Wind Energy

A Provisional Winner of an Offshore Wind Lease is Announced and that Means the Goal Line is Still Far Off

August 24, 2014 23:23
by J. Wylie Donald

Offshore wind took another small step forward last week when US Wind was announced as the provisional winner of the US Bureau of Ocean Energy Management's August 19 auction of development rights to nearly 80,000 acres off of Maryland.  The price?  $8.7 million.

According to the BOEM press release, and other reports the few million to be ponied up by US Wind (or by its Italian parents, Renexia and Toto S.p.A.) is more than was bid for offshore leases in Virginia and Massachusetts and apparently is justified by the substantial financial carrot established by the O'Malley administration: $1.7 billion in construction subsidies.

So what does it mean to be a provisional winner? It means the Attorney General and the FTC have 30 days to complete an antitrust review, following which US Wind can sign the lease, file the required financial assurance and pay the balance of the lease bid.  And then it's all downhill, right?  Well, not so fast. 

First, a lot has been done to get to this point:

November 2010 – BOEM issued Request for Interest to gauge industry’s interest in obtaining offshore Maryland commercial wind leases.  Commercial interests, for example, showed no interest in offshore Maine
February 2012 - BOEM published a Call for Information and Nominations to solicit lease nominations and request public comments.
February 3, 2012 - BOEM published in the Federal Register a Notice of Availability of an Environmental Assessment, and a Finding of No Significant Impact (FONSI) for “commercial wind lease issuance and site assessment activities on the Atlantic OCS offshore New Jersey, Delaware, Maryland, and Virginia.”
June 2012 - BOEM published a Finding of No Historic Properties Affected.
December 18, 2013 - BOEM published a Proposed Sale Notice and took comments.
July 3, 2014 –BOEM  published a Final Sale Notice scheduling the August 19, 2014 sale. 

These steps have completed the first two phases of BOEM’s program for outer continental shelf leasing:  (1) planning and analysis, (2) lease issuance.  So in a little over 3 and a half years an entity interested in pursuing an offshore wind project, is poised, but poised for what? 

It is poised for phases 3 and 4, site assessment, and construction and operations, as BOEM further explains in its fact sheet.  There is an ominous word in the fact sheet, however:  “BOEM conducts environmental and technical reviews of SAP [Site Assessment Plan], eventually deciding to approve, approve with modification, or disapprove” (emphasis added).  A Site Assessment Plan “describes the activities (installation of meteorological towers and buoys) a lessee plans to perform for the assessment of the wind resources and ocean conditions of its commercial lease area.”  That BOEM will eventually complete its review, does not suggest alacrity, or even timeliness.  Once the SAP is approved, another plan must be submitted, the COP, the construction and operations plan. The same ominous term, "eventually," shows up as well in the description of the approval process of the COP. And then, only after the COP is approved, can construction begin.

What struck us as we reviewed all of this is that at least four sessions of Congress will have passed from when BOEM’s 2010 Request for Interest emerged before a single joule of energy will make its way from some mid-Atlantic zephyr into a Maryland household.  And it would not surprise us if it were six or eight sessions.  In other words, success in offshore wind may depend nearly as much on the political winds, as the meteorological ones. 

Regulation | Renewable Energy | Wind Energy

Contrary Legal Winds at Cape Wind - Opponents of Offshore Wind Sue Asserting Preemption

February 9, 2014 22:34
by J. Wylie Donald

Would you care to hazard a guess at how long it takes to bring online an offshore wind farm in the United States?  At the moment, it is 12+ years and counting.  A recent court filing arguing constitutional questions is certain to slow it down some more.

In 2001 Cape Wind Associates, LLC, submitted an application to the United States Army Corps of Engineers for a permit to construct an offshore wind power facility in Nantucket Sound.  About 9 years later Cape Wind finally procured the approval to move forward from the Department of the Interior.  Cape Wind then got down to work and by November 2012 had signed the first U.S. commercial offshore wind lease and long-term power purchase agreements with National Grid and NSTAR Electric Co.  Cape Wnd's Construction and Operations Plan was approved by the Bureau of Ocean Energy Management.  According to Cape Wind it is now seeking out its project financing.

