CAROLYN ELEFANT, Offshore Renewable Energy Law Blog, April 5, 2008
Ever since FERC announced that it would issue conditioned licenses for marine renewables projects, I’ve grappled with whether the policy makes sense for the industry. For those unfamiliar with the concept, a conditioned license is issued following a full environmental review by FERC as well as a finding that the project would serve the public interest. But in contrast to a full license where an applicant can begin development right away, a conditioned license makes project construction contigent on receipt of necessary authorizations from other state and federal agencies, such as a Section 401 water quality certificate or a CZMA certification. In FERC’s view, issuing a conditioned license would enable a developer to commence work on other requirements under the license (such as preparing various monitoring plans) and would facilitate financing. And many developers support the conditioned license for similar reasons.
So a conditioned license sounds great in theory. And yet, in practice, does the conditioned license will always speed up the licensing process or facilitate financing? I’m just not sure. For starters, some states don’t like the conditioned license, believing (incorrectly in my view) that conditioned licensing erodes states’ authority to issue certifications under Section 401 or CZMA. Thus, a state might challenge a conditioned license even if it doesn’t object to the underlying project. Case in point- two Washington state agencies
challenged FERC’s issuance of a conditioned license to Finavera, even though they ultimately issued the required certifications just a month later.
Moreover, a developer can receive a conditioned license only to find that months or years later, a state or federal agency declines to issue a needed certification. Indeed, that’s what happened in a case involving BP’s Crowne Point LNG (liquified natural gas) facility, which eceived a conditioned license from FERC in November 2006. Construction of the facility was conditioned on receipt of a CZMA certificate from the state of Delaware. Ultimately, Delaware denied the certificate, prompting a dispute between New Jersey and Delaware over whether Delaware had authority to veto a project that originated in New Jersey’s portion of the Delaware River. The dispute between the states went to the Supreme Court, which ruled last week that a 1905 Compact between the states gave Delaware the right to block the facility. In the absence of approval from Delaware, the November 2006 conditioned license was rendered meaningless.
In short, given recent events, it’s not clear to me that a conditioned license offers the kind of certainty needed to attract private capital. Indeed, given the recent New Jersey v. Delaware case and the state of Washington’s challenge to FERC’s authority, a conditioned license is just as uncertain as no license at all. While the conditioned license should remain available as an option, developers should realize that getting a conditioned license doesn’t necessarily guarantee that a project will go forward unless and until all of the agencies that issue needed authorizations are on board.