US WE THE PEOPLE must remember, before American colonies became independent the laws of seas were MEDIEVAL laws controlled by KINGS AND QUEENS. The start of claiming territorial rights to offshore land beginning at 3 miles was a SOVEREIGNTY issue. Back then telescopes could see enemy ships 3 miles out ----those ships equipped with artillery could not reach shore at 3 miles. Fisheries along the coast protected for US citizens and their economy.
UNITED NATIONS UNCLOS is that same global 1% KINGS AND QUEENS-----taking what were sovereign land laws and CREEPING INTO INTERNATIONAL control with EEZ.
REAGAN extended territorial waters to offset bringing US into UNCLOS EEZ. Rather than soviet spies---we are sure this was driven by offshore oil drilling capability and locating oil and gas in these 12 mile zones.
CREEPING JURISDICTION goes both ways----UNCLOS is creeping further into US territorial waters and continental shelf sovereignty ----while nations not members of UN like CHINA are extending their territorial rights.
Reagan Extends Territorial Waters to 12 Miles
By ANDREW ROSENTHAL, Special to the New York Times
Published: December 29, 1988LOS ANGELES, Dec. 28--
President Reagan today extended the territorial waters of the United States to 12 miles from 3 miles, a move Administration officials said was partly intended to hinder operations of Soviet spy trawlers that ply American coastlines.
The extension of American jurisdiction was contained in an executive proclamation issued by Mr. Reagan in Los Angeles, where he is taking a working vacation at his new Bel-Air home.
''Extension of the territorial sea by the United States to the limits permitted by international law will advance the national security and other significant interests of the United States,'' Mr. Reagan said in the proclamation. The move would not affect cruise ships and other merchant vessels on innocent passage through American waters. Maritime attorneys and others involved in the shipping business said they had not yet studied the full implications of the action. But they said one practical effect might be that cruise ships would now have to sail 12 miles away from the coastline instead of 3 miles before opening their gambling casinos and duty-free shops.
The White House said Mr. Reagan took the action pursuant to the 1982 United Nations Convention on the Law of the Sea, which was approved by the Senate and grants signatory nations the right to extend their territorial limits to 12 miles. The United States is the 105th nation to proclaim the 12-mile limit under that treaty. White House aides said the action brought American territorial limits in line with those of most other nations and was not prompted by any particular event. Soviet Spy Activities
But State Department officials in Washington said the announcement was motivated in part by a desire to keep Soviet intelligence-gathering vessels farther from the shoreline.
Soviet spy ships, once converted fishing trawlers but more recently built especially for intelligence gathering, eavesdrop on American military communications networks and help monitor the movements of Navy submarines and surface warships.
Pentagon officials say there has been a significant increase in recent months in the amount of time Soviet intelligence ships spend off Pearl Harbor, which is headquarters of the Navy's Pacific Fleet, and off the submarine bases at San Diego and in the Strait of Juan de Fuca in Washington State.
They said Soviet ships were spending up to three times as many days as they had in the past at their listening posts before returning home. They said they did not know what prompted the increase in Soviet activity. The Presidential proclamation will not stop such operations, but might make them more difficult.
State Department officials said the action would have no effect on fishing rights, oil drilling or states' rights to control their shorelines. It also would not affect maritime boundaries between the United States and other countries.
The proclamation extends American sovereignty not only over the surface of the ocean, but also over ''the airspace over the territorial sea, as well as its bed and subsoil.''
It applies to the 50 states, Puerto Rico, Guam, American Samoa, the United States Virgin Islands, the Northern Mariana Islands and ''any other territory or possession over which the United States excercises sovereignty,'' the proclamation said.
What Bush and Jindal did these few decades is DEREGULATE which energy corporations can attain LEASES to drill expanding to foreign corporations the ability to drill for oil in our US EEZ 200 mile offshore. It was not legal---they just did it.
