E5-8119. Alternate Energy-Related Uses on the Outer Continental Shelf

AGENCY:

Minerals Management Service (MMS), Interior.

ACTION:

Advance Notice of Proposed Rulemaking (ANPR).

SUMMARY:

The MMS is seeking comments on the development of a regulatory program to implement portions of the Energy Policy Act of 2005, Section 388—Alternate Energy-Related Uses on the Outer Continental Shelf. Specifically, MMS is seeking comments regarding energy development from sources other than oil and gas and alternate uses of existing facilities.

DATES:

MMS will consider all comments received by February 28, 2006. MMS will begin reviewing comments then and may not fully consider comments received after February 28, 2006.

ADDRESSES:

You may submit comments on the notice by any of the following methods listed below. Please use the Regulation Identifier Number (RIN) “1010-AD30” as an identifier in your message. See also Public Comment Policy under Supplementary Information.

• MMS's Public Connect on-line commenting system, https://ocsconnect.mms.gov. Follow the instructions on the website for submitting comments.
• Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions on the Web site for submitting comments.
• E-mail MMS at [e-mail]. Use the RIN in the subject line.
• Fax: [phone]. Identify with the RIN.
• Mail or hand-carry comments to the Department of the Interior; Minerals Management Service; Attention: Rules Processing Team (RPT); 381 Elden Street, MS-4024; Herndon, Virginia 20170-4817. Please reference “Alternate Energy-Related Uses on the Outer Continental Shelf—1010-AD30” in your comments.

FOR FURTHER INFORMATION CONTACT:

Amy C. White, 703-787-1665.

SUPPLEMENTARY INFORMATION:

Public Comment Policy: All submissions received must include the agency name and RIN, “1010-AD30” for this notice. Our practice is to make comments, including names and addresses of respondents, available for public review. Individual respondents may request that we withhold their address from the record, which we will honor to the extent allowable by law. There may be circumstances in which we would withhold from the record a respondent's identity, as allowable by the law. If you wish us to withhold your name and/or address, you must state this prominently at the beginning of your comment. However, we will not consider anonymous comments. Except for proprietary information, we will make all submissions from organizations or businesses, and from individuals identifying themselves as representatives or officials of organizations or businesses, available for public inspection in their entirety.

Background: Section 388(a) of the Energy Policy Act of 2005 (the Act) amended section 8 of the Outer Continental Shelf Lands Act (OCSLA) (43 U.S.C. 1337) to authorize the Department of the Interior (DOI) to grant leases, easements or rights-of-way on the U.S. Outer Continental Shelf (OCS) for the development and support of energy resources from sources other than oil and gas and to allow for alternate uses of existing facilities on the OCS. This authority will be exercised by the MMS. MMS is the agency within DOI that manages energy and mineral resources on the OCS.

The Act requires MMS to grant leases, easements and rights-of-way on a competitive basis, unless there is no competitive interest. MMS is developing a program and regulations to implement certain portions of section 388(a) of the Act. Under this authority, MMS may issue leases, easements or rights-of-way if those activities:

• Produce or support production, transportation, or transmission of energy from sources other than oil and gas.
• Use, for energy-related purposes or other authorized marine related purposes, facilities currently or previously used for activities authorized under the OCSLA.

The Act does not supersede any existing restrictions on OCS activities, including existing deferrals by Presidential withdrawal or congressional moratoria for oil and gas production-related activities, and does not apply to areas designated as marine sanctuaries, national parks, national wildlife refuges, and national monuments. The Act also authorizes the issuance of leases, easements or rights-of-way for activities that support exploration, development, production, or storage of oil or natural gas and for activities that support transportation of oil or natural gas, excluding shipping activities. These provisions are not addressed in this ANPR and will not be included in this planned rulemaking. MMS will address these activities through additional rulemaking, as needed.

