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.

Friday, February 25, 2011

Ontario's Moratorium on Offshore Wind in the Great Lakes: Impacts on U.S. Great Lakes Offshore Wind Development

What Canada Did

On February 11, 2011, the Ontario Ministry of the Environment ("MOE") announced that it has suspended all activities pertaining to offshore wind development in the Great Lakes. See HERE for official statement. Accordingly, the MOE has suspended review of all applications for Renewable Energy Approvals and is not accepting any further applications for offshore wind projects in the Feed-In-Tariff ("FIT") program. Further, the Ontario Ministry of Natural Resources ("MNR") will not accept any new Crown land applications for offshore wind development and will cancel all existing Crown land applications for offshore wind development that do not have a FIT contract, including those with Applicant of Record status.

The Canadian Wind Energy Association ("CanWEA") and many developers, including Trillium Wind Power Corp., have broadly criticized the MOE's decision to halt the review of permit applications and approvals. The developers have noted that MOE and MNR’s cancellation of submitted applications will cost their investors the value of years of work and have a severe adverse impact on investors’ view of the reliability of offshore wind as an investment option in the future.

MOE has promised that projects will receive refunds for the site release permitting process, developers like Trillium say that a refund for an application fee cannot compensate for the last 15 years of time, money, and resources that they have dedicated towards developing their proposed project.

Why Canada Did It

The MOE stated that this moratorium has been instituted to allow time to review further scientific research on the effects of offshore wind projects on freshwater ecosystems. Others speculate that MOE's alleged need for additional environmental and engineering studies is simply an excuse to provide the Canadian government with more time to re-evaluate and align their offshore regulatory processes and policies.

Although a variety of federal and provincial authorities have issued legislation impacting offshore wind development on the Canadian side of the Great Lakes, neither the provincial government of Ontario nor the federal Canadian government have established a clear directive with regard to what studies, permits, applications, or other submissions must be prepared and submitted and in what order. For example, developers seeking to build offshore wind projects need to obtain submerged land leases from the Ministry of Natural Resources. The MNR has not yet established a competitive application process to govern the issuance of submerged land leases, which give developers site control to conduct environment and meteorological testing on their proposed site. This lack of a competitive process has resulted in a number of applicants -- qualified and unqualified -- being granted “placeholder” rights to a designated area just by virtue of filling out the application with no qualifications standards and thereby are precluding any other applicants whom may be better prepared financially and/or technically. Moreover, there is no official coordination between the leasing/siting process and MOE’s authority to issue Renewable Energy Approvals under the Feed in Tariff program.

What This Means for the U.S. Offshore Wind Industry

Although stakeholders in the U.S. Offshore Wind industry have not reacted strongly thus far, Canada’s offshore wind moratorium could provide fodder for a variety of opposition groups in the U.S. Traditionally, parties that oppose offshore wind development focus on one of three areas: (1) complaints about the visual impacts; (2) alleged adverse environmental impacts; and (3) increased rates associated with fixed prices set forth in power purchase agreements. Since the MOE has indicated that this moratorium stems from possible concerns regarding environmental and/or engineering issues, parties opposing U.S. Great Lakes developments may cite the Canadian moratorium as justification for implementing identical delays for U.S. projects in the Great Lakes.

More concerning is the impact that this decision may have on investor confidence. Although the U.S. Department of the Interior has instituted a more rigorous process (via the Final Rule and the Smart from the Start initiative) by which developers may pursue approvals for offshore wind developments, there is still significant uncertainty in the process. Possible investors for U.S. projects will certainly consider the losses which will inevitably be sustained by investors in the Canadian projects whose applications have been cancelled and/or whose submission is now indefinitely suspended. The potential for financial losses resulting from an unpredictable and untried regulatory process—even if these losses are a result of a completely independent foreign regulatory system— may appear that much more real to investors who are considering investing in U.S. offshore projects.