US 99% of WE THE PEOPLE have had a long, ongoing battle with oil/energy subsidies using Federal taxpayer money--------they take that subsidy and then do not pay the ROYALTIES. Now, US taxpayers are handing those subsidies to FOREIGN GLOBAL ENERGY CORPORATIONS which do not pay ROYALTIES but create devastating environmental damage---as in BP.
BP AND ROYAL DUTCH SHELL TAKING OUR US OIL AND NATURAL GAS AND RUNNING IS AN ATTACK ON OUR US SOVEREIGN COASTLINE.
'Although BP remains the leading leaseholder in the Gulf of Mexico with about 620 leases before this auction, unless an oil company gains new exploration acreage, its resources inevitably dwindle.
Being excluded from the gulf auctions also meant that BP risked losing out to rivals like Royal Dutch Shell and Chevron, which are both pursuing opportunities in the gulf. Last year, Shell passed BP as the largest producer of oil and gas in the Gulf of Mexico'.
This started as ONE WORLD ONE GOVERNANCE MOVED FORWARD during CLINTON/BUSH/OBAMA. What is being called a US EEZ-----ECONOMIC ENTERPRISE ZONE is being filled with foreign global corporations not only in oil and gas extraction-----but as offshore windmills----massive solar panel arrays ------all in our US sovereign waters all global corporations foreign owned.
Drilling Deep in the Gulf of Mexico - The New York Times
Nov 07, 2006 · ... Drilling Deep in the Gulf of Mexico. ... companies are venturing farther out to sea, drilling ... about 125 miles from New Orleans.
When US citizens protest locally against rising taxation, fees, fines------while communities decay, services disappear----this is the public policy driving our lost corporate tax revenue----leaving our communities as global corporate subsidy and failing to bring back corporate taxes OR ROYALTIES.
Unfair Share: How Oil and Gas Drillers Avoid Paying Royalties
Income from oil and gas production doesn’t always trickle down to landowners, as companies find ways to minimize the share they pay in royalties.
by Abrahm Lustgarten
Aug. 13, 2013, 10:20 a.m. EDT
Don Feusner ran dairy cattle on his 370-acre slice of northern Pennsylvania until he could no longer turn a profit by farming. Then, at age 60, he sold all but a few Angus and aimed for a comfortable retirement on money from drilling his land for natural gas instead.
It seemed promising. Two wells drilled on his lease hit as sweet a spot as the Marcellus shale could offer – tens of millions of cubic feet of natural gas gushed forth. Last December, he received a check for $8,506 for a month’s share of the gas.
Then one day in April, Feusner ripped open his royalty envelope to find that while his wells were still producing the same amount of gas, the gusher of cash had slowed. His eyes cascaded down the page to his monthly balance at the bottom: $1,690.
Chesapeake Energy, the company that drilled his wells, was withholding almost 90 percent of Feusner’s share of the income to cover unspecified “gathering” expenses and it wasn’t explaining why.
“They said you’re going to be a millionaire in a couple of years, but none of that has happened,” Feusner said. “I guess we’re expected to just take whatever they want to give us.”
Like every landowner who signs a lease agreement to allow a drilling company to take resources off his land, Feusner is owed a cut of what is produced, called a royalty.
In 1982, in a landmark effort to keep people from being fleeced by the oil industry, the federal government passed a law establishing that royalty payments to landowners would be no less than 12.5 percent of the oil and gas sales from their leases.
From Pennsylvania to North Dakota, a powerful argument for allowing extensive new drilling has been that royalty payments would enrich local landowners, lifting the economies of heartland and rural America. The boom was also supposed to fill the government’s coffers, since roughly 30 percent of the nation’s drilling takes place on federal land.
Over the last decade, an untold number of leases were signed, and hundreds of thousands of wells have been sunk into new energy deposits across the country.
But manipulation of costs and other data by oil companies is keeping billions of dollars in royalties out of the hands of private and government landholders, an investigation by ProPublica has found.