MMS anticipates proposals for various types of energy development projects on the OCS from sources other than oil or natural gas and alternate uses for the OCS, under the Act. MMS anticipates that the majority of the applications received for non-oil and gas development projects will be for the development of renewable energy. Possible sources of renewable energy include, but are not limited to:

• Wind
• Wave
• Current
• Solar

We also would like comments on types of energy that are considered to be alternative energy but not renewable energy.

Alternate uses of existing facilities may include, but are not limited to:

• Offshore aquaculture
• Research
• Education
• Recreation
• Support for offshore operations and facilities
• Telecommunications facilities

Although the Act authorizes MMS to permit alternate uses of existing OCS facilities, MMS is not seeking the authority over activities such as aquaculture, but only the decision to allow platforms to be converted to such uses, if the appropriate agency approves the underlying activity.

Program and Regulation Development

MMS interprets the authority granted in section 388(a) of the Energy Policy Act of 2005 to issue leases, easements or rights-of-way as also providing MMS authority to regulate or permit the activities that occur on those leases, easements or rights-of-way, if those activities are energy related. MMS is developing a comprehensive program and regulations to manage renewable and other alternate energy projects and to permit alternate uses of existing OCS facilities, as authorized in section 388(a) of the Energy Policy Act of 2005. Objectives of the new program are to provide access to the OCS for such projects in a way that balances competing and complementary uses of offshore acreage; takes into account the evolving nature of the energy industry; and provides a fair return to the United States for access to the OCS.

MMS will require that all authorized operations move from proposal to development in a timely manner. MMS regulations will govern projects from proposal through the development process, operations, and end of life. MMS will monitor and enforce compliance. MMS promotes using the best available and safest technology. Contingency planning for technology failure, human factors, or extreme offshore events will be required.

MMS will involve stakeholders throughout the program and regulation development process. We will coordinate with and consult state governors, local government executives, and other Federal agencies concerning activities that may affect them. MMS is interested in developing processes that are clear to all stakeholders.

To assist MMS in developing this new program and implementing regulations, we are requesting public comments. We will consider these comments while developing proposed regulations. To facilitate commenting we have identified five major program areas, listed below, with coordination and consultation an important aspect of all of the program areas. We will discuss each area individually and provide a list of general issues followed by specific questions for each program area. These lists and questions are not all inclusive, but are intended to provide you with ideas and a framework for commenting.

Program Areas

• Access to OCS lands and resources
• Environmental information, management, and compliance
• Operational activities
• Payments and revenues
• Coordination and consultation

Please indicate which program area your comments address. If your comments cover issues outside of the program areas, please identify them as “other.”

1. Are there regulatory regimes, either in the U.S. or abroad, that address similar or related issues that should be reviewed or considered as MMS moves forward with the rulemaking process?

Program area: Access to OCS Lands and Resources

Description: There are several methods authorized by the statute for providing access rights to the OCS, including leases, easements and rights-of-way. All of these methods usually require certain pre-qualification measures, such as a showing of financial capability to carry out the proposed project.

The MMS will require a defined schedule for action and terms and conditions to maintain the interest granted. In addition, approval may be contingent on the receipt of certain data and information.

General issues: Please provide information on how MMS can best:

A. Provide access for resource and site assessment.

B. Issue the appropriate instrument (e.g., leases, easements, rights-of-way).

C. Solicit interest for development projects.

D. Identify terms and conditions of use such as:

Issuance.

Duration.

Assignment of rights.

Suspensions and cancellation of rights.

Limitation of rights.

E. Identify geographical areas of interest for:

Resource and site assessment.

Development feasibility.

F. Ensure fair competition.

G. Process permits and applications.

H. Process pre-application resource assessments.

I. Allow concurrent developments.

J. Minimize multi-use conflicts .

Specific questions:

2. Possible development scenarios include phased access rights, which would allow for resource and/or site assessments and research prior to securing additional access rights. Rights could be permitted on a case-by-case basis. Development rights would be secured by a competitive process. An alternative would be to require that interested parties secure the access rights to an area prior to conducting assessments and research. Please comment on these possible options.

