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United States

One stop approval process in Texas -- Land office notes "very friendly" offshore regulatory environment

America's leading wind power state made a new push offshore last month by awarding development rights to four tracts of ocean space, nearly 30,000 hectares, to Wind Energy Systems Technologies (WEST), a Louisiana company with vast experience in offshore oil and gas rigs dating back to the 1930s. WEST will pay $21,000 per tract for the rights near Jefferson, Calhoun, Brazoria and Cameron counties. No other companies submitted bids.

"We've spent our lives in the engineering business, designing offshore platforms and marine equipment," says WEST's Herman Schellestede, who says his company is marrying what it knows from the oil and gas industry with offshore wind. WEST has constructed 17 major platforms in the Gulf of Mexico, some which drill down to 3000 metres, and an assortment of smaller platforms. He sees work in shallow waters for offshore wind as relatively simple. "To the oil and gas industry, that's like sticking your toes in a tub."

The four new leases are in addition to the company's existing lease arrangement for a section of water off Galveston, Texas, where its hopes to build its first offshore wind project, a 150 MW wind plant slated for 2010. WEST installed a meteorological tower on a decommissioned rig 13 kilometres offshore in that location and has been measuring wind since the summer.

Recycled rigs

Schellestede says his company acquired a Vestas 1.5 MW turbine and hopes to install it next year, partly for testing before making final arrangements for the larger wind plant. Potential use of recycled oil rigs for a majority of the turbine platforms should provide cost efficiencies. It does not have a power purchase agreement yet. "These guys at WEST aren't typical energy guys and they aren't wind guys, they're offshore rig builders," says Jim Suydam of the Texas General Land Office (GLO), which awarded the bids. "We think that in ten years a lot of people are going to be looking back and wishing they'd stuck it out like these guys have and gotten first dibs on these four tracts."

By GLO rules, once the tracts are producing electricity, WEST will pay a minimum of $132 million into a state education fund over the 30-year life of the leases. The state will also collect a percentage of WEST's energy production. "That's where the real money is," Suydam says. "In fact, that's why we're in the wind business at the Texas General Land Office. We're not doing it to feel green and groovy and save the world. We're doing this to make money."

The GLO oversees all development in waters up to 16.4 kilometres from the state's coastline, a range that is unique to Texas. For all other states, federal waters begin beyond 4.82 kilometres. This vestige of Texas' integration into the US in the 1840s has provided it with billions in offshore oil and gas revenues. Now it may grease the wheels for offshore wind since Texas can approve projects within its waters, outside purview of the federal government via the federal Minerals Management Service (MMS). The US Congress directed MMS in 2006 to take over as the lead authority on offshore wind in federal waters and to design rules and regulations for offshore wind. That process has been substantially delayed.

"If you want to build a wind farm, you just have to deal with us -- a very eager leaser," Suydam says. "We're a regulatory-friendly environment and I think that as you see turbines going up off Galveston and you see the Cape Wind guys up in Massachusetts still struggling to get their stuff through the Congress or whatever, you're going to see the advantage that it is."

Other Texas offshore interest has come from Texas-based developer Superior Renewable Energy, which was acquired by Babcock & Brown (B&B). The company had leased a section of offshore waters from GLO but in the summer decided not to make its next lease payment of $80,000. B&B's offshore ambitions now lie on the eastern seaboard through its purchase of offshore wind developer Bluewater Wind. Like the Cape Wind proposal, Bluewater must wait for guidelines from MMS, in addition to resolving an acrimonious energy contract negotiation (Windpower Monthly, October 2007).

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