But a new hurdle has surfaced.  At the end of January, various plaintiffs - the Town of Barnstable, businesses, a non-profit environmental
organization, and individuals - all users within NSTAR's electric service area, sued various Massachusetts governmental entities, as well as NSTAR and Cape Wind (see Complaint attached).  Their goal is

"a declaration that the Commonwealth of Massachusetts violated both the dormant Commerce Clause and the Supremacy Clause when it used its influence over NSTAR's merger request to bring about NSTAR's entry into an above-market wholesale electricity contract with Cape Wind, a politically favored renewable energy project in Massachusetts, to buy electricity at a particular price."

The plaintiffs also seek injunctive relief to invalidate the power purchase agreement between NSTAR and Cape Wind.

Plaintiffs' theories are based on the following premise:  "Massachusetts regulators used their influence over a merger request by NSTAR ..., to bring about NSTAR's purchase of electricity from Cape Wind ..., an in-state renewable energy project, on particular terms." The legal theories are two-fold. First, the Federal Power Act gives the Federal Energy Regulatory Commission exclusive jurisdiction over wholesale electricity rates, charges and terms.  Thus, plaintiffs assert, Massachusetts' acts dictating favorable terms for wholesale electricity sales by Cape Wind to NSTAR are preempted by the Federal Power Act.  Second, because Massachusetts' acts in effect favor an in-state electricity provider over out-of-state providers, Massachusetts is unlawfully discriminating in violation of the "dormant" Commerce Clause of the Constitution. 

These theories recently are exceedingly popular in the energy space.  Although the dormant Commerce Clause has not persuaded a federal judge, in 2013 preemption was used successfully to challenge state requirements for gas-fired generation in Maryland (PPL Energy Plus LLC v. Nazarian) and New Jersey (PPL Energyplus v. Hanna).  Although both decisions are on appeal, if affirmed, they have significant implications for the viability of state renewable portfolio standards. Notwithstanding that dozens of states have RPSs, the argument will be that RPSs regulate rates, charges and terms by implication, even if the legislative, regulatory and contract drafters assiduously leave rates, charges and terms out of their writings.

One commentator, however, points out that "the FERC has never indicated that a state's RPS program that includes a directive to utilities to acquire wholesale renewable energy under long-term contracts to be a violation of the FERC's exclusive jurisdiction under the Federal Power Act."  So this may be much ado about nothing; time will tell.  In the meantime, Cape Wind continues to be delayed.

 

20140121 Cape Wind Complaint.pdf (253.06 kb)

Wind Energy | Utilities

Wind Project "Take" Permits Extended to 30 Years - Eagles Nonplussed

January 7, 2014 10:52
by J. Wylie Donald

Tomorrow bald and golden eagles will sleep less soundly.  On January 8 the Fish and Wildlife Service’s new rule revising the regulations for permits for the taking of golden eagles and bald eagles goes into effect.  According to the FWS, “This change will facilitate the responsible development of renewable energy and other projects designed to operate for decades, while continuing to protect eagles consistent with our statutory mandates.”

Eagles and other migratory birds are a substantial threat to wind projects and not because they will cause turbine blades to fail.  Rather, turbine blades (and to a lesser extent, towers, guy wires, transmission lines and other constructions in the air space) can be lethal to birds.  This poses a serious problem for wind energy companies as birds are legally protected by the Migratory Bird Treaty Act (16 U.S.C. §§ 703-712) and eagles further protected by the Bald and Golden Eagle Protection Act (16 USC §§ 668-668d)

Duke Energy Renewables, Inc. recently ran afoul of these requirements at its 176 turbine Campbell Hill and Top of the World wind projects in Wyoming, where at least 14 golden eagles died between 2009 and 2013.   In November Duke accepted a plea agreement in “the first ever criminal enforcement of the Migratory Bird Treaty Act for unpermitted avian takings at wind projects.”  It included:

• Fines - $400,000 
• Restitution - $100,000 to the State of Wyoming
• Community Service - $160,000 payment to the National Fish and Wildlife Foundation for eagle preservation projects
• Conservation funding - $340,000 to a conservation fund for the purchase of land or conservation easements
• Probation – five years
• Compliance Plan – implementation of a plan at a cost of $600,000 per year with “specific measures to avoid and minimize golden eagle and other avian wildlife mortalities at company’s four commercial wind projects in Wyoming.”
• Permit – required application for a Programmatic Eagle Take Permit.

