# Renewable Energy and Alternate Uses of Existing Facilities on the Outer Continental Shelf

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URL: https://www.frixlaw.com/law-library/documents/fr%3AE9-9462

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** April 29, 2009
- **Citation:** 74 FR 19638

## Text

DEPARTMENT OF THE INTERIOR
Minerals Management Service
30 CFR Parts 250, 285, and 290
[Docket ID: MMS-2008-OMM-0012]
RIN 1010-AD30
Renewable Energy and Alternate Uses of Existing Facilities on the Outer Continental Shelf

AGENCY:

Minerals Management Service (MMS), Interior.

ACTION:

Final rule; Notice of Availability of the Final Environmental Assessment.

SUMMARY:

The MMS is publishing final regulations to establish a program to grant leases, easements, and rights-of-way (ROW) for renewable energy project activities on the Outer Continental Shelf (OCS), as well as certain previously unauthorized activities that involve the alternate use of existing facilities located on the OCS; and to establish the methods for sharing revenues generated by this program with nearby coastal States. These regulations will also ensure the orderly, safe, and environmentally responsible development of renewable energy sources on the OCS.

The MMS prepared a Final Environmental Assessment (EA) analyzing this rule. The EA incorporates by reference the Programmatic Environmental Impact Statement
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.
The EA was prepared to assess any impacts of this rule. The Final EA is available on the MMS Web site at:
http://www.mms.gov/offshore/AlternativeEnergy/RegulatoryInformation.htm.

DATES:

Effective Date:
This final rule is effective on June 29, 2009. The incorporation by reference of the publication listed in the regulation is approved by the Director of the Federal Register as of June 29, 2009.

FOR FURTHER INFORMATION CONTACT:

Final rule:
Maureen Bornholdt, Program Manager, Office of Alternative Energy Programs, at (703) 787-1300 or
maureen.bornholdt@mms.gov;
or Amy C. White, Regulations and Standards Branch, at (703) 787-1665 or
amy.white@mms.gov.

Environmental Assessment:
James F. Bennett, Chief, Branch of Environmental Assessment, at (703) 787-1660 or
James.F.Bennett@mms.gov.

SUPPLEMENTARY INFORMATION:

The MMS developed this program and final regulations under the authority granted to the Secretary of the Interior (Secretary) by the Energy Policy Act of 2005, 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: (i) Produce or support production, transportation, or transmission of energy from sources other than oil and gas; or (ii) use, for energy-related or other authorized marine-related purposes, facilities currently or previously used for activities authorized under the OCS Lands Act.

Background

Mandate of Energy Policy Act of 2005 (EPAct)

The EPAct amended the OCS Lands Act to authorize the Secretary to issue leases, easements, or ROWs 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. Under this authority, MMS will regulate the generation of electricity or other forms of energy from sources other than oil and natural gas on OCS facilities and the transmission on project easements and ROWs issued under this part. The MMS will not regulate sales of electricity or other forms of energy. The MMS will not regulate the transmission of electricity or other forms of energy on State lands.

In addition, the EPAct requires the Secretary to share with nearby coastal States a portion of the revenues received by the Federal Government from authorized renewable energy and alternate use projects on certain areas of the OCS. This final rule implements this mandate and describes the methods MMS will use for identifying what projects are covered by this requirement, 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—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 final rule applies to the activities described in (iii) and (iv) previously (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) previously (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 is the lead agency for authorizing OCS renewable energy and alternate use activities, we recognize that other Federal agencies have regulatory responsibility in such activities. The new authority does not expressly supersede or modify existing Federal laws, and all activities must comply fully with such laws. For instance, FERC has exclusive jurisdiction to issue licenses for hydrokinetic projects under Part I of the Federal Power Act and issue exemptions from licensing under Section 405 and 408 of the Public Utility Regulatory Policies Act of 1978 for the construction and operation of hydrokinetic projects on the OCS. However, no FERC license or exemption for a hydrokinetic project on the OCS shall be issued before MMS issues a lease, easement, or right-of-way. The MMS possesses the exclusive authority to issue leases, easements, and rights-of-way for renewable energy projects on the OCS.

In addition to providing the authority to issue leases, easements, and ROWs, 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.

MMS and Federal Energy Regulatory Commission (FERC) MOU

Until March 2009, regulatory uncertainty existed regarding which Federal agencies had authority to regulate wave and current energy development on the outer Continental Shelf (OCS). Both MMS and the Federal Energy Regulatory Commission (FERC) claimed this authority based on differing interpretations of Part I of the Federal Power Act (FPA) and section 8(p) of OCSLA, as amended by EPAct. However, on March 17, 2009, the Secretary of the Interior and the Acting Chairman of the Federal Energy Regulatory Commission issued a joint statement on the development of renewable energy resources on the OCS. In this joint statement, the Secretary and the Acting Commissioner requested that MMS and FERC staff prepare a Memorandum of Understanding (MOU) to describe the process by which authorizations related to renewable energy resources in offshore waters will be developed.

The MMS and FERC finalized this MOU on April 9, 2009. This agreement clarifies jurisdictional understandings regarding renewable energy projects on the OCS in order to develop a cohesive, streamlined process that would help accelerate the development of wind, solar, and hydrokinetic energy projects. Specifically, the MOU recognizes that (1) MMS has exclusive jurisdiction with regard to the production, transportation, or transmission of energy from non-hydrokinetic alternative energy projects on the OCS, including renewable energy sources such as wind and solar; (2) MMS has exclusive jurisdiction to issue leases, easements, and rights-of-way regarding OCS lands for hydrokinetic projects; and (3) the Commission has exclusive jurisdiction to issue licenses and exemptions for hydrokinetic projects located on the OCS.

Under this new agreement, those entities interested in operating a hydrokinetic project on the OCS must first obtain a lease from MMS. The MMS will issue a public notice to determine whether competitive interest exists in the area, and will proceed with either the competitive or noncompetitive lease issuance process depending on responses received to this public notice. The MMS will conduct the NEPA analysis necessary for the lease issuance and any site assessment activities that will occur on the lease. After an applicant acquires a lease from MMS, FERC may issue a license or exemption for the hydrokinetic project, and conduct any necessary NEPA analysis. After a license is issued, construction and operations of the project may begin as per the terms of the license. To facilitate efficient processing of the lease and license applications, it may be helpful for potential lessees to apprise both MMS and FERC of their interest in hydrokinetic development at the start of the process.

Further, the MOU states that MMS and FERC will work together to the extent practicable to develop policies and regulations with respect to OCS hydrokinetic projects, and coordinate to ensure that hydrokinetic projects meet the public interest, including the adequate protection, mitigation, and enhancement of fish, wildlife, and marine resources and other beneficial public uses. The MOU ensures that the interests of both agencies are adequately represented and that the process of developing renewable energy on the OCS happens efficiently, in an environmentally responsible manner, and with appropriate benefit to the people of the United States.

Importantly, the agreement addresses the issue of potential site-banking by developers on the OCS by eliminating redundant regulatory processes for acquiring use of OCS lands. In addition, by eliminating dual regulatory processes, the agreement addresses the potential for granting conflicting awards of OCS sites to developers by the two agencies. Specifically, FERC has agreed not to issue preliminary permits for hydrokinetic activities on the OCS, and MMS has agreed that FERC will have the primary responsibility to issue licenses for these activities. The Federal Government has effectively eliminated the opportunity for abuse by entities seeking to reserve, block, or acquire for speculative purposes large portions of the OCS. These concerns were raised by many commenters on the REAU rulemaking. The DOI/FERC MOU creates a unified, coherent process for the authorization of hydrokinetic activities on the OCS, ensuring that U.S. resources on the OCS will not be subject to a “land rush,” and will be developed in the most efficient manner possible.

Regulatory Process

On December 30, 2005, the MMS issued an Advance Notice of Proposed Rulemaking (ANPR) (70 FR 77345) requesting comments on the program requirements.

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 provided a summary of the comments received on the ANPR in the Notice of Proposed Rulemaking (NPR) (73 FR 39376) published on July 9, 2008. The NPR is available on the
Regulations.gov
Web site.

Programmatic Environmental Impact Statement (PEIS) Summary

The MMS prepared a final PEIS in support of the establishment of a program for authorizing renewable 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, thus 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 renewable energy and alternate use projects could someday be proposed. Accordingly, this PEIS is focused on renewable 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 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:
http://ocsenergy.anl.gov/
.

Environmental Assessment

The MMS prepared a Final EA analyzing this rule. The EA incorporates by reference the PEIS,
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 EA was prepared to assess any impacts of this rule. The Final EA is available on the MMS Web site at:
http://www.mms.gov/offshore/AlternativeEnergy/RegulatoryInformation.htm.