3. In cases where applicants or interested parties propose activities that would foreclose competing future uses, how should MMS estimate “a fair return,” especially if the competing uses would likely be public uses?

4. What constitutes a geographical area of interest?

5. What assessments should we require prior to competition?

6. How should MMS structure the competitive process and the application process used to issue OCS access rights? Should MMS auction access rights or engage in direct negotiation?

7. Should MMS take a broad approach to developing a program, or should efforts be targeted to specific regions?

8. How should MMS consider other existing uses when identifying areas for access?

9. How should MMS balance existing uses within an area with potential wind and current energy projects?

10. Should MMS require permits for collecting data from vessels? Should we consider this information proprietary? What criteria should we use for holding the information proprietary?

11. What criteria (e.g. environmental considerations, energy needs, economics) should MMS consider in deciding whether or not to approve a project? What criteria should MMS consider for different competing projects (i.e. wind versus current) for the same site?

Program Area: Environmental Information, Management, and Compliance

Description: Environmental management systems and review will be critical components of any activity in the new program. Environmental management systems must address all phases of planning and development, on-going operations, and removal of facilities associated with the new program. The new program will require identifying mitigation measures, monitoring programs, developing methods of validation and verification; establishing roles and responsibilities; and developing procedures for determining mitigation effectiveness, all of which are components of an environmental management system. The environmental management system will rely on an adaptive management strategy that gathers and uses information, including monitoring and evaluation of activities and their environmental consequences. Based on the results of this analysis and a determination of the effectiveness of the mitigation measures, revised or new mitigation measures could be implemented. The new regulations will require compliance with all pertinent environmental laws and regulations.

General issues: Please provide information regarding:

K. Information requirements needed for environmental management systems for any project.

L. Assessments and studies of risks and impacts (site-specific and cumulative) associated with offshore energy and alternate use projects.

M. Examples of best practices for environmental compliance, monitoring, and effectiveness being used in the U.S. and elsewhere.

N. Balancing environmental considerations with national energy needs.

Specific questions:

12. What types and levels of environmental information should MMS require for a project?

13. What types of site-specific studies should MMS require? When should these studies be conducted? Who should be responsible for conducting these studies?

14. What should be the goals and objectives of monitoring, mitigation, and enforcement?

15. What types of impacts are of concern? What are effective approaches for mitigating impacts? How can mitigation effectiveness and compliance with Federal environmental statutes be assessed?

16. What regulatory program elements lead to effective enforcement of environmental requirements?

17. How should environmental management systems be monitored (by the applicant, the MMS or by an independent third party)? What should be the MMS roles versus the roles of industry for ensuring appropriate oversight and governance?

Program Area: Operational Activities

Description: Operational activities address all aspects of the program from the application through project assessment, development, installation, and production, to end of project life and removal of facilities. Inspections, monitoring, and enforcement are conducted throughout the entire project life. Risk analysis, engineering, studies, and research occur as needed.

General issues: Please provide information on:

O. Permitting pilot projects.

P. Ensuring human health and safety on and adjacent to the project site.

Q. Protecting environmental resources during construction, production, and removal.

R. Identifying design and installation requirements associated with new projects and modification of existing facilities.

S. Identifying production requirements as a component of diligence.

T. Managing end of life and facility removal.

U. Conducting oversight responsibilities (e.g., inspection, monitoring, enforcement).

V. Identifying technology assessment and research needs.

W. Preventing waste.

X. Conserving resources.

Specific questions:

18. What options should MMS consider as alternatives to facility removal? Are there unique issues (such as liability) associated with those options?

19. What engineering challenges should be considered when operating in an OCS environment?

20. What safety issues exist when operating an energy production facility on the OCS?

21. How should operational activities be monitored (e.g. annual on-site inspections with verification of operating plans)? Is there an appropriate role for the applicant and independent third party certification agents? Describe existing models that could serve as a prototype inspection and monitoring program.

