[Federal Register: July 9, 2008 (Volume 73, Number 132)]
[Proposed Rules]
[Page 39375-39504]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09jy08-29]
[[Page 39375]]
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Part II
Department of the Interior
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Minerals Management Service
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30 CFR Parts 250, 285, and 290
Alternative Energy and Alternate Uses of Existing Facilities on the
Outer Continental Shelf; Proposed Rule
[[Page 39376]]
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DEPARTMENT OF THE INTERIOR
Minerals Management Service
30 CFR Parts 250, 285, and 290
[Docket ID: MMS-2008-OMM-0012]
RIN 1010-AD30
Alternative Energy and Alternate Uses of Existing Facilities on
the Outer Continental Shelf
AGENCY: Minerals Management Service (MMS), Interior.
ACTION: Proposed rule; notice of availability of the draft
environmental assessment.
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SUMMARY: The MMS is proposing regulations that would establish a
program to grant leases, easements, and rights-of-way (ROW) for
alternative energy project activities on the Outer Continental Shelf
(OCS) as well as for certain previously unauthorized activities that
involve the alternate use of existing facilities located on the OCS;
and would establish the methods for sharing revenues generated by this
program with nearby coastal States. These regulations are also intended
to ensure the orderly, safe, and environmentally responsible
development of alternative energy sources on the OCS. The MMS is
developing this program and proposed regulations under the authority
granted the Secretary of the Interior (Secretary) by the Energy Policy
Act of 2005 (EPAct), which amended the Outer Continental Shelf Lands
Act (OCS Lands Act). Under this new authority, the Secretary maintains
discretionary authority to issue leases, easements or ROWs on the OCS
for previously unauthorized activities that: Produce or support
production, transportation, or transmission of energy from sources
other than oil and gas; or use, for energy-related or other authorized
marine-related purposes, facilities currently or previously used for
activities authorized under the OCS Lands Act.
The MMS has prepared a Draft Environmental Assessment (EA)
analyzing this proposed rule. The Draft EA incorporates by reference
the Programmatic Environmental Impact Statement (EIS) Programmatic
Environmental Impact Statement for Alternative Energy Development and
Production and Alternate Use of Facilities on the Outer Continental
Shelf, Final Environmental Impact Statement, October 2007. This Draft
EA was prepared to assess any impacts of this proposed rule. We are
furnishing this notification to allow other agencies and the public an
opportunity to review and comment on the Draft EA.
All comments received on this proposed rulemaking and the Draft EA
will become part of the public record and will be available for review.
DATES: Submit comments on the proposed regulation by September 8, 2008.
The MMS may not fully consider comments received after this date.
Submit comments to the Office of Management and Budget on the
information collection burden in this rule by August 8, 2008. This does
not affect the deadline for the public to comment to MMS on the
proposed regulations. Submit comments on the Draft Environmental
Assessment by September 8, 2008.
ADDRESSES: You may submit comments on the rulemaking by any of the
following methods. Please use the Regulation Identifier Number (RIN)
1010-AD30 as an identifier in your message. See also Public
Availability of Comments under Procedural Matters.
Federal eRulemaking Portal: http://www.regulations.gov.
Under the tab ``More Search Options,'' click Advanced Docket Search,
then select ``Minerals Management Service'' from the agency drop-down
menu, then click ``submit.'' In the Docket ID column, select MMS-2008-
OMM-0012 to submit public comments and to view supporting and related
materials available for this rulemaking. Information on using
Regulations.gov, including instructions for accessing documents,
submitting comments, and viewing the docket after the close of the
comment period, is available through the site's ``User Tips'' link. The
MMS will post all comments.
Mail or hand-carry comments to the Department of the
Interior, Minerals Management Service, Attention: Regulations and
Standards Branch (RSB), 381 Elden Street, MS-4024, Herndon, Virginia
20170-4817. Please reference ``Alternative Energy and Alternate Uses of
Existing Facilities on the Outer Continental Shelf, 1010-AD30'' in your
comments and include your name and return address. The MMS will post
all comments on Regulations.gov.
Send comments on the information collection in this rule
to: Interior Desk Officer 1010-AD30, Office of Management and Budget;
202-395-6566 (fax); e-mail oira_docket@omb.eop.gov. Please also send a
copy to MMS.
The Draft EA is available on the MMS Web site at: http://
www.mms.gov/offshore/AlternativeEnergy/RegulatoryInformation.htm. You
may submit comments on the Draft Environmental Assessment in one of the
following two ways:
[cir] In written form enclosed in an envelope labeled ``Alternative
Energy Program Rulemaking Draft Environmental Assessment'' and mailed
(or hand carried) to the Branch Chief, Environmental Assessment Branch,
Minerals Management Service, Mail Stop 4042, 381 Elden Street, Herndon,
Virginia 20170.
[cir] Electronically to the MMS e-mail address:
alternative@mms.gov.
MMS is requesting comments on specific items identified throughout
the preamble. For your convenience in commenting, we have compiled a
list of these items at the end of the preamble.
FOR FURTHER INFORMATION CONTACT: Proposed rule: Maureen Bornholdt,
Program Manager, Offshore Alternative Energy Programs, at 703-787-1300
or maureen.bornholdt@mms.gove or Amy C. White, Regulations and
Standards Branch, at (703) 787-1665 or amy.white@mms.gov.
Draft Environmental Assessment: James F. Bennett, Chief, Branch of
Environmental Assessment, at (703) 787-1660.
SUPPLEMENTARY INFORMATION:
Background
Statement of Purpose
Sufficient domestic sources of energy are vital to expanding the
Nation's economy and enhancing Americans' quality of life. However, an
imbalance exists between our energy consumption and domestic energy
production that makes it vital to find ways to narrow the gap between
the amount of energy used and the amount domestically produced. There
is no single solution for narrowing this gap, but there are several
means available. Increasing the Nation's supply of renewable energy
produced from domestic sources will be a key part of any strategy to
meet this goal.
According to the Department of Energy's Energy Information
Administration (EIA) 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 (US). The EIA
estimates that in 2030 renewable energy will account for over 10
percent of domestic energy production and about 7 percent of
consumption. The Energy Policy Act of 2005 (EPAct) encourages the
development of renewable energy resources as part of an overall
strategy to develop a diverse portfolio of domestic energy supplies for
the future. Section 388 of the EPAct gave the Department of the
Interior new
[[Page 39377]]
authority to grant leases, easements, and ROWs for the development of
promising new energy sources such as offshore wind, wave, current, and
solar energy and for ensuring that alternative energy development on
the OCS proceeds in a safe and environmentally responsible manner. The
Secretary of the Interior delegated to the MMS the new authority that
was conferred by the EPAct.
Enactment of the EPAct recognized the need for an unambiguous
outline of authorities pertaining to energy-related activities on the
OCS. Before the EPAct, as various agencies of the Federal government
received proposals for innovative, non-traditional energy-related
projects on the OCS, it became evident that--with limited exceptions--
there existed no clear Federal authority for granting rights to use the
seabed for such projects. This lack of clearly outlined authority was a
significant impediment to the development of renewable energy on the
OCS, and dampened efforts by potential energy developers and Federal
regulators to seriously develop and consider offshore projects.
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. As the Federal
government's primary manager of offshore energy development, the
Department of the Interior, MMS, was given this comprehensive new
authority.
Mandate of Energy Policy Act of 2005 (EPAct)
The EPAct amended the OCS Lands Act to authorize the Secretary to
issue leases, easements, or rights-of-way on the OCS for activities
that:
(i) Support exploration, development, production, or storage of oil
or natural gas, except that a lease, easement, or right-of-way shall
not be granted in an area in which oil and gas preleasing, leasing, and
related activities are prohibited by a moratorium;
(ii) Support transportation of oil or natural gas, excluding
shipping activities;
(iii) Produce or support production, transportation, or
transmission of energy from sources other than oil and gas; or
(iv) Use, for energy-related or other authorized marine-related
purposes, facilities currently or previously used for activities
authorized under the OCS Lands Act.
This new authority does not apply to activities that are otherwise
authorized by law, including those covered by the OCS Lands Act, the
EPAct, the Deepwater Port Act of 1974, and the Ocean Thermal Energy
Conversion Act of 1980. On March 20, 2006, the Secretary of the
Interior delegated to the MMS the new authority that was conferred by
the EPAct.
In addition, the EPAct of 2005 requires the Secretary to share with
nearby coastal States a portion of the revenues received by the Federal
Government from authorized alternative energy and alternate use
projects on certain areas of the OCS. This proposed rule would
implement this mandate and describe the methods to be used for
identifying what projects are covered by this requirement, for
determining which States are eligible to receive shares of the
revenues, and--if two or more States are eligible to receive revenues
from the same project--for allocating the appropriate share to each
eligible State.
The EPAct included a requirement that the Secretary develop any
necessary regulations to implement the new authority. This Notice of
Proposed Rulemaking applies to the activities described in (iii) and
(iv) above (i.e., those relating to production, transportation, or
transmission of energy from sources other than oil and gas and to the
use of existing OCS facilities for energy-related or other authorized
marine-related purposes). Regulations for activities described in (i)
and (ii) above (i.e., those relating to oil and gas) will be
promulgated separately in appropriate parts of the existing MMS oil and
gas regulations.
While the MMS will have the lead in authorizing OCS alternative
energy and alternate use activities, we recognize that other Federal
government agencies have regulatory responsibility in such activities
and the need to consider them fully. The new authority does not
expressly supersede or modify existing Federal laws, and all activities
must comply fully with such laws. As directed by the EPAct provision
calling for promulgation of regulations, the MMS consulted with other
Federal agencies, as appropriate, throughout the rulemaking process,
and, to the extent provided by established DOI rulemaking procedures.
We also consulted with the governors of affected States and others in
the promulgation of this rule.
In addition to providing the authority to issue leases, easements,
and rights-of-way, the EPAct included a requirement that any activity
permitted under this authority be ``carried out in a manner that
provides for--
(A) Safety;
(B) Protection of the environment;
(C) Prevention of waste;
(D) Conservation of the natural resources of the outer Continental
Shelf;
(E) Coordination with relevant Federal agencies;
(F) Protection of national security interests of the United States;
(G) Protection of correlative rights in the outer Continental
Shelf;
(H) A fair return to the United States for any lease, easement, or
right-of-way under this subsection;
(I) Prevention of interference with reasonable uses (as determined
by the Secretary) of the exclusive economic zone, the high seas, and
the territorial seas;
(J) Consideration of--
(i) The location of, and any schedule relating to, a lease,
easement, or right-of-way for an area of the outer Continental Shelf;
and
(ii) Any other use of the sea or seabed, including use for a
fishery, a sealane, a potential site of a deepwater port, or
navigation;
(K) Public notice and comment on any proposal submitted for a
lease, easement, or right-of-way under this subsection; and
(L) Oversight, inspection, research, monitoring, and enforcement
relating to a lease, easement, or right-of-way under this subsection.''
The MMS addresses these items, as appropriate, in this rulemaking.
Summary of Advance Notice of Proposed Rulemaking (ANPR) Comments
Background
On December 30, 2005, the MMS issued an ANPR (70 FR 77345)
requesting comments on the program requirements. Comments pertaining to
specific subparts of the proposed regulations are summarized in the
subpart-by-subpart discussion, as appropriate.
The ANPR requested public comments on five major program areas:
(1) Access to OCS lands and resources;
(2) Environmental information, management, and compliance;
(3) Operational activities;
(4) Payments and revenues; and
(5) Coordination and consultation.
The MMS received 149 comments from 26 States and the District of
Columbia. Comments came from private citizens (60), alternative energy
industries and associations (27), environmental organizations (19),
State and local governments (19), Federal agencies (8), non-government
organizations (6), universities (5), congressional representatives (3),
small business (1), and the oil and gas industry (1).
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The vast majority of comments addressed OCS alternative energy
activities, and we received a few comments on use of existing
facilities. No single issue dominated the comments, and responses
within a given program area were wide-ranging. The comments generally
were supportive of alternative energy development on the OCS and
activities that use existing OCS facilities. Many advised the MMS to
proceed with caution as we develop the program and supporting
regulations and advocated early stakeholder involvement with both the
program and the individual project permitting. Those familiar with the
OCS oil and gas program often suggested we use that program as a model
for consultation and environmental compliance. Some alternative energy
industry and environmental organizations suggested that the MMS
establish a structured, rigid process, citing the need for
predictability and for compliance and timeliness in reviews. Others
advocated a flexible approach in view of the fledgling nature of
offshore alternative energy technologies and suggested that the MMS
address each project on a case-by-case basis. A majority of comments
identified preparation of a programmatic environmental impact statement
(PEIS) under the National Environmental Policy Act (NEPA) as a
necessary and constructive first step.
Comments addressing the major program areas often were
interrelated. For example, comments on access and operations were often
directly linked with concerns for the environment (e.g., access should
not be permitted in areas of environmental sensitivity). Views on
payments appeared to be influenced by the perspective of the commenter
on access issues (e.g., fee structure suggestions depended on whether
MMS used the project's actual footprint or a lease block system).
Coordination and consultation suggestions centered on the opportunity
to address environmental concerns (e.g., focused on input during the
program and individual project NEPA process).
More information on the ANPR, its respondents, and their comments
is available at the MMS OCS Public Connect Web site, at https://
ocsconnect.mms.gov/pcs-public/do/
ProjectDetailView?objectId=0b011f8080050473.
Access for OCS Lands
Comments on area identification described the entire spectrum of
access: from MMS conducting in-depth studies to select specific areas
to lease to MMS opening most of the OCS. While comments recommended MMS
fashioning our program after the Bureau of Land Management (BLM), the
European, or the Federal Energy Regulatory Commission model, comments
were consistent about MMS requiring due diligence from any developer.
Some commenters suggested that we use the PEIS to identify
environmentally sensitive areas to be permanently excluded from
development, and some expressed concerns that we would lease any area
without considering the full range of possible impacts and
alternatives. While others opined that if MMS initially excluded areas,
those areas may never become available even if technology and uses
changed in the future. MMS decided not to propose limiting areas
available for possible development. As we begin to better understand
the impacts, limitations, and benefits of renewable energy projects, we
will be in a better position to select appropriate sites for
development. MMS does not want to exclude potential sites, since the
future technology may be different from the technology available today,
with different impacts.
Other commenters advocated that all U.S. waters should be candidate
areas for the development of renewable energy projects and that
potential developers, who are in the best position to propose sites,
should be given the widest possible latitude to identify potential
resources and sites. One commenter pointed out that Congress already
identified those OCS areas that should be categorically excluded from
renewable energy development: ``any unit of the National Park System,
National Wildlife Refuge System, or National Marine Sanctuary System,
or any National Monument.''
As some responders expressed the belief that renewable energy
production does less damage to the environment than oil and gas
production, they suggested that MMS subject the renewable projects to
less rigorous environmental review and open more areas to development,
regardless of other impacts. Others commented MMS should consider all
impacts on existing resources and uses citing fisheries, public safety,
shipping lanes, aircraft, migratory routes (bird and mammal), and
access to sand and gravel and oil and gas resources. These comments
were often coupled with the suggestion that any fees for the renewable
energy development should compensate for impacts and possible loss of
future uses. The MMS will strictly adhere to the statutory requirements
such as NEPA, CZMA, etc. All projects will undergo appropriate review.
Many comments expressed concern that a competitive bidding process
would limit access to large energy companies, effectively shutting out
small businesses, or add to the considerable economic and financial
uncertainties associated with the developing industry, rendering it
very difficult to finance projects. Others supported using a
competitive basis for awarding permits for resource and site assessment
with an ``option to lease'' or other guaranteed development rights
provided that site-specific requirements were met. Others felt that
given the emerging nature of offshore renewable energy technologies and
the public and private benefits that could be derived from energy
resources development on the OCS, MMS should make the process as simple
and efficient as possible with a clear schedule for processing and
decision-making. The proposed rule lays out the steps in the processes
for acquiring leases, both competitively and noncompetitively.
Some commenters suggested that competing projects or proposals be
evaluated using quantitative factors such as financial strength,
experience and operational performance of the developers. However,
there was considerable support for using criteria that would allow
small and medium size businesses, local communities, and local utility
districts the opportunity to initiate projects. It was also suggested
that proposals be evaluated on the basis of how each best serves the
public interest.
Environmental Information, Management, and Compliance Programs
Comments fell into two broad points of view: (1) Require detailed
studies years prior to building a project or (2) waive or reduce
environmental requirements and other safeguards that are incorporated
into our normal permitting processes.
While most comments suggested that MMS should prepare a PEIS as a
first step, comments were divided as to how MMS should use the
document. Some suggested that the PEIS identify areas open for
renewable development, either advocating that certain areas be excluded
from leasing/permitting or matching the type of renewable energy
development with a particular area. The thought behind this approach is
that by strategically reviewing ``preferred'' locations for renewable
development, the PEIS could reduce the residual project risk that
project developers face, help to ensure State and community input on
identifying more or less desirable locations, and ensure that impacts
remain acceptable. Some
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commenters disagreed with this approach, recommending that access
remain flexible to allow renewable energy developers to select
potential areas and citing the concern that any areas deferred at this
stage may be permanently excluded from future development. Others
stated that the PEIS should identify and analyze programmatic issues
leaving specific environmental evaluation to the project stage.
MMS prepared a PEIS for the Alternative Energy and Alternate Use
Program. The PEIS provides a basic understanding of the possible
impacts of various types of alternative energy and alternate use
projects. However, MMS will develop additional, site specific EISs as
appropriate.
Some comments raised the issue of responsibility for preliminary
site-specific studies. It was suggested that MMS should conduct these
studies to maintain objectivity. Other commenters stated that
conducting these studies is the responsibility of the applicant working
with MMS and potential affected State(s) on study design. Another
recommendation advocated using independent third-party contractors
selected pursuant to the Council on Environmental Quality procedures to
ensure unbiased environmental assessments.
In the ANPR we requested specific comments on types and levels of
environmental information that MMS should require for alternative
energy and alternate use projects; the types of site-specific studies
should MMS require; when these studies should be conducted; and who
should be responsible for conducting these studies. We also requested
input on identifying design and installation requirements associated
with new projects and modification of existing facilities and
identifying technology assessment and research needs. Commenters
consistently supported the development of a Programmatic EIS, followed
by project specific EIS. They also were consistent about requiring
compliance with CZMA and developing an approach that respects local and
State laws and requirements. The MMS developed a PEIS, as suggested, as
was discussed previously. Each individual project will require NEPA
compliance. In the near term we anticipate the NEPA compliance for
development will be project specific EIS. These regulations would
require that the applicant provide the information needed for MMS to
develop the NEPA document. In addition, these regulations detail CZMA
compliance requirements.
Generally, commenters agreed that MMS should conduct and pay for
the PEIS, but the applicant should pay for site-specific NEPA. However,
some commenters stated that it should be the agency's responsibility to
gather and provide information for the project-specific NEPA and to
meet other requirements. Others suggested that MMS can get most of the
required data from other Federal government agencies including:
Department of Energy (DOE), Bureau of Land Management (BLM), and Army
Corps of Engineers (ACOE).
Commenters consistently mentioned that offshore alternative energy
engineering issues are similar to those issued faced by the offshore
oil and gas industry and the MMS should use its experience with oil and
gas when evaluating the engineering aspects of these projects.
Some commenters suggested that MMS use the existing oil and gas
regulations (30 CFR part 250) for the plan requirements. We reviewed
and considered the oil and gas regulations and patterned many of these
roles on those basic requirements if they were appropriate for the
alternative energy program.
Commenters reminded us to recognize that specific data requirements
will vary by the type of project and the location. We addressed this by
not including standards in these regulations. Instead we are requiring
applicants to submit the project design and the data and information
that were the basis for the design, so we can evaluate each project on
a case-by-case basis. As we gain experience with offshore alternative
energy, we may set more specific project requirements. A number of
commenters suggested that the responsibility for determining
engineering requirements for offshore alternative energy projects
should fall on project developers. Some commenters stated that these
projects should meet the same engineering criteria as oil and gas
facilities. However, others felt that the consequences of an incident
would likely not be as great as an incident with an oil and gas
facility, therefore these structures need not meet the same criteria as
do those for oil and gas.
As with environmental impacts, many commenters believed that, at
this time, it would be best to address the engineering requirements of
these projects on a case-by-case basis, instead of detailing
requirements in the regulations. The requirements of these projects
would vary based on location (sea conditions, water depth, anticipated
weather events) and type of project. Research and development and or
demonstration projects are smaller scale activities that take place for
a short duration and in a limited, discrete area.
Some commenters included suggestions for the type of data and
information MMS should require, both for environment and engineering
assessments. However few provided details on the design standards for
projects. Those that provided details suggested the use of various
standards that have already been developed, such as those used in
Europe.
Regulation of Operational Activities
A common message from the commenters was that MMS should recognize
that renewable energy is a young industry so our regulatory approach
for operations should remain flexible yet predictable. Comments
recommended that the OCS oil and gas program should be used as the
model for addressing renewable energy operational activities. Comments
suggested MMS require operators to submit plans similar to the Deep
Water Operations Plan, use Certified Verification Agents, adopt
Occupational Safety and Health Administration requirements as a basis
for ensuring safety, schedule frequent inspections, and assess
penalties for noncompliance. Adaptive management approach and use of
pilot projects to study operations were also recommended. There were
several suggestions that MMS set production requirements to ensure due
diligence of the operators, while others wanted us to be flexible early
on or have no production requirements.
Payments, Royalties, Fees and Bonds
Issues with payments and revenues generated a great deal of
discussion with most comments against using bonus bids as part of the
competitive lease issuance process but supportive of rentals and
royalties. Some respondents requested a payment honeymoon or holiday
until it is determined that OCS renewable activities are profitable or
the industry matures. Commenters requested an orderly, simple, and
predictable financial system where potential investors are certain of
government fees. Many respondents stated that renewable wind, wave and
current resources are not finite like extractable oil and gas
hydrocarbons, there is no removal of a public resource and alternative
energy operations only use a limited amount of public OCS lands;
therefore, we should either not charge a royalty or set a low fee,
especially on pilot projects. Supporters of renewable energy expressed
concern that if the government's financial regimen were onerous it
would discourage development and give large
[[Page 39380]]
energy companies an unfair advantage. Citing the benefits of renewable
energy, most comments supported a financial system structured in a
manner which stimulates growth of offshore renewable generation and
provides incentive for developers to invest in OCS projects with the
hope that it will achieve cost competitiveness with other energy
sources. One Federal agency commenter stated that the perception of
fairness and cooperation is important and opponents of offshore
alternative energy development may claim that wind power facilities are
unfairly using public commons for profit. MMS has considered all
comments on an OCS alternative energy financial system and we propose a
financial regime that we have determined is fair to the American
public, meets Congress' and the Administration's intent with respect to
EPAct and will permit development of offshore alternative energy.
Bonus
Even though most respondents wrote against a system of lease
bonuses, EPAct requires competition and MMS is proposing the cash bonus
as either a bid variable or a fixed element in the alternative energy
leasing regulations. In certain cases where multiple expressions of
interest are received, MMS is proposing to use the cash bonus bidding
system as the basis for determining the winning bidder. Where no
competitive interest exists, a marginal acquisition fee is proposed.
Rentals
There was generally strong support for using rentals in any OCS
alternative energy leasing financial system. Respondents differed on
the rate of rentals that should be charged and the method for
calculating rental acreage. A few commenters felt that no rental fee
should be collected or rental waived until production commenced. Some
commenters proposed rental payments only be collected on the seabed
footprint while others suggested following the Federal oil and gas
model where rentals are paid on the entire OCS leased acreage. MMS is
proposing that a rental fee be collected on the entire leased acreage
with rental rates of $3 to $5 per acre for commercial leases, project
easements and rights-of-way. This rate is below the current prevailing
rates for oil and gas leases. We propose lower rental rates because
during the initial lease period and before the approval of the
Construction and Operations Plan (COP), there is no permanent
disturbance of the OCS. Following approval of the COP, a royalty-based
operating fee is proposed. Additionally, unlike oil and gas projects,
alternative energy projects do not extract a non-renewable energy
source from the leased tract. Thus, the underlying value of the
project's acreage is less affected by an alternative energy project
than it would be for an oil and gas project, so the rental charge for
use of the land can be set appropriately lower for alternative energy
projects.
Royalties
Most respondents supported some element of royalties based on gross
revenue. Comments about royalties covered the full spectrum from
setting no royalties; very low royalties (3% royalty that BLM charges);
to a phased royalty system designed so that the financial terms would
facilitate the emergence of a viable industry. A three-phased example
might include a pilot phase with no royalty and minimal rental fees,
followed by an industry ``wildcatter'' development phase with higher
rental rates and royalties after 5 years. The third is a commercial
phase in which a mature industry is paying yet higher rental and
royalty rates. Unless otherwise specified in the Final Sale Notice, MMS
is proposing a royalty regime in which an operating fee rate would
apply at a rate of one percent in the first two years following
approval of the Construction and Operations Plan on commercial
alternative energy leases, and at two percent thereafter. The operating
fee would be an annual payment that continues through the duration of
the operations term of a commercial lease. Where competition exists for
a lease, MMS may offer bidders the opportunity to bid a constant or
sliding operating fee rate above 2 percent subject to a fixed cash
bonus. The sliding scale operating fee rate could depend on one or more
of the variables which compose the operating fee itself, or on some
other variables, such as time. In this auction format, MMS would
provide a baseline sliding scale function, and the operating fee rate
bid variable would be some multiplier of that function. MMS does not
expect royalties at this level to deter investment in a meaningful
number of otherwise, prospective alternative energy projects.
A limited number of comments were received related to alternative
energy research, testing and pilot projects. These comments stated that
lease fees should be waived for research facilities and some pilot
projects that are limited in scope and intended for testing,
development or experimental evaluation of new systems. MMS has proposed
a ``limited lease'' with a restricted term of five years and minimal
rental for these types of projects.
There were divergent views on what constituted ``fair return.''
Some wanted us to include the benefits of renewable energy as part of
fair return, while others supported requiring additional compensation
for lost uses and social costs. Most commenters strongly rejected
opportunity-cost based valuation because of the complex and burdensome
nature of subjective value-based judgments required to determine
appropriate payment levels. Some respondents stated that only a small
proportion of the sea bottom and surface will be displaced and that
current users can adjust to any new structures. Some pointed out that
if Congress intended that such costs should be addressed, they would
have stated so in the EPAct language. On the other hand, two commenters
proposed to base a portion of the financial regimen on interference
with other uses by charging for the use of the sea floor in
compensation for displacing the pelagic zone and the atmosphere above
the water surface. MMS is not aware of precedents in other Federal or
State statutes that support an opportunity-cost based approach.
Moreover, it is not required by the authorizing legislation. At the
same time, MMS does consider selected aspects of opportunity cost in
some of its bid adequacy assessments for oil and gas leases.
Accordingly, while MMS does not intend to rely heavily on an
opportunity cost framework, for either setting payment sizes or for bid
adequacy purposes, there may be some circumstances in which
consideration of selected aspects of opportunity cost would be
appropriate for helping to set the sizes of certain fees, minimum bids,
or reservation prices.
A single commenter pointed out that since Congress already
subsidizes the development of alternative sources of energy through
production tax credits, MMS lacks the prerogative to encourage
development offshore through favorable financial terms. This commenter
also stated that MMS should not reduce the charge below the true
economic value of the resource. If MMS were to encourage development of
a resource with financial terms below those that private landowners
would be anticipated to charge, development could occur too quickly and
early developers might not make the best use of emerging technologies.
MMS has considered this reasoning in our proposal for the
authorized financial terms and durations of the lease and grant
periods. If future economics of alternative energy technology on the
OCS support different or improved
[[Page 39381]]
technologies, the flexibility which MMS has built into these
regulations will allow for appropriate specification of lease terms and
conditions upon subsequent renewals or in new offerings. Moreover, MMS
is confident that the actual financial terms and length of lease
conditions that it will apply, in conjunction with a myriad of other
administrative and regulatory requirements, strike the proper balance
between ensuring receipt of a fair return and providing the proper
inducement for alternative energy activities to proceed at the proper
pace.
There were differing opinions about charging cost recovery fees for
processing of applicant initiated actions. Most respondents felt that
cost recovery fees for MMS program efforts is appropriate, with some
advocating management costs be recovered from permit applicants through
fees, royalties, and/or a combination of both. Others expressed
concerns that charging cost recovery fees would impact the economics of
the projects and discourage development. To clarify, rentals and
royalties are designed to compensate the American public for use of the
Federal OCS, while cost recovery fees are to be implemented by a
Federal agency when a service (or privilege) provides special benefits
to an identifiable recipient, beyond those that accrue to the general
public. The MMS is proposing case-by-case fees to recover unique
processing costs such as the preparation of Environmental Impact
Statements. We do not have data for our costs of processing lease
applications for this new program, so we are not otherwise proposing
processing fees in this rule. As the program matures, and we acquire
processing cost data, we expect to propose fees to recover our costs of
processing. While we have not included filing fees in this proposed
rule, in the final rule, we may add nominal filing fees for competitive
and noncompetitive lease applications, and for applications for ROWs
and RUEs, to aid in limiting filings to serious applicants.
Comments generally supported MMS using a surety bond or other type
of security to cover the costs associated with non-compliance of lease
terms; lease default; decommissioning and removing wind turbines and
towers at the end of the lease term; and appropriate site remediation
at the end of the lease term. Respondents acknowledged that companies
operating on the OCS should be able to demonstrate appropriate levels
of financial capability. The types of financial securities mentioned
included letters of credit, a test of credit-worthiness, assigned
interest bearing annuity, funding a trust (comparable to a nuclear
decommissioning trust), escrow, insurance policy, or corporate
guarantee. MMS is proposing minimum financial assurance requirements of
$300,000 for the holder of any lease with actual surety levels to be
determined by MMS based on the complexity, number and location of all
planned OCS facilities by the lessee. We feel that this financial
assurance requirement will protect the taxpayer from any default by a
lessee.
The ANPR did not address revenue sharing with States.
Coordination and Consultation
Commenters encouraged MMS to coordinate and consult with affected
government agencies and stakeholders, and viewed the ANPR and the MMS
webpage on renewable energy as solid first efforts. Most comments
suggested consultation early in the process, both in the program
development and for individual projects. Other comments suggested:
allowing the States to ban renewable projects sited adjacent to state
waters that have negative environmental, economic, or public safety
impacts; conducting targeted surveys of coastal states and the industry
to identify potential concerns and objections; providing an opportunity
to identify areas of the OCS to include in the program; working with
Federal and State cooperatives; and requiring developers to include
outreach programs in their application. Many comments supported the use
of existing offshore program coordination mechanisms and suggested
expanding the OCS Policy Committee membership to include
representatives from the offshore renewable energy industry and
affected coastal states. Some comments expressed concern that the
coordination and consultation process would create burdensome
requirements, slow down the application review process, and/or create
artificial conflicts by giving too much visibility to marginal groups/
perspectives.
One commenter suggested that MMS establish a Joint Ocean Renewables
Office, co-locating representatives from each of the agencies
responsible for permitting and authorizing portions of the alternative
ocean energy projects, while another suggested that it was too early,
given the infancy of the offshore renewable energy industry, to rigidly
structure the relationships between regulators and project developers.
Other comments called for MMS to create a ``one-stop shop'' for the
permitting process, in which MMS would coordinate with other agencies
and be the primary point of contact for the industry.
Use of Existing Facilities
A few comments covered issues associated with use of existing
facilities, with the majority focusing on liability, environmental
impacts, and implementation of a rigs-to-reef program. Comments
generally supported leaving facilities in place, at the end of life,
for offshore aquaculture or to serve as artificial reefs. Concerns were
submitted that removing facilities would destroy essential fish
habitats. Some commenters wanted liability to be the responsibility of
the original owners (usually oil and gas operations), while others
wanted to allow for the shedding of liability by an oil and gas
producer if an alternative use of existing infrastructure is approved.
MMS is proposing to require an allocation of responsibilities between
the existing lessee and facility owner (e.g., the oil and gas lessee
and/or operator) and the holder of the Alternate Use RUE.
Programmatic Environmental Impact Statement Summary
The MMS prepared a final PEIS in support of the establishment of a
program for authorizing alternative energy and alternate use activities
on the OCS. The final PEIS examines the potential environmental effects
of the program on the OCS and identifies policies and best management
practices that may be adopted for the program. The PEIS examined three
alternatives as well as the no action alternative. The three
alternatives were: (1) The proposed action which would establish the
program; (2) a case-by-case alternative that would evaluate each
project individually without the benefit of a comprehensive program
and; (3) the preferred alternative, which consisted of a combination of
the first two alternatives, allowing MMS to review projects during the
interim while the program and regulations are being established.
Given the rapidly evolving nature of this nascent industry, the MMS
cannot reasonably anticipate and assess the potential environmental
impacts of all of the various technologies and potential OCS locations
where these alternative energy and alternate use projects could someday
be proposed. Accordingly, this PEIS is focused on alternative energy
technologies and areas on the OCS that industry has expressed a
potential interest in and ability to develop or evaluate from 2007 to
2014. The PEIS proposed policies and best management practices based on
the analyses in the PEIS. As the program
[[Page 39382]]
evolves and more is learned, the mitigation measures may be modified or
new measures developed. Each project developed under this new program
will be subject to environmental reviews under the National
Environmental Policy Act (NEPA), and each project may have additional
project-specific mitigation measures.
