The Massachusetts Energy Facilities Siting Board, in an April 6 final decision, denied Cape Wind Associates’ request for a two-year extension of two previously issued board approvals in relation to its proposed offshore wind farm.
As noted in the decision, Cape Wind in April 2015 requested the extension – through May 1, 2017 – of the two previously issued board approvals, the original 2005 approval and the 2009 certificate approval, relating to a proposed subsea and onshore transmission line intended to interconnect Cape Wind’s proposed offshore wind farm in Nantucket Sound with the regional transmission grid at the Barnstable switching station.
The approvals were set to expire on May 1, 2015, unless Cape Wind had begun construction of the lines, for which the approvals were granted, by that date. The board added that Cape Wind asserted that it could not begin construction by May 1, 2015, because of its inability to finance the transmission line project and wind farm – together, the Cape Wind project, which is being developed by Energy Management Inc. – caused by an appeal of the board’s approval of a project change in the docket, EFSB 02-2B/EFSB 07-8A (November 2014).
In December 2014, the Town of Barnstable and the Barnstable Fire District (collectively referred to as Barnstable) submitted a notice of appeal to the board, and filed their appeal (referred to as the Barnstable appeal in the decision) with the Supreme Judicial Court (SJC).
The board also noted that in the original 2005 approval, it approved the construction by Cape Wind and Commonwealth Electric Company d/b/a NSTAR Electric Company of two new 115-kV electric transmission lines that would travel undersea beneath Nantucket Sound and Lewis Bay and underground in the Towns of Yarmouth and Barnstable on Cape Cod. The purpose of the project is to interconnect Cape Wind’s proposed 130-turbine offshore wind-powered electric generating facility in Nantucket Sound with the regional electric grid.
The transmission line route is about 18.4 miles in length, and would begin at the proposed wind farm on Horseshoe Shoal in Nantucket Sound, travel about 12.5 miles beneath Nantucket Sound and Lewis Bay, come ashore at the southern end of New Hampshire Avenue in Yarmouth, and then continue about 5.9 miles underground through Yarmouth and Barnstable to the Barnstable switching station, the board said.
The wind farm, which would be located entirely in federal waters, is not subject to board jurisdiction.
The board also noted that in May 2008, it extended the deadline by which Cape Wind was required to begin construction for an additional three-year period, through May 1, 2011. Cape Wind requested the extension during the course of a proceeding in which it sought approval of four proposed changes to the project as approved in the original 2005 approval. Cape Wind asserted that project construction would be delayed because of amendments to federal law in 2005 that changed the lead federal agency conducting the environmental review of the wind farm from the Army Corps of Engineers to the Minerals Management Service, thus delaying the issuance of the draft environmental impact statement (EIS). The board added that Cape Wind also cited the Cape Cod Commission’s denial of the the company’s application for development of regional impact for the project.
The board said that it found that the request for a three-year extension was reasonable.
Following the 2008 project change and extension approval, the May 1, 2011, deadline for beginning project construction was extended for four additional years by operation of two laws enacted by the General Court, the board said.
The board in 2009 granted a certificate of environmental impact and public interest for the project, containing nine state and local permits identified by Cape Wind as necessary for project construction.
In August 2014, the board added, Cape Wind and NSTAR asked the board to approve a change to the project that involved installing additional equipment at the Barnstable switching station. The new equipment was required as a result of a new interconnection study by ISO New England, the board said, noting that it approved the project change in November 2014, and imposed six additional conditions on the companies to mitigate impacts caused by the project change.
Judicial proceedings, PPAs, permits & cost
Discussing judicial proceedings, the board noted that the Barnstable appeal case has not been reserved and reported to the full court and the schedule for briefing and oral argument has not been established yet. While Cape Wind viewed the chances of the appellants prevailing as slim, the company noted that potential investors may be hesitant to finance the project with the Barnstable appeal still pending, the board said.
There is also a federal court appeal in the U.S. Court of Appeals for the D.C. Circuit that is preventing Cape Wind from financing the project, according to the company. That case is an appeal from a decision in the U.S. District Court upholding the Bureau of Ocean Energy Management’s (BOEM) approval of Cape Wind’s offshore lease for the wind farm and its construction and operations plan for the facility. Cape Wind expects a decision by May, the board added.
