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Blow to Biden as offshore wind auction in Gulf of Mexico fails to stir interest

The Biden administration on Tuesday held the first ever auction for the right to develop offshore wind in the Gulf of Mexico, with just one of the three available leases provisionally awarded and only two bidders.

The historic sale fell on the anniversaries of 2005’s Hurricane Katrina and 2021’s Hurricane Ida, climate crisis-fueled disasters that devastated Gulf communities. It also comes the day after the Gulf cities of New Orleans and Houston saw their hottest temperatures in recorded history, and as the largest wildfire in state history ravages Louisiana.

The Bureau of Ocean Energy Management held auctions on one lease area off the coast of Lake Charles, Louisiana, and two others off the coast of Galveston, Texas, which together have the capacity to power almost 1.3m homes. Last month, officials said the sale would show that the Gulf – currently the nation’s primary source of offshore oil and gas – can become a key player in a new green economy.

But the result was anti-climatic, with neither of the two lease areas off the Texas coast receiving bids. The German developer RWE was provisionally awarded the third area off Louisiana, beating out just one other bidder.

Several factors may have put a damper on developer interest, the newsletter Heatmap reported last week. Gulf wind speeds are often lower than other coastal areas’, requiring the use of specific turbines for which a robust supply chain must be developed. No Gulf states’ energy policies specifically require the use of offshore wind. And analysts say building out offshore wind in the Gulf will be more expensive than in the north-east, making it harder for wind projects to compete in local energy markets, where existing energy prices are lower.

Kendall Dix, the national policy director of environmental justice organization Taproot Earth, said the sale was an indication that offshore wind development should not be left to the market.

“Maybe there wasn’t an immediate profit to be made,” he said. “But offshore wind … is a critical piece of the energy transition, so we’re probably going to need the public sector, the government, to take on a role in building it out instead of private companies.”

Despite challenges to building out wind in the Gulf, the region’s longtime production of fossil fuels means existing energy production infrastructure offers unique benefits, analysts say.

If planned correctly, that could be welcome news for oil and gas employees who have transferable skills to work in the blossoming industry – especially because, thanks to gains in efficiency in the fossil-fuel sector, workers are being laid off even as production in the area is ramping up, said the former BOEM official Megan Milliken Biven, who is also the founder of the worker advocacy and public policy collaborative True Transition.

But before the sale, some environmental and labor justice advocates said the BOEM did not instate adequate safeguards to ensure communities most harmed by the fossil fuel industry will benefit.

The bureau did include incentives in the lease sale for bidders who commit to supporting workforce training programs, which could help ensure new offshore wind jobs go to workers from the fossil fuel industry.

To support the creation of better jobs, the agency also encourages the use of project labor agreements – agreements between developers and unions that establish wages, safety protections and benefits for workers before hiring begins.

“BOEM recognizes the importance of making sure that we do this economic development in a way where the benefits are going to be spread among a lot of different people,” said Rick Levy, the president of the Texas AFL-CIO.

Had the sale drummed up interest in the areas off Texas’s coast, it could have been particularly beneficial, as Texas is notoriously unregulated and is the only US state that does not require workers’ compensation for on-the-job injuries.

Yet despite pressure from unions and climate activists, the agency stopped short of requiring such agreements or even incentivizing them. That means there is no guarantee jobs in offshore wind will pay well, or that they will be safe.

That is a serious problem because fossil-fuel jobs in the Gulf are notoriously dangerous. The nation currently lacks the regulations to change that, Milliken Biven said.

“There really is no offshore safety program in the Gulf of Mexico. Federal regulators don’t really have one,” said Biven. “If you want to make offshore wind jobs safe, you have to make all offshore jobs safe … We’re a long way off.”

Offshore wind could also be a boon to poor communities in the Gulf who have long been harmed by fossil-fuel pollution, but the bureau did not go far enough to make that a reality, Dix said.

The Biden administration excluded offshore wind from its hallmark environmental justice plan, Justice40, meant to steer 40% of federal environmental investments to vulnerable communities, he noted. And while during a 2022 offshore wind lease sale in California, the BOEM offered bidding credits for developers who entered into community benefits agreements – contracts that ensure developers benefit local communities – it did away with those incentives for Tuesday.

“The Gulf south has had so much environmental injustice for so long, so much economic justice, so much racism, so much pollution,” he said. “Yet they removed the community benefit provision.”

Offshore wind could be used to supplant fossil-fuel energy. But analysts never expected that to be the result of Tuesday’s sale.

Several companies eligible for Tuesday’s sale instead say they would use their leases to fuel renewable hydrogen to power industrial processes and thereby reduce their emissions – an approach some advocates criticize as inefficient and a way to prolong the fossil-fuel sector’s life.

Existing fossil-fuel infrastructure in the Gulf could also be an obstacle to offshore wind, and has already stunted development in the waters off south-east Louisiana and Mississippi.

The reason, Dix said, is that for decades regulators have let energy companies leave their abandoned pipelines in the water. The Gulf of Mexico, he said, is home to more than 18,000 miles of abandoned pipelines. This unused infrastructure makes it unsafe to place new offshore wind transmission cables nearby without costly remediation.

To ensure Gulf communities truly benefit from offshore wind, Dix said, the government must force companies to remove unused infrastructure. And it must stop permitting new oil and gas infrastructure in the region, he said.

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