Two US senators are calling on Interior Secretary Ken Salazar to explain his department’s “economic reasoning” in awarding a commercial offshore wind energy lease to a unit of NRG Energy, while continuing to ban oil and gas activity on the Atlantic outer continental shelf.
“Our nation’s energy policy must make economic sense for taxpayers and not be manipulated to favor one energy source over another,” says Lamar Alexander, a Tennessee Republican.
“I hope we find that the administration’s decisions aren’t driven by politics but instead are geared toward developing the kind of low-cost, reliable energy we need to help our private sector grow and add good-paying jobs,” he adds.
In a 9 November letter to Salazar, Alexander and Republican Senator David Vitter of Louisiana are seeking more information about the lease to compare it with the value of a similar lease for oil and gas on equivalent acreage.
“The administration has a habit of picking energy industry winners and losers, and we want an explanation,” says Vitter. “Secretary Salazar should at least be able to defend the economics of the lease sale for wind energy.”
The senators say they favor development of all offshore energy along the Atlantic coast, but that DOI disagrees. It notes that under Salazar, there has not been a single competitively bid lease for energy there.
The 25-year lease to NRG Bluewater Wind Delaware last month is for exclusive development in a 96,430-acre (390.2sq km) area 11 nautical miles (20.3km) off the coast of Delaware. DOI says there was no competitive interest for the tract.
According to the Interior Department (DOI), NRG Bluewater paid a $25,000 lease acquisition fee to the Bureau of Ocean Energy Management (BOEM), which oversees offshore energy development in federal waters.
The company will be required to make a full annual rental payment of just under $300,000 until commercial operations begin. When that occurs, BOEM will charge it operating fees based on the department’s estimates of the value of electricity sold to the applicable wholesale regional power market(s).
The letter calls on Salazar to answer these questions:
*What is the effective royalty rate Interior has contracted with NRG Bluewater Wind Delaware LLC for this lease for the energy it produces? What is the anticipated revenue to be raised from this development over the next 10 years?
*If NRG Bluewater received the wind energy production tax credit, does the contract stipulate that the royalty rate be adjusted to ensure there won’t be a net payout of federal tax dollars to (the company)? In other words, will this company get paid by the federal government to produce wind energy so they can in turn pay any royalty they might owe to the federal government? Will the total value of any production or other renewable tax credits exceed the price paid for the lease?
* Given that there was no competitive bidding for this lease, what was the actual bid for this lease, and how does that compare to the average bonus bid that was paid in the last OCS lease sale for an oil and gas lease on equivalent acreage?
*Who are the intended customers for the electricity to be sold by NRG Bluewater and what rate have they indicated they will be able to charge utilities for bringing electricity on to the grid?
* What utility companies have indicated they are interested in purchasing electricity from NRG Bluewater, and what states are within the potential service area where consumers will be paying the additional costs of this electricity?
* What has been the environmental review process in awarding NRG Bluewater this lease? Did this process take into consideration threats posed by the development to avian species that could be impacted by wind turbines?
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