An analysis of lease agreements, government documents and thousands of pages of court records shows that such underpayments are widespread. Thousands of landowners like Feusner are receiving far less than they expected based on the sales value of gas or oil produced on their property. In some cases, they are being paid virtually nothing at all.
In many cases, lawyers and auditors who specialize in production accounting tell ProPublica energy companies are using complex accounting and business arrangements to skim profits off the sale of resources and increase the expenses charged to landowners.
Deducting expenses is itself controversial and debated as unfair among landowners, but it is allowable under many leases, some of which were signed without landowners fully understanding their implications.
But some companies deduct expenses for transporting and processing natural gas, even when leases contain clauses explicitly prohibiting such deductions. In other cases, according to court files and documents obtained by ProPublica, they withhold money without explanation for other, unauthorized expenses, and without telling landowners that the money is being withheld.
Significant amounts of fuel are never sold at all – companies use it themselves to power equipment that processes gas, sometimes at facilities far away from the land on which it was drilled. In Oklahoma, Chesapeake deducted marketing fees from payments to a landowner – a joint owner in the well – even though the fees went to its own subsidiary, a pipeline company called Chesapeake Energy Marketing. The landowner alleged the fees had been disguised in the form of lower sales prices. A court ruled that the company was entitled to charge the fees.
Costs such as these are normally only documented in private transactions between energy companies, and are almost never detailed to landowners.
“To find out how the calculation is done, you may well have to file a lawsuit and get it through discovery,” said Owen Anderson, the Eugene Kuntz Chair in Oil, Gas & Natural Resources at the University of Oklahoma College of Law, and an expert on royalty disputes. “I’m not aware of any state that requires that level of disclosure.”
To keep royalties low, companies sometimes set up subsidiaries or limited partnerships to which they sell oil and gas at reduced prices, only to recoup the full value of the resources when their subsidiaries resell it. Royalty payments are usually based on the initial transaction.
In other cases, companies have bartered for services off the books, hiding the full value of resources from landowners. In a 2003 case in Louisiana, for example, Kerr McGee, now owned by Anadarko Petroleum, sold its oil for a fraction of its value – and paid royalties to the government on the discounted amount – in a trade arrangement for marketing services that were never accounted for on its cash flow statements. The federal government sued, and won.
The government has an arsenal of tools to combat royalty underpayment. The Department of Interior has rules governing what deductions are allowable. It also employs an auditing agency that, while far from perfect, has uncovered more than a dozen instances in which drillers were “willful” in deceiving the government on royalty payments just since 2011. A spokesman for the Department of Interior’s Office of Natural Resources Revenue says that over the last three decades, the government has recouped more than $4 billion in unpaid fees from such cases.
There are few such protective mechanisms for private landowners, though, who enter into agreements without regulatory oversight and must pay to audit or challenge energy companies out of their own pockets.
ProPublica made several attempts to contact Chesapeake Energy for this article. The company declined, via email, to answer any questions regarding royalties, and then did not respond to detailed sets of questions submitted afterward. The leading industry trade group, the American Petroleum Institute, also declined to comment on landowners’ allegations of underpayments, saying that individual companies would need to respond to specific claims.
Anderson acknowledged that many landowners enter into contracts without understanding their implications and said it was up to them to do due diligence before signing agreements with oil and gas companies.
“The duty of the corporation is to make money for shareholders,” Anderson said. “Every penny that a corporation can save on royalties is a penny of profit for shareholders, so why shouldn’t they try to save every penny that they can on payments to royalty owners?”
* * *
Gas flows up through a well head on Feusner’s property, makes a couple of turns and passes a meter that measures its volume. Then it flows into larger pipes fed by multiple pipelines in a process the industry calls “gathering.” Together, the mixed gases might get compressed or processed to improve the gas quality for final sale, before feeding into a larger network of pipelines that extends for hundreds of miles to an end point, where the gas is sold and ultimately distributed to consumers.