A Record of Decision (ROD) was published on January 10, 2008. The
preferred alternative was selected as well as interim policies and best
management practices that were recommended in the PEIS. The PEIS and
ROD are available at: ocsenergy.anl.gov. A Draft Environmental
Assessment of the regulations, which tiers off the PEIS, is being
released for review and comment along with the proposed rules.
Overview of the MMS Alternative Energy and Alternate Use Program
To accommodate the regulations to support the Alternative Energy
and Alternate Use Program, MMS is proposing to add a new part to
subchapter B of title 30 of the CFR. The new part 285 would be titled
``Alternative Energy and Alternate Uses of Existing Facilities on the
Outer Continental Shelf'' and would address the requirements of section
388(a) of the EPAct, which amended the OCS Lands Act to add section
8(p).
Approach to Rulemaking
These regulations were developed to provide a regulatory framework
for leasing and managing OCS alternative energy project activities and
authorizing activities that involve the alternate use of OCS Lands Act-
permitted facilities. These regulations are also intended to encourage
orderly, safe, and environmentally responsible development of
alternative energy sources on the Outer Continental Shelf. The MMS
expects that alternative energy projects in the near term will involve
the production of electricity from wind, wave, and ocean current. In
the future, other types of alternative energy projects may be pursued
on the OCS, including solar energy and hydrogen production projects.
These regulations were developed to allow for a broad spectrum of
alternative energy development, without specific requirements for each
type of energy production. However, as we gain experience with
alternative energy development on the OCS, we may update our
regulations to include energy resource-specific provisions and
incorporate by reference appropriate documents.
This proposed rule (30 CFR part 285) applies to all aspects of the
alternative energy and alternate use program; except for the procedures
applying to appeals of MMS decisions or orders, which are covered in 30
CFR part 290, Subpart A. We are also proposing to revise 30 CFR part
290.2 to clarify the MMS decisions on bids under this program are
exempt from the appeals process at 30 CFR part 290 and covered under
Sec. 285.118(c). This section describes the procedures for an
unsuccessful bidder to apply for reconsideration by the Director for
alternative energy leases, Right-of-way (ROW) grants, rights-of-use and
easement (RUE) grants, or alternate use rights-of-use and easements
(Alternate Use RUE).
Overview of the Project Development Process
General Overview
Figure 1 depicts the general process that the MMS proposes for
managing OCS alternative energy program activities under the proposed
rule.
BILLING CODE 4310-MR-P
[[Page 39383]]
[GRAPHIC] [TIFF OMITTED] TP09JY08.000
BILLING CODE 4310-MR-C
Types of Access Rights
MMS will issue lease access rights for commercial development and
site assessment and technology testing. ROW grant and RUE grants will
be issued for the support of alternative energy activities. MMS will
use a special grant, the Alternate Use RUE, for activities that use an
existing facility.
Commercial and Limited Leases
The MMS would issue two types of leases: (1) Commercial or (2)
limited. A Commercial lease would convey the access and operational
rights necessary to produce, sell, and deliver power on a commercial
scale, through spot market transactions or a long-term power purchase
agreement. A commercial lease provides the lessee full rights to apply
for and receive the authorizations needed to assess, test, and produce
[[Page 39384]]
alternative energy on a commercial scale over the long term
(approximately 30 years). A commercial lease would include the right to
a project easement, which would be issued to allow the lessee to
install gathering, transmission and distribution cables, to transmit
electricity; pipelines to transport other energy products (i.e.
hydrogen); and appurtenances on the OCS as necessary for the full
enjoyment of the lease. The project easement would be issued upon
approval of the Construction and Operations Plan (for Commercial
Leases) or General Activities Plan (for Limited Leases).
A limited lease would convey access and operational rights for
activities on the OCS that support the production of energy, but do not
result in the production of electricity or other energy product for
sale, distribution, or other commercial use. This would include leases
issued for site assessment or to develop and test new alternative
energy technology. Limited leases would be issued for a short term, 5
years. Under the provisions of these regulations limited leases could
be renewed, but they cannot be converted to commercial leases. If the
holder of a limited lease wished to pursue commercial development on
the OCS, it would need to obtain a new commercial lease through the
leasing process, as defined in these regulations.
RUE Grants and ROW Grants
Right-of-use and Easement (RUE) grants would be issued by MMS to
authorize the use of a designated portion of the OCS to support
alternative energy activities on a lease or other approval not issued
under this part, e.g. on a State issued lease.
Right-of-way (ROW) grants would be issued by MMS to allow for the
construction and use of a cable or pipeline for the purpose of
gathering, transmitting, distributing or otherwise transporting
electricity or other energy product generated or produced from
alternative energy not generated on a lease issued under this part. A
ROW grant could be used to transport electricity from a State lease to
shore or from one state to another state through a transmission line
that must cross the Federal OCS. A ROW is not the same as a project
easement issued with an alternative energy lease under this part.
Alternate Use RUEs
MMS would issue an alternative use RUE for the energy- or marine-
related use of an existing OCS facility for activities not otherwise
authorized by this subchapter or other applicable law.
Obtaining Access Rights
The EPAct requires MMS to award leases, ROW grants and RUE grants
competitively, unless we make a determination of no competitive
interest. In conjunction with the competitive leasing process, MMS
would prepare NEPA and other environmental compliance documents. The
MMS would put forth a call for interest, designate the lease or grant
area, and publish in the Federal Register all other notices and calls
relating to the sale. If, after putting forth a call for interest, MMS
determines that there is no competitive interest in that particular OCS
area, MMS may proceed in issuing a lease or grant noncompetitively.
Whether a company acquires a lease or grant competitively or non-
competitively it must comply with all MMS lease stipulations or
conditions in the grant. The steps in the competitive leasing process
are shown in Figure 2.
BILLING CODE 4310-MR-P
[[Page 39385]]
[GRAPHIC] [TIFF OMITTED] TP09JY08.001
BILLING CODE 4310-MR-C
Federal Compliance for the Leasing Process
All activities permitted under this part must comply with all
relevant Federal laws, regulations, and statutes, including, but not
limited to the following:
------------------------------------------------------------------------
Responsible Federal agency/ Statute/Executive Summary of pertinent
agencies Order provisions
------------------------------------------------------------------------
Council on Environmental National Requires Federal
Quality (CEQ). Environmental agencies to prepare
Policy Act of an EIS to evaluate
1969, as amended the potential
(NEPA) (42 environmental
U.S.C. 4321 et impacts of any
seq.). proposed major
Federal action that
would significantly
affect the quality
of the human
environment, and to
consider
alternatives to such
proposed actions.
[[Page 39386]]
U.S. Fish and Wildlife Service Endangered Requires Federal
(USFWS); National Oceanic and Species Act of agencies to consult
Atmospheric Administration 1973, as amended with the USFWS and
(NOAA); National Marine (16 U.S.C. 1531 the NMFS to ensure
Fisheries Service (NMFS). et seq.). that proposed
Federal actions are
not likely to
jeopardize the
continued existence
of any species
listed at the
Federal level as
endangered or
threatened, or
result in the
destruction or
adverse modification
of critical habitat
designated for such
species.
USFWS (walruses; sea and Marine Mammal Prohibits, with
marine otters; polar bears; Protection Act certain exceptions,
manatees and dugongs); NMFS of 1972, as the take of marine
(seals, sea lions, whales, amended (16 mammals in U.S.
dolphins, and porpoises). U.S.C. 1361- waters and by U.S.
1407). citizens on the high
seas, and the
importation of
marine mammals and
marine mammal
products into the
United States.
NMFS.......................... Magnuson-Stevens Requires Federal
Fishery agencies to consult
Conservation and with the NMFS on
Management Act proposed Federal
(also known as actions that may
the Fishery adversely affect
Conservation and Essential Fish
Management Act Habitats that are
of 1976, as necessary for
amended by the spawning, breeding,
Sustainable feeding, or growth
Fisheries Act) to maturity of
(16 U.S.C. 1801 federally managed
et seq.). fisheries.
U.S. Environmental Protection Marine Prohibits, with
Agency (USEPA); U.S. Army Protection, certain exceptions,
Corps of Engineers (USACE); Research, and the dumping or
NOAA. Sanctuaries Act transportation for
of 1972 (MPRSA), dumping of
as amended (33 materials,
U.S.C. 1401 et including, but not
seq.). limited to, dredged
material, solid
waste, garbage,
sewage, sewage
sludge, chemicals,
biological and
laboratory waste,
wrecked or discarded
equipment, rock,
sand, excavation
debris, and other
waste into ocean
waters without a
permit from the
USEPA. In the case
of ocean dumping of
dredged material,
the USACE is given
permitting
authority.
NOAA.......................... National Marine Prohibits the
Sanctuaries Act destruction, loss
(NMSA) (16 of, or injury to,
U.S.C. 1431 et any sanctuary
seq.). resource managed
under the law or
permit and requires
Federal agency
consultation on
Federal agency
actions, internal or
external to national
marine sanctuaries,
that are likely to
destroy, injure, or
cause the loss of
any sanctuary
resource.
USFWS......................... Migratory Bird Requires that Federal
Treaty Act of agencies taking
1918, as amended actions likely to
(16 U.S.C. 703- negatively affect
712); Executive migratory bird
Order 13186, populations enter
``Responsibiliti into Memoranda of
es of Federal Understanding with
Agencies to the USFWS, which,
Protect among other things,
Migratory ensure that
Birds'' (January environmental
10, 2001). reviews mandated by
NEPA evaluate the
effects of agency
actions on migratory
birds, with emphasis
on species of
concern.
NOAA's Office of Ocean and Coastal Zone Specifies that
Coastal Resource Management Management Act coastal States may
(NOAA OCRM). of 1972, as protect coastal
amended (16 resources and manage
U.S.C. 1451 et coastal development.
seq.). A State with a
coastal zone
management program
approved by NOAA
OCRM can deny or
restrict development
off its coast, if
the reasonably
foreseeable effects
of such development
would be
inconsistent with
the State's coastal
zone management
program.
USEPA; MMS.................... Clean Air Act, as Prohibits Federal
amended (CAA) agencies from
(42 U.S.C. 7401 providing financial
et seq.). assistance for, or
issuing a license or
other approval to,
any activity that
does not conform to
an applicable,
approved
implementation plan
for achieving and
maintaining the
National Ambient Air
Quality Standards
(NAAQS).
................. Requires USEPA (or an
authorized State
agency) to issue a
permit before
construction of any
new major stationary
source or major
modification of a
stationary source of
air pollution. The
permit--called a
Prevention of
Significant
Deterioration (PSD)
permit for
stationary sources
located in areas
that comply with
NAAQS and a
Nonattainment Area
Permit in areas that
do not comply with
NAAQS--must control
emissions in the
manner prescribed by
USEPA regulations to
either prevent
significant
deterioration of air
quality (in
attainment areas),
or contribute to
reducing ambient air
pollution in
accordance with an
approved
implementation plan
(in nonattainment
areas).
................. Requires the owner or
operator of a
stationary source
that has more than a
threshold quantity
of a regulated
substance in a
process to submit a
Risk Management Plan
to USEPA.
................. In the western
portion of the Gulf
of Mexico, MMS has
authority pursuant
to the OCS Lands Act
for clean air
regulations.
USEPA; U.S. Coast Guard Clean Water Act Prohibits discharges
(USCG); MMS. (CWA), Section of oil or hazardous
311, as amended substances into or
(33 U.S.C. upon the navigable
1321); Executive waters of the United
Order 12777, States, adjoining
``Implementation shorelines, or into
of Section 311 or upon the waters
of the Federal of the contiguous
Water Pollution zone, or in
Control Act of connection with
October 18, activities under the
1972, as OCS Lands Act, or
Amended, and the which may affect
Oil Pollution natural resources
Act of 1990''. belonging to the
U.S.
[[Page 39387]]
................. Authorizes USEPA and
the USCG to
establish programs
for preventing and
containing
discharges of oil
and hazardous
substances from non-
transportation-
related facilities
and transportation-
related facilities,
respectively.
................. Directs the Secretary
of the Interior
(MMS) to establish
requirements for
preventing and
containing
discharges of oil
and hazardous
substances from
offshore facilities,
including associated
pipelines, other
than deepwater
ports.
USEPA......................... CWA, Sections 402 Requires a National
and 403, as Pollutant Discharge
amended (33 Elimination System
U.S.C. 1342 and (NPDES) permit from
1343). USEPA (or an
authorized State)
before discharging
any pollutant into
territorial waters,
the contiguous zone,
or the ocean from an
industrial point
source, a publicly
owned treatment
works, or a point
source composed
entirely of storm
water.
USACE; USEPA.................. CWA, Section 404, Requires a permit
as amended (33 from the USACE
U.S.C. 1344). before discharging
dredged or fill
material into waters
of the United
States, including
wetlands.
USCG.......................... Ports and Authorizes the USCG
Waterways Safety to implement, in
Act, as amended waters subject to
(33 U.S.C. 1221 the jurisdiction of
et seq.). the U.S., measures
for controlling or
supervising vessel
traffic or for
protecting
navigation and the
marine environment.
Such measures may
include but are not
limited to:
Reporting and
operating
requirements,
surveillance and
communications
systems, routing
systems, and
fairways.
USACE......................... Rivers and Section 10 (33 U.S.C.
Harbors 403) delegates to
Appropriation the USACE the
Act of 1899 (33 authority to review
U.S.C. 401 et and regulate certain
seq.). structures and work
that are located in
or that affect
navigable waters of
the U.S. The OCS
Lands Act extends
the jurisdiction of
the USACE, under
Section 10 to the
seaward limit of
Federal
jurisdiction.
USEPA......................... Resource Requires waste
Conservation and generators to
Recovery Act, as determine whether
amended by the they generate
Hazardous and hazardous waste, and
Solid Waste if so, to determine
Amendments of how much hazardous
1984 (RCRA) (42 waste they generate
U.S.C. 6901 et and notify the
seq.). responsible
regulatory agency.
................. Requires hazardous
waste treatment,
storage, and
disposal facilities
(TSDFs) to
demonstrate in their
permit applications
that design and
operating standards
established by the
USEPA (or an
authorized State)
will be met.
................. Requires hazardous
waste TSDFs to
obtain permits.
National Park Service (NPS); National Historic Requires each Federal
Advisory Council on Historic Preservation Act agency to consult
Preservation; State or Tribal of 1966, as with the Advisory
Historic Preservation Officer. amended (16 Council on Historic
U.S.C. 470- Preservation and the
470t); State or Tribal
Archaeological Historic
and Historical Preservation Officer
Preservation Act before allowing a
of 1974 (16 federally licensed
U.S.C. 469-469c- activity to proceed
2). in an area where
cultural or historic
resources might be
located; authorizes
Interior Secretary
to undertake salvage
of archaeological
data that may be
lost due to a
Federal project.
NPS; Advisory Council on American Indian Requires Federal
Historic Preservation; State Religious agencies to
or. Freedom Act of facilitate Native
1978 (42 U.S.C. American access to
1996); Executive and ceremonial use
Order 13007, of sacred sites on
``Indian Sacred Federal lands, to
Sites''(May 24, promote greater
1996). protection for the
physical integrity
of such sites, and
to maintain the
confidentiality of
such sites, where
appropriate.
Federal Aviation Federal Aviation Requires that, when
Administration (FAA). Act of 1958 (49 construction,
U.S.C. 44718); alteration,
14 CFR 77. establishment, or
expansion of a
structure is
proposed, adequate
public notice be
given to the FAA as
necessary to promote
safety in air
commerce and the
efficient use and
preservation of the
navigable airspace.
------------------------------------------------------------------------
National Environmental Policy Act Compliance
The NEPA process helps public officials make decisions based on an
understanding of environmental consequences and take actions that
protect, restore, and enhance the environment. It provides the tools to
carry out these goals by mandating that every Federal agency prepare an
in-depth study of the impacts of ``major federal actions significantly
affecting the quality of the human environment'' and alternatives to
those actions, and requiring that each agency make that information an
integral part of its decisions. NEPA also requires that agencies make a
diligent effort to involve the interested and affected public before
they make decisions affecting the environment.
The MMS is the lead Federal agency for NEPA compliance for
alternative energy and alternate use activities on the OCS. Some of the
information MMS requests under this part is in support of other Federal
agencies information requirements associated with compliance with the
laws and regulations that they enforce.
Coastal Zone Management Act (CZMA) Compliance
Each coastal state has a Federally-approved coastal management plan
(CMP). In compliance with CZMA mandates found at section 307(c)(1),
when the MMS conducts a competitive lease sale for leases or grants
under this part, MMS will determine if the sale activity is reasonably
likely to affect any land or water use of natural resource of a State's
coastal zone. If such effects are reasonably foreseeable, the MMS must
submit a consistency determination to the affected State(s) at least 90
days before the lease sale. This CD will include a detailed description
of the
[[Page 39388]]
proposed activity, its expected coastal effects, and an evaluation of
how the proposed activity is consistent with applicable enforceable
policies in the State's CMP. If the affected State(s) agree with MMS'
determination, MMS may proceed with the competitive sale. If the
affected State(s) disagree, MMS will follow the procedures as outlined
in 15 CFR part 930, subpart C.
In the CMP, the States list Federal licenses and permits which are
reasonably likely to affect coastal uses or resources and require a
Federal consistency review. Listed activities must be conducted in a
manner that is consistent with the enforceable policies of the State's
CMP and the applicant must submit a Federal consistency certification
to the State and approving Federal agency. Also, the State may ask the
Ocean and Coastal Resource Management office within the National
Oceanic and Atmospheric Administration (NOAA) for permission to review,
for consistency, activities that are not listed in its CMP. If NOAA
approves the request, the applicant is required to submit a consistency
certification for the unlisted Federal license/permit. In compliance
with CZMA mandates, the MMS would not issue noncompetitive leases or
approve noncompetitive grants or plans under this part, if: (1)
Consistency has not been conclusively presumed, or (2) the State
objects to the applicant's consistency certification and the Secretary
of Commerce has not found that the permitted activities are consistent
with the objectives of the CZMA or are otherwise necessary in the
interest of national security. Table 1 summarizes the NEPA and CZMA
compliance requirements for leases and grants.
Table 1
----------------------------------------------------------------------------------------------------------------
Lease or grant
Activity MMS process NEPA documentation conditions CZMA
----------------------------------------------------------------------------------------------------------------
Leases
----------------------------------------------------------------------------------------------------------------
Competitive lease sale.......... Conduct Covers lease sale Stipulations, A Federal agency
competitive lease area. mitigation, and activity and must
sale and issue conditions comply with 15
leases. established in CFR part 930
lease contract. subpart C
Non-competitive lease........... Negotiate Covers identified Stipulations, Non-Federal
noncompetitive noncompetitive conditions, activity that
lease and issue lease area and mitigation, and requires a
decision on the proposed monitoring Federal license
Site Assessment activities in the established in or permit and
Plan or General Site Assessment lease and Site must comply with
Activities Plan. Plan or General Assessment Plan 15 CFR part 930,
Activities Plan. or General subpart D
Activities Plan.
----------------------------------------------------------------------------------------------------------------
Grants
----------------------------------------------------------------------------------------------------------------
Competitive ROW grants and RUE Conduct Covers ROW grant Stipulations and A Federal agency
grants. competitive ROW and RUE grant- conditions activity and must
grant or RUE specific sale established in comply with 15
grant sale and area. grant award. CFR part 930
issue grants. subpart C
Non-competitive ROW grants and Negotiate Covers identified Stipulations, Non-Federal
RUE grants. noncompetitive noncompetitive conditions, activity that
ROW grants or RUE grant site and mitigation, and requires a
grants and proposed monitoring Federal license
evaluate General activities in the established in or permit and
Activities Plan. General grant award and must comply with
Activities Plan. General 15 CFR part 930,
Activities Plan. subpart D
----------------------------------------------------------------------------------------------------------------
Development Process
Developing Leases and Grants
Once a company acquires a lease, ROW grant, or RUE grant, it must
submit certain plans to MMS for development of the lease or grant. The
various plans serve as a blueprint for site development, construction,
operations, and decommissioning. The MMS has specific requirements for
each phase of your lease, grant, and plan. The MMS will not allow
development without proper plan submission and approval. Site
assessment activities on a commercial lease would require the applicant
to submit a Site Assessment Plan (SAP) and receive MMS approval of that
plan before beginning those activities. The SAP would undergo the
appropriate NEPA reviews and may require either an Environmental Impact
Statement (EIS) or an Environmental Assessment (EA). The SAP must
demonstrate how you will conduct the proposed activities to comply with
relevant Federal statutes such as the Coastal Zone Management Act
(CZMA), Endangered Species Act (ESA), Marine Mammal Protection Act
(MMPA), and Clean Water Act (CWA).
For a commercial lease, after you perform site assessment
activities, you would be required to submit and receive MMS approval of
a Construction and Operations Plan (COP) before you may begin any
development and production activities on your lease. Like the SAP, the
COP would undergo the appropriate NEPA reviews and may require either
an EIS or an EA. Like the SAP, the COP must also comply with relevant
Federal statutes.
For limited leases, ROW grants, and RUE grants, you would be
required to submit a General Activities Plan (GAP), which covers all
activities on the lease or the grant including site assessment,
development, operations, and decommissioning. Like the SAP and COP, the
GAP would undergo the appropriate NEPA reviews and must comply with
relevant Federal Statutes.
Revenue Sharing
The new subsection 8(p)(2)(B) of the OCS Lands Act (43 U.S.C.
1337(p)(2)(B)) requires payment to certain coastal States of 27 percent
of the revenues received by the Federal Government from any projects
under this section that are located wholly or partially within the area
extending 3 nautical miles seaward of State submerged lands. (For ease
of description, this 3-mile-wide area adjoining State submerged lands
will be referred to in this preamble as the ``8(g) zone,'' a term
widely used to refer to the identical 3-mile area described in section
8(g) of the OCS Lands Act. (43 U.S.C. 1337(g)) In addition, when a
project extends into
[[Page 39389]]
the 8(g) zone of at least one State, subsection extends eligibility for
a share of the revenues to any other State with a coastline that is
located within 15 miles of the geographic center of the project. The
Secretary is required to establish a formula by rulemaking that
provides for the equitable distribution of payments to eligible States
based on the proximity of each State's coastline to the geographic
center of the project.
Operations
The regulations that address operations cover environmental
management, safety management, inspections, facility assessments, and
decommissioning. The regulations on operations are designed to prevent
or minimize the likelihood of harm or damage to the marine and coastal
environments. The structure of the regulations is based on adaptive
management. The operator would be required to monitor activities and
demonstrate that its performance satisfies specified standards in its
approved plans. In addition, the operator would be required to comply
with regulations regarding air quality, safety, maintenance and
shutdowns, equipment failure, adverse environmental affects,
inspections, facility assessments, and incident reporting.
Alternate Use of Existing Facilities
These regulations establish general requirements for how MMS will
consider proposals for activities that involve the alternate use of
existing OCS facilities. This includes general provisions that explain
how MMS will approve and regulate such alternate use activities on the
OCS. We are proposing to authorize such activities through the issuance
of an Alternate Use RUE.
These regulations explain how applicants can request an Alternate
Use RUE; how MMS will decide whether to issue Alternate Use RUEs; how
Alternate Use RUEs will be competitively issued (if MMS determines that
competitive interest exists); the terms of such authorizations;
required payments to MMS; necessary financial assurance; other
administrative issues such as assignment, suspension, and termination;
and decommissioning of approved alternate use structures.
In addition to the proposed provisions in subpart J, MMS has
proposed associated revisions to MMS's existing oil and gas
decommissioning regulations found in 30 CFR part 250, subpart Q, that
clarify the oil and gas platform owner's obligations for
decommissioning, in the event MMS approves alternate uses of the
platform.
Subpart-by-Subpart Discussion
Part 285--Alternative Energy and Alternate Uses of Existing Facilities
on the Outer Continental Shelf
Subpart A--General Provisions
Subpart B--Issuance of OCS Alternative Energy Leases
Subpart C--Rights-of-Way Grants and Rights-of-Use and Easement
Grants for Alternative Energy Activities
Subpart D--Lease and Grant Administration
Subpart E--Payments and Financial Assurance Requirements
Subpart F--Plans and Information Requirements
Subpart G--Facility Design, Fabrication, and Installation
Subpart H--Environmental and Safety Management, Inspections, and
Facility Assessments
Subpart I--Decommissioning
Subpart J--Rights of Use and Easement for Energy and Marine-Related
Activities Using Existing OCS Facilities
Subpart A--General Provisions
Overview
Subpart A establishes MMS's authority and the purpose for the
regulations. It also addresses the general requirements that apply to
all activities regulated under this part, for example, the
qualifications for holding leases, ROW grants and RUE grants on the OCS
and the appeals process. The definitions for these regulations are also
in subpart A.
Other Options and Approaches
Most of the subjects addressed in subpart A are included to provide
general information on these regulations to the applicants and
operators. Some items are governed by other authorities, such as
information collection requirements that are established by the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). These are not
issues that have a direct impact on the development of alternative
energy resources or on alternate use of the OCS.
Selected Approaches
The EPAct requires MMS to ensure that the activities permitted
under these regulations are carried out in a manner that provides for
safety, protection of the environment, oversight, and enforcement (43
U.S.C. 1333(p)(4)). This subpart lays the foundation for these
responsibilities. The responsibilities of the lessee, applicant,
operator, or holder of a ROW grant, RUE grant, or Alternate Use RUE
grant were based on ensuring that projects under these regulations are
designed and conducted in a safe and environmentally sound manner.
Departures from operating requirements were selected as a way of
allowing MMS to maintain flexibility within the program and to be able
to adapt to this new and changing industry. Requirements and
qualifications for lessees and grant holders are based on section 8 of
the OCS Lands Act. Appeal rights are based on those established for
offshore oil and gas operations.
This subpart provides for participation of State and local
governments in task forces or other joint planning agreements with MMS.
The joint planning provision is modeled after section 281.13 of this
subchapter, which pertains to task forces for considering leasing of
minerals in the OCS other than oil, gas, and sulphur. We envision that
such task forces could be useful and applicable to any phase of the OCS
alternative energy program, from preliminary studies and lease sale
formulation through site assessment and construction to
decommissioning. We may invite any affected State Governor or local
government executive to join in establishing a task force or other
joint planning or coordination agreement if we are considering offering
or issuing leases (or grants) under this part. Participation in a task
force will give the parties opportunities to contribute to the planning
process and access to nonproprietary information. The task force or
other such arrangements will be constituted and conducted as agreed to
by the participants consistent with Federal law and these regulations.
The task forces may make recommendations and may be requested to
conduct or oversee research, studies, or reports.
Comments
The MMS seeks comment on all items in subpart A. In general we wish
to know if this subpart is informative, makes it easy to locate needed
information, is easy to read and follow, and includes the appropriate
topics.
Section by Section Discussion of Subpart A
Section 285.100 Authority
This section establishes MMS's authority to issue regulations and
oversee access and development on the OCS for alternative energy and
alternate use of existing facilities. The MMS includes the authority
statement to inform the affected public and other interested parties of
the basis for establishing these regulations. MMS's authority for these
regulations comes from amendments to Subsection 8 of the Outer
Continental Shelf Lands Act (OCS Lands Act) (43 U.S.C. 1337), as set
forth
[[Page 39390]]
in Section 388(a) of the Energy Policy Act of 2005 (Pub. Law 109-58).
Section 285.101 What is the purpose of this part?
This section describes MMS's objectives for this rule. Our
objectives include: (1) Establishing procedures for issuance of leases,
ROW grants, and RUE grants and administration of operations for
activities permitted under this part; (2) informing applicants and
third parties of their obligations under this part; and (3) ensuring
that these activities are conducted in a safe and environmentally sound
manner, in conformance with applicable laws and regulations, and the
terms of the lease or grant. However, this part does not convey access
rights for oil, gas, or other minerals.
Section 285.102 What are MMS's responsibilities under this part?
This section describes MMS's responsibilities, which are derived
from Subsection 8(p)(4) of the OCS Lands Act, as amended by EPAct.
These responsibilities include ensuring activities are carried out in a
manner that provides for:
Safety;
Protection of the environment;
Prevention of waste;
Conservation of the natural resources of the OCS;
Coordination with relevant Federal agencies;
Protection of national security interests of the United
States;
Protection of the rights of other authorized users of the
OCS;
A fair return to the United States;
Prevention of interference with reasonable uses (as
determined by the Secretary or Director) of the exclusive economic
zone, the high seas, and the territorial seas;
Consideration of the location of and any schedule relating
to a lease or grant under this part for an area of the OCS, and any
other use of the sea or seabed;
Public notice and comment on any proposal submitted for a
lease or grant under this part; and
Oversight, inspection, research, monitoring, and
enforcement of activities authorized by a lease or grant under this
part.
To enforce these responsibilities, MMS will require compliance with
all applicable laws, regulations, other requirements, the terms of your
lease or grant under this part, and approved plans. The MMS will also
establish practices and procedures to govern the collection of all
payments due to the Federal Government, including any cost recovery
fees, rentals, operating fees, and other fees or payments. The MMS will
coordinate and consult with the Governor of any affected State and
executive of any affected local government. As part of coordination and
consultation with State and local governments, MMS may invite any
affected State Governor and affected local government executive to join
a task force or other joint planning or coordination agreement.
Section 285.103 When may MMS prescribe or approve departures from the
regulations governing operations?
This section establishes times when MMS may approve departures from
the requirements established in the regulations. The MMS will consider
a departure when it is needed to:
Facilitate the proper development of a lease or grant
under this part;
Conserve natural resources;
Protect life (including human and wildlife), property, or
the marine, coastal, or human environment; or
Protect sites, structures, or objects of historical or
archaeological significance.
A departure must be consistent with Subsection 8(p) of the Outer
Continental Shelf Lands Act and must protect the environment and safety
to the same degree as if there was no approved departure from the
regulations.
Section 285.104 Do I need an MMS lease or other authorization to
produce or support the production of electricity or other energy
product from an alternative energy resource on the OCS?
This section explains that except as otherwise authorized by law,
it is unlawful for any person to construct, operate, or maintain any
facility to produce, transport or support generation of electricity or
other energy product derived from alternative energy resource on any
part of the Outer Continental Shelf except under and in accordance with
the terms of a lease, easement or right-of-way issued pursuant to the
OCS Lands Act.
Section 285.105 What are my responsibilities under this part?
This section describes the general responsibilities of a lessee,
applicant, operator, or holder of a ROW grant, RUE grant, or Alternate
Use RUE grant under these regulations. These responsibilities include:
Designing projects and conducting operations in a safe
manner and to minimize adverse effects to the coastal and marine
environments, including their physical, atmospheric, and biological
components to the extent practicable;
Submitting requests, applications, plans, notices,
modifications, and supplemental information as required by this part;
following up any oral request or notification in writing within 3
business days;
Complying with the terms and conditions of the
applications, plans, notices, and modifications; making payments on
time;
Complying with the Department of the Interior's non-
procurement debarment regulations; and including the requirement to
comply with 43 CFR part 42 in all contracts and transactions related to
a lease or grant under this part; and
Responding to requests from the Director in a timely
manner.
Section 285.106 Who can hold a lease or grant under this part?
This section details the qualifications of a lessee or grant
holder. To qualify for a lease or grant you must be either a citizen or
a national of the United States; an alien lawfully admitted for
permanent residence in the United States; a private, public, or
municipal corporation organized under the laws of the United States any
of its States or territories, or the District of Columbia; or an
association of any of the parties described previously. In addition,
you may be excluded from becoming a lessee or grant holder if you are
excluded or disqualified from participating in transactions covered by
the Federal non-procurement debarment and suspension system, you have
failed to meet or exercise due diligence under any OCS lease or grant,
or you remained in violation of the terms and conditions of any lease
or grant issued under the OCS Lands Act for a period extending longer
than 30-calendar days after MMS directed you to comply.
Section 285.107 How do I show that I am qualified to be a lessee or
grant holder?
This section describes the evidence you must submit to MMS to
establish qualification to hold a lease, ROW grant, or RUE grant. For
an individual, this evidence includes documents that demonstrate
citizenship or lawful admittance of permanent residence. For an
association, the acceptable evidence includes a certified statement
indicating the State in which it is registered and that it is
authorized to hold leases and grants on the OCS, or appropriate
reference to statements or records previously submitted to an MMS OCS
office. Corporations must submit a statement certified by the corporate
Secretary or Assistant Secretary over the corporate seal showing the
State in
[[Page 39391]]
which it was incorporated, and that it is authorized to hold leases and
grants on the OCS, or appropriate reference to statements or records
previously submitted to an MMS OCS office (including material submitted
in compliance with prior regulations), and evidence of the authority of
persons signing to bind the corporation.
Section 285.108 When must I notify MMS if an action has been filed
alleging that I am insolvent or bankrupt?
If any action is filed alleging that a company, operating under
these regulations, is insolvent or bankrupt, the company must notify
MMS within 3 days of learning of the action.
Section 285.109 When must I notify MMS of mergers, name changes, or
changes of business form?
This section requires you to notify MMS of any merger, name change,
or change of business form. This must be done no later than 120-
calendar days after either the effective date or the date of filing the
change or action with the Secretary of the State in the State of
registry.
Section 285.110 Where do I submit plans, applications, or notifications
required by this part?
You must send all plans, application, or notifications to MMS at
the address provided in this section.
Section 285.111 When and how does MMS charge me processing fees on a
case-by-case basis?
