The statements and views expressed in the postings on the Ocean & Offshore Energy Projects and Policy Blog are my own and do not reflect those of Nixon Peabody LLP. This Blog does not provide specific legal advice. Reading or visiting this Blog does not create an attorney client relationship. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

Wednesday, August 21, 2013

DOI Completes First Offshore Energy Area Auction, Prepares for Virginia Auction in September

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.
  Now that the auction is complete, the Attorney General, in consultation with the Federal Trade Commission, has thirty days to complete an antitrust review of the winning bids.  Following that review, BOEM must send unsigned copies of the lease form to Deepwater Wind, who has 10 days in which to execute and return the lease, file financial assurance materials and pay the balance on its winning bid.

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.

Wednesday, June 5, 2013

Massachusetts/ Rhode Island Wind Energy Area Lease Auction Slated for July 29 and 31, 2013!

On Tuesday June 4, 2013, the Department of the Interior's Bureau of Ocean Energy Management (BOEM) announced that the first lease auction for commercial offshore wind energy projects will be held on July 29 and July 31, 2013.  The final sale notice was published in the Federal Register on Tuesday June 5, 2013.

The sale will auction an area previously designated by BOEM as the Rhode Island/ Massachusetts Wind Energy Area (MA/RI WEA) located 9.2 nautical miles south of the Rhode Island coastline.  BOEM will divide the area into two lease areas, referred to as the North Lease Area (Lease OCS-A0486) and the 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 National Renewable Energy Laboratory has stated that the North Lease Area has the potential for installed capacity of 1,955 megawatts (MW), and the South Lease Area has the potential to support 1,440 MW of installed capacity-- together, more than 3 gigawatts of electricity, enough to power more than 1 million homes.  For a map of the MA/RI WEA, click here.  

The North and South Lease Areas will be auctioned simultaneously.  BOEM will consider nonmonetary (i.e., whether a bidder holds a Joint Development Agreement or a Power Purchase Agreement) and monetary (cash bid) factors. The nonmonetary phase of the auction will begin on July 29, 2013, and the monetary phase on July 31, 2013. According to the Notice, the July 29/31 lease auction will be limited to nine bidders who previously responded to a BOEM Request for Interest in the MA/RI WEA and established technical, legal and financial eligibility with BOEM. These bidders include:

In addition to the list of eligible bidders, the notice contains specific information pertaining to the areas available for leasing, lease provisions and conditions, auction details, criteria for evaluating bids, award procedures, lease execution and other information. 

Department of Interior Secretary Sally Jewell, the recently appointed successor to Ken Salazar, indicated that a successful lease sale for the MA/RI WEA would accelerate offshore wind leasing for other designated WEAs along the eastern seaboard of the United States: “If there is good interest in this one, then I think you will have this happening on a consistent basis,” she said.

Although the auction of subsea leases is an encouraging step for U.S. offshore wind developers, Secretary Jewell noted that development of the commercial offshore wind industry is in the hands of the private sector.  “I can’t promise that they will be in production in four years, but we don’t want to be a roadblock,” Jewell said. “The market will dictate, but we certainly don’t want to get in the way.”

BOEM also issued a revised environmental assessment (EA) for commercial wind lease issuance and related activities within the MA/RI WEA.  As a result of the analysis in the revised EA, BOEM issued a Finding of No Significant Impact, which concludes that reasonably foreseeable environmental effects associated with the commercial wind lease issuance and related activities will not impose a significant impact on the environment.  The revised EA and Finding of No Significant Impact are available here

Maine installs first offshore turbine in the US!

This is big news, folks.  The people at the DeepCWind Consortium will officially be the first to place a grid-connected wind turbine in U.S. coastal waters.  As if this wasn't newsworthy enough, the Maine turbine is a floating turbine-- a cutting edge technology that, if proven, could enable construction of offshore wind energy projects in far deeper waters than previous technology has permitted thusfar.   Like I said:  BIG NEWS.

On Friday May 31, 2013, a team comprised of the members of the DeepCWind Consortium, including team leaders from the University of Maine's Advanced Structures and Composites Center supervised the placement of the 65-foot tall turbine into the Penobscot River at Brewer, Maine.  The turbine, known as VolturnUS, is a 1:8 prototype of a proposed 6-megawatt turbine and will ultimately be towed out to a location in Castine Harbor, Maine once river-rise levels permit a safe journey for the turbine.  If the 1:8 prototype proves successful, DeepCWind will construct and deploy two of the 6-megawatt turbines for its proposed Aqua Ventus I project which will be located in state waters off of Maine's Monhegan Island.

