Beveridge & Diamond
 

Minerals Management Service Issues Proposed Regulations for Alternative Energy Development on the Outer Continental Shelf

Beveridge & Diamond, P.C., July 10, 2008

On July 9, 2008, the Minerals Management Service (“MMS”) issued its long-awaited proposed regulations for development of alternative energy on the Outer Continental Shelf (“OCS”) (73 Fed. Reg. 39376).  In the Energy Policy Act of 2005, Congress authorized MMS to issue leases, easements, and rights-of-way for production of energy from sources other than oil and gas, including wind, wave, current and tidal sources.  The 2005 law also authorized MMS to allow use of existing OCS facilities, primarily oil and gas platforms, for alternate uses such as aquaculture.  It has taken MMS almost three years to draft proposed regulations implementing this new directive.

As expected, and of considerable concern to this new industry, MMS used its extensive regulatory program for OCS oil and gas leasing and operations as the template for the proposed alternative energy regulations.  The draft regulations include many controversial provisions, particularly those relating to financial requirements associated with lease issuance, including substantial bonus bids, royalties, and bonding obligations for decommissioning.  This approach is likely to cause concern for many alternative energy developers.  While the financially mature oil and gas industry is able to comply with MMS’ extensive regulatory structure, not all members of the nascent alternative energy industry have that same capability.  Many of these companies have limited capital and while they may have technology equal to or better than larger companies, they may not be able to survive in the financially competitive structure MMS has proposed.

These regulations are important to the alternative energy industry because they will guide the leasing and development process for years to come.  MMS will accept comments on the proposed regulations until September 8.  Our attorneys have decades of experience as agency counsel responsible for drafting and reviewing MMS regulations, and are well-positioned to help our clients review this extensive 128-page regulation and provide insightful comments to the agency.

For further information, contact Peter Schaumberg at pschaumberg@bdlaw.com, Karen Hansen at khansen@bdlaw.com, or Fred Wagner at fwagner@bdlaw.com   

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