In advance of holding an offshore wind lease sale in the Gulf of
Mexico, which is expected this summer, the Department of Interior
recently took several steps to update the offshore wind regulatory
framework. First, Interior issued a Final Rule, which reassigns the
responsibilities for certain regulations governing offshore wind
from BOEM to BSEE. This reassignment aligns the wind regulatory
process more closely with the oil and gas framework in terms of the
division of responsibility between the two sub-agencies. Second,
Interior issued a Notice of Proposed Rulemaking proposing several
key changes to the agency’s current offshore wind regulations.
The proposed rule seeks to streamline certain aspects of the site
assessment and development process and implement other changes
related to lease issuance, financial assurance, safety management
systems, and other matters.

The reassignment of responsibilities from BOEM to BSEE will take
effect once the final rule is published in the Federal Register.
Public comments on the proposed substantive changes are due within
60 days of publication of the proposed rule in the Federal
Register. The following summarizes key components of these
regulatory actions:

Reassignment of Responsibilities

Under the final rule, BOEM retains the authority to identify the
areas that may be leased for offshore development, to issue and
administer leases and other grants, to review and approve
Construction and Operations Plans and Site Assessment Plans, and to
require payments and financial assurance. The regulations
transferred to BSEE include those governing the oversight of
facility design, fabrication, and installation. BSEE would also
review safety management systems and oil spill response plans. In
addition, BSEE would have the authority to enforce compliance with
safety and environmental regulations through the issuance of
noncompliance notices, cessation orders, and civil penalties.
Finally, BSEE will also oversee decommissioning activities.

Proposed Changes to the Regulatory Framework

Proposed changes to the wind energy regulatory framework include
the following:

• Streamlining approval for deployment of meteorological
  (“met”) buoys during site assessment: The
  deployment of floating met buoys to determine baseline ocean
  conditions (as opposed to the installation of met towers that
  anchor to the seafloor) has become the industry standard for
  conducting site assessment activities. BOEM has determined that the
  potential environmental effects caused by met buoys during site
  assessment is minimal. Moreover, the deployment of these buoys is
  subject to regulation by the U.S. Army Corps of Engineers, which
  regulatory process is largely duplicative of the BOEM process. As a
  result, the proposed rule eliminates BOEM’s requirement that a
  Site Assessment Plan (“SAP”) be approved prior to the
  deployment of met buoys for site assessment purposes. BOEM
  anticipates that this change would eliminate the SAP requirement
  for nearly all future development of OCS renewable energy.

• Increasing the flexibility of survey
  timelines: Before construction of the proposed project can
  begin, BOEM’s current regulations require that commercial
  lessees submit a Construction and Operations Plan (“COP”)
  containing survey data that characterizes both the seabed and
  sub-seabed that will be disturbed. This effectively requires
  completion of not only geophysical surveys, but also geotechnical
  surveys, including in situ boring and sampling at
  foundation locations, prior to COP submission. Under the
  proposed rule, lessees could strike their own balance between
  geophysical and geotechnical surveys conducted at the COP stage, as
  long as BOEM deems the data provided is sufficient to define the
  baseline geological conditions of the seabed; develop a geologic
  model; assess geologic hazards; and determine the feasibility of
  the proposed site. Moreover, a more flexible survey timeline would
  allow the use of project design envelopes (“PDEs”) in COP
  submissions. The use of PDEs allows lessees and grant holders to
  propose a range of design parameters for construction and operation
  activities thereby providing more flexibility throughout the
  permitting process while still complying with NEPA and other
  statutory obligations.