The VolturnUS will transmit power directly to the grid via subsea cables.  DeepCWind has stated that the turbine is designed to withstand waves up to 60 feet high and winds up to 150 miles per hour-- that is, the types of conditions that might occur during an Atlantic hurricane.

Floating turbines present enormous opportunities for offshore wind development. Standard offshore turbines are typically installed in waters less than 30-meters deep due to practical limitations associated with the foundations located on the sea floor.  However, floating turbines would enable offshore wind installations to be located in significantly deeper water.  This would allow offshore wind projects to be placed further from shore or in areas such as the U.S. west coast where the ocean floor drops off significantly even close to shore.  The VolturnUS project is one of only a handful of floating turbine projects worldwide which include one by Portugal's Energias de Portugal and Seattle's Principle Power off Portugal and Norway's Statoil North Sea  Hywind turbine which was installed in 2009.

The VolturnUS project has been funded in part by $12 million provided over the past five years by the U.S. Department of Energy.  “Led by the University of Maine, this project represents the first concrete-composite floating platform wind turbine to be deployed in the world – strengthening American leadership in innovative clean energy technologies that diversify the nation’s energy mix with more clean, domestic energy sources,” the DOE said in a press release as the VolturnUS demo turbine went into the Penobscot River on Friday.

The VolturnUS launch event was hosted by Cianbro.  Among the dignitaries on hand for the ceremony were Sen. Susan Collins, Sen. Angus King, Rep. Michael Michaud, Jose Zayas of the U.S. Department of Energy, University of Maine System Chancellor James Page, UMaine Executive Vice President and Provost Susan Hunter, Cianbro CEO Peter Vigue and Dr. Habib Dagher, director of UMaine’s Advanced Structures and Composites Center.

During his preliminary remarks, Dr. Dagher noted that the VolturnUS received its name from a student at the University.  The name breaks down into the descriptive components of "Volt" for electric voltage, "turn" to reflect turbine movement, and "US" to celebrate the first turbine located in U.S. waters. The name VolturnUS also pays homage to Volturnus, the Roman God of the East Wind.

Proponents of deepwater floating turbine projects in Maine hope to support the development of up to 5 gigawatts of power with arrays of up to 80 turbines floating in a 4 by 8-mile area in federal waters approximately 20 nautical miles from the coast by 2030.  DeepCWind has stated that it believes that its  turbine design will be able to produce electricity at 10 cents per kilowatt-hour without subsidies, meeting a 2020 goal of the DOE.

floating wind turbine
A large crane operated by Cianbro transitions VolturnUS into the Penobscot River.

Wednesday, April 24, 2013

Maryland's Offshore Wind Energy Act of 2013

On April 9, 2013, Maryland Governor Martin O'Malley signed the Maryland Offshore Wind Energy Act into law.  North American WindPower recently published an article highlighting the key components of the new legislation and featuring commentary by me!  Feel free to click through to the original article here, or just scroll down for a reprint of the article below.

Stakeholders Weigh In On Maryland Offshore Wind

The Maryland Offshore Wind Energy Act of 2013, recently signed into law by Gov. Martin O'Malley, aims to help boost the local economy and subsidize wind energy development off the state's coast. But what, exactly, does the legislation do? And how have wind industry stakeholders reacted to the new law?

O'Malley introduced the Maryland Offshore Wind Energy Act of 2013 in January, his third attempt at establishing offshore wind legislation in three years. According to the governor’s office, offshore wind development would lead to about 850 manufacturing and construction jobs and 160 post-development jobs for activities such as operations and maintenance.

At the core of the new legislation is a financial mechanism to subsidize an offshore wind project by altering Maryland’s renewable portfolio standard (RPS) and establishing a charge on utility ratepayers’ monthly bills.

The law amends the state’s 20% by 2020 RPS, classifying offshore wind energy as a Tier 1 renewable resource, creating an offshore renewable energy credit (OREC) system and mandating a carve-out for the state’s utilities. If an offshore wind project is proposed, permitted and constructed, utilities will be required to begin procuring up to 2.5% of their portfolio from offshore wind energy as early as 2017.

To help offset the increased costs to the state’s utilities, the legislation will allow ratepayers to be charged an additional $1.50 per month on their electricity bills only if and when an offshore wind farm is built.