The last is directly tied to tomorrow’s rule.  “Take” is defined in the regulations as “pursue, shoot, shoot at, poison, wound, kill, capture, trap, collect, destroy, molest, or disturb.” 50 CFR § 22.3.  “Programmatic take” is “take that is recurring, is not caused solely by indirect effects, and that occurs over the long term or in a location or locations that cannot be specifically identified.”  Id.  The regulations at 50 CFR § 22.26 provide for permits to take bald eagles and golden eagles when the taking is associated with, but not the purpose of, an otherwise lawful activity.  Programmatic permits authorize take that “is unavoidable even though advanced conservation practices are being implemented.”  The new rule commentary notes that permits may authorize “lethal take … such as mortalities caused by collisions with wind turbines, powerline electrocutions, and other potential sources of incidental take.”

Under the current rule, a take permit was good for only 5 years, which inserted much uncertainty into wind farm projects.  The new rule permits wind energy developers to obtain a take permit that runs for 30 years, 50 CFR § 22.26(i), which “better correspond[s] to the operational timeframe of renewable energy projects.”  The risk that a wind project will cause unforeseen harm to eagles during this much longer period is mitigated by a new requirement for 5 year reviews, in which the FWS “will determine if trigger points specified in the permit have been reached that would indicate that additional conservation measures ... should be implemented to potentially reduce eagle mortalities, or if additional mitigation measures are needed.”  Id. at § 22.26(h).  Additional actions that might be taken as the result of the review could be permit changes, including implementation of additional conservation measures and updating of monitoring requirements.  Id.  Even suspension or revocation of the permit is possible.  Id.

That the FWS is serious about protecting eagles is demonstrated by the enforcement action against Duke.  But the FWS also recognizes that development is necessary.  The 30 year permit period appears to be a reasonable compromise (unless one is an eagle).

Regulation | Wind Energy | Utilities

Offshore Wind: Will New Jersey Take the Opportunity to Lead?

February 7, 2013 16:30
by Marshall McLean

Is New Jersey placing the cart before the horse when it comes to the establishment of rules regulating the State’s Offshore Renewable Energy Certificates?  Instead of spending time analyzing how to mitigate the risks of possible state appropriation of OREC funds, let’s build a project already!

In August of 2010, New Jersey Governor Chris Christie signed the Offshore Wind Economic Development Act to “spur economic growth in the Garden State through the development of renewable energy resources and the creation of green jobs.”

The legislation, which established the creation of an offshore wind renewable energy certificate program (OREC), is the Country’s first attempt to make financial assistance and tax credits available for businesses that construct manufacturing, assemblage and water access facilities to support the development of qualified offshore wind projects.

This of course was exciting news in 2010.  Since that time however, the wind industry has experienced tremendous growing pains as a result of a multitude of contributing factors including a glut of cheap natural gas developed through fracking technology, a severe recession, and - perhaps most influentially - the uncertainty of the renewal of the industry’s most valuable Federal incentive: the Production Tax Credit (PTC). 

This uncertainty had a tremendously negative impact on wind development in the United States.  But sun has started to rise: the PTC has been renewed, the Atlantic Wind Connection has continued to move forward with the proposed construction of an offshore transmission backbone in the Atlantic Ocean, and a majority of the general public strongly supports the development of offshore wind.  New Jersey once again finds itself at the vestibule of change, possibly leading the way towards the creation of an offshore wind industry in America, whose footholds are based firmly in the Garden State.

Yet despite this opportunity and the general sense of optimism, offshore wind continues to face political and bureaucratic headwinds in New Jersey.  Since Governor Christie signed the law in 2010, the New Jersey Board of Public Utilities (BPU) has struggled to adopt rules governing how offshore wind developers earn revenue from the electricity that their turbines produce.  It unfortunately appears that minimal progress has been made in determining how the OREC funding mechanism will work, and how projects that are “shovel ready” will be able to demonstrate that they are “qualified offshore wind projects”. Many would argue that this delay could frustrate the goals of the State’s Energy Master Plan which has set the ambitious goal to develop 1,100 megawatts of offshore wind capacity by 2020.

