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.

Tuesday, January 25, 2011

BOEMRE Slows Down; Maryland Picks Up the Pace

Although there is still one last installment of my "What's Next: 2011 Edition" series yet to be published, I had no choice but to interrupt myself with two new developments related to two of my earlier predictions:
  • First, BOEMRE's announcement regarding its revised offshore renewable project permitting rules will directly impact my predictions regarding BOEMRE's anticipated Requests for Interest. In short, the revised shortened timeline for these Requests for Interest is, for the moment, extended.
  • Second, as I predicted here, Maryland Governor Martin O'Malley has issued a more concrete summary of the legislation he plans to pursue in support of offshore wind projects off of Maryland's coast.
A Speedier Permitting Process? Not So Fast, Thanks to Rulemaking Mandates.

Ah, the absurdity that can result from bureaucratic efforts to facilitate efficiency: BOEMRE's announcement that it must now proceed through the rulemaking process twice in order to promulgate a rule designed to eliminate regulatory redundancy in the federal permitting process for offshore wind projects may just take the prize.

BOEMRE originally unveiled the Rule, part of the "Smart from the Start program" on November 26, 2010. On Monday, January 21, 2011, BOEMRE announced that it now plans to republish the November 26, 2010 Rule within the next 30 days as a Proposed Rule. This accouncement indicates that (1) BOEMRE will be shepherding the revised rule through standard informal notice and comment rulemaking procedures; and (2) BOEMRE received at least one adverse comment or notice during the 30 day comment period following the November 26, 2010 direct final rule publication. BOEMRE has not released any information regarding the basis of the adverse comments or notices. The need to proceed through a second round of rulemaking procedures means that the November 26, 2010 Rule will not go into effect until - at the earliest - May 2011.

The November 26, 2011 Rule, which amends the 2009 MMS Final Rule governing offshore renewable energy project permitting, was designed to eliminate a redundant step in the noncompetitive leasing process for commercial renewable energy development on the Outer Continental Shelf. Under the 2009 MMS Final Rule, BOEMRE must issue a second Request for Interest with regard to leasing specific areas of interest on the Outer Continental Shelf even if only one entity responds to BOEMRE's first request. The November 26, 2011 Rule eliminates BOEMRE's obligation to issue a second request for interest in the event that there is only one interested entity -- resulting in a time savings of up to six to twelve months in the leasing process. If time is money in the project development arena- and it is- the elimination of pointless bureaucratic delay seems like a no-brainer.

In an attempt to codify the 2009 Rule as quickly as possible, BOEMRE decided to employ the little-used "direct final rulemaking" process. The direct final rulemaking process is an accelerated version of the standard notice-and-comment method of informal rulemaking set forth under the Administrative Procedure Act that negates the requirement that an agency proceed through rounds of deliberation at both the proposal and final promulgation stages. See 5 U.S.C. 553. Typically, an agency will use the direct final rulemaking process when it believes that a rule is so uncontroversial that the standard notice-and-comment method would be superfluous and impose needless delay.

Under the direct final rulemaking process, BOEMRE published the Rule in the Federal Register accompanied by the following statement:
This rule becomes effective on January 25, 2011 unless BOEMRE publishes a notice withdrawing this rule before that date.

See November 26 Rule. If no adverse comments had been received before January 25, 2011, the Rule would have been effective as of January 25, 2011. However, under the APA, BOEMRE was compelled to withdraw the Rule upon receipt of even one adverse comments or notices during the comment period compelled.

Nothing in the APA, however, prevents BOEMRE from republishing the November 26, 2010 Rule and initiating the standard informal notice and comment rulemaking process. Under the standard rulemaking process, BOEMRE must first publish a "proposed rule" in the Federal Register. BOEMRE has stated that it intends to issue a proposed rule within the next 30 days. The proposed rule will include a notice setting forth a period of time during which the public and interested parties may submit comments in support of or adverse to the Rule-- typically, between 30 and 180 days. After reviewing all comments and notices, BOEMRE will then be required to publish a "final rule" in the Federal Register. The "final rule" must include BOEMRE's written responses to the substance of each and every comment or notice recieved during the comment period. Subject to any further challenges or comments, the Rule may then be codified into the Code of Federal Regulations ("CFR"). See 5 U.S.C. 553.

So what are the immediate impacts? You may recall that BOEMRE issued an RFI for specially identified submerged lands off of the Maryland coast on April 26, 2010. By way of a letter dated November 8, 2010, BOEMRE notified Bluewater Wind, LLC that it has submitted the only eligible submission. Under the November 26, 2010 Rule, BOEMRE would not be required to issue a second RFI and Bluewater Wind, LLC would be permitted to proceed to the next step in the permitting process immediately. However, because the Rule has not gone into effect, BOEMRE has now issued a second RFI in accordance with the 2009 MMS Final Rule.

