation soon to be under full Committee review, that would help the agencies get 

past their threshold disagreements and move forward to set up a sensible regulatory 

approach under their respective statutory mandates. We would be happy to suggest 

potential language. 

Questions from Chairman Costa: 

Question 1. You mention that your Makah Bay project is a true pilot 

project in the sense that you had to conceive, with minimal guidance, a 

comprehensive outreach effort to all stakeholders and a collaborative approach to wave energy development at the project’s inception in 2001, to 

determine how to properly site an ocean wave energy project. You note 

that a high level of consensus resulted. 

• I understand that that Finavera’s project in Washington State took about 

four years to permit, and I’ve heard that Verdant Power’s project in New 

York also took several years. Is that appropriate? 

Finavera Response: The considerable amount of time required to bring the 

Makah Bay Project to its current status reflects the challenge inherent in any effort 

to develop a first-of-its-kind energy project at a location owned by the American 

public adjacent to some of the most beautiful and environmentally sensitive places 

in the country. We wish it could have been a quicker process, but we have no reVerDate 0ct 09 2002 10:56 Oct 04, 2007 Jkt 098700 PO 00000 Frm 00071 Fmt 6633 Sfmt 6621 L:\DOCS\34981.TXT Hresour1 PsN: KATHY
66

grets. It was important to take the time required to build understanding and an 

adequate degree of trust among all the stakeholders. 

We do not believe that future projects will move so slowly, and we certainly hope 

they will not. The licensing of each project will probably make it incrementally easier to license the next one—assuming that project developers can demonstrate, 

through monitoring and evaluation, that project impacts are not problematic from 

the standpoint of public policy. 

Our greatest scheduling-related concern at this point stems from the unresolved 

jurisdictional debate between FERC and MMS. The agencies’ inability to decide how 

to collaborate in meeting their duties has the potential to discourage project development, delay agency decision-making, interrupt licensing and leasing proceedings, 

and encourage litigation. We urge the Subcommittee to take this issue on directly 

and immediately. 

We would encourage the Subcommittees to recognize that the efficiency of any licensing process will be heavily influenced by the quality of engagement by the 

states. State governments have numerous authorities that are related to siting and 

operation of our projects. The states need to be true partners with the federal government in choosing the proper locations for projects, license conditions, and monitoring and evaluation procedures. The federal government should affirmatively encourage informed, coordinated engagement by the states in promotion and regulation of ocean renewable energy. We believe that proper use of the CZMA will be 

helpful in this regard, as will well-run, inclusive NEPA procedures. 

Question 2. Your testimony says that a stakeholder group requested that 

Finavera lead a sophisticated and continuing monitoring and evaluation 

program. Please tell us more about that program. 

What challenges does Finavera face in leading a such a monitoring program? What will that cost and over what time frame? 

Will your data and findings be made public? 

Finavera Response: The key challenge we face in designing the monitoring and 

evaluation program for the Makah Bay Project is the problem of scale. The Makah 

Bay Project is small, involving just 4 devices that collectively have capacity to generate 1 megawatt of electricity. Though we intend to sell the electricity it generates, 

it is not a true commercial-scale project; it is a pilot demonstration project. Yet, because it is the first project to apply for a FERC license, there is considerable interest 

within the company and among stakeholders to use the project to learn all we can 

from it. We need to reach agreement with the stakeholders on a program that is 

extensive enough to address legitimate concerns, but is not so expensive that it renders the project economically infeasible. 

We do not know at this point what the likely cost will be. We can say with confidence, however, that we would welcome participation in the monitoring project 

from federal and other agencies in a manner that would expand resources in order 

to take advantage of the learning opportunity the project represents. 

We would expect that the results of a program negotiated with the Makah Bay 

Project stakeholder community to monitor and evaluate project impacts on public 

resources and values will be made public. 

Question 3. I understand from your testimony that Finavera believes that 

direct subsidies to the ocean wave industry are unnecessary. 

What are your thoughts on an access fee or royalties for renewable projects 

like yours on the Outer Continental Shelf? 

Finavera Response: Finavera believes that it is appropriate, as a conceptual 

matter, for the federal government to charge a fee for use of the OCS by renewable 

energy projects, particularly to the extent the use precludes use of the same area 

by the general public. We do not, however, believe that a royalty is appropriate, 

since a renewable energy project does not use up a finite resource. 

We believe strongly that any fee applied by the federal government to renewable 

energy projects on the OCS should be tailored to acknowledge the financial realities 

of these projects and the national policy imperative of expanding renewable energy 

resources. For some time to come, ocean renewable energy projects of all kinds will 

be small and will not generate substantial revenues, let alone profits, for developers 

or owners. Fees should not discourage development of projects that hold the potential to contribute millions of megawatt hours of clean electricity to the nation’s 

power system. The public will directly benefit from these projects. For the first 

phase of this new industry’s life, the public interest will be fully and properly served 

by promoting the projects themselves. Once the industry becomes established, and 

67

the financial and regulatory risks are reduced to more conventional levels, use fees 

may become a reasonable component of the regulatory system. 

Question 4. You note that most ocean wave energy projects currently are 

proposed for locations within a few miles of shore, mostly within state waters and not on the federal OCS ‘‘because, first, transmission cables are 

very expensive and a limiting factor in project location and, second, so as 

not become involved in the apparent regulatory conflict between FERC 

and MMS over jurisdiction in the zone between three and twelve miles offshore.’’

Please tell us more about the cost of transmission cables and how we might 

address that challenge in encouraging renewable energy projects further 

off-shore. 

Finavera Response: Underwater power cables are expensive. They cost approximately $1 million per mile. This sort of expense is proportionally small for a large 

oil or gas platform that might cost $1 billion or more and produce many billions of 

dollars worth of commodity products sold into global commercial markets. But for 

any renewable energy project at this stage in the industry’s life, the cost of power 

cable is hugely disproportionate to the cost of other features of the project, including 

permitting, manufacturing, and operations, and can easily render a project unprofitable. As ocean renewable projects grow larger over time, the proportionate cost of 

cabling will diminish, and it is likely that some will be sited farther offshore, where 

the energy in waves is greatest. 

Although the cost of undersea cables is expensive, we are most concerned about 

the potential lack of capacity in the on-shore transmission system currently serving 

coastal areas throughout the country. Many coastal areas with potentially valuable 

wave, current or tidal energy sources are served by transmission lines that have no 

ability to carry significant additional amounts of electric energy. Finavera believes 

that the Congress should consider directing the Department of Energy and the relevant federal power marketing administrations to identify the parts of the coastal 

transmission system that will need expansion to carry the clean renewable energy 

that our industry hopes to bring ashore in the coming years. The nation will need 

to know where to steer new investments in transmission infrastructure and, given 

the many public issues related to transmission infrastructure, we will need a number of years to reach the point of making good decisions about the location and character of new construction. 

Question 5. Given the cost of transmission and other challenges associated 

with projects further off-shore, in deeper waters, how many years away do 

you realistically think we are from commercial projects on the OCS? 

Finavera Response: The principal impediment today to location of ocean wave, 

tidal, or current energy project on the OCS is the unresolved jurisdictional dispute 

between FERC and MMS. Congress should expect that no developer will choose to 

risk becoming entangled in that argument, and all development will be planned for 

sites less than three miles offshore until it is clear which federal agency is responsible for what features of wave, tidal or current energy project development on the 

OCS. 

This is an unfortunate situation that hurts the public interest. It arbitrarily constrains project siting to a fairly narrow strip of ocean, thereby increasing the potential for user group conflict, reducing the potential size of the developable renewable 

energy resource, and increasing the regulatory risk associated with all projects. 

If the FERC-MMS dispute were resolved, especially if it were resolved with appropriate legislation, it is highly likely that each project under consideration by 

Finavera could be shifted or expanded to include areas on the OCS. We believe that 

other developers would react similarly. In other words, there will not be a delay in 

movement of energy projects onto the OCS once the federal agency jurisdiction 

problem is resolved (and assuming that transmission capacity constraints can be 

addressed). 

Ms. BORDALLO. Thank you. Thank you very much, Mr. Bak. You 

get an A+. You are just three or four seconds over. 

I would like now to recognize Mr. Zeke Grader, Pacific Coast 

Federation of Fishermen’s Associations. Mr. Grader? 

68

STATEMENT OF W.F. ‘‘ZEKE’’ GRADER, JR., PACIFIC COAST 

FEDERATION OF FISHERMEN’S ASSOCIATIONS 

Mr. GRADER. Thank you, Madam Chairman. My name is Zeke 

Grader, and I am the Executive Director for the Pacific Coast Federation of Fishermen’s Associations, which represents working men 

and women in the West Coast commercial fishing fleet. 

We have been looking at wave energy. It was first brought to our 

attention between 25 and 30 years ago. We began looking at it 

from the standpoint of dual purpose facilities as far as using it for 

breakwater and then rather than doing rock and concrete basically 

being able to take the energy from the waves and then turn it into 

energy, so we have been intrigued with the concept for some time. 

The breakwater idea has never come together, but we have 

looked at wave energy, as well as wind and ocean current generation I think with a great deal of interest in terms of both looking 

for replacement renewable power, and keep in mind when you are 

looking for replacement power nowadays particularly in California 

it better be renewable. 

As a renewable source for hydro, taking out some antiquated fish 

killing hydro dams—whether they are on the Klamath River or on 

Battle Creek or even the Snake River—to be able to remove some 

of these dams that have been so destructive to our fisheries. But 

at the same time, we have to be able to identify a source of renewable replacement energy, so we have had a great deal of interest 

there. 

The second area we have been interested in has been from the 

standpoint of desalination. The west, as you know, has severe 

water problems, probably no place greater than California. Well, 

maybe Texas, but certainly California where most of our rivers are 

overdrafted. Our Bay-Delta system, as Mr. Costa can tell you, has 

got an annual deficit of about 1.6 million acre feet. 

We have to reduce the demand on our rivers and this delta and 

find new reliable sources, and desalinization could be one particularly since most of our population is along the coast. We see wave 

energy or offshore wind as possibly a good source of renewable 

energy to perhaps not completely power desalination, but to help 

reduce its energy or to at least put in most of the energy use based 

on renewables. Again, we are very much intrigued with that. 

Moreover, I think as a fishing industry we are seeing what is 

happening right now with global warming, and particularly the 

thing that is most ominous, that scares us the most, is the acidification of our oceans because of carbon sequestration. We know that 

we all have to commit to find new sources of energy. We cannot 

continue dumping carbon into the atmosphere because a lot of that 

is ending up in our oceans and it is making them acidic. 

We understand those things. That said, however, there are some 

concerns. First of all, we are not really sure what the environmental/ecological impacts may be from these various types of energy. We will have to study that. I suspect it is probably not going 

to be as great as many other activities, but we don’t know for sure. 

Probably the thing that is more troubling for us along the Pacific 

Coast in particular where our Continental Shelf is so narrow, that 

is the band where coastal fishermen can work is a fairly narrow 

band up and down the coast, is that all of that area is important, 

69

and right now it is being affected by movements afoot to try and 

create these so-called marine protected areas, which in fact are 

nothing more than no fishing zones at the current time, or the current closures that have been imposed, rightfully so, by our regional 

fishery council and the National Marine Fishery Service. 

We have to be concerned where riggings are going to be placed 

to make sure that they are not in the middle, for example, of key 

critical fishing grounds. That is our concern there. 

I think to try and help us work things out, and I appreciate Mr. 

Bak’s offer that has been made here. I think it is going to be critical that, first of all, we require consultation, particularly as far as 

fisheries goes, consultation not with NOAA, but with the regional 

council themselves because we often find where, frankly, NOAA 

has sold our fisheries out, and I don’t want to go chapter and verse 

of the examples of what they have done to us. We have had to continually sue them. I think certainly the councils should be given 

consultative authority. 

Moreover, I think we do need to have consistency. I think particularly on the West Coast with the states of Oregon, Washington 

and California, the three Governors have committed to work together. They have pledged to reduce greenhouse gases. 

I think, given the states’ consistency, it is not going to hold up 

the development of this power, but it will just make sure it is done 

right because these three states want to reduce their carbon impact 

and want to look for renewable sources of energy. 

Thank you. 

[The prepared statement of Mr. Grader follows:]

Statement of W.F. ‘‘Zeke’’ Grader, Jr., Executive Director,

Pacific Coast Federation of Fishermen’s Associations 

Chairwoman Bordallo, Chairman Costa, members of the Subcommittees. Thank 

you for the opportunity to provide testimony here this morning. 

My name is Zeke Grader and I am the Executive Director for the Pacific Coast 

Federation of Fishermen’s Associations (PCFFA). PCFFA represents working men 

and women in the U.S. west coast fishing fleet and is the largest fishermen’s organization on the Pacific Coast. Our members are primarily owner/operators and crew 

aboard small to mid-size commercial fishing boats utilizing a variety of gears and 

engaged in numerous different fisheries. Our members can best be described as 

‘‘family fishermen,’’ as opposed to the large industrial fishing fleet operations. 

I have served as ED and counsel for PCFFA since 1976. Representing, among others, nearly all of California’s organized commercial salmon fishermen, with members 

in Oregon and Washington as well, we have had to tackle numerous resource issues 

in our efforts to protect the fishery resource base our members depend upon for 

their livelihoods. That has included numerous land use issues, such as logging in 

salmon watersheds, water—as Mr. Costa knows—in terms of both quantity and 

quality, and fish passage on rivers, as well as ocean activities such as offshore oil 

development. We joked that at least we didn’t have to worry about air pollution—

at least not on the West Coast where we were spared acid rain. That was until recently. Now, however, we are beginning to understand the implication of decades 

of green gas house emissions and what that means for our oceans in terms of sea 

level rise, rising temperatures, currents, upwellings and acidification. 

Members of my organization understand clearly the relationship between the development of renewable energy sources—to reduce our ‘‘carbon footprint’’—and the 

ecological and economic health of our fisheries. With regards to the development of 

renewable energy from wind, current and waves on the outer continental shelf, I 

think I can best describe our position as cautious and conditional. We understand 

the need for and potential benefits of this energy development, but we are wary, 

as well, of potential problems, including those for the environment. 

