Washington (Platts)--23Apr2009

The US Minerals Management Service could begin issuing leases for
renewable energy projects on the Outer Continental Shelf within one to three
years, depending on how much data is available for MMS to complete
environmental reviews and meet other requirements, a spokesman, Nicholas
Pardi, said Thursday.

MMS intends to initiate its leasing process with projects off the coasts
of New Jersey, Delaware and Rhode Island, where wind power projects seem to be
"far along" in their development, Walter Cruickshank, MMS acting director,
said on a teleconference call Thursday.

The Department of the Interior on Wednesday issued an "energy program
framework" for renewable energy production on the Outer Continental Shelf that
outlined the process MMS will follow in granting leases, easements and rights
of way for such projects.

The final rule on renewable energy and alternate uses of existing
facilities on the OCS also spells out how MMS, a unit of the Department of the
Interior, will work with the Federal Energy Regulatory Commission on ocean
hydrokinetic projects on the OCS and creates methods for sharing revenue from
projects on the OCS with adjacent coastal states.

DOI and FERC recently agreed upon a memorandum of understanding that
clarified the jurisdictional authority of each agency for renewable energy
projects on the OCS.

The MOU allocated to FERC authority over licensing of hydrokinetic
projects but left leasing, rights of way and easements for all renewables on
the OCS in the hands of MMS.

Also, FERC agreed to cease issuing preliminary permits for hydrokinetic
projects on the OCS and developers will have to obtain an MMS lease before
they can seek a FERC license.

MMS has "worked very hard to ensure this framework is flexible enough" to
adapt to what it and the renewables power industry learns in the coming years
"and strong enough to ensure that...projects are held to the highest
environmental standard," Cruickshank said.

"This is going to allow our nation to tap very abundant renewable energy
resources" along the Atlantic and Pacific coasts and off the coast of Florida,
Cruickshank added.

Approval of projects will depend on how far along the development plans
are and on how much environmental and project data is available, said Maureen
Bornholdt, program manager of MMS' Renewable Energy and Alternate Use Program.

Also, many states are undertaking planning activities and taking a look
at what the energy potential is on state land and waters, Cruickshank said,
adding: "As those processes run their course, I think were going to see a lot
more interest up and down both coasts."

MMS hopes to begin the leasing process "in the next several months," and
then determine competitive interest in eight months time so it can move
forward with leasing, said Bornholdt.

For wind project lease applications, MMS initially anticipates receiving
about five proposals for OCS sites offshore of New Jersey, one proposal off
the Delaware coast, one off of Rhode Island and at least one proposal offshore
of New York, Bornholdt said.

The Cape Wind project proposed in Nantucket Sound off the coast of
Massachusetts will complete its ocean planning at end of 2009, Bornholdt said.
The Cape Wind project would have 130 turbines that would cover about 24 square
miles of the OCS and would be capable of generating as much as 468 MW.

In an environmental impact statement, MMS in January found that the Cape
Wind project would cause only minor harm to the environment and only moderate
impact on scenic quality. But MMS must still issue a record of decision on the
project before it officially signs off on it.

The potential for upcoming lease applications for hydrokinetic projects
"is a little more uncertain for us," Bornholdt said. There might be some ocean
current projects off the coast of Florida and some wave energy projects on the
West Coast, she said.

Bornholdt added that it may be possible to allow leases for wind and wave
power projects within the same footprints, assuming developers are willing to
collaborate.

The rule also allows for "folks to convert" existing oil and gas
platforms for alternative energy, to perform environmental studies or to use
as way stations for helicopters, said Cruickshank. "We don't know what, if
anything exactly, will come of that," he said. "I don't expect there will be a
whole lot of [those types of applications] at least for a little while."

But if such projects do come along, MMS will make sure that there is
proper clean up of the oil and gas activities, that the "structure will be
safe for the purpose for which it is being proposed," that liability issues
have been dealt with and that the facilities will be removed at the end of the
lease.

MMS also will issue a guidance document in June, Bornholdt said. It will
be a "handbook for folks that are interested in participating" in the
alternative energy program, she said. It will "walk them through, in a plain
English manner" where to apply, how to apply and the qualifications to apply,
among other things. Also in June, MMS expects to hold public educational
workshops on the process.

--Esther Whieldon, esther_whieldon@platts.com