Interior announces first-ever Atlantic lease sales in 2013

Source: Phil Taylor, E&E reporter • Posted: Monday, December 3, 2012

The Obama administration today announced it will hold its first competitive lease sales next year for offshore wind in U.S. waters, a decision that was hailed by clean energy advocates, industry groups and East Coast lawmakers.

The Interior Department said two lease sales will be held in wind energy areas off the coast of Virginia and in federal waters shared by Rhode Island and Massachusetts.

“Wind energy along the Atlantic holds enormous potential, and today we are moving closer to tapping into this massive domestic energy resource to create jobs, increase our energy security and strengthen our nation’s competitiveness in this new energy frontier,” said Interior Secretary Ken Salazar, who called offshore wind the “energy of the future.”

The lease sales hold the potential to produce more than 4,000 megawatts, enough to power about 1.4 million homes, and are the first major milestones in Salazar’s Atlantic wind regime, introduced two years ago as “smart from the start.”

Bidders in next year’s sales would be among the first to tap an Atlantic breeze that Energy Department scientists believe could support 54,000 MW of projects in the Atlantic by 2030.

Today’s announcement comes on the heels of an agreement Interior announced in October to issue a noncompetitive lease about a dozen miles from the Delaware coast to NRG Bluewater Wind Delaware LLC.

Offshore wind leases give developers the exclusive right to install meteorological towers and test buoys and propose construction plans. Any wind farm proposals would be subject to additional environmental review.

Proponents say Atlantic winds are steadier and more predictable and are located closer to major energy consumers on the East Coast than onshore wind, which is heaviest in rural parts of the Great Plains and the West.

But although more than 50 projects and nearly 4,000 MW of offshore wind have been installed in Europe in the past decade, the industry has yet to break ground in the United States, where it faces unsettled federal energy policy, high capital costs and the threat of lawsuits.

“Today’s announcement follows many months of hard work, stakeholder engagement, and extensive collaboration with our federal, tribal, state and local government partners,” said Tommy Beaudreau, director of the Bureau of Ocean Energy Management.

The area of mutual interest proposed for leasing off the shores of Rhode Island and Massachusetts covers about 164,750 acres and is about 10 miles south of Rhode Island.

It will be auctioned in two leases, one in the north zone and one in the south zone, which together could support up to 2,000 MW, about the capacity of a large nuclear power plant.

The proposed lease area offshore Virginia will be a single lease and is about 112,800 acres about 24 miles off the coast of the southern part of the state.

Maps of both areas can be found here and here.

Future notices will provide more details about the areas available for leasing, leasing provisions and conditions, auction details, and criteria for evaluating competing bids, among other details. A date has not been set for either lease.

It was unclear today what royalty fee offshore wind developers would be charged for producing electricity, although one of the proposed lease forms suggests an operating fee rate of 2 percent through the first eight years.

An Interior spokesman did not immediately respond to a request for comment.

At least eight energy companies including Dominion Virginia Power, Fishermen’s Energy LLC and Iberdrola Renewables LLC have expressed interest in developing wind farms off Virginia. The same number of firms also expressed interest in the Rhode Island and Massachusetts wind area.

Reactions

Rep. Ed Markey (D-Mass.), ranking member of the House Natural Resources Committee, today praised Interior for designing lease sales that incorporate the renewable energy goals of coastal states.

“This wind lease sale will bring America closer to unleashing an offshore wind revolution,” he said in a statement. “The decision to hold a competitive lease sale demonstrates that the private sector is very interested in making offshore wind a reality.”

Nicolette Nye, a spokeswoman for the National Ocean Industries Association, said the organization looks forward to the opportunities next year’s leases will offer its members, even those that have focused on oil and gas development.

“The addition of wind power into our offshore energy mix can build upon the enormous contributions the offshore oil and natural gas industry already offers in terms of economic stimulus, jobs, revenue and domestic energy security,” she said in an email. “We are pleased to see that Virginia will get an offshore wind sale next year, but we are also hopeful that they will also get an offshore oil and gas lease sale that has garnered strong bipartisan support in the state.”

Rep. Jim Moran (D-Va.) said the state “has the potential to be a national leader in wind power. … It is encouraging the lease sale has received early support from Gov. [Bob] McDonnell [R]. I hope investment in clean energy in Virginia will continue to garner bipartisan support.”

Environmental groups, likewise, lauded the announcement.

“Today’s decision couldn’t have come at a better time,” said Nancy Sopko, ocean advocate at Oceana. “As our country continues to be plagued by the impacts of the Deepwater Horizon oil disaster, it’s time for us to move away from offshore drilling and transition to a clean energy economy.”

Sopko called the sales the “first major step” toward significant job creation on the East Coast and an opportunity to “rethink” whether to pursue oil drilling off the Atlantic coast.

A 60-day comment period for the proposed sale notices ends Feb. 1.