Brian Redmond, partner at Paragon Energy Holdings, says the law's $1.50/month cap sets the marker for what the public would be willing to accept for a price subsidy for offshore wind.

The law uses a potential 200 MW offshore wind farm to gauge its cost-benefit analysis and rate cap, but Jim Lanard, executive director of the Offshore Wind Development Coalition, says interested developers may aim to build a larger project.

“The real cap is what the impact is on the ratepayers. It’s not likely that you’re going to see developers bid for less than 200 MW, because the cost of mobilizing and preparing a wind farm doesn’t change if it’s for 50 MW or 500 MW - the planning is all the same,”  he explains.

Lanard also believes the new law provides essential subsidies that could jump-start Maryland’s offshore wind industry.

“Without the legislation, there would be no offshore wind development off Maryland,” he says. “In today’s economic environment, you can’t finance a project without showing the banks or investors a revenue stream that proves they are going to get paid back or see a return on investment. You could build the power plant, but there wouldn’t be anyone to buy the power.”

Developers’ POV
Following the legislation’s passage, Doug Copeland, regional development manager of EDF Renewable Energy, welcomed the news.

"EDF Renewable Energy supports Governor O'Malley's offshore wind bill and commends the state in supporting this new industry,” Copeland said in a written statement to NAW. “Our parent company, EDF Energies Nouvelles, develops, builds, owns and operates multiple offshore wind projects in Europe, and we are excited to begin these efforts off the East Coast.

“The governor and his staff have been very thoughtful in how they have structured this bill to advance offshore wind, especially in giving opportunities to Maryland businesses,” he continued. “EDF RE believes offshore wind is a regional effort and commends the state of Maryland for taking a lead. We believe cooperation with other states will also be important to create additional economic benefits. The efforts involved in putting together a team and submitting a viable application will be substantial, and we look forward to the opportunity."

Even before this legislation passed, however, there were a number of offshore wind developers eyeing Maryland. In 2010, the Bureau of Ocean Energy Management issued a call for interest from developers that would want to build an offshore wind farm in the state’s designated wind energy area, located 10 to 30 nautical miles off Maryland’s coast. Six potential developers responded.

One such developer, RES Group, also welcomes Maryland’s new law but notes that the legislation cannot solely create a strong offshore wind industry in the U.S.

“[This legislation] provides an important and positive step toward realizing the significant potential that offshore wind can bring to the United States in terms of energy generation, investment and new jobs,” says Chris Morgan, CEO of RES Offshore. “However, support for a project of around 200 MW will not, on its own, be sufficient to stimulate the level of investment and commitment that will be required by developers, manufacturers and contractors to establish a viable and cost-effective sector.”

“In addition to ORECs,” Morgan continues, “the sector will seek the strategic support that the tax credit legislation has provided to the renewables industry in the past. The current ITC/PTC legislation will benefit those projects that are ready to enter construction this year, but beyond that, the absence of a clear vision for legislation will place a constraint on further offshore development.”

Although a few other states have offshore wind legislation, such as New Jersey’s Offshore Wind Economic Development Act of 2010, Maryland’s law includes several unique provisions.

According to Jennifer Simon Lento, associate at Nixon Peabody LLP, Maryland’s legislation outlines exactly what is expected of potential developers.

“In contrast to the New Jersey legislation, which requires the New Jersey Board of Public Utilities to apply a somewhat undefined ‘economic benefits’ test, the Maryland legislation sets out a very specific list of criteria, including a clearly defined cost-benefit analysis, that an applicant must demonstrate before the Maryland Public Service Commission (PSC) will issue ORECs,” Simon Lento explains.

“The specific criteria required under the legislation means both that the PSC will be able to issue implementing regulations quickly and that developer applicants can draft their applications with the confidence of knowing exactly what needs to be included in the submission,” she continues. “Further, the Maryland legislation is drafted to encourage competition among developers to present projects with the most environmental, labor and cost-savings benefits.”

Paragon Energy Holdings' Redmond adds that the Maryland law could serve as a model for future offshore wind legislation.

“Other states that have yet to quantify the level of price support that their constituents would be willing to bear - be it zero, $1.50 or $2.50 - would be well served to at least establish that marker,” he says. “That, in a sense, will give the industry certainty that they are not shooting at a moving target.