70

Intriguing Potential 

My organization was first introduced to the idea of harnessing the energy of 

waves some 25 years ago. An outer breakwater was being considered for Noyo Harbor on the Mendocino Coast in Northern California. However, the president of our 

organization, a fisherman from that port, scoffed at the idea of a traditional rock 

or concrete barrier built by the Corps of Engineers to fight the waves to make entry 

into harbor safer. 

He suggested, instead, a series of buoys to capture the energy of the waves, rather 

than fight them like a breakwater. His vision was to take the energy of the waves 

captured by the up-and-down motion of buoys for the generation of electricity. The 

idea went further from there. The electricity would be used to produce hydrogen 

from seawater that in turn would be an energy source for powering fishing vessels. 

This was during one of a series of oil embargoes, and I think he saw this as a way 

of wresting this source—that he believed was our future for clean energy—from the 

oil companies before they seized its production and distribution. Most of us at that 

time equated hydrogen with the Hindenburg. The Corps was not interested in investing research into floating buoys that generated electricity when they had the 

rock and concrete technology down for ocean breakwaters. 

The idea of a dual purpose facility—that could both serve as a breakwater (making port entrances safer) and an energy generation facility has continued to intrigue 

some of us for the past quarter century. A dual purpose facility, however, is probably unsuitable for most locations. There are few ports around our nation’s coasts 

where there is both the need for an outer breakwater and the conditions are conducive to a wave energy generation facility. Just the same, on the West Coast, anyway, 

I believe some wave energy generation facilities could help fishermen address other 

problems—other than global warming—they are faced with. 

PCFFA has been an advocate, along with some recreational fishing organizations, 

tribes, and conservation groups for the removal of fish-killing dams, particularly antiquated ones with little hydropower or water storage value. One of the issues we 

have to deal with in the relicensing process for these dams—when we’re proposing 

their removal—is identifying replacement power. Now days replacement means from 

a renewable power source. Along with solar and wind, wave generation is one of the 

renewables we’d like to have available to replace dam hydropower. 

In the west, particularly in California, we’re also faced with a tremendous overdraft of most of our rivers, along with the San Francisco Bay/Sacramento-San Joaquin Delta system—where most of the salmon harvested offshore the three Pacific 

Coast states migrate between the Sierra spawning streams and the ocean. To the 

extent we can develop environmentally acceptable desalination facilities along our 

coast we have the potential for providing a reliable back-up water supply for coastal 

urban areas. This means less demand from urban sources on the water currently 

utilized by agriculture, but more importantly for fishermen this could allow for the 

restoration of flows to many rivers and help to meet a Delta outflow deficit of some 

1.6 million acre-feet. 

One of the major objections raised to desalination has been its energy requirements. A nearby wave generation facility, depending on location along the coast, 

could help to supply a portion of the energy requirements for a desalination operation. 

Thus from the view of fishermen looking for renewable replacement power for 

hydro dams or as a power source for desalination facilities to protect or restore flows 

to rivers and estuaries, the potential of wave energy, and to a certain extent offshore wind and ocean current energy generation, is intriguing. 

Daunting Problems 

Now, having looked at some of the potential we see that could be had from wave 

energy and, perhaps, wind and current, let’s look at some of the problems. The problems we see right off are operational. That is not to say that there may not be other 

physical or biological problems we may be faced with by some of these operations. 

We’re simply not aware of them or at least to what extent there may be problems. 

The operational problems these facilities pose to fishermen are fairly straight forward. They are potential navigation hazards and preclusion of fishing grounds. 

Ocean current generation facilities may also pose a hazard to fish life through entrainment. 

Navigation Hazards. Large structures placed in the ocean, particularly those on, 

above, or just under the surface present obstacles for mariners to avoid. Wave generation, offshore wind facilities, and probably most generation facilities around 

ocean currents will be large, certainly in comparison to our vessels. They will require good marking and lighting. Most important, however, they will have to be loVerDate 0ct 09 2002 10:56 Oct 04, 2007 Jkt 098700 PO 00000 Frm 00076 Fmt 6633 Sfmt 6621 L:\DOCS\34981.TXT Hresour1 PsN: KATHY
71

cated outside of shipping lanes and the courses set by fishermen between ports and 

fishing grounds. 

In addition to the placement of these facilities, some, such as various wave energy 

technologies that have been proposed, have the potential for getting loose in a major 

storm, as we witnessed with some of the offshore oil rigs during Hurricane Katrina, 

and if they’re floating at or just below the surface—possibly undetected by radar—

they constitute a serious navigation threat to vessels at sea. 

Preclusion of Fishing Grounds. The other operational problem is preclusion of 

fishing grounds. Fishermen on the West Coast have already suffered the loss of access to large parts of the ocean for some of their fisheries due to conservation closures implemented by the Pacific Fishery Management Council. We’re not questioning the need for these—we hope most will only be temporary—but state it as 

one of the factors fishermen are dealing with. 

Moreover, in California the state is already moving ahead implementing a network of restricted or no fishing zones, euphemistically called marine protected areas 

(to date, they only regulate fishing, not pollution or any other factor affecting the 

marine environment), and the federal government is preparing to do the same in 

the EEZ. This will mean, most likely, the loss of some important fishing grounds. 

We cannot stand the additive impact of the loss of additional fishing grounds by 

energy generating facilities. For example, one of the areas viewed as having the 

most potential for a wave generation facility off Northern California is in an area 

between 35 and 45 fathoms of depth offshore the port of Eureka. This just happens 

to be the prime Dungeness crab fishing ground. 

Thus, while we find the idea of wave energy, in particular, intriguing, we have 

to be mindful of the physical problems associated with the placement of these facilities and the danger and economic harm that can result if this is not done in a sensitive, thoughtful and careful manner. 

Details and Process 

While we understand the need for development of renewable energy sources and 

can envision the possibilities wave energy could provide fishermen, we are not at 

all comfortable with the current governance of renewable energy generation on the 

OCS. The leasing authority, the Minerals Management Service (MMS) primary expertise is in offshore oil and gas. We have never found MMS to be sensitive to either 

fishing operations or the biological needs of fish or the marine ecosystem in our 

dealings with them in California—specifically in the Santa Barbara Channel. 

Consultation. At the very least, we need a requirement in law, that MMS be required to consult with the regional fishery management councils, the National Marine Fisheries Service and the coastal state fishery agencies over the placement of 

any renewable energy facility in the OCS where it will affect either state or federally managed fisheries. 

We also recommend MMS, if it is to remain the offshore leasing entity, be required to consult with affected fishing groups, that bonding be required to cover liability, and mitigation for economic losses suffered by any third party (e.g., fishermen) be required as a result of these energy operations. 

Consistency. Further, we recommend that any renewable energy generation facility located on the OCS be operated not only consistent with a state coastal management program, but also with regional fishery management council FMPs [fishery 

management plans] or, in the case of a state managed fishery, consistent with the 

statutes or regulations governing an affected fishery. 

State Management. Finally, with regards to the Federal Energy Regulatory Commission (FERC) authority, we recommend a change in law to ensure that FERC not 

preempt state statutes but that its licensing of such facilities be required to be consistent with state statutes and regulations as they may exist over such operations 

or for the protection of a state’s coastal zone, water quality, and fisheries, among 

other resources. 

Conclusion 

Thank you Madam Chairwoman and Mr. Chairman and Subcommittee members 

for this opportunity to comment. I apologize for a certain ambivalence on our part. 

I wish I could provide you with more details, more specificity, but we, too, are looking to learn more about a technology that we believe has some exciting potential. 

It certainly has promise, but in the words of a former Defense Secretary there are 

the ‘‘unknown unknowns’’ that we have to be mindful of. I’d be happy to attempt 

to answer any questions members may have. 

72

Response to questions submitted for the record by Zeke Grader 

Questions from Chairwoman Bordallo: 

1. International Leaders: What nations are the leaders in investments in 

ocean energy technologies? What should the United States do to catch 

up with them? 

From my reading on the issue, it appears most of the investment is taking place 

in the UK right now with some investments taking place in other parts of Europe, 

such as Portugal. The one thing the U.S. should consider, I believe, to catch up or 

stay abreast of other nations would be to provide economic incentives for ocean 

energy technology research and development. Grants, tax incentives and other financial assistance should be encouraged, however, not at the expense of the environment or other traditional marine uses, such as fishing. A balanced approach 

then, would consist of tax and other financial incentives, but with additional oversight by the states, and other federal agencies, such as the National Marine Fisheries Service (including consultation with the Regional Fishery Councils), to ensure 

protection of the marine environment and other marine uses. 

Questions from Mr. Brown: 

1. Do you or your organization receive funding from the Pew Charitable 

Trust or the David and Lucille Packard Foundation? 

I represent two organizations. The first, the Pacific Coast Federation of Fishermen’s Associations is a trade organization whose funding primarily comes from assessments on fishermen’s catches that are voluntarily paid to their local marketing 

associations and a portion remitted to the PCFFA, the umbrella organization. While 

assessments have been the soul funding for PCFFA for most of its existence, it has 

received grants from the David & Lucile Packard Foundation over the past four 

years solely to pay for PCFFA’s work in conservation, not its other activities. None 

of the funds PCFFA receives from Packard are related to the topic of this hearing, 

nor have I or anyone at PCFFA discussed ocean energy issues with anyone at the 

David & Lucile Packard Foundation. PCFFA does not receive any funding from the 

Pew Charitable Trust. 

The Institute for Fisheries Resources (IFR), the 501(c)(3), organized by PCFFA to 

conduct research, education and outreach (no lobbying), does receive government 

contracts and grants and grants from private foundations. The David & Lucile Packard Foundation has made grants to IFR in the past for outreach to fishermen to 

engage them in fishery management and conservation and IFR is now completing 

a Packard grant to assist in the formation of a national commercial fishermen’s organization—the Commercial Fishermen of America, which will soon be opening its 

national office in Maryland. IFR receives grants from numerous other foundations 

for its work, as well as grants and contracts from state and federal agencies. It does 

not, nor has it ever received any funding from the Pew Charitable Trust, nor has 

it ever applied to the Pew Charitable Trust for funding. 

PCFFA and IFR’s relationship with the Pew Charitable Trust has been through 

other entities. IFR’s president Pietro Parravano was one of two commercial fishermen to be named to the Pew Oceans Commission and he still serves on the Joint 

Oceans Commission Initiative, although it no longer receives, to my knowledge, any 

financial support from Pew. We are also members of the Save Our Wild Salmon Coalition which does receive some funding from Pew. Finally, I sit on the executive 

committee of the Marine Fish Conservation Network which does receive some Pew 

funding. As with Packard, I have never been approached by the Pew Charitable 

Trust in regards to the ocean renewable energy issue, nor in regard to the testimony 

I prepared for this hearing. 

2. In answer to a question at the hearing, you said that ‘‘NOAA has sold 

our fisheries out...we’ve had to keep suing them...’’ Are you or your organization currently a party to any lawsuits against any NOAA or any 

agency within the Department of Commerce or the Department of the 

Interior? Please give the details. 

I’d be happy to. The PCFFA is involved in a number of lawsuits against the Department of Commerce, NOAA and NMFS, in regards to the Department’s and its 

agencies chronic failure to protect the salmon resources that most of our membership depends upon for its livelihoods. 

We are the lead plaintiff in a lawsuit against Commerce right now, PCFFA v. 

Gutierrez, having to do with NMFS’ failure to prepare a biological opinion sufficient 

to protect ESA-listed salmon runs in the Sacramento River. Our members are prohibited from taking these fish (the incidental catch rates are set well below the 

73

numbers required for recovery under the ESA, so the fish are protected from fishing 

activity), and we have continually sought to ensure that other factors affecting the 

health and recovery of the listed fish, such as diversions and entrainments at 

pumps, do not endanger these runs. Moreover, the protections for the listed fish 

have benefited the runs of salmon commercial and recreational fishermen are allowed to harvest. In the above case, as a result of the suit, NMFS is now revising 

its biological opinion, we hope so the fish are protected. 

PCFFA was also the lead plaintiff on a case in the Klamath over NMFS’ failure 

to establish a biological opinion sufficient to protect the fish. Shortly after the trial 

judge ruled against us in the spring of 2002, there was a massive die-off of juvenile 

salmon in the river—we believe because of insufficient flows (flows we had asked 

for in the suit) and a massive fish kill late that summer of returning adult spawners. We appealed the trial court decision to the Ninth Circuit, which reversed the 

trial judge. The federal trial court judge subsequently found in our behalf and we 

are now awaiting a new biological opinion from NMFS. The damage, however, from 

the fish kills was done forcing major restrictions on our salmon fishery offshore 

California and Oregon in 2005 (when those juvenile fish would have been adults 

available in the catch) and a near total closure of the Oregon and California salmon 

fishery in 2006, along with the loss of the tribal and in-river sport fishery on the 

Klamath River. Congress recently passed disaster relief funds to help assist the 

communities affected by the salmon closures. For many, however, that relief will be 

too late. 

PCFFA did intervene on the side of the federal government when Klamath Basin 

growers attempted to sue the government for damages as a result of water cutbacks 

in 2001 that were necessitated by a severe drought in the basin and flows were 

needed to ensure survival of the listed fish. The Court of Claims ruled for the government, and PCFFA, in that case. 

PCFFA has also filed lawsuits against the Environmental Protection Agency, 

PCFFA v. Marcus, to force the development of TMDLs, under the Clean Water Act, 

on northern California salmon streams to protect water quality. PCFFA was a coplaintiff in the lengthy litigation brought against the Department of Interior (Bureau of Reclamation) to restore fish flows to the San Joaquin River. PCFFA is also 

involved with a number of other fishing and conservation groups in litigation 

against federal agencies in regard to the protection of salmon runs in the Columbia 

River. 

PCFFA was not organized for the purpose of litigation, nor does it gain any financial remuneration for engaging in litigation. But when agencies flaunt the law as 

they have done in regard to the protection of Pacific Salmon from non-fishing impacts, then we’ve had no alternative but to seek redress in court. To have done less 

we would have failed the trust working fishing men and women have placed in us. 

