Innovation Resources

Gulf Coast Offshore Wind Spurs Energy Innovation – Energy and Natural Resources

In the transition to cleaner and more secure domestic energy
sources, offshore wind presents a significant opportunity for local
economic growth and job creation. Notably, on June 8, 2021, the
U.S. Department of the Interior (DOI) announced its intent to
assess potential opportunities to advance clean energy development
on the Gulf of Mexico Outer Continental Shelf. This article
discusses opportunities and challenges for offshore wind in the
U.S., the Biden administration’s goals, and a comparison of
offshore oil & gas leases vs offshore wind leases.

Offshore Wind in the United States

Offshore wind has the significant advantage of being located
close to population centers along the coast of the United States.
Locating offshore wind farms near populated or industrial areas can
help reduce the amount of energy sourced from non-renewable
sources. Offshore wind serves as a compelling alternative to
long-distance transmission of onshore electricity
generation.1

Data suggests that over 2,000 gigawatts could be accessed in
state and federal waters along the coasts of the United States and
the Great Lakes. Though only a portion of the technical resource
potential will realistically be developed, “the magnitude
(approximately two times the combined generating capacity of all
U.S. electric power plants) represents a substantial opportunity to
generate electricity near coastal high-density population
centers.”2

The National Renewable Energy Laboratory (NREL) evaluated
multiple clean energy technologies for resource adequacy,
technology readiness and cost competitiveness and found that
offshore wind in the Gulf of Mexico has the highest technical
resource potential—508 gigawatts.3 In
particular, significant potential lies off the coasts of Texas and
Louisiana. “The Gulf Coast States comprise 32 percent of the
shallow-water offshore wind potential in the United States, with
the highest potential wind resources off the Texas and Louisiana
coasts.”4 It is estimated that, “if
current cost trends observed in Europe and the northeast United
States …continue, the economics of offshore wind in the Gulf of
Mexico over the next decade will approach positive net values
in…Texas and Louisiana.”5

1105124a.jpg

Offshore wind technical resource potential in the Gulf of
Mexico6

Biden Administration’s Offshore Wind Goals and Upcoming
Renewable Lease Sales

On January 27, 2021, President Biden signed Executive Order
14008, “Tackling the Climate Crisis at Home and Abroad.”
The Executive Order provides for a review of the siting and
permitting processes in offshore waters to increase renewable
energy production in those waters.7 The Executive
Order commits to expand opportunities for the offshore wind
industry and double offshore wind in the United States to 30
gigawatts by 2030.8

The Executive Order directs the Secretary of the Interior to
halt new oil and gas leasing on public lands and offshore waters
pending completion of a review of federal oil and gas activities,
including climate and other related impacts.9 In
response, on February 12, 2021, the Bureau of Ocean Energy
Management (BOEM) announced its rescission of the Record of
Decision for the Gulf of Mexico Outer Continental Shelf Oil and Gas
Lease Sale 257 (Lease Sale 257). Lease Sale 257 was to be the
eighth offshore sale pursuant to the 2017-2022 Outer Continental
Shelf Oil and Gas Lease Program. The decision suspends planning for
the proposed sale that was expected to occur in March
2021.10

Following the DOI’s announcement that it will be assessing
opportunities to advance clean energy development on the Gulf of
Mexico Outer Continental Shelf, on June 11, 2021, it issued a
Request For Interest (RFI) commencing a 45-day public comment
period to “solicit indications of competitive interest and
additional information on potential environmental consequences and
other uses of the proposed area.”11 The RFI is
focused on the Western and Central Planning Areas of the Gulf of
Mexico offshore, the states of Louisiana, Texas, Mississippi, and
Alabama, and the primary focus of the RFI is on wind energy
development.12 The deadline for submissions related
to the RFI is July 26, 2021.13 Following the public
comment period, BOEM will review the information received from the
RFI to determine its path forward with respect to the renewable
energy leasing process in the Gulf of Mexico. Depending on the
feedback received, BOEM will either proceed with a competitive
lease sale or issue a non-competitive lease.14 As
part of the determination process, BOEM held its first Gulf of
Mexico Intergovernmental Renewable Energy Task Force meeting on
June 15, 2021. The task force includes members representing
federal, Tribal, state and local governments from Louisiana, Texas,
Mississippi and Alabama.15 The Task force is
intended to bring together members to “coordinate and share
information on proposed offshore renewable energy-related
activities in federal waters in the Gulf of
Mexico.”16

Offshore Oil and Gas Lease v. Offshore Wind Lease

Both the BOEM Oil and Gas Lease of Submerged Lands Under the
Outer Continental Shelf Lands Act (Offshore O&G Lease) and the
BOEM Commercial Lease of Submerged Lands for Renewable Energy
Development on the Outer Continental Shelf (Offshore Wind Lease)
are issued pursuant to the Outer Continental Shelf Act. However,
the Offshore O&G Lease and Offshore Wind Lease differ in
various ways, as described below:17

  • Rights of Lessee. The Offshore O&G Lease provides
    that the lessee has the exclusive right to explore a defined area
    of the Outer Continental Shelf for oil or gas, including the
    nonexclusive right to explore, build offshore platforms and drill
    water wells. The Offshore Wind Lease does not, by itself, authorize
    any activity within the leased area. Rather, it provides that the
    lessee may submit to the government a Site Assessment Plan and
    Construction and Operations Plan identifying the activities to be
    conducted (including any offshore project).

