The state of Louisiana has approved an agreement for the first offshore windfarms off its coast
Governor John Bel Edwards and the state’s Department of Natural Resources secretary Tom Harris confirmed the state’s Mineral and Energy Board approved Louisiana’s first operating agreement for offshore windfarms at a December meeting.
The board approved a 6,162-acre property agreement for Diamond Offshore Wind (DOW Wind) off the coast of Terrebonne and Lafourche parishes and a 59,653-acre agreement for Cajun Wind off the coast of Cameron Parish. DOW Wind is a wholly owned subsidiary of Diamond Generating Corp (DGC), which is a wholly owned subsidiary of Mitsubishi Corp, formed by DGC to develop, own, and operate offshore wind projects in the US.
Earlier in 2023, Entergy Louisiana, Entergy New Orleans and DOW Wind signed an agreement regarding the evaluation and potential early development of wind power generation in the Gulf of Mexico. The agreement provided a legal framework for Entergy and DOW Wind to work toward the development of potential offshore wind demonstration projects in Louisiana state waters and determine the optimal size and location of future offshore wind projects.
Steelhead Americas, Vestas’ North American development arm is behind the Cajun Wind project. Vestas North America senior vice president of development Chris Rogers said, “Near-shore wind on the Gulf Coast compliments Louisiana’s long and rich legacy of energy development. We look forward to this unique opportunity to actively engage with state leaders and work alongside local communities to spur investment in a safe, clean energy future, while securing significant economic benefits to support the local economy.” Although the Cajun Wind Project remains at an early stage, the operating agreement will allow formal development to commence, including wind measurement campaigns, environmental studies, and direct engagement with the local community.
“For generations, the state of Louisiana has been a leader in energy production. Offshore wind energy is the next chapter in that great history as we expand our options for clean energy production and open new avenues for the development of our state economy,” said Governor Edwards.
“I appreciate the work Secretary Harris and his staff have done negotiating these agreements and would also like to thank our legislative partners who helped in crafting legislation to encourage wind energy leasing in our state.”
Harris noted the two agreements had different payment structures to the state, with the DOW Wind covering a smaller area, but paying more in up-front costs and rental fees per acre, while the larger agreement with Cajun Wind had a lower per-acre fee for up-front and rental payments but a higher energy royalty over the length of the agreement.
DOW Wind paid US$308,101 up-front on its 6,100-acre agreement; Cajun Wind paid US$357,923 on its 59,000-acre agreement. However, DOW Wind is paying 1.5% of gross revenues in energy royalty over the life of the agreement, while Cajun Wind is paying 2.2%.
“One agreement offers more on the front end, while the other pays more over time,” said Harris. “These being the first wind energy operating agreements for the state, we were breaking new trails in negotiating these agreements, and I believe we have established that we can be flexible in how we set up payment structures while still ensuring that the state and its people are appropriately compensated for using our resources.
“Legislation passed in recent years clarifying and codifying rules on leasing state offshore areas for wind energy projects helped Louisiana draw interest from operators,” Mr Harris said.
“It gave potential operators and developers a readily understandable set of rules to work by in planning these kinds of projects. That kind of predictability is very important when you are asking companies to commit the kind of investment we are going to be seeing off our shores.”
Governor Edwards said wind energy projects are a natural fit for Louisiana’s coast, which already has infrastructure and a network of support industries with decades of experience in designing and operating complex projects in the offshore environment.
“Wind energy projects off Louisiana’s coast will benefit from having transportation, fabrication and engineering expertise that has long supported our traditional offshore industry already in place,” Governor Edwards said. “And our existing ports and offshore support companies will benefit from new customers and new opportunities to work and grow jobs.”
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