22. Are there special considerations that MMS should examine in developing an inspection program that covers a diverse set of renewable production facilities? If so, what are they?

Program Area: Payments and Revenues

Description: MMS has the responsibility to ensure a fair return to the United States for the use of any lease, easement, or right-of-way granted. The MMS is required to establish bonus bids, rentals, fees, royalties, or other payments to ensure that return. Additionally, cost recovery fees may be collected to compensate for the administrative costs of providing various services. Developing a payment and revenue structure, as well as appropriately designing fiscal terms applicable to energy and alternate use projects, requires additional information.

General issues: Please provide information on:

Y. Bonus bids.

Z. Rentals.

AA. Royalty terms.

BB. Fees, including cost recovery fees or other payments.

CC. Assessing value/benefits and impacts, Public, Private.

DD. Valuing leases, easements or rights-of-way.

EE. Comparable fiscal systems.

FF. Surety bonds.

Specific questions:

23. What should the payment structure be designed to collect? Should payments be targeted at charging for use of the seabed? Should payments try to capture the opportunity costs of other activities displaced by the activity? Should the payment structure be designed to capture a portion of the revenue stream, and if so, under what circumstances?

24. Offshore renewable energy technologies are in their infancy. Should the payment structure be designed to encourage the development of these activities until the technologies are better established?

25. What methods are used by the renewable energy industry to quantify the risk and uncertainty involved with estimating the size of a renewable energy resource, and evaluating its profitability?

26. What measures of profitability are commonly used as renewable energy investment decision criteria? How do bonus bids, rents, royalties, fees and other payment methods impact the profitability of these projects?

27. Are there economic models available to calculate the profitability of renewable energy proposals?

28. Increased reliance on renewable energy offers both economic and environmental benefits. What are the public benefits to society and do they differ from market driven benefits?

29. In section 8 (p) of the OCSLA as amended by Section 388 of the Energy Policy Act, the Secretary must require the holder of a lease, easement or right of way granted under that subsection to furnish a surety bond or other form of security. What options should MMS consider to comply with this requirement?

Coordination and Consultation

Description: Section 8(p) of the OCSLA, as amended, includes several provisions relating to coordination and consultation with interested and affected parties. Those provisions call for coordinating and consulting with state governors or local government executives concerning activities that may affect them, developing and implementing regulations in consultation with certain Federal agencies and the governors of affected states, and ensuring that activities are carried out in a manner that provides for coordination with relevant Federal agencies. MMS views these requirements as essentially covering all aspects and phases of the non-oil and gas energy and alternate use program established by the Energy Policy Act of 2005.

Questions relating to coordination and consultation:

30. While MMS considers this ANPR an appropriate start at consultation with interested and affected parties, what other efforts could be undertaken at this early stage of program development?

31. Should a broad approach be taken to developing a program or should efforts be targeted to specific regions with commensurate coordination and consultation?

32. Would the establishment of Federal/state cooperatives for targeted areas be useful? Similar to the process for OCS oil and gas program formulation, should we solicit comments on which areas of the OCS should be included or excluded from the program? After establishing where there is consensus in support of program activities, should coordination and consultation efforts be directed to those areas? Conversely, should such efforts be curtailed or abandoned for areas recommended for exclusion?

33. What are the critical stages (e.g. site evaluation, application, competitive sale) for consultation with affected parties?

34. Should procedures for consulting with interested and affected parties be codified in the regulations? In general? In detail?

35. What processes can MMS use to provide for balance between consultations and the time and burden to the projects?

36. Are there specific aspects of the new ROW rule issued by the Bureau of Land Management that should be reviewed by MMS for consideration in its rulemaking?

MMS seeks responses to the questions, and comments as to which option(s) may be considered the most effective and efficient. After analyzing the comments received from this notice, MMS will determine how to proceed. MMS encourages all interested parties to respond to these questions and to provide comments on any aspect of this program.

Dated: December 7, 2005.

Walter D. Cruickshank,

Acting Director, Minerals Management Service.