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, 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."

Wednesday, April 25, 2012

Offshore Energy Blog Author Featured in Law360: BOEM Requests Comments on Limited Lease for New Hydrokinetic Technology

It's been relatively quiet in the U.S. offshore wind industry lately, so it's great to see some movement in other ocean-energy development projects. Yesterday, BOEM announced that it has published a Notice in the Federal Register announcing the beginning of a 30 day public comment period on an environmental assessment that considers the effects of issuing a lease for testing equipment designed to use the force of ocean currents to generate renewable energy.

The lease would be the first limited lease granted for the purpose of testing experimental hydrokinetic devices that produce energy from ocean and tidal currents on the outer continental shelf.  The applicant, Florida Atlantic University, hopes that the lease will lead to the development of successful power-producing hydrokinetic instruments that can be deployed for commercial energy production.  The proposed lease area is 17,080 total acres and is located approximately nine to 15 nautical miles offshore Fort Lauderdale.

Law360 published an article including additional details about the project and featuring the following third party commentary from yours truly:
Energy and project finance attorneys are keeping a close eye on new hydropower technologies, like the ones Florida Atlantic University seeks to test, according to Jennifer Simon Lento of Nixon Peabody LLP, an attorney who writes an offshore energy blog.
Despite advances in land-based wind and solar power, the U.S.' enormous clean energy resources remain underutilized, and efforts to increase offshore energy production deserve support, Lento said.
“This is a very important intermediary step to progressing a new ocean-based energy technology, but it's still an early step," Lento said. “Any time I see the government clearing the way to allow one of these other technologies to move forward, it can only be a good thing.”

Friday, February 17, 2012

Cape Wind: Ready to Seek Project Financing

Following years of challenges, litigations, delays, and concerns, Cape Wind has announced that it is ready to seek project financing for its 420 megawatt 130-turbine offshore wind generation project in Nantucket Sound. The announcement was made in the wake of a deal brokered by Massachusetts’ Governor Deval Patrick’s administration with respect to a proposed merger between NSTAR Electric Company, NSTAR Gas Company, and Western Massachusetts Electric Company and its holding company parent Northeast Utilities. The proposed merger includes a condition that requires the merged utility to purchase 27.5% of Cape Wind’s output—that is, 129 megawatts of capacity from the proposed 468-megawatt project—via a 15 year power purchase agreement (“PPA”). In combination with the sale of 50% of its output to National Grid, Cape Wind now has buyers for 77.5% of the wind farm’s total proposed output which Cape Wind President Jim Gordon has stated is enough to seek project financing.

Before investors will commit to financing the project, merchant generators such as Cape Wind must demonstrate that investors will be able to earn a return on their investment. For energy generators, this means securing purchasers for the majority of the energy generation project’s proposed output—usually via a PPA.

The PPA with NSTAR is one of several conditions of a settlement brokered by the Patrick administration with respect to the NSTAR/ Northeast Utilities merger, a $17.5 billion transaction. The merger has been heavily litigated since the utilities initially petitioned the Massachusetts Department of Public Utilities (DPU) for approval in 2010. Under the proposed settlement, the utilities will be permitted to merge subject to certain conditions designed to create enhanced benefits for Massachusetts ratepayers. Thus, conditions include a four-year freeze on base energy distribution rates and a one-time $21 million credit for ratepayers. Massachusetts Attorney General Martha Coakley has stated that the deal will save Massachusetts consumers an estimated $217 million. Copies of the proposed settlement documents are available here.

If the DPU approves the settlement proposal and allows the merger, NSTAR will have to negotiate the price terms of the PPA with Cape Wind. Under the proposed Settlement, NSTAR and Cape Wind must file a Memorandum of Understanding ("MOU") with DPU within 20 days of the Settlement to set forth proposed timetables and methods by which the parties will negotiate the terms of the PPA. In turn, the parties must file an executed PPA with DPU no later than March 30, 2012. See here.