"In Maryland, developers know that if they can get to the 1.50 per residential customer, then they have a deal. Other states, such as North Carolina, Virgina and New Jersey, which are embarking in wind development activities, would be well served to provide certainty to developers so as to know what is politically palatable to the ratepayers in order to attract offshore wind to their states.”

Wednesday, April 17, 2013

Guest Post: IRS Notice 2013-29 on “Begun Construction” for certain renewable energy facilities

My colleague Forrest Milder, an attorney in the Renewable Energy Tax Credits and Finance practice here at Nixon Peabody, authored the following client alert describing the IRS' April 15, 2013 Notice on what it means to have "Begun Construction" for the purpose of establishing eligibility for tax credits.  

The IRS' April 15 Notice sheds much needed light on this critical threshold that renewable energy developers must meet in order to incorporate tax credit financing as part of their financing structures.  Developers of offshore wind projects that are essentially ready-to-build once financing is established (i.e., all state and federal permitting hurdles have been cleared), including Cape Wind, Deepwater Wind's Block Island project, and Fishermen's Energy's Atlantic City project, will be looking to meet the December 31, 2013 deadline to take advantage of the tax incentives. In other words, the goal of meeting the "Begun Construction" test is one more reason to believe that we may see steel in the water before the end of 2013.

Although IRS Notice 2013-29 offers some guidance with respect to the eligibility criteria, other questions still remain.  For example, under the "Physical Work" test described below, the work must be a “continuous program of construction,” subject to a list of  permitted disruptions such as“severe weather conditions”, “natural disasters”, “labor stoppages” and “financing delays of less than six months."  Since offshore wind construction is subject to seasonal restrictions, it is not clear whether a work stoppage for winter would qualify as a permitted disruption.  

 The original version of this article reprinted below is available here.  For the benefit of the Ocean and Offshore Renewables blog readers, I have hyperlinked a few of the key documents discussed in Forrest's article.

This client alert addresses an IRS notice issued on April 15, 2013, with great significance to projects that generate electricity from wind, geothermal, biomass, landfill gas, municipal solid waste, hydroelectric production, and marine and hydrokinetic energy.

You will remember that before the American Taxpayer Relief Act of 2012 (ATRA) each of these technologies was eligible for a production tax credit (PTC) or investment tax credit (ITC) only if the facility was placed in service by the end of 2013 (except wind, which had to be placed in service by the end of 2012, and geothermal, which can also qualify for a 10% credit beyond that date). ATRA changed the sunset provision to depend on when the facility begins construction, rather than when the facility is placed in service. Now, if one of the facilities described above begins construction by December 31, 2013, it will be eligible for the applicable PTC or the 30% investment tax credit.

On April 15, 2013, the IRS published Notice 2013-29, providing the tests that must be passed in order for these facilities to have “begun construction” by the end of 2013 and still qualify for tax credits. You will note that these tests are very similar to the Section 1603 Grant-in-lieu-of-tax-credit rules published by Treasury in connection with that program, which also has a begun construction requirement, albeit for projects placed in service after December 31, 2011.

Like the Section 1603 program, there are two tests under the notice—the “physical work” test, and the “five percent safe harbor.” Passing either of these tests will be treated as beginning construction under the PTC and ITC rules. A very quick summary—