This section provides that MMS may charge processing fees for
applications or requests filed under this part, on a case-by-case
basis. The MMS may charge processing fees if the preparation of a
document or study is necessary for MMS to evaluate or process an
application or request. For example, MMS may charge processing fees for
the preparation of a project-specific Environmental Impact Statement.
In cases where MMS may charge a case-by-case processing fee, we
will provide the applicant with a written estimate of the proposed fee
for reasonable processing costs. The applicant may comment on the
proposed fee or request approval to directly pay a contractor for the
document, study, or other activity. We will re-estimate our reasonable
processing costs following the procedure established in this section.
Section 285.112 Definitions.
This section provides definitions of terms used throughout the 30
CFR part 285 regulations. Some of the definitions used in this part are
definitions that were established in legislation or previously in
regulations (i.e., 30 CFR part 250). The definition for archaeological
resource is almost identical to the definition used by MMS for oil and
gas operations, in the 30 CFR part 250 regulations. This definition
mirrors that in the Archaeological Resource Protection Act, and was
instituted in response to comments from the Advisory Council on
Historic Preservation and the Departmental Consulting Archaeologist on
our original rule on archaeology. It is consistent with the definitions
in other Federal laws and regulations.
Proposed Sec. 285.112 would add definitions for the revenue
sharing program. The proposed definitions are for coastline, miles,
distance, income, project (for the purpose of revenue sharing), project
area, qualified project, qualified project area, geographic center of a
project, eligible State, and revenues.
The term coastline would have the same meaning given to the term
``coast line'' in section 2 of the Submerged Lands Act, 43 U.S.C.
1301(c). Added subsection 8(p)(2) of the OCS Lands Act refers to
coastal States that have a coastline ``within 15 miles of the
geographic center of the project.'' In this context, and wherever not
otherwise specified, miles would mean nautical miles. The term distance
would mean the minimum great circle distance.
Income, unless clearly specified to the contrary, would refer to
the money received by the project owner or holder of the lease,
easement, or other equivalent agreement (e.g., rights-of-way). As such,
use of the term income would not imply that project receipts exceeded
project expenses (profitability) but rather would serve to distinguish
money received by the project owner from money received by the Federal
Government (referred to as revenues, defined below).
The term project, for the purposes of revenue sharing, would mean
the activities necessary to develop, produce, and transmit energy--or
to create some other product or service authorized under 30 CFR part
285--in, or from, the OCS within a specific geographic area; the
facilities used to develop and produce that energy or create some other
product or service; or both. (As necessary, a different definition of
``project'' may be used for other purposes, such as complying with the
provisions of the National Environmental Policy Act.) The term project
also could be used to refer to the project area.
While the language of the EPAct refers only to a project, for the
purposes of clarity in this regulation, use of the term project area
would allow specific reference to the geographic area for which project
rights have been granted via a lease, group of leases, or equivalent
agreement.
If a project area is located wholly or partially within the 8(g)
zone, and the project is subject to 30 CFR part 285, the project for
which that area has been granted would be a qualified project for the
purposes of subsection 8(p)(2)(B). A qualified project area would be
the MMS-determined project area for a qualified project. A project
easement issued under this part would not be considered part of the
qualified project's area, primarily because to do so would make all OCS
alternative energy projects qualified projects, no matter how far the
actual alternative energy activity is located offshore. Project
easements on the OCS would typically serve to bring power to onshore
distribution grids, so they must pass through areas within 3 miles of
State submerged lands. A secondary reason is that including project
easements in the qualified project's area would both complicate and
distort calculation of the geometric center of the project's area.
However, we propose to allow any fees paid for project easement acreage
to constitute part of the revenues from the qualified project.
The geographic center of a project would be the ``centroid'' of the
project area; i.e., the balancing point of the acreage of a regularly
shaped project area if plotted in two-dimensional space. For example,
in the simple case of a project area comprising a 9-square-mile lease
block, 3 miles on each side, the centroid would be the middle point
inside that square: 1\1/2\ miles inward from the midpoint of each side
and equidistant from each corner of the square. For irregularly shaped
project areas including those that might involve non-contiguous
geometric shapes, MMS would determine the geographic center of such
projects as the ``geometric center'' calculated by the Geographical
Information System software, in conjunction with the methodology and
standard mapping data, employed by MMS for identifying OCS boundaries
and locations for other purposes.
An eligible State would be a coastal State that has submerged lands
within 3 miles of any part of a qualified project area, a coastline
within 15 miles of the geographical center of a qualified project, or
both.
Revenues, for the purpose of revenue sharing on projects covered by
the new subsection 8(p)(2)(B) in the OCS Lands Act, are defined to
include bonuses, rents, license fees, operating fees, other
[[Page 39392]]
fees, and any similar payments paid in connection with a qualified
project or qualified project area. These revenues include receipts
collected by the Federal Government from the entire project area, not
just from the portion of the project or project area extending into the
8(g) zone. Administrative fees, such as those for cost recovery, are
not included under this definition of revenues and would not be subject
to the 27-percent share.
Section 285.113 How will data and information obtained by MMS under
this part be disclosed to the public?
This section describes how MMS will handle data and information
submitted to the MMS, including public disclosure and nondisclosure.
The MMS will follow the applicable requirements of the Freedom of
Information Act (5 U.S.C.) and protect data and information to the
extent allowed by law.
Section 285.114 Paperwork Reduction Act Statements--Information
Collection
These provisions cover Paperwork Reduction Act statements and
information collection requirements pertaining to this part.
Section 285.115 Documents Incorporated by Reference
This section is a listing of the industry standard documents MMS is
proposing to incorporate by reference into the 30 CFR part 285
regulations.
Section 285.116 Requests for Information on the State of the Offshore
Alternative Energy Industry
This section would allow the Director to request information from
industry and other relevant stakeholders (including state and local
agencies) as necessary to evaluate the state of the offshore
alternative energy industry, including the identification of potential
challenges or obstacles to its continued development and require the
applicant, lessee, or grant holder to respond to a request in a timely
manner. These requests could relate to the identification of
environmental, technical, or economic matters that promote or detract
from continued development of alternative energy technologies on the
OCS. The MMS would use the information received to evaluate potential
refinements to the OCS Alternative Energy Program that promote
development of the industry in a safe and environmentally responsible
manner, and that ensures fair value for use of the Nation's OCS. The
MMS would publish these requests for information in the Federal
Register.
Section 285.117 [Reserved]
Section 285.118 What are my appeal rights?
This section describes when a decision made by MMS under this part
may be appealed and who may appeal. Most decisions made under this part
may be appealed according to the regulations found in 30 CFR part 290,
subpart A. An unsuccessful bidder may apply for reconsideration by the
Director of MMS (Director).
Subpart B--Issuance of OCS Alternative Energy Leases
A. Overview for Subpart B
This subpart proposes a process for issuing alternative energy
leases, both for commercial production activities and for assessment or
technology testing activities. That process will be competitive, unless
there is a determination of noncompetitive interest. In addition, this
subpart describes how we will determine when to use a competitive
process for issuing an alternative energy lease and identifies auction
formats and bidding systems and variables that we may use when that
determination is affirmative. Finally, this subpart discusses the terms
under which we will issue alternative energy leases. To establish a
framework, we begin with a discussion of various types of leases that a
prospective alternative energy developer may consider.
Types of Leases. Leases would be required for any type of
alternative energy activity on the OCS. We propose to issue two types:
(1) commercial leases; and (2) limited leases. Although we also are
proposing to convey access to areas of the OCS to the Department of
Energy for research under some form of negotiated lease agreement as
provided in Sec. 285.238, this discussion of types of leases focuses
on the commercial or limited leases that we would issue directly to
lessees on a competitive or noncompetitive basis.
A commercial lease would provide the access and operational rights,
subject to necessary approvals, to produce, sell, and deliver power on
a commercial scale, through spot market transactions or a long-term
power purchase agreement. A commercial lease would be issued over the
long term (i.e., up to approximately 30 years, with possible renewals)
and convey preferential rights to project easements on the OCS for the
purpose of installing transmission and distribution systems.
A limited lease would provide the access rights necessary to
conduct activities such as site assessment and technology testing that
support production of alternative energy but do not themselves result
in the commercial sale, use or distribution of electricity or other
produced power. A limited lease would be issued for a shorter term
(i.e., up to 5 years, with possible renewals), and would not convey any
preferential rights to obtain a commercial lease to develop the leased
area.
We anticipate that offshore alternative energy companies will
prefer to acquire commercial leases rather than limited leases.
However, we believe that providing for the issuance of limited leases
will give all companies, including smaller entities, an opportunity to
pursue alternative energy activities without the commitments and
expenses entailed by a long-term commercial lease. For example, it is
likely that a limited lease would entail less expense for bidding and
lease acquisition, because the rights to assess a site or test
technology would have less value than full commercial development
rights. Also, there likely would be less effort and cost needed in
overall project formulation, planning, and authorizations, as NEPA and
CZMA reviews and associated coordination and consultation would focus
on smaller-scale and shorter-term activities than would be needed for a
commercial lease.
With a limited lease, we expect that a company could acquire a
lease relatively inexpensively and test an energy generating device or
collect data and information for resource assessment for up to five
years. At the end of the limited lease term, if the technology proves
successful or the data is promising, the company could apply for a
commercial lease encompassing the site or apply for multiple leases in
various OCS locations where it wishes to pursue commercial production
with its now proven technology. The limited lease in this case would
have the effect of promoting collection of resource information or the
development of new technology that could be commercially applied in the
future.
A limited lease would not offer any preferential right or option to
future commercial development of the lease site. The competition
requirements of subsection 8(p) of the OCS Lands Act would apply if the
lessee of a limited lease subsequently requests a commercial lease. We
expect that, if pursued, the majority of limited leases would be issued
noncompetitively to small businesses in areas of the OCS that are not
otherwise in demand for commercial alternative energy activity.
The most important factor for an applicant to consider in deciding
[[Page 39393]]
whether to pursue a commercial lease or a limited lease is the right to
commercial development of the leased site. Such right is included only
in a commercial lease. Thus, if an alternative energy project applicant
is interested in demonstrating a particular alternative energy
technology but is unsure that it will ultimately lead to commercial
production, we encourage that applicant to pursue a commercial lease
because it reserves the right to commercially develop the OCS site.
Pursuing a commercial lease would not obligate the lessee to remain on
a lease for the full term of the lease. As provided in subpart D, if
the lessee no longer intends to commercially develop the OCS a
commercial lease may be relinquished by the lessee.
Alternatively, if a company obtained a limited lease to initiate
technology testing activities and subsequently determined that full-
scale commercial development of the OCS area is possible, that lessee
of a limited lease would have no right to develop that site without
applying for a commercial lease, which is subject to potential
competition following public notice. For these reasons, we anticipate
that most project applicants will pursue commercial leases to ensure
that all necessary rights for future development are reserved should
initial testing activities show that a commercial project could be
viable.
In developing the proposed rule, we incorporated requirements of
the EPAct, considered public comment received in response to the ANPR
(70 FR 77345) published in the Federal Register on December 30, 2005,
and reviewed other existing models for the conveyance of rights for
energy and mineral development in the United States and abroad. One
model we considered is a two-stage lease that would authorize short-
term resource assessment and technology testing in the first phase and
then be converted to authorize long-term commercial production
activities in the second phase. We believe that such an approach would
entail the same level of consultation and review that would be involved
in the issuance of the single commercial lease we are proposing to
authorize these activities. Also, a lessee may accomplish the same
activities under a single commercial lease as under a two-stage lease.
In either instance, the lessee would be able to do resource assessment
and technology testing and then decide whether to continue the lease in
effect for commercial production. Therefore, we do not see the benefit
of offering two-stage leases in lieu of a single commercial lease as
proposed.
The types of leases proposed and the activities authorized are
intended to provide both for long-term, large scale commercial
production of alternative energy and for shorter-term, smaller scale
activities in support of alternative energy production, such as site
assessment and technology testing activities. We invite comments on the
proposed types of leases described above and the specific requirements
for leases described in the section-by-section analysis below.
Issuing Leases. It is the goal of MMS to issue alternative energy
leases through a simple and straightforward process and in a fair and
equitable manner. The EPAct requirements mean that both a competitive
and noncompetitive system will be employed.
We anticipate that initial leasing of alternative energy sites on
the OCS may be driven by unsolicited applications, rather than an MMS-
initiated request for interest in an area. A formal request for
interest would be part of the process for confirming that there is no
competitive interest in the area identified in the unsolicited
application. The proposed process for noncompetitive issuance of OCS
alternative energy leases is based on the requirements of EPAct and is
patterned after the existing MMS process for issuing noncompetitive
negotiated agreements for the conveyance of OCS sand and gravel. We
invite comments on the proposed process, including the proposed
acquisition fee and case-by-case procedures by which applicants would
pay for associated NEPA analysis. We also seek comment on the process
we would use to obtain public input on unsolicited applications and the
considerations for determining whether competitive interest exists.
Any leasing process for OCS alternative energy activity, whether
competitive or noncompetitive, would include full analysis as required
by NEPA and other applicable laws. Table 1, which is presented in the
discussion titled ``Overview of the process'' under the Compliance
discussion, describes the NEPA requirements for steps in the OCS
alternative energy process, including the lease issuance step.
The proposed competitive sale process for alternative energy leases
is similar to long-standing Federal and State processes for conveying
mineral rights. This process would have multiple steps, beginning with
a Call for Information and Nominations (Call) that would solicit
information from potential bidders as well as other interested and
affected parties concerning areas to be considered for leasing. The
Call serves several functions by informing the public of the proposed
lease sale, inviting comments from all interested and affected
parties--including Federal, State, and local government agencies and
interest groups--to identify their issues and concerns about the sale,
and requesting potential lessees to describe their bidding interest in
certain areas. After considering input received in response to the
Call, the next step would be Area Identification, in which MMS would
identify the area to be considered for leasing and analyzed under NEPA.
Following the NEPA analysis, MMS would issue a Proposed Sale Notice for
public comment. Next, the MMS would publish a Final Sale Notice
describing the lease sale, including the auction process we will use to
award leases on a competitive basis. Participation in a competitive
sale would not be limited to those entities that commented or expressed
interest in the area unless the sale notice specifies otherwise. We
invite comments on all aspects of the proposed sale process, including
the proposed criteria for determining competition, proceeding with
competitive auctions, and awarding leases.
We want to encourage competition for OCS leases from entities that
will diligently develop alternative energy resources and avoid
situations where leases are acquired for strategic or purely
speculative purposes. Diligence requirements under subparts E and F of
this part would require lessees to make payments and meet lease
development requirements that ensure efficient and expeditious
activities on the lease. Also, subpart D of the proposed rule would
allow leases to be sold and assigned to other companies under certain
conditions.
A competitive lease sale for alternative energy activities could be
held for one type of activity (e.g., wind) or for various activities
(e.g., wind, wave, current, etc). We would determine the scope of
competing alternative energy activities based on responses to initial
public notices (Request for Information, Call for Information and
Nominations, or other Federal notices), issued during the leasing
process and we would clearly state that scope (e.g. wind, wave,
current, etc.) early in that process and the subsequent Proposed and
Final Sale Notices. If we decided to limit competition to one type of
activity (e.g., current), then we would not consider bids for any other
type of activity and the lease that is issued would be limited to that
activity. If we decided to open competition to more than one type of
activity (e.g., wind, wave, current, etc.),
[[Page 39394]]
then we would consider all bids for one or more of those activities and
the lease instrument may authorize one or more of those activities.
We would like to know if the proposed leasing system and lease
development requirements are appropriate to foster efficient
development of OCS alternative energy resources, or whether there are
other conditions or requirements that we should consider to prevent
speculative bidding, holding and resale of the lease rights.
Lease Terms. Provisions relating to the duration of leases are set
forth in several sections of this subpart B as well as in subpart D.
Sections 285.235 and 285.236 set finite terms for both commercial and
limited leases while providing for automatic extensions only if
necessary for MMS review and approval of necessary plans. Depending on
the type of lease (commercial or limited) and the acquisition process
(competitive or noncompetitive), a lease could have up to three
distinct terms: A 6-month preliminary term, a 5-year site assessment
term, and a 25-year operations term. Sections 285.415-421 discuss
suspensions that extend the term of a lease, and Sec. Sec. 285.425
through 427 address lease renewal.
In establishing these lease terms and related provisions for OCS
alternative energy leases we considered numerous suggestions. Two of
the most prominent proposals were (1) provide for open-ended lease
terms based on the oil and gas lease model (i.e., continuation of
leases by drilling or producing) and (2) provide for automatic
extensions and renewals of lease terms. We believe that both of these
proposals could perpetuate inefficient or obsolete operations on a
lease. We prefer to retain discretion relating to lease terms in order
to promote diligent development and ensure use of the most effective
and most efficient operating procedures and technologies. For
commercial leases, the proposed 25-year operations term coincides with
the anticipated term that a lessee and utility would establish in a
power purchase agreement. It is possible that technology could improve
substantially over such a 25-year term, and we want the ability to
ensure that operations on leases keep in step with such technological
improvements. The proposed lease term provisions are designed to be
flexible enough to allow for operations over the entire design life of
facility equipment but also allow for lease relinquishment,
contraction, or termination if the seller is unable to market
production.
We believe that the proposed lease terms and related provisions
would allow necessary flexibility while promoting diligence, thereby
allowing OCS alternative energy activities to operate efficiently. We
invite comments on whether the length and structure of these terms
would inhibit legitimate efforts to develop alternative energy projects
on the OCS and whether there would be better alternatives.
Section by Section Discussion for Subpart B
The discussion in part A of this section of the preamble summarized
principal concepts in the proposed procedures for conveying rights to
develop alternative energy resources on the OCS. This section-by-
section analysis will describe and provide more details on each of the
proposed provisions and discuss the rationale for proposing that
provision.
General Lease Information
Section 285.200 What rights are granted with a lease issued under this
part?
We may issue OCS leases for any alternative energy source.
Paragraph (a) of this section identifies the types of alternative
energy leases that we propose to make available and describes rights
that come with a lease issued under these regulations. In general, a
lease issued under this part conveys the right to install and operate
facilities on a designated portion of the OCS for the purpose of
conducting commercial (production) activities or limited
(noncommercial) activities supporting the production of energy from
alternative energy sources. All rights are subject to compliance with
requirements to secure approvals of, and then comply with, applicable
plans, i.e., Site Assessment Plan (SAP), Construction and Operations
Plan (COP), and General Activities Plan (GAP), that are set forth in
proposed subpart F.
Under paragraph (b) of this section, leases generally include the
right to one or more project easements without further competition for
the purpose of installing lines for gathering, transmission, and
distribution of electricity; as well as pipelines for transporting
other energy products (i.e. hydrogen); and appurtenances on the OCS as
necessary to conduct operations. This could include the cables,
pipelines and other structures necessary to transmit electricity or
transport other energy product produced from the OCS to shore. The
lessee would apply to MMS for the project easement as part of the COP
or GAP. When we approve the proposed plan and project easement, an
addendum covering the project easement will be incorporated in the
lease. Ancillary activities that are not associated with an OCS
alternative energy lease (e.g., a transmission line or support
structure located in Federal waters to support a project in State
waters or a commonly shared line supporting multiple leases) would be
permitted and managed as a separate ROW grant or RUE grant under
proposed subpart C.
The proposed lease right to a project easement is necessitated by
the nature of power generation activities as well as the competition
requirement set forth in EPAct [subsection 8(p)(3) of the OCS Lands
Act]. Each alternative energy project located offshore will need to
transmit produced electricity or transport other energy product (i.e.
hydrogen) to shore by cable or pipeline. If access to the corridor
needed for transmission or transportation is not granted with the
lease, the lessee would be required to compete for that right in
accordance with subsection 8(p)(3). The uncertainty associated with
acquiring a lease for a generation project in the absence of a
guaranteed right to the path needed to transmit or transport the
produced energy to market could be a significant disincentive to
investment. Therefore, we propose to award the transmission or
transportation right along with the lease. We invite comments on the
proposed project easement provision.
Paragraph (c) of this section provides for phased lease
development. The proposed commercial lease framework would be capable
of accommodating multi-phase project development as is commonly used
for onshore utility-scale wind projects (see Sec. Sec. 285.200 and
285.629). The lease applicant would need to inform us of its intent to
develop a project in multiple phases and would need to lease from the
outset all of the acreage necessary for the full build-out envisioned.
If the applicant for a commercial lease phases in operations, the
applicant must pay rentals on the portion of the lease that is not
producing and operating fees on the portion of the lease that is
producing or on which construction is underway. We may waive rental for
the acreage on which activities are deferred, as provided by subpart E
on a case-by-case basis for any lease issued under this part. As
additional acreage is developed, operating fees would be charged in
place of rentals, as appropriate. If the lessee decides not to develop
the additional acreage, it would relinquish that acreage, or MMS could
contract the lease, as provided in Sec. Sec. 285.435 and 285.436.
Multi-phased project
[[Page 39395]]
development would have to comply with NEPA, CZMA, and other applicable
laws.
Section 285.201 How will MMS issue leases?
As required by subsection 8(p) of the OCS Lands Act, MMS must issue
leases, easements, or ROWs for OCS alternative energy activities on a
competitive basis unless we determine after public notice that there is
no competitive interest. If we determine that there is competitive
interest, we will conduct a fair and open competition process. When we
receive an unsolicited request for a lease, we will make a
determination if a competitive interest exists by first issuing a
public notice of the request. After considering the comments received
on the notice, as required by the OCS Lands Act, section 8(p), we will
issue a determination that there is, or is not, competitive interest in
the proposed leases. If two or more project proponents express interest
in leasing the same area of the OCS (overlapping partially or
completely), we would conclude that competitive interest exists and
conduct a competitive lease sale. We may offer areas for leasing that
do not conform exactly with the areas nominated for leasing, after
analysis of requirements given in subsection 8(p)(4) of the OCS Lands
Act. We invite comments on considerations other than interest by more
than one party in leasing the same area of the OCS to determine whether
or not there is a need to conduct a competitive lease sale in an area.
We are aware that instances of partially overlapping interests may
occur. Even if the overlap is a relatively small portion of the
respective areas of interest, a process for deciding what to offer and
how to choose the winning bid needs to be established. For example, if
proposed Project A entails 10,000 acres for generation of 500 megawatts
and Project B entails 2,000 acres for 100 MW, and there is an overlap
of 1,000 acres, we would have to determine how to resolve the conflict.
Six alternative approaches for addressing such a situation are
discussed below. The actual set of approaches that we could consider
for issuing leases is not necessarily limited to these options.
(1) Offer both the Project A and Project B areas and award a lease
for one or the other to the high bidder. If a cash bonus is a bid
variable, it could be based on either the total or the amount per acre,
and if an operating fee is a bid variable, it could be based on the
total or the amount per MW of proposed capacity.
(2) Offer and award a lease through competition for only the
overlapping 1,000-acre area and then follow with a noncompetitive lease
issuance for the remaining 9,000 acres under project A and 1,000 acres
under project B.
(3) Offer to lease individual tracts covering the area of interest,
designated as legal subdivisions of a standard OCS lease block of 9
square miles. Bidders that value specific tracts most highly could win
leases through a simultaneous tract offering, and subsequently propose
operations on multiple \1/4\\1/4\ legal subdivisions to obtain possible
synergies.
(4) Offer the combined A and B areas as one lease and award the
lease to the high bidder (the winning lessee could then relinquish
excess acreage).
(5) Offer standard block sizes or legal subdivisions of those block
sizes and allow bidders to ``package'' those blocks in a bidding unit.
Identify the various features of the auction, e.g., bidder eligibility
to compete and to remain active in various rounds, information to be
released between rounds, rules for ending the auction, method for
choosing the provisional high bidders, restrictions on bidding in
subsequent rounds, etc.
(6) Rely on coordination and consultation efforts with State and
local governments to identify one preferable project area to be offered
and awarded to the high bidder.
We invite comments on any of these approaches. In particular, what
do you think is the capability of package bidding to ensure a fair
return and to induce an efficient allocation of leases?
We also are aware that there will be other instances in which
multiple projects could be proposed in the same general area with no
actual geographic overlap, but the number of lease tracts may need to
be limited based on regional or local needs and concerns. For example,
a State or locality may identify a need for a certain amount of
renewable energy generation from an OCS source. If the number of
prospective leases proposed for an area greatly exceeded the projected
demand, we may limit the number of tracts that could be offered. Such a
case could be addressed by proceeding with an intertract competition in
which multiple tracts could be offered for lease in the proposed
auction formats described below (see Sec. Sec. 285.220 through
285.223), but the number of approved bids would be limited.
Accordingly, MMS proposes to use its discretion and, based on
consultation--notably with the affected States and local communities,
as well as the applicants--identify the appropriate tract or set of
tracts to be offered for sale, thereby forgoing the need for intertract
competition. We offer this approach in an effort to encourage a level
of OCS alternative energy development commensurate with regional and
local needs. We invite comments on our proposed approach, as well as
other possible approaches such as intertract competitive auctions, to
address this issue.
Generally, we believe that priority should be given to leasing
tracts for commercial operations so that in instances where there is
competition between proponents of commercial leasing and limited
leasing, commercial leasing would prevail (assuming that the proposed
activities are not compatible). Thus, competitive leasing of areas for
limited leases might be much less likely than for commercial leases,
and limited leases might be confined to areas in which there is no
interest in commercial leasing. Also, given such a priority, commercial
leasing of an area would proceed noncompetitively even if interest in
limited leasing in the same area is expressed. We invite comments on
this proposed priority.
Once we make the determination about competitive interest, we will
proceed with issuing leases under the appropriate process as described
in this subpart. The competitive process is set forth in Sec. Sec.
285.210 through 285.225, and the noncompetitive process is set forth in
Sec. Sec. 285.230 through 285.231. MMS will prepare an OCS alternative
energy lease form and provide or reference such a lease form in a
public notice. The approved lease form (or forms) for OCS alternative
energy will be developed separately from the rulemaking and in
consultation with interested and affected parties. This approach is
designed to give us the flexibility to accommodate all possible
alternative energy activities and adapt forms as necessary. We invite
comments on this approach for developing appropriate lease documents.
Section 285.202 What types of leases will MMS issue?
This section states that MMS may issue leases for one or more types
of activity relating to assessment and production of alternative energy
and may issue commercial or limited leases as discussed above in the
overview of this subpart. A single purpose lease would authorize one
type of activity (e.g., wind power generation), whereas a multi-purpose
lease would authorize multiple types of activity (e.g., both wind and
wave power generation). A lease issued for one type of alternative
energy activity would not necessarily result in prohibition of other
types of
[[Page 39396]]
activities in that same area, which could be authorized by separate
leases issued subsequently. For example, we may conduct a lease sale
for wind and then conduct a lease sale for wave activities in that same
area. While the initial lessee in such a case would be restricted to
wind development, we could authorize multiple types of OCS alternative
energy activities in an OCS area to the extent that these activities
are compatible and do not unreasonably impede the ability of the
existing lessee to reasonably conduct its operations in the area. We
will not issue access rights for oil, gas, or any other minerals under
this part.
Section 285.203 With whom will MMS consult before issuance of a lease?
As directed by subsections 8(p)(4) and (7) of the OCS Lands Act and
by other relevant Federal statutory requirements (e.g. ESA and
Magnuson-Stevens Fishery Conservation and Management Act (MSA)), MMS
will coordinate and consult with relevant Federal agencies, with the
Governor of any State, and the executive of any local government that
may be affected by an alternative energy lease. As provided in Sec.
285.102 of subpart A, we may invite any Governor of an affected State
or government executive of an affected local government to participate
in a joint task force or other joint planning or coordination agreement
if we are considering offering or issuing leases (or grants).
Participation in a task force would give the parties opportunities to
contribute to the planning process and access to nonproprietary
information.
Further, we recommend that companies that plan to pursue
alternative energy activities on the OCS conduct preliminary outreach
early in the process by contacting interested and affected parties to
provide information and receive feedback concerning their proposals. A
provision in subpart A of the proposed regulations encourages this type
of early contact and coordination (see Sec. 285.103(f)). This approach
is consistent with the many suggestions we have received concerning
timely and thorough coordination and consultation, notably a
recommendation from the U.S. Coast Guard calling for early outreach
from OCS alternative energy project applicants.
We believe that it is particularly important for companies that
plan to produce and deliver electricity to existing onshore
distribution systems to consult with involved States and localities to
establish power generation needs and to become aware of pertinent
regulatory requirements before pursuing OCS commercial development and
production rights. Early communication among potential developers and
the States and localities that would be most affected by any
development that ensues and that regulate associated onshore facilities
helps assure that authorized OCS alternative energy activity will be
compatible with and support any renewable portfolio standards, policies
on the location of transmission and other support facilities, and any
other relevant factors.
We invite comments on issues relevant to coordination and
consultation with Federal agencies and State and local governments.
Section 285.204 What areas are available for leasing consideration?
We intend to consider offering for lease any area of the OCS that
is appropriately platted, except areas prohibited from leasing by
EPAct. Subsection 8(p)(10) of the OCS Lands Act prohibits alternative
energy leasing in any area of the OCS within the exterior boundaries of
any unit of the National Park System, National Wildlife Refuge System,
National Marine Sanctuary System, or any National Monument. In
administering this program, the Secretary will take into account other
uses and may withdraw portions of the OCS from leasing under this part
and restrict operations on leases for national defense purposes.
The areas we actually make available for alternative energy leasing
are likely to be determined through a process that assesses different
types of alternative energy resources and potential environmental
impacts and other relevant information on a national, regional, or more
specific basis. The assessment process will include coordination and
consultation with Federal, State, and local governments and other
interested and affected parties and may entail the establishment of
task forces as discussed above. Based on such assessments, we would
have the discretion to offer or not offer to lease areas as
appropriate. We intend to use our existing system of OCS regions,
planning areas, official protraction diagrams, and lease blocks to
designate, delineate, and describe areas of the OCS under the OCS
alternative energy program.
We invite comments on the proposed process for choosing areas to
make available for leasing and the proposed means for mapping and
describing those areas.
Section 285.205 How will leases be mapped?
This section states that MMS will prepare and use necessary leasing
maps and official protraction diagrams as it does for other energy and
mineral leasing on OCS (e.g., 30 CFR 256.8)
Section 285.206 What is the lease size?
We will determine the size for each lease on a case-by-case basis
to ensure that it is an appropriate size to accommodate the anticipated
activities. The processes leading to both competitive and
noncompetitive issuance of leases will provide public notice of the
lease size. Since there is no size limit in the EPAct amendment to the
OCS Lands Act, and because it would not be prudent to prescribe such a
limit for an unknown range of future activities with varying areal
requirements, we favor the flexibility of this proposed approach.
We plan to delineate leases by using mapped OCS blocks, portions of
such blocks, or aggregations of such blocks. For example, a limited
lease supporting a small data gathering or technology testing facility
might require only a small part of a 3-mile by 3-mile OCS block. In
such a case the lessee could acquire (or retain after originally
acquiring a larger area) an aliquot part as small as a quarter-quarter
(i.e., \1/16\) of a block. On the other hand, it is likely that a
typical commercial-scale alternative energy project would result in the
issuance of one lease encompassing several contiguous OCS blocks. We
invite comments on the proposed provisions governing lease size.
Section 285.207 Through 285.209 [Reserved]
Competitive Lease Process
Section 285.210 How does MMS initiate the competitive leasing process?
This section establishes a process for us to solicit proposals to
develop the alternative energy potential on the OCS. We may use a
general Request for Interest to gauge interest in alternative energy
leasing anywhere on the OCS or a specific Request for Interest to
assess interest in specific areas after receiving an unsolicited
leasing proposal. Any Request for Interest will be published in the
Federal Register.
Depending on the level and extent of interest and review of
comments, we may formulate a nationwide or regional program schedule of
lease sales or we may initiate individual competitive lease sales on a
case-by-case basis without an overarching program schedule. Once a
determination is made
[[Page 39397]]
to offer an area(s) for competitive lease, we would initiate an
alternative energy lease sale process.
Section 285.211 What is the process for competitive issuance of leases?
This section lays out the discrete steps we propose to follow in
preparing for and holding a lease auction and issuing leases
competitively. These steps include a Call for Information and
Nominations (Call), an Area Identification, a Proposed Sale Notice, and
a Final Sale Notice.
An Area Identification step would follow the Call. In it we would
use responses to the Call and other information to delineate a
geographical area or areas to be considered for leasing and analysis
under NEPA and other applicable laws. This process includes identifying
potential impacts on the environment, consulting with other agencies
and State and local officials on mitigating stipulations and
conditions, and perhaps public hearings. We would provide public notice
of the area identified for leasing, which could encompass the OCS
blocks, portions of blocks, or aggregations of blocks requested for
leasing.
The product of these evaluations and consultations would then be
reflected in the Sale Notices that implement a competitive lease sale.
We invite comments on the most useful way to describe areas we decide
to make available for alternative energy leasing.
Section 285.212 What must I submit in response to a Request for
Interest or a Call for Information and Nominations?
This section describes the type of information we seek from
potential lessees, in a response to a Request for Interest or a Call.
We may issue a broad request for interest to be used as a basis for
developing a national or regional schedule of alternative energy lease
sales, or we may issue a tract specific request to be used to determine
competitive interest in a particular area that has been proposed for
leasing. We would issue a Call as the first step in a competitive lease
sale process to elicit information from all interested and affected
parties concerning proposed leasing activities and the existing
conditions that may affect or be affected by those activities. In all
cases--responding to a general or specific Request for Interest or a
Call--we would require prospective lessees to submit the same types of
information. That information would include: the area of interest for a
possible lease; a general description of objectives and the facilities
needed to achieve those objectives; a general schedule of proposed
activities, including those leading to commercial production or other
approved operations; available and pertinent data and information
concerning alternative energy resources and environmental conditions in
the area of interest, including energy and resource data and
information used to evaluate the area of interest; certification that
the proposed activity conforms with State and local energy planning
requirements, initiatives or guidance, as appropriate; documentation
showing that the applicant is qualified to hold a lease; and any other
information specifically requested in the Federal Register notice.
