A Louisiana company was awarded leases to four tracts Tuesday in the state's first open bidding for offshore wind power in the Gulf of Mexico.
Wind Energy Systems Technology, already developing a wind farm eight miles off of Galveston, was nominated by the state and was the only bidder for the tracts. A British company had expressed interest but later indicated it wasn't prepared to make an offer, said Texas Land Commissioner Jerry Patterson.
Patterson said he expects to hold bidding for more offshore wind power leases in about a year. The Texas General Land Office oversees development of territory up to 10 miles from the state's coastline.
"If you're in the wind business, whether it's onshore or offshore, Texas is the place to be," Patterson said.
Though it's not clear why more companies didn't bid on the offshore tracts Tuesday, it may be that many are busy with wind power projects on land in Texas, said Christine Real de Azua, spokeswoman for the American Wind Energy Association.
Texas is now the nation's top producer of wind power, according to the association. The state had 3,352 megawatts of wind-generating capacity installed by the end of the second quarter this year, ahead of California's 2,376 megawatts.
Patterson dismissed the idea that offshore wind turbines will hurt flocks of migrating birds or be an eyesore for coastal visitors. Birds tend to fly higher than the wind equipment and, at eight miles offshore, the giant turbines can't be seen by tourists on land, he said.
And if they are in view, he said, "I don't think it looks all that bad."
A press release from the Land Office regarding these leases is beneath the fold.
Jerry Patterson, Commissioner of the Texas General Land Office, today awarded the first four competitively bid leases for offshore wind power in the nation's history.
"The Texas Wind Rush is on, and the pioneers are staking their claims," Patterson said. "And wherever there are pioneers, the settlers soon follow."
The leases, awarded to Wind Energy Systems Technology (W.E.S.T., LLC), allow work to begin immediately on the construction of meteorological testing towers on each of the four tracts. Wind Energy Systems Technology is based in Louisiana. The company already holds the nation's only offshore lease for wind power, and is collecting data for a wind farm off the coast of Galveston.
Once the wind farms are operational, W.E.S.T. will pay the state's Permanent School Fund a minimum of $132 million over the 30-year life of the leases, discounted for the present value of the leases. The company's actual dollar commitment to the PSF, in today's dollars, is $258 million.
Factor in the Permanent School Fund's minimum gross revenue from the wind farms producing at 250MW to 300MW, and that total rises to more than $231 million, discounted for present value, or $433 million over the 30-years the leases cover.
"Wind energy is not a feel-good fad," Patterson said. "This is real technology, real business, real energy and it's happening right here in Texas."
Four offshore tracts were offered for wind development as part of the regular oil and gas lease sale held today. The offshore wind energy tracts are near Jefferson, Calhoun, Brazoria and Cameron counties. The four tracts total 73,098 acres in size. The tracts range in size from 12,240.02 to 23,040 acres.
The research and development stage will last approximately four years and the production term will be 30 years for each lease.
W.E.S.T. will now begin to pay the state's Permanent School Fund $91,000 a year for the right to develop wind farms on the four tracts of land. Following the research phase of the leases, W.E.S.T. will begin to develop wind farms on each of the four tracts. If winds are favorable, W.E.S.T. plans to build wind farms that will produce a minimum of 250 MW to 300 MW per lease.
W.E.S.T. will then begin paying the state's Permanent School Fund a percentage of the electricity produced on the leases. For the first eight years of each lease, W.E.S.T. will pay the Permanent School Fund from 3.5 to 6.5 percent of all electricity produced from the four tracts of land.
Generally, that royalty will start at 3.5 percent of all electricity produced for the first eight years of the lease. That percentage will grow to 4.5 to 4.75 percent of total production for years nine through 16, and 5.5 to 6.5 percent of total production for years 17 through 30 of the 30-year lease.
"This was the first, but won't be the last," Patterson said. "The future of offshore wind power in the U.S. is right here in Texas, and the Land Office is open for business."