While the BPU’s need to get things right is laudable, the question remains whether the delay will threaten New Jersey’s ability to become the Country’s leader in offshore wind.  Maryland, Delaware, Maine and Massachusetts have all made aggressive steps to become the geographic center of the East Coast’s offshore wind industry.  The delay is also problematic when taken in the context of the PTC, which will only be available to projects that begin construction in 2013.  Continued delay would threaten a developer’s ability to realize the tax benefits of the PTC, potentially derailing any hope for construction of a windfarm off the New Jersey coast.

Fishermen’s Energy has petitioned the BPU for approval of its Atlantic City offshore wind project.  This pilot project, which has received all of its New Jersey Department of Environmental Protection (DEP) approvals, will be a 25 megawatt project to be located 2.8 miles from Atlantic City.  In addition, Fishermen’s was recently selected by the US Department of Energy (DOE) to receive up to $4 million to complete the engineering, site evaluation, and planning phase of its project and, upon completion of this phase, the Cape May-based company will be eligible to complete for an additional $47 million in grants for follow-on design, fabrication, and deployment phases to achieve commercial operation by 2017.  In short, Fishermen’s Energy is ready to go.

So the question is: why can’t the BPU establish a pilot OREC program for this particular project, which is vastly smaller in size than any of the three other proposed windfarms off the shores of New Jersey? 

While interested parties continue to debate the overall net economic benefits to ratepayers for these offshore wind projects, what seems to be missing from the conversation is the common sense analysis of (i) the game-changing long term economic and social advantages that a “first of its kind” industry such as offshore wind could have on the New Jersey economy; and (ii) the outrage that all of us New Jerseyans would share if those jobs and benefits were diverted to a state such as Maryland.  Offshore wind will happen here on the East Coast, the question is who will lead the charge?

On the very date of the publication of this blog, the Telecommunications and Utilities Committee of the New Jersey Assembly has proposed an amendment to bill A-1384 in order to reclassify Fishermen’s project as a pilot project, a designation that Fishermen’s has received from the DEP, but which (as of the date of this blog) has no relevance to the BPU and its implementation of the rules governing the OREC funding mechanism.  While it is too early to predict the likelihood of success of this amendment, what is clear is that certain key members of the Legislature, including the amendment’s sponsor Upendra Chivukula (D-Somerset), are equally as anxious Fishermen’s and the general public to keep things moving in the right direction.

Developing 25MW of wind will not provide Fishermen’s with an unfair competitive advantage.  If anything, learning from Fishermen’s and the OREC Legislation’s inevitable shortcomings will provide the other major offshore wind developers with the opportunity to solidify financing structures and calculate pricing models.  It will also allow for ratepayers to see, first hand, how offshore wind will impact their monthly electricity bills.  Establishing a quick pilot OREC program for Fishermen’s makes logical sense, and this is good business for New Jersey.

Yes, the OREC program should certainly be very well thought out, discussed and debated. However, as we see with any innovative legislation, mostly notably New Jersey’s Solar Act (which recently was amended to address some unintended statutory consequences), it is nearly impossible for the BPU to get this 100% right the first time.  Thus, let Fishermen’s “test the waters” and lead us out of the channel slowly.

Climate Change | Wind Energy

Wind Projects: Bald Eagles Don't Surf

February 5, 2013 23:57
by J. Wylie Donald

One would think that preliminary estimates of bird fatalities at a proposed 78 MW wind farm in southeastern Minnesota were hardly news.  After all, there are over 60,000 MW of wind energy installed in the United States.  But last Friday the Wall Street Journal published an op-ed piece by Robert Bryce, Senior Fellow at the Manhattan Instittue, which used that preliminary estimate to rip into the project, New Era Wind, and wind energy in general, accusing the Fish & Wildlife Service of using a “double standard ... when it comes to renewable energy.” 

The topic ostensibly ruffling Mr. Bryce's feathers is the “incidental take” of bald eagles.  The Journal doesn’t mince words; here is the leader:  “The federal government plans to allow wind turbines to kill bald eagles for 30 years.”  The permit that was being applied for was an “eagle take permit.”  Mr. Bryce refers to it as “an eagle-kill permit.”  One needn’t read any further.  Killing the national symbol simply must stop.  Wind energy is irrevocably bad.  According to the piece, “For years, the wind industry has had de facto permission to violate both the Migratory Bird Treaty Act (which protects 1,000 species) and the Bald and Golden Eagle Protection Act. Federal authorities have never brought a case under either law—despite the Fish and Wildlife Service's estimate that domestic turbines kill some 440,000 birds per year.”