On the plus side, the Ontario market collapse may also increase investment in the U.S. offshore wind industry and result in more opportunities for job creation on our side of the border. As a result of its FIT program, many manufacturers and investors have viewed Ontario as having taken the lead in offshore wind development. Ontario's indefinite moratorium on offshore wind permitting means that Ontario has effectively lost that competitive advantage. Incentive-based legislation (e.g., the New Jersey Offshore Wind Economic Development Act and recently proposed legislation in Maryland) and slow but steady project progress in the U.S. may now compel these manufacturers to set up shop in the U.S. instead-- thus garnering the associated revenue and job creation for the U.S. economy.

Special thanks to Leslie Garrison of Bluewater Wind/NRG for her contributions to this post.

Friday, February 18, 2011

Ocean & Offshore Energy Projects and Policy Blog Nominated by LexisNexis!

Dear Offshore Energy Blog Readers, Colleagues and Friends:

For the first time, the LexisNexis Environmental Law & Climate Change Community is honoring a select group of blogs that set the online standard for environmental and energy law and policy online publications. I am pleased to announce that Ocean & Offshore Energy Projects and Policy Blog is one of the nominated candidates for the LexisNexis Top 50 Environmental Law & Climate Change Blogs for 2011.

I hope that you will click on this link and submit a comment in support of the Ocean & Offshore Energy Projects and Policy Blog.

The deadline for comments is 28 February 2011. Thanks for your support!!


Jennifer Simon Lento, Esq.

Friday, February 11, 2011

New Jersey OREC Regulations Issued! Fishermen's Energy Submits First Application to NJ BPU!

New Rules Issued Implementing New Jersey's OWEDA

On Thursday February 10, 2011, the New Jersey Board of Public Utilities ("BPU") approved new rules implementing the New Jersey Offshore Wind Economic Development Act (OWEDA). See NJBPU Press Release, dated 2/10/11. The rules became effective upon last Thursday's filing with the New Jersey Office of Administrative Law. The rules, codified at N.J.A.C. 14:8-6, were promulgated through a Special Adoption, and will remain in effect until 18 months from the effective date-- i.e., until August 10, 2012.

The Rules, which largely mirror the OWEDA, establish the Offshore Wind Renewable Energy Certificate (OREC) program. The OREC program requires developers of "qualified offshore wind projects" to submit an application requesting that the BPU issue ORECs for the designated project. Once applications have been deemed administratively complete, the BPU will have 180 days to review the substance of an application and issue a finding. The BPU will designate dates by which applications must be received so that they are able to review all developer applications simultaneously and comparatively.

This application must include, among other things, a detailed description of the project, construction plans, financing methods and analysis demonstrating the financial integrity of the developer and access to sufficient capital, proposed OREC pricing methods, and operations, maintenance and safety plans. In addition, the application must include a comprehensive cost-benefit analysis which must demonstrate "positive economic and environmental net benefits to the State."

Once the application has been received, the BPU may issue Offshore Wind Renewable Energy Certificates. These ORECs can be purchased by electricity distributors in New Jersey. The OWEDA provides that electricity sold to retail customers in New Jersey must include, at the least, the minimum percentage of energy derived from Offshore Wind generation projects as required for that energy year, as determined by the BPU.

The new Rules include some provisions which many developers are likely to find objectionable or difficult to implement. For example, the Rules require an applicant to identify by name the key project personnel and then commit to maintaining those exact people throughout the project development process. The Rules do not appear to include exceptions for personnel identified in the application who later leave the applicant's employ, get promoted, or otherwise shift their career function over the course of what could reasonably be years. Another provision requires applicants to describe the type of job creation anticipated through the project and then formally commit to those jobs actually coming to fruition. If the described jobs do not come about, the applicant must provide a direct adverse consequence that it will impose upon itself.