The Physical Work Test. The work must be “physical,” such as setting anchor bolts or pouring concrete pads. The property must be “integral” to the activity, e.g., a transmission tower is not eligible. Note that “preliminary activities,” like designing the facility or securing financing do not qualify. Manufacturing components pursuant to a “binding written contract” is also includible, but not if the property is “in existing inventory or normally held in inventory by a vendor.” The work must also be a “continuous program of construction,” and the IRS has provided a list of  permitted disruptions that range from “severe weather conditions” and “natural disasters” to “labor stoppages” and “financing delays of less than six months.”
The Five Percent Safe Harbor. Like Section 1603, the amount must be paid or incurred in accordance with the Section 461 regulations. Here, too, costs can be incurred pursuant to a binding written contract. An important new requirement states that the taxpayer must also make “continuous efforts to advance toward completion of the facility.” This is a significant change from the Section 1603 rules, which potentially allowed grandfathered equipment that met the five percent test to be warehoused and used years later. This new continuous efforts test is not unlike the rules that apply to the physical work test, bearing in mind that under the five percent test, the efforts do not have to be “physical”; illustrations include “paying or incurring additional amounts,” and “obtaining necessary permits,” as well as “performing physical work of a significant nature.” The notice repeats the exact same list of permitted disruptions that will not affect passing the “continuous efforts” test as applied to the “physical work” test.
Four other things worth noting—first, there is no pre-approval process, like there was with the “preliminary applications” required under Section 1603. Second, there is no statement in the notice that a project must be specifically identified; it remains to be seen if that was an intentional omission. Third, the definition of “binding contract” is different from what it was under Section 1603; in the IRS notice, a contract is binding if it is “enforceable under local law against the taxpayer or a predecessor and does not limit damages to a specified amount (for example, by use of a liquidated damages provision).” Of course, under the Section 1603 rules, a provision limiting damages to five percent of the contract amount was specifically permitted. Finally, the notice gives two illustrations of the effect of cost overruns where the five percent safe harbor has been used—if the project consists of multiple facilities that could be operated independently (e.g., a wind farm), then the project may be scaled back (if necessary) to ensure that the smaller project passed the five percent test by the end of 2013. On the other hand, if the project is only one facility, e.g., a boiler and turbine generator, then it cannot be scaled back, and a cost overrun can be fatal. Other renewables that are still subject to the old rules. Thus, the tax credit rules for solar, fuel cells, small wind, microturbines, combined heat and power facilities, geothermal that generates heat, and geothermal that generates electricity, but that begins construction after 2013, continue to have the same placed-in-service tests as before ATRA. For example, solar facilities must still be placed in service by the end of 2016 to qualify for the thirty percent ITC. There is not a “begun construction” test for these facilities.

For more information about renewable energy tax credits and/or IRS Notice 2013-29, please contact Forrest Milder at 617-345-1055 or fmilder@nixonpeabody.com, or Jennifer Simon Lento via this blog, at 617-345-1352, or at jsimonlento@nixonpeabody.com.

Wednesday, March 27, 2013

2013: A Big Year for Offshore Wind

If you have been watching the offshore wind industry in the United States for the last decade -- and if you are reading this blog, I assume that you have -- you are probably tired of hearing the much-hyped announcement at the beginning of each year, i.e., "THIS YEAR WILL BE THE YEAR THAT WE PUT STEEL IN THE WATER!!"  Eleven months later, December arrives and we are forced to admit that this was not, in fact, "the year." 

Faithful readers, I beg you to put your skepticism and regulatory fatigue aside because 2013 will actually be the year that we see the first wind turbines constructed in US waters.   

(1)  Cape Wind Makes Strides Towards Obtaining Financing

More than twelve years after Cape Wind announced its plan to construct the United States' first offshore wind project in Nantucket Sound, the project's developers have signed on with the Bank of Tokyo-Mitsubishi UFJ (BTMU) to arrange debt financing for the project.  BTMU will also commit "a significant amount of debt capital" that will go toward development and construction costs.  Arranging financing for the project is the critical step that Cape Wind must complete before initiating construction on the project.

Cape Wind began seeking financing in 2012 after it finalized the second of its two 15-year power purchase agreements (PPA) with National Grid and NSTAR, the state's two largest electric utilities.  Cape Wind's PPAs account for 77.5% of its projected output.

Cape Wind Associates has designated Barclays to provide financial advisory services to Cape Wind.  Barclays will continue to assist them to procure investors and equity financing for the project.  Although Cape Wind has not disclosed its full project costs, news analysts have predicted that the project costs will approach $2.6 billion.

Cape Wind's deal with BTMU is strong evidence that the project is on track to meet its construction schedule.  Cape Wind has stated that it intends to begin construction on the planned 130 turbine-project by the end of 2013 with the expectation that the project will be partially commissioned in 2015 and fully commissioned in 2016. 

Potential investors have a keen interest in Cape Wind's ability to meet its end-of- 2013 "begin construction" milestone.  If Cape Wind can begin construction before January 1, 2014, the American Taxpayer Relief Act of 2012 (P.L. 112-240), or "ATRA", effective as of January 2, 2013, will enable Cape Wind to take advantage of the much-discussed Production Tax Credit ("PTC") or the Investment Tax Credit ("ITC"). 