This vitriol prompted us to dig into this a little.  First, a little information on bald eagles.  The Fish and Wildlife Service estimates that there are nearly 10,000 nesting pairs of bald eagles in the contiguous United States.  When not nesting, bald eagles like to surf thermals, riding easy until unwary prey ventures forth.  The population is up from “barely 400” in 1963, when there were grave concerns that the national symbol might not make it into the twenty-first century.  Fortunately the bald eagle has made it, and in 2007 it was de-listed from the Federal List of Endangered and Threatened Wildlife and Plants maintained pursuant to the Endangered Species Act. 

But delisting did not mean the bald eagle had to make its way in the world alone.  It had the Bald and Golden Eagle Protection Act (16 USC §§ 668-668d), which prohibited the “taking” of such eagles without a permit (where taking included killing, and disturbing).  Permitted takings were established under federal regulations; pertinent here is 50 CFR  § 22.26, which “authorizes take of bald eagles and golden eagles where the take is compatible with the preservation of the bald eagle and the golden eagle; necessary to protect an interest in a particular locality; associated with but not the purpose of the activity; and … (2) For programmatic take: the take is unavoidable even though advanced conservation practices are being implemented.”  Further, the FWS issued guidance, the Land-Based Wind Energy Guidelines, and a draft guidance specifically focused on eagles, wind turbines and permits. While it is true that New Era’s take permit will be the first for bald eagles, it is not the first take permit ever issued and the wind industry has hardly had the opportunity ever to get a permit, as the FWS did not issue its regulations until 2009.  From what we have read, New Era Wind is moving forward in accordance with the statute, the regulations and the guidance, and the FWS is responding similarly.

Turning now to the editorial, it is useful to go back to the source.  Mr. Bryce has been a burr under the wind industry's saddle for the last few years with several opinion pieces in the Journal on birds and the wind industry.  The industry has responded directly to his claims.  A press release in 2011, Rhetoric v. Reality:  Wind Energy and Birds, offers these numbers based on a 2007 U.S. Forest Service report:  "Wind power causes far fewer losses of birds (approximately 108,000 a year) than buildings (550 million), power lines (130 million), cars (80 million), poisoning by pesticides (67 million), domestic cats (at least 10 million), and radio and cell towers (4.5 million)."

It is also interesting to follow the media journey of the FWS preliminary estimate.  It came out on January 15.  Industrial Wind Action reported the story the next day.  Industrial Wind Action, according to its website, “was formed to counteract the misleading information promulgated by the wind energy industry and various environmental groups.”  The story made it into the mainstream on January 17, when it was reported by Minnesota Public Radio.  Two weeks later it was a national news story in the Journal.

We started here considering an editorial about a preliminary estimate, which the FWS  acknowledges is a conservative "worst case" and the FWS's permission for New Era to move forward with its application "does not indicate that New Era will automatically be granted an eagle take permit."  In other contexts a preliminary estimate, without more, would hardly be worthy of comment; it simply isn't ripe.  Not so here, where there is an axe to be ground (or a turbine blade to fail), not only does reasonable rhetoric retreat leaving us with "kill permits," but a small installation out in the woods makes it into the national press. 

Renewable energy developers should take note.  Notwithstanding strong support for green energy, it may get very dirty in the trenches, and everyone will know about it.   

 

Renewable Energy | Wind Energy

A Wind Farm in Oregon Threatens National Security and President Obama Acts

September 30, 2012 23:41
by J. Wylie Donald

This past Friday, President Obama stopped a national security threat in its tracks:  We quote:

There is credible evidence that leads me [the President] to believe that Ralls Corporation (Ralls), ..., and its subsidiaries, and the Sany Group (which includes Sany Electric and Sany Heavy Industries), a Chinese company affiliated with Ralls (together, the Companies); and, Mr. Dawei Duan (Mr. Duan) and Mr. Jialing Wu (Mr. Wu), citizens of the People's Republic of China and senior executives of the Sany Group, who together own Ralls; through exercising control of Lower Ridge Windfarm, LLC, High Plateau Windfarm, LLC, Mule Hollow Windfarm, LLC, and Pine City Windfarm, LLC (collectively, the Project Companies), ..., might take action that threatens to impair the national security of the United States; …

Accordingly, under section 721 of the Defense Production Act, the President ordered Ralls to divest itself of all interest in the project and to remove all construction – including any foundations.