Notice of Proposed Rulemaking

Summary of Comments

The MMS published a NPR (73 FR 39376) on July 9, 2008. The proposed rule was accompanied by a 60-day public comment period that ended September 8, 2008.

In response to the request for comments, MMS received 280 letters from a range of entities, including, but not limited to, Non-Governmental Organizations, State and local governments, industry, and the general public. A list of commenters is included at the end of the summary. The following table illustrates the segmentation of comment letter submissions received by organization type:

ER29AP09.000

No single issue dominated the comments, which were divergent and wide-ranging. In general, comments were supportive of renewable energy developments on the OCS and reuse of existing OCS facilities. Commenters advised MMS to provide as much certainty as possible in the final rule to support the burgeoning offshore renewable energy industry, while also providing flexibility to allow industry to meet the necessary requirements. The MMS was also urged to advocate for early and consistent stakeholder involvement in both the program and with individual project permitting.

The most common topics addressed by commenters included: Aquaculture, State and local consultation, bonding, confidentiality, alternate-use liability transference, jurisdiction, revenue sharing, and environmental review processes. These topics and others are addressed further in the sections that follow.

Access to OCS Lands and Procedures for Leasing

With regard to timeframes for activities required by the proposed rule, several commenters requested this rule provide clear and defined timelines for MMS's responsibilities. Some suggested that timelines should be set for the issuance of the public notice to determine developer interest. Others suggested that a timeline be set for the comment evaluation period following the deadline for public comments in response to a public notice. Some suggested that a timeline be set for the determination of competitive interest. Other commenters proposed a timeline be set for MMS action on lease-suspension requests.

With regard to jurisdiction, one commenter raised the question about whether MMS has jurisdiction over the cables associated with a renewable energy project even if these cables were used for a nonrenewable energy project at the end of the original lease term.

Some commenters requested that due-diligence requirements be established to ensure that the applicant is financially and technically sound when being considered as a potential leaseholder.

Some comments suggested that additional clarification is needed on a number of elements in the rule, including on what constitutes competitive interest, the ROW and right-of-use and easement (RUE) grant process, and activity cessation and suspension orders and the activities that these orders affect.

A large number of comments related to the process for renewing leases. Some of these comments requested that the renewal process begin earlier, and others asked that while a lease renewal request is pending, the rule make it clear that the lease term will be automatically extended until MMS makes a decision.

Some commenters expressed concern with the concept of lease area contractions, suggesting that MMS could contract leases capriciously. Other commenters suggested MMS should reconsider allowing for the scaling of projects to ensure fairness and ease of market entry. The MMS should also consider additional strategies beyond diligence requirements to ensure that individual developers could not tie up large areas of the OCS, thereby prohibiting other development interests and, potentially, other uses.

Many commenters suggested that MMS should permit lessees of limited leases to have priority consideration when considering a commercial lease application. For instance, if a lessee is already operating on a limited lease in a given area, and that same area is opened up for a commercial lease sale, that lessee should be given priority over other competitors for that lease area.

With regard to the issuance of limited leases for the purpose of research, some commenters supported the idea of having Department of Energy supported research access rights expanded to include State governments and academic institutions.

Several comments urged MMS to consider and establish a multi-factor evaluation process when considering a project proposal in a competitive lease sale.

Environmental Information, Management, and Compliance Programs

Several commenters suggested that the environmental review process proposed by MMS would be overly burdensome and redundant. Some commenters suggested that the NEPA process proposed by MMS goes far beyond what NEPA requires and what other agencies require to implement NEPA in order to demonstrate the extent of environmental impact. Some commenters suggested that the NEPA process is far too cumbersome as set out in the proposed rule. Having the Site Assessment Plan (SAP), Construction and Operations Plan (COP), and lease sale Environmental Impact Statement (EIS) undergo NEPA is burdensome and unnecessary.

With regard to the environmental review process, several comments pertained to the division of cost burden, requesting clarification, or changes to the designation of responsible parties with regard to payment. Some commenters suggested that MMS should allow companies the option of developing the required environmental documents instead of having MMS staff and its contractors develop them for projects.

With regard to the Coastal Zone Management Act (CZMA) review process, several commenters requested clarification on how the process would work. Some commenters suggested that it is unclear in the proposed rule regarding exactly what is required under a noncompetitive lease sale versus a competitive lease sale. Other commenters were unclear on what parts of CZMA applied to these types of lease sales.

Many commenters expressed concern with minimizing the environmental impacts of leases, easements, and ROWs. With regard to cumulative impacts and monitoring, several commenters proposed that projects be closely monitored for their overall impacts on the environment, both beneficial and adverse. Some commenters suggested that the proposed rule did not adequately address the need for consideration of potential impacts on commercial fishing. Other commenters advocated that monitoring activities should not only encompass the proposed project area, but also those areas directly adjacent to projects. Some commenters suggested that the guidelines for monitoring should clarify that States reserve the right to impose additional requirements as needed. The MMS also received comments suggesting that cumulative effects should be required as part of an applicant's SAP, COP, and initial project proposal. The cumulative effects should also be considered as part of the lease-sale evaluation process.

With regard to adaptive management, several commenters proposed that the requirements and process for adaptive management are unclear in the proposed rule and need to be clarified. Some suggested that the lease instrument should be site specific and clearly specify the scope of the adaptive management activities MMS might require. Some comments pointed to the approach employed by the U.S. Fish and Wildlife Service for specifying adaptive management, where the terms and obligations are negotiated upfront. Some suggest that adaptive management should be included as a standard component of the SAP, General Activities Plan (GAP), and COP.

Several commenters advocate that MMS apply categorical exclusions for certain data gathering activities. Some comments suggest that categorical exclusions could apply to most, if not all, resource evaluation activities, the installation of monitoring devices, and activities conducted prior to the approval of plans while on a lease. Some comments point to the policy currently employed by the U.S. Bureau of Land Management (BLM) for granting these exclusions.

Facility Design, Fabrication, and Installation

With regard to facility design and engineering, the majority of comments pertained to the proposed requirement that the lessee use a Certified Verification Agent (CVA). Many commenters suggested that the required use of a CVA is redundant, expensive, and not effective where such design, fabrication, installation, repairs, and modifications are done under the direction of a licensed engineer. Some commenters pointed out that because construction of offshore wind facilities consist of repeated installation of numerous, nearly identical units, requiring the CVA to verify, witness, survey, or check most, if not all, of a wind farm installation is burdensome and unnecessary.

With regard to the engineering and design standards by which offshore renewable energy facilities are aligned, many commenters suggested it was unclear in the proposed rule to what standard(s) the CVA would compare individual projects, as there is no governing body approving such designs, nor does MMS state specific standards in the rule. Some commenters urged MMS to adopt internationally accepted standards wherever possible. Other commenters suggested that MMS consider a phased approach in the facility design, fabrication, and installation requirements, thereby proposing that MMS rely on existing standards while proceeding with the analysis of all standards to determine what modifications might be justified in a second phase of the program. In addition, because there are no set standards or governing body, some commenters proposed that MMS provide training to prospective CVAs to meet the safety requirements that MMS will impose.

Regulation of Operational and Decommissioning Activities

With regard to site-assessment activities, some commenters expressed a desire to have the ability to conduct site-assessment activities before a lease has been issued. Other commenters suggested that the SAP and COP be combined into a single plan, while others recommended that MMS create a categorical exclusion for site-assessment activities.

With regard to information requirements, many commenters requested additional clarification regarding various information requirements under the lease, including

those required during the application phase, within the plans, during the environmental reviews, and during the technical evaluation of a proposed project.

A large number of comments addressed the topic of the proposed notification requirements. Some commenters suggested that the 3-day notification requirement, as explained in subpart H, should be restated to address equipment or failures that pose significant risk to the environment, personnel, or property. Some commenters suggested that the notification requirement may not be appropriate for routine repair work, and would be better suited to emergency repairs only or those that would require environmental documentation. As stated in the proposed rule, the notification requirements are unclear regarding what activities would require notification; because there are a range of activities that could take place, such as changing light bulbs, this provision needs to be better defined.

Several comments addressed the topic of inspections. Some commenters pointed out that renewable energy facilities, like wind farms, will be unmanned and, as such, should not be subject to the same inspection requirements that the oil and gas industry are subject to. Certain commenters suggested that offshore wind turbines be classified as unmanned for safety purposes, as these facilities are unmanned during normal operations. Unscheduled inspections to the actual wind turbines or energy generating facilities would be better served with visits to the 24-hour shoreside monitoring station, where real-time information on the condition and operation of the facility would be available. Some commenters advocated unscheduled inspections should be coordinated with the developer to minimize possible safety risks to the inspector.