Judging from our record on the lawsuits, nearly every federal judge and appeals 

court has agreed with us. 

3. Do you or your organization receive any grants from any agency within 

either of those two departments? Do you serve on any FACA committees 

under any agency within either of these departments? 

Yes, we have in the past. We’re sophisticated enough to know when to sue an 

agency, when its done wrong, and partner with them when they’re doing something 

right for the fish. We received a NOAA restoration grant for some of the work we 

attempted at oyster restoration in San Francisco Bay. I no longer serve on any 

FACA committee within any agency in the two departments although I did serve 

on the Secretary of Commerce’s Marine Fisheries Advisory Committee (MAFAC) 

during the Reagan and first Bush presidencies. 

4. You testify that your organization, when advocating for the removal of 

a hydropower dam, will identify ‘‘replacement power’’ from renewable 

power sources. Do you calculate the amount of energy that will be lost 

from the dam and come up with an equal or greater amount of energy 

from renewable sources? Do you also calculate the cost of the energy 

produced from the dam and the cost of the equal or greater amount of 

energy produced from the renewable sources? 

Yes, we actually have brought on an economist who specializes in the valuation 

of hydropower and other energy production to assist us in finding replacement 

power equal or greater than that which we seek to remove. Today, replacement 

power is mainly from renewable sources. Unless we can identify viable replacement 

power, it is nearly impossible to make a case for dam removal to FERC. 

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5. You testify that your organization was first introduced to the idea of 

harnessing wave energy approximately 25 years ago. Yet this type of 

technology is still considered by many to be in its infancy. If it takes 

more than 25 years to develop the technology and make this type of 

technology economic, how can we replace the nation’s oil/gas needs in 

the short term? 

First, let me say in regard to this question and the following, my expertise is in 

fishing, not development of ocean renewable energy technologies. We have an interest in this technology as far as it may benefit our fisheries and not adversely impact 

them. My responses thus to this and the following questions are not based on any 

expertise in this technology, but are offered from the perspective of a fishery trade 

organization that hopes to play a constructive role in the debate over development 

of ocean renewable energy sources. 

Second, from what I’ve seen this technology doesn’t take 25 years to develop; what 

it took was 25 years to convince policy makers and business leaders that we needed 

to reduce our dependence of carbon-based fuels. And a lot of them still don’t get it. 

There is a lot of technology available now to reduce U.S. dependence on oil/gas. 

What’s lacking is political will. And the other technologies we need—whether its 

wave, tidal, ocean current or offshore wind farms as renewable sources, or desalination and reuse facilities for addressing water needs, we could develop in a very short 

time, I believe, if we began now—if we stopped whining and started acting. 

6. Does the offshore wave technology buoy system that you describe require some type of cable to relay the energy back to shore? Does this 

raise potential conflicts with other users such as fishing equipment that 

might touch the sea bottom? What types of on-shore facility is needed to 

harness the energy created by the buoys? 

A cable to shore will be required and with that, as well as the placement of the 

equipment in the ocean, there is a potential for conflict. That is why we believe 

stakeholders such as fishermen be brought in early in the planning process to work 

these types of issues out. As I said in my testimony, we see a lot of potential good 

coming from ocean renewable energy development, so we’re not going to be throwing 

up roadblocks to its development, but just making sure it’s compatible with fishing 

operations. 

7. Mr. Keeney testified that while the Ocean Thermal Energy Conversion 

Act of 1980 was passed more than 20 years ago, ‘‘There has been a low 

level of activity under OTEC Act since its passage in 1980...NOAA has not 

received any license applications for OTEC facilities or plantships.’’ 

While much of the offshore technology is interesting, how long will it be 

before it becomes economic for the private sector to invest in? 

Now that there is finally a recognition of the need to reduce ‘‘our carbon footprint’’ 

through increased energy efficiency, decreased energy use where possible, and development of renewable energy sources, the climate for investment in offshore technology is the best it’s ever been and should continue to improve. Apparently some 

investors are interested in getting into it now. Certainly Congress can help by creating financial incentives such as tax breaks for this type of energy development. 

Our one caution is that neither Congress nor the Administration attempt to short 

circuit the review and regulatory system needed to ensure this development does 

not harm the marine environment or other beneficial uses of our oceans and coasts. 

8. One of the concerns raised about underwater turbines is the effect on 

fish. What is your view on underwater turbine technology? 

If the turbines are slow turning where fish can avoid them it should not be a 

problem. Fast turning blades, however, could literally grind up fish. I think we will 

have an opportunity soon to evaluate this technology with the project being sited 

in the East River in New York. 

9. You mention that siting new structures in the ocean might pose navigation hazards. It has been suggested that new wind power facilities could 

be placed on existing or decommissioned oil/gas platforms that are already sited in the offshore areas. How do you feel about such proposals? 

Would you prefer that wind power be required to construct new platforms for their operations? 

Again, let me reiterate, my expertise is in fisheries, not in the development of this 

technology. From what I have seen the configuration of an offshore wind farm is 

different than the siting of oil platforms on the OCS. We have serious problems with 

proposals for dismantling the rigs in place and leaving them at their sites, or in a 

nearby ones, as a so-called artificial reefs. Our members in the Santa Barbara 

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Channel who’ve worked around the rigs for 40 years, believe if they are to stay in 

place, a portion of the structure (e.g., first floor) should be left above the water line 

with proper navigational lighting. The big benefit from the rigs is the shade canopy 

they provide, not from scrap metal on the ocean floor. Thus, if rigs are suitable for 

wind farms, that should be explored—it is preferable to cutting them off below the 

waterline. However, any such use should not absolve oil companies from their cleanup responsibilities around the rigs, including the safe disposal of toxic sediments. 

10. You also testify that, while supportive of renewable energy sources, you 

‘‘cannot stand the additive impact of the loss of additional fishing 

grounds by energy generating facilities.’’ Does this mean that you 

would oppose any alternative energy sources that might be proposed 

for anywhere your members fish? Does that include facilities as well as 

cables necessary to link production facilities to on-shore facilities? 

No. I was simply pointing out that along the west coast, the area for coastal fishing is limited by a narrow shelf. I would not being offering positive comments about 

ocean energy generation technology if we had taken a position of ‘‘not in our backyard’’ and decided to fight anything. In siting these facilities we have to be mindful 

of the limited fishing areas and try to pick the areas both for the location of the 

equipment and the cables to minimize fishing impacts. That is why it is so important that fishermen be consulted at the very beginning of the process in order to 

avoid conflicts later on that could either delay or stop a project. 

11. You mention that you think that offshore renewable energy facilities be 

operated consistent with regional fishery management council fishery 

management plans. These councils have no authority over non-fishing 

activities. Do you think the council authority should be extended to include the ability to regulate non-fishing activities? 

I don’t think the Regional Fishery Councils should regulate offshore energy, but 

we should require the licensing and permitting authorities, i.e., the Federal Energy 

Regulatory Commission and the Minerals Management Service to consult with the 

Regional Fishery Councils to prevent conflicts with those fisheries the councils have 

responsibility, i.e., fishery management plans, for. 

12. You mention the loss of fishing grounds to marine protected areas has 

been a concern of your group. You also state that you think the Minerals Management Service should be required to work through the fishery management councils on any offshore energy proposals that might 

affect fishing grounds. Do you also think that other Federal actions 

such as additional closures of fishing grounds due to changes in National Marine Sanctuary designations or modifications should also go 

through the council process? 

The National Marine Sanctuaries have not closed any fishing grounds, to date, 

on the west coast. They have rather, helped to protect some key fishing grounds 

from dumping, etc. 

The problem is, rather, with the designation of so-called marine protected areas 

(MPAs). I say so-called because most, if not all, have to date done nothing more 

than restrict or prohibit fishing. They have not addressed water quality, dumping 

or any number of other factors affecting marine life. While we believe they may play 

a role in conserving our ocean waters, they are a relatively minor tool in that effort 

compared to statutes protecting water quality, preserving wetlands, preventing overfishing, etc. Our fear is the process of establishing MPAs not run amok, closing important fishing grounds, while providing only marginal, at best, conservation benefits. MPAs have, unfortunately, become marine conservation on the cheap for a lot 

of groups—government and non-government alike—those who don’t have the stomach for the hard work of protecting all of our ocean waters from all of the factors 

affecting our marine environment. For that reason I believe any MPA siting process—whether it be by the states, a national marine sanctuary, or the federal MPA 

program—that affects any federally managed fishery should be required to consult 

with the Regional Fishery Management Councils. 

Thank you for this opportunity to respond to your questions. 

Ms. BORDALLO. Thank you very much, Mr. Grader. 

The Chair now recognizes Dr. Doug Rader. 

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STATEMENT OF DOUGLAS N. RADER, Ph.D., PRINCIPAL 

SCIENTIST FOR OCEANS AND ESTUARIES, ENVIRONMENTAL 

DEFENSE 

Mr. RADER. I am staggered by Mr. Grader’s adherence to time. 

Thank you, Madam Chairman, for the opportunity to present the 

views of Environmental Defense on developing environmentally responsible low emissions energy from America’s seas. 

As I hope you know, Environmental Defense is a global nongovernmental organization working to develop solutions to environmental problems that are robust because they are grounded in 

science, law and economics. We are known for finding the ways 

that work. 

In terms of full disclosure, you should know I also chair the 

Habitat Environmental Protection Advisory Panel for the South Atlantic Fishery Management Council, which encompasses Federal 

fisheries management from North Carolina to Florida. 

The upswing in interest in U.S. ocean waters for uses other than 

fishing is truly remarkable in renewable energy, but also deepwater fossil fuels, deepwater mining, marine aquaculture, carbon 

storage and sequestration and others. Remarkable. 

Some of these proposed activities are more compatible than others with ocean health. Regardless, the future looks to us to be multiple use in the sea. A new day is dawning in the sea. 

The growing consensus that global warming threatens the biosphere, including our oceans and their living resources, is obviously 

fueling the push for energy conservation, for developing green, low 

carbon energy sources and now for environmentally responsible 

blue energy from the sea. 

Such development in the oceans must be done carefully with 

strong science, properly aligned incentives to ensure the sustainable ocean future we all desire, but the simple truth is that the 

current ocean management system is unprepared for the complex 

array of challenges and opportunities facing America’s seas, both in 

terms of agency mission and agency capacity, yet the need for an 

updated integrated approach to management of regional seas, that 

need expressed clearly by the U.S. Ocean Commission and the Pew 

Oceans Commission is greater every day. 

Because the risks are real, particularly in moving from small 

scale pilots, as good as they may be, to anything approaching commercial scale, we offer four overarching principles that should govern that expansion. 

Number one, ocean energy development should be based on clearly defined criteria consistent with a national policy of protecting 

and restoring healthy ocean ecosystems, taking into account cumulative impacts. 

Number two, the government must support the research necessary to develop cutting edge green technologies so it can understand and mitigate their potential impacts, especially at commercial scales, and then to accelerate both as pilots and beyond the 

technologies that are the least pollution. 

Number three, the government must invest in the science needed 

to manage marine ecosystems effectively. 

Number four, the public must benefit from the conversion of public resources to private gain. Appropriate incentives should be put 

77

in place to encourage green energy development, and the public 

must be involved in charting our own ocean future as citizens. 

While the potential for blue ocean energy from U.S. waters seems 

very, very bright indeed, reaching that potential depends upon bold 

leadership from Congress to make sure that ocean energy development proceeds consistent with a broader vision for protecting and 

restoring America’s seas. 

A key requirement for obtaining that bold future is in placing 

policies and decision making frameworks that instill confidence in 

citizens, but also in industry. Whether that evolution can occur 

with existing agencies remains to be seen. 

Finally, in addition to being a nerd scientist, I am also an amateur historian, and in my many hours in the North Carolina archives I found considerable evidence of the role of wind power on 

colonial landscapes. 

It seems clear to me personally that our future landscapes and 

our future seascapes must adapt to help produce green energy and 

blue energy in a fashion that contributes both to energy sufficiency 

and security and to ocean ecosystem integrity. 

Thank you much, and in closing I will second Mr. Bak’s proposal, 

but suggest Guam as an alterative location. 

[The prepared statement of Mr. Rader follows:]

Statement of Douglas N. Rader, Ph.D.,

Principal Scientist for Oceans and Estuaries, Environmental Defense 

Introduction 

Madame Chairman, Mr. Chairman, and Members of the Committee, I am honored 

to appear before you today to present the recommendations of Environmental Defense on how to manage ocean energy resources effectively, to provide economic and 

global-warming benefits while protecting the health of ocean ecosystems. 

As many of you know, Environmental Defense is a worldwide, not-for-profit organization, whose hallmark is ‘‘finding the ways that work,’’ environmentally, economically, and legally. Our organization is deeply committed to durable strategies that 

meet people’s needs for energy while taking dramatic action to reduce global warming pollution. Achieving this goal will entail the use of a variety of tools including 

energy conservation and renewable energy production. 

I currently serve as Principal Scientist for Oceans and Estuaries for Environmental Defense. While my training is in marine and estuarine ecology, my work experience has focused on sustainable fisheries, and coastal resource and water quality protection. I have worked for Environmental Defense since 1988, with special attention to integrated and effective management of coastal and marine ecosystems; 

I helped form our Oceans Program in 1996. Prior to coming to Environmental Defense, I worked in state government in North Carolina, serving as director of the 

first National Estuary Program certified under the Clean Water Act of 1987, the Albemarle-Pamlico National Estuary Program. 

In addition, I have served as chair of the South Atlantic Fishery Management 

Council’s Habitat and Environmental Protection Advisory Panel for most of the last 

decade. In that role, I have worked very closely with agency staff on policies to protect essential fish habitats (EFH) from energy development activities, on measures 

to protect both shallow and deep-water coral ecosystems, and on drafting one of the 

nation’s first comprehensive Fishery Ecosystem Plans (FEP) for the U.S. Southeast 

region, which considers how non-fishing ocean uses, such as offshore energy, effect 

fish stocks. 