We knew climate change and national security were tightly connected.  After all, the Department of Defense issued Trends and Implications of Climate Change for National and International Security in October of last year. There we learned that destabilization of less affluent countries as a result of the effects of climate change was a primary risk and a threat to national security.  We did not learn anything about the threat posed by domestic windfarms.  Then Defense Secretary Panetta accepted an award in May 2012 from the Environmental Defense Fund on behalf of the Department of Defense.  He noted: “The area of climate change has a dramatic impact on national security; rising sea levels, severe droughts, the melting of the polar caps, the more frequent and devastating natural disasters all raise demand for humanitarian assistance and disaster relief”.  His domestic focus was cybersecurity, not wind turbines on the Oregon plateau.

So it was something of a surprise that the Obama Administration engaged on climate change and national security by tangling with China on a small wind farm project in northeastern Oregon.  But then again, who knew Naval Weapons Systems Training Facility Boardman was just a few miles down the road testing drones and the electronics on airplanes such as the EA-18G Growler? Who knew?  The folks at the Committee on Foreign Investments in the United States (CFIUS) knew.

CFIUS is a little known government entity.  A useful and prescient summary of the role of CFIUS in windfarm projects was published by our colleague at Steptoe & Johnson, Richard Reinis, back in 2009.  In a nutshell,  “The CFIUS statute authorizes the President to investigate the impact on US national security of mergers, acquisitions, and takeovers by foreign persons. If a transaction would result in an impairment of national security that could not be mitigated by agreement with the parties, the President may block the transaction or order divestiture of an already completed deal.”  Mr. Reinis then demonstrates his forecasting skills and describes where CFIUS approval might be necessary: “a wind farm within observation distance of a sensitive, national security installation, or in proximity of any other significant national security site.”  Fast forward three years and he could have been writing the President's order.

To return to Naval Weapons Systems Training Facility Boardman, drones and the Growler, when CFIUS knows something, it can shut things down.  And it did.  Back in July CFIUS issued a cease and desist order to Ralls.  Ralls responded with a lawsuit challenging CFIUS authority under the Constitution and the Administrative Procedure Act.  Following an agreement with the government to permit some limited preliminary construction, Ralls withdrew its suit.  Then came last Friday’s order.  Sany Group, Ralls’ Chinese affiliate, immediately vowed to sue.

Sany Group’s and Ralls’s fight is certain to be an uphill battle;  the implementing legislation states that the President’s decisions are not subject to judicial review.  See 50 U.S. C. App. 2170(e).  Some have suggested that the path to success lies in a suit against CFIUS, not the President, under the holdng in the Supreme Court's recent decision in Sackett v. EPA, where final agency action entitles one to judicial review.  If that is the case, we expect a further obstacle.  Litigating national security is notoriously difficult.  The government refuses to disclose the details of the national security question and the courts are handcuffed.  We are intrigued here by the order's twice-repeated requirement to remove any foundations.  Are super-sensitive detectors suspected among the rebar and concrete?  We recall the multi-million dollar fiasco of the U.S. embassy in Moscow, where bugs were embedded throughout.  We do not expect ever to find out the details of the national security threat posed by Ralls, in contrast (we hope) to the threats posed by other facets of climate change. 

Climate Change | Renewable Energy | Wind Energy | Supreme Court

Blow the Man Down. US Offshore Wind Farm Leasing Takes a Big Step Forward

February 3, 2012 10:47
by J. Wylie Donald

Yesterday was a banner day for offshore wind farms in the mid-Atlantic.  Promoters and advocates received a favorable environmental assessment, a new form and two calls for nominations. 

