U.S. BOEM Announces First Offshore Wind Auctions In The Gulf Of Maine And Off The State Of Oregon

On May 1, 2024, the United States Bureau of Ocean Energy Management (BOEM) published Proposed Sale Notices (PSNs) in the Federal Register to hold its first auctions for offshore wind lease areas (i) in the Gulf of Maine (ATLW-11), and (ii) off the coast of Oregon (PW-2). Offshore wind development in both of these areas will utilize floating wind technology.

The proposed Gulf of Maine auction includes eight lease areas offshore Maine, Massachusetts, and New Hampshire with the potential to generate approximately 15 GW of renewable energy, and the proposed Oregon auction includes two lease areas in Coos Bay and Brookings with the potential to generate 2.4 GW of renewable energy. The timing of the PSNs are consistent with BOEM's recently finalized five-year Outer Continental Shelf Renewable Energy Leasing Schedule, which identified the Gulf of Maine and Oregon auctions to occur in October 2024.

Lease Area Details and Lease Stipulations

(i) Gulf of Maine (ATLW-11)

The eight lease areas proposed in the Gulf of Maine (ATLW-11) PSN total approximately 969,999 acres, comprising:

1. OCS-A 0562 with a total of approximately 121,339 acres;
2. OCS-A 0563 with a total of approximately 132,369 acres;
3. OCS-A 0564 with a total of approximately 110,308 acres;
4. OCS-A 0565 with a total of approximately 115,290 acres;
5. OCS-A 0566 with a total of approximately 127,388 acres;
6. OCS-A 0567 with a total of approximately 123,118 acres;
7. OCS-A 0568 with a total of approximately 134,149 acres; and
8. OCS-A 0569 with a total of approximately 106,038 acres.

Notably, the proposed lease areas OCS-A 0564, OCS-A 0567, OCS-A 0568 and OCS-A 0569, located in the southern region of the Gulf of Maine wind energy area (WEA), are subject to a proposed lease stipulation because of navigational safety concerns that bans development on the surface or subsurface of select portions of the lease areas, including the installation of floating foundations, mooring systems, anchoring structures, or inter-array cables along the designated borders of the lease. For these leases, the total "developable acres" are less than the total "lease areas," which are listed above. BOEM will coordinate with the U.S. Coast Guard as it promulgates safety fairways. Based on the lessee's site-specific navigational safety risk assessment, BOEM may require additional mitigation measures at the Construction and Operation Plan (COP) stage.

For the proposed lease areas that are directly adjacent to each other, which include OCS-A 0562 and 0563, and OCS-A 0565 and 0566, BOEM has proposed a lease stipulation that would require the lessees to design a surface structure layout consisting of two common lines of orientation across the adjacent leases. Should the lessees fail to reach a consensus regarding the layout, each lessee must ensure a one nautical mile buffer zone from the neighboring lease's border, within which they cannot erect any surface structures. This rule will ensure that there is at least a two nautical mile separation between the facilities planned by each lessee along the dividing line of their leases. BOEM is currently soliciting comments on this proposed stipulation, particularly with regard to the required setback distances and whether setbacks should prohibit both surface and subsurface structures.

The Environmental Assessment for the Gulf of Maine WEA was initiated on March 18, 2024. As BOEM has done with previous auctions, the Environmental Assessment analyzes the potential environmental impacts of lease issuance, site characterization, and site assessment activities. It does not consider the impacts associated with the siting, construction, or operation of the wind energy facilities, which will be analyzed during the COP stage. The Environmental Assessment must be finalized prior to the auction.

(ii) Oregon (PW-2)

The two lease areas proposed in the Oregon (PW-2) PSN total approximately 194,995 acres:

1. OCS-P 0566 with a total of approximately 61,203 acres; and
2. OCS-P 0567 with a total of approximately 133,792 acres.

BOEM advises potential bidders that portions of the lease areas may not be available for future development (i.e., installation of wind energy facilities) because of sensitive seafloor habitats and navigational safety concerns. Based on comments received during development of the Brookings and Coos Bay WEAs, BOEM identified areas of known or expected sensitive seafloor habitats within the WEAs, particularly within the Brookings WEA. BOEM will require further data gathering and evaluation of seafloor habitats and expects to place restrictions on disturbance of sensitive seafloor habitats during COP review. BOEM may also require additional mitigation measures at the COP stage when the lessee's site-specific navigational safety risk assessment is available to inform BOEM's decision-making.

BOEM concurrently pushed the draft Environmental Assessment for Commercial Wind Lease Issuance on the Pacific Outer Continental Shelf, Oregon and commenced a 30-day comment period. Like the Gulf of Maine Environmental Assessment, the Oregon Environmental Assessment analyzes the potential environmental impacts of lease issuance, site characterization, and site assessment activities. It does not consider the impacts associated with the siting, construction, or operation of the wind energy facilities, which will be analyzed during the COP stage. The Environmental Assessment must be finalized prior to the auction.

