Policy Memo: Promoting Wind Deployment With Gulf Gusto in Texas and Louisiana

To: The Bureau of Ocean Energy Management (BOEM)
From: Victoria Hallas, Yale Center for Business and the Environment
Date: February 3, 2023
RE: Cross Collaboration between Government and Private Developers to Invest in Research and Development and Master Planning of Offshore Wind in the Gulf of Mexico.
Executive Summary
The majority of all U.S. offshore oil and gas (O&G) production takes place in the Gulf of Mexico (the Gulf).¹ Federal agencies (the U.S. Bureau of Ocean Energy Management [BOEM] and U.S. Department of Energy [DOE]) and state governments in Texas and Louisana have a clear connection to this industry and should evaluate the following actions to accelerate the transition from O&G to offshore wind (OSW). Proposed policy measures include:
A Cooperative Agreement between BOEM, DOE, and states to contract out research and development (R&D) grants to O&G and OSW developers in order to (1) foster collaboration; (2) further advance environmental research through studies, surveys, and site investigations; and (3) present investment opportunities in emergent OSW technology in BOEM R&D lease areas.
A BOEM-issued OSW Master Plan to develop a nationwide approach for creating a structured OSW development pipeline further expediting deployment of OSW projects by streamlining permitting processes and agency coordination and review.
Overview of Intent
O&G and OSW developers are interested in future BOEM-issued lease areas in the Gulf due to the potential for up to one million gigawatts of offshore power generation.^1,2 The policy recommendations discussed below are intended to expedite the transition from traditional O&G extraction to OSW during the next phase of lease sales in the Gulf. These recommendations will promote cross_collaboration between once entirely separate industries to meet the nation’s OSW production goal of 30 gigawatts by 2030.³
Background
Institutional O&G investors find there is a need to: (1) set and meet emissions-reduction targets, (2) invest in clean energy to enhance their long-term value propositions, and (3) collaborate beyond the O&G sector to set cross-industry standards.⁴ Texas, in particular, is the sixth largest producer of wind power in the world and has continually demonstrated a commitment to renewables.⁵ Texas policy makers believe R&D for renewable energy technology will accelerate a cost-effective transformation.⁶ There is clear precedence for R&D of new OSW technology with the issuance of the first R&D lease off of Oregon and BOEM’s continued interest in creating additional R&D lease areas in the Gulf.6 Currently, R&D lease areas are granted to state governments who may subcontract out to academic institutions. Although never proposed before, BOEM has confirmed that it may be feasible for states to subcontract out grant funding to commercial developers for further advancing OSW development through R&D.⁷
Implementation and Feasibility
The following policy recommendations include: (1) create tangible financial incentives that will direct the O&G industry to invest in OSW in the Gulf; (2) direct commercial developers to partner with the states, such as Texas and Louisiana, to obtain grant funding for R&D in BOEM-designated lease areas in the Gulf; and (3) provide a master plan that outlines a nationwide OSW deployment plan that includes state-specific targets.
1. Establish BOEM-issued R&D leases for states, with a designated OSW developer partner, to invest in the deployment of new OSW technology (e.g., the reuse of existing infrastructure such as decommissioned pipelines for cable routing, collection of data  [e.g., wind speed data], and floating wind and next generation turbines). This will be funded by existing grants (e.g., DOE’s Transitions Technology Grant and State Energy Competitive Financial Assistance) made available through a Cooperative Agreement between BOEM, DOE, and states such as Texas and Louisiana.
A. Texas and Louisiana would apply for an unsolicited request for a BOEM research lease to advance OSW technology. Once awarded, the state(s) could contract out R&D to a consortium of O&G and OSW developers. R&D leases have been successfully implemented by states (e.g., Oregon State University for the PacWave South project); however, states have never contracted out R&D  to private developers. Additional R&D investments will also be available through the Bipartisan Infrastructure Bill to develop and demonstrate OSW technology and design. ⁸
B. Developers that invest in an R&D lease could receive a State Business Energy Investment Tax Credit towards the total value of the OSW project to be deployed in one of the Gulf’s future R&D lease areas. Issuance of this credit to the O&G developer would be contingent on the developer committing to a transition to clean energy within the next five to ten years. OSW developers would be incentivized by the tax credit, access to grant funds, and increased capital from this joint venture.
C. Developers could undertake environmental studies and surveys that would otherwise be conducted as part of a Site C. Assessment Plan or Construction and Operations Plan for a commercial OSW project. These environmental studies or surveys would be funded through state grant funding, but would be available to commercial developers to supplement permitting applications.
Develop a BOEM-issued OSW Master Plan that will outline how the federal government will handle OSW planning over the next five years. Developers, utilities, manufacturers, port operators, and other stakeholders would be engaged during the master planning development process. The master plan would: (1) outline development goals for states, regions, and nationally; (2) review ways for O&G developers to better integrate into the OSW market; (3) develop a plan for phased deployment; (4) provide lessons learned from both industries; and (5) direct developers through a more streamlined permitting process.
Conclusions
BOEM should lead Texas state authorities to implement the two policies proposed. The benefit of the R&D policy recommendation is that the grants and tax credit programs are already in place, which makes this policy easier to implement. The OSW Master Plan would be developed with thorough input from states, such as Texas, to determine offshore wind priorities and goals. The transition to OSW will be met through partnerships and the sharing of knowledge in new technology while also balancing the competing interests of each party.
^{References 
1 Congressional Research Service. (2022). Five-Year Offshore Oil and Gas Leasing Program: Status and Issues in Brief. Retrieved from https://sgp.fas.org/crs/misc/R44692.pdf.
2 Weis, E. (2018). Wind Energy Legislation Strategies for the Lone Star State. Inquires Journal, (10)5. http://www.inquiriesjournal.com/articles/1738/wind-energy-legislation-strategies-for-the-lone-star-state.
3 The White House. (2021). FACT SHEET: Biden Administration Jumpstarts Offshore Wind Energy Projects to Create Jobs. Retrieved from: https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/29/fact-sheet-biden-administration-jumpstarts-offshore-wind-energy-projects-to-create-jobs/.
4 Boston Consulting Group. (BCG). (2022). How institutional Investors See the Future of Oil and Gas. Retrieved from https://www.bcg.com/publications/2022/how-investors-see-future-of-oil-gas.
5 Alqarqaz, Q. (2019). Texas Renewable Energy Policy Sets an Example for the World. Retrieved from https://spectrum.ieee.org/texas-renewable-energy-policy-sets-an-example-for-the-world.
6 Bureau of  Ocean Energy Management. (2019). BOEM Offers First Renewable Energy Research Lease in Federal Offshore Waters Along the U.S. West Coast. Retrieved from https://www.boem.gov/newsroom/boem-offers-first-renewable-energy-research-lease-federal-offshore-waters-along-us-west.
7  Interview and Correspondence with the Bureau of Ocean Energy Management (January 2022)
8 The White House. (2022). FACT SHEET: Biden-⁠Harris Administration Announces New Actions to Expand U.S. Offshore Wind Energy. Retrieved from: https://www.whitehouse.gov/briefing-room/statements-releases/2022/09/15/fact-sheet-biden-harris-administration-announces-new-actions-to-expand-u-s-offshore-wind-energy/?utm_source=link.}