The Environmental Assessment.  Secretary Ken Salazar of the Department of the Interior gave wind developers a big boost when he announced the Department's decision to move forward with government leases of offshore areas for wind farms. This comes at a crucial time for wind turbine manufacturers; Danish turbine giant Vestas A/S announced last month that it would be closing one factory, laying off ten percent of its work force in light of the recession and increased competition from China, and considering additional layoffs in the United States. 

The Department's finding of "no significant impact" from activities related to site assessment such as geotechnical surveys or the installation of meteorological towers opens the door to the gathering of data without completion of a further environmental impact statement.  Completion of the environmental assessment is not a green light for all projects, but it is estimated that it will take two years off the planning and construction schedule.  Specific projects still will need to complete an environmental impact statement.  One issue, for example, may be birds. The red knot, an intercontinental migrating species of sandpiper, flies almost twenty thousand miles each year from Brazil to Canada and back, stopping off for saltwater taffy along the Delaware Bay. Birdkill is a substantial problem for wind farm operators. Efforts to put the red knot on the federal endangered species list will only make solving that problem harder.

New Jersey, Delaware, Maryland and Virginia are all excited about the potential opportunities. Governor McDonnell (a Virginia Republican) wants to make Virginia the Energy Capital of the East Coast.   Governor O'Malley (a Maryland Democrat) noted:  “We need the energy. We have the resources. We need the jobs, and we need a more renewable and cleaner, greener future for our kids.”  

The Lease Form.  To streamline the issuance of wind farm leases on the Outer Continental Shelf the Department's Bureau of Ocean Energy Management put together a "first-of-its-kind" lease form, BOEM Form 0008.  Comments were solicited last fall and they were limited.  One that was significant was that lessees should make available data they collect.  Certain wind data could be kept as proprietary and confidential.  The Form is silent on that subject.  Notwithstanding, the wind energy industry is enthusiastic about the Form.  Comments by The Offshore Wind Development Coalition felt that with 15 offshore wind projects on the blocks in the U.S., the Form "will provide an essential ingredient for continued progress."     

The Calls.  The Department of Interior also issued a "Call for Information and Nominations" for almost 80,000 acres approximately 10 miles off Ocean City, Maryland, and for a little more than 110,000 acres 23 miles off Virginia Beach, Virginia.   The Calls solicit any additional lease nominations and request public comments about "site conditions, resources and other existing uses of the identified area that would be relevant to BOEM’s potential leasing and development authorization process."  An earlier solicitation of interest for Maryland obtained nine "indications of interest" for commercial leases.  This interest is local, interstate and international.  The achievement of Maryland is the result of sustained effort to get to this point.  Since 2009, in a "state interagency marine spatial planning process" the Maryland Department of Natural Resources (DNR) worked  with "resource experts, user groups, The Nature Conservancy (TNC), Towson University and the Maryland Energy Administration (MEA) to compile data and information about habitats, human uses, and resources offshore Maryland."

Offshore wind farms are coming. "Blow the man down" is a 19th Century sea shanty chronicling the rough life of a mate aboard sailing packets plying the North Atlantic.  It may be time to update the reference.

Regulation | Renewable Energy | Wind Energy

2010 Hurricane Season: A Product of Climate Change, or Not?

May 28, 2010 07:13
by J. Wylie Donald

On Monday night on the last day of May we will make our way home from our various Memorial Day activities and on Tuesday welcome the 2010 Atlantic hurricane season.  It looks ominous.  The National Oceanic and Atmospheric Administration reports that this year could be “one of the more active on record.”  A few things form the basis for this prognostication.

First, wind shear in the upper atmosphere is deadly for hurricanes.  In 2009 El Niño in the eastern Pacific was strong, and so was the wind shear it generated.  This year El Niño has dissipated.  Second, sea surface temperatures are higher than average.  Low wind shear and high sea surface temperature support hurricane formation.  Third, favorable wind flows off the west coast of Africa are expected.  Scientists refer to the pattern of warm waters and favorable winds over decades as the “tropical multi-decadal signal.”  A component of the tropical multi-decadal signal is the “Atlantic multi-decadal oscillation” or AMO, which is primarily identified with Atlantic sea surface temperatures.  The current state of the oscillation favors the formation of hurricanes and began in 1995.

