January 17, 2023

US BOEM Proposes Modernized Offshore Wind Regulations

On January 12, 2023, the Bureau of Ocean Energy Management (“BOEM”) within the US Department of Interior (“DOI”) released a Notice of Proposed Rulemaking (“Notice”) for its Renewable Energy Modernization Rule (“proposed Modernization Rule”). The Modernization Rule updates the first set of BOEM regulations governing offshore wind on the Outer Continental Shelf (“OCS”) promulgated in 2009.

BOEM’s renewable energy program has matured since BOEM promulgated the first set of regulations in 2009—BOEM has conducted 11 auctions and issued and managed 27 active commercial leases over this time period. Based on this experience, BOEM has identified opportunities to modernize its regulations to facilitate the development of offshore wind energy resources. BOEM believes that the proposed Modernization Rule is necessary to advance its energy policies in a safe and environmentally sound manner that would provide a fair return to the US taxpayer by modernizing the current regulations, streamlining overly complex and burdensome processes, clarifying ambiguous provisions, enhancing compliance provisions, and correcting technical errors and inconsistencies. Through the proposed Modernization Rule, BOEM is aiming to reduce administrative burdens on both developers and BOEM staff, reduce developer costs (which it projects will save the renewable energy industry $1 billion over the next 20 years) and uncertainty, and implement greater regulatory flexibility to further adapt to a rapidly changing industry with increasing demand for OCS renewable energy.

Summary of the Proposed Modernization Rule’s Major Reforms

The proposed Modernization Rule contains eight major reforms identified by BOEM and recommended by industry since 2010: (1) eliminate unnecessary requirements for the deployment of meteorological (“met”) buoys; (2) increase survey flexibility; (3) improve the project design and installation verification process; (4) establish a public Renewable Energy Leasing Schedule; (5) reform its renewable energy auction regulations; (6) tailor financial assurance requirements and instruments; (7) clarify safety management system regulations; and (8) revise other provisions and make technical corrections. The details of each proposed reform are discussed below.

1. Meteorological Buoys Requirements Modifications

The proposed Modernization Rule eliminates both the site assessment plan (“SAP”) requirement for met buoys and the limited lease requirement for installing “off-lease” (or activities occurring on the OCS conducted outside the leasehold of a BOEM commercial lease) met towers and met buoys. However, off-lease met towers and met buoys would continue to require US Army Corps of Engineers (“USACE”) permits given the USACE’s jurisdiction over obstructions deployed in US navigable waters under Section 10 of the Rivers and Harbors Act. BOEM is eliminating these requirements because when it first finalized the SAP process in 2009, the industry gathered met data primarily from towers fixed in place by foundations pile-driven into the seafloor. However, the industry now uses buoys anchored to the seafloor that gather the same data at lower costs and with less environmental impact. And although BOEM’s existing SAP process is well-suited for the complexities involved with installing met towers, BOEM believes the process has proven to be both unreasonably burdensome for simply anchoring met buoys on the seafloor and redundant with the USACE’s overlapping process.

2. Geotechnical Survey Requirements Modifications

The proposed Modernization Rule defers and/or extends the required time periods for meeting certain geotechnical survey requirements, such as engineering site-specific surveys (e.g., boreholes, vibracores, grab samplers, cone penetrometer tests, and other penetrative methods), until after construction and operations plan (“COP”) approval but before construction. The proposed Modernization Rule also reorganizes the COP data requirements by topic and will incorporate updates to BOEM’s guidance on best practices for surveying. To ensure the site is suitable for construction, avoid seafloor hazards, and identify historic and cultural resources, the regulations currently require detailed geotechnical survey data for each proposed wind turbine location in the COP submitted by the lessee before project construction is authorized. However, in response to requests made by lessees, BOEM is proposing these changes because it has learned that the precise location of each wind turbine may be uncertain at the COP submittal stage, and geotechnical data collected primarily for engineering purposes are more relevant to the review process after COP approval.

3. Project Design and Installation Verification Process Modifications

The proposed Modernization Rule expands the independent, third-party certified verification agent’s (“CVA”) review of a project’s design, fabrication, and installation to include verification of the design and commissioning of the critical safety systems to assist BOEM in meeting requirements of the Outer Continental Shelf Lands Act and its implementing regulations. BOEM is proposing this change to both ensure that any activities authorized by BOEM are carried out safely and encourage additional firms to participate in offshore renewable energy projects as CVAs. The proposed Modernization Rule also changes the regulatory language defining the CVA’s role from “certify” and “certification” to “verify” and “verification” to further align with the proper industry standard term. Lastly, the proposed Modernization Rule enables BOEM to instead approve CVA nominations before COP submittal and allows separate facility design reports (“FDRs”) and fabrication and installation reports (“FIRs”) for major project components. BOEM is proposing these changes to both encourage developers to seek CVA review throughout their project design process and permit the use of specialized CVAs to verify specific project components.