A large number of comments pertained to the decommissioning obligations set out in the proposed rule. Some suggested that allowing structures to remain in place at the end of a lease makes more sense than removal, both from a financial perspective and from an environmental perspective. Facility components, such as a turbine foundation, scour protection equipment, and cabling could cause greater harm to the surrounding ecology during and after removal than if left in place. Some commenters suggested that these structures could benefit the local ecology by continuing to serve as artificial reefs. Some comments requested that MMS require CZMA review as part of the decommissioning application. Others advocated having decommissioning requirements be determined on a case-by-case basis in the COP, by considering site-specific characteristics. On the side of those that support removal of all structures, some commenters suggested that the final rule should include a requirement that the development site be returned to the ecological baseline that existed prior to the installation of the energy project. Other commenters suggested that the requirements incorporate a presumption that all facilities, cables, and other obstructions be removed, as submarine cables and other components can pose a long-term obstruction for much of the fishing gear used on the OCS.

Some comments suggested that the specifics of the decommissioning requirements should be modified. Some suggested that the removal of structures to the seabed depth specified in the rule is unnecessary. Some pointed to requirements employed in Europe, where the common removal depth for a wind turbine foundation is no more than 2 meters or 6 feet.

Payments, Royalties, Fees, and Bonds

The majority of comments regarding payments and financial assurance requirements urged MMS to expand the range of financial assurance options available to the lessee, including allowing the use of a third-party guaranty, audited financial statements, power purchase or other sale agreements, insurance, or other alternatives approved by MMS.

Another point raised in a large volume of comments addressed the topic of decommissioning costs. Some commenters suggested MMS should separate financial assurance for decommissioning costs from financial assurance for other regulatory obligations, while others suggested that the rule be crafted in a way that ensured the final bonding costs will remain within reason and are reviewed carefully to cover only the necessary costs. A number of commenters suggested MMS should revise the provisions to provide more cost-effective protection against defaults on decommissioning obligations. Some commenters shared concern regarding MMS's ability to use bonding for cleanup and recovery activities once a lease term has ended. Some commenters suggested the decommissioning obligation under a limited lease, with a meteorological tower cited as an example, should not accrue—at a minimum—until after the development lease is awarded and MMS has approved the plan.

At least one commenter mentioned the uncertainty in the requirements and in the process of granting and overseeing ROWs and RUEs will impact the feasibility for the developer to obtain financing.

With regard to operating fees, many commenters recommended that operating fees under a commercial lease be deferred until the leaseholder is either generating energy or has begun construction on the lease. One suggestion was made to have the operating fees deferred until the CVA approves the COP.

With regard to bidding, some commenters recommended MMS establish minimum bids and allow for the rejection of high bids in certain circumstances.

Some commenters suggested the leasing fees, royalties, and rent in the proposed rule were set too low in light of the value of existing fisheries that could be displaced by renewable energy projects.

Coordination and Consultation

Many commenters urged early and consistent consultation and coordination with relevant State and Federal agencies. A few commenters suggested the establishment of standing inter-agency advisory and planning committees to allow for continuous dialogue with multiple stakeholders during the lease issuance process. Some commenters requested they be specifically mentioned as a consulting entity in the rule.

With regard to State competitions for offshore development, some commenters requested MMS recognize the results of State competitions and grants for renewable energy development offshore their States when considering potential lessees in Federal waters.

With regard to consultation during specific stages in the lease issuance process, some commenters suggested the rule require applicants consult with affected State and local governments during the area identification stage and throughout the remaining SAP and COP review processes. Some suggested MMS work more closely with the Federal Energy Regulatory Commission to avoid duplication in coastal EAs and reviews, while others suggested MMS work just as closely with State agencies during the coastal zone management processes. Other comments from industry suggested that renewable energy developers should also confer with local oil and gas project planners to ensure compatibility. Some commenters advocated that MMS express, in the final rule, a process for MMS to

coordinate with States, tribes, and local governments in adjusting mitigation and monitoring requirements.

A common thread running through the comments on coordination and consultation is the desire to establish and use planning and coordination mechanisms to facilitate appropriate siting of OCS renewable energy activity and to develop meaningful priorities. Some commenters recommended establishing new mechanisms, and others suggested working with existing means. The MMS believes that such approaches may be accommodated under the final rule, and we are committed to reaching out to stakeholders, and local, state, and Federal government agencies as we implement the rule.

We began outreach to officials and organizations at the national, regional, state, and local levels when we began the rulemaking process, and we have received valuable input throughout the process. We have participated in existing regional planning mechanisms, such as the West Coast Governors Agreement and the Northeast Regional Ocean Council, which are working toward properly balanced uses of the ocean through a regionally coordinated approach to relevant issues, including renewable energy development. We recognize and support new efforts, such as the one under way jointly by the States of New York, New Jersey, Delaware, Maryland, and Virginia to convene a Mid-Atlantic Ocean Summit, as well as the U.S. Offshore Wind Collaborative's proposed New England and Mid-Atlantic States Joint Planning Agreement. We also have been working with individual States, localities, and tribes in the implementation of the MMS interim policy on resource assessment and technology testing and hope to build on those efforts in the establishment of joint task forces addressing commercial renewable energy development opportunities as provided under the final rule.

Two States—New Jersey and Rhode Island—are well along in planning efforts that will help to determine appropriate areas of the OCS for development, and MMS has been an active partner with those States. Such efforts—supported by MMS environmental study and technical research initiatives, as well as the Coordinated OCS Mapping Initiative mandated by EPAct—will contribute significantly as MMS implements this final rule.

Section 388 of EPAct 2005 requires that any activity permitted under this authority be carried out in a manner that provides for, among other things, protection of the environment, conservation of the natural resources of the outer continental shelf; coordination with relevant Federal agencies; protection of national security interests of the United States, prevention of interference with reasonable uses and functions of the exclusive economic zone, the high seas, and the territorial seas, and consideration of any other use of the sea or seabed, including, but not limited to fisheries, protection of biodiversity and ecosystem function, sealanes, potential siting of deepwater ports, or navigation. Consistent with this statutory direction, MMS understands that this rule will be applied in conjunction with interagency-led planning activities that are undertaken to avoid conflicts among users and maximize the economic and ecological benefits of the OCS. These activities will include multifaceted spatial planning effort that will incorporate ecosystem based science and stewardship along with socioeconomics, research, and modeling in the context for demands for other ocean uses and functions. It is anticipated that the Council on Environmental Quality will help coordinate this interagency effort, with the National Oceanic and Atmospheric Administration (NOAA) playing a key role, along with MMS. Through this type of coordination and advance planning, we expect to be able to speed the process of developing renewable energy projects in the OCS.

This final rule is designed to be implemented both within the existing federal framework of multi-agency management of ocean activities, as well as to adapt to alternative ocean governance regimes that could be developed in the future. MMS will coordinate closely with all relevant federal and state agencies both on the implementation of this rule, through actualization and operation to termination and decommissioning, as well as on the development of any broader governance structure to address the many competing demands and interests facing our oceans.

The MMS is responsible for ensuring that the decisions made within this comprehensive regulatory structure are supported by environmental analysis, documents, and other decision support resources. We will ensure that environmental analysis for OCS renewable energy proposals is proportional to the scope and scale of each proposal, is effectively tiered to programmatic NEPA documents, and efficiently incorporates other publicly available information by reference. The MMS will ensure timely and efficient coordination of the development and review of environmental documents with all agencies that have jurisdiction or special expertise to provide the decisionmakers. We will ensure that mitigation and monitoring information informs future decisionmaking processes.

Management of renewable energy activities by MMS under this rule is founded on many years of experience in administering OCS energy and mineral programs and will be supported by extensive investigation and information gathering under the MMS Environmental Studies and the Technology Assessment and Research Programs. Both of these programs will play a significant role to ensure the safe and environmentally-responsible use of OCS renewable energy resources. Several initiatives examine real offshore renewable energy activity experiences in Europe that will provide useful information in considering similar activity in U.S. waters as well as opportunities to form close partnerships with and learn from international governments and developers possessing offshore renewable energy expertise. As we implement our regulatory framework to harness these new and exciting ocean renewable energy opportunities, we will draw on partnerships among the Federal, state, and local governments entities to share critical information, and agency expertise, and to foster better communication between different arms of the Federal Government

The MMS believes that all of these efforts and others will be extremely helpful in deciding where and when to pursue development of renewable energy on the OCS. They will help government at all levels to commit resources appropriately and will provide developers with information to facilitate proper and efficient project proposals. Most importantly, MMS coordination and consultation with regional, state, and local planning mechanisms will give those entities that will be most affected by renewable energy activity a proper voice in the development of priorities.

