This post was originally published for the American Bar Association Section of Environment, Energy and Resources Marine Resources Committee Newsletter, Vol. 16, No. 2 (August 2013).
On July 31, 2013, the Bureau of Ocean Energy Management, an office within the U.S. Department of the Interior, held the first ever subsea land auction for the purpose of developing an offshore wind farm on the outer continental shelf. The land area, which was previously designated as a Wind Energy Area (“WEA”) as part of BOEM’s Smart from the Start program, consists of two lease areas located approximately 9.2 nautical miles off the coast of Rhode Island and Massachusetts. Deepwater Wind, the developer of a demonstration scale 30 MW offshore wind project near Block Island, Rhode Island, is the provisional winner for both lease areas.
The 257-square mile Wind Energy Areas consist of a North Lease Area (Lease OCS-A0486) and a South Lease Area (Lease OCS-A0487). The North Lease Area consists of about 97,500 acres and the South Lease Area covers about 67,250 acres. The combined lease areas have potential to support 3,395 megawatts of wind generation—more than seven times the rate expectancy for the Cape Wind Farm in Nantucket Sound-- enough to power more than 1 million homes, according to the Department of Energy’s National Renewable Energy Laboratory. Deepwater Wind has stated that it plans to build an offshore wind farm of up to 1,000 megawatts with more than 100 turbines in the two lease areas.
|Image via U.S. Department of the Interior. Additional maps for these areas are available on BOEM's website.|
Deepwater Wind’s leases have a preliminary term of 6 months. During this preliminary term, Deepwater Wind must submit a Site Assessment Plan (SAP) to BOEM for approval. The SAP, among other things, must include a detailed explanation of the activities Deepwater Wind plans to undertake to assess wind, ocean, and metocean conditions. Following BOEM’s approval of the SAP, Deepwater Wind will have 4 and 1/2 years in which to submit a Construction and Operations Plan (COP) for approval. After the COP is approved, BOEM will grant Deepwater Wind a 25 year operations term lease.
Although nine bidders were pre-qualified to participate in the auction, only three bidders actually participated in the auction: Providence, RI-based Deepwater Wind, Philadelphia-based Sea Breeze Energy, and U.S. Wind, a company with ties to an Italian energy conglomerate. None of the bidders were aware of which companies were bidding against them during the course of the auction.
BOEM set opening-round prices for each lease and then raised the prices in subsequent rounds of the auction. Bidding for the north section started at $2 an acre, or $194,996. Bidding for the south section opened at $1 an acre, or $67,252. The sale of the north lease went on for 11 rounds before ending with Deepwater Wind’s $3,744,135 bid. The sale of the south lease went on for only two rounds before Deepwater Wind won with its bid of $94,000.00.
BOEM will hold its next competitive lease sale for Virginia’s 112,800 acre Wind Energy Area on Sept. 4, 2013. BOEM has stated that it expects to announce additional auctions for Wind Energy Areas offshore Massachusetts, Maryland, and New Jersey later this year and in 2014.