7 minute read
Offshore wind
US offshore wind growth brings risk and opportunity
Gerald Morrissey (left) and Vincent Foley (right), Partners in the Maritime Practice Group of the US based Holland & Knight LLP, discuss the marine risk and insurance implications from a legal perspective of the projected growth in US offshore wind farm construction vessels
There has been an increase in news and commentary about the vessels needed for construction and operation of US offshore wind farms that is driven by the 16 active leases on the US East coast and support for the ambitious 30 giga-watt by 2030 goals advanced by President Biden.
A great deal of expertise and practices developed for European offshore wind through the last 20 years is being imparted to development of projects in the US. But, there are many issues and applications in the US that are new and/or different.
US-SPECIFIC IMPLICATIONS
A good deal of commentary has touched on the role that the Jones Act may have on the availability of vessels for projects in the US.
Most commonly, the discussion concerns the requirements to use US “coastwise qualified” vessels for offshore wind projects (e.g., because of the Jones Act, and Passenger Vessel Services Act, to name two relevant statutes); concerns about availability of coastwise qualified vessels; and, ultimately, concerns about the relative cost of building coastwise qualified vessels.
More in-depth analysis points out that, while employing a foreign-flagged turbine installation vessel (TIV) in conjunction with coastwise qualified feeder vessels can comply with Jones Act requirements, using a coastwise qualified TIV would be operationally more efficient and, theoretically, more cost effective.
While marine risk is quite logically an implicit facet of these efficiency and cost considerations, the impact of using a US coastwise qualified TIV on marine risk exposure has not received much specific attention.
As utility scale US offshore wind comes closer to fruition,
Although Jones Act considerations apply in one way or another to any potential vessel involved in a US offshore wind project, the most significant issue concerns the vessels needed to construct and install the turbines.
and as construction of the first US coastwise qualified TIV proceeds, it is reasonable to expect more rigorous analysis and consideration of the expected reduction in marine risk exposure of projects using a coastwise qualified TIV for integrated transportation and installation.
THE “JONES ACT”
The “Jones Act” refers to a US statute that regulates the carriage of merchandise by water between any two points in the US, referred to as “coastwise trade.”
The term Jones Act is commonly used to refer collectively to a number of other US statues that regulate carriage of passengers, cargo (or equipment), towing, dredging, salvage, and fisheries.
A Jones Act coastwise qualified vessels must be: > Constructed in the US (although substantial foreign content including engines and equipment is permissible); > Registered/flagged in the US (with a “coastwise” endorsement); > The master and majority of the crew must be US citizens; and, > The vessel must be at least 75% owned by US citizens or Jones Act-qualifying US citizen entities, and operated and overall controlled by a Jones Act qualifying entity.
For the purposes of offshore wind, all points within US territorial waters (generally extending from the coastline out to three nautical miles) are considered coastwise points.
Accordingly, the Jones Act was implicated in the Block Island project locations in the territorial waters of Rhode Island.
In addition, the Outer Continental Shelf Lands Act (OCSLA) extends the application of federal laws, including the Jones Act, to the subsoil and seabed of the Outer Continental Shelf (OCS) and artificial islands or installations permanently or temporarily attached to the seabed for certain purposes.
In late 2020, Congress clarified a long-standing ambiguityover whether offshore wind installations would be considered OCSLA attachments, amending the extension of federal laws in Section 4(a) of OCSLA to cover: “(iii) installations and other devices permanently or temporarily attached to the seabed, which may be erected thereon for the purpose of exploring for, developing, or producing resources, including non-mineral energy resources…”[1] US Customs and Boarder Protection (CBP), which administers the Jones Act, has subsequently issued interpretive rulings expressly applying the Jones Act to proposed US offshore wind projects on the OCS.[2]
OFFSHORE WIND PROJECT VESSELS
Construction and operation of offshore wind projects can involve a wide array of vessels and vessel types for preconstruction surveying, construction of foundations, scour protection, cable laying, tower/turbine installation and long-term operation and maintenance.[3]
Although Jones Act considerations apply in one way or
another to any potential vessel involved in a US offshore wind project, the most significant issue concerns the vessels needed to construct and install the turbines.