  • Term. Offshore O&G Leases continue from the
    effective date of the lease for the primary term and thereafter, so
    long as oil or gas is produced from the leased area in paying
    quantities, or drilling or well reworking operations are conducted.
    In contrast, Offshore Wind Leases continue for a fixed term that
    can be extended or modified in accordance with 30 CFR 585.

  • Environmental and Safety Considerations. Pursuant to
    the Offshore O&G Lease, the lessee must maintain all operations
    within the leased area in compliance with regulations or orders
    intended to protect the environment and the Outer Continental
    Shelf. The lessee must also allow access at the site of any
    operation, subject to safety regulations, to any authorized federal
    inspector and provide any documents that are pertinent to safety or
    environmental protection. Additionally, when an oil rig is
    decommissioned, the lessee must mitigate any environmental impact.
    The Offshore Wind lease provides that the government retains the
    right to disapprove a Site Assessment Plan or Construction and
    Operations Plan based on the determination that the proposed
    activities would have unacceptable environmental consequences.
    Further, the lessee may not carry out any activities in a manner
    that would cause any undue harm or damage to the environment or
    that would adversely affect sites or objects of historical,
    cultural or archaeological significance.

  • Royalties and Payments. For Offshore O&G Leases,
    all oil and gas (except helium) are subject to a royalty. Any
    helium produced remains the property of the United States. If oil
    or gas is lost due to the lessee’s negligence, the lessee is
    liable for those royalty payments. For an Offshore Wind Lease,
    unless otherwise specified in the lease, the lessee must make rent
    payments and operating fee payments in accordance with 30 CFR Part
    585. Rent for a commercial lease is $3 per acre per year, with
    additional rent due (i) at the beginning of each subsequent 1-year
    period for the entire lease area until the facility begins to
    generate commercially and (ii) for any project
    easements.18 After a lease begins commercial
    generation of electricity, the lessee must pay annual operating
    fees as determined by BOEM in accordance with the formula in 30 CFR
    585.506.19

  • Conduct of Activities. The Offshore O&G Lease
    allows for directional drilling in areas adjacent to the leased
    area. In contrast, the Offshore Wind Lease provides that the lessee
    must conduct all activities in the leased area and project
    easements in accordance with the Site Assessment Plan or
    Construction and Operations Plan.

  • Disposition of Production. Pursuant to the Offshore
    O&G Lease, the government may purchase up to
    16 2/3 percent by volume of the oil
    and gas produced at the regulated price or, if there is no
    regulated price, at the fair market value at the wellhead of the
    oil and gas saved, removed or sold. In addition, the lessee must
    offer 20 percent of the crude oil, condensate and natural gas
    liquids produced on the lease at market value to small or
    independent refiners as defined in the Emergency Petroleum
    Allocation Act of 1973. No such equivalent provisions exist in the
    Offshore Wind Lease.

Challenges in Offshore Wind Development

The barriers to offshore wind development continue to include
the mitigation of impacts on the environment, the technical
challenges of installation, and the challenges related to grid
interconnection.20 Environmental surveys,
monitoring tools and resources are employed to understand the
impact of offshore wind construction on wildlife and marine life.
This information can be used to guide energy developers on how to
implement sustainable ocean energy projects.21 Due
to the nature of offshore wind projects, there is an increased risk
for corrosion and damage to the offshore wind systems. As such, the
systems must be designed to withstand the wear and corrosion that
results from exposure to seawater.22 Finally,
operating changes and equipment upgrades will likely be required to
facilitate and integrate offshore wind on a widespread
basis.23

Footnotes

1. U.S. Department of the Interior Bureau of Ocean Energy
Management. “Renewable Energy on the Outer Continental
Shelf
.”

2. U.S. Department of Energy, Office of Energy Efficiency
& Renewable Energy, Wind Energy Technologies Office. “Offshore Wind Research and
Development
.”

3. Musial W, Beiter P, Stefek J, Scott G, Heimiller D,
Stehly T, Tegen S, Roberts O, Greco T, Keyser D (National Renewable
Energy Laboratory and the Alliance for Sustainable Energy, LLC,
Golden, CO). 2020. Offshore wind in the US Gulf of Mexico: regional
economic modeling and site-specific analyses
. New Orleans (LA):
Bureau of Ocean Energy Management. 94 p. Contract
No.: M17PG00012. Report No.: OCS Study BOEM
2020-018.

