Frontier Projects in Frontier Areas

21 Sep 2009

Changes in the US regulatory environment are beginning to propel offshore wind development—but challenges remain
By Daron Threet, Cortney Madea & Larry Eisenstat

Despite its steady global growth, development of offshore wind projects in the United States has been slow—in large part due to both regulatory uncertainties and the fact that most projects in the near-term will be located in what are frequently referred to as “frontier areas”: parts of the US where offshore energy projects are few and far between. Although the federal government has recently tried to clarify procedures for permitting offshore wind projects, significant hurdles remain that will continue to present challenges to developers in this new US industry. 

The benefits of offshore wind are compelling. Compared to onshore wind, offshore wind has the potential to generate more power on a more consistent basis. Offshore winds flow at higher speeds and are often less turbulent and more consistent than onshore wind. While land wind slows as it brushes ground and vegetation, offshore wind picks up speed as it travels across the water. In wind power generation, small increases in wind speed can yield significant gains in electricity. For example, wind with an average speed of 16 mph produces 50% more electricity than wind with an average speed of 14 mph. On the Atlantic coast—an expected hotbed for offshore wind development in the United States—the National Renewable Energy Laboratory estimates that average wind speeds are approximately 18 mph, while the majority of land wind resources have wind speeds between 14 and 16 mph. This ample resource (The US Department of Energy estimates 900,000 MW of potential wind energy exists off the coasts) can also feed directly into major population centers, whereas the best quality land wind resources are located in the Midwest, far from load centers.
Despite these and other benefits, offshore wind development has been extremely slow-going in the US. The first proposed offshore wind project, Cape Wind, to be located off the coast of Nantucket, has undergone more than seven years of federal regulatory review, with no decision to date. Cape Wind’s review has been significantly slowed by the lack of an established federal regulatory process and the absence of a clear regulatory authority for the lead permitting agency to review the proposal and issue project approvals. The Energy Policy Act of 2005 attempted to fill this regulatory gap by giving the US Minerals Management Service (MMS), part of the US Department of Interior, the authority to issue permits for offshore wind facilities. Under its new authority, MMS issued regulations on April 29th, 2009, establishing an offshore wind permitting program. Though MMS’ rules provided some much-needed clarity for the permitting process, the US regulatory landscape remains extremely complex. In addition to MMS, over a dozen federal agencies including the Environmental Protection Agency, the National Oceanic and Atmospheric Administration, the Army Corps of Engineers, and the Coast Guard have roles in permitting offshore wind facilities. These federal agencies sometimes have overlapping or conflicting jurisdiction in implementing the more than 50 potentially applicable federal environmental statutes and Executive Orders that govern marine projects. 

In addition to federal regulation, state, local, and tribal governments can also have roles in permitting offshore wind projects. For example, under the federal Submerged Lands Act, states have title over submerged lands (i.e. the seafloor) generally extending three miles seaward from shore. Texas, Florida’s Gulf Coast, and Puerto Rico have three-marine-league limits (approximately ten miles). Therefore, to build a project in federal waters, developers must also obtain state approval to install transmission lines that cross state submerged lands to connect their projects to the grid onshore. This requires extensive federal and state coordination for project reviews and additional work for developers to satisfy both federal and state requirements.   

Issues associated with what MMS calls “frontier areas” further complicate the regulatory process for many projects. These areas, which include virtually all federal land off the Atlantic and Pacific seaboards, were subject to a 26-year moratorium on oil and gas leasing that expired on October 1st, 2008. Under this moratorium, almost all traditional offshore energy project development, including oil and gas exploration and production, was off limits in these areas. 

The lack of energy project development in the “frontier areas” creates several challenges for developers. Unlike in the Gulf of Mexico where more than 4,000 energy facilities built over the course of decades have created an extensive collection of environmental data and studies regarding marine life and ecosystems, offshore energy project development on the Pacific and Atlantic coasts has been almost non-existent. With comparatively little data in “frontier areas,” project developers must select project sites and make the case to regulators and citizens that their facilities will have minimal impacts on the environment, despite the significant lack of baseline data about the current state of those environments. Addressing this data gap issue can be a costly balancing act for developers as federal and state regulators tend to disagree about how much data should be collected and analyzed before projects are put in the water; or, afterwards, as part of operational monitoring or adaptive management plans. Another challenge associated with “frontier areas” is that state and local communities in these areas are typically not accustomed to energy project development off their coasts, and can raise NIMBY concerns regarding impacts to environment, tourism, and industries such as commercial fishing.     
The simple truth is that permitting offshore energy projects, particularly outside the Gulf, is a difficult task, given the complex US regulatory environment and the sheer number of state and federal agencies and laws involved and approvals needed. These challenges must be addressed and resolved in order to realize the tremendous benefits of offshore wind.

Daron Threet is counsel in Dickstein Shapiro LLP’s Energy Practice. Cortney Madea is an associate in the firm’s Energy Practice, and Larry Eisenstat is a partner and head of its Energy Practice.

Dickstein Shapiro LLP

Dickstein Shapiro LLP