The Dept. of the Interior is reviewing offshore wind regulations including “the Renewable Energy Modernization Rule, as well as financial assurance requirements and decommissioning cost estimates for offshore wind projects…”
Concerns about offshore wind financial assurance were first raised on this blog in response to a precedent setting waiver of the “pay as you build” requirement. Vineyard Wind was authorized to defer providing the full amount of required decommissioning financial assurance until year 15 of actual operations. The waiver request, which had been denied in 2017, was resubmitted in 2021 and approved. This questionable decision was consistent with the administration’s enthusiastic promotion of accelerated offshore wind development.
BOEM’s streamlining rule codified the deferred financial assurance option. The rule authorizes the transfer of decommissioning risks from developers to taxpayers and consumers by (1) not requiring any additional supplemental financial assurance at the Construction and Operations Plan (COP) approval stage, (2) not requiring supplemental assurance at the installation stage, and (3) providing for incremental supplemental assurance post-installation (e.g. for Vineyard Wind, the full amount is not due until 15 years after installation). See the rule’s previous and current language in the table below (emphasis added).
30 CFR 585.516 – What are the financial assurance requirements for each stage of my commercial lease?
| financial assurance required before BOEM will: | language prior to 4/24/2024 “modernization” rule | current language |
| Approve your COP | A supplemental bond or other financial assurance, in an amount determined by BOEM based on the complexity, number, and location of all facilities involved in your planned activities and commercial operation. The supplemental financial assurance requirement is in addition to your lease-specific bond and, if applicable, the previous supplement associated with SAP approval. | There is no supplemental bond requirement at the COP approval stage. |
| Allow you to install facilities approved in your COP | A decommissioning bond or other financial assurance, in an amount determined by BOEM based on anticipated decommissioning costs. BOEM will allow you to provide your financial assurance for decommissioning in accordance with the number of facilities installed or being installed. BOEM must approve the schedule for providing the appropriate financial assurance coverage. | A supplemental bond or other authorized financial assurance in an amount determined by BOEM based on anticipated decommissioning costs of the proposed facilities. If you propose to incrementally fund your financial assurance instrument, BOEM must approve the schedule for providing the appropriate financial assurance. |
The current financial assurance language is fuzzy enough that BOEM could deny deferred funding requests and require full financial assurance at the time facilities are installed. However, revising the language to clearly require that assurance be fully demonstrated prior to installation would provide clarity and eliminate the deferral option going forward.
The more difficult challenge may be adjusting financial assurance requirements for the projects already under construction. It’s also important to ensure that parent corporations are not shielded from decommissioning and other liability risks.
Bud's Offshore Energy (BOE) 