In Antony and Cleopatra, Shakespeare coined the phrase “salad days” to mean a youthful time filled with unbridled enthusiasm and idealism. Indeed, youth, much like salad, is often raw, flavorful and most of all… green. Therefore, it is fitting to think of our present time as the salad days of offshore energy in the United States. Let’s dig in.
Executive Order appetizers
On January 27, President Biden took early steps to implement his campaign promise to transition the United States away from fossil fuels and invest in renewable energy, with the issuance of the “Executive Order on Tackling the Climate Crisis at Home and Abroad.” The Executive Order directs the Secretary of the Interior to (1) pause on entering into new oil and natural gas leases on public lands or offshore waters, (2) launch a rigorous review of all existing leasing and permitting practices related to fossil fuel development on public lands and waters and (3) identify steps that can be taken to double renewable energy production from offshore wind by 2030.
The Executive Order’s impact on offshore oil and gas development has been immediate, with the Bureau of Ocean Energy Management (BOEM) effectively canceling the first two planned offshore oil lease sales of 2021. On February 12, BOEM announced that it was rescinding the Record of Decision for Gulf of Mexico Oil and Gas Lease Sale 257, scheduled to occur on March 17, 2021. The sale would have included approximately 14,594 unleased blocks, totaling 78.2 million acres of the Gulf of Mexico.
BOEM’s Outer Continental Shelf (OCS) Oil and Gas Program for 2017-2022 also included a lease sale in the Cook Inlet Planning Area, which was scheduled for 2021. On January 15, BOEM released a draft Environmental Impact Statement (EIS) for public comment, analyzing the potential environmental impacts of holding the proposed sale. On February 4, BOEM canceled the draft EIS public comment period, effectively ending the planned sale. It is reasonable to assume that the two other anticipated lease sales under BOEM’s OCS Oil and Gas Program, scheduled to occur in late 2021 and 2022 to lease additional blocks in the Gulf of Mexico, will not go forward.
Accordingly, the Biden Administration has sent an unequivocal message—the immediate future of U.S. offshore energy lies in renewables.
Jones Act main course
While President Biden’s Climate Change Executive Order closed the door on oil and gas lease opportunities, it opened a window on offshore wind. In fact, based on projected development opportunities, the Executive Order’s policy goal to double renewable energy production from offshore wind by 2030 seems to undersell the sector’s prospects. The work towards achieving—and exceeding these offshore wind policy goals is well underway, with BOEM announcing on February 3 that the agency has resumed its environmental review of the Vineyard Wind Project. The project aims to construct 62 wind turbine generators 15 miles off the coast of Massachusetts, which will generate up to 800 megawatts of electricity (enough electricity to power 400,000 homes).
Jones Act vessel operators will play a major role in developing Vineyard Wind and numerous other offshore wind projects undergoing federal review. President Biden reaffirmed this fact in his January 25th “Executive Order on Ensuring the Future Is Made in All of America by All of America’s Workers,” which included the Jones Act in its list of “Made in America Laws.” The associated White House press release noted that “the President will continue to be a strong advocate for the Jones Act... which supports American production and America’s workers,” and further that “with the signing of the 2021 National Defense Authorization Act, the Jones Act has also been affirmed as an opportunity to invest in America’s workers as we build offshore renewable energy, in line with the President’s goals to build our clean energy future here in America.” As discussed in the February edition of Marine News (“Winds of Change in D.C.”), the 2021 National Defense Authorization Act, enacted by a Congressional veto override on January 1, 2021, amended the Outer Continental Shelf Lands Act to clarify that the Jones Act extends to installations on the OCS engaged in the exploration, development, and production of non-mineral energy resources, including wind.
Desserts ahead
These salad days of offshore renewable energy development may be just an appetizer. While Vineyard Wind leads the way, BOEM has received Construction and Operation Plans (COPs) for 10 U.S. offshore wind projects. Submission of the COPs represents a critical step in the administrative process used to approve renewable energy projects. The COPs, once deemed complete by BOEM, undergo an environmental review under the National Environmental Policy Act (NEPA), which requires significant interagency consultation and public engagement. In addition, once the NEPA process is complete and the COPs approved, the developer must submit a Facility Design Report, a Fabrication and Installation Report, and sufficient financial assurances to support planned decommissioning costs. In many ways, BOEM is, the most critical federal agency when it comes to the future of U.S. offshore maritime operations. The speed with which the agency completes its administrative review will dictate the market entry timing for stakeholders looking to engage in the construction and operation of these offshore wind projects.
Importantly, the menu of potential offshore energy projects is not limited to wind. On February 16, BOEM issued a lease to Oregon State University for the PacWave South Project, the first wave energy research project in Federal waters. The testing area, which will span approximately 1,696 acres or 2.65 square miles, is located approximately seven miles off Oregon’s central coast. Once fully licensed by the Federal Energy Regulatory Commission (FERC), construction will commence with operations scheduled to begin as early as 2023. The project will consist of four test berths to support the testing of up to 20 wave energy converter devices, with an anticipated capacity of 20 megawatts. If the project proves successful, the U.S. could someday find its energy demands met by the wind and the waves. For now, however, let’s just take our offshore energy development one course at a time.