We believe that this information is necessary for MMS in developing
leasing schedules, determining competitive interest for unsolicited
proposals, and proceeding with alternative energy lease sales. We also
believe that such information should be readily available from
prospective lessees and that this requirement poses no undue burden. In
cases where a prospective lessee has already submitted the required
information, we would not require it to be submitted subsequently. For
example, if a company responded to a broad or specific Request for
Interest for an area that MMS subsequently decided to offer in a lease
sale, that company would not have to resubmit information in response
to the Call for that sale. Only companies that had not previously
expressed interest and submitted information would be expected to
provide the required information in response to the Call.
In addition to the items listed, we believe that information
relating to potential markets that could be served and processes that
could be used to serve those markets is important. Also, information on
similar projects elsewhere in the world and on issues associated with
proceeding in your proposed area(s) may be necessary for our
deliberations, especially those entailed in developing a broad leasing
program or schedule. We invite comments on information that we should
request to identify alternative energy interest in general or specific
OCS areas.
Subpart A discusses how we would handle such data and information,
including procedures for withholding material from public disclosure to
the extent allowed by law. We invite comments on the handling of data
and information.
Section 285.213 What will MMS do with information from the Requests for
Information or Calls for Information and Nominations?
This section states that we will use the information we receive to
identify lease areas, develop options for conducting environmental
analysis and adopting lease provisions, and prepare documentation to
satisfy relevant Federal requirements, such as NEPA, the Coastal Zone
Management Act (CZMA), the Endangered Species Act (ESA), and the
Magnuson-Stevens Fishery Conservation and Management Act (MSA).
For purposes of Federal consistency, we will treat alternative
energy competitive lease offerings as Federal agency activities and
follow the requirements of subsection 307(c)(1) of the CZMA procedures.
That means we must determine if the effects to any land or water use or
natural resource of a State's coastal zone from the competitive lease
offering are reasonably foreseeable and comply with the appropriate
Federal consistency regulatory path found in 15 CFR part 930 subpart C.
We invite comments on how this process could be expedited.
Section 285.214 What areas will MMS offer in a lease sale?
This section states that the areas we will offer for lease will be
identified as provided in Sec. 285.211(b). However, it should be noted
that the leasing area could be reduced subsequently through the lease
sale process. This section also states that no further nominations for
a lease sale will be accepted following the completion of the Call for
Information and Nominations step.
Section 285.215 What information will MMS publish in the Proposed Sale
Notice and Final Sale Notice?
We will publish Proposed Sale Notices and Final Sale Notices in the
Federal Register for each lease sale. Proposed Sale Notices and Final
Sale Notices will provide information pertaining to:
The area offered for leasing;
Proposed and final lease terms and conditions including
lease size, lease term, payment and bond requirements, performance
requirements, and site specific lease stipulations;
Auction details including bidding procedures and systems,
the bid variable and minimum bid, the bid deposit, the place and time
for filing bids and the place, date and hour for opening bids;
The official MMS lease form to be used or a reference to
that form;
[[Page 39398]]
Bid evaluation criteria we will use and how the criteria
will be used in decision-making for awarding a lease;
Award procedures including how and when we will award
leases and how we will handle unsuccessful bids or applications;
Procedures for appealing the lease issuance decision; and
Execution of the lease instrument.
The Proposed Sale Notice would invite comments from all interested
and affected parties. We expect that the use of such a notice in the
process of offering leases for development of OCS alternative energy
sources would provide a valuable opportunity for us to consult on the
selection of appropriate competitive leasing procedures and the
formulation of the details of the lease instruments to be issued. After
considering comments on the Proposed Sale Notice, we would revise and
publish a Final Sale Notice that adjusts as appropriate and confirms
the same information. The final steps in the leasing process would be
conducting the actual auction and awarding the leases. Figure 2 shows
the steps in the proposed competitive leasing process.
We invite comments on whether this process provides sufficient
information and notice to encourage competition for prospective
alternative energy sites.
Section 285.216 through 285.219 [Reserved]
Competitive Lease Award Process
Section 285.220 What auction format may MMS use in a lease sale?
This and the next two sections describe how we propose to structure
a competitive process for granting alternative energy leases. We will
hold auctions to award leases using either sealed bidding, ascending
bidding, or two-stage bidding. The sealed bidding format is mandated
for oil and gas lease sales by subsection 8(a) of the OCS Lands Act. In
contrast, no particular auction format is specified for alternative
energy lease sales conducted under subsection 8(p) of the OCS Lands Act
and there may be advantages to using other approaches with emerging OCS
industries.
For each auction, we would establish a sale area or sale areas
based on information received in response to Request for Interest and
Call notices, and establish a bid variable, a minimum acceptable bid,
and criteria for bid acceptance. We would include specific details of
the selected auction format in appropriate Federal Register notices
including the Proposed Sale Notice and the Final Sale Notice. The sale
notices would include details on the bidding process, such as the
auction format, bidder eligibility, bidder deposits, the bid variable,
the object of the bidding, minimum bid amounts, bid increments,
criteria for ending or continuing the auction, method for determining
the provisional winning bidder(s), and bid adequacy considerations. A
general description of the three auction formats from which we propose
to choose follows.
Sealed Bidding would consist of a single round and provide for each
lease sale participant to submit a single bid by post or e-mail, after
which we would publicly announce the high bidder. We will specify in
the Call either a cash bonus or an operating fee rate for the bid
variable. This traditional format works best in cases where there are
limited areas of overlapping interest and one bidder is much better
informed than others about the underlying technical and economic
prospects of leasing the area for use in an alternative energy project.
This auction format is administratively compatible with application
of a ranking and filtering procedure which would identify the set of
highest bids per tract before MMS decides which of those tracts to
lease. This ranking of high bids can serve as a bid adequacy mechanism
for determining which high bids to accept. It also has the advantage of
creating competition for lease rights across tracts, when competition
for individual leases is absent. This procedure is known as
``intertract competition.''
Ascending Bidding involves multiple rounds of bidding and provides
for participants to submit increasing sequential bids over a predefined
time period. Again, we will specify either a cash bonus or an operating
fee rate for the bid variable. Bids may be submitted orally or
electronically (e.g., Internet). If bidding activity continues right up
to the deadline, the time period may be continuously extended as
warranted by additional bidding activity. This type of auction format
works best in the presence of common high interest and strong
competition among bidders who are equally informed about the quality
and value of the lease area.
Two-stage Bidding would combine the two formats previously
discussed, sealed and ascending bidding. Generally, we would require
interested bidders to offer a minimum cash bonus to join the auction.
Then, in the most likely process formulation, participants would submit
ascending bids (e.g., operating fee rate, cash bonus, etc.) in the
first stage until all but two bidders drop out or more than one bidder
offers to pay the maximum bid amount specified by MMS. The auction
would then move to the second stage, where the remaining participants
typically would offer a sealed bid on a bidding variable not employed
in stage one. However, we reserve the option to conduct the two-stage
auction using sealed or ascending bidding in either or both stages, and
to select the bid variables in each stage. This type of auction works
well when competition for specific acreage is weak, or when potential
lessees are better informed than the lessor.
Subject to the bid adequacy requirements referenced in Sec.
285.222, typically the qualified bidder offering the highest cash bonus
or the highest fee rate, depending on which deciding bid variable is
used, would win the lease. When there are multiple leases, intertract
competition could be used to decide which of the high bids to accept
under the rubric of bid adequacy.
We invite comments on the relative merits of these alternative
auction formats for leasing OCS acreage for alternative energy projects
and on other alternatives. Also, we request comments on whether
allowing bidders to define a set of tracts on which they wish to submit
a package bid would increase interest in a sale, generate higher
aggregate bonus bids, and help ensure that bidders acquire their
primary tracts of interest.
Section 285.221 What bidding systems may MMS use for commercial leases
and limited leases?
A bidding system is composed of various elements, the most
important of which are the bid variable(s) and the payment
requirements. The bid variable is generally subject to a minimum bid
level and potentially to a reservation price, both established by MMS.
The minimum bid level represents the entry level of the bid, i.e., the
smallest bid amount that MMS might consider acceptable. Usually the
same minimum bid level would be set across certain classes of tracts.
The reservation price is a tract-specific measure that represents an
estimate of the underlying value of the tract when used for a specific
purpose. In cases where sufficient competition is deemed to exist, a
reservation price typically would not be needed to ensure that a fair
return is obtained in the auction for the individual tract. For an
alternative energy lease, we propose to choose from five different bid
variables:
(1) A cash bonus with a constant or sliding operating fee rate;
(2) a constant operating fee rate with a fixed cash bonus;
[[Page 39399]]
(3) an initial operating fee rate for use in a sliding operating
fee calculation with a fixed cash bonus;
(4) a constant operating fee rate followed by a cash bonus; or
(5) the starting value for a fee rate to be used in calculating a
sliding operating fee followed by a cash bonus.
The fee rate in this context is analogous to a royalty rate used in
oil and gas leasing. If a cash bonus is the bid variable, the operating
fee each year would be based on the formula in subpart E. If the fee
rate is the bid variable, the cash bonus would be fixed, and the
operating fee would be calculated using the fee rate offered by the
winning bidder as a part of the formula in subpart E of this
regulation. The two-bid variable systems, cash bonus and operating fee
rate, either constant or as a sliding scale, would be used only in a
two-stage auction.
The resulting annual operating fee in these two-stage bidding
auctions would be derived from the formula established in subpart E of
this part which is based in part on megawatts of installed capacity and
the prevailing market rates for electricity sold in the consuming
region targeted by the lease. Values for the formula components,
excluding the fee rate when it is used as the bid variable, will be
established in the Final Sale Notice or in the final public notice in
the case of a non-competitive lease.
For limited leases we propose the cash bonus as the only
permissible bid variable. The MMS imposed no operating fee for limited
leases because such leases are not authorized to engage in commercial
operations. This also means we will not be using a two-stage auction
format for issuing limited leases.
The proposed bidding systems and parameters have been developed
based on a consideration of the EPAct requirements, domestic and
foreign alternative energy programs, and the long-standing OCS oil and
gas leasing program, as well as comments received in response to the
ANPR. The proposed alternatives for a competitive lease sale bidding
system are used in other domestic mineral leasing programs such as
offshore oil and gas. Also, the BLM, which manages ROWs for wind energy
development on U.S. Federal onshore lands, has held one competitive
auction to date. In that auction BLM used a cash bonus as the bid
variable and established a minimum initial bid of $17.00 per acre.
One alternative bidding system suggested by commenters that we
considered but rejected is a multiple-factor system. Such a system
would consist of many different bid variables as factors, both
quantitative and qualitative, in determining the winning bid in a
competitive process. This is the approach used in Denmark, which has
the most developed offshore wind program in the world and issues
licenses based on multiple factors (e.g., project design, operator
experience, etc.). We concluded that our AEAU program requires a
bidding system based on clear objective standards, simple to administer
and transparent to the public.
We invite comments on which of the proposed bidding systems is most
appropriate for alternative energy leases and why.
Section 285.222 What does MMS do with my bid?
We will open the sealed bids at the place, date, and hour specified
in the Final Sale Notice for the sole purpose of publicly announcing
and recording the bids. However, we will not accept or reject any bids
at that time. We will determine whether to accept a high bid as a
winning bid based on the following factors.
With sealed bidding, bid acceptance criteria typically rely on (1)
minimum bid levels we establish with bids above that level being
acceptable if there is a sufficient level of competition or if the
lease area is not considered prospective, or (2) assessments of the
adequacy of the high bids for a specific lease area in comparison to
calculated reservation prices for the property rights that are the
object of the bidding. Whereas a minimum bid reflects a publicized
level below which bids are not deemed satisfactory or competitive and
thus will not be considered, the reservation price reflects an
unpublished estimate of the value of the tract and thus generally the
lowest bid level at which we would award the lease. In this context,
the term reservation price could also refer to the lowest operating fee
at which we would award the lease, if the operating fee is used as the
deciding bid variable. The calculation of the reservation price
compensates for insufficient market competition, so if enough
competition for the tract materializes, there is less need to rely on a
reservation price. However, when there is little competition for
specific acreage, the reservation price becomes critical if the absence
of competition is known to the interested party. An additional factor
we may consider in calculating the reservation price is the value of
other uses of the area that are incompatible with the alternative
energy project and which are under consideration for leasing.
Due to the competitive aspects of the ascending bidding procedure,
bid acceptance ordinarily would be less dependent on application of a
reservation price and instead could rely solely on the bidding results
to ensure receipt of fair market value. The ascending bid framework has
been used by the BLM for allocating the property ROWs for wind energy
projects. If we conclude that ascending bidding is the preferred
auction format for many alternative energy situations, then sale
procedures for ascending auctions could differ substantially from the
customary OCS sealed bid model.
With a two-stage auction format, the bid acceptance considerations
are the same as those discussed that apply to the format for the final
stage that was used (i.e. sealed and/or ascending bidding).
One way to reduce reliance on a calculated reservation price in
sealed bidding or two-stage bidding could be to apply the auction
format to multiple areas employing intertract competition. Intertract
competition may be needed in areas with high industry interest in a
number of OCS leases, but where expected demand per tract is limited or
constrained. In addition to enhancing competition, the object of
intertract competition would be to provide signals through the bids
which serve to assist us in leasing only the most valuable sources of
energy needed to meet the expected demand.
Our goal is to accept or reject all sealed bids within 90-calendar
days after the sale date, although we may extend that time if
necessary. In the case of ascending bidding, we may be able to
determine the winning bidder once we confirm that the high bidder is a
qualified bidder. Nevertheless, we reserve the right to reject any and
all bids, regardless of the amount offered or bidding system employed.
We will send a written notice to each high bidder, accepting or
rejecting the bid or informing the bidder of tied high bids.
We invite comments on the appropriate bid acceptance considerations
and the potential use of intertract competition.
Section 285.223 What does MMS do if there is a tie for the highest bid?
This section does not apply to bids at the end of stage one of a
two-stage bidding format. If the highest bids are tied, we will notify
the tied bidders. Within 15-calendar days after notification, unless
otherwise specified in the Final Sale Notice, we will determine the
winning bidder from among the tied bidders by lot.
[[Page 39400]]
The proposed provisions governing bidding procedures and results
are largely patterned after the way other mineral leases are handled by
the Federal Government. However, the procedures proposed to govern tied
high bids are slightly different from other existing systems in that
they are designed to always result in the award of a lease rather than
returning it to the government inventory for future offering. We invite
comments on the likelihood of receiving tied bids and on the proposed
provisions for selecting a winner in that case. In particular, would
holding an additional round of bidding be more appropriate than
resolving a tie by lot or, perhaps, by offering a joint lease?
Section 285.224 What happens if MMS accepts my bid?
This section explains the responsibilities of the successful
bidder. Our acceptance notice will include three copies of the lease to
be executed by the bidder. The first 6 months' rental, the balance of
the winning or fixed bonus, and required financial assurance will be
due within 10-business days. We may extend this deadline upon request
if we find that the delay is due to events beyond the control of the
successful bidder. After the three executed copies are returned to MMS,
we will execute the lease on behalf of the United States and send one
fully executed copy to the lessee. If the bidder fails to execute the
lease or otherwise fulfill requirements, the bidder's deposit will be
forfeited and no lease will be issued.
If, before the lease or grant is executed on behalf of the United
States, the OCS area which would be subject to the lease is withdrawn
or restricted from leasing, we will not issue a lease and will refund
the deposit. We reserve this right to rescind a lease offering in
situations where new environmental or other concerns about the
prospective area, operation, or need for the facility surface after the
lease sale. If the awarded lease or grant is executed by an agent
acting on behalf of the bidder, the bidder must submit with the
executed lease evidence that the agent is authorized to act on behalf
of the bidder. We invite comments on any difficulties these procedures
for formally issuing of a lease might cause potential lessees.
Section 285.225 What happens if my bid is rejected and what are my
appeal rights?
This section explains what options a bidder has if we reject the
apparent high bid. In that case, we will provide a written statement of
reasons and refund any money deposited with the bid. The bidder may
then petition the MMS Director for reconsideration in writing, within
15-business days of bid rejection. The Director will send the bidder a
written response either affirming or reversing the rejection. Denial of
a bid reconsideration by the Director is a final agency action. It is
not subject to review by the Interior Board of Land Appeals, but is
judicially reviewable. We invite comments on the fairness of this bid
appeal process.
Section 285.226 through 285.229 [Reserved]
Noncompetitive Lease Award Process
Section 285.230 May I request a lease if there is no call?
Anyone qualified to hold an OCS lease under Sec. 285.106 may
request an alternative energy lease from us at any time, except in
areas otherwise proposed for competitive lease offerings or excluded by
statute from leasing. Such an unsolicited request for a lease may be
submitted to conduct either commercial or noncommercial activities
authorized in this part. To be valid, the request must include the
information equivalent to that required under Sec. 285.213 in response
to a Call for Information and Nominations. Specifically, the
unsolicited request must contain a depiction of the area requested for
lease; a general description of the objectives of the project and the
facilities that would be used; a general schedule of proposed
activities including those leading to commercial production or other
approved operations; available and pertinent data and information
concerning alternative energy resources and environmental conditions in
the area of interest; certification that the proposed activity conforms
with State and local energy planning requirements, initiatives or
guidance, if any; and documentation that you are qualified to be a
lessee as specified in Sec. 285.107.
In addition, your request must include an acquisition fee of $0.25
per acre for the area requested as required by Sec. 285.502. This fee
is proposed at a level intended to be high enough to discourage
speculation but low enough not to inhibit interest, allowing lessees to
establish a low ratio of lease acquisition costs to total project
costs. We invite comments on whether and how any requested information
may inhibit requests and on whether this fee will serve its intended
purpose.
Section 285.231 How will MMS process my unsolicited request for a
noncompetitive lease?
Paragraphs (a), (b), and (c) of this section state that MMS will
first determine competitive interest in processing an unsolicited
request in order to decide whether to proceed with leasing under a
competitive or noncompetitive process. If we find that there is
competitive interest in the lease area, we will proceed with a
competitive lease process. If we determine that there is no competitive
interest, then we will issue a notice of such determination.
If we determine that there is a competitive interest, we will
proceed with a competitive process, we will apply your acquisition fee
to any bid you submit. If you choose not to bid, we will not refund
your acquisition fee. We believe retention of your fee in this case is
appropriate, because your original request indicated that your interest
was serious and that you intended to pursue development if we carried
out the steps needed to issue you a lease. If you submit a qualified
bid that does not win, we will refund your deposit, including the
amount of the acquisition fee. We invite comment on whether our
proposal not to return your acquisition fee if you choose not to bid is
appropriate.
Paragraph (d) describes how MMS will proceed if it determines there
is no competitive interest. Within 60 days after we issue a finding
that there is no competitive interest, the prospective lessee must
submit either a SAP for a commercial lease or a GAP for a limited
lease. We will review the plan and conduct NEPA and other required
analyses before simultaneously issuing the noncompetitive lease or
grant and approving the SAP or the GAP.
Our process for conveying OCS sand and gravel by negotiated
noncompetitive lease under Public Law 103-421 is a relevant model for
the proposed process for issuing alternative energy leases on a
noncompetitive basis. The sand and gravel process starts with a request
to MMS for a noncompetitive lease. If we determine that the request has
potential, we require a NEPA analysis (environmental impact statement
or environmental assessment). We inform the requestor of the type of
environmental analysis required and provide an estimated schedule for
completing the analysis and making the decision whether or not to issue
a lease. As part of the NEPA analysis, we undertake or participate in
endangered species consultations with the National Oceanic and
Atmospheric
[[Page 39401]]
Administration and the U.S. Fish and Wildlife Service. We may ask the
requestor to fund the NEPA analysis. After the NEPA analysis is
completed, we decide whether or not to issue a lease to convey OCS sand
and gravel resources. If the decision is made to issue a lease, the
specific terms and conditions (e.g., mitigating measures, size and
length of lease) are discussed with the requestor and included in the
noncompetitive agreement (lease instrument) that we offer. The
requestor must sign that agreement to complete acquisition of the
lease.
We would treat alternative energy noncompetitive lease issuance and
SAP or GAP approval as Federal licenses or permits (as defined by 15
CFR 930.51), and follow the requirements of subsection 307(c)(3)(A) of
the CZMA and 15 CFR Part 930, Subpart D, as shown in Table 1. Under the
CZMA and its implementing regulations an OCS plan is any plan for the
exploration or development of, or production from, any area leased
under the OCS Lands Act that is submitted to the Department of the
Interior which describes in detail Federal license or permit
activities. Since, for leases issued noncompetitively, the lease and
SAP or GAP will be processed simultaneously (before the area has been
leased), the SAP or GAP cannot qualify as an ``OCS Plan'' under the
CZMA implementing regulations. For leases issued competitively, the SAP
or GAP will be submitted and processed after the lease has been issued,
and in those instances, the SAP or GAP would be processed as an ``OCS
Plan'' (as defined by 15 CFR 930.73), and follow the requirements of
subsection 307(c)(3)(B) of the CZMA and 15 CFR part 930, subpart E.
We invite comments on the proposed SAP or GAP deadlines and the
proposed NEPA and CZMA compliance procedures.
Section 285.232 through 285.234 [Reserved]
Commercial and Limited Lease Terms
Section 285.235 If I have a commercial lease, how long will my lease
remain in effect?
This section describes the duration terms for a commercial lease.
Commercial leases issued competitively would have three separate phases
of lease activity: preliminary term, site assessment term, and
operations term. For commercial leases issued competitively, the
preliminary term would be the initial 6 months during which the lessee
must submit a SAP in accordance with subpart F. If the commercial lease
is issued noncompetitively, there is no preliminary term, because lease
issuance and SAP approval occur simultaneously. The site assessment
term for all commercial leases would begin on the date that we approve
the lessee's SAP for a term of 5 years to allow conduct of the approved
activities proposed in the SAP. A commercial lease would expire at the
end of the site assessment term unless the lessee submits a COP, in
form and content satisfactory to us, before the end of the 5-year term.
The preliminary and site assessment terms are automatically extended as
necessary to allow us to review and approve plans.
The operations term would follow, beginning on the date that we
approve the lessee's COP, and would last 25 years to allow development,
construction, and ultimately commercial production activities. An
operations term longer than 25 years could be established if applicable
parties determine that such a term is warranted (e.g., the lessee and
project proponent negotiate a power purchase agreement with a 30-year
term before the lease is issued).
Section 285.236 If I have a limited lease, how long will my lease term
remain in effect?
Limited leases issued competitively would have two phases:
preliminary term and operations term. For limited leases issued
competitively the preliminary term would be the initial 6 months during
which the lessee must submit a GAP in accordance with subpart F. If the
commercial lease is issued noncompetitively, there is no preliminary
term, because lease issuance and GAP approval occur simultaneously. The
operations term for all limited leases would begin on the date that we
approve the GAP and continue for a term of 5 years to allow the lessee
to conduct the approved activities proposed in the GAP.
Section 285.237 What is the effective date of a lease?
This section describes how we will determine the effective date of
a lease. A lease issued under this part must be dated and become
effective as of the first day of the month following the date a lease
is signed on behalf of the lessor. However, if the lessee submits a
written request and we approve, a lease may be dated and become
effective as of the first day of the month within which it is signed on
behalf of the lessor.
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Section 285.238 How can I conduct alternative energy research
activities on the OCS?
This section describes how alternative energy research activities
might be conducted on the OCS. We may set aside areas of the OCS for
testing and research activities managed by the U.S. Department of
Energy (DOE). This provision was developed following discussions with
DOE officials who cited a need for an offshore research area or areas
patterned after the European Marine Energy Center, an offshore wave and
tidal energy technology testing site in the United Kingdom. The
proposed rule would allow us to establish one or more such sites for
testing all types of offshore alternative energy technology after
giving public notice, coordinating and consulting with relevant Federal
agencies and State and local governments, and determining that there is
no competitive interest in the area, and comply with all relevant
Federal statutes (e.g. ESA, NEPA, MSA).
We believe that such research areas should not preempt potential
commercial development and should be administered by DOE under some
sort of lease-like agreement rather than directly by MMS. The purposes,
issue process, and terms of this kind of lease will be established on a
case-by-case basis in negotiations between MMS and DOE. This kind of
lease would not be bound by the other provisions of this rule
[[Page 39403]]
pertaining to leases. These would not be conventional alternative
energy leases, authorizing private developers to conduct commercial or
non-commercial activities. These would be a negotiated agreement
between DOI and DOE to convey to DOE the access right to conduct
alternative energy-related research and development. The leasing
arrangements made under this provision should not be confused with the
limited lease issued directly through a competitive or noncompetitive
process we conduct without DOE involvement. We invite comments on this
concept for making areas of the OCS available for alternative energy
research.
Subpart C--Rights-of-Way Grants and Rights-of-Use and Easement Grants
for Alternative Energy Activities
Overview
Applicability. This subpart addresses issuing ROW grants and RUE
grants for OCS alternative energy activities that are not associated
with an MMS-issued alternative energy lease. Alternative energy leases
include the rights to project easements for cables, pipelines, and
other facilities associated with projects on OCS leases as discussed in
subparts B and F. It is important to distinguish the grant authority
under this part with grant authorities of MMS under other regulations,
such as those in 30 CFR part 250. The two examples below are helpful to
illustrate the types of activities on the OCS that MMS would authorize
with a ROW grant or RUE grant issued under this subpart C.
Example 1: The MMS would issue a ROW grant under this part for
activities involving the placement and maintenance of a transmission
cable that crosses the OCS and transmits energy produced from
alternative energy resources onshore or in state waters. The proposed
Juan de Fuca Cable Project--which would install on the OCS a cable
several hundred miles long to transport electricity from renewable
energy sources in the northwest to the San Francisco area--is a good
illustration of an activity requiring a ROW granted under this subpart.
Example 2: The MMS would issue an RUE under this part for
activities involving the placement and operation of a facility on the
OCS that supports an alternative energy project located on state
submerged lands.
The proposed provisions include general requirements for ROW grant
and RUE grant applicants, as well as application and issuance
procedures. These provisions are similar to the provisions proposed for
issuing OCS alternative energy leases.
The MMS would not issue ROW grants and RUE grants for installing
site assessment facilities (e.g., meteorological towers) on the OCS. If
a company intends to install site assessment facilities, it must
acquire a lease under this part.
Competitive and Noncompetitive Processes. As required by subsection
8(p) of the OCS Lands Act, MMS must issue ROW grants and RUE grants
through a competitive process unless MMS determines after public notice
that there is no competitive interest. This subpart provides for public
notice of applications for ROW grants and RUE grants to allow potential
competitors and other interested and affected parties to comment on
proposals and possibly compete for the ROW grants and RUE grants.
However, due to the nature of potential operations on ROW grants and
RUE grants, as well as the areal requirements involved, it is unlikely
that there will be much, if any, competition. It appears that in most
cases even separate geographically overlapping proposals for ROWs and
RUEs would not be mutually exclusive. It is therefore unlikely that MMS
would conduct an auction of ROW grants or RUE grants. The
noncompetitive process for granting ROWs and RUEs would be similar to
the noncompetitive leasing process described in subpart B, except there
is no acquisition fee and a GAP is required in lieu of a SAP.
In the unlikely event that MMS did determine that there is
competition for a ROW or RUE, we would follow the process outlined in
subpart B for competitive issuance of leases, with the ultimate terms
and conditions of the grant established in a Final Sale Notice. It is
more likely that we would receive unsolicited proposals that would be
processed after public notice and determination that no competitive
interest exists.
As explained above in the discussion of subpart B, because of the
competition requirement set forth in subsection 8(p) of the OCS Lands
Act, MMS decided to authorize transportation and other ancillary
activities associated with an OCS alternative energy lease through the
issuance of a project easement as part of the lease rather than
providing for separate grants of ROWs and RUEs. We invite comments on
the proposed provisions for ROWs and RUEs, as well as project
easements.
Plans. As with limited leases, before operations may commence on a
ROW grant or RUE grant, the grant holder must submit a GAP to MMS in
accordance with subpart F and receive necessary approvals.
Data and Information. Subpart C requires the submission of data and
information associated with ROW grant and RUE grant proposals. Subpart
A discusses how MMS would handle such data and information, including
procedures for withholding material from public disclosure to the
extent allowed by law. We invite comments on the handling of data and
information.
Coordination and Consultation. The MMS must coordinate and consult
with other Federal agencies and State and local governments as directed
by subsections 8(p)(4) and (7) of the OCS Lands Act and by other
relevant Federal statutory requirements (e.g. ESA and MSA). As in
subpart B, subpart C provides for coordination and consultation with
affected Federal agencies, the Governors of affected States, and the
executives of affected localities, including possible participation of
State and local governments in task forces or other joint planning
agreements with MMS. We invite comments on these provisions.
CZMA Compliance. For purposes of Federal consistency, MMS would
treat ROW grant or RUE grants issued through a competitive process as
direct Federal agency activities and follow the subsection 307(c)(1)
procedures of the CZMA. The MMS would determine if the ROW grant or RUE
grant is reasonably likely to affect any land or water use or natural
resource of a State's coastal zone and comply with the appropriate
Federal consistency regulatory path found in 15 CFR part 930 subpart C.
The MMS would treat ROW grants and RUE grants issued
noncompetitively as Federal licenses or permits, which would follow
requirements of CZMA subsection 307(c)(3)(A) and 15 CFR part 930
subpart D. For ROW grants and RUE grants issued noncompetitively, MMS
requires that the applicant submit simultaneously its proposed GAP. The
GAP is properly characterized as a Federal license or permit under
current CZMA regulations since it will describe activities and
operations proposed to be undertaken in areas of the OCS that are not
under a lease, and therefore cannot qualify as an OCS Plan (as defined
by 15 CFR 930.73).
We invite comments on the proposed CZMA compliance procedures.
Areas Available for ROW Grants and RUE Grants. As with OCS
alternative energy leases, ROWs and RUEs may be granted on any
appropriately platted area that is not located within the exterior
boundaries of any unit of the National Park System, National Wildlife
Refuge System, National Marine
[[Page 39404]]
Sanctuary System, or any National Monument. We invite comments on the
areas available for ROW grants and RUE grants.
ROW and RUE Size. The proposed size of a ROW would encompass 200
feet (61 meters) in width, the full length of the cable, pipeline or
other facilities, and adjacent areas reasonably necessary for accessory
facilities such as power stations for electricity or pumping stations
for other energy products (i.e., hydrogen). The size of a RUE would be
determined by MMS on a case-by-case basis to include the site of
proposed facilities, associated structures, and the areal extent of
anchors, chains or other equipment. The proposed ROW and RUE size
provisions are patterned after comparable provisions governing mineral
activities. We invite comments on the proposed ROW and RUE size
provisions.
ROW and RUE Term. A ROW grant or RUE grant is proposed to be in
effect for as long as it is properly maintained, continues to support
the activities for which it was granted, and is used for the purpose
for which it was granted, unless otherwise stated on a case-by-case
basis. Since ROW grants and RUE grants are tied to specific activities
and purposes, MMS believes that in most cases it will be appropriate to
link their term to those activities and purposes rather than setting
specific independent terms. However, the proposed provisions do
preserve discretion for MMS to set specific terms when called for. We
invite comments on the provisions for ROW and RUE terms.
Other ROW and RUE Provisions. ROW grants and RUE grants will be
issued on forms approved by MMS and will become effective on the date
granted by MMS or as stated in the grant instrument. Financial
assurance and rental requirements are provided in subpart E. Additional
provisions relating to the administration of ROW grants and RUE grants
are set forth in subpart D. We invite comments on these ROW and RUE
provisions.
Section by Section Discussion for Subpart C
ROW Grants and RUE Grants
Section 285.300 What types of activities are authorized by ROW grants
and RUE grants issued under this part?
This section explains what ROW grants and RUE grants authorize,
which includes activities relating to the production, transportation or
transmission of electricity or energy from any alternative energy
resource that is not produced or generated on an OCS alternative energy
lease issued under this part. It further clarifies that you do not need
an ROW grant or RUE grant for a project easement authorized under
subpart B of this part.
Section 285.301 What do ROW grants and RUE grants include?
This section provides a detailed description of ROW grants and RUE
grants, including their dimensions, boundaries, and limitations based
on factors such as locations of associated and accessory facilities, as
well as taking into consideration environmental and safety concerns.
This does not cover RUE grants issued for the alternate use of existing
facilities; those are covered in subpart J of this part.
Section 285.302 What are the general requirements for ROW grant and RUE
grant holders?
This section cites the proposed regulation pertaining to lease and
grant holder qualifications in subpart A. It then lists the express
conditions you must meet to be granted a ROW or a RUE so as not to
prevent or interfere in any way with the management, administration, or
the granting of other rights by the United States. Further, these
conditions allow for other users to use or occupy any part of the ROW
grant or RUE grant not actually occupied or required for any necessary
operations.
Section 285.303 How long will my ROW grant or RUE grant remain in
effect?
This section states in general terms the proposed duration of ROW
grant and RUE grants.