Rob Gibbs, Vice President of Garden State Offshore Energy, one of the three anticipated prospective applicant project developers (i.e., GSOE, Bluewater Wind and Fishermen's Energy), said the following with regard to the new Rules:

We’re pleased the OREC regulations are out and are currently reviewing them to ensure what’s been adopted is financeable from a project perspective. While the regulations contain a good deal of detail with respect to application requirements, we were disappointed the Board did not go further in establishing common assumptions that all interested developers would use in their applications. For instance, establishing common assumptions on capacity factor, forward energy prices, etc. would enable the Board to compare applications on a similar basis rather than letting interested developers use divergent data points that are subjective and could make it more difficult for meaningful comparison. We also would have liked to have seen more definitive time periods for submitting applications but we understand a stakeholder process will be held in the next few weeks so we’re encouraged that this will be fleshed out quickly.

Fishermen's Energy Submits First OREC Application

Fishermen’s Energy of New Jersey, LLC (Fishermen’s) announced that it filed the first application for approval for the issuance of ORECs with the New Jersey Board of Public Utilities on February 9, 2011. The application was filed for a "Demonstration Project" consisting of six turbines with an output not to exceed 25MW. The project will be located in New Jersey state waters about 2.8 miles from Atlantic City.

If approved by the NJ BPU, the Fishermen’s Atlantic City Windfarm, located in New Jersey State waters, is on schedule to be the first grid connected offshore wind project in the United States.

Daniel Cohen, President of Fishermen’s Energy, stated:

The decision to allow us to receive OREC funding will be up to the NJ BPU. The price for the electricity is within the range we testified to during the legislative
process to enact the Offshore Wind Development Act, with about a one tenth of one percent rate increase in the first operating year, which will decrease each year thereafter, as the cost of fossil fired energy increases. This is a bargain for New Jersey and its ratepayers as a societal and energy cost hedge and to start a new

Mike Madia, Chief Operating Officer of Fishermen's Energy and the team leader in charge of the BPU application, further asserted that the project's benefits will far outweigh its upfront costs:

This project will be a magnet for industrial development of wind energy manufacturing in New Jersey. The State’s and the NJ BPU’s willingness to support this first offshore wind project for New Jersey and the US will be a key selling point to convince wind turbine manufacturing and related supply chain participants to locate new facilities in New Jersey, bringing their associated jobs and investment. Aside from industrial jobs, based on polling data among tourists, Fishermen’s projects that the presence of an operating wind farm visually associated with Atlantic City and that is accessible to tourists by boat from shore, will result in increased tourism to Atlantic City, drawing people to the birthplace of offshore wind in the Americas. This coupled with the economic incentives for manufacturing included in the Offshore Wind Economic Development Act provides compelling reasons for new industry to locate in New Jersey.

Monday, February 7, 2011

Another Big News Day: Salazar, Chu Announce Major Initiatives; News out of RI and NJ

DOE, DOI Announce Inter-Agency Offshore Wind Initiative: Funding for R&D Projects Solicited and New Wind Energy Areas Identified

Although recent events have suggested that the Obama administration's goal to generate 80% of the Nation's energy from carbon-neutral generation is at loggerheads with regulatory progress, DOI Secretary Salazar and and DOE Secretary Chu today unveiled the first-ever inter-agency Strategic Work Plan in support of offshore wind. The Strategic Work Plan, part of the National Offshore Wind Strategy, incorporates and expands upon the "Smart from the Start" program announced by Secretary Salazar in November 2010. The Strategic Work Plan will begin with two major initiatives: (1) $50.5 Million in funding for research and development; and (2) the continued identification of "Wind Energy Areas."

