The Biden government's approach to setting guidelines in the offshore wind context can already be seen in the most recent laws and implementing regulations relating to tax law, maritime law and environmental law. We deal with the interplay of these legal issues in this White Paper in the context of the general policy objectives of the new administration. In Part 1, we looked at recent developments in New Jersey and New York, as well as recent executive actions by the Biden administration that are affecting the offshore wind sector. In this second part we discuss some related tax, maritime and environmental problems and developments affecting the sector.
These developments show the significant and broad role that offshore wind plays in promoting the Biden administration's policy goals related to combating climate change, expanding the availability of renewable energies and their contribution to the country's electricity needs, and creating well-paying products will play permanent jobs.
OFFSHORE WIND TAX DEVELOPMENTS
Production tax credit (PTC) for wind projects
The 2021 Intermediate Act provided for an extension of the existing PTC by one year, allowing taxpayers to credit business tax based on electricity generated by onshore and offshore wind projects. The under I.R.C. Section 45 (a) (5) is a credit of 1.5 cents per kWh of electricity that the taxpayer generates from wind in a qualified system in the first 10 years after commissioning the project. The amount of the loan is adjusted to inflation and expires depending on the start of the plant construction. Eligibility for the loan should end in 2020, but the 2021 Funds Act extended the loan's applicability to projects starting construction in 2021. Projects that start construction after 2021 are not eligible, which will expire in 2022.
Investment Tax Credit (ITC) for offshore wind projects
A 30 percent ITC against business tax is now available for certain offshore wind turbines located in the United States' navigable inland waters or in the United States coastal waters that begin construction before January 1, 2026, while the ITC is five Years. I.R.C. Section 45 (d) (1). Unlike the PTC, this ITC for offshore wind projects does not expire for projects whose construction begins before 2026. This offshore wind ITC will provide meaningful financial support and funding for qualified offshore wind projects over the next five years and is likely to encourage further development initiatives during the period to utilize the loan.
Research and development support under the Funds Act of 2021
Pursuant to Section 3003 of the Budget Act of 2021, the creation of a program to fund research and development and commercialize wind energy technologies is approved. The aim of the program is to improve the efficiency and cost-effectiveness of wind energy, optimize its performance and remove obstacles to the commercialization of wind technology. The program includes a focus on offshore wind-specific projects and facilities. Over $ 100 million is allocated to the program, including providing grants, conducting research, creating demonstration projects, and providing vouchers to small businesses. This program is an indication of the federal government's renewed focus on wind energy, including offshore wind projects, and its commitment to expanding that area.
OFFSHORE WIND MARITIME LEGAL / REGULATORY DEVELOPMENTS
One of the main questions in the offshore wind industry in recent years has been whether and to what extent ships flying a foreign flag may be used to support offshore wind construction and operation. The numerous offshore wind-related activities earlier this year by Congress, the President, and Customs and Border Protection (CBP) have partially addressed this issue and appear to suggest that further action is taken in the near future to address other outstanding issues are likely to be.
Under the Jones Act, only ships with a U.S. flag and coastal qualification (i.e. owned, operated, and controlled by U.S. citizens) are allowed to carry goods between any two points in the United States. Therefore, ships flying a foreign flag may only be used to support offshore wind projects that do not require the transport of goods between two US points – for example by using a stationary foreign installation ship to install components that are transported on board coasts under the US flag become. qualified feeder ships. A report published by the U.S. Government Accountability Office (GAO) in December 2020, titled Offshore Wind Power – Planned Projects May Lead to New Ships Building in the U.S., but the industry has made few decisions due to uncertainties to understand the importance of the problem for industry noting that "there are currently no Jones Act compliant vessels that can serve as a (wind turbine installation vessel)" and that larger capacity feeder vessels are also likely to be needed to support the industry. In other words, while reports of the construction of Jones Act-compliant installation and feeder vessels have surfaced, at least in the short term, the use of foreign vessels of some capacity for offshore wind construction will continue to be required. It is therefore essential for the industry to have clarity about the extent to which foreign ships can be used.
This clarity appears to have been given in relation to projects on the US Outer Continental Shelf (OCS). Under the Outer Continental Shelf Lands Act (OCSLA), the restrictions of the Jones Act also apply to the outer continental shelf in some cases. Based on the previous OCSLA wording, there was an open question as to whether the OCSLA's extension of the Jones Act would apply to offshore wind farms on the OCS. That question was answered, at least in part, by the passage of the National Defense Authorization Act (NDAA) for fiscal year 2021, which amended the OCSLA to clarify that US law (including the Jones Act) applies to “Installations and other devices that are permanently or temporarily attached to and can be erected on the seabed for the purpose of exploring, developing or producing resources; including non-mineral energy resources. ”(Emphasis added).
