Republicans press administration to defend economics of offshore wind

Two Republican senators are pressing the Obama administration to explain the math behind a decision to allow an offshore wind facility in leased waters off Delaware’s coast while blocking oil drilling in the same region.

Sens. David Vitter, R-La., and Lamar Alexander, R-Tenn., made their skepticism known in a letter to Interior Secretary Ken Salazar that questions “the underlying economics of this lease sale” and seeks info on “the value of a similar lease sale for oil and gas on equivalent acreage.”

In October, NRG Bluewater Wind won a federal lease and the exclusive right to place an offshore wind farm in nearly 100,000 acres about 11 miles from the Delaware coast, but the project is on hold amid financing concerns and other issues. NRG Bluewater Wind scrapped its power purchase agreement between with Delmarva Power & Light Co. last December, after it failed to secure financing for the project.

Obama’s Interior Department has ruled out oil and gas drilling along the Atlantic Coast until mid 2017 at the earliest, as part of a five-year plan for selling offshore leases nationwide. However, the Bureau of Ocean Energy Management is preparing to permit seismic research that could help identify possible hidden pockets of oil and gas along the East Coast.

Vitter said that the decision to permit an offshore wind farm — while still ruling out oil and gas development in the area — is evidence that the Obama administration is “picking energy industry winners and losers.”

“Sec. Salazar should at least be able to defend the economics of the lease sale for wind energy,” Vitter said in a statement. “For example, the federal government receives significant revenue from royalties for offshore oil and gas production in the form of rents, royalties, bonus bids and taxes. Can the same be said for this offshore wind project?”

Vitter and Alexander pressed Salazar to detail the anticipated revenue to be raised from the NRG Bluewater Wind project over the next decade and the effective royalty rate for the project. Oil and gas companies generally pay a royalty rate of 12.5 percent to 18.75 percent on energy extracted from federal offshore leases.

Interior Department spokesman Blake Androff noted that “the administration is pursuing an aggressive all-of-the-above energy strategy” that “includes not only investing in advanced technologies and renewable energy production, but also safe and responsible production of domestic oil and gas.”

The ocean energy bureau is set to sell drilling leases in the western Gulf of Mexico on Nov. 28.