Section 285.304 [Reserved]
Obtaining ROW Grant and RUE Grants
Section 285.305 How do I request a ROW grant or RUE grant?
This section addresses how to apply for a new or modified ROW grant
or RUE grant. A separate application is required for each ROW grant or
RUE grant requested. It lists the information the application must
contain, including the area requested, objectives, facilities projected
to achieve those objectives, a general schedule of proposed activities,
environmental conditions in the area of interest.
Section 285.306 What action will MMS take on my request?
This section explains how MMS will process requests for ROW grant
and RUE grants based on whether or not competitive interest is
determined. It cites the competitive process outlined in Sec. 285.308
and describes the noncompetitive process. The noncompetitive ROW grant
and RUE grant process is similar to the noncompetitive lease issuance
process, requiring a determination of no competitive interest,
negotiation of terms and conditions between grantee and grantor, as
well as submission and simultaneous approval of a GAP.
Section 285.307 How will MMS determine whether competitive interest
exists for ROW grants and RUE grants?
This section outlines how MMS will determine whether or not there
is competitive interest by publishing a public notice (Request for
Interest). The public notice would describe the parameters of a project
and give potential competitors an opportunity to express their
interest. The MMS will make a determination of competitive interest
based on comments received in response to the notice. If competitive
interest is determined, MMS will initiate the process outlined in Sec.
285.308. If no competitive interest is determined, MMS will follow the
process outlined in Sec. 285.306.
Section 285.308 How will MMS conduct an auction for ROW grants and RUE
grants?
This section describes how an auction will be held if MMS
determines that there is competitive interest for ROW grants and RUE
grants. The proposed grant auction process is similar to the auction
process for leases.
Section 285.309 When will MMS issue a noncompetitive ROW grant or RUE
grant?
This section describes the circumstances under which MMS will issue
a grant. The MMS will issue a grant if we approve your GAP and you
accept all terms and conditions of the grant.
Section 285.310 What is the effective date of a ROW grant or RUE grant?
The effective date of a ROW grant or RUE grant is established by
MMS on the ROW grant or RUE grant instrument.
Section 285.311 Through 285.314 [Reserved]
Financial Requirements for ROW Grants and RUE Grants
Section 285.315 What deposits are required for a competitive ROW grant
or RUE grant?
This section cites the deposit requirements of Sec. 285.501
pertaining to ROW grant and RUE grant auctions and provides for the
return of a rejected high bid.
[[Page 39405]]
Section 285.316 What payments are required for ROW grants or RUE
grants?
This section lists the payments required in order for MMS to issue
the ROW grant or RUE grant. It states that the balance on an accepted
high bid and the first year annual rental as specified in Sec. 285.507
(the greater $5.00 per acre per year or $450 per year) must be paid
before MMS will issue the ROW or RUE.
Subpart D--Lease and Grant Administration
Overview
This subpart addresses noncompliance with regulations pertaining to
a lease or grant, assignment and designation of operator, and
suspension, renewal, termination, relinquishment, and cancellation of
leases and grants.
Noncompliance. The requirements that the lessee or grantee must
meet to maintain a lease or grant in effect would include plan and
reporting requirements (subpart F), payment obligations (subpart E),
and procedures for conducting, stopping, and resuming operations or
receiving appropriate suspensions from MMS (subpart D). In an instance
of noncompliance MMS may issue a notice of noncompliance specifically
citing failure to comply and prescribing corrective action. In an
instance of noncompliance that poses an imminent threat MMS may issue a
cessation order directing the lessee or grantee to cease an activity or
activities. Likewise, failure to take corrective action prescribed in a
noncompliance order may lead to the issuance of a cessation order. A
cessation order does not lengthen the term of the lease or grant or
relieve any payment obligations. Also, noncompliance may lead to the
assessment of civil or criminal penalties. The MMS believes the
proposed noncompliance provisions, in conjunction with the proposed
regulatory requirements, are essential to ensure prompt, efficient, and
responsible alternative energy activities on a lease or grant. We
invite comments on the proposed provisions.
Designation of Operator. The provisions governing designation of an
operator to perform activities on a lease or grant are patterned after
the regulations at 30 CFR 250.143 through 146.
Assignment. The provisions governing assignment of leases or grants
would generally follow the regulations at 30 CFR 256.62, including
assignor and assignee responsibilities, procedures for filing
transfers, and the effects of an assignment on a particular lease or
grant. The MMS believes such requirements are appropriate for all OCS
alternative energy leases and grants. We invite comments on these
provisions.
Suspension. The proposed rule provides for lease or grant
suspensions that would lengthen the duration of the lease or grant to
allow completion of activities or continuation of operations.
Extensions relating to MMS technical and environmental review of
required plans would be automatic. The lessee or grant holder could
request suspensions for other purposes and these would be subject to
Director approval.
Renewal. The proposed rule provides that a lessee or grantee may
request a renewal to conduct substantially similar activities as were
originally authorized, and MMS, at its sole discretion, may approve
such requests. The renewal provisions also provide timeframes and
information requirements associated with renewal requests, as well as
guidance on making payments and suspending activities while a renewal
request is pending. The length of a renewal will be set by MMS on a
case-by-case basis. As explained above in the discussion of lease term
provisions in Subpart B, MMS is purposely proposing to retain
discretion relating to lease terms and renewals as a tool to promote
diligence. We invite comments on the proposed provisions as well as
alternatives such as:
(1) Open-ended lease terms;
(2) Shorter lease terms (i.e. 10 years); or
(3) Automatic renewals.
Termination, Relinquishment, and Cancellation. The MMS would be
able to cancel leases or grants for failure to comply with the OCS
Lands Act and other applicable laws, regulations, and lease
requirements; for fraudulent acquisition; and for a continuing and
undiminished threat to marine life, property, natural resources,
national security or defense, or the marine, coastal, or human
environment. Provisions governing terminations and relinquishments of a
lease or parts of a lease are also proposed.
Section by Section Discussion for Subpart D
Noncompliance and Cessation Orders
Section 285.400 What happens if I fail to comply with this part?
This section states that MMS can take appropriate corrective action
if you fail to comply with applicable provisions of Federal law, the
regulations in this part, other applicable regulations, or MMS orders.
The MMS may issue to you a notice of noncompliance if it determines
that there has been a violation. A notice of noncompliance will tell
you how you failed to comply, and will specify what you must do to
correct the noncompliance and when you must act. This section also
states that if you do not follow a notice of noncompliance, or any
other regulation of this part, MMS may issue a cessation order, cancel
your lease or grant, assess civil penalties, and in addition you may be
subject to criminal penalties.
Section 285.401 When may MMS issue a cessation order?
This section specifies that a cessation order can be issued if you
fail to comply with any law or regulation under this part. The
cessation order will have a timeframe for you to correct the
noncompliance and set forth what measures you are required to take in
order to resume activities on your lease or grant.
Section 285.402 What is the effect of a cessation order?
This section gives the details of what you must do when you receive
a cessation order. You must cease all activities on your lease or grant
for the specified period and you must continue to make all required
payments while a cessation order is in effect. A cessation order does
not extend the term of your lease or grant for the period you are
prohibited from conducting activities. Once again, if MMS determines
that the circumstances giving rise to the cessation order cannot be
resolved within a reasonable time period, your lease or grant may be
cancelled.
Section 285.403 [Reserved]
Section 285.404 [Reserved]
Designation of Operator
Section 285.405 How do I designate an operator?
Under this section if you intend to designate an operator who is
not the lessee or grant holder, you must identify the proposed operator
in your specific plan (SAP, COP, or GAP). Once approved in your plan,
the designated operator is authorized to act on your behalf and
authorized to perform activities necessary to fulfill your obligations
under laws and regulations in this part. This section requires you to
keep MMS informed if there is any change of status with your designated
operator. And if you are the designated operator you must comply with
all regulations governing those activities and may be held liable or
penalized for any noncompliance. Designation of an operator does not
relieve the lessee or grant holder of its obligations.
[[Page 39406]]
Section 285.406 Who is responsible for fulfilling lease and grant
obligations?
When you are not the sole lessee or grantee, you and your co-
lessee(s) or co-grantee(s) are jointly and severally responsible for
fulfilling your obligations under the lease or grant. If your
designated operator fails to fulfill any obligations under this part,
MMS may require you or any or all of your co-lessees or co-grantees to
fulfill those obligations.
Section 285.407 [Reserved]
Lease or Grant Assignment
Section 285.408 May I assign my lease or grant interest?
Under this section you can assign all or part of your lease or
grant interest. To assign interest, an assignment application must be
sent to MMS. The assignment application includes various detailed
requirements outlined in this section (i.e. location identification,
qualifications, contact information, etc.). The assignment takes effect
on the date MMS approves your application.
Section 285.409 How do I request approval of a lease or grant
assignment?
This section contains additional details of the assignment
requirements.
Section 285.410 How does an assignment affect the assignor's liability?
You are liable for all obligations that accrued under your lease or
grant before MMS approves your assignment. If your assignee fails to
perform any obligation you may be responsible for corrective action.
Section 285.411 How does an assignment affect the assignee's liability?
The assignee is liable for all obligations once MMS has approved
the assignment. The assignee will be responsible to comply with all
lease or grant terms and conditions as well as all applicable
regulations.
Section 285.412 through 285.414 [Reserved]
Lease or Grant Suspension
Section 285.415 What is a lease or grant suspension?
A suspension is an interruption of the term of your lease or grant.
You can request or MMS can order a suspension. A suspension extends the
term of your lease or grant for the length of time the suspension is in
effect. Activities may not be conducted on your lease or grant during
the period of a suspension unless otherwise directed by MMS.
Section 285.416 How do I request a lease or grant suspension?
To request a suspension you must submit a request to MMS containing
the details explained in this section.
Section 285.417 When may MMS order a suspension?
Under this section MMS may order a suspension to comply with
judicial decrees prohibiting some or all activities under your lease or
when continued activities pose an imminent threat of serious or
irreparable harm or damage to natural resources, life (including human
and wildlife), property, etc. This section also states that if you have
a suspension from an imminent threat you may be required to conduct a
site-specific study to resume activities.
Section 285.418 How will MMS issue a suspension?
MMS can issue a suspension order orally, but ultimately it will be
written. The written explanation will describe the effect of the
suspension order on your lease or grant and any associated activities.
The order may also include authorization of certain activities during
the period of the suspension.
Section 285.419 What are my immediate responsibilities if I receive a
suspension order?
You must take action to comply fully with the terms of a suspension
order upon receipt.
Section 285.420 What effect does a suspension order have on my
payments?
You must make all payments on your original term obligations until
MMS authorizes/orders the suspension. Once the suspension has been
issued MMS may waive your payments during the suspension period.
Section 285.421 How long will a suspension be in effect?
The time frame for a suspension will mostly be outlined by MMS.
However, if you request a suspension, MMS will not approve a suspension
request longer than 2 years.
Section 285.422 through 285.424 [Reserved]
Lease or Grant Renewal
Section 285.425 May I obtain a renewal of my lease or grant before it
terminates?
The MMS may approve a renewal request to conduct substantially
similar activities that were authorized under the original lease or
grant. The MMS will not approve a renewal request that involves
development of alternative energy not originally authorized in the
lease or grant. We invite comments on establishing standard criteria
for consideration in lease renewal decisions. For example such criteria
could include:
(1) Design life of existing technology;
(2) Availability and feasibility of new technology;
(3) Environmental and safety record of the lessee;
(4) Operational and financial compliance record of the lessee; and
(5) Competitive interest and fair return considerations.
Section 285.426 When must I submit my request for renewal?
This section provides a timeframe for when you must request a
renewal. You must submit no later than 180 calendar days before the
termination date of your limited lease or grant, and no later than 2
years before the termination date of the operations term of your
commercial lease.
Section 285.427 How long is a renewal?
The MMS will set the term of a renewal on a case-by-case basis not
to exceed the original term of the lease or grant.
Section 285.428 What effect does applying for a renewal have on my
activities and payments?
If you request a renewal you must continue all payments and may
continue to conduct your approved activities until your lease expires
or until we make a determination on your request.
Section 285.429 through 285.431 [Reserved]
Lease or Grant Termination
Section 285.432 When does my lease or grant terminate?
Your lease or grant terminates upon the expiration of the
applicable term, upon cancellation by the Secretary, or upon approval
of your relinquishment.
Section 285.433 What must I do after my lease or grant terminates?
After your lease or grant terminates, you must make all payments
due and perform any other outstanding obligations under the lease or
grant (including decommissioning).
[[Page 39407]]
Section 285.434 [Reserved]
Lease or Grant Relinquishment
Section 285.435 How can I relinquish a lease or a grant or parts of a
lease or a grant?
To surrender a lease or grant you must submit a relinquishment
application to MMS. The application will include the information
required in this section such as identifying information and contact
information. You are responsible for all payment obligations until the
relinquishment is in effect.
Lease or Grant Contraction
Section 285.436 Can MMS require lease or grant contraction?
The MMS may review your lease or grant area, at intervals no more
frequent than every 5 years, to determine whether the lease or grant
area is larger than needed to develop the project and manage activities
in a manner that is consistent with the provisions of this part. MMS
will notify you of its proposal to contract the lease or grant area and
give you the opportunity to present orally or in writing information
demonstrating that you need the area in question to manage lease
activities consistent with these regulations. Prior to taking action to
contract the lease or grant area, MMS will issue a decision addressing
your contentions that the area is needed.
Lease or Grant Cancellation
Section 285.437 When can my lease or grant be canceled?
The Secretary may cancel your lease or grant if you obtained it
fraudulently, failed to comply with laws and regulations, for national
security, or if your activities cause serious harm or damage to natural
resources, life, property, etc. In certain circumstances, the Federal
government may provide compensation if your lease is cancelled.
Subpart E--Payments and Financial Assurance Requirements
Overview
This subpart proposes a payment structure for alternative energy
leases that complies with subsection 8(p)(2) of the OCS Lands Act. In
part, that subsection added by the EPAct directs the Secretary to
establish royalties, fees, rentals, bonuses, or other payments to
ensure a fair return to the United States for any lease, easement, or
ROW granted for alternative energy activity on the OCS. As with other
OCS programs, we intend to collect this fair return through a
combination of payments. In addition to up-front acquisition fees or
bonus payments for alternative energy leases, we propose to charge
acreage-based rentals for technology assessment activities on limited
leases. On commercial leases we propose to charge acreage-based rentals
for the pre-development phases of alternative energy production
ventures and their ancillary facilities, and a share of revenues from
the alternative energy production phase in the form of an operating
fee. After reviewing guidance available from other alternative energy
leasing systems, we summarize internal analysis that guided our initial
proposed payment amounts. Then we describe how we chose to structure
the components of those payments in the section-by-section discussion.
Payments to other landowners. While developing the initial
financial terms proposed in this rule, we examined comparable domestic
and foreign alternative or renewable energy programs. For renewable
energy projects like wind farms on private lands onshore, leasing the
land or obtaining easements is a common arrangement. Payments on such
leases are structured in numerous ways that can include a single up-
front payment, a fixed annual payment, a share of the revenues from the
project, or a combination of such payments. In some cases, a minimum
annual payment per acre or per turbine may be assessed, especially
during periods prior to development or during non-activity. Often,
lease terms will include a royalty payment or operating fee based on
power generation or revenues.
Our research indicates that for projects commissioned in the 1998-
2005 period, payments to landowners on privately leased lands for wind
power generation tend to be fixed annual payments in the range of
$1,500 to $6,000 per turbine, or minimum rents of $1,500 to $5,000 for
each megawatt of nameplate capacity. This is equivalent to royalty
payments on private leases generally ranging from 1 percent to 4
percent or more of gross revenues on an annual basis, with lower rates
seen in more remote areas and higher rates in areas nearer to markets
or areas with other competing land uses. Sometimes the lease payments
will be set lower in the initial years of operation, and escalate in
later years after capital costs have been recovered. Onshore wind
energy development projects may also be subject to annual property
taxes assessed by local governments on the value of improvements made
to the property. These rentals and fees compensate the landowner for
the lessee's use of the land. Such factor payments are an essential
element in achieving efficient allocation of the available factors of
production for any good. They also confirm that alternative energy
projects, notwithstanding their prospective social benefits, can be
expected to support payments for use of public land.
There is a limited amount of legislative history that would give
insight on the type of alternative energy payment structure intended by
the Congress. For this reason, we reviewed alternative energy
regulatory regimes implemented by other governmental agencies in the
United States and overseas.
We found that the programs employed overseas, in countries with the
most mature offshore wind industries, such as Denmark, Germany, and the
United Kingdom, were fundamentally different from the program
authorized by the EPAct. Hence, they generally do not offer the best
comparisons for determining appropriate financial terms for our
domestic offshore program. In Denmark, for example, which has the most
extensive offshore wind program in the world, operators are not charged
rentals or operating fees. On the other hand, annual rent provisions
based on production are used by the United Kingdom and are part of the
required lease terms for wind leases issued offshore Texas in state
submerged lands. The United Kingdom requires an annual rent payment
based on two percent of revenue. Between 2005 and 2007, the State of
Texas issued the nation's first offshore wind energy leases on both a
competitive and non-competitive basis that included annual fees per
tract paid until production and then production royalty schedules that
would increase payment rates from 3.5 percent to 6.5 percent of revenue
over the productive life of the lease.
For commercial onshore wind facilities sited on Federal lands
managed by the Bureau of Land Management (BLM), the operator pays a
fixed annual payment. That payment is derived from a formula that
effectively captures a share of expected revenues based on capacity
using fixed parameters; i.e., a 3 percent royalty, a capacity factor
(30 percent), and an assumed average electricity price of $0.03 per
kilowatt hour. This formula generates a fixed fee for all lessees of
$2,365 per 1000 kilowatts (kW) (or 1 megawatt, MW) of anticipated
installed capacity. The BLM minimum rent is phased in over the first
three years at 25 percent for year 1, 50 percent for year 2, and 100
percent for year 3 and thereafter. The full minimum rental fee is
required after the start of commercial operations and is due annually
in
[[Page 39408]]
advance on a calendar year basis. In summary, we found that most
financial requirements for wind energy leases are designed with
relatively modest lease terms, which provide a market-based and fair
return to the owners of the leased lands, but which are not so high as
to discourage development of alternative energy projects. The proposed
rates in this rule are in line with financial terms used elsewhere and
would constitute a small fraction of the expected offshore alternative
energy project costs. We request your comments on whether or not
information from other sources supports this conclusion. If not, please
provide such alternative information.
Potential OCS Feasibility. We supplemented this guidance with a
detailed economic analysis of potential alternative energy projects on
the OCS. See Final Summary Report, ``MMS Offshore Renewable Energy
Program--Cost-Benefit Analysis to Support the Rulemaking Process for 30
CFR 285,'' Industrial Economics, Incorporated, October 18, 2007. This
report is available from MMS upon request. Part of the rationale for
the payment levels proposed herein was drawn from the cost-benefit
analysis carried out for this rule. This analysis considered an
alternative energy development forecast of 73 wind, wave and subsurface
water current projects that could enter the operations term within the
20-year period, from 2007 through 2026, assuming that development would
be economically viable.
The economic analysis evaluated four different payment scenarios
that utilize a range of rental and operating fee magnitudes and forms
from which we are likely to choose. These scenarios consisted of a
baseline payment scenario in which no payments would be required and 3
additional scenarios reflecting progressively higher rental and royalty
terms, some phased in over time. The high payment scenario incorporates
a step scale for rental that may be useful if we found it necessary to
encourage diligence during the site assessment phase or to help ensure
a fair return. A step scale formulation for the operating fee also may
be used for a different reason. During production, the step scale
allows lessees to keep more of the revenues in early years to help
recover project capital costs and for the repayment of debt, in
comparison to a fixed operating fee set around the mid-point of the
step scale levels. This step scale formulation tends to increase short-
term cash flow, thereby raising the project's rate of return and hence
profitability.
Results from the economic analysis show that the same number of
projects (55) would be viable (i.e., we estimated a nominal internal
rate of return of at least 11 percent) under the baseline (no
payments), low and intermediate payment scenarios. Three of those
projects (approximately five percent) became nonviable under the high
payment scenario. Therefore, a lessee's decision to develop a wind,
wave or subsurface water current project would only be slightly
sensitive to our imposition of anticipated payments in the high payment
scenario, and even then only in a small proportion of all cases. A
detailed technical report documenting this forecast as well as the
results of the cost-benefit analysis may be viewed at www.mms.gov.
In addition to the economic analysis, we carried out an ancillary
and more focused income analysis to estimate how the allocation of
profits between lessee interests and the government would vary under
the low, intermediate and high payment scenarios. We evaluated 3
hypothetical wind energy projects; one with an installed capacity of
150 MW assumed to start power generation in 2020 and two with an
installed capacity of 500 MW, one assumed to start power generation in
2010 and the other in 2020. Using cost estimates from trade periodicals
and Internet sites and choosing revenue levels (from power sales,
renewable energy credits, capacity payments, and credits for providing
ancillary services) that yield minimally profitable project economics
(internal rate of return of 10 percent), we compared project owner and
government shares of net revenue. We found that the payments assumed in
the intermediate payment scenario allocated approximately 40 percent of
the net revenue to the government for the 2010 project. For the two
2020 projects, the government share fell to about 15 percent (with
internal rates of return above 12 percent) in the intermediate payment
scenario and rose to 40 percent only in the high payment scenario. This
exercise supports the view that the government receipts, with the
payment schedules we considered, should not discourage truly feasible
alternative energy projects. Further, while the initial offshore
alternative energy developments could be comprised of a significant
proportion of marginal projects, the long term profit outlook is
brighter, because future lease owners will have the opportunity to
install newer and more efficient equipment. We base this optimistic
outlook on an expectation that most of these future leases should be
able to utilize newer technology in shallow water locations near major
metropolitan areas and sell power for generally higher electricity
prices than will be the case for the initial alternative energy leases
issued on the OCS.
External Benefits. In choosing initial acquisition, rental, and
operating fee amounts, we considered that the cost to society for
generating electricity has two components, the internal cost to the
generator and the external cost in terms of pollution. External costs
attributed to environmental degradation are less for electricity
generated with renewable energy resources than from conventional fuels.
A report issued by the European Wind Energy Association in May
2005, titled Support Schemes for Renewable Energy--A Comparative
Analysis of Payment Mechanisms in the European Union, discusses the
issue of external costs and presents findings applicable to this
discussion. Page 11 of the report states that:
The European Commission's ExternE project on external costs
estimated that the cost of producing electricity from coal or oil in
the European Union would double, and the cost of electricity
production from gas would increase by 30 percent, if external costs,
in the form of damage to the environment and health, were taken into
account.
In contrast, the external cost of generating electricity from
renewable energy sources is much less significant, accruing from the
emissions of vessels and equipment used during the construction,
operation and decommissioning of the generation facilities. Clearly,
external costs to society may be reduced by substituting renewable
energy for fossil fuels.
However, avoided damages are not easily assessed for individual
projects, and the exact terms of a payment structure that would
properly credit the benefits to renewable energy developers is not
known. In the U.S. there are already important categorical incentives
which would apply to all onshore and offshore wind energy production
projects. According to Title 26--Internal Revenue Code, Subtitle A,
Chapter 1, Subchapter A, Part IV, Subpart D, Sec. 45(a) and 45(d)(1),
wind energy generators may claim a production tax credit (PTC) for a
qualified facility during the 10-year period beginning on the date the
facility was originally placed in service. The credit amount for 2007
was $0.02 per kilowatt-hour, according to the Internal Revenue
Service's Internal Revenue Bulletin 2007-21, Notice 2007-40, published
on May 21, 2007. Wave and subsurface water current projects are not
eligible to
[[Page 39409]]
claim the credit. Aside from the PTC, renewable portfolio standards
established by many states encourage offshore alternative energy
activities by requiring that part of the electricity sold by a retail
electricity supplier be generated from renewable sources. This raises
the demand for alternative energy and serves to make the related
projects more profitable.
We view the existence of such provisions as the principal
compensation to project owners for the social benefits of their
alternative energy projects, and want to ensure that our payment
proposals do not seriously undermine the purpose of that compensation.
To understand the financial implications of both our payment proposals
and the PTC, we quantified the economic significance of both elements
as part of the feasibility analysis mentioned above. Recall that we
found that the forecasted number of profitable projects, 55 out of
73,would be the same under both the baseline no payments case (i.e.,
rentals or operating fees) and the case where the rental and operating
fee levels proposed here would apply to initial OCS alternative energy
projects (for the high case payments scenario, 3 of the 55 projects
became unprofitable). In contrast, we estimate that only 31 of those 73
projects would be economically viable without the PTC. That is,
introducing payments at the levels proposed in this rule has no
apparent effect on economic viability over the range of project types
and sizes considered in our analysis, while eliminating the PTC would
convert 24 of these 55 otherwise profitable projects from economically
viable to nonviable.
These findings lead to the expectation that the size of the
proposed fee payments would be a small portion of the value of the PTC.
To confirm this expectation, we focused on a set of these projects
already identified as being most sensitive to added costs: a
representative sample of 12 of the 24 projects in our analysis that
could be made unprofitable if the PTC were eliminated. For each
project, we calculated both the current and discounted values of the
fee payments and the PTC, for both the 10-year period that the PTC
would be in effect as well as over the entire life of the project. For
these four sets of cases, we found that the ratio of the value of the
fee payments to that of the PTC varied across projects from a low of
about 5 percent to a high of about 15 percent. So, our analysis of the
data confirmed our expectation that the fee payments we propose would
not be a significant portion of the value of the PTC, that is, it would
not reduce the PTC by more than 15 percent in any case and, in most
cases, a 5 to 10 percent reduction in the effective net value of the
PTC could be expected. Thus, we conclude that the proposed size of our
payments would not adversely affect the rate of offshore alternative
energy development. We request comments on whether the results of this
analysis accurately characterize the basic economics of anticipated OCS
alternative energy projects.
Another part of the rationale for the payment scheme we propose for
alternative energy lessees relates to the societal benefits of these
projects compared to traditional OCS oil and gas projects. By requiring
lower payments for alternative energy leases, we help electricity
generators reduce internal costs, thereby improving the economics of
electricity generation from alternative energy sources. At the same
time, based on the analysis discussed previously, we do not expect
these payments to materially affect the economics of alternative energy
projects. It should be a rare occurrence that the decision to develop
an alternative energy project depends on the level of the modest rent
and operating fees under consideration. Yet, these relatively lower
payment terms should still ensure a fair return to the public, when
benefits resulting from reduced external costs to society are taken
into account. Additional discussion of the proposed payment terms and
their effect on project economics continues under Sec. 285.505 of the
preamble.
An important goal of the first phase of our proposed alternative
energy program is to provide financial terms that do not discourage the
alternative energy industry from demonstrating the practicality of
alternative energy production on the OCS. Thus, we propose to collect
payments of relatively small size initially from a nascent OCS
alternative energy industry. After successful demonstration of the
commercial viability of that activity, we may decide to adjust
financial terms. To provide for that adjustment, these proposed
regulations would authorize us to consider revisions to financial terms
for established projects based on their operating experience and for
new projects based on prevailing and anticipated conditions in the
energy market.
Financial Assurance Requirements
This portion of the subpart is intended to minimize the risk of
financial loss to the Federal Government if lessees, operators and
grant holders default in fulfilling their obligations under this rule
and other applicable laws or regulations. The proposed rule would
fulfill that purpose in two ways: through the prequalification of
lessees, operators, and grant holders, and providing sufficient
financial collateral to assure lessee, operator, and grant holder
obligations can be fulfilled by a third party in the event of default.
The rule anticipates different requirements for ranges of activities
for commercial production leases, limited leases, ROW grants, and RUE
grants.
The financial assurance portion of the proposed rule is divided
into four general areas:
(5) Basic financial assurance requirements for commercial leases;
(6) Financial assurance for limited leases, ROW grants, and RUE
grants;
(7) Requirements for financial assurance instruments; and
(8) Changes in financial assurance.
Basic Financial Assurance Requirements for Commercial Leases
The financial assurance requirements for commercial leases are set
forth first in the proposed rule. Generally, the financial assurance
required by MMS will be used to ensure the performance of the following
lease obligations:
(a) The projected amount of rentals and other payments due the
Government over the next 12 months;
(b) Any past due rentals and/or other payments;
(c) Other monetary obligations; and
(d) The costs, as estimated by MMS, of lease abandonment and
cleanup.
Before MMS will issue a commercial lease, the prospective lessee
must provide either a lease-specific $100,000 bond; alternative
financial assurance that the Regional Director determines protects U.S.
interests to the same extent as the bond; or evidence that your
designated lease operator has provided commensurate financial
assurance.
Additional bonds/financial assurance are required before the MMS
will approve a Site Assessment Plan (SAP) or a Construction and
Operations Plan (COP). The amount of this additional bond/financial
assurance will be determined by MMS and be based upon the type and
number of facilities to be used in your planned activities.
Financial Assurance for Limited Leases, ROW Grants, and RUE Grants
The proposed rule provides that when you obtain a limited lease,
ROW grant or RUE grant, you must post a lease or grant-specific bond or
other approved financial assurance in the amount of $300,000. Unlike
commercial leases, further financial assurance is not automatically
triggered by applications
[[Page 39410]]
for activity such as the Site Assessment Plan and the General
Activities Plan. However, MMS may require you to increase your level of
financial assurance as activities progress on your limited lease or
grant.
Requirements for Financial Assurance Instruments
This portion of the proposed rule lays out the provisions that must
be included in any financial instrument you use for financial
assurance. The financial instrument must be payable to MMS upon demand,
on a form approved by MMS, and guarantee compliance with all terms and
conditions of the lease or grant. Surety bonds must be issued by a
surety listed in the current Department of the Treasury Circular 570.
This portion of the proposed rule also provides guidance on the
types of financial instruments that MMS will accept.
Changes in Financial Assurance
This portion of the proposed rule discusses topics such as
termination or reduction of financial assurance instruments and
reduction of required bond amounts. Also covered are topics such as
forfeiture of bonds and MMS requirements for supplemental bonds.
Revenue Sharing
This proposed rulemaking also addresses the requirements related to
the new subsection 8(p)(2)(B) of the OCS Lands Act (43 U.S.C.
1337(p)(2)(B)), which describes how revenues received by the Federal
Government as a result of payments from alternative energy projects or
alternate uses of existing facilities would be shared, in some cases,
with affected States. Proposed Sec. Sec. 285.540 through 285.541 set
out a process for implementing revenue sharing from alternative energy
projects. We invite your comments on the following issues associated
with that implementation process.
1. The law does not specifically address the eligibility of a State
with submerged lands within 3 miles of the edge of a project but with a
coastline more than 15 miles from the geographic center of that
project.
The Secretary shall provide for the payment of 27 percent of the
revenues received by the Federal Government as a result of payments
under this section from projects that are located wholly or
partially within the area extending three nautical miles seaward of
State submerged lands. Payments shall be made based on a formula
established by the Secretary by rulemaking * * * that provides for
equitable distribution, based on proximity to the project, among
coastal states that have a coastline that is located within 15 miles
of the geographic center of the project.
Has MMS interpreted the pertinent language of EPAct in a manner
that is reasonable and provides the most equitable share of revenue to
adjoining states?
2. Using the proposed methodology for determining project area and
the geographic center of the project, the share of each eligible State
would be independent of the location of any concentration of project
activities. Should the formula for distributing revenues allow the
flexibility to compensate for a situation in which a qualified project
area lies off more than one State but in which the vast majority of
facilities and activity are concentrated off a single State? For
example, a project area might be 9 miles long and straddle the
administrative boundary between two States, with the first phase of the
project constructed at one end or, alternately, the completed project
might leave perhaps 90 percent of the facilities at one end. The
proposed methodology would assign the same State shares, regardless of
where the project activities were concentrated. One way to compensate
for this would be to identify one or more ``special project areas,''
which could include only the geographic focus of generation activities,
would have their own geographic centers, and would be used only for
determining shares of operating revenues. (Creation of such special
project areas would not affect eligibility but would alter revenue
shares.) Is this a reasonable approach for MMS to take? Is there
another approach permitted by law that would achieve the same purpose?
3. Should the rule restrict MMS's authority to redefine project
areas with regard to time or other factors? For example, should such
redefinitions be limited to a period at the end of each fiscal or
calendar year? Or should the original project area remain fixed,
irrespective of changes in the acreage used for project activities?
4. Is the inverse distance formula proposed for this rule a
reasonable method for achieving an equitable distribution of revenues?
If not, are there alternative formulas that would be superior? If so,
what makes them superior?
5. What other issues should MMS consider in this rulemaking?
Section by Section Discussion for Subpart E
Payments
Section 285.500 How do I make payments under this part?
This section explains how persons would submit application and
filing fees, as well as payments due under the provisions of leases,
easements and ROW grants. Some payments would be made electronically
through the Pay.Gov Web site at: https://www.pay.gov/paygov/ other
payments will be made directly to the Minerals Revenue Management
office in Denver, Colorado. We plan to promulgate subsequent
regulations to describe specific payment procedures for the alternative
energy and alternate use program. Until that occurs, we propose that
payment procedures for this program follow the model of the oil and gas
program cited at 30 CFR 218.51.
We request suggestions concerning how the payment procedures should
be structured and what the content of alternative energy payment
procedures should include.
Depending on the method of award we select for issuing a lease or
grant, persons that seek access to the OCS for alternative energy
activities may be required to submit a bonus or other up-front cash
payment for a lease or grant issued competitively or an acquisition fee
for a lease or grant issued noncompetitively. We then propose that
lessees pay rental during the preliminary and site assessment terms.