President Biden reaffirmed this obligation to apply the Jones Act to offshore wind projects by issuing the Executive Order Made in America. The Made in America Executive Order contained the Jones Act under its definition of “Made in America Laws,” which means that increased interstate consultation will be required before any waiver of the Jones Act can be granted. A White House press release noted that the Made in America Executive Order “confirms the President's strong support for the Jones Act. The president will continue to be a strong supporter of the Jones Act. The signing of the NDAA for fiscal 2021 also confirmed the Jones Act 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. "
Shortly after the President issued the Made in America Executive Order, CBP, the agency charged with interpreting the Jones Act, issued Decision Letter HQ H309186 (January 27, 2021), the first interpretative judgment on the application of the Jones Act to offshore wind turbines and -Installations since 2011. CBP applied the changed language of the OCSLA to conclude that several proposed scenarios would violate the Jones Act in which a non-inshore qualified ship at a U.S. point (either Port Providence or a ship anchored in US waters or on the OCS that is being discharged from a monopile or wind turbine generator installed on the ocean floor of the OCS. CBP also found that scenarios would violate the Jones Act in those prior to Construction at a US point (either in Port Providence or on a ship anchored in US waters or on the OCS) the Cleaning was carried out and discharged on the pristine seabed of the OCS by offshore wind monopiles.
While the above actions appear to have resolved issues related to the application of the Jones Act to the OCS, questions remain regarding the interpretation by CBP of which items carried on board a ship constitute "goods" (ie item covered by the Jones Act falls and is required) to be transported between US points by a ship with a US flag on the coast). In particular, CBP excludes items that qualify as “marine equipment” from the definition of goods. In late 2019, CBP revoked previous decisions based on a standard for such determinations related to whether the subject matter in question was being used to fulfill the “mission of the ship” because CBP found that such an approach was in circulation .1 Instead, CBP stated that it would interpret “marine equipment” as containing elements that are “necessary and appropriate for the navigation, operation or maintenance of a ship and for the comfort and safety of those on board ". However, CBP made it clear that this decision would be made on a case-by-case basis and specifically declined at the time to clarify how this standard would be applied to offshore wind projects. As a result, there remains uncertainty about how Jones Law will apply in relation to the carriage of various components and equipment required to build and operate offshore wind energy. Given the momentum behind the industry, exhibited earlier in the year by actions by Congress, the Executive, and the CBP, further clarification of this issue seems likely in the near future.
OFFSHORE WIND ENVIRONMENTAL / REGULATORY DEVELOPMENTS
The social cost of carbon
The social costs of carbon (SCC) are an important political tool in the discussion about climate change, also with regard to the environmental permit for offshore wind, which is discussed in more detail below. The SCC, which allocates an amount of money to the impact of a tonne of carbon (CO2) in a given year, has far-reaching implications, depending on the amount and where it is used in a federal cost-benefit analysis. A cost-benefit analysis is usually required before a federal agency implements a new rule or makes government decisions, including federal approval decisions. Section 5 of the Climate Crisis Regulation contains the first step towards restoring the use of a higher quality SCC and pre-established levels for other greenhouse gases such as methane (CH4) and nitrous oxide (NOx). To this end, President Biden's Executive Ordinance on the Climate Crisis re-creates the Interagency Working Group on the Social Costs of Greenhouse Gases (IWG), which was dissolved by an executive ordinance under the Trump administration. to evaluate and determine. and nitrous oxide values by January 2022. The revised SCC values and values for CH4 and NOx should agree with the values developed under the Obama administration, if not higher.
Indeed, on February 26, 2021, Heather Boushey announced on behalf of the IWG that the IWG would "immediately replace the previous administration's estimates with pre-2017 inflation-adjusted estimates" (i.e., restore the Obama-era values). .3 The quick decision comes from a memorandum from President Biden dated January 27, 2021 entitled “Memorandum to Restore Confidence in Government Through Scientific Integrity and Evidence-Based Policy Making”. The memorandum instructs federal agencies to review and promptly update any policy, process, or practice that does not use the best science available. The IWG also assumes that the Federal Register will publish an upcoming announcement in order to determine whether an update of the value discounting approach is justified. In this case, it is expected that a more comprehensive revision of the estimates will be published within one year. While the full impact of even higher SCC, CH4 and NOx levels remains to be seen, renewable energy development projects, including offshore wind projects, are expected to continue to receive funding.