Each section of pipeline is owned and managed by a different company. These companies buy the gas from Chesapeake, but have no accountability to Feusner. They operate under minimal regulatory oversight, and have sales contracts with the well operator, in this case Chesapeake, with terms that are private. Until Chesapeake sold its pipeline company last winter, the pipelines were owned by its own subsidiaries.
As in many royalty disputes, it is not clear exactly which point of sale is the one on which Feusner’s payments should be based – the last sale onto the open market or earlier changes in custody. It’s equally unclear whether the expenses being charged to Feusner are incurred before or after that point of sale, or what processes, exactly, fall under the term “gathering.” Definitions of that term vary, depending on who is asked. In an email, a spokesperson for Chesapeake declined to say how the company defines gathering.
Making matters more complicated, the rights to the gas itself are often split into shares, sometimes among as many as a half-dozen companies, and are frequently traded. Feusner originally signed a lease with a small drilling company, which sold the rights to the lease to Chesapeake. Chesapeake sold a share of its rights in the lease to a Norwegian company, Statoil, which now owns about a one-third interest in the gas produced from Feusner’s property.
Chesapeake and Statoil pay him royalties and account for expenses separately. Statoil does not deduct any expenses in calculating Feusner’s royalty payments, possibly because it has a different interpretation of what’s allowed.
“Statoil’s policy is to carefully look at each individual lease, and to take post-production deductions only where the lease and the law allow for it,” a company spokesman wrote in an email. “We take our production in kind from Chesapeake and we have no input into how they interpret the leases.”
Once the gas is produced, a host of opaque transactions influence how sales are accounted for and proceeds are allocated to everyone entitled to a slice. The chain of custody and division of shares is so complex that even the country’s best forensic accountants struggle to make sense of energy companies’ books.
Feusner’s lease does not give him the right to review Chesapeake’s contracts with its partners, or to verify the sales figures that the company reports to him. Pennsylvania – though it recently passed a law requiring that the total amount of deductions be listed on royalty statements – has no laws dictating at what point a sale price needs to be set, and what expenses are legitimate.
Concerns about royalties have begun to attract the attention of state legislators, who held a hearing on the issue in June. Some have acknowledged a need to clarify minimum royalty guarantees in the state, but so far, that hasn’t happened.
“If you have a system that is not transparent from wellhead to burner tip and you hide behind confidentiality, then you have something to hide,” Jerry Simmons, executive director of the National Association of Royalty Owners (NARO), the premier organization representing private landowners in the U.S., told ProPublica in a 2009 interview. Simmons said recently that his views had not changed, but declined to be interviewed again. “The idea that regulatory agencies don’t know the volume of gas being produced in this country is absurd.”
Because so many disputes come down to interpretations of contract language, companies often look to courts for clarification. Not many royalty cases have been argued in Pennsylvania so far, but in 2010, a landmark decision, Kilmer v. Elexco Land Services, set out that the state’s minimum royalty guarantee applied to revenues before expenses were calculated, and that, when allowed by leases, energy companies were free to charge back deductions against those royalties.
Since then, Pennsylvania landowners say, Chesapeake has been making larger deductions from their checks. (The company did not respond to questions about this.) In April, Feusner’s effective royalty rate on the gas sold by Chesapeake was less than 1 percent.
Paul Sidorek is an accountant representing some 60 northeastern Pennsylvania landowners who receive royalty income from drilling. He’s also a landowner himself – in 2009, he leased 145 acres, and that lease was eventually sold to Chesapeake. Well aware of the troubles encountered by others, Sidorek negotiated a 20 percent royalty and made sure his lease said explicitly that no expenses could be deducted from the sale of the gas produced on his property.
Yet now, Sidorek says, Chesapeake is deducting as much as 30 percent from his royalties, attributing it to “gathering” and “third party” expenses, an amount that adds up to some $40,000 a year.