Before the ATRA amendment, Internal Revenue Code Section 45(d)(1) provided that a project had to be placed in service “before January 1, 2013” in order to claim the PTC which is currently 2.2 cents per kilowatt hour sold to a third party.  The January 2, 2013 Amendment now provides that a renewable energy project is eligible for the tax credit if “the construction... begins before January 1, 2014”.  In the same legislation, a corresponding change inserting the language “the construction of which begins before January 1, 2014” was made to Section 48(a)(5)(C)(ii) of the Internal Revenue Code to allow facilities eligible under amended Section 45 the option to elect to use the ITC in lieu of the extended PTC.  The ITC will provide a potential investor with tax credits equivalent to up to 30% of the project cost.  Of course, a project can only claim the ITC or the PTC-- not both.

Wednesday, July 25, 2012

Summer 2012 Update: Projects and Agency Developments

Although it's been pretty quiet in the U.S. offshore wind world this summer, there have been a few significant events both on the projects side and with respect to regulatory and agency developments.  Cape Wind and Fishermen's Energy have reported important development and/or permitting milestones this summer.  In addition, BOEM has published its Environmental Assessment for the Wind Energy Area (WEA) located off the coasts of Massachusetts and Rhode Island, as well as (in collaboration with FERC) updates to the guidelines governing new wave and tidal technologies.

Project Updates

Cape Wind: Litigation Dropped, Construction Surveys Begin

On June 26, 2012, Cape Wind announced that a stipulation had been filed to resolve some of the claims in a pending litigation over fishing rights in Nantucket Sound.   The stipulation was filed by the Martha's Vineyard/Dukes County Fishermen's Association, who alleged that “[d]evelopment of the Cape Wind Energy Project will cause an effective closure of prime, historic fishing grounds on Horseshoe Shoal...”   Several other plaintiffs listed in the lawsuit are still involved, including the Alliance to Protect Nantucket Sound, the town of Barnstable, and the Wampanoag Tribe of Gay Head (Aquinnah).  The case is captioned as Public Employees for Environmental Responsibility v. Bromwich, 10-01067, and was filed in 2010 in the U.S. District Court, District of Columbia.
Although the settlement agreement with the Fishermen's Association was not officially disclosed, the Fishermen's Association now expresses unilateral support for the 120-turbine 468-megawatt wind farm:
“Instead of being on different ends of the fence, we’re going to work together to determine which areas are open to fishing, what areas will be successful for different kinds of fishing and how to make that fishing safe and available to all fishermen,” said Warren Doty, president of the Fishermen's Association.
Mr. Doty further noted that in exchange for the Association's support, Cape Wind has agreed to support access and a new permit program for fishermen who make a living in the waters around Horseshoe Shoal: the newly-formed Martha’s Vineyard Fishermen’s Preservation Trust.  The Trust will buy fishing permits and lease them at affordable rates to Island fishermen and will be operated through the Permanent Endowment for Martha’s Vineyard. The amount of any monetary contributions from Cape Wind toward the permit bank was not disclosed pursuant to a confidentiality agreement.
In addition, Mr. Doty said that the Association's initial concerns that an exclusionary zone would be created around the turbines have been addressed, with Cape Wind agreeing not to limit fishing access for the fishermen who harvest conch, scup and sea bass in the area.

In early July, Cape Wind announced that it has initiated the next stages of geophysical and construction surveys that must be performed in advance of construction.  Cape Wind spokesman Mark Rogers reported that the survey would be a four-stage process building on work performed in previous years. 

While earlier surveys related to Cape Wind's permitting efforts, the newest round of geotechnical survey work pertains to Cape Wind's final project design plans.  Survey work will include investigations into sediment characteristics at the various depths at which Cape Wind expects to drive the wind-turbine foundation piles.  Under the current plans, Cape Wind anticipates pile diameters of approximately 15-feet and expects to drive the foundations to a depth of about 80-feet below the sea bed.

The geotechnical survey work is being performed by the Dutch marine surveying company, FugroFugro has conducted numerous marine based geotechnical surveys for oil and gas companies, mining operations, construction projects and many of the off-shore wind projects recently built in Europe.  The company's U/S. headquarters is located in Norfolk, Virginia.

In addition to Fugro, Fathom Research of New Bedford, MA will assist in the sediment analysis.  Waltham, MA based ESS Group will monitor and advise with respect to any potential disturbances to marine mammals.