Offshore wind that allows development and reflection
NEPA developments for offshore wind
Most large infrastructure projects, including offshore wind turbines, are severely affected by legal and regulatory developments related to the National Environmental Policy Act of 1969 (NEPA). Section 207 of the Climate Crisis Executive Ordinance requires the Bureau of Ocean Energy Management (BOEM) to review the site and permit procedures in consultation with other agencies, including the Chair of the Environmental Quality Council (CEQ). CEQ is the agency responsible for monitoring and implementing NEPA. NEPA is the legal mechanism according to which federal authorities must take into account the environmental impacts of infrastructure projects by submitting an Environmental Impact Statement (EIS), all of which are required for "important federal measures" that can "significantly affect" the quality of the human environment. 4th
NEPA is not used to stop a project and is procedural in nature. It is designed in such a way that a thorough environmental review and public contributions are required before BOEM can, for example, issue an offshore wind lease to a potential developer through a formal decision protocol.5 What is important is that a BOEM lease is required for any offshore wind project in the OCS , 6 and usually before an application can be made to the Federal Energy Regulatory Commission (FERC) for approval and approval of a hydrokinetic project to transfer electricity to the interstate power grid. Removing the NEPA hurdle is an important milestone for any infrastructure project that requires federal approval. With respect to offshore wind, as the BOEM leasing and FERC licensing process continues, which includes the NEPA review process, developers have a competitive advantage in obtaining government approvals for obtaining renewable energy credits necessary to fund the project be used.
The Climate Crisis Executive Order had the immediate effect of getting BOEM back on track for the NEPA review of the Vineyard Wind project. Changes to the Vineyard Wind turbines and signals from the previous administration that these changes could result in a defective EIS prompted Vineyard Wind to request BOEM to discontinue testing its application. Any request for a new application would have resulted in a delay of over a year. On January 22, 2021, Vineyard Wind requested that the original application be continued under the review process. In a recent press release, BOEM announced that it would continue its environmental review of the Vineyard Wind project and continue developing a definitive EIS to signal that the turbine changes would not require a new application.
Further changes to the previous government's NEPA guidelines are also on the horizon. For example, Section 7 (e) of the Climate Science Executive Order instructs CEQ to repeal its August 2017 draft guideline on accounting for greenhouse gas (GHG) emissions during the NEPA review, and instead to revert to the August 2016 guidance published in August 2016 Government of President Barrack Obama. These guidelines will immediately restore environmental auditing benefits to all clean energy projects, not just offshore wind projects.
An even hotter topic concerns the changes made to NEPA regulations by the previous government. On July 16, 2020, CEQ, under previous management, passed a new regulation with effect from September 14, 2020, which some viewed as limiting NEPA reviews for certain projects, especially more carbon-intensive projects. While this is procedural in nature, NEPA reviews and litigation are known to often delay a controversial project for many years. The new NEPA rules were promoted by President Trump's Executive Order 13807 of August 15, 2017, according to which federal agencies must process environmental assessments for "large infrastructure projects" as One Federal Decision (OFD ).7 A clear purpose of OFD was to provide the Environmental audits for accelerating oil and gas infrastructure projects. The new NEPA rule made countless changes to the NEPA rules in accordance with OFD. While the changes are seemingly harmless, it has been argued that they have far-reaching implications for the NEPA process, making it too easy to go through an environmental assessment without full public engagement.8 The new regime is currently the subject of litigation but is currently being pursued by Biden rates administration.
The full impact of the reversal or change of NEPA by the Biden government in the offshore wind context remains to be seen. The new administration has stated that it is reviewing the new NEPA rule to see if any changes are needed. The Climate Science Executive Order repeals OFD, the basis for changing the rules. A signal change is likely, and the CEQ has attempted residency in many of the pending litigation of the rule, denying a residency application in the U.S. District Court for the Western District of Virginia. Therefore, the new administration needs to address the problem sooner rather than later.
Other environmental considerations
The NEPA process for large-scale projects often also includes consultation and collaboration with other agencies responsible for protecting natural resources under a variety of other laws, such as the EPA or the U.S. Fish and Wildlife Service (USFWS). The Climate Crisis Executive Order is a signal to these agencies that their consultation for offshore wind projects should be particularly timely in addition to their own separate reviews, while the revocation of OFD is a separate signal to see the benefits of clean energy projects in the Restore environmental impact review.