Maryland: Proposed Offshore Wind Legislation

Governor Martin O'Malley revealed further details about the legislation he intends to sponsor this year in support of a Maryland-based offshore wind industry. According to the summary, O'Malley's proposed legislation will:

direct the Public Service Commission to require Maryland’s five distribution utilities to award long-term contracts to procure between 400 to 600 megawatts of offshore wind energy. The Commission will oversee the procurement process and approve the final contracts which must be for a period of not less than 20 years. Any additional costs of electricity from offshore wind, and ultimately the additional savings, will be shared by all ratepayers and customer classes in the State.

O'Malley's proposed legislation appears to track similar legislation adopted last year in New Jersey.

Tuesday, January 18, 2011

What's Next: 2011 Edition, Part 2.

Part 2 of my Top 10 Predictions for Offshore Wind in 2011 examines new technology developmens and new legislative incentives for Offshore Wind.

(4) State Legislation In Support of Offshore Wind Projects

In the wake of New Jersey’s 2010 OWEDA legislation and following the failure of the 111th Congress to pass a national renewable energy standard, many coastal states with offshore wind potential are considering adopting state legislation to provide incentives for developing offshore wind projects in state and state-adjacent federal waters. This type of legislation provides critical support for offshore wind projects by ensuring lenders and financiers that the energy produced by these projects will be purchased and distributed to end-users.

Other coastal states where Power Purchase Agreements ("PPA"s) for offshore wind projects have not yet been signed (fn1) are likely to follow suit and attempt to enact legislation to encourage offshore wind development. In fact, last week, Maryland Governor O’Malley announced that he plans to propose legislation which will require utilities to purchase a certain amount of wattage from offshore renewable energy projects. Other states that are likely to enact laws which include financial or other incentives for offshore wind development are New York (for both Atlantic and Great Lakes-based development opportunities), Texas (for developments in state waters in the Gulf of Mexico), Michigan (for Great Lakes development) and the Carolinas.

(5) Development of "Floating" Turbines

I admit that I follow the development progress of the various engineering teams working to produce a scaleable floating wind turbine the way that some people follow “American Idol.” In my opinion, a fully tested and engineered scaleable model of a floating wind turbine will transform the offshore wind industry globally and create worldwide opportunity for the production of energy without sacrificing environmental integrity or land in the periphery of already over-burdened demand centers.

BOEMRE provides the following description of the turbine technology that is currently in use at foreign installed offshore wind projects and which will be used for the projects currently proposed in the United States:

Offshore wind facilities today are generally developed and operated as follows. Once a suitable place for the wind facility is located, piles are driven into the seabed. For each turbine, a support structure and a tower to support the turbine assembly, to house the remaining plant components, and to provide sheltered access for personnel are attached to the piles. After the turbine (generally a three-bladed rotor connected through the drive train to the generator) is assembled, wind direction sensors turn the nacelle (a shell that encloses the gearbox, generator, and blade hub) to face into the wind and maximize the amount of energy collected. Wind moving over the blades makes them rotate around a horizontal hub connected to a shaft inside the nacelle. This shaft, via a gearbox, powers a generator to convert the energy into electricity.

See: BOEMRE website.

Because the current generation of turbines must be secured via piles driven into the seabed floor, locations for offshore wind farms have been limited to areas where the water depth does not exceed 30 meters. As a result, most coastal areas in the United States have been deemed unsuitable for offshore energy development including nearly all of the western seaboard-- regardless of the bounty of the wind resources located there. Instead, offshore wind development proposals have been limited to areas with appropriate oceanic bathymetry (i.e. ocean depth) such as the shallower areas of the Outer Continental Shelf extending from Maine down to the southern reaches of the mid-Atlantic region, the Gulf of Mexico, and the Great Lakes.

However, if engineers can overcome the technology issues that preclude the development of offshore energy projects in waters deeper than 30 meters, large swathes of ocean territory located near demand centers could open up for offshore wind development.

Over the last eighteen months, a development team at the AEWC Advanced Structures and Composites Center at the University of Maine, in collaboration with the DeepCwind Consortium has been working to develop a “floating” wind turbine that could be installed in waters significantly deeper than 30 meters. The program, if it is able to stay on track with its funding requirements (nearly $20 million per year over the next four years) expects to design, build, deploy, and test 1:3 scale floating turbine prototypes at a designated (and state approved) test site in Maine's coastal waters over the next 3 years. The program expects to have its first full-scale floating turbine designed, built and deployed at a deep water test site by 2015. See: HERE at page 2.

The University of Maine team is not the only engineering team seeking to develop a scaleable floating wind turbine. In August 2009, Statoil, a Norwegian company with extensive offshore oil drilling experience, installed the first full scale test model of a floating wind turbine, known as the Hywind Project. The Hywind project has less than a year left in its two year testing period, and was designed to be installed at depths of 120-700 meters below sea level.