Reuse of Existing Facilities

The vast majority of comments pertaining to alternate use addressed the concern that MMS would authorize mariculture activities on the OCS in the absence of express Federal mariculture legislation (such as the National Offshore Aquaculture Act that has been debated in Congress but never passed). Several commenters argued that MMS did not have the legal authority under subsection 8(p) of the OCS Lands Act to authorize Alternate Use RUEs for

mariculture activities that involved the use of an existing OCS facility.

Several commenters raised concerns regarding the apportionment of decommissioning liability between the holder of the alternate use right-of-use and easement (Alternate Use RUE) and the existing OCS lessee or operator. Most of these commenters argued that the Alternate Use RUE holder should assume liability for decommissioning the existing OCS facility, thereby allowing the existing lessee or operator to shed its decommissioning liabilities for that particular existing structure that is subject to the approved alternate use. Other commenters expressed concern that the alternate use provisions were too general in nature, and did not set forth specific grant terms, payment levels, or financial assurance commitments.

BILLING CODE 4310-MR-P

ER29AP09.001

ER29AP09.002

BILLING CODE 4310-MR-C
Overview of the MMS Alternative Energy and Alternate Use Program

To accommodate the regulations to support the Alternative Energy and Alternate Use Program, MMS will add a new part to subchapter B of title 30 of the Code of Federal Regulations (CFR). The new part 285 will be titled
Renewable Energy and Alternate Uses of Existing Facilities on the Outer Continental Shelf
and will address the requirements of section 388(a) of the EPAct, which amended the OCS Lands Act by adding section 8(p) (43 U.S.C. 1337(p)). In the proposed rule the new part 285 was titled
Alternative Energy and Alternate Uses of Existing Facilities on the Outer Continental Shelf
. We are now using the term “renewable energy” instead of alternative energy because it is a more commonly used term and more easily understood by the industry and general public.

Approach to Rulemaking

The MMS developed these regulations to provide a regulatory framework for leasing and managing OCS renewable 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 renewable energy sources on the OCS. The MMS expects that renewable energy projects in the near term will involve the production of electricity from wind, wave, and ocean current. In the future, other types of renewable 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 renewable energy development, without specific requirements for each type of energy production.

Following the publication of these regulations, MMS will publish a guidance document to support the regulations. This guidance document will provide more details on the program and will describe the type of information that we are looking for in various plan submittals. As we gain experience with renewable energy development on the OCS, we will update our regulations to include energy-resource-specific provisions and incorporate by reference appropriate documents.

This final 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. The MMS is revising § 290.2 to clarify our decisions on bids under this program that are exempt from the appeals process at 30 CFR part 290 and are covered under § 285.118(c). This section describes the procedures for a bidder whose high bid was rejected to apply for reconsideration by the Director of MMS (Director) for renewable energy leases, ROW grants, RUE grants, or Alternate Use RUE.

Overview of the Project Development Process

General Overview

Types of Access Rights

The MMS will issue lease access rights for commercial development and site assessment and technology testing. The ROW and RUE grants will be issued for the support of renewable energy activities. The MMS will use a special grant, the Alternate Use RUE, for activities that use an existing facility.

Commercial and Limited Leases

The MMS will 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 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 renewable energy on a commercial scale over the long term (approximately 30 years). A commercial lease will include the right to a project easement, which will 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 will be issued upon approval of the COP (for commercial leases) or GAP (for limited leases).

A limited lease will 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 exceeding a limit specified in the lease. In a change from the proposed rule, MMS has decided to permit limited leases that generate power during technology testing to sell that power within limits set in the lease instrument. For example, a limited lease could include in its terms and conditions the authorization to sell electricity produced during the testing of experimental ocean current turbine generators of up to 5 megawatts (MW) total installed capacity, thereby allowing the lessee to recoup some of the expenses entailed in its limited lease activities. Limited leases may be issued for site-assessment purposes only or for site assessment and development and testing of new or experimental renewable energy technology. Limited leases will be issued for a short term, 5 years. Under the provisions of these regulations, limited leases may 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, the leaseholder will need to obtain a new commercial lease through the leasing process, as defined in these regulations.

RUE Grants and ROW Grants

The MMS will issue RUE grants authorizing the use of a designated portion of the OCS to support renewable energy activities on a lease or other approval not issued under this part (e.g., on a State-issued lease).

The MMS will issue ROW grants 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 renewable energy not generated on a lease issued under this part. An 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. An ROW is not the same as a project easement issued with a renewable energy lease under this part.

Alternate Use RUEs

The MMS will issue an alternate 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. See preamble at subpart J, for more details regarding Alternate Use RUEs.

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, we will prepare NEPA and other environmental compliance documents. The MMS will 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, we determine that there is no competitive interest in that particular OCS area, we may proceed in issuing a lease or grant noncompetitively. Whether a company acquires a lease or grant competitively or noncompetitively, it must comply with all MMS lease stipulations or conditions in the grant.

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:

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ER29AP09.003

ER29AP09.004

ER29AP09.005

ER29AP09.006

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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 by requiring that each agency make that information an integral part of its decisions. The 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 renewable energy and alternate use activities on the OCS. Some of the information we request under this part are in support of other Federal agencies' information requirements associated with compliance with the laws and regulations that they enforce. —

Coastal Zone Management Act Compliance

Each coastal State has a federally-approved coastal management plan (CMP). In compliance with CZMA mandates found at section 307(c)(1), when 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 or natural resource of a State's coastal zone. If such effects are reasonably foreseeable, the MMS must submit a consistency determination (CD) to the affected State(s) at least 90 days before the lease sale. This CD will include a detailed description of the 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's 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 their CMP, the State lists Federal licenses and permits which are reasonably likely to affect coastal uses or resources and requires 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 NOAA ORCM 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, MMS will 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.

ER29AP09.007

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 the lease, grant, and plan. The MMS will not allow development without proper plan submission and approval. Site assessment activities on a commercial lease will require the applicant to submit a SAP and receive MMS approval of that plan before beginning those activities. The SAP will undergo the appropriate NEPA reviews and may require either an Environmental Impact Statement (EIS) or an EA. The SAP must demonstrate how you will conduct the proposed activities to comply with relevant Federal statutes such as the CZMA, Endangered Species Act (ESA), Marine Mammal Protection Act (MMPA), and CWA.

For a commercial lease, after you perform site assessment activities, you will be required to submit and receive MMS approval of a COP before you may begin any development and production activities on your lease. Like the SAP, the COP will 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 will be required to submit a 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 will 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 subsection 8(g) of the OCS Lands Act (43 U.S.C. 1337(g)). In addition, when a project extends into the 8(g) zone of at least one State, subsection 8(p) extends eligibility for a share of the revenues to States 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 ensure safety and 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 company will be required to monitor activities and demonstrate that its performance satisfies specified standards in its approved plans. In addition, the

company will be required to comply with regulations regarding air quality, safety, maintenance and shutdowns, equipment failure, adverse environmental effects, 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 we will approve and regulate such alternate use activities on the OCS. We will 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 we determine 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 provisions in subpart J, MMS will make associated revisions to our existing oil and gas decommissioning regulations found in 30 CFR part 250, subpart Q, to clarify the oil and gas platform owner's obligations for decommissioning in the event we approve alternate uses of the platform.

Subpart-by-Subpart Discussion

Part 285—Renewable Energy And Alternate Uses Of Existing Facilities On The Outer Continental Shelf

Subpart A—General Provisions

Subpart B—Issuance of OCS Renewable Energy Leases

Subpart C—Rights-of-Way Grants and Rights-of-Use and Easement Grants for Renewable 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 for Activities Conducted Under SAPs, COPs and GAPs

Subpart I—Decommissioning

Subpart J—Rights of Use and Easements 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.

Approach

The OCS Lands Act 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. 1337(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 are based on ensuring that projects under these regulations are designed and conducted in a safe and environmentally sound manner.

Departures from the regulations 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 and are designed to deter nuisance and speculative interference with the leasing process. Appeal rights are modeled after 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 § 281.13 of this subchapter, which pertains to the use of task forces when 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 to offer or issue 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 force may make recommendations and may be requested to conduct or oversee research, studies, or reports. However, MMS is not limited to using just task forces for coordination and consultation. Throughout the lease, grant issuance, and project development processes, MMS will work with affected State, local, and tribal governments and other planning and oversight organizations.