During the operations term, commercial lease holders would be obligated
to pay operating fees or a rental. We propose no operating payments for
limited leases, easements and ROW grants because they do not produce.
Only rental would be paid by limited lease holders for each year of a
specified lease term, and be paid by grantees for as long as an
easement or right-of-way is in effect.
Section 285.501 What deposits will MMS collect for a competitively
issued lease, ROW grant, or RUE grant?
This section provides the deposit requirements for persons
submitting a bonus or other cash payments on a competitive lease, ROW
grant, or RUE grant. Sealed bids would be offered with a deposit of 20
percent of the bid amount, unless specified otherwise in the Final Sale
Notice. Bidders participating in ascending auctions would deposit a
cash payment as established in the Final Sale Notice. Procedures for
submitting the balance owed on accepted high bids would also be
established in the Final Sale Notice.
[[Page 39411]]
We traditionally require a 20 percent deposit on sealed bids submitted
in oil and gas sales to assure bids are genuine, but will consider
proposals for setting a different deposit requirement for alternative
energy lease sales. Historically, a small number of bidders have failed
to execute an oil and gas lease within the allotted time period. In
those situations the bidders forfeit their deposits. MMS is considering
implementation of a similar requirement for alternative energy
competitive auctions.
We request your comments on setting the deposit amount and deposit
forfeiture requirements, including the extent to which these amounts
and requirements should be related to the type of auction format
employed.
Section 285.502 What initial payment will MMS require to obtain a
noncompetitively issued lease, ROW grant, or RUE grant?
Developers are allowed to submit unsolicited applications for
alternative energy leases. We are required by law to give the public
notice of such applications, and determine if other parties are
interested in competing for the lease rights. In cases where there is
no competitive interest, we may issue a lease to the applicant. We
propose an acquisition fee of $0.25 per acre for noncompetitive leases.
For example, an application to lease a single OCS block of 25 square
miles in area, or 16,000 acres, would be submitted with an acquisition
fee of $4,000. However, a fee that small will not necessary provide a
fair return to the United States for use of the seabed. If we decide to
issue a noncompetitive lease, we are considering whether to require an
additional payment equal to the difference between the minimum bid we
would have set for a competitive sale offering in the same area and the
acquisition fee. In this way, the sum of the payments made to acquire
the lease noncompetitively will provide a similar return to the
government regardless of whether the lease is issued competitively or
noncompetitively. We seek comments on the adoption of this alternative
approach.
Following our determination that there is competitive interest, a
lease or grant sale would be held. If the applicant submits a qualified
bid, the acquisition fee would be applied to the applicant's bid.
Otherwise, we would not refund the acquisition fee.
We are not proposing to require an acquisition fee payment when
applying for a noncompetitive ROW grant or RUE grant. We invite
comments on whether such a payment should be included in the final
rule. We request comments concerning whether the size and treatment of
acquisition fees proposed in this section is appropriate and whether or
not it would discourage expression of any legitimate interest in a
possible alternative energy lease.
Section 285.503 What rentals will MMS collect on a commercial lease?
This section would provide a rental rate of $3 per acre per year
for a commercial lease, unless we specify a different rate in the Final
Sale Notice for leases issued on a competitive basis. When we issue a
commercial lease noncompetitively, the elements of the rental and any
adjustments to it would be given in the lease instrument. Rental for
the first 6 months, or preliminary term, would be due when we issue the
lease. Rental for the next 12 months and for each subsequent year
during the site assessment term would be due at the beginning of the
year for the entire lease area until approval of the COP, which begins
the operations term and when the obligation to pay operating fees would
begin. We propose to apply the same interest charge to late rentals
from alternative energy leases as we do to late payments from oil and
gas leases under 30 CFR 218.54.
We may specify the payment of rental during part, or all, of the
operations term instead of or in addition to operating fees, in the
Final Sale Notice for leases issued on a competitive basis. We reserve
this right partly to make any adjustments that may be needed in
connection with the operating fee structure we propose in Sec.
285.505.
For example, a situation could arise where a lease is developed in
phases, and both rental and operating fees could be due on different
parts of the commercial lease during the same time period. In this
case, rental would be paid on portions of the lease not authorized for
commercial development, and operating fees could be required for the
portion of the lease with commercial operations.
A variety of considerations are behind our proposed baseline $3.00
per acre rental value, subject to any change in the Final Sale Notice
for competitively issued leases. In general, a rental payment serves
several purposes. It compensates the Federal government for the
opportunity cost of precluding other incompatible uses of the OCS area.
Also, it serves as a holding cost that encourages the lessee to
expedite activity on the area. Under some circumstances, we may
determine that charging progressively higher rental rates over time
would be desirable to obtain a fair return and perhaps be necessary to
induce diligent operations. In those cases, we may adopt a rental rate
schedule instead of a constant rental rate.
The proposed baseline commercial alternative energy lease rental
rate of $3 per acre would be less than one-half of the lowest oil and
gas rental rate of $6.25 per acre for oil and gas leases in shallow
waters of the Gulf of Mexico issued in 2007. Rentals, as well as
operating fees, proposed in these regulations for commercial
alternative energy leases would be lower than those for other uses of
the OCS such as oil and gas development, in part to encourage industry
to invest in offshore alternative energy technology. Another reason for
setting lower payment rates for commercial alternative energy leases
than for oil and gas leases is the lower environmental costs of
generating electricity with renewable energy, rather than fossil fuels
such as oil, gas and coal, as discussed in the Overview to this part.
Since external costs of electricity generated from renewable energy are
much lower than external costs of electricity generated from fossil
fuels, we propose to provide for relatively lower payments by
alternative energy developers to encourage investment.
We request comments concerning whether the baseline rental fee
proposed in this section would be appropriate for lessees and fair to
the public.
Section 285.504 What rentals will MMS collect on a limited lease?
This section would provide a $3 per acre per year rental rate for a
limited lease, unless a different rate is specified in the Final Sale
Notice for leases issued on a competitive basis. When we issue a
limited lease noncompetitively, the rental and any adjustments to it
would be established in the lease instrument. Rental for the first 6
months would be due when MMS issues the lease. Rental for the next 12
months and for each subsequent year would be due at the beginning of
the year for the entire lease area through the end of the lease term.
We propose to apply the same interest charge to late rentals from
alternative energy leases as we do to late payments from oil and gas
leases under 30 CFR 218.54. These rental requirements are equivalent to
those on a commercial alternative energy lease during the preliminary
and site assessment terms, before activity begins for constructing and
producing energy.
We request comment on whether there is any valid reason to charge a
different rental for limited leases than for commercial leases.
[[Page 39412]]
Section 285.505 What operating fees will MMS collect from a commercial
lease?
This section provides that the annual operating fee payments for
commercial alternative energy leases would be determined by a formula
related to the anticipated, rather than actual, gross value of the
electricity generated on the lease. Upon approval of a COP for a
commercial lease and commencement of operations for commercial
projects, rental payments typically would cease. We propose to then
invoke the production charge in the form of a capacity-based operating
fee payment. This operating fee would not apply to limited leases as
those leases do not allow commercial production of energy. These
payments would be due on a schedule established in the Final Sale
Notice and lease instrument. We also propose to apply the same interest
charge to late operating fees from alternative energy leases as we do
to late payments from oil and gas leases under 30 CFR 218.54. We
propose the following formula for determining the annual operating fee:
F M H c P r
(annual operating = (installed * (hours per year) * (capacity factor) * (power price per * (operating fee
fee) capacity in units unit of rate)
of production) production)
The operating fee rate r, like a royalty rate, is one element in
the formula. The other elements serve as reasonable and easily
observable proxy measures of the output and price related to a specific
operation. We propose that the fee rate be set equal to 1 percent
during the first two years of the operations term, and would be set
equal to 2 percent for the third and remaining years of the operations
term, unless we specify otherwise in the Final Sale Notice for
competitively issued leases. We would establish initial values for
other elements in the formula, such as the power price and capacity
factor, and provide for periodically revising the initially selected
values based on new information. When we issue a commercial lease
noncompetitively, the elements of the operating fee and any adjustments
to it would be given in the lease instrument.
Using the proposed payment terms, government lease revenues for a
commercial lease in any given year would depend on the phase of the
project and the relevant prices as designated by MMS for electricity in
the Region. The proposed lease rental and operating fee payments can be
illustrated with an example for wind energy. An offshore wind lease,
issued non-competitively, on 12,000 acres of the OCS would be required
to pay $36,000 to the Government annually based on a charge of $3.00
per acre in rent during the site assessment term under Sec. 285.503.
Once we approve the COP, the operations term begins, and operating fees
typically are payable. For a lease with an installed capacity of 200
megawatts and an operating capacity factor of 0.38, i.e., 38 percent,
the operating fee payable to the Government would be about $333,000
during the first two years of the operations term and about $666,000
annually thereafter if the applicable electricity price was $50 per
megawatt hour. Additionally, if the approved project plan has easements
covering 2,000 acres, an additional $10,000 in rentals ($5.00 per acre)
would be collected per year under Sec. 285.506.
During the production phase of a project, a capacity-based
operating fee, rather than a production amount or value based fee, has
several advantages. The capacity based fee avoids detailed audits of
production sales accounts, and mitigates subsequent disagreements and
possible legal actions which entail a significant expense to both
lessees and the government. However, applying it as well during the
pre-production construction phase that begins with approval of the COP
appears both inappropriate and unnecessary, since imposition of a
simple rental fee can better serve the objective in that period of
encouraging diligent efforts to begin production.
In either the pre-production construction or production phase, at
least two reasons can be cited for employing a rental rate or operating
fee higher than the rental rate charged during the preliminary and site
assessment period rental rate. First, we would only approve a COP for a
project that has the potential for commercial operations. Hence, a
lease with proven resource potential is likely more valuable, and
should command a higher payment. Second, you will be using more
intensively the leased area when the project moves from the site
assessment phase to construction work phase. Hence, while you are not
depleting a public asset such as oil or gas, you are causing increased
disturbances on public property which makes a higher payment
appropriate. The operating fee rate in the first 2 years of the
operating term, even at the reduced level proposed, serves as that
increased payment while avoiding confusion with the rental applied
before the COP. Also, phasing in the operating fee is similar to the
BLM fee for onshore wind ROWs for projects, with the minor difference
being that a BLM grantee is charged 25 percent of the full operating
fee in the first year and 50 percent in the second after approval of a
project, instead of 50 percent in both years as we propose.
Prior to holding a lease sale, a high level of uncertainty exists
in the estimation of the amount of energy a given facility could
generate and in the evaluation of the economic viability of a project
planned for an area to be leased. Although we have included a baseline
2 percent fee rate in the proposed regulation, subject to revisions in
the Final Sale Notice, this rate is not necessarily the appropriate fee
rate for every wind, wave, subsurface water current or other renewable
energy project that might be developed on the OCS. However, in the
interests of reducing uncertainty, where possible, for pioneering OCS
alternative energy projects and stimulating investment in such
projects, we intend to use a 2 percent fee rate for the first
commercial alternative energy leases issued on the OCS after the first
2 years of the operations term.
For leases issued competitively, we propose that an alternative
energy lease on the OCS may be issued, depending of the bidding system,
with constant or sliding operating fee rates. With a sliding fee rate,
the operating fees could automatically change over the life of a lease
according to a sliding scale schedule specified in the Final Sale
Notice and/or lease instrument. The term sliding in this context
applies generally to any change in the operating fee rate over time or
other increment. A sliding fee rate could provide for future
adjustments based on the analysis of either market data or actual
project data. Another example would be a case where the fee rate used
to calculate the operating fee changes in a specific manner at
predetermined time intervals. If a sliding operating fee rate is used
as a bid variable in an auction, MMS
[[Page 39413]]
would specify a mathematical function to determine changes to the value
of the operating fee over time and the function variable which would be
bid. The sliding operating fee in any year would be the amount derived
from this function in conjunction with the operating fee formula.
If the operating fee rate is constant, it could only vary from one
period to the next following approval of a request for reduction or
waiver. In addition to a predetermined sliding fee process, we reserve
the right to review relevant electricity price information and capacity
factor information as they relate to the formula, established in
subpart E, and adjust the values used in the operating fee formula
accordingly. Upon the completion of the first year of commercial
operations on the lease, MMS may adjust the capacity factor as
necessary (to accurately represent a comparison of actual production
over a given period of time with the amount of power a facility would
have produced if it had run at full capacity). Thereafter, MMS may
adjust the capacity factor (to accurately represent a comparison of
actual production over a given period of time with the amount of power
a facility would have produced if it had run at full capacity) no
earlier than the completion of the sixth year of operation, or any five
year period thereafter. We request comments on the frequency of the
review and adjustment of the capacity factor.
In either the case of a competitively or noncompetitively issued
lease, we may reduce or waive fee rates under the process given in 30
CFR 285.509. We would establish operating fees for activities not
related to the generation of electricity, such as the generation of
hydrogen, on a case by case basis through the lease sale process.
Operating fees and other payment requirements for activities conducted
as an alternate use of an OCS facility, such as an oil and gas
platform, previously authorized under the OCS Lands Act, are explained
in Subpart J of these proposed regulations.
In addition to the capacity-based fee approach being proposed, MMS
also considered other methods for computing the operating fee. They
included fees based on the actual amount or value of production either
in the current year or in prior years, fees that varied depending on
the characteristics of the project (e.g., water depth, distance from
shore, output efficiency, etc.), fees that involved a combination of
rentals and output-based charges, or some combination of these options.
We are requesting comments on whether the proposed capacity-based
operating fees are always in the best interests of the alternative
energy program from the perspective of both lessees and the Government,
or whether there are circumstances where a different type of fee would
be more appropriate. In the latter case, we would like you to identify
what those cases are, and how lessees or the Government would benefit
from an operating fee based on other than anticipated capacity
utilization as a proxy measure for production quantity. To the extent
practical, please include detailed examples and explanations for any
alternatives suggested.
Section 285.506 What rental payments will MMS collect on a project
easement?
This section would provide an annual rental rate of $5 per acre for
project easements, or a minimum of $450 per year, which would be due
initially upon approval of the COP or GAP. Subsequent payments would be
made on an annual basis, probably in conjunction with payments due
under Sec. 285.505, unless we specify otherwise in the lease for the
associated commercial project. The width of the area covered by a
project easement for a cable or pipeline would be 200 feet. The area
covered by an installation, outside of the cable or pipeline corridor,
would be limited to the areal extent of anchor chains, other devices,
or facilities associated with the installation.
We grant ROW easements for electrical cables and pipelines under
the existing oil and gas program, similar to project easements under
the proposed alternative energy program. Rental rates for grants issued
through the oil and gas program are specified by regulation and provide
a precedent. The level of compensation due to the government for grants
issued under the oil and gas program is an appropriate analog for uses
under the proposed program. Accordingly, we propose to charge project
easement holders a constant rental rate equal to $5 per acre,
commencing with our approval of your COP or GAP and continuing until
lease termination.
We request comment on whether this is the most appropriate way to
set rentals for easements and whether the size of the rental is
appropriate.
Section 285.507 What rental payments will MMS collect on ROW grants or
RUE grants associated with alternative energy projects?
This section would provide the rental rates for ROW grant and RUE
grants. Proposed rental rates for alternative energy ROWs parallel
rentals considered fair and reasonable for oil and gas ROWs, and would
be due in the amount of $70 per statute mile that a ROW crosses. For
sites outside the main corridor, an additional rental of $5 per acre,
or a minimum of $450 per year, would be charged. Likewise, proposed
rental rates for an alternative energy RUE would parallel those for oil
and gas RUEs and be charged at an annual rental rate of $5 per acre, or
a minimum of $450 per year. The first rental payment would be due when
the ROW or RUE request is filed. Subsequent payments could be made on
an annual basis, for a 5 year period or for multiples of 5 years. We
propose to apply the same interest charge to late rentals due on ROW
grants or RUE grants for alternative energy projects as we do to late
payments from oil and gas ROWs and RUEs under 30 CFR 218.54.
ROW authorizations approved under the oil and gas program are
granted for electrical cables and pipelines, and similar requests would
also be approved under the proposed alternative energy program. The
value of compensation due to the government for ROW grants issued under
the oil and gas program forms a useful precedent, which also appears to
be an appropriate analog for alternative energy activities. As
discussed in the last paragraph of the preceding section on project
easements, the rental requirements for an alternative energy RUE are
related to the payment requirements for oil and gas RUEs.
Proposed rental rates for oil and gas pipeline ROW grants were
published on October 3, 2007, in the Federal Register, Vol. 72, No.
191, in 30 CFR 250.1130 of the rulemaking for 30 CFR parts 250, 253,
254, 256, RIN 1010-AD11, titled Oil and Gas and Sulfur Operations in
the Outer Continental Shelf--Pipelines and Pipeline Rights-of-Way. If
we determine that the proposed oil and gas ROW rental payment
regulations should be revised as a result of new information received
through comments, we would also consider this information as it might
apply to alternative energy ROW rental rates.
We request comment on whether this is the most appropriate way to
set rentals for easements, and whether the size of the rental is
appropriate.
Section 285.508 Who is responsible for submitting lease or grant
payments to MMS?
For each lease, easement, ROW or RUE, one person, designated as
payor, would be responsible for making all payments. All payors and the
lessee shall maintain auditable records in accordance with regulations
in Subpart
[[Page 39414]]
A. We may also issue guidance related to recordkeeping.
Section 285.509 May MMS reduce or waive lease or grant payments?
This section provides that the MMS Director has the authority to
reduce or waive a rental or operating fee, including components of the
operating fee such as the fee rate or capacity factor, when necessary
to encourage continued or additional activities. Applications to modify
lease payment terms must include information that demonstrates that
continued or additional activity would not be economic without the
reductions or waiver requested. No more than six years of your
operations term will be subject to a full waiver of the operating fee.
It is our intent to use relevant electricity market and operating
information to set the initial values for the power price and capacity
factor of the operating fee formula, and to revise the same parameters
after a lease is issued, in Sec. Sec. 285.505(c)(2) and (3). Beyond
that mechanism for revising payment requirements, the Director may
consider a reduction or waiver of payments. In practice, we anticipate
that most requests for reduced payments would involve a reduction in
the fee rate of the operating fee formula. The Director may authorize
such reductions if an applicant can show that market or operating
conditions have changed significantly in a way that reduces project
cash flows to uneconomic levels.
Section 285.510 Through 285.514 [Reserved]
Basic Financial Assurance Requirements for Commercial Leases
Section 285.515 What financial assurance must I provide when I obtain
my commercial lease?
Before MMS will issue a commercial lease, the applicant must
provide either a $100,000 basic lease-specific bond or another MMS
approved financial assurance. You may also satisfy this requirement by
providing proof that your designated lease operator provided the bond
or approved financial assurance.
Section 285.516 What are the financial assurance requirements for each
stage of my commercial lease?
Minimum financial assurance requirements for each stage of lease
development are presented in this section. A $100,000 basic bond or
other financial assurance is required at lease issuance. A second bond
or financial instrument, in an amount determined by MMS, is due before
the MMS will approve your Site Assessment Plan (SAP). And a third bond
or financial instrument, in an amount determined by MMS, is due before
the MMS will approve your Construction and Operations Plan (COP).
Section 285.517 How will MMS determine the amounts of the SAP and COP
financial assurance requirements associated with commercial leases?
The MMS will determine the amount required by considering projected
amounts of rentals and other payments due the government over the next
12 months; any past due rentals or other payments; and the costs of
lease abandonment and cleanup. You may increase an existing bond or use
a combination of existing bonds and other approved financial assurances
to satisfy your requirements.
Section 285.518 [Reserved]
Section 285.519 [Reserved]
Financial Assurance for Limited Leases, ROW Grants, and RUE Grants
Section 285.520 What financial assurance amount must I provide when I
obtain my limited lease, ROW grant or RUE grant?
Before MMS will issue a limited lease, ROW grant, or RUE grant, the
applicant must provide either a $300,000 basic limited lease or grant-
specific bond or another MMS approved financial assurance. The basic
bond for a limited lease or grant is higher than the basic bond on a
commercial lease because we anticipate that obligations on a limited
lease or grant will begin to accrue sooner, but will not be as
extensive as the obligations on a commercial lease. With the commercial
lease, we have established periods to reassess the bond amount (i.e.,
before approving the SAP or the COP). We do not have these automatic
reassessments under a limited lease or grant. Also, a limited lease has
a short term, only 5 years and we do not anticipate reassessing the
bond amount, unless the applicant proposes significant or complex
facilities. You may also satisfy this requirement by providing proof
that your designated limited lease or grant operator provided the bond
or approved financial assurance.
Section 285.521 Do my financial assurance requirements change as
activities progress on my limited lease or grant?
The MMS may require you to provide additional financial assurance
as activities on your lease progress and projected liabilities of
rentals and other payments due the government over the next 12 months;
any past due rentals or other payments; and the costs of lease
abandonment and cleanup increase.
Section 285.522 through 285.524 [Reserved]
Requirements for Financial Assurance Instruments
Section 285.525 What general requirements must a financial assurance
instrument meet?
All bonds and other forms of financial assurance must be payable to
MMS upon demand and be in a form approved by MMS. Your surety bonds
must be issued by a certified surety listed in the current Treasury
Circular 570. This section also provides guidance on executing your
bond and when your surety must notify you and the MMS due to changes in
its Treasury certification status, insolvency, or bankruptcy.
Section 285.526 What instruments other than a surety bond may I use to
meet the financial assurance requirement?
You may utilize alternative financial assurance instruments when
MMS determines that they protect the interests of the U.S. Government
to the same extent as a bond. If using an alternative financial
instrument, you must monitor its value and must provide the authority
for MMS to sell it and use the proceeds if the MMS determines that you
have failed to satisfy any lease obligation.
Section 285.527 Can I use a lease or grant-specific decommissioning
account to meet the financial assurance requirements?
MMS may authorize you to establish a decommissioning account in a
federally insured institution with certain limitations. Funds may not
be withdrawn without prior MMS approval, and must be pledged to meet
your decommissioning and site clearance obligations. This section also
discusses how interest paid on the account must be treated and when we
may allow the use of Treasury Securities to satisfy the obligation to
make payments into the account.
Section 285.528 [Reserved]
Section 285.529 [Reserved]
Changes in Financial Assurance
Section 285.530 What must I do if my financial assurance lapses?
This section discusses the steps you must take if your surety loses
Treasury certification, becomes insolvent, has its
[[Page 39415]]
charter suspended, or if your approved security expires. You must
promptly notify MMS and provide new financial assurance.
Section 285.531 What happens if the value of my financial assurance is
reduced?
This section requires that additional financial assurance be
provided whenever the value of the current assurance falls below the
required amount.
Section 285.532 What happens if my surety wants to terminate the period
of liability of my bond?
This section describes the liabilities that accrue during a period
of liability and provides requirements that a surety must follow when
requesting to terminate the period of liability under its bond.
Section 285.533 How does my surety obtain cancellation of my bond?
The MMS will release a bond or allow a surety to cancel a bond only
when all obligations covered by the bond have been completed
satisfactorily or MMS accepts a replacement bond or alternative form of
financial assurance. This section describes when your period of
liability ends, when your financial assurance will be released by MMS,
and how the MMS may approve a reduction in the amount of your approved
financial assurance if portions of your lease obligations have been
satisfactorily completed.
Section 285.534 When may MMS cancel my bond?
This section presents a comprehensive table which displays the
different types of bonds required in this subpart, and when the period
of liability ends. The table further displays when the bond will be
released under a variety of circumstances.
Section 285.535 Why might MMS call for forfeiture of my bond?
The MMS may call for forfeiture of your bond if you default on any
of the conditions under which you accepted your bond or refuse or fail
to comply with any term or condition of your lease or grant.
Section 285.536 How will I be notified of a call for forfeiture?
This section specifies that you and your surety will be notified in
writing of the call for forfeiture and provided the reasons for the MMS
action. The MMS will also advise you and your surety in writing of the
actions you must take within ten days to avoid forfeiture.
Section 285.537 How will MMS proceed once my bond or other security is
forfeited?
This section explains that you and any co-lessee or co-grant
holders are jointly and severally liable for the full cost of
corrective actions on your lease or grant, regardless of the amount
collected under your bond. MMS may take or direct action to recover all
costs in excess of the forfeited bonds.
Section 285.538 [Reserved]
Section 285.539 [Reserved]
Revenue Sharing With States
Section 285.540 How will MMS equitably distribute revenues to States?
Proposed Sec. 285.540 of this rule describes the factors MMS would
consider in determining how to equitably distribute revenues among
eligible States. This section also provides the procedure for
calculating the State revenue shares.
The location of a State's submerged lands relative to the nearest
part of a qualified project area (i.e., whether all or part of the
project area falls within the State's 8(g) zone) or the proximity of
the State's coastline to the geographic center of the qualified project
would determine State eligibility, such that a State becomes eligible
by meeting either criterion. However, only proximity of a State's
coastline's to the geographic center of the qualified project would be
a factor in allocating revenues among eligible States, should more than
one State be eligible. If a qualified project changes significantly in
size, scope, or some other way that may affect the equitable
distribution of revenues, MMS may re-evaluate the project area to
ensure that an equitable distribution of revenues is maintained when
any such change becomes apparent.
To determine each eligible State's share of the 27 percent of the
revenues received by the Federal Government for a qualified project,
MMS is proposing to use the inverse distance formula, based on the
proximity of the States' coastline to the geographic center of the
qualified project. This is the formula used for the same purpose under
the Coastal Impact Assistance Program administered by MMS. Under this
methodology, eligible States with coastlines that are closer to a
qualified project's center would receive proportionally more revenues
than eligible States with coastlines that are farther away. In
particular, if eligible State A is twice as far as eligible State B
from the qualified project's center, then State A would receive half as
much of the revenues as would State B. If Si is equal to the nearest
distance from the geographic center of the qualified project to the i =
1, 2, * * * nth eligible State's coastline, then State i would be
entitled to the fraction Fi of the 27-percent aggregate
revenue share due all the States according to this formula:
Fi = [(1/Si) / ([Sigma] i=1...n (1/
Si))].
For example, if the nearest point of the coastline of State A is 21
miles from the qualified project's center, and the nearest point of the
coastline of State B is 7 miles away (and there are no other eligible
States), the ratio of A's distance to B's distance is 21:7, or 3:1.
(Put another way, there are 28 total miles of distance from the nearest
coastline points of eligible States to the qualified project's center;
21 of the 28 miles represent the distance from State A, and the
remaining 7 miles represent the distance from State B.) In the
calculations, this gets inverted (giving the formula its name) such
that the ratio of A's share to B's share becomes 1:3 This results in
the 27 percent being divided such that A gets one-fourth and B gets
three-fourths of the 27-percent revenue share provided to the eligible
States. These proportionate shares reflect the relative distances from
the center of the qualified project to the nearest points of their
coastlines in an inverse manner.
Section 285.541 How will a qualified project's location affect an
eligible State's share of revenues?
Proposed Sec. 285.541 includes a table that describes how a
State's eligibility for revenue sharing would be determined, using 3
different situations. The examples are intended to provide
interpretations of the rule for both typical cases and unusual
situations. As such, the table provides 3 program principles from which
proper application of the proposed rule can be inferred for other
cases. These are those program principles:
There must be at least one eligible State for every
qualified project.
A State becomes eligible for revenue sharing from a
qualified project if either or both of two distance criteria are
satisfied, i.e., at least a part of the project lies within the State's
8(g) zone or the geographic center of the project is within 15 miles of
the nearest point of the State's coastline.
The proportion of revenues to be shared by an eligible
State depends only on the distance from the geographical center of the
qualified project to the nearest point of the State's coastline.
To illustrate this further, here are expanded versions and
discussions of the cases in the section and table.
Example (a). A qualified project area is located partially within
the zone
[[Page 39416]]
extending 3 miles seaward of State A's submerged lands. The qualified
project area does not extend into any other State's 8(g) zone, and the
geographic center of the qualified project is more than 15 miles from
the coastline of any other State. In this scenario, State A would
receive the entire 27 percent share of the Federal revenues from the
qualified project, regardless of the distance from the center of the
qualified project to the nearest point on State A's coastline. This is
the case because of the program principle that there must be at least
one eligible State for every qualified project.
Example (b). A qualified project area is located partially within
the zone extending 3 miles seaward of State A's submerged lands. The
project area does not extend into any other State's 8(g) zone. The
geographic center of the project is within 15 miles of State B's
coastline, but is farther than 15 miles from State A's coastline. In
this scenario, State A and State B would each receive a portion of the
27 percent of revenues to be shared from the project. This is the case
because of the program principle that a State becomes eligible for
sharing in the revenues from a qualified project by meeting either one
of the two distance criteria, regardless how or when another State
might become eligible. The sharing between the two States would be in
accordance with their proximity to the geographic center of the
qualified project. To elaborate, assume that the geographic center of
the qualified project lies 20 miles from the closest point to State A's
coastline and 10 miles from the closest point to State B's coastline.
Pursuant to the inverse distance formula, States with coastlines that
are farther from the geographic center of a project would get
proportionally lower revenue shares from the project.
State A's proportion = [(1/20) / (1/20 + 1/10)] = 1/3.
State B's proportion = [(1/10) / (1/20 + 1/10)] = 2/3.
Therefore, State B, being twice as close as State A to the qualified
project's center, would receive a share that is twice as large as State
A's share.
The sharing rate of the total revenues is mandated to be 27 percent
under the EPAct. Hence, if the qualified project generates $1,000,000
of revenues in a given year, the Federal Government would distribute
the States' 27 percent share as follows, rounded to the nearest whole
dollar:
State A's share = $270,000 x 1/3 = $90,000.
State B's share = $270,000 x 2/3 = $180,000.
Example (c). A qualified project area is located partially within
the zone extending 3 miles seaward of State A's and State B's submerged
lands. The project area does not extend into any other State's 8(g)
zone. The geographic center of the qualified project is within 15 miles
only of State B's and State C's coastlines. In this example, all 3
States would receive portions of the 27 percent of revenues to be
shared from the qualified project based on the inverse distance
formula. This is the case because of the program principle that the
proportion to be shared by an eligible State depends only on the
shortest distance from its coastline to the geographical center of the
project, not the number or type of criteria that were the basis for its
eligibility.
To illustrate how the inverse distance formula would be applied in
the case of 3 eligible States, assume that the qualified project center
lies 20 miles from the closest coastline point in State A, 10 miles
from the closest coastline point in State B, and 14 miles from the
closest coastline point in State C. The proportion of the 27 percent
revenue share due each State would be calculated as follows:
State A's proportion = [(1/20) / (1/20 + 1/10 + 1/14)] = 7/31.
State B's proportion = [(1/10) / (1/20 + 1/10 + 1/14)] = 14/31.
State C's proportion = [(1/14) / (1/20 + 1/10 + 1/14)] = 10/31.
If the qualified project generates $1,000,000 of revenues in a
given year, the Federal Government would distribute the States' 27
percent share as follows:
State A's share = $270,000 x 7/31 = $60,968.
State B's share = $270,000 x 14/31 = $121,935.
State C's share = $270,000 x 10/31 = $87,097.
Subpart F--Plans and Information Requirements
Overview
Subpart F describes the types of plans and information requirements
for commercial leases, limited leases, ROW grants, and RUE grants for
alternative energy activities. The subpart outlines the timing of
submission, content requirements, and necessary MMS approvals for each
of the plans. The MMS will not allow a lease or grant holder to conduct
any activities on the OCS without proper plan submittal and MMS
approval. The types of required plans are described below. The lessee,
grant holder, or operator must submit the appropriate plan to MMS for
review and approval, before beginning any activities covered by that
plan.
Types of Plans. The MMS is proposing three types of plans that
would be required, depending on the type of instrument held and the
activity to be conducted:
(1) Site Assessment Plan (SAP),
(2) Construction and Operations Plan (COP), and
(3) General Activities Plan (GAP).
The SAP and the COP would be used for commercial leases, while the
GAP would be used for limited leases and grants.
Prior to conducting site assessment activities on a commercial
lease, a lessee would be required to submit a SAP. The SAP describes
the surveys that a lessee plans to conduct to characterize a commercial
lease, including a project easement. These surveys would include: (1)
Physical characterization surveys (e.g., geological and geophysical
surveys or hazards surveys), (2) resources assessment surveys (e.g.,
meteorological and oceanographic data collection), and (3) baseline
environmental surveys (e.g., biological, archaeological, or
socioeconomic surveys).
A COP would be required before a lessee could begin construction
and/or operations on a commercial lease, including a project easement.
The COP describes the construction, operations, and conceptual
decommissioning activities the lessee plans to undertake.
A GAP would be required before a lessee or grantee could begin
activities on a limited lease (including a project easement, as
applicable) or ROW grant or RUE grant. The GAP describes the site
assessment and/or development activities. These activities include: (1)
Physical characterization surveys (e.g., geological and geophysical
surveys or hazards surveys, (2) resources assessment surveys (e.g.,
meteorological and oceanographic data collection), (3) baseline
environmental surveys (e.g., biological, archaeological, or
socioeconomic surveys), and (4) construction activities, operations,
and conceptual decommissioning plans for all planned facilities.
