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Feds award Cape Wind a sweet 28-year lease deal

Cape Wind’s new long-term lease of federal waters in Nantucket Sound calls for super-low royalty fees designed to spur development of offshore wind power in America.

U.S. Interior Secretary Ken Salazar, who earlier this year gave a tentative thumbs up for the 130-turbine wind farm, announced yesterday that the feds and Cape Wind Associates have signed a 28-year lease for 25 square miles of federal waters off Cape Cod and the Islands.

The lease, which is another major step toward construction of America’s first offshore wind farm, calls for an annual fee of $88,278 until the project is up and running. The lease fee jumps to 2 percent of operating revenues for the first 15 years and then to 7 percent in later years. The first year’s fee would generate about $2 million.

By comparison, royalty fees for offshore oil and natural gas facilities run from 12.5 percent to 18.75 percent.

But supporters of Cape Wind noted yesterday that offshore oil and gas royalty fees are “riddled with loopholes” that sometimes allow energy companies to pay very little, if anything, in fees when drilling offshore.

Sue Reid, a senior attorney for the Conservation Law Foundation, said comparing Cape Wind’s operating fees to the book fees of oil platforms is an “apples to oranges” comparison. Oil companies extract a finite amount of actual fossil fuels when they drill, while wind farms merely use an inexhaustable supply of wind, she said.

But Cape Wind’s stipulated low fees are nevertheless yet another example of the government assisting development of wind power and other renewable-energy technologies. Cape Wind is also expected to be reimbursed about $600 million, via tax credits, after expected construction of the $2 billion wind farm.

Salazar’s lease announcement was a clear victory for Cape Wind, which is now awaiting a decision by state regulators about its proposed multibillion-dollar deal to sell half of its electricity to National Grid.

“This crucial milestone opens a new chapter of clean electricity production and a new source of jobs for our nation,” said Jim Gordon, president of Cape Wind Asssociates.

Opponents of Cape Wind said the fight isn’t over, pointing to a number of environmental lawsuits that have already been filed against the project.