Contributed by Sean Moran, Vinson & Elkins
The offshore wind power sector was extremely excited at the end of February.
In the three-day New York Bight auction conducted by the Bureau of Ocean Energy Management (“BOEM”) beginning on February 23, six companies successfully bid almost $4.4 billion for leases of areas covering 488,000 acres of U.S. federal waters. Leases are in New York Bight. It is an area of the Outer Continental Shelf with shallow waters that lies between Long Island and New Jersey.
This is a significant milestone that shows the commitment of companies to the energy transition to carbon zeroity. However, it is only the beginning of a difficult process to develop offshore wind facilities in these waters. Below is a summary of some of the requirements and challenges that will need to been met, confronted and overcome.
Where federal and state jurisdictions meet
First, winning bids are provisional. They must be subject to competition reviews by Justice Department and Federal Trade Commission before being finalized.
Next, the Outer Continental Shelf will house the wind generation facilities. This is approximately 3 nautical miles from the East Coast. The facilities will remain under federal jurisdiction. Aspects of the facilities located within the states’ coastal zones (landward of the 3-nautical mile limit and below the high water mark), specifically the transmission and interconnection lines, are subject to overlapping state and federal jurisdiction.
Finally, facilities located in the uplands (landward from the mean high water mark), such interconnection lines or substations are almost entirely subject to state jurisdiction.
This regulatory maze can make permitting complicated and allow opponents to challenge many of the federal and state authorizations required. There have been four lawsuits against the BOEM-authorized first offshore wind project (Vineyard Wind).
Federal permitting on Outer Continental Shelf requires a multitude of agencies, with BOEM at center. BOEM administers permitting, construction, and operation of offshore wind facilities under the Outer Continental Shelf Lands Act (“OCSLA”), which involves issuing and overseeing the leases described above.
Once BOEM issues an offshore wind development lease, the lessee begins the site assessment phase. During this phase, the lessee submits to BOEM, for review and approval, a Site Assessment Plan (the “SAP”), which describes the lessee’s proposed site characterization activities. These include the lessee’s detailed proposal to construct and operate a meteorological tower or buoys, and other site characterization surveys and studies (such as seafloor mapping and surveys for avian, marine mammal, and archaeological resources). The lessee must also show how it will safely carry out these activities and how it will not interfere with any other uses of the Outer Continental Shelf (e.g. navigation, national security or defense) as well as how it will not cause undue damage to natural and cultural resource.
Construction planning needs a decommission Plan
Once the SAP approval is granted (which historically has been a long process), the lessee can enter the construction and operation phase. During this phase, the lessee submits to BOEM, for review and approval, a Construction and Operations Plan (the “COP”). This comprehensive plan addresses all activities and effects of the facilities, starting with construction and ending with their final decommissioning or removal.
The scope of the COP includes all off-shore and onshore activities. The specific reports include a facility report and a fabrication or installation report. The plan must also address the construction process, describe the facility’s operation, and provide the timing and means of decommissioning.
BOEM and the lessee will conduct numerous technical and environmental reviews, just like the site assessment phase. These reviews include an analysis of the potential indirect and direct impacts of construction and operation of this facility, including in relation to geology, coastal and maritime shipping and uses, threatened or endangered species, sensitive biological resources, habitats, socioeconomics and air quality.
Many of these environmental and cultural reviews and studies are also mandated by a number of federal laws—some of these run in tandem, and to an extent overlap, with the BOEM analysis. These include analysis under the National Environmental Policy Act and consultation under section 7 (Endangered Species Act), consultation under the Magnuson-Stevens Act (including in regard to Essential Fish Habitat), consultation pursuant to section 106 of National Historic Preservation Act and compliance with the Migratory Bird Treaty Act.
The federal and state agencies queue
Other federal agencies beyond BOEM involved in the permitting and review of offshore wind facilities include the U.S. Army Corps of Engineers, National Marine Fisheries Services (“NMFS”), the Environmental Protection Agency (“EPA”), the U.S. Coast Guard, and the Federal Aviation Administration (“FAA”). The Clean Water Act covers discharges of dredged and/or fill material and the Rivers and Harbors Act covers activities that affect navigation. The NMFS is governed by the Endangered Species Act (Marine Mammal Protection Act) and the Magnuson-Stevens Act. The Clean Water Act and Clean Air Act are implemented by the EPA. The Coast Guard supervises Private Aids to Navigation (fixed and floating objects in U.S waters) and Obstructions to Navigation. The FAA makes determinations on No Hazard to Air Navigation (including a Department of Defense review).
BOEM will perform or lead most of the environmental and cultural analyses and reviews with participation by other federal agencies. However due to the location and presence of certain facilities and parts in state waters along coast, New York and New Jersey state agencies will also review aspects.
In New York, for example, the New York Department of State’s Division of Coastal Resources reviews federal actions for consistency with the state’s Coastal Management Plan, and the New York State Department of Environmental Conservation reviews and permits projects that may require state-delegated Clean Water Act permits, that may affect freshwater and tidal wetlands and water bodies, and that involve the installation of transmission cables and substations.
In New Jersey, the New Jersey Department of Environmental Protection reviews federal actions for consistency with the state’s Coastal Management Plan and reviews and permits projects that may require upland waterfront development, and that may affect freshwater or coastal wetlands.
To make offshore work possible, we need to be onshore.
Because the grid is not designed to handle large amounts of offshore power, interconnecting offshore generating units to the grid presents practical challenges. There are very few interconnection points available on Long Island’s southern shore, as well as along the New Jersey shore. Some have limited offtake capacity.
These interconnection points are not able to handle the power generated by all New York Bight wind farms. Therefore, early movers will benefit as more interconnection points are utilized. Other interconnection areas might be available far away from the lease areas. This could dramatically increase interconnection cost.
For all of the power that is expected to be generated in New York Bight lease areas, it will be important to upgrade and build new transmission infrastructure.
Working around Jones Act
Another major issue that needs to be addressed in the construction and operation of an offshore wind facility is the necessity to comply with the Merchant Marine Act of 1920 (section 27), known as the “Jones Act.” The Jones Act requires the use of U.S.-flagged vessels to transport people and products between two U.S. points or to engage in dredging and towing activities in U.S. waters. These U.S. flagged vessels must be built in America, owned by Americans, and manned only by citizens of the United States.
Recently, Congress extended Jones Act to installations attached on the Outer Continental Shelf in order to develop or produce nonmineral energy resources. (i.e., an off-shore wind turbine built on the OCS seabed becomes a U.S. point to whom the Jones Act applies).
There are very few Jones Act-qualified, purpose built vessels that can transport, service, and install offshore wind farms in America at the moment. Additionally, U.S. ports are not suitable for these purposes. They require large, dedicated terminals with deepwater access to stage, marshal, and assemble wind components, as well as other marine facilities that support ongoing maintenance and repair of wind farm developments.
This will require the construction and retrofitting a fleet Jones Act-qualified ships, as well as the upgrading and expansion of U.S. maritime ports to accommodate offshore wind activity.
Although there is still much to do in developing these facilities and other U.S. offshore turbine facilities, sponsors and partners are charting a path and charting their course. Their efforts, together with U.S. state and federal support for a successful transition into carbon-neutral energy generation, bodes well for this rapidly growing space in the energy market.
About the author
Vinson & Elkins partner Sean Moran focuses on asset finance, with an emphasis on financing, acquiring, and disposing of renewable energy, zero carbon, and infrastructure assets.