Section-by-Section Discussion of Subpart A

Authority (§ 285.100)

This section restates MMS's authority to issue regulations and oversee access and development on the OCS for renewable energy and alternate use of existing facilities. The authority statement is included to inform the affected public and other interested parties of the basis for establishing these regulations. The authority for these regulations was granted to the Secretary of the Interior in amendments to subsection 8 of the OCS Lands Act (43 U.S.C. 1337), as set forth in section 388(a) of the EPAct (Pub. L. 109-58).

With regard to hydrokinetic projects on the OCS, MMS possesses the exclusive authority to issue leases, easements, and rights-of-way for such projects, but will not duplicate the operational approvals granted by FERC when it issues licenses and exemptions for the construction and operation of hydrokinetic projects on the OCS.

The MMS revised this section from the NPR to state that the Secretary of the Interior delegated to MMS the authority to regulate activities under section 388(a) of the EPAct. These regulations will address activities that: (a) Produce or support production, transportation, or transmission of energy from sources other than oil and gas; or (b) use, for energy-related purposes or for other authorized marine-related purposes, facilities currently or previously used for activities authorized under the EPAct.

What is the purpose of this part? (§ 285.101)

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 for 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.

We did not make any changes to the section.

What are MMS's responsibilities under this part? (§ 285.102)

This section describes MMS's responsibilities, which are derived from section 8(p)(4) of the OCS Lands Act (43 U.S.C. 1337(p)(4)). 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. We will also establish practices and procedures to govern the collection of all payments due to the Federal Government, including any service recovery fees, rents, operating fees, and other fees or payments. We will coordinate and consult with the Governor of any affected State and executive of any affected local government or Indian tribe. As part of coordination and consultation with State and local governments, we may invite any affected State Governor, representative of an affected Indian tribe, and affected local government executive to join a task force or other joint planning or coordination agreement.

Based on comments received on the NPR, we added affected Indian tribes to this section. In addition, we added text in paragraph (a)(5) to emphasize coordination with Federal agencies involved in planning activities that are undertaken to avoid conflicts among users and maximize the economic and ecological benefits of the OCS, including multifaceted spatial planning efforts.

When may MMS prescribe or approve departures from these regulations? (§ 285.103)

This section establishes times when MMS may approve departures from the requirements established in the regulations. We 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 OCS Lands Act and must protect the environment and safety to the same degree as if there was no approved departure from the regulations.

We did not make any changes to the section.

Do I need an MMS lease or other authorization to produce or support the production of electricity or other energy product from a renewable energy resource on the OCS? (§ 285.104)

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 the generation of electricity or other energy product derived from a renewable energy resource on any part of the OCS, except under and in accordance with the terms of a lease, easement, or ROW issued pursuant to the OCS Lands Act. If you intend to construct and operate a hydrokinetic facility on OCS lands, you will first need a lease from MMS and later be required to seek a license from FERC.

It should be noted that with the final rule MMS is clarifying that authorization of geological and geophysical and related site assessment surveys will be the responsibility of the U.S. Army Corps of Engineers. In many instances these types of activities may be verified under the Corps' Nationwide Permit Program. We have revised the regulation at subpart F to remove MMS approval of these types of surveys and the requirement to describe the design of such surveys in relevant plans. Although MMS will not be the permitter for such surveys—either before or after issuance of a lease or grant—we strongly urge that those conducting surveys coordinate with MMS and the Corps to ensure that proposed activities meet both Corps permitting requirements and MMS information requirements described in subpart F relating to lease or grant issuance and plan approval.

We did not make any changes to the section.

What are my responsibilities under this part? (§ 285.105)

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 to minimize adverse effects to the coastal and marine environments, including their physical, atmospheric, and biological components to the extent practicable, and taking measures to prevent the discharge of pollutants, including marine trash and debris;

• 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 (DOI) nonprocurement debarment regulations; including the requirement to comply with 2 CFR part 1400 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.

We added measures to prevent the discharge of pollutants, including marine trash and debris, to this section to clarify that adverse effects to the environment include pollutants, trash, and debris. Also, while hydrokinetic projects will entail obligations and responsibilities relating to FERC regulation under licenses and exemptions, the holder of a hydrokinetic lease must comply with all terms and conditions set forth in the MMS-issued lease including MMS' right to access data and information for all activities conducted on leases issued under this part to meet our statutory responsibilities as lessor.

Who can hold a lease or grant under this part? (§ 285.106)

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 nonprocurement 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 days after MMS directed you to comply.

Based on comments received on the NPR, MMS added a requirement to this section that in order to qualify to become a lessee or a grant holder, the applicant must demonstrate the technical and financial capabilities to construct, operate, maintain, and terminate/decommission projects for which you are requesting authorization. We also deleted § 285.106(b)(4) because it was redundant with § 285.106(b)(2).

The MMS also received comments requesting that we limit ownership of leases and grants to United States citizens and companies. The requirements for lease and grant holders limit ownership to United States citizens, lawfully admitted aliens, and United States companies. Another comment stated that it is not clear if private universities and research institutions are eligible to hold leases or grants under this part. Private universities and research institutions could be qualified to hold leases or grants under these regulations, under paragraph (a)(4), as an “association”.

In addition, we added Federal agencies to the list of entities qualified to hold a lease. After the proposed rule was published, MMS received inquiries from the U.S. Navy concerning the acquisition of areas of the OCS as set-asides for renewable energy development to meet requirements imposed by the Energy Independence and Security Act of 2007 and EPAct that pertain to improved energy performance in the federal sector. By adding Federal agencies to the qualification list, MMS could issue a lease to the Navy or other Federal agency that would authorize OCS renewable energy development to provide electrical generation for its installations and facilities.

As with hydrokinetic commercial leases issued to private entities, a Federal or state agency holding an MMS lease cannot construct or operate an hydrokinetic project without a FERC-approved license or exemption.

How do I show that I am qualified to be a lessee or grant holder? (§ 285.107)

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 an appropriate reference to statements or records previously submitted to an MMS OCS office. A corporation must submit a statement certified by the corporate Secretary or Assistant Secretary over the corporate seal showing the State in which it was incorporated, and that it is authorized to hold leases and grants on the OCS, or an 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 the persons signing to bind the corporation. If MMS has qualified you to hold a renewable energy lease, RUE, or ROW in one OCS Region, it is our intent that you will be qualified to hold a renewable energy lease, RUE, or ROW in the other OCS Regions. We will provide more information in the implementation guidance that we intend to issue after the final rule is approved.

Based on comments received on the NPR and to conform with changes made to § 285.106, we added a description of the documentation that you may provide to MMS to demonstrate the technical and financial capabilities to construct, operate, maintain, and terminate/decommission projects for which you are requesting authorization.

We also added some documentation requirements for local, state, and federal entities that are comparable to those for associations and corporations.

When must I notify MMS if an action has been filed alleging that I am insolvent or bankrupt? (§ 285.108)

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.

We did not make any changes to the section.

When must I notify MMS of mergers, name changes, or changes of business form? (§ 285.109)

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 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. You do not have to request an assignment under §§ 285.408 through 285.411 in these cases.

We did not make any changes to the section.

How do I submit plans, applications, reports, or notices required by this part? (§ 285.110)

You must submit all plans, applications, reports, or notices to MMS at the address provided in this section.

We changed this section, requiring that, unless otherwise noted, applicants must submit one paper copy and one electronic copy of all plans, applications, reports, or notices required by this part.

When and how does MMS charge me processing fees on a case-by-case basis? (§ 285.111)

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 study, EA, or EIS.

The Independent Offices Appropriations Act (31 U.S.C. 9701), the Omnibus Appropriations Bill (Pub. L. 104-133, 110 Stat. 1321, April 26, 1996), and the Office of Management and Budget (OMB) Circular A-25, authorize Federal agencies to recover the full cost of services that confer special benefits. Under the Department of the Interior's (DOI) implementing policy, the Minerals Management Service (MMS) is required to charge the full cost for services that provide special benefits or privileges to an identifiable non-Federal recipient above and beyond those that accrue to the public at large. An application or request filed under this regulation conveys special benefits to recipients beyond those accruing to the general public and are subject to service fees.

There may be other authorities that MMS may use to recover costs depending on the particular circumstances of the project and the nature of the evaluation or processing needed. Such authorities may include the Regulations for Implementing the Procedural Provisions of the National Environmental Policy Act (40 CFR 1506.5), Public Law 99-591 (title I, section 101), and Public Law 110-161 (division F, title I, section 121).