“Now that the royalties are flowing, some people just count it as a blessing and say we don’t care what Chesapeake does, it’s money we wouldn’t have had before,” Sidorek said. But he’s filed a lawsuit. “I figure I could give my grandson a first-class education for what Chesapeake is deducting that they are not entitled to, so I’m taking it on.”
Landowners, lawyers, legislators and even some energy industry groups say Chesapeake stands out for its confusing accounting and tendency to deduct the most expenses from landowners’ royalty checks in Pennsylvania.
“They’ve had a culture of doing cutthroat business,” said Jackie Root, president of Pennsylvania’s chapter of the National Association of Royalty Owners.
Chesapeake did not respond to questions on whether its approach differs from that of other companies.
Root and others report good working relationships with other companies operating wells in Pennsylvania, and say that deductions – if they occur at all – are modest. Statoil, which has an interest in a number of Chesapeake wells, does not deduct any expenses on its share of many of the same leases. In an email from a spokesperson, the company said “We always seek to deal with our lease holders in a fair manner.”
Several landowners said that not only do deductions vary between companies using the same gas “gathering” network – sales prices do as well.
On Sidorek’s royalty statements, for example, Chesapeake and Statoil disclose substantially different sales prices for the same gas moved through the same system.
“If Statoil can consistently sell the gas for $.25 more, and Chesapeake claims it’s the premier producer in the country, then why the hell can’t they get the same price Statoil does for the same gas on the same day?” Sidorek wondered.
He thinks Chesapeake was giving a discount to a pipeline company it used to own. Chesapeake did not respond to questions about the price discrepancy.
Chesapeake may be the focus of landowner ire in Pennsylvania, but across the country thousands of landowners have filed similar complaints against many oil and gas producers.
In dozens of class actions reviewed by ProPublica, landowners have alleged they cannot make sense of the expenses deducted from their payments or that companies are hiding charges
Publicly traded oil and gas companies also have disclosed settlements and judgments related to royalty disputes that, collectively, add up to billions of dollars.
In 2003, a jury found that Exxon had defrauded the state of Alabama out of royalty payments and ordered the company to pay nearly $103 million in back royalties and interest, plus $11.8 billion in punitive damages. (The punitive damages were reduced to $3.5 billion on appeal, and then eliminated by the state supreme court in 2007.)
In 2007, a jury ordered a Chesapeake subsidiary to pay $404 million, including $270 million in punitive damages, for cheating a class of leaseholders in West Virginia. In 2010, Shell was hit with a $66 million judgment, including $52 million in punitive fines, after a jury decided the company had hidden a prolific well and then intentionally misled landowners when they sought royalties. The judgment was upheld on appeal.
Since the language of individual lease agreements vary widely, and some date back nearly 100 years, many of the disagreements about deductions boil down to differing interpretations of the language in the contract.
In Pennsylvania, however, courts have set few precedents for how leases should be read and substantial hurdles stand in the way of landowners interested in bringing cases.
Pennsylvania attorneys say many of their clients’ leases do not allow landowners to audit gas companies to verify their accounting. Even landowners allowed to conduct such audits could have to shell out tens of thousands of dollars to do so.
When audits turn up discrepancies, attorneys say, many Pennsylvania leases require landowners to submit to arbitration – another exhaustive process that can cost tens of thousands of dollars. Arbitration clauses can also make it more difficult for landowners to join class action suits in which individuals can pool their resources and gain enough leverage to take on the industry.
“They basically are daring you to sue them,” said Aaron Hovan, an attorney in Tunkhannock, Pa., representing landowners who have royalty concerns. “And you need to have a really good case to go through all of that, and then you could definitely lose.”
All of these hurdles have to be cleared within Pennsylvania’s four-year statute of limitations. Landowners who realize too late that they have been underpaid for years – or who inherit a lease from an ailing parent who never bothered to check their statements – are simply out of luck.
