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.