It is worth noting that the AMO arises independently of climate change.  The IPCC includes a discussion of the AMO in its 2007 report.  The language is dense but the graphs are not and I commend them to you. Click here.  To even a lay reader like myself, it is quite apparent that something is cycling and that, whatever it is, we are in the middle of the hot portion.

So the interesting question is whether the AMO and climate change together will lead to more severe and more frequent hurricanes.  A working group of the World Meteorological Organization addressed this question in a statement published in 2006. Click here.  To quote the WMO:  “The scientific debate … is not as to whether global warming can cause a trend in tropical cyclone intensities. The more relevant question is how large a change:  a relatively small one several decades into the future or large changes occurring today?”

This is no small question.  If climate change will increase the severity and frequency of hurricanes today, then many of the steps society is taking right now may be inadequate.  Building codes, zoning decisions, and emergency response planning are all based on the likely scenarios to be encountered.  But it just may be that we don’t know the likely scenarios.  By the same token, if the climate change effect will not be noticed for decades, strategies for adaptation can be successful.

The WMO working group meets again at the end of hurricane season in November.  For planning purposes, let’s hope they can provide more guidance.  In the meantime, maybe a trip to Kansas is in order.

Climate Change | Wind Energy | Weather

Wind Projects and Insurance - CAPE WIND Approval Makes This Even More Important

April 29, 2010 05:29
by J. Wylie Donald

Movie production or distribution is not something I get to do every day.  Or even at all.  But this opportunity is proving hard to pass up.  What happens when a windmill fails?  Let’s watch what happened in Denmark in February 2008.  http://www.windaction.org/videos/14294.  Can you get insurance for this?  And what about other problems that wind farm owners and operators might face? 

This is not of obscure interest.  Last night Interior Secretary Salazar made a decision on whether the Cape Wind wind farm project in Nantucket Sound can move forward:  he approved it.  Proponents assert this is the harbinger of a $270 billion industry and can be the source of 75% of the energy needed by Cape Cod, Nantucket and Martha’s Vineyard.  Critics point to desecration of Native American sites and rituals, as well as the destruction of unique and beautiful views.  (It seems hard to believe that nine years have passed since the project was announced. But that is due process. In the end the Secretary’s decision coincided with the views of Mass Audubon, the NRDC, the Conservation Law Foundation, the governors of Maryland, New Jersey, Massachusetts, Rhode Island, Delaware and New York, national policy and national opinion polls.).

But let’s return to our exploding wind turbine.  It goes without saying that there must be insurance for these projects.  The key is in identifying the risks and recognizing what can be insured, what requires indemnification or hold harmless agreements, and what risks must be minimized because they cannot be eliminated or transferred.  This is no more than the usual risk management paradigm.

A failed wind turbine is an obvious risk and we can be confident that our Danish wind entrepreneurs procured property insurance.  The description accompanying the video identifies high winds during a storm and a failed braking mechanism as the cause of the calamity. Two technicians barely managed to escape. Debris was hurled 500 meters. While the cause of the loss might seem obvious (high winds and covered), one can be sure the applicable policy was reviewed closely to ensure a "wear and tear" exclusion was not applicable or an anti-concurrent causation clause did not apply. Less certain is the scope of business interruption insurance available.  While certainly the output of one turbine is now absent, is that enough to trigger business interruption coverage, which often requires a “necessary interruption” of one’s business?  Perhaps more significantly, who bears the risk if the wind does not blow, or the design is not as efficient or productive as anticipated.  Similarly, what are the implications for promises of startup by a certain date or contractual obligations to deliver a certain quantity of power or that certain tax credits will be available. 

Another side of the operation is liability exposure.  Are individuals or property likely to be injured by a failure?  What is the kind of injury?  Again, it is highly unlikely the Danes did not obtain coverage for an individual or vehicle injured or damaged by the failing structure (whether it was the turbine, the blades or the mast).  Other issues are not so obvious.  In England claims have been asserted that infrasonic waves are dangerous.  Low frequency noise complaints or “strobe effects” are claimed to cause injury.  We may expect assertions of loss of property values when windmills disturb high-priced views.  Will a general liability policy pick up these claims? 

The decision on Cape Wind is laudable and necessary for wind energy to become a robust contributor to the nation’s energy mix.  Coverage needs to keep up.

Wind Energy | Weather


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