Even if a gas company were found liable for underpaying royalties in Pennsylvania, it would have little to fear. It would owe only the amount it should have paid in the first place; unlike Oklahoma and other states, Pennsylvania law does not allow for any additional interest on unpaid royalties and sets a very high bar for winning punitive penalties.
“They just wait to see who challenges them, they keep what they keep, they give up what they lose,” said Root, the NARO chapter president. “It may just be part of their business decision to do it this way.”
As CLINTON/BUSH/OBAMA now TRUMP have deregulated our coastal waters and its natural resources by opening leases for drilling and for installation of massive floating and underwater platforms---whether wind, solar, seafood-----we now have global corporate industries floating just beyond our continental shelf----and more and more in our territorial waters. When US 99% WE THE PEOPLE allow so many multi-national corporations to build massive industrial platforms---we are opening the door to those global corporations needing global security and global military corporations to protect those facilities.
'To understand what an exclusive economic zone is, it is important to understand what other zones are extending into sea. The first boundary extending into sea is territorial water, which is the area in which all laws of a country or jurisdiction typically apply. This area extends 12 nautical miles (22.2 km.) into the ocean. The contiguous zone is an area in which a country may usually enforce laws such as customs and immigration. It extends 24 nautical miles (44.4 km.) into the ocean'.
As we see below----the MILITARY comes into play no matter which nation is flexing its muscles. China wants to treat its 200 MILE EEZ as 'territorial' waters-----it should be able to as sovereign nations control those economic activities and China may have that massive industrial platform needing military and security protection.
'Perhaps most important, the code fails to address the principal disquietude in U.S.-China relations: fundamentally contradictory interpretations of a country’s legal rights within its Exclusive Economic Zone (EEZ)'.
The US does not have competing EEZ disputes because PACIFIC AND ATLANTIC separate us from other national concerns outside of CANADA AND MEXICO.
China and America Clash on the High Seas: The EEZ Challenge
"Were the U.S. to accept China’s interpretation of UNCLOS, U.S. military vessels could be barred from operating in the roughly one-third of the world’s oceans that are now EEZs."
Jeff M. SmithJoshua Eisenman May 22, 2014
During U.S Secretary of Defense Chuck Hagel’s recent trip to China, China’s Minister of Defense, General Chang Wanquan, warned that Beijing would make “no compromise, no concession, [and] no trading” in the fight for what he called his country’s “territorial sovereignty.” Chang told Hagel: “The Chinese military can assemble as soon as summoned, fight any battle, and win.” The comments come amid an escalating campaign by Chinese nationalists to alter the status quo in the Western Pacific that has raised alarm in capitals across the region.
While China’s more aggressive external posture in the East and South China Seas has been on display since 2009, Beijing’s dispute with Japan over the Senkaku/Diaoyu islands and with Vietnam over disputed waters and islands in the South China Sea have grown increasingly volatile over the past year.
Just this February, U.S. Navy Captain James Fanell, Director of Intelligence and Information Operations for the U.S. Pacific Fleet, warned that recent navy war games by the People’s Liberation Army Navy (PLAN) revealed a “new task” for the service:
“To be able to conduct a short, sharp war to destroy Japanese forces in the East China Sea, followed by what can only be expected [to be] the seizure of the Senkakus, or even the southern Ryukus...Tensions in the South China and East China Seas have deteriorated, with the Chinese coast guard playing the role of antagonist, harassing neighbors, while PLAN ships, their protectors, conduct port calls throughout the region, promising friendship and cooperation.”
And this month, China and Vietnam found themselves embroiled in a dangerous game of brinksmanship after China deployed a massive oil rig to waters claimed by both countries near the Paracel islands. Shadowed by dozens of Chinese naval vessels, including a half-dozen PLAN warships, the Chinese flotilla immediately clashed with civilian vessels from Vietnam, where an outburst of anti-China protests has forced the evacuation of thousands of Chinese citizens.
