U.S. Sen. David Vitter (R-La.), top Republican on the Environment and Public Works Committee, today responded to news reports that the U.S. Department of Interior is planning a second offshore lease sale for wind energy in the Atlantic Ocean on September 4, 2013. The first sale is scheduled for July 31, 2013. Interior has already granted one other lease, without competitive bidding. As the Administration moves forward with more offshore wind energy off the east coast, the ban on oil and gas leasing, which started when President Obama took office, continues in the same region.
"Energy sources that can work to be sustainable and affordable are something we can all support, but the Administration has a bad habit of picking energy industry winners and losers," Vitter said. "According to the Interior's own analysis, 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. 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."
In November 2012, Sens. Vitter and Lamar Alexander (R-Tenn.) wrote a letter to former Interior Secretary Ken Salazar, noting that the agency will not allow offshore oil and gas leasing in the Atlantic Outer Continental Shelf (OCS), 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." Seven months later on June 5, 2013, the Senators finally received a response from Interior that provides limited analysis that further undermines justification for offshore wind.
In the November letter, the Senators write, "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%." This is before taxes and after competitively bidding on the lease. This tax is levied on all energy produced by an oil and gas company working on federal offshore or onshore resources. The Senators want to compare with an offshore wind lease granted without competitive bidding in October 2012 and subsequent upcoming lease sales. The Senators asked "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?"
As part of Interior's response, they explain that a minimum bid for oil and gas offshore lease sales are $100 per acre for deepwater leases, compared to $1 or $2 per acre for the upcoming wind lease sales. In addition, there is strong indication that the royalty rate is a fraction of the tax credit, thus meaning federal subsidies more than cover what these projects are expected to pay in royalties.