Massachusetts Electric and Nantucket Electric d/b/a National Grid and NSTAR d/b/a Eversource Energy (NYSE:ES) had entered into power purchase agreements (PPAs) with Cape Wind for 50% and 27.5%, respectively, of the wind farm’s output, the board noted.
Cape Wind in December 2014 told National Grid and Eversource that it would not be able to achieve certain milestones under the PPAs related to financing and beginning construction of the wind farm. National Grid and Eversource in January 2015 separately notified Cape Wind that they were terminating the PPAs, and Cape Wind in February 2016 informed the two companies that the respective PPAs were terminated, the board added.
According to Cape Wind, legislation pending before the General Court could provide Cape Wind and other offshore wind power developers with the opportunity to participate in solicitations for off-take arrangements sufficient to obtain financing. According to Cape Wind, without PPAs or another off-take agreement, lending institutions would be unlikely to provide financing for the project, which could not be built as a “merchant generator,” the board added.
Because of the uncertain status of the PPAs, Cape Wind in early 2015 suspended its arrangement of financing for the project.
According to Cape Wind, the transmission project’s cost has been reduced since the original 2005 approval, the board said, adding that in 2005, the cost of all jurisdictional transmission facilities was estimated at $79.5m. According to Cape Wind, the current cost estimate of those facilities is $63m, largely due to a 50% reduction in the price of copper, the board said.
Discussing permits, the board noted that while Cape Wind was in possession of all necessary permits in 2012, the company has conceded that some of the permits had lapsed or expired. BOEM, for instance, in July 2015 approved the company’s request for a two-year suspension of its offshore lease, or until July 24, 2017, and imposed some conditions on Cape Wind.
Decision on extension
Regarding the extension request, the board noted that Cape Wind argued that the board agreed that its assumptions and findings were not changed in November 2014 when it issued the 2014 project change approval. Cape Wind claimed that its conclusion of no changes in background conditions is validated by the NEPA process conducted by BOEM, including the final EIS in January 2009, and three environmental assessments approved by BOEM in 2010, 2011 and 2014.
Cape Wind also asserted that the evidence and arguments of the project’s opponents – the Alliance to Protect Nantucket Sound and Barnstable – relating to the obstacles facing the wind farm are not relevant to the board’s standard of review in this proceeding, and in any event, given the wind farm’s proposed location in federal waters, are beyond the scope of the board’s authority.
The board added that the Alliance argued that Cape Wind has not offered any credible evidence that it will be able to begin project construction by May 1, 2017. The Alliance contends that Cape Wind’s lack of progress in financing and permitting the wind farm is a changed condition that the board should consider in deciding the case, the board said. Among other things, the Alliance asserted that the board should deny the extension because background conditions have changed such that the evidence indicates that the wind farm is not likely to contribute to the regional energy supply.
Barnstable argued that with the PPAs now terminated, Cape Wind is not likely to obtain any off-take arrangement, and asserted that Cape Wind’s requested extension date is unrealistic.
The board also said that Cape Wind’s assertion that the 2014 project change approval supports its conclusion that background conditions have not changed is misplaced. The board noted that its investigation of the project change was limited only to an examination of how the changes at the switching station would affect the balance of reliability, cost and environmental impacts previously found. The board said that it did not review the surrounding conditions of two proposed transmission lines beyond the entry point to the switching station.
The evidence in the proceeding still precludes a finding that the wind farm is likely to contribute to the regional energy supply, the board said, adding that several of the federal permits have lapsed or expired.
The evidence presented in the case is overwhelming that the requested extension until May 1, 2017, is not adequate given the numerous obstacles facing the project, the board said. Regardless of the pending and prospective appeals, the project’s financing depends on an off-take arrangement, and pending legislation is the only option for that put forward by Cape Wind, the board said.
While Cape Wind insists that May 1, 2017, remains a reasonable extension period, it cannot provide any project schedule that it considers reliable, the board said, adding that at this time, Cape Wind needs a lengthy, almost open-ended extension period, which would be unreasonable.