• Modifying installation verifications and project design
  processes: Lessees are required to use a Certified
  Verification Agent (“CVA”) to provide an independent
  third-party review of Facility Design Reports (“FDRs”)
  and Fabrication and Installation Reports (“FIRs”). The
  proposed rule would allow companies to submit separate FDRs and
  FIRs for each major project component, subject to CVA approval that
  the major components will function together in an integrated
  manner. This change would thereby allow lessees to begin
  fabricating and installing certain approved facility components
  while other components are receiving separate CVA verification.
  Additionally, the proposal would reduce the number of components
  that are considered “fabricated” (as opposed to
  “procured”) and clarify that fabrication activities that
  do not take place on the OCS can commence before the submittal of
  the FDR, FIR, or any required plans.

• Establishing a Renewable Energy Leasing
  Schedule: Currently, BOEM announces offshore renewable
  lease sales individually. The proposed rule would require the
  publication of a five-year schedule detailing the OCS renewable
  energy leases being considered by BOEM. The schedule would differ
  from the Oil and Gas Five-Year Leasing Program in that the schedule
  would not have requirements for public comment periods and would
  not constitute final agency action. As a proposed schedule, BOEM
  would not be obligated to offer all sales on the schedule; BOEM
  could adjust the schedule as necessary through published
  updates.

• Changes to BOEM’s renewable energy auction and
  lease issuance procedures: The proposed rule would
  introduce a new term of “provisional winner” to describe
  the bidder that BOEM determines has submitted the winning bid at
  the close of the auction. The provisional bidder would then become
  the “winning bidder” pending favorable completion of the
  government’s post-auction reviews. The proposal also gives BOEM
  clear authority to award a lease to the next highest bidder in the
  event the provisional winner fails to ultimately sign the lease,
  provide the required amount of financial assurance, or tender the
  outstanding bid balance. In addition, under the proposed rule, BOEM
  would continue the use of bidding credits and multiple factor
  auctions. BOEM seeks comments on whether these bidding methods are
  effective mechanisms of advancing priorities such as promoting
  workforce development and supply chain enhancement, consistent with
  the goals of OCSLA.

• Changes to financial assurance
  requirements: The proposed rule would eliminate the
  supplemental financial assurance currently required before COP
  approval, simplify the requirements for financial assurance during
  the early stages of a commercial lease, and provide more options
  for the financial assurance instruments that BOEM may accept. In
  addition, while current regulations require full funding of
  decommissioning accounts for each renewable energy facility’s
  installation, the proposed rule would allow incremental funding of
  decommissioning accounts during the operations term of a lease.
  Finally, BOEM also seeks comment on various aspects of the
  financial assurance framework, including whether BOEM should
  explicitly rely on the financial strength and reliability of other
  jointly and severally liable parties—including any current or
  predecessor lessees and grant holders, or co-lessees and co-grant
  holders—when determining the need for, and amount of,
  financial assurance necessary to cover accrued obligations.

• Supplementing safety management system
  (“SMS”) regulations: The proposed rule would add
  additional clarity concerning the types of information that the
  agency considers necessary in an SMS and would incentivize (through
  streamlined oversight) SMS certification from a recognized
  accreditation organization. The proposed rule would also require
  the submittal of an annual summary detailing how the SMS performed
  and the submittal of a triannual report summarizing the results of
  the most recent SMS audit, the corrective actions implemented, and
  a description of any changes made to the SMS since the prior
  report.

• Revising lease terms and clarifying BOEM’s
  authority to issue civil penalties: The proposed rule
  would amend the default lease terms currently in place by merging
  the existing preliminary and site assessment terms into one
  preliminary period, establishing new lease periods for COP review
  and for design and construction that can vary in length, and
  converting the existing 25-year operations term that commences at
  COP approval into a 30-year operations period commencing at the
  commercial operations date. The rule would also explicitly allow
  BOEM to assess immediate civil penalties in the renewable energy
  context for violations that constitute a threat of serious,
  irreparable, or immediate harm or damage to life, property, or the
  marine, coastal, or human environment, without notice and an
  opportunity to correct.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

Akin Gump Strauss Hauer & Feld LLP

At least 78 new US carbon capture and storage (CCS) projects were announced between 2021 and 2022, signifying a historic inflection point for CCS projects.