Today, I draw from these experiences, to recommend measures that Congress can 

take to ensure that as America begins in earnest to look to the sea for energy to 

light our cities and fuel our economy, a rational system that aligns incentives with 

conservation is in place to protect our priceless ocean legacy and the coastal communities that rely upon it. 

‘‘Blue’’ Ocean Energy 

Meeting America’s on-going energy needs while at the same time addressing the 

global warming challenge will require a new age of energy conservation, and the 

78

tapping of sustainable options for ecofriendly energy production. There is no doubt 

that firm limits on emissions of greenhouse gases, and increased energy conservation, are critical to slowing global warming. But it seems increasingly unlikely that 

conservation alone can meet the nation’s energy demands. As the world turns to 

‘‘low carbon’’ or ‘‘clean’’ energy sources that minimize contributions to global warming, it is increasingly likely that the sea will be a part of the ‘‘greening’’ (or, maybe 

more appropriately in this case, ‘‘bluing’’) of our energy-production portfolio. 

First, let me make clear that there are key ocean energy sources (like wind, tide, 

wave, and current) that are potentially sustainable, and that will help us address 

global warming, while others will not help us move closer to a sustainable future 

(for example, methane clathrates from the deepsea). 

In pursuing ocean energy sources that are better for the environment, I offer the 

following four key principles. 

1. Ocean energy development should be based on clearly defined criteria, and consistent with a national policy of protecting and restoring healthy ocean ecosystems, including cumulative impacts. 

2. The public should benefit from the use of public resources, and appropriate incentives should be in place to encourage green energy development; decision 

processes should encourage public engagement, and meet the highest standards of transparency. 

3. The federal government should support the research needed to develop cuttingedge green technologies, to understand and mitigate their potential impacts, 

and to accelerate technologies that are less polluting, and more consistent with 

sustainable oceans. 

4. The federal government should invest in the science needed to manage marine 

ecosystems effectively; government decisions should be based on the best peerreviewed science. 

Protecting Ocean Ecosystems 

Today, it appears that while some ocean energy technologies have unacceptable 

impacts on coastal ecosystems, many others may have fairly low and manageable 

environmental impacts. Even so, our decision processes are not currently adequate 

to distinguish among projects that are consistent with sustainable oceans and those 

that are not. 

To make the challenge even greater, many of the technologies available today 

have the very real potential for much greater cumulative impacts at larger scales. 

Little has been done to assess the consequences of commercial scale operations in 

the ocean, or to identify ways to minimize and mitigate those effects. For example, 

a small wave energy facility may have a negligible impact, but many such facilities 

or a very large scale facility could have adverse impacts on local circulation patterns 

that could be critical for maintaining transport of fish larvae, sediment and nutrient 

delivery, and other important ecological processes and services. Similarly, the way 

ocean energy projects are implemented, and the specific kind of technology employed, could have a large bearing on the size of their cumulative environmental impact. For example, slow-speed turbines that are phased in over time would be expected to have lower environmental impact than the damming of an estuary to construct a tidal barrage. 

Incentives and Public Benefits 

The ocean is a vast common resource, presenting significant challenges for policy 

makers on how to avoid unsustainable use while encouraging appropriate development. Few ‘‘use privileges’’ or other conservation incentives exist in the sea that 

could institutionalize orderly and controlled development of marine resources. Environmental Defense has recently completed a study of approaches that have been 

used in this country to manage public trust resources, called ‘‘Sustaining America’s 

Fisheries and Fishing Communities.’’ We found that while granting use privileges 

is a common tool in resource management, the way those privileges are administered can achieve other social benefits. 

There is also a strong need for a new ‘‘social contract’’ with regard to ocean resource use similar to the evolution of natural resource policies on land, where emphasis has shifted through time from rapid extraction at all costs (‘‘use-it-or-loseit,’’ with no economic rents) to sustainable use (appropriate regulation coupled to 

positive incentives, and including economic rents, e.g. auctions of electromagnetic 

spectrum). 

Current Challenges 

Our Nation lags behind others in assessing, experimenting and investing in truly 

sustainable ocean energy technologies, and has fallen far short on investing in the 

science necessary to manage ocean ecosystems effectively. Basic information on the 

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distribution, abundance and function of marine habitats is woefully inadequate. In 

fact, much of the information available on deepwater ecosystems has been developed 

directly by private project proponents. Until we properly understand habitat function and oceanographic processes that support habitats and biodiversity, we will remain unable to adequately avoid impacts on important habitats, and mitigate for 

unavoidable impacts. Until we adequately understand the array of perspective technologies available, and their likely implications for marine ecosystems, it will remain difficult to plan for sustainable ocean energy. 

Recent debates have centered on the risks and environmental dangers of specific 

installations, and on perceived impacts on coastal ways of life, rather than on defining broad science-driven criteria for ocean energy development that transcend individual projects while conserving coastal landscapes and seascapes. Certainly, coastal 

communities and other ocean resource users (e.g., fishermen) should have a voice 

in where development occurs. However, fully understanding the potential costs 

(such as habitat degradation) and benefits (including reducing the impacts of global 

warming) is critical to ensuring rational decision-making that is in the best interest 

of all. The ‘‘Not in My Backyard!’’ approach will not provide for the public interest. 

The prevailing ‘‘thumb in the dike’’ attitude is entirely understandable, given the 

complexity and disarray of federal institutions. Management authority for ocean 

uses is split among many agencies with unaligned legal requirements. There is neither a clearly defined approval process for ‘‘blue’’ energy development nor are there 

set conditions for decision-making. Getting past this fractured system of ocean governance will require the development and implementation of programs that people 

can trust to ensure that the coastal environments they hold dear will not be destroyed by industrial development for renewable energy production. 

It is very clear that we need updated governance systems that can guide ocean 

energy development consistent with maintaining high-quality marine and estuarine 

ecosystems. A key task for Congress is to update our governance systems in order 

to guide renewable ocean energy development consistent with maintaining highquality marine and estuarine ecosystems. 

Few people recognize that widespread coastal renewable energy production is not 

new in the United States. In fact windmills used to be prolific in the Southeast. 

While scouring the North Carolina Archives for historic documents, I found maps 

from the 1700s showing the locations of many coastal windmills. In addition, there 

are many old photographs of windmills from the 19th and early 20th Centuries 

spread throughout the Southeast coastal plain. 

These past experiences, as well as those from around the world on ocean energy, 

hold important lessons for U.S. policymakers. It is clear that, despite being many 

years in the making, the expansion in technologies is still underway, and that—if 

properly understood and managed—America does not have to settle for damaging 

approaches to harness ‘‘blue’’ energy. 

Effective Governmental Decision-making 

The lack of effective governance systems in the sea is effectively enumerated in 

the final reports of the U.S. Ocean Commission on Ocean Policy and the Pew 

Oceans Commission. All analyses of threats to the Nation’s oceans place the fragmentation of management authority by topic and geography at or near the top of 

the list. 

We can ill-afford a continuation of ineffective governance. There is high potential 

for expansion of existing uses of our coastal and ocean waters and the Exclusive 

Economic Zone (EEZ) for mariculture, sand and gravel mining, phosphorite mining 

and others. In addition, a high potential exists for new uses including renewable 

ocean energy. It seems increasingly likely that the ocean of the near future will be 

far more complex than today. 

There is great urgency in fixing this key problem of dysfunctional ocean governance before the looming expansion in ocean uses makes it impossible. The compelling need for clean, renewable energy production raises the stakes dramatically. 

Unfortunately, the current morass of government programs competing for primacy 

in this area, and the apparent mission of decision agencies as primary advocates for 

energy production, compels coastal residents’ skepticism. The complex mosaic of 

state and federal agencies with some responsibility for ocean energy management 

or regulation is daunting, with little organization in which potentially affected parties can have confidence. 

Each of the federal agencies that makes decisions relating to the oceans has significant shortages of capacity in key areas needed to make sound and efficient decisions. Some of the key capacity needs are as follows: 

• Technical capacity to develop and apply standards to minimize impacts on valuable fisheries and key ecosystems 

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• Scientific capacity to identify how to minimize ecosystem impacts, and to develop new research in strategic leverage points in ocean ecosystem protection 

• Regulatory capability to quickly evaluate, propose and finalize decisions about 

proposed projects, and to monitor and enforce compliance with those decisions 

• Confidence of the public in the agency’s unbiased decisions 

There is currently no one agency that has adequate capacity in each of these arenas. Rather than walk through the capabilities and drawbacks of the myriad agencies, I would like to point out a couple of positive developments in governance. None 

of these is adequate, and each of these has positive lessons the committee can draw 

upon as you move forward. 

Positive Examples 

While developing slowly, and constrained by existing tools and authorities, there 

is important movement toward ecosystem-based management at the regional scale, 

with which comprehensive energy policy can be unified. 

In the U.S. Southeast by the South Atlantic Fishery Management Council 

(SAFMC) is creating an integrated ecosystem-based management plan, called the 

‘‘Fishery Ecosystem Plan,’’ to protect and sustain the living marine resources of the 

region in the context of changing threats from both fishing and non-fishing activities. One small piece of that effort is a policy to protect essential fish habitats (EFH) 

from the potential impacts of energy development in the region, adopted in revised 

form by the SAFMC in 2006. The positive lesson from this effort is that an agency 

with an ecosystem mandate can identify the key habitats that need protection, and 

can establish approaches that emphasize science, transparency, inter-agency consultation and effective decision-making. While I remain concerned that the wind, 

wave and tidal sections of that policy need to be updated, and the approaches to 

elevate concerns about non-fishing threats are underutilized. The approach has 

proven effective in getting decisions on unacceptable impacts. I would suggest from 

this experience that regional fishery management councils can provide a helpful 

voice in shaping energy policy development when they are focused on their responsibility to fully protect EFH. 

Similarly, the States are playing an important role in building a more integrated 

approach to marine ecosystems. The California Marine Life Protection Act, and the 

North Carolina Marine Fisheries Reform Act provide excellent examples of forwardlooking legal frameworks that build from existing foundations, but apply new authority to protect key marine and estuarine ecosystems. 

Now, many regions of the country are taking up the challenge that managing 

jointly held natural resources present. The Gulf of Mexico Coalition, the Great 

Lakes Regional Collaborative, and new interstate collaborations on the West Coast, 

the U.S. Southeast, and New England, represent important early strides toward the 

management of regional seas. In addition, important cross-state pollination is underway under the umbrella of the National Fish Habitat Plan, and its regional 

collaboratives. 

Recommendations for Blue Energy 

An effective management system for blue ocean energy in the outer continental 

shelf (OCS) needs to address several key challenges, including: 

1. A national ocean policy that brings together the many expanding offshore uses 

under a unified vision for healthy and sustainable oceans. 

2. Clearly defined criteria for decision-making that align incentives to provide for 

clean (i.e. low-carbon), renewable ocean energy development and conservation 

of the ocean environment. 

3. A lead regulatory entity (such as an agency or regional council) with an ecosystem-protection mission and substantial capacity (including knowledge, authority, and funding) on both energy and marine ecosystem health. 

4. A transparent and robust project planning and evaluation process that includes 

integrating input from stakeholders, states and other agencies; 

5. Long-term development plans that: 

• meet the defined criteria for decision-making; 

• project and address cumulative impacts; 

• establish clear and efficient siting parameters for specific installations; 

• establish measurable objectives for evaluation; 

• are compatible with regional ecosystem plans; 

• are based on appropriate social and economic incentives and strong 

science, including enhanced investments in understanding and mapping 

benthic habitats; 

• have strong accountability measures for unanticipated adverse environmental impacts, such as performance bonding. 

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6. Sustained funding for ocean and energy science and management. 

Conclusion 

This generation must chart the course for a successful transformation from the 

wild-west mentality that characterizes our nation’s marine frontiers to one of order 

and sustainable production of protein, minerals and energy in harmony with the 

protection of ocean ecosystems. It is inevitable that a sea-change will occur over the 

next few decades in uses of the territorial sea and the exclusive economic zone, from 

ad hoc fisheries and opportunistic energy and mining to a mixed use future. It will 

happen faster than anyone believes. 

The opportunity exists to lay the foundation for an organized and efficient use of 

natural resources that is both sustainable and sustaining of coastal and marine ecosystems and communities, but it will not happen unless bold leaders seize this opportunity. Civil society can step forward by creating positive models, and identifying 

decision approaches that take into account multiple perspectives. Congress can lead 

by setting a high bar before widespread permitting ensues. 

Ms. BORDALLO. This is the second time you have made my day. 

The Chair now recognizes Mr. George Hagerman, Senior Research Associate, Virginia Tech Advanced Research Institute.

STATEMENT OF GEORGE M. HAGERMAN, JR., SENIOR 

RESEARCH ASSOCIATE, VIRGINIA TECH ADVANCED 

RESEARCH INSTITUTE 

Mr. HAGERMAN. Thank you, Madam Chairwoman. You have my 

written testimony. I won’t read it. I instead am making this presentation. This will be an attachment. I think it will get some of the 

things across that would not come across otherwise. 

Basically I was asked in my invitation letter to discuss the 

energy resource potential from offshore wind, ocean wave and 

ocean current in the OCS, and I will present what we know of the 

overall energy estimates from those three locations and in fact answer an earlier question from Mr. Inslee. 

I am not going to be talking about some important resources for 

various reasons. Ocean thermal energy conservation or OTEC, 

which you have heard about, is a deepwater resource. It is off the 

Shelf and requires at least 500 to 1,000 meters access to the deep 

cold water. That does exist in EEZ, but not on our Continental 

Shelf. 

Tidal in-stream energy is an inshore resource and so is not relevant to Federal waters, and marine biofuels, which has a considerable research history, has not been asked to be discussed today, but 

it does have quite a bit of potential. 

[Slide.] 

Mr. HAGERMAN. This is going to be sort of my conclusion in 

terms of for the percentages, and you will be able to read this later, 

but basically the largest of the three resources I have been asked 

to present on is offshore wind. 

My written testimony has what NREL assumes for excluded 

areas to allow for commercial fishing and military uses and other 

potentially conflicting uses offshore. With those exclusions, you can 

see that the potential yield of energy in terawatt hours per year is 

comparable to in the 50 to 60 to 70 percent range of U.S. electricity 

consumption, so it is a huge resource even with those exclusions. 