4. Public Renewable Energy Leasing Schedule Introduction

The proposed Modernization Rule introduces a new commitment by the secretary of DOI to publish a schedule of anticipated lease sales that BOEM intends to hold in the next five years, to be updated at least once every two years. This proposed schedule will include a general description of the area of each proposed lease sale, the anticipated quarter of each sale, and reasons for changes made to the previously issued leasing schedule, if any. Comments on the timing and scope of a scheduled lease sale can be made during the public comment opportunities afforded by BOEM during the planning process for each particular lease sale scheduled (e.g., Request for Interest, Call for Information and Nominations). BOEM is proposing this change to provide advance notice to stakeholders of areas being considered for future lease sales in order to increase certainty, enhance transparency, and facilitate planning by industry, the states, and other stakeholders.

5. Renewable Energy Auctions Procedures Modifications

The proposed Modernization Rule reorganizes and clarifies the pre- and post-auction procedures. In particular, it addresses the use of bidding credits and specifies actions to be taken if a “provisional winner” (a newly added term) fails to meet its obligations or if an existing lease is relinquished, contracted, or cancelled. The proposed Modernization Rule also simplifies and clarifies the auction regulations, replacing the currently enumerated auction formats, bid systems, and bid variables with a more flexible process to accommodate an emerging industry while allowing for auctions to be customized based on circumstances. However, the proposed Modernization Rule preserves the option to use multiple factor auctions. BOEM is proposing these changes to deter potential bidder collusion and more clearly outline auction processes and requirements—based on lessons learned from the 11 prior auctions.

6. Financial Assurance Requirements Modifications

The proposed Modernization Rule tailors the financial assurance requirements (which are required of lessees and grant holders to protect the US taxpayer against potential liabilities arising from any default on lessee or grant holder regulatory obligations) to both allow incremental funding of decommissioning accounts in accordance with a BOEM-approved schedule during the lease term and expand the acceptable categories of financial assurance instruments. The proposed Modernization Rule also eliminates the supplemental financial assurance currently required before COP approval and simplifies the requirements for financial assurance during the early stages of a commercial lease. BOEM is proposing these changes to better align those requirements with actual risks posed as a result of such a default.

7. Safety Management System Requirements Modifications

The proposed Modernization Rule clarifies the information requirements for safety management systems by introducing both a performance-based approach to provide flexibility in determining the best way to ensure personnel safety on and near the OCS and provide a lessee or grant holder streamlined oversight if it acquires a safety management certification from an accredited conformity assessment body. The proposed Modernization Rule also adds two safety reporting requirements: (1) an annual summary of how a safety management system performed (normalized to work hours and energy generation) and (2) a report every three years summarizing the results of the most recent safety management system audit and the corrective actions implemented and providing a description of any changes made to the SMS since the prior report. BOEM is proposing these changes to align with industry practice, to clarify safety management systems requirements, and to incentivize lessees and grant holders to obtain a safety management certification from an accredited conformity assessment body—all in order to reduce the frequency and intensity of regulatory oversight activities.

8. Other Modifications and Technical Corrections

The proposed Modernization Rule includes various modifications that do not fit within any of the major reforms discussed above, the most significant of which are (1) restructure commercial lease terms into four periods tied to activities required to develop the lease; (2) explicitly allow regulatory departures before and after a lease or grant is issued or made; (3) authorize civil penalties without either notice or a time period for corrective action when violations cause or threaten to cause serious, irreparable, or immediate harm or damage; (4) add specific procedures regarding lease segregation and consolidation; and (5) standardize the annual rental rate per acre across most grants. The proposed Modernization Rule also both corrects technical errors in the existing regulations and makes corrections to ensure consistency between the proposed changes and existing practice.

Next Steps

Public comments on the proposed Modernization Rule will be due to BOEM 60 days after publication of the Notice in the Federal Register, which is supposed to occur in the coming days. Once the public comment period ends, the proposed Modernization Rule will be subject to further changes at BOEM’s discretion depending on the public comments it receives.

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