Considered Approaches
In developing an approach for the types of plans to require for
alternative energy projects, MMS considered a number of options. One
option we considered was a single comprehensive project plan. This plan
would cover the entire project, including site assessment,
construction, operations, production, and decommissioning. However, we
were concerned that the one plan approach would make compliance with
NEPA, CZMA, and other Federal laws
[[Page 39417]]
more difficult, since the single plan would need to be modified at each
stage of the project and would possibly require additional compliance
reviews. Another option was multiple plans, with a different plan for
each stage in the project. For example, the applicant would submit one
plan for site assessment, one for construction, another for production,
and a final plan for decommissioning. This option was not selected
because it was considered overly burdensome and would require the
preparation of multiple NEPA documents, reviews and other compliance
documents.
The selected approach would require two plans for a commercial
lease (SAP and COP) and one plan (GAP) for limited leases and ROW grant
or RUE grants. We chose this approach for commercial lease because
there are two distinct phases for commercial development for
alternative energy projects: A site assessment phase, where a lessee
may install a meteorological or marine data collection facility to
assess alternative energy resources, and a generation of power phase,
which includes construction, operations, and decommissioning. Limited
leases are limited to resource measurements or technology testing and
are not for the commercial generation of power. Therefore, only one
phase exists, and only one plan, a GAP, is required for this phase.
Having only one plan for one phase allows for a simple process to
conduct resource evaluation or technology testing. The same reasoning
was used for ROW grant and RUE grants--these instruments do not involve
commercial power generation activities on the OCS. We wanted to
distinguish between generating and non-generating types of projects.
Overview of Required Plans
The two plans for commercial development are a site assessment plan
(SAP) and a construction and operations plan (COP). These plans should
clearly describe the general approach to the project and include
detailed technical and environmental information. The two plan approach
for commercial activities sets two defined times for conducting NEPA
analysis and CZMA determinations. These plans must include all the
information needed to conduct appropriate NEPA analysis and for
compliance with other relevant laws. In addition, the applicant must
submit one copy of their CZMA consistency certification with each plan.
This approach includes a predictable schedule for development and
milestones for plan submittals.
The SAP covers site assessment and other data gathering activities
that would be conducted to gather information needed to develop the
project. The data gathered under the SAP would be used to develop the
COP for the project. The site assessment activities may include
physical characterization surveys (e.g., geological and geophysical
surveys or hazards surveys), resources assessment surveys (e.g.,
meteorological and oceanographic data collection), and baseline
environmental surveys (e.g., biological, archaeological, or
socioeconomic surveys). Additionally, a SAP may include the
construction of simple facilities for data collection, such as
meteorological towers. If MMS approves the SAP, the operator may begin
conducting any approved activities except those that involve the
construction of facilities proposed in the SAP. The operator would
gather the data needed to confirm the location of any facilities
proposed in the SAP or for the COP. The operator would submit the
findings and data to MMS before constructing any facilities. Most of
the data and findings of SAP activities would be submitted as part of
the COP. The SAP expires when MMS approves the COP. To conduct site
assessment type activities after a COP is approved, the applicant would
need to include those activities in the COP.
To facilitate development of a commercial lease, an applicant may
choose to submit to MMS a COP with the SAP. In this case the NEPA,
CZMA, and compliance with other relevant laws would be done at one
time. If the applicant decides to submit the COP and SAP
simultaneously, then sufficient data and information must be submitted
with the COP for MMS to conduct needed technical, NEPA, and other
required reviews. If new information becomes available after the
applicant completes the site assessment activities, then the COP will
require revision. Furthermore, MMS may need to conduct additional
reviews, including NEPA, on any new information.
The COP would describe the construction and operations for the
project itself, covering all planned facilities, including onshore and
support facilities, and all anticipated project easements needed for
the project. It would also describe the actual activities related to
the project including construction, commercial operations, maintenance,
and decommissioning. The COP would include the results of the survey
activities conducted under the SAP. The COP must demonstrate to MMS
that the operator has planned and is prepared to conduct the proposed
activities in a manner that conforms to their responsibilities under
these regulations. It also must demonstrate that the project:
Will conform to all applicable laws, implementing
regulations, lease provisions and stipulations or conditions of the
commercial lease;
Is safe;
Does not unreasonably interfere with other uses of the
OCS, including those involved with national security or defense;
Does not cause undue harm or damage to natural resources,
life (including human and wildlife), property, or the marine, coastal,
or human environment;
Does not cause undue harm or damage to sites, structures,
or objects of historical or archaeological significance;
Will use best available and safest technology; will use
best management practices; and will employ properly trained personnel.
Limited leases, ROW grants, and RUE grants would require approval
of a general activities plan (GAP). The GAP includes components of both
the SAP and the COP. However, we expect that limited leases, ROWs, and
RUEs would involve less extensive activities than those planned for a
commercial lease. The applicant could include multiple scenarios in the
GAP to address the potential outcome of the site assessment activities,
so that multiple locations would be evaluated as part of the NEPA
analysis. If, after evaluating the site, the initially planned location
of a facility needs to be relocated, additional NEPA would not be
required, since alternative locations were evaluated in the NEPA for
the GAP.
Site Assessment Plan (SAP): The SAP describes the operator's
initial assessment and survey activities needed to characterize the
alternative energy project site for a commercial lease, including a
project easement. These activities would take place during the site
assessment term of a commercial lease. The data obtained during site
assessment is used to develop a COP and is included in the COP. The
activities proposed in a SAP may include vessel-based surveys and the
installation of facilities (including vessels) attached to the sea
floor, such as meteorological towers to measure winds, radars to assess
avian resources, or marine data collection facilities to measure waves
or currents. The MMS expects that the applicant would conduct physical
characterization surveys, resource assessment surveys, and baseline
environmental surveys under the SAP. Information contained in the SAP
must provide sufficient
[[Page 39418]]
detail for MMS to adequately assess the proposed activities and ensure
compliance with NEPA and other relevant Federal laws.
The MMS must approve the SAP before the operator can begin
conducting any proposed activities. If MMS approves the SAP, the
operator may begin conducting activities that do not involve the
installation of facilities. The operator would gather data to confirm
the placement of the facilities. Before constructing any facilities,
the operator would submit to MMS the findings of the data gathering and
appropriate data, along with additional information on the facilities.
After MMS receives the additional data and information and after we
notify you that we have no objections, the applicant may begin
construction activities proposed in the SAP. If MMS has objections, the
applicant may not begin construction until all MMS objections are
resolved to MMS's satisfaction.
When MMS receives the applicant's COP for technical and
environmental review, MMS may extend the lease term during the review
period, if necessary. The SAP expires when MMS approves the COP.
Therefore, if an applicant anticipates conducting site assessment
activities anytime during the COP period, those activities must be
described in the COP and receive MMS approval of the COP before
conducting the activities.
Subpart F outlines what the applicant must demonstrate in the SAP
such as legal requirements, safety, other uses of the OCS,
environmental protection, technology, best management practices, and
the use of properly trained personnel. The provisions also outline the
information that the applicant must submit with the SAP as well as
additional information that must be submitted if the SAP includes
activities that require the installation of bottom-founded facilities.
The MMS envisions that most of the facilities would be relatively
simple and temporary. If an operator proposes to install a facility
that the MMS determines is significant, or complex, additional
information would be required. If MMS makes this determination, you
would be required to complete the survey activities in the SAP and
submit an initial survey report of the results of those activities to
the MMS. You must also submit a Facility Design Report and a Facility
Fabrication and Installation Report, as described in subpart G, and a
Safety Management System, as described in subpart H, before any
construction could begin. The Facility Design Report provides MMS with
a detailed description of the proposed facility or facilities and
locations on the OCS. The Fabrication and Installation Report describes
the lessee/operator's or grant holder's plans for both the facility's
fabrication and installation process. MMS will review these reports
prior to each stage of these operations.
For commercial leases acquired noncompetitively, you must submit
the SAP within 60 calendar days after the MMS determination of no
competitive interest. The MMS will not issue the lease until the SAP is
approved. If you acquired a commercial lease competitively, you must
submit the SAP within 6 months of the date of lease issuance. We will
conduct technical and environmental reviews, including NEPA analysis,
and forward the plan and required information to affected States for
CZMA review. After the reviews are complete, MMS would approve,
disapprove, or approve with modifications the SAP. MMS will specify the
terms and conditions of the approval and you must incorporate these
into your SAP. If the SAP is approved or approved with modifications,
the applicant must conduct all site assessment activities in accordance
with the provisions of the approved plan and MMS would require the
applicant to certify compliance with certain of the terms and
conditions as identified by the MMS. If MMS does not approve the SAP,
we will provide an explanation of our disapproval, and the applicant
may modify and resubmit the revised SAP.
If you want to conduct activities not directly addressed in the
approved SAP, you would need to provide MMS with a written description
of the proposed activities and receive approval from MMS before
conducting the activities. We will determine whether the activities are
within the scope of the approved SAP or if the SAP needs to be revised.
If MMS determines that you must revise the SAP, then MMS must approve
the revised SAP before you can conduct the activities.
Construction and Operations Plan (COP): The COP describes the
construction, operations, and conceptual decommissioning plans for the
operations term of any project under a commercial lease, including your
project easement. Your plan would describe all operations and
facilities (onshore and offshore) that would be installed and used to
test, gather, transport, transmit, or generate and distribute energy
from the lease. The COP would include:
Nominations of certified verification agents (CVA) for MMS
approval;
Preliminary plans for project design, facility fabrication
and installation, and production transportation and transmission;
Plans for safety management, inspection, maintenance, and
monitoring systems; and
The decommissioning concept.
The proposed rule outlines the process for preparing, submitting,
processing, and implementing a COP. The COP should include any
anticipated site assessment activities that may be conducted during the
life of your plan. The MMS must approve the COP before you can
construct any facilities for commercial operation.
As with the SAP, the proposed provisions outline what a COP must
contain and demonstrate, as well as how the COP is submitted,
processed, and authorized. The MMS may require additional specific
information for submittal with the COP, to aid in the appropriate
reviews of the project by external agencies and to assist in compliance
with all relevant Federal laws and regulations (e.g., NEPA, CZMA, ESA,
and MMPA). We may request additional information if the information
provided is insufficient.
For commercial leases acquired noncompetitively and competitively,
you must submit a COP within 5 years after MMS approves your SAP. MMS
will extend the term of the SAP, if necessary, while conducting the
technical and environmental reviews of your COP. We will conduct these
technical and environmental reviews of your COP, including NEPA
analysis, and forward the plan and required information to affected
States for CZMA review. After the reviews are complete, MMS would
approve, disapprove, or approve with modifications the COP. MMS will
specify the terms and conditions of the approval and these terms and
conditions would be incorporated into your COP. If MMS approves the COP
or approves the COP with modifications, the applicant must conduct all
of the proposed activities in accordance with the provisions of the
approved plan and MMS would require the applicant to certify compliance
with certain of the terms and conditions as identified by the MMS. If
MMS does not approve the COP, we will provide an explanation of our
disapproval, and the applicant may modify and resubmit the revised COP.
If MMS approves your project easement, we will issue an addendum to
your lease specifying the terms of the easement. The project easement
may include off-lease areas that contain areas for cable, pipeline or
associated facilities. These areas cannot exceed 200
[[Page 39419]]
feet (61 meters) in width, unless safety and environmental factors
during construction and maintenance of the associated cables or
pipelines require a greater width. For associated facilities, the area
is limited to the area reasonably necessary for power stations for
electricity or pumping stations for other energy products such as
hydrogen.
You may propose in your COP to develop your lease in phases. You
must clearly provide details as to the portions of the lease that will
be initially developed for commercial operations, and what portions of
the lease will be reserved for subsequent phased development.
If MMS approves your COP, you must commence construction by the
date given in your construction schedule, as stated in the approved
COP. MMS may approve a deviation from this schedule. However, before
you may construct and install facilities under the approved COP, you
must submit to MMS a Facility Design Report and a Fabrication and
Installation Report. You may commence commercial operations 30 calendar
days after the CVA has submitted the final fabrication and installation
report to MMS. The activities described in these 2 reports must fall
within the scope of the approved COP, or you will be required to submit
a revision to the COP for approval before commencing the activity.
A COP may require future revisions and potentially require
additional or new environmental and regulatory reviews. You must notify
MMS in writing before you conduct any activities not described in your
approved COP, describing in detail the activities you propose to
conduct. MMS will determine whether the proposed activities may be
conducted under your existing COP or require a revision to the COP. We
may request that you provide additional information for us to make this
determination. The MMS will periodically review an approved COP and may
determine, based on the significance of any changes in information and
environmental conditions affecting activities, that revisions are
necessary. The revisions may require new environmental and technical
reviews.
Any time you cease commercial operations, without an MMS approved
suspension, you must notify MMS. MMS may cancel your lease and you must
start the decommissioning process if you cease commercial operations
for an indefinite period which extends longer than 6 months.
When you complete the commercial operations under your approved
COP, you must start the decommissioning process described in subpart I
of this part.
General Activities Plan (GAP): The GAP describes the operator's
planned activities for a limited lease, ROW grant, or RUE grant. It
would include information similar to what is required in a SAP, as well
as additional information concerning planned activities throughout the
term of the lease or grant. As with the SAP, the GAP must be submitted
within 6 months of competitive issuance of a lease or grant or within
60 calendar days after the determination of no competitive interest for
a lease or grant being pursued noncompetitively. In some cases, a GAP
would describe activities that are analogous to those covered in a COP
for a commercial lease, i.e. if you are proposing a facility or
multiple facilities. Review, approval, and revision of a GAP will be
subject to requirements and procedures similar to those applied to SAPs
and COPs.
NEPA Compliance for Plans: MMS action on the SAP, COP, and GAP
would require the preparation of appropriate NEPA documentation. We
anticipate that initially, all commercial development projects will
require an EIS for each phase of the project (i.e. one EIS for the SAP
and one EIS for the COP). Also, we anticipate that limited leases and
RUE and ROW grants will require an EIS. After the impacts and related
mitigation of alternative energy activities on the OCS are better
understood, it is possible that projects may require an environmental
assessment. The applicant must provide MMS with the data necessary to
complete the required NEPA documentation. This would include a
description of those resources, conditions, and activities that could
be affected by your proposed site assessment activities, including
associated construction and decommissioning activities. This would
include, but is not limited to information on the following:
Hazard information including meteorology, oceanography, or
manmade hazards.
Water quality including turbidity and total suspended
solids from construction.
Biological resources including benthic communities, marine
mammals, sea turtles, coastal and marine birds, fish and shellfish,
plankton, barrier islands, beaches, dunes, wetlands, seagrasses and
plant life.
Threatened or endangered species including critical
habitats, as defined by the Endangered Species Act of 1973.
Sensitive biological resources or habitats including
essential fish habitat, refuges, preserves, special management areas
identified in coastal management programs, sanctuaries, rookeries, hard
bottom habitats, chemosynthetic communities, and calving grounds.
Archaeological resources including historic and
prehistoric archaeological resources to meet the requirements of the
National Historic Preservation Act of 1966, as amended, and associated
regulations.
Social and economic including employment, existing
offshore and coastal infrastructure (including major sources of
supplies, services, energy, and water), land use, subsistence resources
and harvest practices, recreation, recreational and commercial fishing
(including typical fishing seasons, location, and type), minority and
lower income groups, coastal zone management programs, and viewshed.
Coastal and marine uses including military activities,
vessel traffic, and mineral exploration or development.
Other resources, conditions, and activities as identified
by the Director.
The MMS may decide to use a third party to prepare the NEPA
document.
CZMA Compliance for Plans: For purposes of Federal consistency, MMS
will treat SAPs, COPs, and GAPs as OCS plans which must comply with
requirements of CZMA subsection 307(c)(3)(B) and 15 CFR part 930,
subpart E. The plans must describe all federally licensed or permitted
activities and operations proposed on the MMS-issued lease, ROW grant,
or RUE grant. The lease or grant holder will be required to prepare a
consistency certification to submit to MMS with the proposed plan. The
MMS will send one copy of the plan, supporting information, and
consistency certification to the affected State CZMA agency. The State
agency will then determine whether the supplied information is adequate
for its review. When the State agency has adequate information it will
begin its consistency review and either concur with or object to the
consistency certification.
Subsequent consistency reviews for revisions to the plan are not
required unless MMS determines that the revisions: (1) Result in a
significant change in the impacts previously identified and evaluated;
(2) require any additional Federal authorizations; or (3) involve
activities not previously identified and evaluated. For CZMA compliance
purposes, when a State objects to the consistency certification, MMS
will not approve the plan if: (1) Consistency has not been conclusively
[[Page 39420]]
presumed; or (2) the State objects to the applicant's consistency
certification and the Secretary of Commerce has not found that the
permitted activities are consistent with the objectives of the CZMA or
are otherwise necessary in the interest of national security.
NEPA and CZMA Compliance for Additional Reports and Approvals: The
NEPA and CZMA compliance for a project will be addressed in the MMS
decision process for the SAP, COP, or GAP. The reports and applications
that are required relating to facility design, fabrication,
installation, and decommissioning are intended to provide MMS with
specific technical details on the project as approved in the SAP, COP,
or GAP. If these documents present activities that fall outside the
scope of your approved SAP, COP, or GAP, then you will be required to
submit a revision to your SAP, COP, or GAP.
Additional NEPA or CZMA review may be required if the revisions for
facility design, fabrication, installations, or decommissioning:
(1) Result in a significant change in the impacts previously
identified and evaluated;
(2) Require any additional authorizations; or
(3) Propose activities not previously identified and evaluated.
Frequency of NEPA/CZMA Reviews Based on Instrument Held: The number
of NEPA and CZMA reviews that would be conducted on your lease or grant
is determined by the type of instrument that you hold (Table 2). For a
competitive, commercial lease there would be three NEPA and three CZMA
reviews--one each for the Lease Sale action, the SAP, and the COP. For
a non-competitive commercial lease, two NEPA and two CZMA reviews would
be required--one for the lease with the SAP and one for the COP. Since
MMS requires the applicant to submit a SAP or a GAP within 60 calendar
days after the Director issues a determination that there was no
competitive interest for your lease or grant, the SAP would be reviewed
under the same review as the lease issuance action. An efficiency is
gained in this example because MMS can conduct reviews on the SAP and
lease issuance at the same time. It would be unreasonable to require
this for competitive commercial leases since MMS would have to request
all bidders to submit a SAP before they actually knew whether they
would be awarded a lease.
For limited leases, two NEPA and two CZMA reviews would be required
for a competitive limited lease and one review for a non-competitive
lease. The reviews for the competitive limited lease would be conducted
on the lease sale action and the GAP, while the non-competitive limited
lease would have a simultaneous review of the lease issuance action and
the GAP.
We envision that all ROW grants and RUE grants would likely be non-
competitive. The ROW/RUE issuance action and the GAP would be reviewed
under NEPA and CZMA simultaneously. In the unlikely case of a
competitive ROW/RUE grant, a separate NEPA and CZMA review would be
conducted on the ROW/RUE sale and the GAP.
Table 2.--Frequency of NEPA/CZMA Reviews Based on Instrument Held
------------------------------------------------------------------------
NEPA documentation
Instrument held MMS process and CZMA review
------------------------------------------------------------------------
Competitive Commercial Lease.... Conduct lease sale 1. Lease Sale EIS.
and issue 2. SAP.
decision on plans. 3. COP.
Non-Competitive Commercial Lease Negotiate and 1. Lease Issuance
issue lease. and SAP.
2. COP.
Competitive Limited Lease....... Conduct lease sale 1. Lease Sale.
and issue 2. GAP.
decision on plan.
Non-competitive Limited Lease... Negotiate and 1. Lease Issuance
issue lease. and GAP.
Competitive ROW, RUE Grant...... Conduct ROW, RUE 1. ROW, RUE Sale.
sale and issue 2. GAP.
decision on plan.
Non-competitive ROW, RUE Grant.. Negotiate and 1. ROW, RUE
issue ROW, RUE issuance and GAP.
grant.
------------------------------------------------------------------------
Section by Section Discussion for Subpart F
Section 285.600 What plans and information must I submit to MMS before
I conduct activities on my lease or grant?
This section describes the three different types of plans that are
required to be submitted to MMS for approval. The type of plan that you
would submit depends on the type of instrument held and the type of
activity to be conducted: (1) Site Assessment Plan (SAP), (2)
Construction and Operations Plan (COP), and (3) General Activities Plan
(GAP). The SAP and the COP would be used for commercial leases, while
the GAP would be used for limited leases and grants. Prior to
conducting site assessment activities on a commercial lease, a lessee
would be required to submit a SAP to MMS for review and approval. A COP
is required to be submitted to MMS for review and approval before a
lessee could begin construction and/or operations on a commercial
lease, including a project easement. A GAP is required to be submitted
to MMS for review and approval before a lessee could begin activities
on a limited lease or ROW grant or RUE grant including, if applicable,
a project easement.
Section 285.601 When am I required to submit my plans to MMS?
The timing for the submission of your plans depends on whether your
lease or grant was issued on a competitive or noncompetitive basis
(refer to subpart B for leases or subpart C for grants for further
discussion of these types of conveyance). The timing is as follows:
Competitively issued lease or grant: You must submit your
SAP or GAP within 6 months of issuance.
Non-competitive lease or grant: You must submit your SAP
or your GAP within 60 calendar days after the Director issues a
determination that there was no competitive interest for your lease or
grant.
Operations for commercial lease: You must submit a COP at
least 6 months before the end of your site assessment term if you plan
to request an operations term for your commercial lease.
MMS will allow you to submit your COP with your SAP. However, you
must submit the necessary data and information with your COP to allow
MMS to complete its technical and environmental reviews. Furthermore,
you may need to make revisions to your
[[Page 39421]]
COP, followed by additional MMS reviews, including those required under
NEPA, if new information becomes available after you complete your site
assessment activities. For example, following a geophysical survey, you
may determine the presence of hard bottom habitat that was previously
not identified. Based on this information, MMS may require you to
conduct a biological survey to describe the communities present in that
habitat. The results from those surveys may require you to revise your
COP in order to propose the relocation of some of part or all of your
proposed facilities to another part of your lease.
Section 285.602 What records must I maintain?
You must maintain and provide to MMS upon request all data and
information related to compliance with required terms and conditions of
your SAP, COP, or GAP. You must meet this requirement until MMS
releases your financial assurance.
Section 285.603 [Reserved]
Section 285.604 [Reserved]
Site Assessment Plan and Information Requirements for Commercial Leases
Section 285.605 What is a Site Assessment Plan (SAP)?
This section generally describes a SAP. A SAP contains the plans
for conducting surveys, data gathering, and operations to characterize
a commercial lease, including the project easement. A SAP must include
a description of how surveys such as physical characterization surveys,
resource assessment surveys, and baseline surveys would be conducted.
It includes additional requirements for both simple and complex
facilities.
Section 285.606 What must I demonstrate in my SAP?
This section provides details on the requirements for a SAP. The
SAP must demonstrate how a lessee would conform to all applicable laws,
implementing regulations, lease provisions and stipulations. The
activities conducted under a SAP must:
Conform to all applicable laws, implementing regulations,
lease provisions and stipulations;
Be safe;
Not unreasonably interfere with other uses of the OCS,
including those involved with national security or defense
Not cause undue harm or damage to natural resources, life
(including human and wildlife), property, or the marine, coastal, or
human environment; or to sites, structures, or objects of historical or
archaeological significance;
Use best available and safest technology;
Use best management practices; and
Use properly trained personnel.
The SAP must demonstrate that the planned site assessment
activities include all surveys and other activities to gather
information and data required for the COP.
Section 285.607 How do I submit my SAP?
This section requires you to submit a hard copy and an electronic
version of the SAP to MMS at the address in Sec. 285.110.
Section 285.608 [Reserved]
Section 285.609 [Reserved]
Contents of the Site Assessment Plan
Section 285.610 What must I include in my SAP?
This section contains further detailed requirements on what must be
submitted for SAP applications. This includes: identifying information,
a discussion of the objectives, air emissions, lease stipulations, a
listing of all Federal, State, and local authorizations or approvals
for projected site assessment activities, a list of entities that you
have consulted with regarding the potential impacts of your project,
financial assurance information, and additional information as
requested by MMS. For site assessment activities that include the
installation of any facilities (e.g., a single monopole meteorological
tower), additional requirements are listed. They include:
A location plat,
Geotechnical survey,
General structural and project installation information,
A description of the deployment activities,
Construction schedule,
A list of solid and liquid wastes generated,
Shallow hazards,
Archaeological resource surveys,
Relevant geological surveys,
Biological surveys,
Socio-economic surveys,
A description of any vessels and aircraft,
Proposed measures for avoiding, minimizing, reducing,
eliminating, and monitoring environmental impacts,
CVA nominations (if required),
Decommissioning and site clearance procedures,
References, and
Additional information as requested by MMS.
Section 285.611 What information and certifications must I submit with
my SAP to assist MMS in complying with NEPA and other relevant laws?
This section requires the applicant to submit information needed to
assist MMS in preparing compliance documents related to NEPA
(Environmental Impact Statement or Environmental Assessment) and other
relevant laws, including MSA, ESA, and CZMA, that are required for SAP
approval. This includes information on resources, conditions, and
activities listed in this section that could be affected by or could
affect activities proposed and approved in your SAP.
This section also requires the applicant to submit a consistency
certification for CZMA. The consistency certification must state that
the proposed activities covered in the SAP comply with the State(s)
approved coastal management program and that the applicant will conduct
these activities in a manner consistent with such a program. The
consistency certification must also include ``information'' as required
by 15 CFR 930.76(a) and 15 CFR 930.58(a)(2) and ``analysis'' as
required by 15 CFR 930.58(a)(3).
Section 285.612 How will MMS process my SAP?
This section describes the MMS review process for a SAP. The MMS
will review the SAP and determine if it contains all of the required
information needed to complete the technical and environmental reviews.
After MMS has all of the information needed for its reviews, we will
prepare appropriate NEPA documentation.
The MMS will forward a copy of your SAP and consistency
certification to the State's CZM Agency after all information
requirements for the SAP are met. We will consult with relevant
Federal, State, and local agencies and provide to other Federal, State,
and local agencies relevant non-proprietary data and information
pertaining to the proposed site assessment activities as directed by
subsections 8(p)(4) and (7) of the OCS Lands Act and by other relevant
Federal statutory requirements (e.g. ESA and MSA). We may request
additional information during the review and approval process; if you
do not provide this information MMS may disapprove your application.
After MMS completes the technical and environmental reviews, we may
approve, disapprove, or approve with modifications your SAP. If we
disapprove your SAP, we will provide the reasons for the disapproval
and you
[[Page 39422]]
will have an opportunity to revise and resubmit your SAP. If we approve
your SAP, it will be subject to terms and conditions set by MMS. We
will specify these terms and conditions and they will be incorporated
into your SAP. Examples of the types of terms and conditions we may
require include, but are not limited to terms and conditions from and
ESA incidental take statement, conservation recommendations resulting
from EFH consultations, and other safety, operational, or environmental
protection measures. Also you must certify compliance with certain of
these terms and conditions as identified by MMS. The certification
would include summary reports, a description of mitigation measures and
monitoring, the effectiveness of the mitigation measures, and new
proposed mitigation measures.
Activities Under an Approved SAP
Section 285.613 When may I begin conducting activities under my
approved SAP?
After MMS approves the SAP, the applicant may begin to conduct any
approved activities that do not involve the construction of facilities
or any other seabed disturbing activities on the OCS.
Section 285.614 When may I construct OCS facilities proposed under my
SAP?
This section discusses the timing of constructing simple and
complex facilities and various reports that must be submitted at each
stage for MMS approval before proceeding to the next step. Also
required are CVA nominations for plans and the Safety Management
System.
Before you begin construction of any OCS facility described in the
SAP, you must complete the initial survey activities that relate to the
construction and installation of the facility or facilities, and a
report of the findings of those activities must be submitted to MMS.
This report must also identify the specific location on the lease area
where facilities will be installed. If MMS determines that the
facilities are complex or significant, additional information,
described in the last paragraph of this section, is required. The
applicant may begin to construct and install a facility or facilities
after MMS receives the initial survey report and has no objections. If
MMS does not respond to the applicant with objections within 60
calendar days after receiving the report, MMS is deemed not to have
objections to the report.
However, if MMS has objections to the initial survey report, we
will notify the applicant in writing within 60 calendar days of
receipt. The MMS may follow-up with written correspondence outlining
its specific objections to the initial survey report and request that
certain actions be performed to resolve the agency's objections. The
applicant cannot begin construction until the objections are resolved.
If you are constructing multiple facilities or a complex or
significant facility you must complete the required survey activities,
and submit an initial survey report of the findings of those activities
to MMS. The applicant must also submit a Facility Design Report; a
Facility Fabrication and Installation Report; CVA nomination; and a
Safety Management System.
Section 285.615 What other reports or notices must I submit to MMS
under my approved SAP?
This section identifies the various reports and notifications that
must be submitted to MMS and their timing. This includes the initial
survey report, an annual summary of findings from site assessment
activities, notification of completion of construction and installation
activities, and annual compliance certification. The compliance
certification includes a listing and description of any mitigation
measures and monitoring and their effectiveness. The MMS will protect
the annual summary information from public disclosure as provided in
Sec. 285.113.
Section 285.616 [Reserved]
Section 285.617 What activities require a revision to my SAP and when
will MMS approve the revision?
The lessee or operator must notify MMS in writing, including a
detailed description, prior to conducting any activities not described
in the SAP, and we will determine if those activities require a
revision to the approved SAP. We will also conduct periodic reviews of
the activities being conducted under an approved SAP, to ensure that
they fall within the scope of the SAP. The SAP will likely be required
to be revised if the applicant plans to:
Conduct activities not described in the approved SAP,
Change the size or type of facility or equipment used,
Change the surface location of a facility or structure,
Add another facility or structure not contemplated in the
approved SAP,
Change the location of the onshore support base from one
State to another or to a new base requiring expansion, or
Change the location of bottom disturbances by 500 feet
(152 meters), or changes to any other activity specified by MMS.
A revision to the SAP may require NEPA, CZMA, and other required
compliance if MMS determines that the proposed revision could result in
a significant change in impacts previously identified and evaluated;
require any additional Federal authorizations; or involve activities
not previously identified and evaluated.
The MMS may approve the revision to the SAP if the revision is
designed to prevent or minimize adverse effects to the coastal and
marine environments, including their physical, atmospheric, and
biological components to the extent practicable; and the revision is
otherwise consistent with the provisions of subsection 8(p) of the OCS
Lands Act.
Section 285.618 What must I do upon completion of approved site
assessment activities?
After completing activities under the approved SAP, the applicant
must initiate the decommissioning process for any facilities built for
conducting SAP activities. However, if you submit a COP to MMS, the
applicant may leave the facilities in place while MMS reviews the COP.
You are not required to start decommissioning if the facilities are
authorized to remain in place under your approved COP. However, if MMS
determines that the facilities built for conducting SAP activities may
not remain in place, then the decommissioning process described in
subpart I of this part must be initiated. Upon the termination of your
lease, you must initiate this same decommissioning process for all
facilities authorized by your approved COP.
Section 285.619 [Reserved]
Construction and Operations Plan for Commercial Leases
Section 285.620 What is a Construction and Operations Plan (COP)?
This section provides the basic requirements for the COP. The COP
describes your construction, operations, and conceptual decommissioning
plans under your commercial lease, including your project easement. The
COP must include the location of the operations and facilities, the
land, labor, material, and energy requirements associated with such
operations and facilities, and environmental and safety safeguards. The
COP must cover all proposed activities and operations, including
activities associated with constructing and maintaining project
easements. The
[[Page 39423]]
MMS must approve the COP before any construction and operation can
begin.
Section 285.621 What must I demonstrate in my COP?
This section describes what the applicant must demonstrate in the
COP. The COP must demonstrate how proposed activities conform with all
applicable laws, implementing regulations, lease provisions and
stipulations or conditions of the commercial lease. In addition, the
COP must demonstrate that the proposed activity is:
Safe;
Does not unreasonably interfere with other uses of the
OCS;
Does not cause undue harm or damage;
Uses best available and safest technology;
Uses best management practices; and
Uses properly trained personnel.
Section 285.622 How do I submit my COP?
This section provides the requirements for submitting the COP and
future revisions, the applicant must submit one hard copy and one
electronic version of the COP to MMS. The applicant may submit
information to cover the project easement with the original submission
of the COP or at a later time, as a revision to the COP.
Section 285.623 [Reserved]
Section 285.624 [Reserved]
Contents of the Construction and Operations Plan
Section 285.625 What survey activities must I conduct to obtain
approval for the proposed site of facilities?
Before MMS will approve the site of the commercial facilities
proposed for the project, you must conduct the listed surveys and
activities under the SAP and submit the results to MMS in your COP. The
required surveys and activities include:
Shallow hazard surveys;
Geological surveys;
Geotechnical surveys;
Archaeological resource surveys;
Biological surveys;
Socio-economic surveys; and
An overall site investigation.
You would conduct these surveys and activities under the SAP. You
must describe in your COP any other surveys that you may need to
conduct during your COP phase.
Section 285.626 What must I include in my COP?
This section lists the project-specific information that must be
included in the COP. The required information includes:
Identifying information;
The construction and operation concept;
Designation of an operator;
Lease stipulation and compliance information;
A location plat;
General structural and project design, fabrication, and
installation information; including how you will use a CVA to review
and verify each stage of the project
All cables and pipelines, including lines on project
easements;
A description of the deployment activities;
A list of solid and liquid wastes generated;
A listing of chemical products used;
A description of any vessels, vehicles, and aircraft that
will be use to support the activities;
A general description of the operating procedures and
systems;
Decommissioning and site clearance procedures;
A listing of all Federal, State, and local authorizations,
approvals or permits that are required;
Proposed measures for avoiding, minimizing, reducing,
eliminating, and monitoring environmental impacts;
A summary of information incorporated by reference;
A list of entities with whom you consulted, or will be
consulting, regarding potential impacts associated with the proposed
activities;
Reference information;
Financial assurance statements;
CVA nominations;
Construction schedule; and
Any other information required by MMS.
