International obligations: climate changeAt a United Nations climate conference in late 2023, participants championed the successes of climate commitments in previous years. Nevertheless, there was consensus that not enough action has occurred to enable participants to meet the goals of the Paris Agreement in 20151. This agreement set ambitious goals relating to climate change mitigation, including the goal to keep the rise in mean global temperature to below two degrees Celsius (above pre-industrial levels).The use of renewable energy sources, such as offshore wind, has generated significant traction as a fuel source of the future to help meet such goals .Focus on offshore windThe United States, a signatory to the Paris Agreement, has iterated ambitious climate goals, including through offshore wind projects. Specifically, President Biden aspires to power over 10 million homes using wind turbines by 20302. Moreover, offshore wind projects provide value beyond the environment alone—they also offer opportunities for job creation, economic growth, and valuable investments.Challenges to offshore wind farmsNevertheless, establishing offshore wind projects poses several challenges. Offshore wind farms largely depend on massive turbines that are assembled offshore. Their installation necessitates the use of foundation-laying vessels equipped with large cranes. Therefore, a significant challenge lies in the design and construction of suitable ships that can withstand harsh marine environments, navigate narrow channels, handle heavy loads, and still remain cost-effective and efficient. Due to their complexity, there are only a handful of wind turbine installation vessels in the world. Currently, existing vessels are being contracted and relocated globally, causing delays due to weather conditions and leading to supply shortages.An examination of the functions of offshore services vessels sheds light on their complexity, and subsequent challenges in building them. The vessels are enormous to support large cranes that can lower massive offshore wind foundations into the water. These foundations need to be set in place, which the vessels accomplish by pounding foundational pieces into the seabed. After setting is complete, the work above water begins. The vessels place a tower on the foundation, and then situate a power generator on top of the tower. To accomplish these myriad tasks, the vessels drop stilts onto the seabed to lift the vessel above the ocean waves to create stability for construction.U.S.-specific challengesIn the United States, the availability of offshore services vessels is conflated by the Jones Act, which is at the root of every U.S. offshore wind project. Generally speaking, the Jones Act requires that only US‐built, U.S.-owned and US‐registered vessels with a U.S. coastwise trade endorsement transport goods or passengers by water in the United States. Since no wind turbine installation vessels currently comply with these requirements, workarounds need to be employed, such as using a foreign-flagged installation vessel that brings the wind turbine components from a foreign port, for example in Canada. Clearly, workarounds pose challenges, like the prospect of a Canadian port being hundreds of miles away from an offshore site, increasing voyage and installation time. Smaller vessels that are Jones Act compliant are often used to bring equipment as well as offshore workers from a closer U.S. port to the offshore project site, relying on the so-called feeder solution. Challenges remain, such as completing the vessel-to-vessel transfers of large equipment at the offshore site, in sea and weather conditions that can be very difficult.While the Jones Act creates a need for Jones Act compliant wind turbine installation vessels, it also places high barriers to entry into the construction market for such specialized assets. To qualify as a U.S. citizen owner, as required under the Jones Act, the entity that makes the investment must be controlled by U.S. citizens and be at least 75% U.S. owned at each tier in its corporate chain, up to its ultimate beneficial owners. Alternatively, the owner may be able to rely on the lease-financing exception to the Jones Act’s U.S. ownership requirements, but this requires bareboat chartering the vessel out at all times to a third party, which qualifies as a U.S. citizen, and acts as the owner of the vessel for the purposes of the project. Another barrier to entry is that the owner must use a U.S. shipyard, which increases significantly the cost of construction.There have been several attempts at building Jones Act compliant offshore wind turbine installation vessels. To our knowledge, only one such project remains underway, with the goal of taking delivery of the first Jones Act compliant vessel of this kind at the end of this year.ConclusionGiven the complexity of the Jones Act, as well as offshore wind farm construction generally, it is no surprise that legal challenges and disputes in such projects abound. This highlights the need for a robust legal framework and skilled representation for players in the market, at every stage of their offshore wind projects, from structuring to implementation. Ultimately, for a cleaner, more sustainable energy landscape that empowers communities and fosters economic growth, the success of offshore wind in the United States is pivotal.
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[1] United Nations Climate Change Conference (COP 28) (30 November-12 December, 2023). https://unfccc.int/cop28
[2] White House Fact Sheet: Biden-Harris Administration Announces New Actions to Expand U.S. Offshore Wind Energy (September 5, 2022). https://www.whitehouse.gov/briefing-room/statements-releases/2022/09/15/fact-sheet-biden-harris-administration-announces-new-actions-to-expand-u-s-offshore-wind-energy/