Overview of the PSNs and Forthcoming Final Sale Notice

The publication of both PSNs in the Federal Register initiated a 60-day public review and comment period, which ends on July 1, 2024. Both PSNs contain detailed information pertaining to the proposed areas available for leasing, certain lease provisions and conditions, auction details, criteria for evaluating competing bids, and procedures for lease award, appeals and execution. BOEM is soliciting feedback on various aspects of the proposed lease areas, including size, orientation and location, and which areas, if any, should be prioritized for inclusion or exclusion from the lease sales.

The Final Sale Notices (FSNs) for each lease sale will be published in the Federal Register at least 30 calendar days before the lease sales are conducted. The FSNs will provide finalized auction details, including the date and time of the auction, the lease areas to be auctioned, auction mechanics, lease stipulations, and a list of bidders qualified to participate in the auction. BOEM anticipates publishing FSNs for the two lease auctions in September 2024, and holding the lease auctions in October 2024.

Any entity who would wish to participate in the Gulf of Maine or Oregon lease sales must submit the required qualification materials to BOEM no later than July 1, 2024. Eleven entities for the Gulf of Maine auction and four entities for the Oregon auction have already received a confirmation from BOEM that their qualifications are pending or that they are qualified to participate in the respective lease sales.

Bidders must also submit an original Bidder's Financial Forms (BFFs) in connection with lease sales by the date listed in the FSNs, listing any affiliates participating in the same auction, among other disclosures. Affiliated entities are not permitted to compete against each other, and, where two or more affiliated entities have qualified for an auction, they must decide which one will participate.

Multi-Factor Bidding System

For both lease sales, BOEM proposes an ascending clock auction with a multi-factor bidding system involving a monetary factor and non-monetary factors, similar to other recent competitive offshore wind lease auctions. The bid made by a particular bidder in each round will represent the sum of the monetary factor (cash bid) and the value of any non-monetary factors in the form of bidding credits.

To qualify for the proposed credits, a bidder must commit to the bidding credit requirements on its BFF and submit a conceptual strategy as described in the addendum to the BFF. For the Gulf of Maine, if a bidder makes a bid for a lease area in more than one region and seeks to qualify for a bidding credit, the bidder is required to submit a single bidding credit conceptual strategy that identifies any differences in the strategy for each region. The deadlines for the BFF and conceptual strategy will be announced in the FSNs.

(i) Gulf of Maine (ATLW-11)

As part of the monetary factor for the Gulf of Maine auction, the minimum bids for the lease areas are as follows:

In terms of non-monetary factors for the Gulf of Maine, bidders can earn non-monetary bidding credits by: (1) supporting the offshore wind energy industry, either through workforce training programs, the development of a domestic supply chain, or a combination of both; and/or (2) establishing and contributing to a fisheries compensatory mitigation fund, or contributing to a similar existing fund, to mitigate the potential adverse effects for commercial and for-hire recreational fisheries resulting from offshore development in the Gulf of Maine.

A bidder may elect to qualify for one or both bidding credits. Bidders can receive a 12.5% credit for workforce training, supply chain development, or a combination of both, and a 12.5% credit for establishing a fisheries compensatory mitigation fund. The credits are additive, so a bidder who qualifies for both credits would receive 25% of the cash bid in bidding credits.

(ii) Oregon (PW-2)

As part of the monetary factor for the Oregon auction, the minimum bids for the lease areas are as follows:

In terms of non-monetary factors for Oregon, BOEM is proposing to grant bidding credits to bidders for (1) committing to support the offshore wind energy industry, either through workforce training programs, the development of a domestic supply chain, or a combination of both; (2) establishing a Lease Area Use Community Benefit Agreement (Lease Area Use CBA) with a community or stakeholder group whose use of the lease area, or whose use of resources harvested from the lease area, is expected to be impacted by the lessee's potential offshore wind development; and/or (3) establishing a General Community Benefit Agreement (General CBA) with a community or stakeholder group that are expected to be affected by the offshore wind development that is not otherwise addressed by the Lease Area Use CBA.

A bidder may elect to qualify for any combination of the three non-monetary bidding credits. Bidders can receive a 15% credit for workforce training, supply chain development, or a combination of both, a 5% credit for establishing a Lease Area Use CBA, and another 5% credit for establishing a General CBA. The credits are additive, so a bidder who qualifies for all three credits would receive 25% of the whole bid in bidding credits.

Special thank you to Shun Iwamitsu, Law Clerk in the Energy & Infrastructure Group, for his assistance in preparing this alert.

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