The MMS intends to recover those costs that we incur following the decision that the document processing will have a unique processing cost. We will not charge for costs that MMS incurred before that decision was made. In cases where we may charge a case-by-case processing fee, we will provide the applicant with a written estimate of the processing costs that may include a standard overhead rate, or the closest estimate we have based on previous work, which is similar in nature. The case-by-case processing fees provided for in this rule relate to the documents that an applicant must submit to satisfy various statutory and regulatory requirements pertaining to actions authorized by this regulation. For example, MMS statutory responsibilities require that we independently review any analysis performed by an outside contractor. This review is necessary before a decision can be rendered on the application. Processing fees charged by MMS will include contract oversight and efforts to review and approve documents prepared by contractors, whether the contractors are paid directly by the applicant or through MMS. The applicant may comment on the proposed fee or request approval to directly pay a contractor for the document, study, or other activity. If warranted, based on information provided, we will re-estimate our reasonable processing costs following the procedure established in this section.

The MMS made several edits to this section. We expanded and clarified this section regarding the following issues: (1) That if a study or other document such as an EA or EIS is not required, MMS will not charge a processing fee at this time, (2) that MMS document review and approval and contract oversight will be recoverable costs, (3) that processing costs will include a standard bureau overhead rate or an estimate that will take projected costs into account, and (4) that payment instructions and terms will be provided in the final cost estimate.

Based on comments, we changed the citation for 43 CFR part 4, subpart J, to just 43 CFR part 4. The 43 CFR part 4, subpart J is “Special Rules Applicable to Appeals Concerning Federal Oil and Gas Royalties and Related Matters.” The 43 CFR part 4 covers all DOI appeals.

Definitions (§ 285.112)

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 contained in other regulations (i.e., 30 CFR part 250). For example, the definition of 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 adopted 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.

We received comments on various definitions in this section. We revised the following definitions to reflect the comments:

Commercial activities
—we added, “for renewable energy leases and grants,” to the definition to clarify that this does not apply to alternate use of existing OCS facilities.

Eligible State
—we revised this definition to conform with changes we made concerning revenue sharing. We clarified that eligible States must be no more than 15 miles from the geographic center of a qualified project area.

Geographic center of a project
—we made minor edits to the definition to conform with the final rule's revenue sharing provisions.

Income
—we made minor, grammatical edits to the definition; the original meaning of the term has not changed.

Lease
—we changed the definition from an “authorization” to an “agreement authorizing” the use of a designated portion of the OCS for activities allowed under this part.

Lessee
—we clarified the definition.

Natural resources
— we made minor edits to the definition.

Person
—we added “Federal agency” to the definition, since MMS may issue leases, RUEs, or ROWs to another Federal agency.

Project
—we clarified the definition.

Project area
—we clarified the definition.

Qualified project
—this definition was removed because the term is explained in the regulations for revenue sharing.

Qualified project area
—this definition was removed because the term is explained in the regulations for revenue sharing.

Revenues
—we changed the meaning of revenues to clarify that it does not include administrative fees.

Right-of-use and easement (RUE) grant
—we made minor edits to the definition.

Right-of-way (ROW) grant
—we made minor edits to the definition.

Significant archeological resource
—we made minor edits to the definition.

Site assessment activities
—we removed “physical characterization studies” and “baseline collection studies” as examples of the types of site assessment activities, and we added technology testing as a type of site assessment activity. We added “involving the installation of bottom-founded facilities,” since surveys can be performed using an ACOE permit.

You and your
—we made minor edits to the definition.

We, us and our
—we made minor edits to the definition.

How will data and information obtained by MMS under this part be disclosed to the public? (§ 285.113)

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 (FOIA) (5 U.S.C. 552) and protect data and information to the extent allowed by law. In response to comments we received regarding the protection and release of proprietary data and information, we clarified how we will protect data and information under this part and when MMS will release that data and information.

As set forth in § 285.113, MMS will not release data and information that we have determined to be exempt under exemption 4 of FOIA. However, the passage of time may erode the protections offered by exemption 4 of FOIA. To accommodate for this possibility, MMS has set forth a schedule in this section that we will follow to review such data and information, and any objections by the submitter, to determine whether release at that time would result in substantial competitive harm or disclosure of trade secrets. If MMS determines that the release of such data and information will not result in substantial competitive harm or disclosure of trade secrets, then MMS will release it. If it is determined that release will result in substantial competitive harm or disclosure of trade secrets, then the data and information will not be released at that time, but will be subject to further

review every 3 years thereafter. Nothing in this section is intended to displace or supersede MMS's obligations under 43 CFR part 2.23.

Paperwork Reduction Act Statements—Information Collection (§ 285.114)

These provisions cover Paperwork Reduction Act statements and information collection requirements pertaining to this part. We revised the burden to appropriately reflect the changes due to comments.

Documents Incorporated by Reference (§ 285.115)

This section lists the industry standard documents MMS will incorporate by reference into the 30 CFR part 285 regulations.

We did not make any changes to the section. In the future, we will incorporate new documents after MMS has thoroughly reviewed them and determined that they are needed and appropriate.

Requests for Information on the State of the Offshore Renewable Energy Industry (§ 285.116)

This section allows the MMS Director (1) to request information from industry and other relevant stakeholders (including State and local agencies), as necessary, to evaluate the state of the offshore renewable energy industry, including the identification of potential challenges or obstacles to its continued development, and (2) to 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 renewable 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 to ensure a fair value for use of the Nation's OCS. The MMS would publish these requests for information in the
Federal Register
.

In response to comments, MMS edited this section to include “regulatory matters” as an additional issue that such information requests may entail. We also deleted the last sentence in paragraph (a) of this section.

Reserved Section (§ 285.117)

Section 285.117 is reserved.

What are my appeal rights? (§ 285.118)

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. A bidder whose bid is rejected may apply for reconsideration by the MMS Director. If your lease is issued in order to obtain a FERC license or exemption, you may only appeal those decisions made by MMS under the authority of this subpart.

Based on comments, we changed the citation in § 285.118(b) from 43 CFR 4.21 to 43 CFR part 4, since multiple sections of 43 CFR part 4 apply to appeals.

Subpart B—Issuance of OCS Renewable Energy Leases

Overview for Subpart B

This subpart outlines a process for issuing renewable energy leases, both for commercial production activities and for assessment or technology testing activities. The process will be competitive, unless there is a determination that no competitive interest exists. In addition, this subpart describes how we will determine when to use a competitive process for issuing a renewable 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 renewable energy leases. To establish a framework, we begin with a discussion of various types of leases that a prospective renewable energy developer may consider.

Types of Leases

Leases will be required for any type of renewable energy activity on the OCS. We will issue two types: (1) Commercial leases and (2) limited leases. Although we also will convey access to areas of the OCS for research under some form of negotiated lease agreement as provided in § 285.238, this discussion of types of leases focuses on the commercial or limited leases that we will issue directly to lessees on a competitive or noncompetitive basis.

A commercial lease will 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 will be issued over the long term (i.e., up to approximately 30 years, with possible renewals) and will convey preferential rights to project easements on the OCS for the purpose of installing transmission and distribution systems. A commercial lease will not include a limit on the amount of energy to be produced and sold.

A limited lease will be issued for a shorter term (i.e., up to 5 years, with possible renewals). It will provide the access rights necessary to conduct activities, such as site assessment and technology testing that support production of renewable energy, and may provide the right to produce and sell power within limits set by the terms and conditions of the lease. Limited leases are not intended to authorize long-term or large-scale commercial operations. As provided in the proposed rule, operations on a limited lease may interconnect to electricity or other power distribution systems for testing and information gathering purposes. In response to comments on the proposed rule recommending authorization of the sale of power generated from limited leases to offset site assessment and technology testing expenses, we have changed relevant definitions and text in the final rule to allow limited amounts of electricity to be sold from such leases. Also, since we anticipate only small amounts of power (e.g., 5 MW) to be generated for a relatively short duration (less than 5 years), we do not propose to charge an operating fee for the sale of power from limited leases. We will charge only rentals for limited leases.

In issuing limited leases authorizing use of the OCS for hydrokinetic activity, it will be necessary to coordinate early with the FERC licensing process. For example, if MMS entertains a proposal for a limited lease a determination from FERC will be necessary as to whether an exemption or license is required. Should FERC determine that a license or exemption would not be required for such a proposal, MMS would proceed with the limited lease issuance. However, if FERC determines that a license or exemption would be required, MMS would not proceed with limited lease issuance but would instead proceed with commercial lease issuance.

