Is It Clear Sailing Ahead for Gulf of Mexico Wind Energy?
As the U.S. advances its offshore wind ambitions to install 30 gigawatts by 2030, industry players and watchers are awaiting the Biden administration’s next move.
As part of the maritime counsel that assisted with Block Island Wind Farm—the first offshore commercial wind farm in the U.S., Blank Rome partner Keith Letourneau is familiar with challenges that may surface for wind farm developers considering the GoM. Though the Block Island project offshore Rhode Island was in state waters more than six years ago, there are still some lessons learned that could apply in terms of contracting in the GoM, he said.
Letourneau, whose comments have been edited for length and clarity, shared insight on offshore wind potential in the GoM.
VA: What are some of the challenges that could arise for developers of offshore wind farms in the Gulf of Mexico?
KL: The challenges are numerous.
One is getting adequate capital, obviously. Whether or not people are interested efficiently to invest; the risks attendant to the construction; risks attendant to environmental assessments through BOEM. Then you have capital construction costs, and where are you going to build the structures.
You have public concerns about the impact on migratory species. … In the Gulf of Mexico, shrimpers are potentially adversely affected by continued offshore construction. You also have the impact of hurricanes and the engineering that is required to make sure that wind turbines are structurally sound and whether they’re going to be able to withstand them. That engineering has taken place on the East Coast, but the frequency of hurricanes in the Gulf of Mexico is typically more pronounced.
You’ve got challenges with respect to the use of vessels. The Jones Act applies to the construction of offshore wind towers on the Outer Continental Shelf, which means that if you’re moving equipment and goods from the coast of the United States, they have to be carried aboard a U.S.-flagged vessel and there aren’t that many that are specifically equipped to carry those. There’s one [Dominion Energy’s offshore wind turbine installation vessel with delivery planned for late 2023] being constructed right now at the Keppel shipyard in Brownsville. That will be the first U.S.-built wind turbine that basically designated vessel to assist in constructing offshore facilities. Otherwise, they are all foreign-flagged vessels, which means you would have to be transporting in all of your equipment from overseas in order to install it in the U.S., unless you’re transporting it from the U.S. site to the offshore site aboard a U.S.-flagged vessel.
The other issue with respect to the Jones Act is the vessels have to be manned by U.S. merchant seamen. The question then becomes whether or not there are adequate numbers of U.S. merchant seamen that are sufficiently skilled to do the work constructing and maintaining these offshore wind towers. So those are considerable challenges right there.
VA: Are you expecting to see many companies pursue offshore wind in the Gulf of Mexico when the leases are called? Could companies, if they’re based abroad, partner with a U.S. company to help overcome some of the issues related to the Jones Act?
KL: I think the answer to both of your questions is yes. Right now, there are reports that there are nine companies that are very interested in potentially taking leases in the Gulf of Mexico. Those leases are likely going to be issued. A sale will likely take place in 2023. So, yes, there’s definitely a lot of interest.
The last sale that BOEM did for offshore New York—the New York Bight area—the federal government earned close to five $5 billion in revenue. So, there’s definitely interest in developing offshore and there certainly is more available funding from the federal government through a variety of programs that exist, not the least of which is the Inflation Reduction Act, the Infrastructure Investment and Jobs Act and the Port Infrastructure Development Program.
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"Is It Clear Sailing Ahead for Gulf of Mexico Wind Energy?" by Velda Addison was published in Hart Energy on October 11, 2022.