Wind farms on land in the United States are providing natural energy at increasing rates. In 2007, the United States reached a wind energy generating capacity of roughly 16 billion kWh.1 While this production is impressive, it is a tiny fraction of the estimated 10,777 billion kWh of potential annual United States wind energy.2 Much of the gap between actual output and potential output could be closed by utilizing the potential wind energy on the Outer Continental Shelf (OCS) of the United States. Aesthetic, radar and environmental concerns have impeded the realization of this potential, but scientific studies, technological advances, tax benefits, and new legislation have the potential to catalyze this profitable, zero-emissions energy industry in the current era of environmental consciousness.

Current Status of Wind Energy

Recent European success in wind energy on the OCS has entrepreneurs hurrying to take advantage of the United States' potential.3 Wind rushing over the OCS blows stronger and more steadily than wind slowed by forests, hills, and buildings on land. It also tends to continue blowing during the hottest times of the day when energy is needed most.4 Additionally, the transportation and construction problems that on-land projects face are mitigated offshore where marine shipping and handling equipment is better adapted to the size and lifting challenges posed by the large turbines.5

The financial outlook for wind energy is bright. Wind farms on the OCS are better located to provide energy to large cities where energy is needed most and energy rates are highest.6 The Renewable Energy Tax Credit has been extended through 2008.7 Moreover, legislation to further extend the tax credit for wind power has passed the House and is currently pending in the Senate.8 Despite the practical and economic advantages, wind energy projects have been met with opposition.9

Opposition to Wind Energy

Opponents of wind energy cite aesthetic, radar, and environmental concerns. However, technology may enable future projects to avoid aesthetic opposition altogether. Floating deepwater platforms are being developed that will enable companies to locate wind farms at depths greater than the current 60 meter limit.10 This will make it possible to place wind farms out of view from the coast.

In 2006, the Department of Defense released a report stating that wind turbines present challenges to radar systems and consequently cause problems for aviation and national defense. The Department of Defense noted, however, that there are ways to mitigate the negative effects, and these methods should be applied on a case-by-case basis.11

Opponents also cite harmful effects on the environment. The National Oceanographic and Atmospheric Administration has warned that the electromagnetic waves from underwater cables could disrupt senses that certain fish need for hunting and navigation. In Europe, however, Danish officials reported that marine life has actually increased near turbine supports.12

Original concerns that the blades posed a threat to migratory birds have also been countered. New, smooth towers discourage nesting, and the slow moving blades do not pose the same threat that the old-style, faster blades posed.13 Additionally, radar images of migrating birds show that birds perceive the presence of the wind turbines and fly around them even in times of bad visibility.14

Proposed Rule Demonstrated by success on land in the United States and on the OCS in Europe, wind energy on the OCS in the United States has potential to significantly contribute to the country's energy production. The industry's environmental and economic advantages seem to outweigh the radar, environmental, and aesthetic concerns that are increasingly mitigated by developing technologies and studies. In response to the circumstances, the U.S. Department of the Interior's Minerals Management Service published a proposed rule to clarify the procedure that will ensure that all wind energy activities capitalize on the advantages in accordance with aesthetic, radar, and environmental concerns.

On July 9, 2008, the U.S. Department of the Interior's Minerals Management Service (MMS) published a proposed rule in the Federal Register that will establish a program to grant leases, rights-of-use and easements (RUE), and rights-of-way (ROW) for orderly, safe, and environmentally responsible alternative energy projects and alternate uses of existing facilities on the OCS. This includes the production, transportation, and transmission of energy from sources other than oil and gas on locations with or without existing energy production facilities. Activities including site characterization, technology testing, construction, operation, and decommissioning will be regulated. The Energy Policy Act (EPAct) of 2005, which amended the Outer Continental Shelf Lands Act, grants the MMS this authority. Alternative Energy and Alternate Uses of Existing Facilities on the Outer Continental Shelf, 73 Fed. Reg. 39376 (proposed Jul. 9, 2008) (to be codified at 30 C.F.R. pts. 250, 285, 290).

To qualify for a lease or grant under the proposed rule, you must show that you are either: a citizen or a national of the United States; an alien lawfully admitted for permanent residence in the United States; a private, public, or municipal corporation organized under the laws of any state of the United States, any of its States or territories, or the District of Columbia; or an association of any of the parties described previously. 30 Fed. Reg. 39461 (to be codified at 30 C.F.R. pt. 285).

