The Interior Department’s Bureau of Ocean Energy Management (BOEM) oversees development of the nation’s oil, gas, mineral and renewable energy resources on the Outer Continental Shelf.
The agency issued final regulations for offshore wind leasing in April 2009. Since then, it has issued two commercial leases, in 2010 to Cape Wind Associates, LLC for a 468-MW, 130-turbine project between Cape Cod, Martha’s Vineyard and Nantucket Island, and to NRG Energy, Inc. for the right to development a 96,430-acre area off Delaware.
The $2.6 billion Cape Wind project has agreements with utilities to purchase about 75% of its output. It has hired Barclays to help it raise financing and hopes to begin construction later this year.
The NRG lease was the first issued under Interior’s “Smart from the Start” initiative, which employs a comprehensive planning approach to reduce conflicts with other offshore interests before parcels are put out for lease. The Delaware project is in limbo after NRG was unable to find investors despite a 25-year purchase power agreement with Delmarva Power & Light Co. (See related story, “PJM States Seek `First Mover’ Status.”)
Federal Leasing Process
BOEM has established a four-stage process to offshore wind development:
- Planning and Analysis: BOEM announces a Call for Information and Nominations (Call) and Notice of Intent to Prepare an Environmental Assessment (EA), triggering 45-day comment period on issues the agency should consider.
This stage is intended to identify potential conflicts between commercial wind development and other uses, such as commercial fishing and shipping traffic. In the Rhode Island/Massachusetts call, for example, the agency removed the “Cox’s Ledge” fishing grounds from consideration for wind power.
Environmental reviews are limited to consideration of vessel survey work and resource assessment, not commercial wind development.
At the end of the process, the area selected for commercial leasing is designated a Wind Energy Area (WEA).
- Leasing: The agency publishes notices to determine the level of interest in the WEA, leading to negotiations with a single developer (following a determination of No Competitive Interest) or a competitive auction of the lease. Lease winners have the right to submit development plans for BOEM’s approval.
- Site Characterization and Assessment: The lessee has five years to conduct surveys in the lease area (site characterization) and submit a Site Assessment Plan (SAP) if it intends to install meteorological tower or buoy for data collection.
- Construction and Operations – Commercial Development: The lessee has five years to submit a Construction and Operations Plan (COP) specifying the size and layout of turbines in the project. If approved by BOEM, the lessee will typically have rights to operate for 25 years.
BOEM will hold an auction in late July for the 164,750-acre Wind Energy Area off of Rhode Island and Massachusetts. BOEM also is expected to auction 112,800 acres off Virginia later this year.
