On November 30, 2018, the “Act on Promotion of Utilization of Sea Areas for the Development of Marine Renewable Energy Generation Facilities” (the “Act”) was passed by the Diet. The Act creates mechanisms for the designation of general sea areas for the promotion of offshore renewable energy generation and creates a certification system for utilization plans for long-term occupancy of these sea areas. This new system for utilizing general sea areas under the Act has attracted attention as it allows for the long-term and stable operation of offshore wind power generation businesses in general sea areas within Japanese waters.

Because Japan is an island nation, marine renewable energy businesses such as offshore wind power generation are regarded as important. Until now, however, there have been no unified rules for long-term occupancy of sea areas––being Japanese territorial and inland sea waters––other than areas designated under the Port and Harbor Act and the Coast Act (the “General Sea Areas”). Nor has there been a framework for coordinating between sea area users in certain industries such as maritime transport and fisheries.

The Act was passed to remedy the above deficiencies. It contains a mechanism for coordination between sea area users, as well as a certification system for the long-term occupancy of sea areas. These mechanisms are particularly important from the standpoint of future investment in, and operations of, offshore wind power businesses.

The following is a brief overview of the key points of the Act which we consider to be particularly important.

(1) Designation of Promotion Areas

The Minister of Economy, Trade, and Industry (“METI”) and the Minister of Land, Infrastructure, Transport, and Tourism (“MLIT”, and together with METI, "The Ministers") will be able to jointly designate utilization promotion areas (Sokushin Kuiki) ("Promotion Areas"), made up of General Sea Areas, for the development of marine renewable energy generation business (Article 8, Paragraph 1 of the Act). When designating Promotion Areas, The Ministers must consult with the Minister of Agriculture, Forestry, and Fisheries (“MAFF”); the Minister of the Environment (“MOE”); and/or any other relevant authorities. The Ministers must also hear the opinions of relevant prefectural governors and (if established) a specifically organized council (Kyogikai) made up of a combination of any of the parties named in this paragraph (excluding MOE and other relevant authorities) and other interested parties. (Article 8, Paragraph 5 and Article 9 of the said Act).

(2) Introduction of a License System for Occupancy of Promotion Areas

After the Act enters into force, the permission of the MLIT will be required when any party wishes to occupy Promotion Areas; install or reconstruct facilities or structures; or engage in any other actions covered by the Act (or a Cabinet Order) in the Promotion Area (Article 10, Paragraph 1 of the Act). The maximum valid term of an occupancy license is 30 years, and the same maximum term applies to each renewal of the license (Article 10, Paragraph 4 of the said Act).

(3) Public Tenders and the Certification of Occupancy Plans

When the Ministers designate a Promotion Area, they shall establish guidelines for public tenders for the occupancy of sea areas within the Promotion Area (Koubo Senyo Shishin) (the “Guidelines for Public Tender of Occupancy”). These guidelines must be made in accordance with relevant basic policies (Kihon Houshin) and will allow the Ministers to select, by public tender, entities to carry out marine renewable energy generation business in a sea area within the Promotion Area (Article 13, Paragraph1 of the said Act). The Ministers will select a business operator (Sentei Jigyousha) based on the occupancy plan (Koubo Senyo Keikaku) submitted by that business operator (the "Business Operator"; Article 15 of the Act). The Ministers will then certify the occupancy plan submitted by the Business Operator (Nintei Koubo Senyo Keikaku) (the “Certified Occupancy Plan”; Article 17 of the Act). The valid term of the certification will be specified in the Guidelines for Public Tender of Occupancy in advance, and cannot exceed 30 years (Article 13, Paragraph 3 of the Act).

Under the Act, use of the sea areas within the Promotion Area and the actual offshore wind energy generation businesses therein are to be developed by the Business Operator. This development must be based on the Certified Occupancy Plans. However, the MLIT must grant the Business Operator's application for the occupancy of sea areas within the Promotion Area as long as the application is in accordance with the Certified Occupancy Plan (Article 19, Paragraph 2 of the Act). If a Certified Occupancy Plan has been granted to the Business Operator, no other person can apply for permission to occupy the same area during the occupancy period under that certification (Article 19, Paragraph 3 of the Act).

The status of the Business Operator may be transferred, with the approval of the Ministers, to either a general successor of the Business Operator, or a person who has acquired from the Business Operator ownership or any other titles necessary for the installation and maintenance of equipment for the marine renewable energy generation facilities subject to the Certified Occupancy Plan (Article 20 of the Act).