In addition to BOEM and FERC approval activities and the consultation process, offshore wind development also includes the typical environmental approval processes associated with large infrastructure projects. It will include Wetlands and Other Waters Crossing of the United States (WOTUS) that requires a Clean Water Act (CWA) permit, which gives the EPA authority to regulate species, or a review of species that regulated by the Endangered Species Act (ESA)) or the Marine Mammal Protection Act (MMPA), over which USFWS is responsible. The construction of ports or onshore office and / or maintenance space is likely to be done in current or former industrial areas with soil and groundwater pollution problems that would require a thorough environmental assessment under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) and its state's Counterparts before buying or leasing.
The Climate Crisis Executive Order does not specifically address these everyday environmental issues and concerns. Some approval processes (e.g. ESA and MMPA review) are approached at an early stage through consultation in the NEPA process and the possible changes made by the Biden administration to this process. The EPA or a government agency with delegated authority to issue Section 401 certifications are likely to require Section 401 Certifications of CWA Water Quality for transmission crossings and onshore interconnectors. A Section 404 permit under the CWA for wetland dredging and backfill activities is also likely to be required by the U.S. Army Regional Engineering Corps with an EPA-delegated approval agency or an EPA-delegated state agency to issue such permits. The state may also submit a number of environmental site laws and regulations for review that must be reviewed and approved by the appropriate state agency.
Additionally, Section 328 (a) of the Clean Air Act (CAA) requires federal air pollution regulations to be extended to projects in the OCS if the project is within 25 miles of the state's maritime border. Assuming this is the case, the construction period of an offshore wind project can generate greenhouse gas emissions which, depending on the area's reach status, can trigger a robust review of new sources under the CAA. Some CAA permits (possibly under a general permit) will likely be required for more routine equipment that generates emissions – for example, backup generators. The CAA Offshore Wind Regulations, codified at 40 C.F.R. Part 55 would be administered by the EPA.
While the Climate Crisis Implementing Ordinance does not address the details of the robust and complex environmental permit system of an offshore wind project, it does signal that such projects should be given priority and timely.
Trends and environmentally friendly questions for the future
As the regulatory and licensing rules for offshore wind projects become clearer and cheaper, the technology behind these projects is also advancing. The OCS on the US east coast is currently the most technically feasible location for offshore wind. Used or planned commercial-scale turbines continue to require foundation support, resulting in an intensive construction process that requires pile driving and, more broadly, more impacts during construction on the seabed and aquatic life.
However, floating turbines are on the horizon. Several floating wind projects are in the early stages (pilot or small-scale projects), either in areas where solid foundation turbines could be too disruptive to the local economy (e.g. Maine) or in areas of the OCS where the water is too deep to build solid foundations (e.g. Maine, California and Hawaii). Maine is leading the advancement of this new technology through a pilot project. On January 22, 2021, Maine Governor Janet Mills announced in a letter to the local fishing industry that she would propose a 10-year moratorium on all state offshore wind projects while continuing the proposed floating turbine research project in federal waters support and extend the time for public contributions to this project. Despite all odds, Maine appears to be eager to advance floating turbine technology along the coast. Further larger projects are planned on the coast of California and Hawaii. Oregon and Washington are expected to follow suit.
Although it is still too early to provide a detailed comparison of floating and solid foundation offshore wind projects from an environmentally friendly point of view, it is possible that floating turbines will prevail, provided they can be built to scale, which is still a long way in the future. This is the only offshore wind option in certain areas of the OCS. The less disruptive nature of the construction and maintenance of floating turbines (which can be pulled ashore for repair, maintenance and decommissioning) will inevitably result in less impact on the aquatic environment and a shorter environmental deadline. Whether the licensing and location benefits outweigh the cost aspects of buying more expensive turbines (or relying on other clean energy projects like solar and onshore wind in areas where solid foundations are technically impractical) is likely to be a hot topic be the future.
The offshore wind sector is well positioned to provide a synergistic focus for tackling climate change and meeting national renewable energy targets. The vast scale and scale of offshore wind development make it a crucial part of efforts to achieve the goals of President Biden's Presidential Climate Crisis Executive Order, as well as those of U.S. coastal states where the prospects for offshore wind are at various stages of development are located. Navigating the legal, regulatory, political, and technical waters associated with this development requires the assistance of seasoned professionals who can provide guidance and advice on the many complex issues and concerns.