In addition, a collaboration of European companies including, among others, Converteam, EDF Energies Nouvelles, Institut des Sciences de l'Ingenieur Toulon-Var, IFP Energies Nouvelles, Oceanide, and the engineering company that installed the Hywind Project, Technip, have announced plans to install their own prototype floating offshore wind turbine called the Vertiwind project. The Vertiwind project is a vertical-axis offshore floating wind turbine which will be located in French waters in an area identified as the Sea Cluster of the Provence Alpes Côte d’Azur region. The project is backed and sponsored by the French Prime Minister through the French Environment and Energy Management Agency.

Although we should not expect a fully tested scaleable floating turbine to be production ready in 2011, the enormous market potential of this technology makes any significant engineering progress worth watching.


1. Although I would laud the effort, I do not believe that Delaware legislators will prioritize enactment of legislation mandating inclusion of offshore wind generated energy in Delaware’s renewable energy portfolio. The primary purpose of legislation that requires utilities to purchase offshore wind generated electrons is to facilitate investment in offshore wind projects by mandating a back-end market – i.e., requiring utilities to enter into PPAs with offshore wind energy generators. Delmarva Energy has already signed a PPA with Bluewater Wind, an offshore wind project developer, for a project that is slated to be built in waters adjacent to the Delaware coast. Therefore, in my opinion, it is less critical for Delaware to adopt incentive based legislation.

Friday, January 7, 2011

What's Next: 2011 Edition, Part 1.

We are one week-- a mere seven days -- into 2011, and the U.S. offshore wind sector is already in full swing! I started drafting this post, which was intended to be a "Top 10" list of predictions for 2011, just before New Years. However, at least one of my predictions was so uncanny that it has already come to fruition!

In an effort to make these posts a little less lengthy, I am breaking the Top 10 into three parts. This post includes the first three predictions-- stay tuned for the next seven!

(1) Army Corps of Engineers Issues Final Permit and ROD for Cape Wind

After years of inaction, delay, and litigation challenges, the United States Army Corps of Engineers has issued a final permit for the Cape Wind Offshore Wind Farm. Cape Wind is set to be located in an area known as Horseshoe Shoals off the coast of Nantucket Island in federal waters off the coast of Massachusetts. The Army Corps permit was issued pursuant to the Corps' regulatory authority under Section 404 of the Clean Water Act (33 U.S.C. 1344), and under Section 10 of the Rivers and Harbors Act of 1899 (33 U.S.C. 403). The permit, which was issued concurrently with the Army Corps' Record of Decision, was granted in consideration of the Final Environmental Impact Statement approved by Mineral Management Services (now the Bureau of Ocean Energy Management, Regulation and Enforcement) and subsequent to the issuance of the first-ever submerged land lease granted for an offshore renewable energy project. Under the Permit, Cape Wind must complete construction of the 130 turbine installation by 2020.

(2) BOEMRE Requests for Interest and Calls for Information

In 2009, BOEMRE issued Requests for Interest with regard to potential offshore renewable energy developments in Delaware, Maryland, and Massachusetts (in cooperation with Rhode Island). Under the Department of the Interior's new "Smart from the Start" program, I believe that we should expect to see BOEMRE RFI's issued for the waters off of Maine, New Jersey, New York, and North Carolina.

Joan Bondareff, Vice Chair of Virginia's Offshore Wind Development Authority (and of counsel in Blank Rome's Washington, DC office) offers the following prediction related to offshore wind development in Virginia:

In VA, we expect DoI to issue an RFI in January for leasing areas on the OCS off the coast of Virginia. At the newly-constituted VA Offshore Wind Development Authority, established in legislation last year and promoted by Gov. McDonnell, we are looking forward to working with companies interested in offshore wind development and building public-private partnerships to facilitate bringing these projects on-line in the future at what we hope can be competitive rates. We also welcome the DoI's Smart from the Start Initiative.

(3) Action Under 2010 New Jersey OWEDA Legislation: New BPU Regulations for OREC Program; Bids Expected Shortly Thereafter

Under the recently enacted New Jersey Offshore Wind Economic Development Act ("OWEDA"), the New Jersey Board of Public Utilities (BPU) has been directed to develop and establish an offshore wind renewable energy certificate (OREC) program that calls for a percentage of electricity sold in the state-- a minimum of 1,100 megawatts-- to be from offshore wind energy. The OWEDA also offers financial incentives, including both tax credits and direct funding through the New Jersey Economic Development Authority, to businesses that build manufacturing, assemblage, and water access facilities for qualified offshore wind projects.

Under the legislation, New Jersey BPU is required to issue regulations governing the OREC program within 180 days of the legislation's enactment date-- i.e., by February 15, 2011.

Once the OREC program has been established, we should expect to see applications submitted by a number of developer entities including the Garden State Offshore Energy, Fishermen's Energy, LLC and Bluewater Wind, LLC.