First, DOI and DOE have announced up to $50.5 Million to fund research and development projects that will contribute to the efficient development of domestic offshore wind projects. Today, the first round of funding was announced in the following three areas:

  • Technology Development (up to $25 million over 5 years): DOE will support the development of innovative wind turbine design tools and hardware to provide the foundation for a cost-competitive and world-class offshore wind industry in the United States. Specific activities will include the development of open-source computational tools, system-optimized offshore wind plant concept studies, and coupled turbine rotor and control systems to optimize next-generation offshore wind systems.
  • Removing Market Barriers (up to $18 million over 3 years): DOE will support baseline studies and targeted environmental research to characterize key industry sectors and factors limiting the deployment of offshore wind. Specific activities will include offshore wind market and economic analysis; environmental risk reduction; manufacturing and supply chain development; transmission planning and interconnection strategies; optimized infrastructure and operations; and wind resource characterization.
  • Next-Generation Drivetrain (up to $7.5 million over 3 years): DOE will fund the development and refinement of next-generation designs for wind turbine drivetrains, a core technology required for cost-effective offshore wind power.
See DOI Press Release.

Second, Secretary Salazar also announced several new "wind energy areas" (WEAs) located on the Outer Continental Shelf off the coasts of Delaware (122 square nautical miles), Maryland (207), New Jersey (417), and Virginia (165). See here for a map of the new WEAs. Additional new WEAs off of Massachusetts, Rhode Island, and the Southern Atlantic Region will be identified by DOI by Spring 2011. The WEAs, part of the Smart for the Start program initiative to reduce permitting and leasing process time, will allow developers to take advantage of pre-existing and/or approved coordinated environmental studies, large-scale planning (such as ocean zoning and mapping studies), as well as expedited approval processes.

The Offshore Wind Strategy will be employed in furtherance of the Obama administration's goal of generating 80% of the Nation's electricity from carbon-neutral generation projects by 2035. See State of the Union Address, January 25, 2011. Under the Offshore Wind Strategy, 10 gigawatts of offshore wind generating capacity will be deployed in state and federal waters by 2020 (enough to power 2.8 million homes) and another 54 gigawatts will be deployed by 2030 (enough to power 15.2 million homes).

State Developments:

Much Bigger NJ Offshore Wind Farm?

New Jersey is going to be a hot spot for the foreseeable future. First, later this week, we expect that the New Jersey Board of Public Utilities will issue regulations implementing the requirements of last August's Offshore Wind Economic Development Act. More information to come on that later this week.

However, there also appears to be some changes in the development plans for the wind farms currently proposed off of the New Jersey coastline. At last week's GreenPower Conference, "Offshore Wind Power USA: Creating a Roadmap for Commercially Successful Offshore Wind Projects" in Boston, Robert Gibbs, Vice President of the Deepwater Wind/ PSEG Global collaborative offshore wind development group Garden State Offshore Energy, provided a rather startling update regarding its New Jersey project. Up until last week, GSOE had been saying that its plan was to develop a utility scale project of approximately 350 megawatts of name plate capacity approximately 20 miles off of Cape May, New Jersey. During last week's conference, Mr. Gibbs' presentation included a slide which suggests that GSOE may be intending to expand its development plan to provide for a utility scale project of up to 1,000 megawatts of name capacity. Notably, GSOE's development arm, Deepwater Wind, recently made a similar announcement with regard to its Rhode Island Sound project.

GSOE's plan to radically increase the size of its project is in part motivated by seeking economy of scale benefits now available via larger, more productive turbines. However, it also creates a potentially dicey competitive environment for the other New Jersey developer, Fishermen's Energy. Under New Jersey's offshore wind energy legislation, the OWEDA, direct funding and financial incentives are directed for up to 1,100 megawatts of offshore energy generation. Thus, if the GSOE project encompasses 1,000 megawatts, it essentially eliminates incentives for projects other than the GSOE project.

Rhode Island: One Less Opponent for Block Island

There is one less opponent to Deepwater Wind's proposed 6-turbine offshore wind installation near Block Island. Rhode Island Attorney General Peter Kilmartin dropped his office’s appeal of the power purchase agreement between Deepwater Wind and National Grid. The appeal, which is set to be heard in the first quarter of 2011, was filed after the state’s Public Utilities Commission approved a price agreement for the sale of electricity from the planned Block Island wind farm.

The appeal will nevertheless proceed because three other petitioners, the Conservation Law Foundation and two manufacturers, are still actively involved in the proceeding.