The PJ Tatler

Just a Bunch of Hot Air? Senators Finally Get Response on Value of Wind Leases

Seven months after asking former Interior Secretary Ken Salazar for data on the economics of offshore wind production, Sens. David Vitter (R-La.) and Lamar Alexander (R-Tenn.) finally got a response from the department that they say just undermines the administration’s focus on offshore wind power.

The senators noted that that the Interior Department won’t allow offshore oil and gas leasing in the Atlantic Outer Continental Shelf and requested data on the economics of the wind lease sale to compare with “the value of a similar lease for oil and gas on equivalent acreage.”

“The Federal Government derives significant revenue from royalties for offshore oil and gas production. The current rate companies must pay is between 12.5% and 18.75%,” Vitter and Alexander wrote in the November 2012 letter. “…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?”

In a six-page response, Interior said a minimum bid for oil and gas offshore lease sales is $100 per acre for deepwater leases, compared to $1 or $2 per acre for the upcoming wind lease sale. There’s also strong indication that the royalty rate is a fraction of the tax credit, meaning federal subsidies more than cover what these projects are expected to pay in royalties, Vitter’s office said.

“The administration has a habit of picking energy industry winners and losers, but their ‘winners’ – in this case – actually cost taxpayers money and are not sustainable without government subsidies,” Vitter said. “I appreciate the Interior Department’s response – albeit six months late – but their response tells us that the government assistance the wind industry receives in leasing and special tax credits, exceeds the money they can generate for the Treasury in offshore production. I’ll reiterate that alternative energy has potential for our ‘all of the above’ energy future, but the administration needs to quit ignoring the economic benefits of traditional energy.”

Interior cranked out the response a day after Vitter noted the department had ignored their request.

“The Interior Department should at least be able to defend the economics of offshore lease sales for wind energy – or at the very least respond to our letter,” he said. “The federal government receives significant revenue from royalties for offshore oil and gas production in the form of rents, royalties, bonus bids and taxes. Can the same be said for any potential offshore wind project?”