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New Offshore Energy Rule Leaves Environmental Challenges Intact
Environmental Law Update
May 11, 2009
In late April, President Obama announced the completion of a long-overdue rulemaking that would provide a framework for renewable energy development and allow the U.S. "to move from the ‘oil and gas only’ approach of the [Bush] Administration to the comprehensive energy plan that we need."1 The rule is a necessary and important first step toward developing the vast wind resources on the Outer Continental Shelf (OCS). But the rule is not nearly the magic wand that project developers may at first assume it to be. The rule is very complex, outlining everything from leasing and decommissioning to financial assurance and revenue-sharing with states. Moreover, developers will still need to contend with challenging environmental requirements that can derail or delay a successful project.
Background: Legal Authority Governing Offshore Development
Prior to 2005, the Outer Continental Shelf Lands Act of 1953 (OCSLA) gave the Secretary of the Interior the authority over federal offshore areas for the exploration and development of mineral resources. The Energy Policy Act of 2005 (EPAct) amended OCSLA and expanded the Secretary's authority to grant a lease, easement or right-of-way on the OCS for energy development activities from sources other than oil and gas. Consequently, no energy project, whether oil and gas or renewable energy, can be sited on the OCS absent a lease granted by the Minerals Management Service (MMS), the bureau within the Department of the Interior charged with managing the OCS. EPAct called on the Secretary to promulgate regulations within nine months to establish a renewable energy program. MMS decided that until the regulations were complete, it would not consider proposals for new renewable energy projects on the OCS.2 Thus, the future of renewable energy on the OCS hinged on the issuance of the rule.
The Latest Political Forces Behind Renewable Energy Development
Just days into his term, President Obama pledged his support for a comprehensive plan for long-term economic growth. "To accelerate the creation of a clean energy economy," he said, "we will double our capacity to generate alternative sources of energy like wind, solar, and biofuels over the next three years."3 Shortly after his confirmation, Secretary of the Interior Ken Salazar reaffirmed that commitment: "We need a new, comprehensive energy plan that takes us to the new energy frontier and secures our energy independence." Vital to that energy plan, the Secretary said, was the rulemaking and release of the final framework to govern renewable energy development on the OCS.
Energy Development and Economic Stimulus Meet Environmental Activism
The final rule and the recent focus on stimulating a green economy are positive steps for offshore wind projects. But developers cannot overlook the tension between the Administration's economic goals and environmental laws such as the National Environmental Policy Act (NEPA) that govern the permitting and operation of new projects. The legitimate purposes of these environmental laws can be bent toward blocking or delaying the very energy development that the Administration seeks to stimulate. The tension has not gone unnoticed. The non-partisan Congressional Budget Office indicated that waiving environmental and judicial reviews is a key way lawmakers could speed the delivery of stimulus money into the economy.4 And the U.S. Chamber of Commerce weighed in by encouraging Congress to adopt a provision to expedite renewable energy projects funded by the economic stimulus to ensure job growth and economic progress.5
In the American Recovery and Reinvestment Act, Congress enacted a provision requiring that sufficient resources be dedicated to expeditious NEPA review of projects funded by the Act.6 Likewise, MMS responded to public concern that the NEPA process could unreasonably delay renewable energy projects. As originally proposed, the rule called for three separate NEPA and Coastal Zone Management Act (CZMA) reviews for competitively issued commercial leases. Based on comments on the proposed rule, however, MMS reduced the reviews to two.7
The streamlining of NEPA and CZMA reviews is good news, and the wind industry should be pleased with the Administration's recent movement toward a broader energy portfolio. But offshore wind developers can still count on a costly, complicated and lengthy regulatory process that, in the end, remains subject to challenge in federal court. If the past is any guide, project opponents will seek to derail or overturn MMS's approvals by artful use of NEPA and the Endangered Species Act. Among the most common arguments are:
- Failure to take a "hard look" at environmental consequences under NEPA;
- Failure to analyze a reasonable range of alternatives;
- Failure to require preparation of an Environmental Impact Statement (“EIS”);
- Failure to consider new information instead of relying on "stale" or inadequate NEPA documents;
- Failure to analyze cumulative impacts;
- Failure to give due weight to the expert advice of marine resources agencies; and
- Failure to seek and respond to public comments.
These and other arguments find their principal legal roots in NEPA and the Endangered Species Act, and they may have additional currency under the new Administration, given its outspoken commitment to environmental issues and deference to scientific resource agencies. As MMS gets its "sea legs" with the new regulatory process, project developers must prepare themselves – and the agency – for the environmental challenges that are sure to follow.
The new legal framework for approving offshore development of renewable energy offers hope for enhanced opportunities on the OCS. Whether these opportunities result in major advances toward the Administration's desired green economy will depend, however, on focused attention to the environmental requirements bearing on the permitting process. Offshore renewable-energy developers should strive to minimize litigation risks through pre-project planning, building a good administrative record to avoid later legal challenges, working with experienced environmental and legal consultants, and communicating regularly with permitting agencies and other stakeholders.
1See Press Release, Minerals Management Service, Secretary Salazar Details Strategy for Comprehensive Energy Plan on U.S. Outer Continental Shelf (Feb. 10, 2009) (www.mms.gov/ooc/press.htm).
2See Request for Information and Nominations of Areas for Leases Authorizing Alternative Energy Resource Assessment and Technology Testing Activities Pursuant to Subsection 8(p) of the Outer Continental Shelf Lands Act, as Amended, 72 Fed. Reg. 62,673 (Nov. 6, 2007).
3See Remarks of President Barack Obama, Weekly Address (January 24, 2008) (http://www.whitehouse.gov)
4See Letter from Douglass W. Elmendorff, Director, Congressional Budget Office, to Senator Kent Conrad, Chairman, Senate Committee on the Budget (January 28, 2009) (www.cbo.gov/ftpdocs/99xx/doc9975/01-29-ConradII.pdf).
5Available at: http://www.letsrebuildamerica.com/issues/letters/2009/090129_letter_fix_nepa.htm. See also http://pnp.uschamber.com/renewable/. (website tracking stalled renewable projects due to charges of NEPA-violations).
7See Renewable Energy and Alternate Uses of Existing Facilities on the Outer Continental Shelf, Final Rule; Notice of Availability of the Final Environmental Assessment at 172 (Apr. 22, 2009) (www.mms.gov/offshore/AlternativeEnergy/PDFs/.pdf).