As originally proposed, a limited lease will not convey any preferential rights to obtain a commercial lease to develop the leased area. Several comments on the proposed rule recommended that limited leases be set up to allow conversion to commercial leases or at least to give the lessee some sort of preference in subsequently pursuing a commercial lease for the same leasehold. Although we have not changed the text of the rule to provide an express commercial right preference, we believe that there will be ways to recognize the limited lessee in the commercial sale process under the final

rule. For example, at the time a limited lease is offered, whether competitively or noncompetitively, MMS will be able to indicate in the lease terms and conditions that acquiring a particular limited lease will give weight to the lessee in any subsequent conveyance of commercial rights. Such details will be established through the leasing process and published in the associated public notices. Also, the level of NEPA analysis for such leases will have to be commensurate with the type and scope of potential activities entailed with the lease rights conveyed. We believe that this approach for limited lessees will be best accommodated under a multiple-factor competitive process, which the rule has been revised to include as an available approach.

The MMS believes that by offering the two types of lease, commercial and limited, the rule provides a developer the flexibility to pursue a lease that will be best suited for its needs. If a developer testing a technology for demonstration purposes is uncertain as to whether full-scale commercial activities will ultimately be conducted on the lease, including long-term sale of power to the grid to generate revenues, then a commercial lease can be obtained instead of a limited lease to assure full and unlimited operational rights to produce, sell, and deliver power. In the event that the demonstration facility is not technically feasible for commercial operations, the lessee is not obligated for the full term of the lease and may relinquish the lease pursuant to § 285.435.

We continue to believe that offshore renewable energy companies generally 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 renewable energy activities without the commitments and expenses entailed by a long-term commercial lease. Even if the rule provided for limited leases to be issued with a preference for subsequent commercial rights, competition for those competitive rights still will be required under subsection 8(p) of the OCS Lands Act, as amended, and NEPA compliance could require some analysis of a commercial development scenario.

The most important factor for an applicant to consider in deciding whether to pursue a commercial lease or a limited lease is the assured right to full-scale commercial development of the leased site, and such right is included only in a commercial lease under the final rule. Thus, if a renewable energy project applicant is interested in demonstrating a particular renewable 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 full right to commercially develop the OCS site. Technology testing can be conducted during the site assessment term of a commercial lease. Pursuing a commercial lease will 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 leasehold (e.g., results of testing prove unsatisfactory), 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 company may receive some advantage in pursuing the right to develop that site commercially, for example as a consideration in a multi-factor competitive process, but the issuance of a commercial lease would be subject to the statutory requirements concerning competition. Thus, the subsequent full commercial lease right is not assured to a holder of a limited lease. 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.

The types of leases and the activities authorized are intended to provide for both long-term, large scale commercial production of renewable energy and for short-term, smaller scale activities in support of renewable energy production, such as site assessment and technology testing activities, including the limited sale of power generated.

One commenter recommended providing for issuance of combined limited and commercial leases to facilitate necessary site assessment and authorize such activities in advance of the issuance of commercial rights. We believe such an approach is possible under the rule. It will require a developer to simultaneously request both a limited lease (e.g., for a meteorological tower) and a commercial lease. We anticipate that the limited lease could be processed and issued in a relatively short time (perhaps 6 months), allowing construction and operation of the meteorological tower while the commercial lease is processed over a longer time (1-2 years). Some renewable energy interests, especially wind developers, view such a process as a more timely and efficient approach to leasing and development. We will work with project proponents and stakeholders to pursue this approach if requested, and we plan to describe it in detail in the guidance document we intend to issue after the rule is promulgated.

Issuing Leases

It is the goal of MMS to issue renewable energy leases through a simple and straightforward process and in a fair and equitable manner. The OCS Lands Act requires that leases, easements, and ROWs be issued competitively, unless after publication, MMS determines that there is no competitive interest.

We anticipate that initial leasing of renewable energy sites on the OCS may be driven by unsolicited applications from project proponents, rather than by an MMS-initiated request for interest in an area. A formal Request for Interest will be part of the process for confirming that there is no competitive interest in the area identified in the unsolicited application. The process for the issuance of OCS renewable energy leases when no competitive interest exists is based on the requirements of the OCS Lands Act and is patterned after the existing MMS process for issuing noncompetitive negotiated agreements for the conveyance of OCS sand and gravel.

Any leasing process for OCS renewable energy activity must comply with the applicable requirements of NEPA and other Federal laws. Table 1, which is presented in the discussion titled,
OVERVEW OF THE PROJECT DEVELOPMENT PROCESS
, under the
Federal Compliance for the leasing process
, describes the NEPA requirements for steps in the OCS renewable energy process, including the lease issuance step.

The competitive sale process for renewable energy leases is similar to long-standing Federal and State processes for conveying mineral rights. It provides several opportunities for input from interested and affected parties—notably State and local governments and affected Indian tribes—to develop appropriate lease sale terms and conditions including mitigation measures. The process is outlined in the following sections.

Call for Information and Nominations (Call)

Once MMS decides to initiate a competitive leasing process, which will usually occur following a Request for Interest, the first step in the sale process will be to publish in the

Federal

Register

a Call for Information and Nominations (Call). Comments are due 45 days after the Call. The Call informs the public of the area under consideration for leasing; it solicits comments from all interested parties on areas or subjects that should receive special attention and analysis; it invites potential bidders to indicate areas and levels of interest; and it invites public input regarding possible advantages and disadvantages of potential leasing and development to the region and the Nation.

Along with the Call, MMS will announce how it plans to document compliance with the requirements of NEPA. We believe that at the outset of the OCS Alternative Energy Program, it is likely that an EIS will be required for a competitive lease sale. However, it is possible, especially as the program matures, that less-costly environmental documentation, an EA, may be appropriate.

Area Identification

After the comment period for the Call closes, MMS will use the information received to develop, evaluate, and recommend options for continued environmental analysis and for consideration of leasing. This process step is known as Area Identification, and it determines the geographical area of the proposed action to be analyzed in an ensuing environmental analysis document (e.g., EIS, EA), any alternatives to the proposed action, and mitigation measures and other issues to be analyzed and considered further. The MMS will strive to resolve as many issues as possible at this step to prevent unnecessary conflicts throughout the remainder of the process. Early resolutions of such issues serve to reduce the level of public controversy and help industry and the Federal Government (and ultimately the taxpayer) focus on promising acreage and avoid needless expense.

In identifying the area to be studied in the environmental analysis, consideration is given to the level of industry interest; comments from State and local governments, Federal agencies, affected Indian tribes, environmental groups, and other interested parties; geologic and geophysical information; environmental conditions and effects of development; and other economic and social considerations. At this stage, the area considered for leasing will be more closely identified based on relevant considerations such as use conflicts. Public notice of the area identified usually will be provided with a press release and a fact sheet that includes a map of the proposed sale area.

NEPA Documentation

The MMS will prepare draft environmental documentation that includes, but is not limited to, a description of the lease sale proposal, including the renewable energy resource to be developed and a projection of the site assessment, construction, and generation activities that might occur; reasonable alternatives to the leasing proposal; a description of the existing environment; a detailed analysis of possible effects on the environment, including socioeconomic and cumulative effects; a description of the assumptions on which the analysis is based; potential mitigation measures; any unavoidable adverse environmental effects; the relationship between short-term uses and long-term productivity; any irreversible or irretrievable commitment of resources; and the records of consultation and coordination with others in preparation of the document. This document may also describe the technology assumed or deemed necessary for site assessment and commercial development and operations in the proposed lease sale area. Pertinent published and unpublished investigations from academic and other institutions and organizations and from other Federal and State agencies are reviewed during the preparation of the NEPA document. When the draft is complete, it is made available for public review. In the case of a draft EIS, the document is filed with the EPA and a Notice of Availability is published in the
Federal Register
, providing for a 60-day public comment period.

No sooner than 30 days after publication of a draft EIS, but within the 60-day comment period, one or more public hearings will be held in the vicinity of the proposed lease area for the purpose of receiving comments on the draft EIS. The MMS will announce the time and location in the
Federal Register
at least 30 days before the public hearings.

The comments and data received through the public hearings and the official review process are analyzed along with any newly acquired information and, when appropriate, are incorporated into the final EIS or EA. At this stage, new stipulations or other measures to protect sensitive areas, or biological or other types of resources, may be included after comments from affected States and affected Indian tribes are reviewed. In some cases, new deferral options are developed and incorporated into the final EIS. Under typical circumstances, 3 to 5 months after the public hearing, a final EIS is filed with EPA and a Notice of Availability is published in the
Federal Register
.