Notably, the Settlement includes an "out" for NSTAR in the event that Cape Wind fails to begin construction of its facility by December 31, 2015. Specifically, the Settlement provides that if the DPU determines that Cape Wind has not commenced "physical construction" by December 31, 2015, "then NSTAR Electric shall terminate the Cape Wind Contract [the PPA] as of December 31, 2015." "Physical Construction" is defined as "any physical installation of equipment or materials into the seabed of the Cape Wind construction site that is integral to the assembly of the wind turbine generation units." Id.

The NSTAR PPA will likely contain terms similar to those set forth in the National Grid PPA which was approved by DPU and upheld by the Massachusetts Supreme Court in December 2011. Under the National Grid PPA, National Grid will purchase power from Cape Wind at a starting price of 18.7 cents per kilowatt-hour, escalating 3.5 percent annually over a 15-year term.

Cape Wind has obtained all of the necessary environmental permits and, in 2010 received the first-ever submerged land lease for a renewable energy project to be located on the outer continental shelf from the U.S. Department of the Interior.

Wednesday, January 25, 2012

Some Encouraging Developments: Submerged Land Leases in the Mid-Atlantic to Be Issued in 2012; New Funding Opportunities from DOE

Although we are already well into the first quarter of 2012, there are still a number of unresolved 2011 matters that deserve some attention. We are still grappling with the biggest elephant in the room-- that is, the on-going congressional effort to extend and/or authorize certain tax incentives (e.g., the Offshore Wind Investment Tax Credit ) designed to promote renewable energy projects. However, despite the ongoing lethargy and frustrations with respect to tax incentives, the Obama Administration continues to authorize agency initiatives supporting the development of a U.S. offshore renewable energy industry. In the last two days, both the Department of the Interior ("DOI") and the Department of Energy issued important and (pardon the pun) groundbreaking announcements impacting offshore wind.

DOI Announces Three Important Things in One Week!

Industry participants and observers alike are likely reeling from the sheer volume of industry-moving announcements issued by DOI in the last week.

First, on February 2, 2012, DOI Secretary Ken Salazar and Bureau of Ocean Energy Management ("BOEM") Director Tommy P. Beaudreau announced the results of the National Environmental Policy Act ("NEPA") environmental assessment ("EA") performed with respect to proposed Wind Energy Areas ("WEAs") located on the Outer Continental Shelf ("OCS") off the coasts of New Jersey, Delaware, Maryland and Virginia. The Environmental Assessment, which was published today in the Federal Register, concluded that there would be no significant environmental and socioeconomic impacts from issuing wind energy leases in the designated mid-Atlantic WEAs.

The EA considered potential impacts arising out of site characterization and assessment activities that would need to occur before developers could build generation facilities on the OCS. These activities include geophysical, geotechnical, archeological and biological surveys and the installation and operation of meteorological towers and buoys. The EA will provide baseline data and provide substantial context for BOEM's consideration of future leasing proposals in the mid-Atlantic Wind Energy Areas and in the Bureau's review of developers' site assessment plans. If a lessee proposes a wind energy generation project on its lease, BOEM would prepare a separate site- and project-specific analysis under NEPA of its construction and operations plan, and provide additional opportunities for public involvement.

Although the NEPA clearance should enable developers to move forward more quickly with projects proposed for the mid-Atlantic WEAs, BOEM and DOI have yet to finalize the lease auction process through which developers must compete with one another for leases. Notwithstanding the pending auction methodologies, Secretary Salazar stated today that submerged land lease proposals for projects in the mid-Atlantic WEAs will be vetted before the end of 2012.

In DOI's press release, Depute Secretary of the Interior David J. Hayes offered the following comments on the EA and FONSI:

“Today’s announcement opens up the ‘sweet spots’ off the mid-Atlantic coast for development of our nation's remarkable offshore wind resource... Interior will continue to do its part to build a world-class offshore wind industry that provides clean, reliable, home-grown power and the American jobs that come with it.”

Second, in a surprisingly efficient move for BOEM, the Bureau simultaneously published Calls for Information and Nominations ("CFI") for WEAs located off of Maryland and Virginia. The CFIs were issued to solicit lease nominations from potential project developers and to request public comments regarding site conditions, resources and multiple uses of the Wind Energy Areas.