In an attempt to quiet the turbulent waters of the Western Pacific, last month leaders from more than twenty Pacific navies signed the promisingly worded Code for Unplanned Encounters at Sea at the Western Pacific Naval Symposium in Qingdao, China. Unfortunately, the agreement continues the recent trend in regional pacts: marginally productive but lacking in any real teeth.
The resolution is non-binding; only regulates communication in “unplanned encounters,” not behavior; fails to address incidents in territorial waters; and does not apply to fishing and maritime constabulary vessels, which are responsible for the majority of Chinese harassment operations. Perhaps most important, the code fails to address the principal disquietude in U.S.-China relations: fundamentally contradictory interpretations of a country’s legal rights within its Exclusive Economic Zone (EEZ).
For as the temperature has risen on China’s maritime territorial disputes, the U.S. and China have been struggling to manage their own, altogether separate, conflict of interest at sea. Though it has not garnered the attention of the East or South China Sea disputes, this legal wrangle has the potential to be every bit as dangerous, and has already led to nearly a dozen confrontations at sea between U.S. and Chinese naval vessels.
The Legal Dispute
Historically the oceans of the world were divided into two categories: “territorial seas,” a state’s sovereign waters stretching three nautical miles from its coastline, and the “high seas,” open to unrestricted navigation for all. During decades-long negotiations for the UN Convention on the Law of the Sea (UNCLOS), which took effect in 1994, conferees agreed to extend a nation’s territorial waters from three to twelve nautical miles and create several new maritime boundary designations including an Exclusive Economic Zone (EEZ) extending 200 nautical miles from a country’s coastline. There, the coastal state would enjoy exclusive rights over economic exploitation activities and marine scientific research, among other related things. Though not a party to UNCLOS, the U.S. observes the maritime boundary distinctions in practice.
Maritime Boundary Definitions
Over time different interpretations of a nation’s rights in its EEZ have developed. The U.S. and most other countries of the world treat the EEZ like the high seas when it comes to foreign militaries conducting surveillance: permission is not required from the coastal state. China, by contrast, argues that the EEZ is more akin to a country’s territorial sea, where coastal state permission must be obtained for a foreign military to conduct surveillance activities there.
YES, these offshore wind platforms ARE A BOONDOGGLE-----we are looking this week at SOVEREIGN LAND issues rather than being drained by tax subsidies-----the gorilla-in-the-room is not whether these industrial farms are unsightly------it is WHO OWNS THEM giving those global 1% exceptional control inside our US territorial and EEZ waters.
Maryland electricity consumers and taxpayers will be paying more for electricity produced from these offshore wind farms due to their higher cost and subsidization. The state seems to want to lead the way in this industry despite the higher cost and the Cape Wind failure'.
'U.S. Wind is a subsidiary of the Italian firm Toto Holdings SpA'.
Maryland Approves Two Offshore Wind Farms
June 8, 2017
Maryland utility regulators have approved two wind farms off the coast of Ocean City—a seaside resort community. If built, these wind farms would be the largest of their kind in this country. The wind farms will receive subsidies funded through increases in residential and commercial utility bills. The projects, however, still need to obtain federal permits—a process that is expected to begin around December. If the plans are approved, one of the wind farms could be operational by 2020.
But residents of Maryland’s Eastern Shore region are worried about the wind farms’ 600-foot towers obstructing views and suppressing property values. Ocean City’s mayor, Rick Meehan, indicated that the town’s elected officials will continue to express their concerns as the permitting process moves forward to the federal level.[i]
The only offshore wind farm currently operating in the United States is located off of Block Island, Rhode Island, and it has just five turbines. Block Island is a unique situation in which wind is displacing diesel generators at a similar cost for electricity. More on the Block Island wind farm can be read here.
