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FERC Authorizes Construction of First Hydrokinetic Project

10.04.2008

On March 20, 2008, the Federal Energy Regulatory Commission ("FERC") issued an Order on Rehearing and Clarification and Amending License ("Rehearing Order") amending the Conditioned Original License issued by FERC for the Makah Bay Offshore Wave Pilot Project ("Project"). As amended, the license authorizes Finavera Renewables Ocean Energy, Ltd. ("Finavera") to commence Project construction.

FERC’s Rehearing Order responds, in part, to a petition filed by the Washington Department of Ecology ("Ecology"). Ecology contended that the Clean Water Act ("CWA") and the Coastal Zone Management Act ("CZMA") prohibited FERC from issuing its Conditioned Original License until Finavera had obtained a CWA water quality certification and a CZMA consistency concurrence. FERC’s Rehearing Order amending the Project license to incorporate Ecology’s February 14, 2008 water quality certification and CZMA consistency concurrence states that Ecology’s arguments are moot. 

FERC’s Rehearing Order added that its Conditioned Original License did not authorize construction activities and therefore did not authorize activities for which a water quality certification or CZMA consistency concurrence were required. FERC’s November 30, 2007 Policy Statement on Conditioned Licenses for Hydrokinetic Projects emphasized that issuing conditioned licenses would enable licensees to begin development of plans and consultations not requiring construction and improve the ability of developers to secure financing without diminishing the importance of other state and federal authorizations required by federal law. 

FERC’s policy on issuing conditioned licenses, as clarified by the Rehearing Order, leaves at least two issues of concern for license applicants. First, FERC characterized both its conditioned original license order and its order amending Finavera’s conditioned license as "final unless a [timely] request for rehearing is filed." Under the Federal Power Act, strict time limits apply to requests for rehearing. FERC’s policy of issuing conditioned licenses and amendments authorizing construction as final orders subject to rehearing may create confusion for licensees (and intervenors) regarding when to request rehearing or lead to the filing of duplicative rehearing requests to avoid an unintended waiver of the right to seek rehearing and judicial review of FERC’s orders. 

Second, because conditioned licenses for demonstration projects are issued for only five years, significant delays by state and federal agencies in issuing their required authorizations could jeopardize the effective term of these licenses. Virtually acknowledging this issue, several FERC Commissioners issued statements thanking Ecology for expediting its review, expressing hope for a better working relationship with the State of Washington, and indicating that FERC staff and Washington are discussing a Memorandum of Understanding ("MOU") that would facilitate development of hydrokinetic projects. FERC and the State of Oregon signed such a MOU effective March 26, 2008.

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