Section 285.627 What information and certifications must I submit with
my COP to assist the MMS in complying with NEPA and other relevant
laws?
This section discusses additional submittal requirements to assist
MMS in complying with NEPA and other relevant laws, including MSA, ESA,
and CZMA. The information must include the resources, conditions, and
activities listed in this subpart, that could be affected by proposed
activities, or that could affect proposed construction, operation, and
decommissioning activities. The applicant must include one copy of the
consistency certification for the project to verify compliance with
each State's approved coastal management program, including required
``information'' and ``analysis'' per Sec. 285.611. Also, the applicant
must submit an oil spill response plan and the Safety Management System
for the project.
Section 285.628 How will MMS process my COP?
This section discusses how MMS will review the submitted COP and
determine if it contains the information necessary to conduct the
technical and environmental reviews. The MMS will notify the applicant
if the COP lacks any information needed for the reviews. We will
prepare appropriate NEPA documentation and forward one copy of the COP,
consistency certification, and associated data and information under
the CZMA to the State's CZM Agency. When appropriate, we will
coordinate and consult with, and provide relevant, non-proprietary data
and information to, relevant State, Federal and local agencies as
directed by subsections 8(p)(4) and (7) of the OCS Lands Act and by
other relevant Federal statutory requirements (e.g. ESA and MSA). We
may request additional information during the review and approval
process; if you do not provide this information MMS may disapprove your
application.
After MMS completes the technical and environmental reviews, we may
approve, disapprove, or approve with modifications your COP. If we
disapprove your COP, we will provide the reasons for the disapproval
and you will have an opportunity to revise and resubmit your COP. If we
approve your COP, it will be subject to terms and conditions set forth
by MMS. The applicant must certify compliance with certain of those
terms and conditions as required under Sec. 285.615(c). If MMS
disapproves your COP, we will inform you of the reasons and you will
have an opportunity to resubmit a revised plan addressing the concerns
identified. The MMS may suspend the term of your lease, as appropriate,
to allow this to occur. If the project easement is approved, MMS will
issue an addendum to the lease specifying the terms of the project
easement.
Section 285.629 May I develop my lease in phases?
In the COP, the applicant may request to develop the commercial
lease in phases. To support this request, the applicant must provide
details as to what portions of the lease will be initially developed
for commercial operations, and what portions of the lease will be
reserved for subsequent phased development.
[[Page 39424]]
Section 285.630 [Reserved]
Activities Under an Approved COP
Section 285.631 When must I initiate activities under an approved COP?
After MMS approves the COP the applicant must commence construction
by the date given in the construction schedule, and included as a part
of your approved COP, unless MMS approves a deviation from the
schedule.
Section 285.632 What documents must I submit before I may construct and
install facilities under my approved COP?
This section describes documents that must be submitted to MMS for
review, before construction and installation of facilities under an
approved COP. This includes a Facility Design Report and a Fabrication
and Installation Report for facilities proposed for commercial
operations. The requirements for these reports are found in Sec.
285.701 and 702. The activities described in these reports must fall
within the scope of the approved COP. If they are not within the scope
of the approved COP, the applicant will be required to submit a
revision to the COP for MMS approval, before commencing the activity.
Section 285.633 How do I comply with my COP?
After completing the environmental and technical reviews of the
COP, if MMS approves your COP, we will specify terms and conditions to
be incorporated into your COP. These terms and conditions will be
considered as part of the COP and you must comply with them. We will
specify these terms and conditions and they will be incorporated into
your COP. Examples of the types of terms and conditions we may require
include, but are not limited to terms and conditions from and ESA
incidental take statement, conservation recommendations resulting from
EFH consultations, and other safety, operational, or environmental
protection measures. Also you must certify compliance with certain of
these terms and conditions as identified by MMS. The certification
would include summary reports, a description of mitigation measures and
monitoring, the effectiveness of the mitigation measures, and new
proposed mitigation measures.
Section 285.634 What activities require a revision to my COP and when
will MMS approve the revision?
The lessee or operator must notify MMS in writing, including a
detailed description, prior to conducting any activities not described
in the COP, and we will determine if those activities require a
revision to the approved COP. We will also conduct periodic reviews of
the activities being conducted under an approved COP, to ensure that
they fall within the scope of the COP. The COP will likely be required
to be revised if the applicant plans to:
Conduct activities not described in the approved COP;
Change the size or type of facility or equipment used;
Change the surface location of a facility or structure;
Add another facility or structure not contemplated in the
approved COP;
Change the location of the onshore support base from one
State to another or to a new base requiring expansion;
Change the location of bottom disturbances by 500 feet
(152 meters); or
Make changes to any other activity specified by MMS.
A revision to the COP may require NEPA, CZMA, and other required
compliance if MMS determines that the proposed revision could result in
a significant change in impacts previously identified and evaluated;
require any additional Federal authorizations; or involve activities
not previously identified and evaluated.
The MMS may approve the revision to the COP if the revision is
designed to prevent or minimize adverse effects to the coastal and
marine environments, including their physical, atmospheric, and
biological components to the extent practicable; and the revision is
otherwise consistent with the provisions of subsection 8(p) of the OCS
Lands Act.
Section 285.635 What must I do if I cease activities approved in my COP
before the end of my commercial lease?
The applicant must notify MMS any time commercial operations are
ceased, without an MMS approved suspension. We may cancel the lease if
activities are ceased for an indefinite period that is longer than 6
months, and you must initiate the decommissioning process described in
subpart I of this part.
Section 285.636 What notices must I provide MMS following approval of
my COP? The applicant must notify MMS in writing of the following
events, within the time periods provided:
No later than 30 calendar days after commencing activities
associated with the placement of facilities on the lease area under a
Fabrication and Installation Report;
No later than 30 calendar days after completion of
construction and installation activities under a Fabrication and
Installation Report; and
At least 7 business days before commencing commercial
operations.
Section 285.637 When may I commence commercial operations on my
commercial lease?
The applicant may commence commercial operations 30 calendar days
after the CVA has submitted to MMS the final report for the fabrication
and installation review.
Section 285.638 What must I do upon completion of my commercial
operations as approved in my COP?
After completing operations on your lease, you must initiate the
decommissioning process as set forth in subpart I of this part.
Section 285.639 [Reserved]
General Activities Plan Requirements for Limited Leases, ROW Grants,
and RUE Grants
Section 285.640 What is a General Activities Plan (GAP)?
The GAP describes proposed activities and operations for the
assessment and development of the limited lease or grant including, if
applicable, a project easement. A GAP contains the plans for conducting
surveys, data gathering, and operations to characterize a limited lease
or grant. A GAP must include a description of how surveys such as
physical characterization surveys, resource assessment surveys, and
baseline surveys would be conducted. It includes requirements for
construction, activities, and decommissioning plans for all planned
facilities, including onshore and support facilities, that you will
construct and use for your project including project easements. It
includes additional requirements for both simple and complex
facilities, or if you intend to apply for a project easement. You must
receive MMS approval of your GAP before you can begin activities on
your lease or grant. For a ROW grant or RUE grant that is issued
competitively, you must submit your GAP within 6 months of issuance.
For a ROW grant or RUE grant issued noncompetitively, you must submit
your GAP within 60 calendar days of the determination of no competitive
interest. The MMS will evaluate your request for a noncompetitive grant
and GAP simultaneously.
Section 285.641 What must I demonstrate in my GAP?
The GAP must demonstrate that the applicant plans and is prepared
to conduct the proposed activities in a manner that:
Conforms to all applicable laws (NEPA, MSA, ESA, and
CZMA),
[[Continued on page 39425]]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
]
[[pp. 39425-39474]] Alternative Energy and Alternate Uses of Existing Facilities on
the Outer Continental Shelf
[[Continued from page 39424]]
[[Page 39425]]
implementing regulations, lease provisions, and stipulations;
Is safe;
Does not unreasonably interfere with other uses of the
OCS, including those involved with national security or defense;
Does not cause undue harm or damage to natural resources,
life (including human and wildlife), property, or the marine, coastal,
or human environment; or to sites, structures, or objects of historical
or archaeological significance;
Uses best available and safest technology;
Uses best management practices; and
Uses properly trained personnel.
Section 285.642 How do I submit my GAP?
This section provides the requirements for submitting the GAP. The
applicant must submit one hard copy and one electronic version of the
GAP to MMS. The applicant may submit information to cover the project
easement with the original submission of the GAP or at a later time, as
a revision to the GAP.
Section 285.643 [Reserved]
Section 285.644 [Reserved]
Contents of the General Activities Plan
Section 285.645 What must I include in my GAP?
This section lists the project-specific information that must be
included in the GAP. The required information includes:
Identifying information;
The site assessment concept;
Designation of operator;
ROW, RUE or limited lease stipulation;
A listing of all Federal, State, and local authorizations,
approvals, or permits required;
Financial assurance information; and
Other information requested by MMS.
If activities include the installation of any facilities (e.g.,
single monopile meteorological tower, anchored vessels, transmission
substations) the applicant must also submit the following information
or a description of how this information will be acquired:
A location plat;
Geotechnical survey;
General structural and project design, fabrication, and
installation information;
A description of deployment activities;
A list of solid and liquid wastes generated;
A listing of chemical products used;
Shallow hazards;
Socio-economic surveys;
Archaeological resources;
Geological survey relevant to the design and siting of the
facility
Biological survey;
Proposed measures for avoiding, minimizing, reducing,
eliminating, and monitoring environmental impacts;
Description of any vessels, offshore vehicles, and
aircraft used to support activities;
Decommissioning and site clearance procedures;
References cited in the plan; and
Any additional information required by MMS.
The applicant may reference information and data discussed in other
plans or documents previously submitted or that are otherwise readily
available to MMS. If the project will require a project easement,
multiple facilities, of the facility is complex or significant, the
following additional information must be included in the GAP:
The construction and operation concept;
All cables and pipelines, including cables on project
easements;
A description of the deployment activities;
A general description of the operating procedures and
systems;
A list of agencies and persons with whom you consulted, or
with whom you will be consulting, regarding potential impacts
associated with your proposed activities;
CVA nominations for reports required in subpart G of this
part;
Construction schedule;
Other information.
Section 285.646 What information and certifications must I submit with
my GAP to assist MMS in complying with NEPA and other relevant laws?
This section discusses the detailed information that must be
submitted with the GAP to assist MMS in complying with NEPA and other
relevant laws. For NEPA compliance the lessee or grantee must provide
information on resources, conditions, and activities listed in this
section, that could be affected by or could affect your proposed
activities. In addition, the lessee or grantee must submit information
for CZMA compliance including one copy of the consistency certification
required by CZMA and required ``information'' and ``analysis'' as
required in Sec. 285.611.
Section 285.647 How will MMS process my GAP?
This section discusses how MMS will review the submitted GAP and
determine if it contains the information necessary to conduct our
technical and environmental reviews. The MMS will review the submitted
GAP and determine if it contains all the required information necessary
to conduct our technical and environmental reviews. If the GAP lacks
information needed for the reviews, we will notify the applicant and
request the necessary information. We will prepare appropriate NEPA
documentation and forward one copy of the GAP and supporting documents
to the State(s) CZM Agency. When appropriate, we will coordinate and
consult with relevant State and Federal agencies as directed by
subsections 8(p)(4) and (7) of the OCS Lands Act and by other relevant
Federal statutory requirements (e.g. ESA and MSA) and provide to other
State and Federal agencies relevant data and information pertaining to
the proposed site assessment activities. We may request additional
information during the review and approval process; if you do not
provide this information MMS may disapprove your application.
After MMS completes the technical and environmental reviews, MMS
may approve, disapprove, or approve with modifications your GAP. If we
disapprove your GAP, we will provide the reasons for the disapproval
and you will have an opportunity to revise and resubmit your GAP. If we
approve your GAP, it will be subject to terms and conditions set forth
by MMS. We will specify these terms and conditions and they will be
incorporated into your GAP. Examples of the types of terms and
conditions we may require include, but are not limited to terms and
conditions from an ESA incidental take statement, conservation
recommendations resulting from EFH consultations, and other safety,
operational, or environmental protection measures. Also you must
certify compliance with certain of these terms and conditions as
identified by MMS. The certification would include summary reports, a
description of mitigation measures and monitoring, the effectiveness of
the mitigation measures, and new proposed mitigation measures. If the
project easement is approved, MMS will issue an addendum to the lease
specifying the terms of the project easement.
[[Page 39426]]
Section 285.648 [Reserved]
Section 285.649 [Reserved]
Activities Under an Approved GAP
Section 285.650 When may I begin conducting activities under my GAP?
After MMS approves the GAP the applicant may begin conducting
activities that do not involve the construction of facilities on the
OCS.
Section 285.651 When may I construct OCS facilities proposed under my
GAP?
Before beginning construction of any OCS facility or any related
seabed disturbing activities proposed in the approved GAP, the lessee
or grantee must complete the initial survey activities described in the
approved GAP that relate to any of these activities and submit a report
of the findings of those activities to MMS. The initial survey report
must also identify the specific location on the limited lease or grant
area that you intend to install the facility. If MMS determines that
the proposed facilities are complex or significant, the lessee or
grantee must submit the additional information required in this
section.
The lessee or grantee may begin to construct and install the
facility or facilities after MMS notifies the lessee or grantee that it
has received the initial survey report and MMS has no objections. If
MMS receives the initial survey report, but does not respond with
objections within 60 calendar days of receipt, MMS is deemed not to
have objections to the report and the lessee or grantee may commence
construction and installation of the facility or facilities.
If MMS has any objections to your initial survey report, we will
notify the lessee or grantee within 60 calendar days of receipt. We may
follow-up with written correspondence outlining specific objections to
the initial survey report and request certain actions be taken to
resolve MMS's objections. You may not begin construction until all
objections have been resolved to MMS's satisfaction.
For a project easement, multiple facilities, or a facility deemed
by MMS to be complex or significant, the applicant must submit a
Facility Design Report; a Facility Fabrication and Installation Report;
and a Safety Management System.
Section 285.652 How long do I have to conduct activities under an
approved GAP?
For a limited lease, after MMS approves the GAP, then you must
conduct the approved activities within 5 years, unless MMS renews the
term. For an ROW grant or RUE grant, the time for conducting approved
activities is provided in the terms of the grant.
Section 285.653 What other reports or notices must I submit to MMS,
under my approved GAP?
This section lists the various reports and notifications that must
be submitted to MMS. These include the initial survey report, notice of
completion of construction and installation activities, annual
compliance certification, an annual report of findings that result from
conducting the activities approved under the GAP, and an annual
compliance certification of certain terms and conditions of your GAP
that MMS identifies. The compliance certification includes a listing
and description of any mitigation measures and monitoring and their
effectiveness. If you determine that any of the measures or monitoring
were not effective, then you must include recommendations for new
measures or monitoring methods. You must also submit an annual summary
report of the findings from any activities that you conduct under your
approved GAP and the results of those activities. The information from
this report will be protected as provided in Sec. 285.113.
Section 285.654 [Reserved]
Section 285.655 What activities require a revision to my GAP and when
will MMS approve the revision?
The lessee or grantee must notify MMS in writing prior to
conducting any activities not documented in the GAP. The MMS will
determine if those activities require a revision to the approved GAP.
We will also conduct periodic reviews of the activities being conducted
under an approved GAP to ensure that they fall within the scope of the
GAP. The GAP will likely be required to be revised if you plan to:
Conduct activities not described in the approved GAP;
Change the size or type of facility or equipment used;
Change the surface location of a facility or structure;
Add another facility or structure not contemplated in the
approved GAP;
Change the location of the onshore support base from one
State to another or to a new base requiring expansion; or
Change the location of bottom disturbances by 500 feet
(152 meters).
The GAP requires revision if MMS specifies any changes to any other
activity.
Revisions to the GAP will require NEPA and other required
compliance if MMS determines that the proposed revision could result in
a significant change in impacts previously identified and evaluated;
require any additional Federal authorizations; or involve activities
not previously identified and evaluated.
The MMS may approve the revision to the GAP if the revision is
designed not to cause undue harm or damage to natural resources; or to
sites, structures, or objects of historical or archaeological
significance; and the revision is otherwise consistent with the
provisions of subsection 8(p) of the OCS Lands Act.
Section 285.656 What must I do if I cease activities approved in my GAP
before the end of my term?
The lessee or grantee applicant must notify the MMS upon ceasing
activities under an approved GAP without an approved suspension. If
activities are ceased for an indefinite period that exceeds 6 months,
MMS may cancel the lease or grant under Sec. 285.437 and the applicant
must initiate the decommissioning process, as set forth in subpart I of
this part.
Section 285.657 What must I do upon completion of approved activities
under my GAP?
After completing the activities approved under the GAP, the
applicant must initiate the decommissioning process, as required in
subpart I of this part.
Cable and Pipeline Deviations
Section 285.658 Can my cable or pipeline construction deviate from my
approved COP or GAP?
This section discusses the requirements related to the construction
of cables, pipelines, and facilities so as to minimize deviations from
the approved plan under the limited lease or grant.
If MMS determines that a deviation occurred, you would be required
to notify affected lessees or ROW/RUE grant holders and you would be
required to relinquish the unused portion of the lease or grant.
Substantial deviations could result in the cancellation of the lease or
grant. MMS may delay the start of construction until MMS modifies the
lease or grant.
Subpart G--Facility Design, Fabrication, and Installation
Overview
As indicated in the discussion of subpart F, your plan would
include general descriptions for project design and facility
fabrication and installation. Subpart G describes the various detailed
technical reports that the MMS would
[[Page 39427]]
require lessees, operators, and grant holders to submit that address
the final design, fabrication, and installation of facilities on a
lease or grant. These reports would be submitted after MMS approves the
SAP, COP, or GAP, as applicable.
Subpart G also describes a third party verification process that
would require lessees, operators, and grant holders to use a certified
verification agent (CVA), to verify and certify that projects are
designed, fabricated, and installed in conformance with accepted
engineering practices and with the submitted reports.
Certified Verification Agents: The CVA is responsible for
conducting an independent assessment of the facility design and the
fabrication and installation processes to ensure that facilities are
designed, fabricated, and installed in conformance with accepted
engineering practices and the approved plans and applications.
The CVA will also ensure that repairs and major modifications are
completed in conformance with accepted engineering practices. The CVA
will certify and report to the lessee, operator, or grant holder; and
MMS on the status of each phase included in the Facility Design Report
and the Fabrication and Installation Report. The CVA must submit
interim reports, as required by the Director, and a final report
covering the adequacy of each phase.
The MMS is aware of companies overseas that are capable of acting
as certification bodies; we do not know the extent of the capabilities
of domestic firms to provide CVA services. All of the major
verification organizations (ABS, Lloyds, GL, DNV, etc.) operate
worldwide. Their U.S. offices have access to expertise from around the
world, so they could draw from their European affiliates as necessary.
Also, the main areas of concern will involve structural issues related
to project facilities. Current U.S. verifiers have years of offshore
experience and could address structural issues for these facilities.
They could hire outside or contract expertise as necessary to address
turbine design and other aspects of the proposal. However, we request
comments regarding both the domestic and international availability of
CVAs that will be necessary to implement the OCS alternative energy
program as described in the proposed rule.
Facility Design Report: This report provides MMS with a detailed
description of the proposed facility or facilities and locations on the
OCS. The lessee, operator, or grant holder is required to provide to
MMS a complete set of structural drawings, structural loading
information, detailed design criteria, and foundation information
including mooring or tethering systems in the case of a floating
facility. The CVA, nominated in your plan, will conduct an independent
assessment of the design of the facility and ensure that it is designed
to withstand the environmental and functional loads conditions
appropriate for the intended service life at the proposed location. The
CVA must submit interim reports, as required by the Director, and a
final report covering the adequacy of the design phase.
Fabrication and Installation Report: Under the proposed rule,
fabrication and installation reports would be combined. The Fabrication
and Installation Report describes the lessee/operator's or grant
holder's plans for both the facility's fabrication (including the
manufacture, assembly, and construction) and installation process. The
report would include a schedule for fabrication and installation as
well as detailed engineering and environmental information. The CVA,
nominated in the SAP, COP or GAP, will conduct an independent
assessment of the fabrication and installation phases. The CVA must use
good engineering judgment and practices in conducting an independent
assessment of fabrication and installation activities and ensure that
these activities are conducted according to the approved applications.
The CVA must submit interim reports, as required by the Director, and a
final report covering the adequacy of the fabrication and installation
phase.
After fabrication and installation activities are completed, a
company representative must submit a certification statement certifying
that the fabrication and installation were conducted in accordance with
accepted engineering practices and certified by an MMS approved CVA.
Other Options and Approaches: MMS considered incorporating design
standards in these regulations. We are in the process of reviewing
international standards and guidance documents for Alternative Energy
systems including those developed by the British Wind Energy
Association, Det Norske Veritas, Germanischer Lloyds, IEC, and
Energistyrelsen (Denmark). We are also assessing the applicability of
certain American Petroleum Institute (API) and International Standards
Organization (ISO) standards for offshore alternative energy
structures, operating systems, and management practices. As part of
this assessment, we are participating in a project that compares the
performance of Atlantic wind structures under IEC and API standards.
This project is scheduled for completion in July 2008. The application
of domestic and international standards will depend on the type of
project, and regional and site-specific environmental conditions. The
MMS may elect to incorporate into the regulations those standards that
are expected to have widespread applicability to Alternative Energy
projects. Other standards may be proposed by operators (or determined
to be necessary by MMS) on a case-by-case basis.
Section by Section Discussion for Subpart G
Reports
Section 285.700 What reports must I submit to MMS before installing
facilities described in my approved SAP, COP, or GAP?
This section lists the two reports required prior to installing
facilities: (1) Facility Design Report; and (2) Fabrication and
Installation Report. The MMS has 60 calendar days to review these
reports and notify the applicant of any objections. If MMS does not
have any objections, the applicant may begin to construct and install
the facilities at the end of the 60 period.
If there are any objections, MMS will notify you either verbally or
in writing within 60 calendar days of receipt. After notification of
objections, MMS may follow-up with written correspondence outlining its
specific objections to the report and requesting certain actions
necessary to resolve the agency's objections. You cannot commence
activities addressed in such report until any objections are resolved
to MMS's satisfaction.
Section 285.701 What must I include in my Facility Design Report?
The Facility Design Report provides specific details of the design
of any facilities, including cables and pipelines, that are outlined in
your approved SAP, COP, or GAP. This report must demonstrate that the
design conforms to the responsibilities of a lessee contained in these
regulations. This section includes a list of required contents for the
report and details the required contents of each element of the report.
The report must include:
A cover letter;
A location plat;
Front, side, and plan view drawings;
A complete set of structural drawings;
A summary of environmental data used for design;
[[Page 39428]]
A summary of the engineering design data;
A complete set of design calculations;
Project-specific studies used in the facility design or
installation;
Description of the loads imposed on the facility;
A geotechnical report; and
A certification statement and location of records.
Section 285.702 What must I include in my Fabrication and Installation
Report?
The Fabrication and Installation Report describes how facilities
will be fabricated and installed in accordance with the design criteria
identified in the Facility Design Report, the approved SAP, COP, or
GAP; and generally accepted industry standards and practices. The
Fabrication and Installation Report must demonstrate how your
facilities will be fabricated and installed in a manner that conforms
to your responsibilities of a lessee contained in these regulations.
This section includes a list of required contents for the report and
details the required contents of each element of the report. The report
must include:
A cover letter;
A schedule for fabrication and installation;
Fabrication information;
Installation process information;
Federal, State, and Local Permits (e.g. EPA, USACE);
Environmental information; and
Project easement design.
Section 285.703 [Reserved]
Section 285.704 [Reserved]
Certified Verification Agent
Section 285.705 What is the function of a Certified Verification Agent
(CVA)?
This section details the responsibilities of the CVA. The CVA must
ensure that facilities are designed, fabricated, and installed in
conformance with accepted engineering practices and the Facility Design
Report and Fabrication and Installation Report, and ensure that repairs
and major modifications are completed in conformance with accepted
engineering practices. The CVA must provide reports of all incidents
that affect the design, fabrication, and installation of the project
and its components.
Section 285.706 How do I nominate a CVA for MMS approval?
A CVA must be nominated in the SAP, COP or GAP, as applicable. This
section describes the process for nominating the CVA and the
information that must be included in the qualifications statement. The
section also requires that the verification be conducted by or under
the direct supervision of registered professional engineers and
prohibits conflict of interest by CVAs.
Section 285.707 What are the CVA's primary duties for facility design
review?
The CVA must certify to MMS that the facility is designed to
withstand the environmental and functional load conditions for the
intended life at the proposed location. This section lists those
elements of the design phase that the CVA must independently assess.
These elements include:
Planning criteria;
Operational requirements;
Environmental loading data;
Load determinations;
Stress analyses;
Material designations;
Soil and foundation conditions;
Safety factors; and
Other pertinent parameters of the proposed design.
For floating facilities, the CVA must ensure that the requirements
of the U.S. Coast Guard for structural integrity and stability, e.g.,
verification of center of gravity, etc., are met.
Section 285.708 What are the CVA's primary duties for fabrication and
installation review?
The CVA must certify to the MMS that the facilities are fabricated
and installed as proposed in the approved Facility Design Report and
the Fabrication and Installation Report. This section details the
monitoring and inspection functions of the CVA during this phase of the
project. It also requires the CVA to inform the lessee when procedures
or design specifications are changed.
For the fabrication and installation review, the CVA must:
Use good engineering judgment and practice in conducting
an independent assessment of the fabrication and installation
activities;
Monitor the fabrication and installation of the facility;
Make periodic onsite inspections while fabrication is in
progress;
Make periodic onsite inspections while installation is in
progress; and
Certify in a report that project components are fabricated
and installed in accordance with accepted engineering practices, the
approved COP, SAP, or GAP, and the Fabrication and Installation Report.
The report must identify the location of all records pertaining to
fabrication and installation. The lessee or grantee may commence
commercial operations or other approved activities 30 calendar days
after MMS receives the certification report, unless MMS notifies the
applicant within that time period of objections to the certification
report.
The CVA must monitor the fabrication and installation of the
facility to ensure that it is built and installed according to the
Facility Design Report and Fabrication and Installation Report. If the
CVA finds that fabrication and installation procedures are changed or
design specifications are modified, the CVA must inform the applicant.
Section 285.709 When conducting on-site fabrication inspections, what
must the CVA verify?
The CVA must make periodic on-site inspections while fabrication of
the facility is in progress. The CVA must verify the following items
during these inspections:
Quality control by lessee (or grant holder) and builder;
Fabrication site facilities;
Material quality and identification methods;
Fabrication procedures specified in the Fabrication and
Installation Report, and adherence to such procedures;
Welder and welding procedure qualification and
identification;
Structural tolerances specified and adherence to those
tolerances;
The nondestructive examination requirements, and
evaluation results of the specified examinations;
Destructive testing requirements and results;
Repair procedures;
Installation of corrosion-protection systems and splash-
zone protection;
Erection procedures to ensure that overstressing of
structural members does not occur;
Alignment procedures;
Dimensional check of the overall structure, including any
turrets, turret-and-hull interfaces, any mooring line and chain and
riser tensioning line segments; and
Status of quality-control records at various stages of
fabrication.
For any floating facilities, the CVA must ensure that the
requirements of the U.S. Coast Guard for structural integrity and
stability, e.g., verification of center of gravity, etc., have been
met. The CVA must also consider foundations, foundation pilings and
templates, and anchoring systems and mooring or tethering systems.
[[Page 39429]]
Section 285.710 When conducting on-site installation inspections, what
must the CVA do?
The CVA must make periodic on-site inspections while installation
is in progress. The CVA must verify, survey, witness, survey or check
the following items during facility installation:
Loadout and initial flotation activities;
Towing operations to the specified location, and review
the towing records;
Launching and uprighting activities;
Submergence activities;
Pile or anchor installations;
Installation of mooring and tethering systems;
Final deck and component installations; and
Installation at the approved location according to the
Facility Design Report and the Fabrication and Installation Report.
For a fixed or floating facility, the CVA must witness the loadout
of the jacket, decks, piles, or structures from each fabrication site
and the actual installation of the facility or major modification and
the related installation activities.
For a floating facility, the CVA must witness the loadout of the
facility; the installation of foundation pilings and templates, and
anchoring systems; and the installation of the mooring and tethering
systems.
The CVA must conduct an onsite survey of the facility after
transportation to the approved location. The CVA must spot-check the
equipment, procedures, and recordkeeping as necessary to determine
compliance with the applicable documents incorporated by reference and
the regulations under this part.
Section 285.711 What reports must the CVA submit for project
modifications and repairs?
This section requires a report from a CVA on major repairs and
modifications to certify that the repairs and modifications to the
project conform with accepted engineering practices. The report must
also identify the location of all records pertaining to the major
repairs or major modifications.
A major repair is a corrective action involving structural members
affecting the structural integrity of a portion of or all the facility.
A major modification is an alteration involving structural members
affecting the structural integrity of a portion of or all the facility.
Section 285.712 What are the CVA's reporting requirements?
This section details when the CVA must submit reports to MMS and
the lessee or grantee. This includes interim reports, as requested by
the MMS. For each report the CVA must submit one electronic copy and
one hard copy to MMS. In each report, the CVA must:
Give details of how, by whom, and when the CVA activities
were conducted;
Describe the CVA's activities during the verification
process;
Summarize the CVA's findings; and
Provide any additional comments that the CVA deems
necessary.
Section 285.713 What must I do after the CVA confirms compliance with
the Fabrication and Installation Report on my commercial lease?
After receiving confirmation of compliance with the Fabrication and
Installation Report from the CVA, the lessee or grantee must notify MMS
within 10 business days after commencing commercial operations.
Section 285.714 What records must I keep?
This section provides requirements for records that the lessee must
maintain for the duration of the project, until MMS releases the
required financial assurance. The lessee or grantee must compile,
retain, and make these records available to MMS representatives. These
records include:
The as-built drawings;
The design assumptions and analyses;
A summary of the fabrication and installation examination
records;
The inspection results; and
Records of repairs not covered in the inspection report.
The lessee or grantee must record and retain the original
material test results of all primary structural materials during all
stages of construction. The lessee or grantee must provide MMS with the
location of these records in the certification statement.
Subpart H--Environmental and Safety Management, Inspections, and
Facility Assessments
Overview
This subpart describes requirements to prevent or minimize the
likelihood of harm or damage to the marine and coastal environments and
to promote safe operations, including their physical, atmospheric, and
biological components. The MMS intends to use adaptive management
practices to regulate alternative energy activities using a system
whereby the operating industries would demonstrate and validate their
performance. The MMS then will require adjustments to mitigation and
monitoring activities on a case-by-case basis based on operating
experiences. MMS will specify terms and conditions to be incorporated
into the SAP, COP, or GAP. You must certify compliance with certain of
those terms and conditions.
Environmental Management: While the proposed subpart H would not
require use of an Environmental Management System (EMS), the MMS
generally endorses the EMS concept and the general concepts of the
International Organization for Standards standard 14001 (ISO 14001). We
encourage companies operating under this Part to develop and implement
EMS systems under ISO 14001 or other accepted industry standards. We
believe that lessee and grantee development and implementation of an
EMS would facilitate compliance with the certification requirements
proposed by the MMS. However, an EMS would not be a substitute for and
would not excuse the operator from complying with any requirements in
this subpart. The environmental management provisions include specific
requirements relating to threatened, endangered, and protected species,
air quality, and archaeological and cultural resources.
Air Quality: Those equipment, facilities, and activities associated
with alternative energy leases and grants (e.g., survey, construction,
and maintenance activities) that emit air pollutants will be treated as
``OCS sources'' under section 328 of the Clean Air Act. When those OCS
sources are located within the Gulf of Mexico West of 87.5[deg]W
longitude, the applicant would be required to comply with air quality
provisions of this regulation. Any OCS sources located outside of that
area will be regulated under the U.S. Environmental Protection Agency's
air quality regulations at 40 CFR 55.
Section 328 of the Clean Air Act divided the control over air
pollution from OCS sources between the Environmental Protection Agency
(EPA) and the MMS. The MMS regulates air pollution from OCS sources
located within the Gulf of Mexico west of 87.5[deg] west longitude,
this includes areas offshore of Texas, Louisiana, Mississippi and
Alabama. Air pollution from OCS sources anywhere else (Pacific, Artic,
and Atlantic coasts and the Gulf of Mexico east of 87.5[deg] west
longitude, offshore Florida) on the OCS is regulated by the EPA. The
EPA may delegate this authority, refer to 40 CFR 55. Under the proposed
regulations
[[Page 39430]]
MMS may request data and information regarding:
Emission triggers and controls;
Screening formulas and thresholds;
Pollutant significance levels;
Controls for emissions that exceed significance levels;
Emission offsets;
Prevention of Significant Deterioration areas;
Modeling;
Monitoring; and
Meteorological data.
The applicant would be required to submit emissions information
that is adequate for MMS to determine which air quality requirements
apply to the project, if any. This information would be summarized in
the NEPA document prepared for the proposed project.
Safety Management System: As proposed in this subpart, the safety
management system would include, as applicable:
Remote monitoring, control, and shut down capabilities;