4. U.S. Department of the Interior Bureau of Ocean Energy
Management. June 8, 2021. “BOEM Gulf of Mexico Regional Task Force Meeting on
Renewable Energy
.”

5. Musial W, Beiter P, Stefek J, Scott G, Heimiller D,
Stehly T, Tegen S, Roberts O, Greco T, Keyser D (National Renewable
Energy Laboratory and the Alliance for Sustainable Energy, LLC,
Golden, CO). 2020. Offshore wind in the US Gulf of Mexico: regional
economic modeling and site-specific analyses
. New Orleans (LA):
Bureau of Ocean Energy Management. 94 p. Contract
No.: M17PG00012. Report No.: OCS Study BOEM
2020-018.

6. Id.

7. The White House. January 27, 2021. “Executive Order on Tackling the Climate Crisis at
Home and Abroad
.”

8. The White House. March 29, 2021. “Fact Sheet: Biden Administration Jumpstarts
Offshore Wind Energy Projects to Create Jobs
.”

U.S. Department of the Interior Bureau of Ocean Energy
Management. May 10, 2021. “Secretaries Haaland and Raimondo to Make Clean
Energy Jobs Announcement, Discuss Progress on Offshore Wind
Development
.”

The White House. January 27, 2021. “Executive Order on Tackling the Climate Crisis at
Home and Abroad
.”

9. 86 FR 10132, February 18, 2021. “Gulf of Mexico, Outer Continental Shelf, Oil and
Gas Lease Sale 257
.”

10. U.S. Department of the Interior Bureau of Ocean
Energy Management. February 12, 2021. “BOEM Rescinds Record of Decision for Gulf of
Mexico Lease Sale
.”

11. U.S. Department of the Interior. June 8, 2021.
Interior Department to Explore Offshore Wind
Potential in the Gulf of Mexico
.”

U.S. Department of the Interior Bureau of Ocean Energy
Management. June 11, 2021. “Request for Interest in Commercial Leasing for
Wind Power Development on the Gulf of Mexico Outer Continental
Shelf (OCS)
.”

12. U.S. Department of the Interior Bureau of Ocean
Energy Management. June 11, 2021. “Request for Interest in Commercial Leasing for
Wind Power Development on the Gulf of Mexico Outer Continental
Shelf (OCS)
.”

13. Id.

14. U.S. Department of the Interior Bureau of Ocean
Energy Management. June 11, 2021. “Request for Interest in Commercial Leasing for
Wind Power Development on the Gulf of Mexico Outer Continental
Shelf (OCS)
.”

Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. 1337(p)(3). The OCSLA requires BOEM
to award leases competitively, unless BOEM determines that there is
no competitive interest. If the RFI, reveals that there is no
competitive interest in the RFI Area, BOEM may initiate a
non-competitive leasing process under 30 CFR 585.232. However, if
the RFI, results in competitive interest in any portion of the RFI
Area, BOEM may proceed with the competitive leasing process under
30 CFR 585.211 through 585.225.

15. U.S. Department of the Interior. June 8, 2021.
Interior Department to Explore Offshore Wind
Potential in the Gulf of Mexico
.”

16. U.S. Department of the Interior Bureau of Ocean
Energy Management. June 8, 2021. “BOEM Gulf of Mexico Regional Task Force Meeting on
Renewable Energy
.”

17. U.S. Department of the Interior Bureau of Ocean
Energy Management. “Oil and Gas Lease of Submerged Lands Under the
Outer Continental Shelf Lands Act
.”

U.S. Department of the Interior Bureau of Ocean Energy
Management. “Commercial Lease of Submerged Lands for Renewable
Energy Development on the Outer Continental
Shelf
.”

18. 30 CFR 585.503.

19. Id30 CFR 585.506.

20. U.S. Department of Energy, Office of Energy
Efficiency & Renewable Energy, Wind Energy Technologies Office.
Offshore Wind Research and
Development
.”

21. U.S. Department of Energy, Office of Energy
Efficiency & Renewable Energy, Wind Energy Technologies Office.

Offshore Wind Market Acceleration Projects – Environmental Surveys,
Monitoring Tools, and Resources
.”

22. U.S. Department of Energy, Office of Energy
Efficiency & Renewable Energy, Wind Energy Technologies Office.
Offshore Wind Research and
Development
.”

23. U.S. Department of Energy, Office of Energy
Efficiency & Renewable Energy, Wind Energy Technologies Office.

Offshore Wind Market Acceleration Projects – Transmission Planning
and Interconnection Studies
.”

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