In advance of holding an offshore wind lease sale in the Gulf of Mexico, which is expected this summer, the Department of Interior recently took several steps to update the offshore wind regulatory framework. First, Interior issued a Final Rule, which reassigns the responsibilities for certain regulations governing offshore wind from BOEM to BSEE. This reassignment aligns the wind regulatory process more closely with the oil and gas framework in terms of the division of responsibility between the two sub-agencies. Second, Interior issued a Notice of Proposed Rulemaking proposing several key changes to the agency’s current offshore wind regulations. The proposed rule seeks to streamline certain aspects of the site assessment and development process and implement other changes related to lease issuance, financial assurance, safety management systems, and other matters.
The reassignment of responsibilities from BOEM to BSEE will take effect once the final rule is published in the Federal Register. Public comments on the proposed substantive changes are due within 60 days of publication of the proposed rule in the Federal Register. The following summarizes key components of these regulatory actions:
Reassignment of Responsibilities
Under the final rule, BOEM retains the authority to identify the areas that may be leased for offshore development, to issue and administer leases and other grants, to review and approve Construction and Operations Plans and Site Assessment Plans, and to require payments and financial assurance. The regulations transferred to BSEE include those governing the oversight of facility design, fabrication, and installation. BSEE would also review safety management systems and oil spill response plans. In addition, BSEE would have the authority to enforce compliance with safety and environmental regulations through the issuance of noncompliance notices, cessation orders, and civil penalties. Finally, BSEE will also oversee decommissioning activities.
Proposed Changes to the Regulatory Framework
Proposed changes to the wind energy regulatory framework include the following:
- Streamlining approval for deployment of meteorological (“met”) buoys during site assessment: The deployment of floating met buoys to determine baseline ocean conditions (as opposed to the installation of met towers that anchor to the seafloor) has become the industry standard for conducting site assessment activities. BOEM has determined that the potential environmental effects caused by met buoys during site assessment is minimal. Moreover, the deployment of these buoys is subject to regulation by the U.S. Army Corps of Engineers, which regulatory process is largely duplicative of the BOEM process. As a result, the proposed rule eliminates BOEM’s requirement that a Site Assessment Plan (“SAP”) be approved prior to the deployment of met buoys for site assessment purposes. BOEM anticipates that this change would eliminate the SAP requirement for nearly all future development of OCS renewable energy.
- Increasing the flexibility of survey timelines: Before construction of the proposed project can begin, BOEM’s current regulations require that commercial lessees submit a Construction and Operations Plan (“COP”) containing survey data that characterizes both the seabed and sub-seabed that will be disturbed. This effectively requires completion of not only geophysical surveys, but also geotechnical surveys, including in situ boring and sampling at foundation locations, prior to COP submission. Under the proposed rule, lessees could strike their own balance between geophysical and geotechnical surveys conducted at the COP stage, as long as BOEM deems the data provided is sufficient to define the baseline geological conditions of the seabed; develop a geologic model; assess geologic hazards; and determine the feasibility of the proposed site. Moreover, a more flexible survey timeline would allow the use of project design envelopes (“PDEs”) in COP submissions. The use of PDEs allows lessees and grant holders to propose a range of design parameters for construction and operation activities thereby providing more flexibility throughout the permitting process while still complying with NEPA and other statutory obligations.
- Modifying installation verifications and project design processes: Lessees are required to use a Certified Verification Agent (“CVA”) to provide an independent third-party review of Facility Design Reports (“FDRs”) and Fabrication and Installation Reports (“FIRs”). The proposed rule would allow companies to submit separate FDRs and FIRs for each major project component, subject to CVA approval that the major components will function together in an integrated manner. This change would thereby allow lessees to begin fabricating and installing certain approved facility components while other components are receiving separate CVA verification. Additionally, the proposal would reduce the number of components that are considered “fabricated” (as opposed to “procured”) and clarify that fabrication activities that do not take place on the OCS can commence before the submittal of the FDR, FIR, or any required plans.
- Establishing a Renewable Energy Leasing Schedule: Currently, BOEM announces offshore renewable lease sales individually. The proposed rule would require the publication of a five-year schedule detailing the OCS renewable energy leases being considered by BOEM. The schedule would differ from the Oil and Gas Five-Year Leasing Program in that the schedule would not have requirements for public comment periods and would not constitute final agency action. As a proposed schedule, BOEM would not be obligated to offer all sales on the schedule; BOEM could adjust the schedule as necessary through published updates.
- Changes to BOEM’s renewable energy auction and lease issuance procedures: The proposed rule would introduce a new term of “provisional winner” to describe the bidder that BOEM determines has submitted the winning bid at the close of the auction. The provisional bidder would then become the “winning bidder” pending favorable completion of the government’s post-auction reviews. The proposal also gives BOEM clear authority to award a lease to the next highest bidder in the event the provisional winner fails to ultimately sign the lease, provide the required amount of financial assurance, or tender the outstanding bid balance. In addition, under the proposed rule, BOEM would continue the use of bidding credits and multiple factor auctions. BOEM seeks comments on whether these bidding methods are effective mechanisms of advancing priorities such as promoting workforce development and supply chain enhancement, consistent with the goals of OCSLA.
- Changes to financial assurance requirements: The proposed rule would eliminate the supplemental financial assurance currently required before COP approval, simplify the requirements for financial assurance during the early stages of a commercial lease, and provide more options for the financial assurance instruments that BOEM may accept. In addition, while current regulations require full funding of decommissioning accounts for each renewable energy facility’s installation, the proposed rule would allow incremental funding of decommissioning accounts during the operations term of a lease. Finally, BOEM also seeks comment on various aspects of the financial assurance framework, including whether BOEM should explicitly rely on the financial strength and reliability of other jointly and severally liable parties—including any current or predecessor lessees and grant holders, or co-lessees and co-grant holders—when determining the need for, and amount of, financial assurance necessary to cover accrued obligations.
- Supplementing safety management system (“SMS”) regulations: The proposed rule would add additional clarity concerning the types of information that the agency considers necessary in an SMS and would incentivize (through streamlined oversight) SMS certification from a recognized accreditation organization. The proposed rule would also require the submittal of an annual summary detailing how the SMS performed and the submittal of a triannual report summarizing the results of the most recent SMS audit, the corrective actions implemented, and a description of any changes made to the SMS since the prior report.
- Revising lease terms and clarifying BOEM’s authority to issue civil penalties: The proposed rule would amend the default lease terms currently in place by merging the existing preliminary and site assessment terms into one preliminary period, establishing new lease periods for COP review and for design and construction that can vary in length, and converting the existing 25-year operations term that commences at COP approval into a 30-year operations period commencing at the commercial operations date. The rule would also explicitly allow BOEM to assess immediate civil penalties in the renewable energy context for violations that constitute a threat of serious, irreparable, or immediate harm or damage to life, property, or the marine, coastal, or human environment, without notice and an opportunity to correct.
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