On April 24, 2024, the U.S. Bureau of Ocean Energy Management (“BOEM”) and the U.S. Bureau of Safety and Environmental Enforcement (“BSEE”) announced that they had finalized changes to the Renewable Energy Modernization Rule (the “Mod Rule”).[1] These changes, which went into effect on July 15, 2024, are intended to streamline the permitting process for the offshore wind industry that has historically been affected by a lengthy and costly approval process. Industry experts predict the Mod Rule will cut the previous five-year permitting process in half and create $1.6 billion in savings over the next 20 years for the offshore wind industry.[2]

In 2021, the Biden administration set an ambitious goal of installing 30 gigawatts of offshore wind by 2030 and further incentivized developers with federal tax credits in the Inflation Reduction Act of 2022.[3] Ships are fundamental to achieving this mission: vessels are required from project planning through the deployment of wind turbines and personnel to construct the development and on to post-construction maintenance. To date, redundancies and commercial impracticability in the permitting process has hindered the expansion of offshore wind. As an example, Ørsted announced last year it was abandoning its Ocean Wind I and II projects off the coast of New Jersey due to financial infeasibility.[4] The Mod Rule intends to provide regulatory certainty and cost-saving measures to encourage further development.

Under prior regulations, BOEM required developers to receive approval through a Site Assessment Plan (“SAP”) to deploy meteorological buoys (“met buoys”) and first allow developers to collect data to inform designs on their lease area. The U.S. Army Corps of Engineers (the “Army Corps”) separately requires a Nationwide Permit 5 (“NWP 5”) to survey navigable waters as well. When BOEM was established in 2010, met towers fixed to the ocean floor by foundations collected most of the met information. Now, met buoys anchored to the ocean floor offer a less invasive way to collect met data. The shift to met buoys encouraged BOEM to eliminate SAP approval in the Mod Rule since Army Corps approval is already required to deploy non-fixed-bottom met buoys. The Mod Rule also removes the limited lease requirement for buoys deployed in off-lease areas to promote future offshore wind development as the NWP 5 process already regulates it.

Until now, BOEM’s environmental and technical reviews of the Construction and Operation Plan (the “COP”) required BOEM, alongside federal and state agencies, to examine a proposed project before green lighting it, reviews that could take up to five years to complete. The extended time between assembling surveys for COP and the completion of review by BOEM often meant that some design features of the project would prove unnecessary after waiting years for review. Inflexibility at this level meant that developers would also be unable to incorporate technologies that emerged after the COPs, with the installed equipment then being significantly behind technological advancements. The Mod Rule permits stage collection of data through project design envelopes (“PDEs”) in COP submissions, which will allow for greater flexibility within the COP review process to submit a range of design parameters that can shift with innovative technology or economic considerations that impact development feasibility, which can result in additional savings for the developer.

Relevance of Offshore Wind to Maritime Industry

The relevance of offshore wind to the U.S. maritime industry lies in the Jones Act,[5] which Congress passed in 1920 to ensure the longevity of the U.S. maritime industry for wartime needs. The Jones Act mandates that only U.S. flagged ships, built in the United States, owned and crewed by Americans can move cargo from one point in the United States to another. The modern interpretation of the Jones Act views an offshore wind turbine as a point, meaning a vessel embarking from the United States to an offshore wind site in U.S. waters must be Jones Act-qualified.

A typical offshore wind farm may require as many as 25 types of vessels–to lay cable, transfer crew, address surveying, lift components, monitor the environment, install, maintain and service turbines–many of which will require construction of new Jones Act-compliant vessels[6] and create jobs, both onshore and offshore. Current guidance states that a foreign ship may lay the foundation for an offshore wind turbine, but Jones Act-qualified vessel are required to ferry parts to the site. While wind turbine installation vessels (“WTIVs”) exist globally, there are none in use that meet Jones Act requirements. Dominion Energy is currently constructing Charybdis, the country’s first Jones Act–compliant WTIV, for $625 million with a possible launch in 2025.[7]

Chevron Implications

The future of offshore wind may be tested in the courts after the U.S. Supreme Court overruled Chevron deference in Loper Bright v. Raimondo[8] in June 2024. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.[9] has insulated agency action for the last 40 years and provided agencies deference when interpreting ambiguities within federal statutes. Now, if ambiguities arise on agency’s interpretation of a statute, it is up to the courts to determine if it is reasonable. This new era of implementing environmental laws, like new offshore wind permitting rules, is made more uncertain by the rejection of Chevron, and it will likely create challenges to promulgating new regulations in the future.

BOEM and BSEE receive their authority through the U.S. Department of Interior, which derives power from the Outer Continental Shelf Lands Act[10] and its most recently amended version, the Energy Policy Act of 2005.[11] These statutes grant BOEM and BSEE the authority to provide leases for energy production, transportation or transmission of the Outer Continental Shelf. While the Mod Rule appears to be a clear extension of BOEM and BSEE’s statutory authority, it may face challenges given that the plaintiffs in Loper Bright have historically opposed offshore wind development in New Jersey.

While the rejection of Chevron may create rough waters, the Mod Rule will provide needed improvement to the permitting process and promises to bolster widespread involvement of the maritime industry in the development of offshore wind. The maritime attorneys at Vedder Price are monitoring regulatory developments and would be happy to assist clients in navigating these changes.