Winds of Change

Federal Auction for Offshore Wind Leases in Northeast Set Record High

By David L. Wochner, Abraham F. Johns, and Michael L. O’Neill

On December 13 and 14, 2018, the U.S. Department of the Interior’s Bureau of Ocean Energy Management (BOEM) conducted an auction for three offshore wind power parcels in Massachusetts. The auction not only broke the record [1] for number of companies bidding, but also for being the highest grossing offshore wind lease sale. The promotion of federal offshore land auctions and positive statements [2] from both the Secretary of the Interior and the acting head of BOEM suggest that the Trump Administration remains committed to developing U.S. offshore wind resources.

BOEM holds authority to lease federal lands off the shores of the U.S. consistent with national needs, primarily under the Outer Continental Shelf Lands Act, among other laws. While the leases do not authorize any project-specific development of offshore wind energy, leasing is an important first step toward installing any offshore energy infrastructure.

From the eleven bidding companies, the three provisional winners, Equinor, Mayflower Wind (a joint venture of Shell and EDP Renewables), and Vineyard Wind, collectively bid more than $400 million for nearly 390,000 acres in three parcels. BOEM last offered these three parcels for auction in January 2015, but they went unsold. Several factors likely contributed to this auction’s success: it was the final federal sale of offshore wind leases for a few years, the cost of building offshore wind farms continues to decline, industry expects the offshore wind sector to maintain its pattern of strong growth, and many states are setting aggressive renewable energy goals. For example, although Massachusetts has only 113 MW of installed capacity for wind currently, the state set a target [3] of 2,000 MW of wind energy by 2020.

Further illustrating the Trump Administration’s promotion of wind energy, the U.S. Department of Transportation announced in early December 2018, that the port city of New Bedford, Massachusetts, will receive $15.4 million to expand the port’s facilities to accommodate the growing offshore wind industry. Before the award, New Bedford already had positioned itself as a focal point for the sector, hosting the offices of three offshore wind developers. The grant will allow the city to create a new staging site for these businesses and increase docking space for an additional 60 vessels.

The administration’s continued monetary and bureaucratic support, along with the auction’s impressive results, signal that the offshore wind industry is poised for significant growth. “We are truly blown away by this result,” said [4] Acting Director of BOEM Walter Cruickshank after the auction. “The results make me optimistic about the future of the offshore wind sector.”

K&L Gates Global Energy, Infrastructure and Resources practice area, combined with our market-leading environmental and public policy practices, have advised offshore wind power developers around the world, including in the United States, on the entire range of issues associated with siting, constructing and operating offshore wind facilities. In conjunction with SNC Lavalin, K&L Gates offshore wind power team [5] has published the definitive guide to U.S. offshore wind power development. [6]

Notes:
[1] Solomon Odom, BIDDING BONANZA! Trump Administration Smashes Record for Offshore Wind Auction with $405 Million in Winning Bids, U.S. DEP’T OF THE INTERIOR (Dec. 14, 2018) https://www.doi.gov/pressreleases/bidding-bonanza-trump-administration-smashes-record-offshore-wind-auction-405-million.
[2] Id.
[3] Renewable Energy Snapshot, MASS.GOV, https://www.mass.gov/service-details/renewable-energy-snapshot.
[4] Craig Richard and Ros Davidson, BOEM ‘blown away’ by offshore lease bidding frenzy, WINDPOWER OFFSHORE (Dec. 14, 2018) https://www.windpoweroffshore.com/article/1521282/boem-blown-away-offshore-lease-bidding-frenzy.
[5] Offshore Wind Power, K&L Gates http://www.klgates.com//files//Upload/EIR_Energy_Power_Offshore_Wind_Power_US.pdf.
[6] Offshore Wind Handbook, K&L Gates (Oct. 2018) http://www.klgates.com/files/Upload/2018-08_OG_Offshore-Wind-brochure.pdf.