Vitter: 2nd Offshore Wind Lease Sale Off East Coast Highlights Administration’s Energy Hypocrisy
Again questions ban on oil and gas leasing in the same geographical area
September 4, 2013
U.S. Sen. David Vitter (R-La.), top Republican on the Environment and Public Works Committee, today commented after the U.S. Department of Interior's second offshore lease sale for wind energy in the Atlantic Ocean. The first sale was July 31, 2013. Interior also 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.
"Selling leases in the Atlantic shouldn't be exclusive for the wind industry, especially when traditional energy is completely shut out of the same area," Vitter said. "We can all support energy sources that work to be sustainable and affordable but 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."
Sen. Vitter first called out the Administration for the double standard of allowing offshore leasing for wind but not for oil and gas in a November 2012 letter with Sen. Lamar Alexander (R-Tenn.) to former Interior Secretary Ken Salazar. The letter noted 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." On June 5, 2013, the Senators received a response from Interior providing very limited analysis.
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 as well as subsequent lease sales. The Senators asked, "What is the effective royalty rate Interior has contracted with NRG Bluewater Wind Delaware LLC for the October 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 June 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 wind lease sales. In addition, there is strong indication that the royalty rate for wind energy is a fraction of the tax credit it receives, thus meaning federal subsidies more than cover what these projects are expected to pay in royalties. Click here to read analysis by David Kreutzer, Ph.D., of the Heritage Foundation.