Offshore wave. You have heard this number before, 252 terawatt 

hours per year. That is if 15 percent utilized. 

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Ocean current. The really only ocean current in the Federal OCS 

is the Florida current between Miami and Bimini, and that is a 

very small resource in terms of the overall national scene. 

So this gives you a sense of the scale of these resources and so 

I am going to focus on offshore wind. I am not going to even really 

go through this slide. This is the essentials of offshore wind. It is 

the movement of solar energy from the equator to the poles in the 

form of nor’easters like we experienced last week. 

This shows the distribution of offshore wind. You can see the 

Mid-Atlantic is really where you have a resource that could be harnessed using technology that is commercially demonstrated off the 

coast of Europe now. 

This is a better graphic of that. The red is the Mid-Atlantic, and 

you can see that there is considerable, in terms of installed capacity, gigawatts. The Mid-Atlantic really has a huge potential relative 

to the other regions. New England is also significant, as are the 

Great Lakes, in the zero to 30 meter water depth range. 

You can see that in terms of Pacific versus Atlantic really the 

wind resource in the Pacific Northwest in California is onshore, 

and the opposite is true in the Mid-Atlantic. Indeed, if we look at 

Virginia as a Mid-Atlantic state, you can see the red, red and the 

purple, is high harnessable resources, and you can see that it is 

just the mountain ridges. 

These are often national park land, forest land, difficult to permit, whereas we only have one Federal regulatory authority in the 

OCS and so this really represents a much more attractive target 

for large scale development of renewable energy on the Mid-Atlantic. 

This is the technology that is used to harness the offshore winds 

in the zero to 30 meter depth range. In Virginia we could get 20 

percent of our annual electricity demand by harnessing just a little 

over a quarter of the monopile base potential. 

This will go in the 30 to 60 meter depth range, so it has gotten 

beyond PowerPoint engineering. This is the Beatrice Project. This 

is technology we are keeping a close eye on because this is significant in the Mid-Atlantic as well. 

Offshore wave energy. You have heard about 252 terawatt hours 

a year, much more diverse. There are all kinds of terminators, attenuators, point absorbers. There has not yet been a convergence 

to a single best technical approach. Waves are governed by wind. 

They are higher offshore than onshore. 

This is the distribution of the resource. Now you can see it is opposite of the offshore wind. In the lower 48 it is really Washington, 

Oregon and northern and central California where you have the 

premiere wave resource, where you have the narrow Continental 

Shelf and so you don’t have the reduction of the wave energy that 

you have off the east coast. 

Ocean current energy. This is some work that was done by DOE 

in 1980. They did a resource estimate in the Bimini Current. There 

are a lot of challenges there, and now you add to that the potential 

climate changing impact of potentially taking kinetic energy out of 

the gulfstream, and I think this is one that is not—I don’t see this 

as being large on the horizon compared to offshore wind and wave. 

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Recommendations for research and development. The data exists. 

NOAA has the National Data Buoy Center. Scripps has a wave 

measurement program. There is some good wave modeling by both 

the Corps of Engineers and the NOAA National Centers for Environmental Prediction. 

You need to map these potentially competing uses, so you need 

to involve the CZM program managers. Many of them have GIS 

layers already developed, and I can give examples if wanted. If I 

can add to this testimony later, I can give specific examples. 

You also need to look at the cumulative energy potential as a 

function of the market value of energy. In other words, if the market value of energy goes to 15 cents a kilowatt hour and becomes 

competitive then you are going to have a much bigger resource. 

You have to put that into the equation. I think the PERI feasibility 

study is a good model for developing that collaborative approach. 

Finally, you need to involve the utility, grid operators, their load 

flow modeling, grid constraints with the onshore interconnection 

points, and they need to be involved in this process as well, so it 

is not just the resource. You need to involve these other stakeholders. 

Thank you for extending my length of time. 

[The prepared statement of Mr. Hagerman follows:]

Statement of George M. Hagerman, Jr., Senior Research Associate,

Virginia Tech Advanced Research Institute, Arlington, Virginia 

The following comments do not represent the position of Virginia Tech but represent my views as a citizen of Virginia and a research engineer with over 25 years 

experience in the field of renewable ocean energy conversion. This experience is 

summarized briefly, below, and my resume is included as an attachment to this testimony. 

From 1980 to 1985, I worked as a project engineer for Gibbs & Cox, Inc., a naval 

architecture firm in Arlington, Virginia, in support of the U.S. Department of Energy’s ocean energy program, which at that time was focused primarily on ocean thermal energy conversion (OTEC). 

In 1986, I formed SEASUN Power Systems in Alexandria, Virginia, where I conducted regional wave energy resource and technology assessments for private utilities and state government organizations in California, Hawaii, Virginia, and North 

Carolina. With financial support from the U.S. National Science Foundation, Virginia’s Center for Innovative Technology, and limited private funding, I also carried 

out extensive numerical and physical modeling of wave-powered desalination systems. 

In 1996-97, I was again hired by Gibbs & Cox, Inc. to manage a fully integrated 

feasibility study of a land-based OTEC plant for a commercial client in Puerto Rico, 

where I was responsible for direction of seven junior engineers and coordination of 

sub-contractor activities. 

In 1999, I was hired by Virginia Tech, where I am now a Senior Research Associate at the Advanced Research Institute in Arlington, Virginia. Recent ocean energy 

projects include evaluation of coastal wind data to estimate turbine output for a proposed wind energy project on Virginia’s Eastern Shore, a preliminary assessment of 

the wave energy resource potential off southern New England, and potential project 

site characterizations for the U.S. Electric Power Research Institute’s (EPRI’s) offshore wave energy feasibility study for Hawaii, Oregon, Washington, Massachusetts, 

and Maine. Last spring EPRI completed a similar feasibility study of tidal in-stream 

energy conversion, with participation by and co-funding from Nova Scotia, New 

Brunswick, Maine, Massachusetts, Alaska, San Francisco, and utilities in the Puget 

Sound area of Washington. As with EPRI’s offshore wave energy study, I was responsible for energy resource assessment and site characterization. 

The EPRI wave energy feasibility study was completed in 2004, and its tidal instream energy conversion study was completed in 2006. A comprehensive set of reports is freely available for public download at the EPRI ocean energy web site: 

http://www.epri.com/oceanenergy/. 

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During the past eighteen months, I have been working closely with colleagues at 

four other state universities, as well as Virginia’s maritime industry, to help launch 

the Virginia Coastal Energy Research Consortium (VCERC), which was created in 

the 2006 legislative session of the General Assembly and funded by budget amendment in the 2007 legislative session. The Virginia Tech Advanced Research Institute 

was named as one of five founding members, in addition to Old Dominion University, the Virginia Institute of Marine Science, Norfolk State University, and James 

Madison University. 

VCERC was established to serve as an interdisciplinary research, study, and information resource for the Commonwealth of Virginia on its coastal energy resources, including offshore winds, offshore waves, marine biofuels, and seafloor 

methane hydrates. My main research activities for VCERC to date have been estimating the potential energy and economic benefits of offshore wind energy development on the Outer Continental Shelf (OCS) off Virginia, and I will present some 

preliminary results of this work today. 

OCS Offshore Wind Energy Potential 

Much of the information presented here was developed by federal researchers at 

the National Renewable Energy Laboratory (NREL) in Golden, Colorado, under the 

leadership of Walt Musial. Their preliminary estimate of the offshore wind energy 

resource distribution of the mainland United States are presented in Figure 1, 

below.

Figure 1. Regional distribution of U.S. offshore wind energy resources out to 50 

nautical miles (n.mi) offshore. Numbers are potential installed capacity (in 

gigawatts), assuming a wind turbine spacing density of 5 megawatts per square kilometer. To account for exclusions due to other uses of sea space (e.g., military exercise 

areas, shipping lanes, and commercial fishing grounds), NREL researchers assumed 

there would be no offshore wind energy development within 5 n.mi of shore (100% 

exclusion), and that only one-third of the available resource could be developed between 5 and 20 n.mi. offshore (67% exclusion), while two-thirds of the available resource could be developed between 20 and 50 m.mi offshore (33% exclusion).

For the ‘‘Lower 48’’ states mapped in Figure 1, the total potential offshore wind 

capacity in the federal OCS across all regions and all depths is 908 gigawatts (GW). 

Assuming a 35% annual capacity factor (due to wind speed variability), this represents an electric generation potential of 2,780 terawatt-hours (TWh). 

The most immediately developable resource, using monopile foundations that have 

been commercially proven in European waters is in depths of 30 meters or less. As 

shown in Figure 2, below, such depths are most abundant in the mid-Atlantic reVerDate 0ct 09 2002 10:56 Oct 04, 2007 Jkt 098700 PO 00000 Frm 00090 Fmt 6633 Sfmt 6621 L:\DOCS\34981.TXT Hresour1 PsN: KATHY

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gion. The next most developable resource would be in depths of 30 to 60 meters, 

using trusswork foundations, which are now being demonstrated by the Talisman 

Project in the Beatrice Field of the North Sea. Again the mid-Atlantic leads the regions in having vast OCS areas in this depth range.

A significant concern for coastal utility grids interconnected with large amounts 

of offshore wind energy is the hour-to-hour variability of the resource, as well as 

its seasonal variability. Rather than relying on back-up fossil fuel power plants onshore, however, utilities may derive more benefits from deploying distributed solarelectric (photovoltaic) systems on commercial and institutional buildings on shore, 

which particularly addresses the seasonal variability question. 

Hourly variability may be addressed by on-shore batter y storage in plug-in hybrid electric vehicles, and/or storage of compressed hydrogen in the offshore tower 

structure. We are just starting to look at these options in Virginia. 

Hybrid offshore wind and offshore gas combustion turbine projects represent another promising alternative, which has many advantages. These include increased 

revenues derived from having a completely dispatchable baseload power supply, and 

the much lower environmental impact and greater security of submarine power 

cable vs. pipeline energy transmission to shore. Eclipse Energy’s Ormonde project 

is an example of such a hybrid, combining 108 MW of offshore wind power capacity 

with 98 MW of natural gas generation. It is expected to be operating in 2008. 

Another renewable ocean energy resource that deserves consideration is marine 

biomass, which represents a sustainable source of offshore methane that can replace 

offshore fossil gas in hybrid wind-gas generation projects as described above, once 

the offshore fossil reserves are depleted. 

OCS Offshore Wave Energy Potential 

One preliminary finding of the EPRI wave energy feasibility study is that extracting just 15% of the offshore wave energy flux into the federal OCS would yield 252 

TWh annually. Although this is an order of magnitude smaller than the offshore 

wind generation potential estimated above, it is nevertheless comparable to all conventional hydro-electric generation in the U.S. (which was 258 TWh in 2004). Wave 

energy in the OCS is thus a substantial resource.


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Wave energy’s contribution could be even greater if hybridized with deep-water 

wind turbines in a single floating system that would share common mooring hardware and electrical interconnection cables, thus improving system economics. The 

output of such a floating hybrid wind-wave system would also be more continuous, 

since ‘‘yesterday’s winds are today’s waves.’’

Thank you for this opportunity to testify, and I would be happy to answer any 

questions or provide additional information. 

Ms. BORDALLO. Thank you. Thank you very much, Mr. 

Hagerman. 

Now the Chair recognizes Dr. Porter Hoagland, Research Specialist, Woods Hole Oceanographic Institute. 

STATEMENT OF PORTER HOAGLAND, Ph.D., RESEARCH 

SPECIALIST, WOODS HOLE OCEANOGRAPHIC INSTITUTE 

Mr. HOAGLAND. Thank you, Madam Chairwoman. My current 

understanding of the regulatory processes relating to EEZ renewable energy projects draws from my recent work with colleagues in 

the design of a national policy framework for the siting of coastal 

ocean wind power. 

The conclusions of our work are relevant to the siting of wave 

and current projects too. I will focus my remarks on your questions 

concerning the general need for addressing the impacts on the environment and other uses of the ocean. 

In the context of renewable energy, the relevant resource to be 

allocated is ocean space. The presence of quality differences across 

ocean areas implies that areas with the right qualities may be 

scarce, meaning that they have economic value. 

Further, ocean areas may have value for other human uses. It 

is necessary to determine which other uses are compatible with renewable energy and which are not. Further, it is important to 

quantify these respective values in order to appreciate fully the opVerDate 0ct 09 2002 10:56 Oct 04, 2007 Jkt 098700 PO 00000 Frm 00092 Fmt 6633 Sfmt 6602 L:\DOCS\34981.TXT Hresour1 PsN: KATHY

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portunity costs from decisions to allocate ocean areas for renewable 

energy. 

As part of the process of assessing environmental impacts, Congress should require that economic analyses be conducted of the opportunity costs of siting renewable energy, including the development of estimates of nonmarket or passive use damages. 

Until recently, the Federal permitting process has been based 

upon Section 10 of the 1899 Rivers and Harbors Act, which regulates obstructions to navigation. While navigational issues still are 

important, recent legislation finds that the 1899 Act is inadequate 

per se for making decisions about the use of the ocean for renewable energy. 

Section 388 of the Energy Policy Act assigns responsibility to 

MMS for the design and implementation of a policy framework for 

renewable energy in the ocean. MMS is now in the process of drafting regulations under the authority of the OCS Lands Act to grant 

leases, easements or rights-of-way for siting renewable energy facilities. 

Energy-related activities authorized under these new provisions 

are not to interfere with other reasonable uses of the EEZ. While 

this assignment of authority to MMS renders moot the question of 

the adequacy of the 1899 Act as a means for providing access, the 

issues that arise with coordinating responsible agencies will not 

disappear. 

Many permittings and environmental reviews must be undertaken by other agencies, and I have summarized these briefly in 

my written testimony. 

On the surface, the long list of review authorities may appear to 

be evidence of a lack of integration in marine policy. However, the 

multiple approval process cannot be circumvented without difficulty, and it cannot be easily harmonized by administrative reorganizations, calls for regional management, devolution of authority 

to coastal states or mandates for stakeholder involvement. 

