Is Virginia Poised to Become a Mid-Atlantic Hub for Offshore Wind Energy?

By Michael P. Giordano, Vandeventer Black LLP

While the United States grips with the devastating effects of a tragic offshore oil spill, states on the Atlantic coast are turning their focus toward the development of a different kind of energy off of their own shores.  Offshore wind energy has the potential to provide 900,000 megawatts of power, an amount nearly equal to the United States’ current total installed electric capacity.  Until recently, this energy source was largely ignored.  Now, the question is not whether offshore wind energy is going to be developed, but rather, where it will be developed, and more importantly, which states are going to manufacture and transport all of the equipment associated with it.

Despite technological, economic, and regulatory challenges, the offshore wind industry received a strong boost when the U.S. Department of the Interior approved the nation’s first offshore wind farm, Cape Wind, off the coast of Massachusetts.   Before Cape Wind, the system for regulating and leasing offshore wind projects was nonexistent.   Now it is clear that the Minerals Management Service (“MMS”), the same bureau within the U.S. Department of the Interior that leases offshore oil and gas projects, has exclusive jurisdiction over offshore renewable energy projects.  Last year, the MMS issued a final rule establishing a program for issuing leases, right-of-way grants, and right-of-use and easement grants for renewable energy production on the outer continental shelf.  The rule provides a roadmap for the development of offshore wind.  In December, the MMS established a Virginia Task Force to communicate and disseminate information to state and local government officials.  Pursuant to its leasing program, the MMS could publish a formal request for interest in commercial wind energy leasing off the coast of Virginia as early as this summer.

The benefits of a thriving offshore wind energy industry could be substantial for Virginia.  This past April, the Virginia Coastal Energy Research Consortium (“VCERC”), an entity funded by the Commonwealth, published its Virginia Offshore Wind Studies Final Report.  In the report, the VCERC identified 25 lease blocks off the coast of Virginia that could generate up to 3,200 megawatts of energy and create up to 11,600 jobs within 20 years.  Virginia is also uniquely situated as an ideal hub for manufacturing and logistics thanks to Hampton Roads’ natural, deep-water port.  Additionally, local shipyards are ready and able to build and/or convert vessels specifically for offshore projects.  Some estimate that the market opportunity, if the Commonwealth can lure manufacturers to Virginia, could be as much as $80 billion. Regardless of where the turbines are manufactured, the VCERC concluded that an initial 600 megawatt project would attract at least $403 million investment in the local economy.

Aware of the potential economic opportunity, public and private entities within the Commonwealth are pressing forward with an aggressive plan.  Leading developers, logistics specialists, engineering firms, and shipyards have formed the Virginia Offshore Wind Coalition (“VOW”) to promote Virginia as a first rate home for wind energy related projects.  This past session, VOW was the primary lobbying group in support of HB 389, which created the Virginia Offshore Wind Development Authority.  The Authority will facilitate, coordinate, and support the development of the offshore wind energy industry and associated supply chain vendors.  More recently, Governor Bob McDonnell joined the governors of nine other states and the U.S. Department of the Interior to form the Atlantic Offshore Wind Energy Consortium.  The Consortium pledged to work together to promote the development of wind energy off the Atlantic Coast.  Interior Secretary Ken Salazar also announced the establishment of a new federal renewable energy office in Virginia to help states coordinate and expedite renewable energy projects off the Atlantic Coast.

Virginia’s efforts to tap into offshore wind energy have gone relatively unnoticed—until now.  Still, the Commonwealth must strive to achieve more public and private support if it is to compete in the race to build projects and to lure manufacturers and supply chain vendors.  Entities like the VOW, which continues to draft promotional material for distribution to the wind energy industry, will go a long way toward capitalizing on the opportunities presented by offshore renewable energy.

Michael P. Giordano will be joining the energy practice group at Vandeventer Black LLP in Norfolk, VA in August of 2011.  He is also the author of Offshore Windfall: What Approval of the United States' First Offshore Wind Project Means for the Offshore Wind Energy Industry, 44 U. Rich. L. Rev. 1149 (2010).

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