Available Opportunities

The MMS has proposed two types of leases, a commercial lease and a limited lease, to be available to those that qualify. A commercial lease "would provide the access and operational rights, subject to necessary approvals, to produce, sell, and deliver power on a commercial scale, through spot market transactions or a long-term power purchase agreement." Id. at 39392 (to be codified at 30 C.F.R. pt. 285). A commercial lease would be issued over the long term, up to approximately thirty years, with possible renewals. A limited lease, on the other hand, does not confer rights of commercial sale or distribution of produced energy, but would provide the access rights necessary to conduct preliminary activities such as site assessment and technology testing. A limited lease would be issued for a shorter term, up to five years, with possible renewals. Id. at 39470 (to be codified at 30 C.F.R. pt. 285).

The MMS anticipates that companies will prefer to acquire a commercial lease rather than a limited lease, but proposes the option of the limited lease so that small companies can pursue alternative energy opportunities without the expenses of a longterm lease. With a limited lease, a company can assess the viability of alternative energy without the expense and documentation of the bidding and lease acquisition associated with commercial leases. Nonetheless, the MMS encourages applicants to pursue a commercial lease because commercial leases can be relinquished by the lessee if the lessee loses interest in the project. Id.

Rights to use the land for alternative energy may also be obtained through ROW grants and RUE grants. A ROW grant authorizes companies with alternative energy projects not on the OCS to use the OCS to install cables, pipelines, and associated facilities that involve the transportation or transmission of electricity or other energy product from the alternative energy projects. Id. at 39403 (to be codified at 30 C.F.R. pt. 285).

A RUE grant is similar to an MMS-issued alternative energy lease in that the grant authorizes the holder to construct and maintain facilities on the OCS that support the production, transportation, or transmission of electricity or other energy product from any alternative energy source. A RUE grant is different from a lease under the proposed rule because a RUE grant is issued for alternative energy projects that are located on state submerged lands, rather than more distant locations on the OCS. Id.

Additionally, an Alternate Use RUE grant will be used when a company seeks to use an existing oil or gas facility as an alternative energy facility. The MMS proposes an approach where the original lessee and the alternate use applicant share a balance of the financial assurance and decommissioning responsibilities. Id. at 39434 (to be codified at 30 C.F.R. pt. 285).

The MMS also proposes a procedure for dividing the rights, at the outset, of a previously unused location. During the leasing process, the MMS will clarify the scope (e.g. wind, wave, current, etc.) of activity included in the lease. Multiple companies could hold a lease for a location, but each would hold the exclusive right to a different form of energy. Id. at 39393 (to be codified at 30 C.F.R. pt. 285).

Lease and Grant Information

In addition to initial fees such as up-front acquisition fees or bid deposits, the MMS proposes that the United States receive a return throughout the duration of the lease. For commercial leases, the annual operating fee would equal the product of the installed capacity expressed in megawatts, the total hours in a year (8760), the capacity factor (the anticipated efficiency of the facility's operation expressed as a decimal between zero and one), the retail electric power price expressed in dollars per megawatt hour, and the operating fee rate (beginning at 0.01 and increasing over time). Id. at 39412 (to be codified at 30 C.F.R. pt. 285). Limited leases would be charged an acreage-based rental fee during their assessment activities. Id. at 39477 (to be codified at 30 C.F.R. pt. 285). Additionally, a minimum annual fee per acre or per turbine may be assessed during periods of inactivity. Id. at 39407 (to be codified at 30 C.F.R. pt. 285).

States with a coastline within fifteen miles of the geographic center of the project would receive a share of the revenues under the proposed rule. Under the EPAct, the sharing rate of the total revenues is mandated to be 27 percent. States within fifteen miles of the geographic center of the project would get a portion of this 27 percent proportional to their relative distance from the center of the project. Id. at 39481 (to be codified at 30 C.F.R. pt. 285).

Required Preparation

The MMS is proposing to require three types of plans from an interested company, depending on the type of instrument held and the activity conducted, before a company conducts activities on the lease or grant. Id. at 39482 (to be codified at 30 C.F.R. pt. 285). The three types of plans are a Site Assessment Plan (SAP), a Construction and Operations Plan (COP), and a General Activities Plan (GAP). Id. The plans must demonstrate, among other requirements, that the proposed activities conform to applicable laws, do not unreasonably interfere with other uses of the OCS such as national security or defense, and do not cause undue harm to natural resources. Id. at 39483, 39485, 39490 (to be codified at 30 C.F.R. pt. 285). Additionally, each plan must describe how the visual impact of the project will be analyzed. Id. at 39484, 39486, 39491 (to be codified at 30 C.F.R. pt. 285).

Conclusion

Wind Energy is playing an increasingly important role in providing a source of clean affordable energy in the United States electricity grid. The Department of Interior's Minerals Management Service proposed July 9 rule establishes a program for participation in a balanced wind energy program on the OCS of the United States.