What is critical here is that an agency is authorized to take a 

leadership role as a facilitator of a regulatory process. This is a key 

feature of the successful policy frameworks we studied. Clearly 

MMS has the experience and now the authority to assume the 

mantle of lead agency for siting renewable energy in the ocean. 

In order to improve our understanding of the value of ocean 

space as a resource renewable energy, Congress should mandate a 

nationwide effort to assess ocean space as a resource for renewable 

energy development. This resource assessment could complement 

emerging efforts to develop regional and national capacities and 

ocean observation systems. 

Further, Congress should encourage the undertaking of scientific 

research to design and evaluate the impacts of the first generation 

of renewable energy facilities as the siting of these facilities can be 

thought of as natural experiments. 

In general, subsidies at both the Federal and state levels encourage the development of renewable energy in the United States, but 

does it make sense to promote ocean wind, for example, with a production tax credit and accelerated depreciation on the one hand 

and to exact a royalty on the production of electricity on the other? 

88

1 Hoagland, P., M.E. Schumacher, H.L. Kite-Powell and J.A. Duff. 2006. Legal and regulatory 

framework for siting offshore wind energy facilities. Project No. 2004-OWEC-01. Westborough, 

Mass.: Offshore Wind Energy Collaborative Pilot Projects Grant Program, Massachusetts Technology Collaborative (30 June). 

This contradiction can be resolved by interpreting the financial 

terms as a sequential variable royalty comprising an initial subsidy 

while cashflows are negative, followed by the payment of royalties 

as cashflows turn positive. 

In practice, the precise details would need to be ironed out, and 

the nature of incentives thereby created would need to be scrutinized carefully. Congress should encourage innovation in the design of financial institutions that would achieve both a development of renewable energy in the ocean and a return for the use of 

the ocean as a public resource. 

Finally, one of the key recommendations of the U.S. Commission 

on Ocean Policy is the need to increase funding for oceanographic 

research, monitoring and the conservation and management of the 

marine environment. 

Following the precedence embodied in the use of the OCS revenues for the Land and Water Conservation Fund, the National Historic Preservation Fund and revenue sharing with coastal states, 

Congress should consider requiring that any remaining revenues 

from the siting of renewable energy facilities be applied toward the 

sustainable financing of ocean management. 

Thank you very much. 

[The prepared statement of Mr. Hoagland follows:]

Statement of Porter Hoagland, Ph.D., Marine Policy Center,

Woods Hole Oceanographic Institution, Woods Hole, Massachusetts 

Thank-you Chairwoman Bordallo, Chairman Costa, and Subcommittee Members 

for the opportunity to testify before this joint hearing of the House Subcommittee 

on Fisheries, Wildlife and Oceans and the House Subcommittee on Energy and Mineral Resources on ‘‘Renewable Energy Opportunities and Issues on the Outer Continental Shelf.’’ My name is Porter Hoagland. I am employed as a Research Specialist 

at the Marine Policy Center, a social science research unit of the Woods Hole Oceanographic Institution in Woods Hole, Massachusetts. I have worked and studied as 

a marine policy analyst focusing on the economic and regulatory issues relating to 

the conservation and management of coastal and ocean resources for more than 25 

years. This testimony represents my own views and not those of the Woods Hole 

Oceanographic Institution. 

I have been asked to discuss the current regulatory structure for offshore wind, 

wave and current projects, what Federal agencies are in charge, the role of States, 

and what Congress can do to clarify the existing regulatory structure. My current 

understanding of the regulatory structure relating to renewable energy projects on 

the U.S. Outer Continental Shelf (OCS) draws from my recent work with colleagues 

on the design of a national policy framework for the siting of coastal ocean wind 

power. Concerning this work and in portions of this testimony, I would like to acknowledge the help of my colleagues, Ms. Mary Schumacher and Dr. Hauke KitePowell at Woods Hole and Professor John Duff at the University of Massachusetts 

Boston. I would also like to acknowledge the sponsors of this research, including the 

Massachusetts Technology Collaborative, the Goldman Sachs Group, Inc., and the 

Johnson Endowment at the WHOI Marine Policy Center. 

Our recent work seeks to clarify the national, regional, and local decisions about 

the siting of wind power facilities in the U.S. coastal ocean. Its main conclusions 

are general enough to be of relevance to the siting of offshore wave and current 

projects as well. One of our main goals has been to identify and characterize the 

common features of a land and resource management system that are appropriate 

for the siting of wind power in the U.S. coastal ocean. In our full project report 1, which I would be happy to make available to the Subcommittees, we identify 16 

common features of an ‘‘access system’’ for coastal ocean wind power, and we discuss 

their usefulness and efficiency. My testimony today will focus mainly on the findings 

89

of our study relating to those access system features that may help Congress clarify 

the regulatory structure. 

Ocean Space as the Relevant Resource 

In the context of renewable energy facilities, the relevant resource to be allocated 

is ocean space. With respect to ocean wind power, ocean space may be characterized 

by its average wind speed, wind consistency, distance from electrical transmission 

facilities, distance from electrical consumers, and exposure to adverse weather conditions, among other qualities. The existence of quality differences across ocean 

areas implies that, like good cropland, ocean space with the right qualities may be 

a scarce natural resource. As a consequence, ocean space useful for wind farming 

or other renewable energy production may have economic value. Further, ocean 

space may have value for other human uses, including commercial fishing, marine 

aquaculture, recreation, environmental conservation, shipping, among many others. 

Consequently, there may be significant opportunity costs from a decision to allocate 

ocean space for renewable energy development (or, alternatively, for other purposes). 

There is no private market for ocean space. Specialized institutions must be devised, if they do not yet exist, for allocating ocean space for renewable energy development. The existence of institutions to establish legal interests in ocean space and 

to provide a means for enforcement against any infringement of these interests is 

critical. Such legal interests are one key component of an ‘‘access system’’ for allocating ocean space that is needed to enable the development of renewable energy 

in the ocean as a productive industry. The features of an access system may influence the extent to which the siting of ocean renewable energy is economically efficient. 

The siting of renewable energy facilities does not involve an exclusive use of ocean 

space in all cases. It is necessary to determine which other uses are compatible with 

wind farming and which are excluded or diminished. For example, some types of 

aquaculture and recreational fishing may be compatible with wind farming, while 

certain kinds of commercial fishing (dragging the seafloor with trawl nets) and the 

aesthetic appearance of the seascape may not. In making decisions about exclusivity 

and compatibility, it is critical to quantify tradeoffs in economic terms, where feasible. Importantly, the economic concept of ‘‘resource rent,’’ representing the value 

of ocean space as a scarce resource, should be utilized in analyzing such tradeoffs. 

It is relatively straightforward to estimate resource rents associated with commercial activities and progressively more difficult to estimate the value of uses that are 

further removed from markets, such as recreation, aesthetics, or the benefits of environmental amenities. Consequently, the opportunity costs of allocating areas for 

specific uses or for specific combinations of uses can be uncertain. Similarly, there 

is uncertainty about the non-market values of modifications in seabird or subsea 

habitat when a renewable energy facility is sited. Even the opportunity costs of displacing commercial uses, such as shipping and fishing, can involve uncertainty in 

their calculations. 

It is important for a disinterested party to undertake economic studies, such as 

studies to estimate resource rents and non-market values. Although stakeholders, 

such as prospective developers or nongovernmental organizations, may wish to conduct or sponsor their own analyses, there is the clear possibility of bias built into 

assumptions and hidden in the results. Typically, the government would conduct 

policy analyses or contract for studies to be undertaken by independent analysts. 

Although arguably more credible than analyses conducted by stakeholders, the government, too, may not be a completely disinterested party. Therefore, the results of 

such analyses should be subject to a scientific peer-review. 

Current Regulatory Structure, What Federal Agencies are in Charge, and 

the Role of States 

The federal ‘‘permitting’’ process has until recently been based upon section 10 of 

the 1899 U.S. Rivers and Harbors Act (RHA), which assigns jurisdiction to the U.S. 

Army Corps of Engineers (ACoE) to regulate obstructions to navigation in the navigable waters of the United States and on its Outer Continental Shelf (OCS). While 

navigational issues still are paramount, recent legislative developments would seem 

to acknowledge that the RHA is inadequate for making decisions about the exclusive 

use of the ocean for permanent activities such as offshore wind power generation. 

Section 388 of the Energy Policy Act of 2005 [P.L. 109-58], which was signed into 

law by President George W. Bush on August 8, 2005, assigns responsibility for the 

design and implementation of an access system for siting ocean wind energy to the 

Minerals Management Service (MMS) in the U.S. Department of the Interior. MMS 

is now in the process of drafting interim regulations under the authority of the 

Outer Continental Shelf Lands Act Amendments of 1978 to grant leases, easements, 

90

or rights-of-way for siting facilities that produce, transport, or transmit energy from 

sources other than oil and gas, including ocean wind energy facilities. These rights 

are to be granted on a competitive basis, unless a determination of ‘‘no competitive 

interest’’ is made. 

Additional provisions of the Energy Policy Act require MMS to establish financial 

terms that ensure a fair return to the United States for the granting of these rights 

and to set up a revenue-sharing program with coastal states for grants within three 

nautical miles of a state’s submerged lands, analogous to the existing 8(g) program 

for OCS mineral leasing. MMS is now to act as the lead agency in coordinating the 

actions of other agencies in siting decisions. 

Another important component in the development of MMS policy has been the 

drafting of offshore administrative lines from adjoining coastal states. These administrative lines will serve a number of important functions, such as helping MMS determine which states have prevailing interests in extended offshore areas because 

of the growing number of commercial activities on the federal OCS; providing a 

basis for accurate delineation of OCS planning areas; assisting in development and 

evaluation of ‘‘affected State’’ status under the Coastal Zone Management Act and 

the OCS Lands Act; assisting in the required comparative analysis by MMS to determine an equitable sharing of developmental benefits and environmental risks; 

and helping define appropriate consultation and information sharing between MMS 

and coastal states. 

While this assignment of authority to MMS renders moot the question of the adequacy of the RHA as a legal means for providing access, the issues that arise with 

coordinating responsible agencies will not disappear. In particular, an RHA § 10 permit for potential obstructions to navigation will still be required among other approvals or reviews by numerous federal and state agencies. Further, there is now 

a requirement that energy-related activities authorized under these new provisions 

‘‘are carried out in a manner that provides for...prevention of interference with reasonable uses of the EEZ.’’ The Secretary of the Interior is accorded discretion in determining what uses are to be classified as reasonable. 

Based upon our review of access systems in Europe and on the U.S. public lands, 

we find that an access system needs a lead agency that is responsible for resource 

assessments, area selections, and allocations for specific resources. A lead agency 

with a ‘‘place-based’’ orientation is more likely than one with a ‘‘functional’’ orientation to allocate access to and to manage an area under its jurisdiction within a 

framework of multiple-use planning that takes the opportunity costs of alternative 

uses (including non-uses) into account. At least in principle, such an agency is better 

suited to advance a complex mix of policy objectives, such as energy diversification, 

environmental protection, resource conservation, and a fair return to the public, 

among others. 

Because MMS now has primary responsibility for regulating offshore renewable 

energy development on the OCS, MMS also has lead agency responsibility under the 

National Environmental Policy Act (NEPA) for conducting environmental assessments and drafting environmental impact statements. Further, as lead agency, 

MMS has the responsibility for coordinating permitting and environmental review 

undertaken by other federal agencies under a wide variety of other laws and 

policies. 

At the federal level, such permitting and review includes, but may not be limited 

to the following: Section 7 consultations triggering potential biological assessments 

under the Endangered Species Act for interactions with protected species (NMFS); 

permits for harassments or incidental takes under the Marine Mammal Protection 

Act (NMFS); conservation assessments for potential impacts on essential fish habitat under provisions of the Magnuson-Stevens Fishery Conservation and Management Act (NMFS and the regional Fishery Management Councils); permits for 

dredge and fill activities under provisions of Section 103 of the Ocean Dumping Act 

and Section 404 of the Clean Water Act (ACoE and EPA); taking into account under 

section 106 of the National Historic Preservation Act of any impacts on historic resources deemed eligible for listing on the National Register of Historic Places (NPS); 

and permits for private aids to navigation (USCG). 

Even when the proposed location for an offshore wind energy facility is in federal 

waters, a number of state agencies will also play some role in the siting process. 

Among other possible sources of state jurisdiction, state and tribal governments 

have standing as ‘‘stakeholders’’ under the NEPA requirements for environmental 

impact review; and, under the Coastal Zone Management Act, most uses of coastal 

federal waters must be consistent with any affected state’s definition and authorized 

uses of its ‘‘coastal zone.’’

This long list of review authorities ostensibly may appear to be both confusing 

and evidence of a lack of integration in marine policy. Moreover, the amount of 

91

interagency coordination and the number of required approvals has been blamed for 

retarding the nascent industry’s growth. Notwithstanding these concerns, to a large 

extent, the multiple approval process cannot be circumvented easily, and it cannot 

be easily harmonized further by administrative reorganizations, mandates for regional management, or devolution of authority to coastal states. What is critical is 

that a lead agency—here MMS—serves as a facilitator of this process, establishing 

a form of ‘‘one-stop shopping’’ in ocean-space allocation decisions. At this juncture, 

this seems to be the direction that MMS is taking. 

The development of renewable energy facilities in the ocean, particularly wind 

power, also is influenced by a number of other public policies. These policies continue to be in a state of flux, thereby increasing the level of regulatory risk faced 

by entrepreneurs who are thinking about constructing a wind farm in the coastal 

ocean. Among these policies are the reinstatement of the federal production tax 

credit and the enactment by states of renewable portfolio standards. 

Recommendations for Congressional Clarifications of Existing Regulations 

In our study of the design of an appropriate access system for renewable energy 

in the ocean, we have analyzed the economic implications of 16 generic features of 

access systems. Among these features, the following issues stand out as candidates 

for Congressional clarification of regulations: multiple-use decision-making; financial 

terms and subsidies; environmental monitoring I finish with a recommendation concerning sustainable financing of ocean management. 