Maryland Offshore Wind Projects
The project owners, U.S. Wind and Skipjack Offshore Energy, will build a combined 77 wind turbines with a capacity of 368 megawatts between 12 and 21 nautical miles off the coast of Ocean City, Maryland. The projects are expected to cost residential ratepayers about $1.40 a month and commercial and industrial customers about 1.4 percent a year. The companies can sell renewable-energy credits at a price of $132 for each megawatt hour they produce for 20 years, which will help to cover the $2.1 billion estimated cost of building the two projects.
Utilities and other electricity suppliers are required to buy enough of the credits annually for Maryland to meet its goal of having 25 percent of its electricity generated by renewable sources by 2020. It is estimated that at least 2.5 percent will need to come from offshore wind.
The Maryland public utility commission is requiring the companies to create almost 5,000 direct jobs during the development, construction and operating phases of these projects; pass 80 percent of any construction cost savings to ratepayers; and invest $76 million in a Maryland steel plant, $39.6 million toward port upgrades at a shipyard near Baltimore and $12 million to the state’s Offshore Wind Business Development Fund. The projects, however, will each employ only 30 to 50 permanent, full-time employees.
U.S. Wind will receive incentives for 62 turbines, which it plans to build 12 to 15 miles off the coast of Ocean City at a cost of almost $1.4 billion. The wind farm is expected to be operational in early 2020. U.S. Wind plans to construct future phases, eventually raising the number of turbines to up to 187. U.S. Wind is a subsidiary of the Italian firm Toto Holdings SpA.
Skipjack Offshore Energy will construct 15 turbines, 17 to 21 miles off the coast of Ocean City at a cost of $720 million. The wind farm is expected to be operational towards the end of 2022. Skipjack is a subsidiary of Rhode Island-based Deepwater Wind Holdings LLC.
The Ocean City Town Council is worried about how these wind farms will affect tourism, particularly the views from high-rise condominiums. Each mile the project gets moved away from Maryland’s coast would cost another $1 million. To deal with the council’s concerns, the commission indicated that U.S. Wind is required to locate its project as far to the east (away from the shoreline) of the designated wind energy area as practical. And, both developers must use “best commercially available technology” to conceal the structures during the day and night.[ii]
The Eastern Shore of Maryland houses marshlands and a state and national park at Assateague Island, which are abundant with wildlife. Researchers are studying the potential impacts these wind farms could have on wildlife, tracking migration patterns of birds such as red-throated loons to see how much they intersect with the wind farms.[iii]
The Costs Offshore Wind Projects
According to the Energy Information Administration (EIA), offshore wind turbines are the second most expensive generating technology that the agency considers in its Annual Energy Outlook, behind only solar thermal. The agency estimates that the levelized generating cost of an offshore wind turbine coming on-line in 2022 would be 15.7 cents per kilowatt-hour in 2016 dollars—almost 3 times more than a natural gas combined cycle plant and more than twice as much as onshore wind.[iv] As a result of its high cost, the agency expects no offshore wind farm to be built in the next 40 years in the United States.
Other countries, especially in northern Europe where wind resources are strong, have constructed offshore wind farms. Denmark has installed a large number of offshore wind turbines and exports the excess power to Norway and Sweden—countries that can use their hydroelectric facilities to store the power, much of which is produced at night. Germany also has invested in offshore wind farms.
But electricity prices in these European countries are very steep—residential electricity prices are triple the prices we see in the United States. These high prices push more of their citizens into energy poverty, where energy costs are above 10 percent of their income. Even in these countries, however, the wind industry is heavily subsidized.
As EIA’s forecasts show, it is more economical for the United States to build onshore wind turbines than offshore wind turbines. Unlike northern Europe, the United States has vast open areas where onshore wind farms can be constructed much more economically than offshore wind farms. In fact, the large expense of offshore wind and lack of potential customers put the kibosh on Cape Wind–a wind farm proposed off Nantucket Sound in Massachusetts.
Maryland electricity consumers and taxpayers will be paying more for electricity produced from these offshore wind farms due to their higher cost and subsidization. The state seems to want to lead the way in this industry despite the higher cost and the Cape Wind failure.