In Europe, wind farm construction generally uses a specialized TIV, that is designed to both transport the turbine components from port to the installation site, and install them on site.
Because of the transportation of equipment between two points in the US, a TIV used in the same manner for US offshore wind projects would need to be US coastwise qualified, but at present none exist.
Thus, for the Block Island project a non-coastwise qualified TIV was permissibly used to construct the towers by staying in a stationary position, while two smaller coastwise qualified vessels were used as “feeder” vessels to ferry the components from port to the installation sites.
For two test towers installed on the OCS off the coast of Virginia, a non-coastwise qualified TIV was permissibly used by loading the components on the TIV in a foreign port (Halifax), and transiting to the tower installation site for installation on the OCS.
In each case, the non-coastwise qualified TIV was permissible because the TIV did not engage in transportation of merchandise or passengers between two US points.
For the Virginia project, the transit from Halifax to the OCS installation site was not a Jones Act movement, but required transiting back and forth to a relatively distant foreign port.
For the Block Island project, the TIV did not engage in any transportation itself, but required the additional coastwise qualified feeder vessels and required a second heavy lift for the components. The first was in port, and the second at sea from the feeder vessels to the TIV.
MARINE RISK CONSIDERATIONS
Employing a non-coastwise qualified TIV in the scenarios described above impacts installation efficiency and cost. These are balanced against considerations such as the cost and logistical details of constructing coastwise qualified TIVs such as US shipbuilding capacity and the high projected cost of US construction and operation.
But a matter worthy of more discussion is the relative risk of using a single TIV for transportation and installation against the feeder vessel approach.
The Block Island feeder vessels were themselves jack up vessels which permitted a more stable platform for the at sea heavy lift from the feeder vessel to the TIV.
Floating feeder vessels could be used, especially in conjunction with advanced station keeping and lifting compensation technologies. But, in either scenario the second at sea heavy lift when using a feeder vessel increases the risk of property damage, potential vessel casualty and associated marine pollution, and personal injury.
These concerns are a subset of cost and efficiency, but, they also warrant specific consideration from the perspective of marine risk and insurance, in particular because of the increased risks of personal injury or death claims, a safety and well-being issue which warrants consideration independent of the cost and efficiency analyses.
In the absence of available US coastwise qualified TIVs, the feeder vessel installation approach is likely to be employed again. This is an approach that US Customs and Border Protection (CBP) recently held would comply with the Jones Act in a ruling issued in connection with the Vineyard Wind project offshore of Massachusetts.
At the same time, Dominion has undertaken construction of the first coastwise qualified TIV, at Keppel AmFELS in Brownsville, TX, due to be delivered at the end of 2023. It was announced that the vessel would be chartered for use by two other projects slated for construction before Dominion’s Virginia project.
The current trajectory of the offshore wind industry suggests that this trend of investment in US vessels and infrastructure will continue. While marine risk considerations alone are not likely to drive a decision to build a coastwise qualified TIV they are relevant factors for analysis and consideration by the industry.
“As utility scale US offshore wind comes closer to fruition, and as construction of the first US coastwise qualified TIV proceeds, it is reasonable to expect more rigorous analysis and consideration of the expected reduction in marine risk exposure of projects using a coastwise qualified TIV for integrated transportation and installation.’’
[1] Section 9503 of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021,H.R. 6395, 116th Cong. § 9503 (2021) (NDAA) (emphasis highlighting amendment added). [2] See, e.g., See HQ H309186 (Jan. 27, 2021), HQ H316313 (Feb. 4, 2021); and HQ H317289 (March 25, 2021). [3] See, e.g., GAO report on Offshore Wind Energy, GAO-21-153 at 9-11 (Dec. 2020).