Finally, BOEM published a new submerged land lease form in the Federal Register. BOEM developed the lease form following consultation with the public and with industry representatives with the hope that the form will "streamline the issuance of renewable energy leases on the OCS." The lease form will be effective 15 days following publication, i.e., on February 17, 2012.

Readers, I know it's a lot to take in. But wait. There's more!!

DOE Wants to Give You Money!

On February 1, 2012, the US Department of Energy's Wind and Water Program published a notice in the Federal Register announcing its intention to release a Funding Opportunity Announcement ("FOA") tentatively entitled "U.S. Offshore Wind: Advanced Technology Demonstration Projects." The preliminary notice of the FOA has been published to solicit comments from the public and from prospective FOA applicants in advance of the final FOA publication on February 29, 2012.

This FOA is being issued in furtherance of one of the two primary goals set forth February 2011 DOE/DOI inter-agency Strategic Work Plan, an initiative designed to implement the Obama administration's National Offshore Wind Strategy. The two essential goals of the Strategic Work Plan included the creation and implementation of DOI's Smart from the Start program, and the creation of oversight of incentives and funding by DOE for innovative processes and technologies that will help lower the cost of offshore renewable energy to DOE's 2020 goal of $.10/kWh.

According to the Federal Register notice, DOE distributed $26.5 million to 19 offshore wind technology projects and $16.5 million to 22 "market-barrier removal" projects in 2011. The Federal Register notice does not indicate how much money will be available through this round of funding.

In addition to accepting comments by postal and electronic mail, DOE has scheduled a public meeting on February 7, 2012 from 9:30am to 12:30pm at the L'Enfant Plaza Hotel, 480 L'Enfant Plaza Southwest, Washington, D.C. to address comments and questions from the public and from prospective applicants.

Tuesday, January 3, 2012

2011 Wrap Up, Part 1: Northeast Projects Update

For offshore wind industry participants (and spectators), 2011 was a bit of an emotional roller coaster -- and some of the most intense drama occurred in the last days of December. From Congressional battles over expiring tax incentive legislation, to highly influential and precedential court decisions and project specific developments, the events of 2011 have set the stage for what could become a climactic 2012.

The next several posts will be dedicated to addressing where some high-profile projects left off in 2011 and considering where those projects may go in 2012 by geographical region. This post will discuss New England projects including Cape Wind, Deepwater Wind's Block Island project, and Anbaric Transmission's recently announced Bay State Offshore Wind Transmission System.

Massachusetts - Cape Wind: Another Year of Courtroom Battles Comes to a Close

As has been the case for most of the last decade, the bulk of activity relating to the proposed Cape Wind Offshore Wind farm in 2011 took place in the Courtroom. See e.g, Circuit Court ruling remanding FAA’s No Adverse Effect Decisions. However, in the final days of 2011, Cape Wind secured a favorable ruling from the Massachusetts Supreme Court upholding its proposed power purchase agreement (PPA) with National Grid. See Alliance to Protect Nantucket Sound et al., v. Department of Public Utilities, et al., No. SJC-10934 (Dec. 28, 2011).

On December 28, 2011, the Massachusetts Supreme Court issued its decision to uphold the PPA between Cape Wind and National Grid (National Grid PPA). The National Grid PPA requires National Grid to purchase 50% of the energy, capacity and Renewable Energy Credits (RECs) produced by Cape Wind —i.e., up to 234 megawatts—and will extend for fifteen years beginning on the date that Cape Wind begins commercial operation. The National Grid PPA was the first to be approved under a provision of Massachusetts’ Green Communities Act that allows renewable energy generators to enter directly into long term contracts with utilities.

The lawsuit was filed in late 2010 after the Massachusetts Department of Public Utilities (DPU) issued a formal approval of the PPA. The plaintiff group, comprised of long-standing opposition group Alliance to Protect Nantucket Sound, trade organizations Associated Industries of Massachusetts and New England Power Generators Association, and Canadian energy distributer TransCanada Power Marketing, Ltd, alleged that (1) the National Grid PPA violates the commerce clause of the United States Constitution; (2) the DPU improperly found that the National Grid PPA was in the public interest and cost-effective; (3) the National Grid PPA should have been solicited through a competitive bidding process; and (4) the DPU made a mistake when it both approved a method for recovering project costs from all distribution customers and required the National Grid PPA to include financing provisions sufficient to fund development of a renewable energy generation source.

