October 4, 2022

Volume XII, Number 277

Advertisement

October 03, 2022

Subscribe to Latest Legal News and Analysis

Offshore Wind Developers Race to Compete for Lucrative Government Leases

The desire to get in on the ground floor of offshore wind development in the U.S is at an all-time high. Following the announcement by President Biden of a goal of producing 30 gigawatts of offshore wind energy by 2030 and a tax incentive credit for offshore wind energy farms that begin construction by 2025, the demand for government leases of offshore space to develop wind energy has now skyrocketed and has created an emerging new green-energy sector. As a result of the announcement, the bids at auctions of such leases has exponentially increased reflecting a rush of new investments by wind developers, many of whom are European.  

In February 2022, the Bureau of Ocean Energy Management held an auction for leases in the New York Bight for the development of offshore wind energy, which ultimately totaled winning bids of $4.37 billion, or nine times the amount paid at the last auction for offshore wind energy leases just a mere four years prior. The highly competitive auction prices have since proven not to be limited to the New York Bight. Demand has since continued into May 2022 when TotalEnergies and Duke Energy prevailed at an auction for 110,091 acres in Carolina Long Bay for a combined lease price of $315 million.

Analysts are in agreement that it does not appear that the demand for government leases for wind energy development in the U.S. will decline anytime soon. While there may be a finite amount of space and leases available for traditional turbines, the development of floating turbines creates an exciting and new opportunity to increase the capacity for development in areas further offshore which were not previously thought to be useful for production. Given the potential for higher winds in areas further off of the coast, the advancement of floating turbines is likely to assist in keeping up with the demand from developers looking to break into this new and developing market. 

This sudden increase in demand for offshore wind energy development leases is expected to have not only an economic benefit but an environmental one as well. It is anticipated that the effort to meet offshore wind development goals will create a large amount of jobs, which in turn should continue to incentivize development and drive the price of the leases up, while eliminating many of the environmental concerns associated with offshore drilling.  

However, the increase in demand for leases does not come without its share of hurdles and criticism. The increase in cost of the leases to developers is expected to largely be passed on to consumers. As a result, some states may decide to limit the developers ability to do so, which may cause developers to think twice about the long-term profitability of increasing their bids. Some critics also cite certain environmental concerns with offshore wind energy development in that it could disturb the ocean. Nonetheless, competition for the leases and the inflated cost to enter the offshore wind energy market indicate that bidders anticipate strong economics for these projects.

© 2022 Foley & Lardner LLPNational Law Review, Volume XII, Number 157
Advertisement
Advertisement
Advertisement
Advertisement

About this Author

Eric Blumrosen Houston Corporate Attorney Foley & Lardner
Partner

Eric Blumrosen is a Partner at Foley & Lardner's Houston office. He is a corporate lawyer focusing on mergers & acquisitions, private equity, joint ventures, corporate finance and venture capital transactions, primarily within the Energy, Innovative Technology, and Health Care and Life Sciences sectors. A significant portion of his practice is advising non-U.S. clients in cross-border transactions, establishing operations and making strategic acquisitions in the United States. When handling cross-border...

713-276-5533
George Khalaf Attorney Foley Lardner
Associate

George Khalaf is an associate in Foley Gardere’s Transactions Practice. While in law school, George served as a summer associate at Foley Gardere, as well as another prominent law firm in Houston, where he assisted on a variety of transactional matters in the energy, real estate, and finance industries. His practice includes counseling businesses on general corporate matters, mergers and acquisitions, organizational structure, employment policies, and due diligence. He also served as a student attorney at the Transactional Law Clinic of the University of Houston Law...

713.276.5071
Jaylin C. Taff Houston Business Lawyer Foley & Lardner
Associate

Jaylin Taff is an associate in the Business Law Department with Foley & Lardner LLP. Jaylin is based in the Houston office where she is a member of the Transaction Practice Group. Prior to joining Foley, she was an associate attorney for another law firm in Texas. During law school, she was a summer associate at Foley.

713-276-5044
Advertisement
Advertisement
Advertisement