Fishermen's Energy:

On July 19, 2012, Fishermen's Energy announced that (Atlantic City, NJ July 19, 2012) Fishermen’s Energy announced that it has received approval from the US Army Corp of Engineers (“USACOE”) for its Individual Permit under the Clean Water Act, for the Fishermen’s Atlantic City Windfarm (“FACW”).  Although Fishermen's Energy is still waiting to see whether the New Jersey Bureau of Public Utilities accepts its application under New Jersey's Offshore Renewable Energy Credit ("OREC") program, the Army Corps permit is the final federal permit required for the construction of the proposed 5-turbine Atlantic City area offshore wind farm.
"This final permit from the US Army Corp of Engineers brings Fishermen’s Energy demonstration project off Atlantic City one step closer to fruition. This project is the catalyst needed to jumpstart the offshore wind industry in New Jersey and it sends the right signals to manufacturers that New Jersey is open for business," said Rhonda Jackson, Communications Director of Fishermen’s Energy.
"The Fishermen's Atlantic City Windfarm fully demonstrates how renewable energy projects can be developed in an environmentally responsible manner. Fishermen's Energy has worked diligently to ensure that all regulatory and environmental concerns raised by State and Federal agencies are completely addressed. This project will serve as an example of how offshore wind projects should be pursued" said Chuck Harman, Principal Ecologist and Project Manager for AMEC Earth & Environmental (“AMEC”).
Before Fishermen’s Energy can begin construction, the company must finalize its status under the New Jersey OREC program as well as select its construction contractors.  Fishermen's has indicated that it hopes to select New Jersey vendors whenever practical and plans to commence onshore port and facilities construction in Atlantic City in 2013 with offshore construction and commissioning in 2014.

BOEM and FERC Updates

MA/RI Environmental Assessment:

On July 2, 2012, Secretary of the Department of the Interior, Ken Salazar, announced the publication of an environmental assessment for commercial wind leases and site assessment activities on the Outer Continental Shelf off of Rhode Island and Massachusetts (the EA).  This EA pertains to an area also known as the "Area of Mutual Interest" or "AMI" pursuant to an agreement between Massachusetts and Rhode Island.  A copy of the Federal Register Notice of Availability is available here.  BOEM will accept public comments on the EA until August 2, 2012 and will consider any comments submitted before determining whether to issue a Finding of No Significant Impact (FONSI), require revisions to the EA, or determine that a more comprehensive Environmental Impact Statement is required. 

In sum, the EA considers six (6) alternative approaches to leasing submerged land in the AMI, including one "no action alternative."  The six alternatives are:
  1. Lease issuances in all areas of the designated AMI Wind Energy Area (WEA)-- This is the proposed action and preferred alternative. 
  2. Lease issuances in all areas of the designated AMI WEAs, with certain areas designated as important to North Atlantic Right Whales excluded.
  3. Exclusion of all areas within the AMI WEA that are located within 15 nautical miles of inhabited Massachusetts coastal areas.
  4. Exclusion of all areas within the AMI WEA that are located within 21 miles of inhabited Massachusetts coastal areas.
  5. Exclusion of any areas within the AMI WEA that are host to submerged telecommunications cables.
  6. No action alternative.
BOEM hosted information sessions in Rhode Island and Massachusetts to provide additional opportunities for public input on the Environmental Assessment and to explain the commercial leasing process on July 16 and on July 17. A copy of BOEM's presentation is available here.

BOEM and FERC Revise Guidelines for Wave and Tidal Projects:

On July 19, 2012, The Bureau of Ocean Energy Management (BOEM) and the Federal Energy Regulatory Commission (FERC) announced revised guidelines for potential marine hydrokinetic energy developers interested in pursuing technology testing and commercial development activities on the nation’s Outer Continental Shelf (OCS).   The revised guidelines replace 2009 guidelines issued by BOEM’s predecessor agency, the Minerals Management Service (MMS), and FERC and are available here

Wave and tidal generation projects located on the OCS are subject to approval and permitting requirements overseen by both BOEM and FERC.  This joint agency oversight was established pursuant to a Memorandum of Understanding between the Department of the Interior and FERC that was issued in April 2009.

Like the 2009 guidelines, the revised guidelines include an explanation regarding the respective responsibilities of each agency and instructions on how best to navigate the process of obtaining a marine hydrokinetic lease and license on the OCS.  Topics include, among others: provisions for obtaining leases and licenses, fee structures, and hybrid (e.g., wind and marine hydrokinetic) project considerations.  The revised guidelines were issued to "promote further clarity for the regulatory process and facilitate a more efficient process in authorizing marine hydrokinetic (e.g., energy developed from waves and ocean currents) research and testing activities."