Multiple-Use Decision-making. Most modern access systems incorporate methods 

of resolving existing or potential conflicts among alternative uses. All of the access 

systems in our database incorporate provisions for consideration, at some level of 

detail, of alternative uses of the ocean in areas where ocean renewable energy facilities might be sited. The need for methods of resolving multiple-use conflicts arises 

from the recognition that allocation decisions may result in opportunity costs in 

terms of displaced uses, including such ‘‘non-uses’’ as habitat protection or the supply of ecosystem services. This need is a reflection also of the incompleteness of 

property rights for alternative uses of ocean space as a public resource and the absence of markets for allocating ocean space as a resource. 

Policy objectives for U.S. offshore renewable energy development, which relate to 

the prevention of interference with other ‘‘reasonable’’ uses and the consideration of 

other uses of the sea and seabed, appear to require MMS to conduct multiple use 

decision-making with respect to the siting of renewable energy facilities. MMS appears to be moving in the direction of analyzing the economic opportunity costs of 

siting renewable energy facilities in the ocean, although there is no explicit mandate 

from Congress to do so. 

An important need is for the development of estimates of ‘‘non-market’’ values. 

For example, the siting of an ocean renewable energy facility may involve a change 

in the seascape. Both coastal residents and tourists may benefit from an unimpeded 

view of the ocean, but this view is not a commodity that typically is traded in established markets. Environmental economists have developed methods for estimating 

non-market values, and these methods can be applied to estimate the economic 

losses (or gains) associated with changes in the aesthetic properties of seascapes. 

Areas where additional research is needed include the selection of the most appropriate analytical methods and the development of estimates of potential non-market 

damages from siting ocean renewable energy facilities. 

Notwithstanding the cumbersome nature of traditional non-integrated management, an access system should incorporate methods of resolving existing or potential 

conflicts among alternative uses. In practice, estimating the opportunity costs of allocating areas for specific uses or for specific combinations of uses can be very uncertain. Nevertheless, as part of the process of conflict resolution, Congress might 

specify that economic policy analysis be incorporated into an access system so that 

the government can begin to systematically integrate estimates of opportunity costs 

into its decisions about allocating ocean space. Such a comparison is needed especially where renewable energy has been selectively subsidized. 

Subsidies and Other Financial Terms. In general, exogenous subsidies encourage 

the development of ocean wind power in the United States. Within the maritime 

boundaries of coastal states, the federal production tax credit (PTC) and accelerated 

depreciation, state renewable portfolio standards policies, system benefits funds, and 

property and sales tax abatements can lower the relative costs of wind power construction and operation. Only the federal subsidies (PTC and accelerated depreciation) would appear to apply to developments in the U.S. exclusive economic zone, 

however. 

The rationale for such subsidies is to level the playing field for renewable power, 

with respect to electric utilities that rely upon fossil fuels. Fossil fuel burning plants 

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receive implicit subsidies when they are not required to account for the external 

costs of pollution, such as through releases of carbon dioxide or other pollutants. Little work has been undertaken to estimate the scale of the subsidies enjoyed by fossil 

fuel burning plants and to understand the extent to which subsidies for renewable 

energy do, in fact, level the playing field. Congress might encourage the development of economic models and the compilation and analysis of data to understand 

whether the renewable energy subsidy appropriately levels the playing field. 

Policy discussions calling both for subsidies for renewable energy and charges 

(royalties or other) for the use of ocean areas are apparently inconsistent. Does it 

make sense both to promote ocean wind, for example, with a production tax credit 

and accelerated depreciation on the one hand and exact a royalty on the production 

of electricity from this same source on the other? This question also raises issues 

of the relative incentives faced by wind farm developers in choosing onshore versus 

offshore sites. 

This issue may be resolved, at least conceptually, by considering a sequencing of 

subsidy and royalty. In effect, we might consider one form of a variable royalty, 

known as a ‘‘Brown tax.’’ A Brown tax comprises an initial subsidy, while cash flows 

are negative (say, through the initial expenditures to characterize the relevant 

environmental parameters and to optimize the operations of a renewable energy 

facility), followed by the payment of royalties as cash flow turns positive. Because 

wind power is subsidized with a production tax credit and accelerated depreciation 

rules, these subsidies can be thought of as the ‘‘negative’’ royalties that apply during 

the early phases of ocean wind development. Over time, these subsidies may be 

phased out, and positive royalties could then be invoked. 

A potentially useful institution for implementing a variable royalty is known as 

a Townsend-Young ‘‘evergreen lease.’’ An evergreen lease is renegotiated after approximately one-half of the tenure has been completed: say, at ten years on a 20-

year lease. Evergreen negotiations for a renewable energy lease might involve an 

increase in royalty payments, in line with the sequencing of a Brown tax. Although 

the precise details of a variable royalty/evergreen lease method would need to be 

ironed out, and the nature of incentives thereby created would need to be scrutinized carefully, this kind of an institution may make sense for both the government 

and energy producers where rents are expected to increase over time due to expansion in demands for both ocean space and electricity. 

As a further consideration, we might expect that many areas of the ocean initially 

will be provided to industry on a first-come, first-serve basis for the siting of renewable energy facilities. As ocean space becomes increasingly scarce, however, methods 

of competitive bidding and allocation will come into play. Under an access system 

that mandates a competitive process for allocating ocean space for renewable energy 

development, prospective developers will bid away any subsidies as well as resource 

rents. The bidding away of subsidies implies that the economic efficiencies embodied 

in a competitive access system may defeat the purpose of other policy objectives that 

encourage the development of renewable energy through subsidies. 

The existence of these issues suggests that there is a need for Congress to encourage experimentation with innovative financial institutions that would achieve both 

the development of renewable energy in the ocean and a return for the use of ocean 

space as a public resource. 

Monitoring. A strong argument can be made for including provisions in an access 

system that promote the collection of environmental monitoring data prior to the allocation of legal interests. Such data can improve our understanding of the value 

of ocean space as a resource for the specific purpose of siting renewable energy facilities. Further, such data can help us to get a sense of the opportunity costs of 

siting renewable energy facilities in the ocean. Environmental monitoring data could 

be collected by the government and released publicly or through a permitting program for prospective wind farm developers. Alternatively, prospective developers 

might be encouraged to pool their resources to conduct environmental monitoring 

efforts in areas that show promise for wind power development. A policy to pool 

monitoring efforts would reduce the waste associated with duplicate monitoring efforts in the same location. 

Congress might usefully require the implementation of a national environmental 

monitoring effort to assess the characteristics of ocean space as a resource. This national effort could be integrated into complementary efforts on the development of 

regional and national capacities in ocean observation systems. 

The external effects of ocean renewable energy facilities are not normally a function of output (electricity) but instead of the placement of the structures. Once rock 

piles, towers, turbines, or floating facilities are in place, both the view and, potentially, the habitat have been altered. Short of removing the structures, there is little 

that can be done to mitigate adverse effects. As a consequence, relative to the more 

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common types of pollution-generating facilities, there would appear to be a reduced 

need for the ongoing monitoring and enforcement of ocean renewable energy facilities. 

The siting of the first generation of wind farms in the ocean may be understood 

as a kind of scientific experiment. The understanding gained from these initial experiments undoubtedly would be of use in subsequent decisions about the location, 

scale, and patterns of ocean wind farm development. Congress might encourage the 

undertaking of research efforts to design and evaluate the results of these first-generation experiments. 

Sustainable financing. I’d like to add one final word about the sustainable financing of ocean management. One of the key recommendations of the U.S. Commission 

on Ocean Policy was the need to assign returns to the public from the use of its 

marine resources, such as bonuses, rentals, and royalties for offshore oil and natural 

gas, to help fund oceanographic research, monitoring, and conservation and management of the marine environment. As I mentioned above, under the Energy Policy 

Act, MMS is to establish financial terms that ensure a fair return to the United 

States for the granting of rights to renewable energy development. Further MMS 

is to establish a revenue-sharing program with coastal states for grants within three 

nautical miles of a state’s submerged lands. Following this policy, and other precedent embodied in the use of OCS revenues for the Land and Water Conservation 

Fund and the National Historic Preservation Fund, Congress should require that remaining revenues from the siting of renewable energy facilities be used for sustainable financing of ocean management. 

Ms. BORDALLO. The Chair thanks Dr. Hoagland and all of the 

witnesses that appeared here this afternoon. 

I do have a few questions for Mr. Jason Bak. You spoke about 

royalties. You testified that rents and royalties for seabed use 

should promote ocean renewable energy, not discourage it. 

Can you please elaborate on what you mean by that? How could 

the royalties promote renewable energy development? 

Mr. BAK. Sure. What we have seen in various other jurisdictions 

in relation to wind energy is that these royalties are phased in over 

time in order to have an up front royalty free stage that would 

allow the developer to have slightly higher returns than it would 

otherwise. 

So in British Columbia, for example, in the wind energy industry 

we see that there is a 10-year rent free period that helps stimulate 

developers to get into development or, in this case, get in the 

water, and then in time when the technology is more robust, when 

you start seeing those near commercial returns, then apply a reasonable type royalty. 

So the stimulation would be the lack of a royalty for a fixed period so that the project can get to an economy of scale or a certain 

level of development and then phase in a royalty. 

Ms. BORDALLO. Thank you. 

I have another question for Mr. Grader, Mr. Zeke Grader. In 

your testimony you discuss your interest in ensuring that renewable energy projects are operated in a manner that is consistent 

with regional fishery management plans. 

Fishery management plans are developed regularly, and energy 

projects will have a much longer duration. How do you envision the 

two could be coordinated? 

Mr. GRADER. I think basically requiring that the energy or the 

agency, for example, if it is Minerals Management Service, require 

that there be a consultation with the regional councils to make 

sure that, for example, we are not placing these facilities down in 

areas that are prime fishing grounds. For example, one of the areas 

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being looked at off of Eureka is between 25 and 35 fathoms offshore. Well, that happens to be right in the middle of a prime fishing grounds. 

If we might relocate that someplace else, these are the types of 

things I think that could be dealt with if there was the early on 

discussion and requirement for consistency in this to make sure 

that it is not one activity or the other, but that in fact we coordinate them so we can have both and both can operate successfully. 

That is my concern because we have had to operate with the 

Minerals Management Service off of Santa Barbara, our fishermen 

there, for 40 years now, and it has not always been the happiest 

of experiences. 

We just think that looking forward to this new type of energy, 

which we are excited about and see the need for, we just want to 

make sure that it is done in a way that is consistent with the fishing activities and other types of existing activities. 

Ms. BORDALLO. Thank you. Thank you very much. 

Dr. Hoagland, the use of revenues. The last sentence in your 

written testimony I noticed recommends that Congress require that 

revenues obtained from renewable energy projects on the OCS be 

used to sustain the financing of ocean management. 

Can you elaborate on this? What would the revenue support? For 

example, do you envision monitoring or mitigation programs? 

Mr. HOAGLAND. I don’t have specific recommendations in that regard, but I think monitoring and mitigation would fall under that, 

as well as the administration of the program. 

I think if you go back to the Ocean Commission’s report, that is 

one of their key recommendations. They probably have a long list 

in there of how they envision the money would be spent. 

I might add that we probably would expect that any revenues in 

addition to those that would go into those other revenue sharing 

arrangements might be small in the foreseeable future, but that 

should be incorporated into the law. 

Ms. BORDALLO. So you do envision then monitoring or mitigation 

programs? 

Mr. HOAGLAND. I think that could fit under it, yes. 

Ms. BORDALLO. Yes. The Chair now would like to thank Mr. Inslee from Washington for returning after voting. We have been holding the hearing right through the voting process, and the Chair 

now recognizes Mr. Inslee for any questions he may have. 

Mr. INSLEE. Thank you. 

Mr. Grader, I thought your comments about ocean acidification—

I didn’t hear them, but my staff told me about them. I was just 

thinking. You kind of have the ying and yang of this industry because I am very concerned about acidification potentially affecting 

the whole food chain. If the phytoplankton collapse, you know, your 

industry is in pretty big trouble. 

So here is an industry that can help on that, zero CO2 emitting 

to deal with acidification, but at the same time if it is at a place 

that is causing you difficulty it is kind of a ying and yang kind of 

situation. 

Here is a question I guess. Do you think there is a possibility 

and have you talked to any of the Federal agencies about going to 

the more proactive? The gentleman from the coastline commission, 

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Mr. Diers, had talked about trying to go to a more proactive siting 

plan. 

In other words, should we be giving thought to the Federal agencies actually identifying areas that will be energy zones, if you will, 

in advance of specific permit applications from the industry? Would 

that be helpful? 

Mr. GRADER. I think that makes a great deal of sense. In fact, 

I wish we were doing that in some more activities right now. For 

example, we are going through in California placement of these 

marine protected areas, and we haven’t seen any coordination, for 

example, with the Federal council as far as where their existing 

conservation zones were. 

I think we do need to have much more coordination here. I think 

it would be useful. I think the states could participate as well as 

the coastal management authorities. Keep in mind, this energy is 

different than LNG. It is different than offshore oil, which we had 

real problems with and we fought with. 

We understand the need for renewable energy. We can see some 

real benefits from it. It is just a matter, as you described, of the 

ying and the yang, you know, making sure it is placed there correctly. 

I think this type of coordination, proactive activity of doing this 

planning, would be extremely helpful. It is something we have 

never seen, frankly. 

Mr. INSLEE. Maybe I could ask folks from the industry. Does it 

make sense to try to have a new regime where we charge the Federal government to go out and identify areas we could call energy 

zones that are almost prepermitted? Is that something we should 

be thinking about? 

Mr. BAK. I think that could be useful in incentivizing developers, 

project developers along with technology developers, to actually 

finding economic zones. 

If there are groups who would do the symmetry, the measuring 

of the profile of the sea floor, who would help do some of the 

prepermitting on the environmental side that would be very, very 

valuable because it removes that up front cost. Yes, I think that 

would help. 

Mr. HAGERMAN. In NOAA, when NOAA was given charge of the 

OTEC program in the early 1980s one of the outcomes of that was 

to identify certain zones that were used to characterize both the resource, as well as the environmental effects. 