Massachusetts Supreme Court Justice Margot Botsford wrote in the decision that while the Massachusetts Green Communities Act does not explicitly address the authority of state regulators to approve cost-recovery methods for renewable power:

[I]t is well established that the (Massachusetts Department of Public Utilities)
has the statutory authority to rule on the appropriateness of proposed
cost-recovery formulas…

(T)he department's decision in this proceeding is not precluded by the fact that the proposed cost recovery method is novel, particularly in light of the new emphasis on development of renewable energy in the (Green Communities Act)…

The department permissibly determined that the environmental benefits of (the power purchase agreement) … will accrue to all National Grid customers, and it is therefore appropriate to require all customers to share in the costs of acquiring these benefits, in accordance with departmental precedent…

Although the affirming Supreme Court decision removes the uncertainty associated with outstanding legal challenges to the National Grid PPA, it remains to be seen whether the resolution of that challenge will yield sufficient confidence to inspire another utility to enter into a PPA with Cape Wind for the remaining 50% of its projected output.

Rhode Island- Block Island 5-Turbine Demonstration Project: 2012 Could Be The Year.

Following the resolution of a much belabored challenge to the Rhode Island Department of Public Utilities’ approval of its PPA, Deepwater Wind hopes that 2012 will be the year that they can begin construction on its five-turbine wind farm -- and recent events suggest that they may be able to bring that goal to fruition.

In late December, Rhode Island news sources reported that Deepwater Wind’s Chief Administrative Officer Jeff Grybowski has stated that the company will announce the involvement of a major new investor in early 2012. Although the identity of the new investor has not yet been announced, Grybowski said it is a “major global industrial company that sees a bright future for offshore wind.” The unnamed new investor will partner with investment management firm D.E. Shaw to fund the development of the Block Island wind farm, which is slated to be constructed within three nautical miles of Block Island in Rhode Island state waters.

Also in December 2011, Deepwater Wind hosted a public meeting to ensure sufficient public involvement and support for the proposed 15-mile transmission line that would connect the Block Island wind farm to the grid. The current plan shows the transmission line beginning at the 5-turbine Block Island Offshore wind farm, making landfall at the Narragansett Pier through the seawall and then following a route through Narragansett’s shorefront. The transmission line would and end at a private transmission station in South Kingstown before feeding into National Grid’s network. Deepwater has commited to spending $6 million to conduct environmental surveys of the sea floor and along the entire route where the transmission line would be constructed proposed, and along the route of a 14-mile cable that would link the project, and Block Island, to the Rhode Island power grid.

Deepwater Wind has stated that it hopes to complete the transmission line and the Block Island Wind facility by 2014.

New England Coastal Waters - Anbaric Transmission: An Offshore “Backbone” Transmission Line for the Northeast

Following the positive feedback from government agencies and some industry insiders in response to Atlantic Wind Connection’s proposed “backbone” transmission project for the Mid-Atlantic region (a/k/a, the "Google project"), it was only a matter of time before someone proposed to construct a similar project in the northeast. And so, it was not a huge surprise when Anbaric Transmission, an experienced subsea transmission project developer, announced in mid-November 2011 that it had filed a request for interconnection with the New England ISO for what it calls the “Bay State Offshore Wind Transmission System.”

The Bay State Offshore Wind Transmission system is designed to accommodate 2,000 MW of offshore wind energy and will serve generation developers who responded to the Bureau of Ocean Energy Management’s Requests for Interest for designated Wind Energy Areas off of New England coastlines. See here, pg. 12-14. BOEM has received responses from ten developers proposing to build a total of 8,000 megawatts of offshore wind.

Anbaric Transmission has been involved with two previous subsea transmission projects: the Neptune Regional Transmission System, a 660-MW submarine connection between New Jersey and Long Island, and the Hudson Transmission System, a 660-MW line under construction beneath the Hudson River between New Jersey and Manhattan.