Coastal Zone Management Consistency Determination

Concurrent with the preparation of the final EIS or other NEPA documentation, a CZMA consistency review and subsequent Consistency Determination (CD) is completed by MMS relative to each affected State's federally approved coastal zone management plan. Each CD includes a review of each State plan, analyzes the potential impacts of the proposed lease sale in relation to program requirements, and makes an assessment of consistency with the enforceable policies of each State's plan.

Proposed Sale Notice

The Proposed Sale Notice is the public announcement of the terms and conditions of a proposed competitive lease sale, including the proposed provisions of the lease(s) to be issued. Generally, the Proposed Sale Notice will be issued after (1) completion of the final NEPA documentation; (2) preparation of the CD; and, (3) preparation of various in-house analyses of proposed lease sale economic terms and conditions. Information from these completed documents and analyses is consolidated in an executive decision memorandum that summarizes all proposed lease sale issues that may relate to State, local government, and/or affected Indian tribe comments and recommendations; environmental concerns; coastal zone consistency conflicts; economic benefits and costs; operational or legal constraints; multiple-use conflicts; or any other subject of concern. This memorandum also evaluates any prelease mitigation measures that are available or appropriate to resolve conflicts, issues, and concerns. On the basis of this memorandum and all supporting materials, decisions are made on the proposed terms and conditions of the sale. An attempt is made to balance the various economic, social, and environmental factors including those raised by the affected States, local governments, and affected Indian tribes, as well as other Federal agencies and the general public. A Notice of Availability of the Proposed Sale Notice is published in the
Federal Register
approximately 4 to 6 months prior to the proposed sale date. The Notice of Availability informs the public where copies of the actual Proposed Sale Notice may be obtained.

The proposed notice also assists in consultation with affected States, localities, and Indian tribes. Officials will be sent copies of the Proposed Sale Notice along with a letter explaining the rationale for the decisions made in determining the conditions of the proposed sale. The officials will have 60 days to submit comments on the proposed competitive lease sale. These comments will provide a framework for the discussion and resolution of concerns that the affected States, localities, or Indian tribes may have on a particular sale.

Final Sale Notice

After the end of the period for comments on the Proposed Sale Notice, a final decision memorandum will be prepared for the Director. If the Director decides to proceed with the lease sale after consideration of the comments and any other new pertinent information, MMS would issue a Final Sale Notice. The Final Sale Notice would include the date, time, and place of the sale; blocks available for lease; stipulations and other mitigating measures; bidding systems and lease terms; and other pertinent information. The Final Sale Notice is published in the
Federal Register
at least 30 days before the sale date.

Bid Evaluation

After the Final Sale Notice is published in the
Federal Register
, bids submitted by qualified bidders are received by MMS. The bids, including bid deposit if applicable, are checked for technical and legal adequacy as well as financial capability. They are also immediately evaluated to determine if the bidder has complied with all applicable regulations. The MMS reserves the right to reject any or all bids and the right to withdraw an offer to lease an area from the sale.

Issuance of a Lease

When a high bid is deemed acceptable by MMS, the submitter is immediately notified of the decision and is provided a set of official lease forms for execution. The successful bidder must pay within 10 days the remaining 80 percent of the bonus bid and file the required financial assurance. Upon receipt of the required payments and properly executed lease forms, a lease is issued to the successful bidder. Leases usually are effective the first day of the month following the date they are signed by an MMS official. Within 45 days after you receive the lease copies, you must pay the first 6 months rent.

Under the lease, the Federal Government conveys certain exclusive rights to the lessee and reserves other rights to the Government. The lease further spells out requirements for surety bonds, operating fee payments, rent payments, and assignment or other transfers.

Following the competitive process outlined previously, a lease sale for renewable energy activities may be held for one type of activity (e.g., wind) or for various activities (e.g., wind, wave, ocean current, etc.). We will determine the scope of competing renewable 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 will clearly state that scope (e.g., wind, wave, ocean current, etc.) early in that process and the subsequent Proposed and Final Sale Notices. If we decide to limit competition to one type of activity (e.g., ocean current), we will not consider bids for any other type of activity, and the lease will be limited to that activity. If we decide to open competition to more than one type of activity (e.g., wind, wave, ocean current, etc.), we will consider all bids for one or more of those activities, and the lease may authorize one or more of those activities.

Noncompetitive Lease Process

The 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. This section also states that if MMS processes a proposed lease area on a competitive basis, no unsolicited requests for leasing in that area will be considered for as long as that process is pending. Thus, once an area is subject to a lease sale process, the only way to pursue a lease within that area is through that competitive process until that process concludes. After the process concludes, and if acreage within the area that had been considered for lease remains unleased, unsolicited requests will again be considered for that acreage.

If we determine that there is a competitive interest, we will proceed with a competitive process and 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 in order to discourage all but serious requests and because of the costs associated with processing your original request. If you submit a qualified bid that does not win, we will refund your deposit, including the amount of the acquisition fee.

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 lease or grant and approving the SAP or the GAP.

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. The term depends on the type of lease (commercial or limited) and the award process. For example, a competitive commercial lease would have 3 terms: A 6-month preliminary term, a 5-year site assessment term, and a 25-year operations term. Sections 285.415 through 285.421 discuss suspensions that extend the term of a lease, and §§ 285.425 through 285.429 address lease renewal.

Section-by-Section Discussion for Subpart B

General Lease Information

What rights are granted with a lease issued under this part? (§ 285.200)

We may issue OCS leases for any renewable energy source. Paragraph (a) of this section identifies the types of renewable energy leases that we will make available and describes the 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 renewable energy sources. All rights are subject to compliance with requirements to secure approvals of, and then comply with, applicable plans (i.e., SAP, COP, and GAP) that are set forth in subpart F.

Paragraph (a) clarifies that an MMS lessee cannot construct or operate a hydrokinetic project without a FERC-

approved license or exemption. This revision was made to conform with provisions in the April 2009 MOU signed by the Department of the Interior and FERC. Under that MOU, construction and operations of hydrokinetic projects on the OCS cannot commence without a license or exemption from FERC, except in circumstances where FERC has notified MMS that a license or exemption is not required. OCS wind energy projects are not required to obtain a FERC license.

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 through the OCS (i.e., extending to the State/Federal boundary) 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. These may include the OCS segment of cables, pipelines, and other structures necessary to transmit electricity or transport other energy products produced from the OCS to shore. The lessee will 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. Additional project easements and revisions may be authorized through the plan revision process. One commenter recommended that easements be identified earlier in the process (i.e., in the lease or in the SAP). We believe such an approach would be premature at this stage in the process and impractical, but we will work with applicants and stakeholders as we implement the rule. Also, project easements that run through other leases or grants may be accommodated under the rule, and such situations will be addressed in the implementation guidance we intend to issue after the rule is approved.

Ancillary activities that are not associated with an OCS renewable 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) will be permitted and managed as a separate ROW grant or RUE grant under subpart C.

Paragraph (c) of this section provides for phased lease development. The commercial lease framework will accommodate multi-phase project development as is commonly used for onshore utility-scale wind projects (see §§ 285.200(c) and 285.629). The lease applicant must 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 planned full build-out. If the applicant for a commercial lease phases in operations, the applicant must pay rent on the portion of the lease that is not generating electricity and operating fees on the portion of the lease that is generating electricity. We may waive the rent 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 may relinquish that acreage, or MMS may contract the lease, as provided in §§ 285.435 and 285.436. Multi-phased project development will have to comply with NEPA, CZMA, and other applicable laws.

We did not make any changes to this section.

How will MMS issue leases? (§ 285.201)

As required by subsection 8(p) of the OCS Lands Act, MMS must issue leases, easements, or ROWs for OCS renewable 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 proposed lease. In the public notice, we may offer additional areas for leasing. 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 lease. If two or more project proponents express interest in leasing the same area of the OCS (overlapping partially or completely), we will conclude that competitive interest exists and conduct a competitive lease sale.

We are aware that instances of partially overlapping interests may occur and requested comments on this issue. For example, if proposed Project A entails 10,000 acres for generation of 500 MW and Project B entails 2,000 acres for 100 MW, and there is an overlap of 1,000 acres, we will have to determine whether there is competitive interest in all or part of the acreage requested. The following six alternative approaches for addressing such a situation were offered for comment with the proposed rule.

(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
1/16
legal subdivisions (a
1/4
1/4
of a lease block) to obtain possible synergies.

(4) Offer the combined Project 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 (package bidding). 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.

The consensus of the comments we received is that all of these approaches are reasonable. Some commenters recommended an additional approach that would give the competing project proponents the opportunity to adjust their areas of interest to eliminate overlapping proposed lease areas. We have not adopted this recommendation due to potential adverse effects on competition.

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3AE9-9462. Public record. Not legal advice.