These were kind of like reference study zones where developers 

could then go in and say gee, if I put my technology here it would 

cost this, so there is also some precedent in doing that at least with 

OTEC. You could have a zone that everybody would agree OK, here 

is the baseline data. 

Of course, the identification of the zone would have to involve the 

other stakeholders to make sure that there are minimal conflicts 

there, but then once you have that zone that could also be a reference point to see how well the technology is doing as it goes 

through generation after generation. 

Mr. HOAGLAND. As I mentioned in my testimony, the idea of a 

resource assessment, a national resource assessment, is important, 

and an important example of that is the OCS program itself where 

96

the U.S. Geological Survey and MMS are involved in a resource assessment of the oil and gas resources offshore. 

There also is precedent in that program for the pooling of industry activities in mapping the resource, which could reduce duplication, so that is another thing that should be considered. 

Mr. RADER. Congressman, I think you are exactly right. The 

choice of place will be essential to getting this right both on the 

front end and the back, and what we need to learn from pilots can 

be maximized by choosing those places where both the ecological 

and technological questions can be answered in the long term as 

commercialization proceeds to minimize conflicts between existing 

users, including commercial fishermen and recreational fishermen 

and these new uses of the exclusive economic zone. 

Mr. INSLEE. So let me get to potentially the biggest problem we 

have with this—the surfers. My son is a surfer, and his fellows 

have been asking him is this going to affect the surfing, which is 

the make or break issue, of course, in the nation. 

I have told him no, it will not. It will be an infinitesimal impact 

on surfing waves. Is that correct? 

Mr. GRADER. There has been a big protest right now off of Scotland. I didn’t know you could surf Scotland, but apparently you 

can, and there has been a protest there. The surfers are claiming 

that this will reduce the wave heights by 10 feet. 

How valid that is I don’t know, but certainly the surfers are 

going to have to be considered in all this planning effort. 

Mr. BAK. I can definitely speak to that. The simple physics of it, 

using our device, a point absorber, means that you have to attenuate a lot of mass, a lot of water movement, with your actual device 

in order to make a measurable impact on the wave energy. 

It is very, very, very difficult to attenuate the waves and actually 

reduce the height of the waves for surfers. I think it is a fear of 

the unknown. I think you need to engage the stakeholders very, 

very early on. We did that successfully with surfers in Makah Bay. 

It is just telling people so they are not afraid or unsure of what 

the result may be, but physically it would be difficult. 

Mr. INSLEE. So the technical response to the surfer inquiry would 

be then chill out, dude? Would that be the response? 

Mr. BAK. Exactly. 

Mr. INSLEE. Do any of you have any comments about the legislation that I have introduced? Hopefully some positive, but if there 

are any ideas for constructive criticisms, we would love to hear it. 

Mr. O’NEILL. Yes. Actually, Congressman Inslee, I was very 

heartened by the first panel and the second panel in terms of the 

comments made by NOAA and the comments made by the gentleman representing the different states. 

NOAA actually asked specifically for adaptive management and 

embracing the adaptive management principles. Additionally, the 

gentleman representing the different states was looking for a programmatic environmental impact statement. 

I think that programmatic environmental impact statement could 

also go a long way to providing some of the environmental studies 

that have been suggested by the panelists on this second panel 

today. 

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Mr. RADER. Congressman, Environmental Defense looks forward 

to working with you to get this key issue right, and we also side 

with Mr. Diers in suggesting that blending in an appropriate dose 

of ecosystems into the great technological proposals and management proposal that you have put on the table would go a long way 

toward meeting all of our objectives. 

Mr. BAK. I would like to thank you as well, Congressman, for the 

help that you have given us over the last few years throughout the 

permitting of the Makah Bay project and the help that your office 

has given us. 

It has helped us trailblaze in wave energy, and I think the bill 

that you have introduced is fantastic for that push to get this industry growing. We definitely believe in a number of the items that 

you have included in that bill and would like to stress that we 

would like to be a part of that process in offering any information 

that we can going forward. 

Again, thank you very much for your continual help. 

Mr. GRADER. Let me just add I think one thing. Part of a bigger 

issue beyond your bill, but other legislation, is I think the example 

of trying to plan for this wave energy and do it in a successful way 

really gets at the point of our need for a national ocean policy because then we could really begin planning all these activities in our 

ocean in a coherent way, which we have not done to date. 

Mr. INSLEE. Thank you. 

Ms. BORDALLO. I thank the gentleman from Washington. 

The Co-Chair, Mr. Costa, has returned and so he probably has 

some questions for the witnesses and will close off the hearing, but 

before he does I would like to invite all of you on the panel to take 

a look at Guam and the oceans around the territory for new wind 

and wave technology. Will you do that? 

Mr. O’NEILL. Absolutely. 

Ms. BORDALLO. Thank you. 

Mr. Chairman? 

Mr. COSTA. [Presiding.] Thank you, Madam Chairwoman. I appreciate your solid efforts. I unfortunately had a conference call, 

and then we had some votes. I know that this panel did a good job. 

I read your testimony last night. 

Mr. Grader, long time no see. 

Mr. GRADER. Yes, it has been, Mr. Chairman. 

Mr. COSTA. How are our fisheries doing? 

Mr. GRADER. It is a mixed bag. 

Mr. COSTA. Yes, I know. 

Mr. GRADER. Yes. 

Mr. COSTA. The efforts to try to deal with renewable sources of 

energy, both as it relates to wave action, and I appreciate the conversation, the exchange between the gentleman from Washington 

state. I, too, have a relative who seems to be an aggressive surfer, 

and I know how intense they can be. 

I am just wondering. Has your association that has been long active in water-related issues in California taken the time to examine 

the potential impact as it relates to both wind action and wind 

power, as well as wave power? 

98

I know these are prototypes and they haven’t yet been implemented, but given the interest and the potential it seems to me we 

need to understand the impacts on fisheries. 

Mr. GRADER. I think we are just beginning to understand this. 

Like I said in my testimony, I think we are intrigued with this for 

obvious reasons, and one thing that obviously you would be concerned with is we see these as a mechanism for perhaps powering 

desal plants, which could help take some pressure off of water use, 

free up water for agriculture. Of course, we see it as freeing up 

water for in-stream and doing that. 

The biggest issue here is other than what potential impacts it 

may have on the environment, and, like I said, I think those will 

probably be minimal will be my suspicion, but I think the issue is 

just one of space. Can we place these in areas where they don’t 

interfere with fishing either from the standpoint of preclusion to 

fishing grounds or creating navigation hazards? 

I think what Mr. Inslee had mentioned was the idea of some 

proactive planning could perhaps do that, so people are not simply 

going to be where there is a fisherman, a recreational fisherman 

or whoever or a coastal community reacting to these type of things. 

If you bring them all together initially and start planning for it, 

it seems to me it would make a lot more sense and perhaps make 

this go faster, make it less expensive and do it with much less controversy and chaos. 

Mr. COSTA. Let me just ask one other quick question. I know 

that artificial reefs have been an effort that we have tried to pursue in California and elsewhere with some mixed success. Do you 

think these have any potential for habitat purposes? 

Mr. GRADER. Mostly not. I think they are overblown mostly by 

some people that just want to leave their debris in the ocean. I 

mean, I suspect you could probably make a case for plastics in the 

ocean, the fact that things are——

Mr. COSTA. I am not making that case, Mr. Grader. You and I 

go back a long way. 

Mr. GRADER. Yes. Yes. 

Mr. COSTA. I have supported a lot of fishery restoration efforts 

over the years, as you know. 

Mr. GRADER. No, I know that, and we appreciate that. I think 

I am a little bit nervous about people proposing——

Mr. COSTA. No. I just asked the question. I understand. 

Mr. GRADER.—steel archipelagos or any other type of archipelago 

out there. 

Mr. COSTA. Mr. Bak, I wasn’t here to hear your testimony, but 

I did read it. I wanted to ask you specifically how far away are we 

from the establishment, and Mr. Inslee—I am sorry he left—talked 

about his bill, but where we can really begin to get a handle 

through a number of prototype efforts on the potential power, the 

challenges we face, how we deal with the application process and 

so forth. I mean, are we talking about a year? Two years? Where 

do you think we are? 

Mr. BAK. This summer we will be installing one of our devices 

with Oregon State University off of Newport, Oregon. The following 

year we are going to upgrade the device using the data from the 

year that we have collected it being in the water, and then the folVerDate 0ct 09 2002 10:56 Oct 04, 2007 Jkt 098700 PO 00000 Frm 00104 Fmt 6633 Sfmt 6602 L:\DOCS\34981.TXT Hresour1 PsN: KATHY
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lowing year, in 2009, we are going to install our first megawatts 

of devices producing power connected to the grid in Washington 

state. 

Mr. COSTA. Where else in the country or in the world? Are we 

at the cutting edge, or are there other places we should be looking 

at? 

Mr. BAK. In the world right now there is not a cumulative megawatt of wave energy installed anywhere, so we are planning for 

the——

Mr. COSTA. We are at the cutting edge? 

Mr. BAK. Exactly, and we are planning for this to——

Mr. COSTA. And jobs that could be created? Do you have any perspective? 

Mr. BAK. Right now we are bringing in foreign investment to 

build our device in Oregon with Oregon Iron Works and SAIC. During that process we are going to employ 10 to 20 people who are 

actually turning and bending steel, and that is for one device, in 

addition to a number of technical consultants. 

If we were to build a 100 megawatt array we are looking at 

somewhere close to 100 people for the construction and fabrication 

process and then maybe 20 to 30 on an ongoing basis to manage 

and maintain the array, so this does create jobs. This does bring 

in foreign investment, and this is part of the new energy economy. 

If we can find a way to streamline the process for us to spend 

our money getting devices in the water, we will create jobs. 

Mr. COSTA. So comparable to the embryonic effort with wind 

power that many of us witnessed back in the 1970s and in the 

1980s, do you see a similar type of progression with regards to 

wave power if successful or more accelerated? 

Mr. BAK. I would say with wave energy I see it as being somewhere where wind was in the 1990s. We are at the stage now 

where we are coming close to competing with offshore wind in level 

of technical development. 

Right now wind projects still find it difficult to be financed by 

banks offshore. We are at the stage where we can get bank involvement in our technology, meaning we can borrow other people’s 

money and use it to build out our technology aggressively, so I can 

see the wave energy industry moving toward commercial projects 

in the next three to five years, and that is what we intend. 

Mr. COSTA. The one facility that you are talking about in Washington, I was looking at the different schematics here. Which plan 

are you looking at for the one megawatt? 

Mr. BAK. It is using the AquaBuOY technology. 

Mr. COSTA. The AquaBuOY. OK. And I guess best science has 

yet to determine which of the different technologies. I mean, that 

is why you have prototypes which is ultimately going to provide the 

most amount of energy, the least amount of impact and the best 

bang for your buck. 

Mr. BAK. And it has to do as well with the financing of this technology. There is a little financial push that is needed to really move 

this industry to the next level to get the same attention as ethanol, 

as wind, et cetera. 

100

The financing of the technology and providing a level playing 

field for them to compete is something that we are very keen on 

seeing happen through various bills, et cetera. 

Mr. COSTA. And I suspect you added whatever other comments 

you wished during your testimony about what we need to be considering here to try to encourage the efforts? 

Mr. BAK. Yes. If I can stress one aspect of our written testimony 

is that I think investor tax incentives right now would be very, 

very useful for the market to bring capital into this space, and then 

the market and the investors can determine which technologies 

succeed based on their performance, based on their environmental 

impact, based on many factors. 

This again is an incentive that was used in Denmark in conjunction with a feed-in tariff in the 1980s that grew a whole wind 

energy industry that still today has a dominant market share, and 

even GE can’t knock the Danish wind turbines out of having that 

market share, so there is that same opportunity here in America. 

Mr. COSTA. Tax incentives. Why didn’t I think of that? 

Mr. BAK. You can use them initially and scale them back. 

Mr. COSTA. No. You don’t have to belabor that. 

Mr. BAK. I am a big, big, big fan. 

Mr. COSTA. Right. Everybody seems to discover them at some 

point. 

Anyway, I have belabored this committee enough. I have certainly exceeded my time. I hope I haven’t exceeded the patience of 

my fellow Co-Chair of this Subcommittee. 

We appreciated the Subcommittee on Fisheries, Wildlife and 

Oceans taking the time to do this with us. I think it was a good 

collaborative effort, and we will continue to look at more efforts 

when we can do this. It saves time, saves staff time. We appreciate 

the staff’s effort on this as well. 

I believe at this point, Madam Chairwoman, unless you have 

something else you would like to say, we are going to ask unanimous consent to allow for the submission of questions for the 

record. We ask all the witnesses to respond to those questions 

within 10 days. 

Without any further ado, we will wrap up this important hearing. I want to thank all the witnesses, and we will follow your efforts closely. Thank you. 

[Whereupon, at 5:39 p.m. the Subcommittees were adjourned.]

[A letter submitted for the record by John Alton Duff, J.D., 

LL.M., Environmental, Earth and Ocean Sciences Department, 

University of Massachusetts/Boston, follows:]

101

April 24, 2007

Dear Chairwoman Bordallo, Chairman Costa, and Subcommittee Members:

Thank you for the invitation to submit testimony to this joint hearing of the 

House Subcommittee on Fisheries, Wildlife and Oceans and the House Subcommittee on Energy and Mineral Resources on ‘‘Renewable Energy Opportunities 

and Issues on the Outer Continental Shelf.’’ While I am not able to appear personally, I submit for your consideration the article Offshore Management Considerations: Law and Policy Questions Related to Fish, Oil and Wind, published in 

Volume 31 of the Boston College Environmental Affairs Law Review at pages 385-

402 in 2004.

Sincerely,

John Duff, J.D., LL.M. 

Assistant Professor 

University of Massachusetts/Boston 

100 Morrissey Blvd. 

Boston, MA 02125-3393

(617) 287-7445

John.Duff@umb.edu

]NOTE: The article has been retained in the Committee’s official files.]

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