Wind Farm Is Favored in Bill

Special Interest Language Was Quietly Placed in Energy Act That
Exempts Cape Wind From Public Bidding

By JULIA WELLS

The hotly debated Cape Wind project - its backers now basking
in the role of wounded underdog over a recent amendment to the U.S.
Coast Guard authorization bill - was the direct beneficiary of a
special interest provision slipped quietly into the federal Energy
Policy Act before it was signed into law last year.

Carefully crafted and written in seamless legislative language, the
provision exempted the Cape Wind project from competitive bidding
requirements that would apply to all other projects like it, once the
bill became law. The special interest language, which was added to the
bill after it had been approved by the House but before it was voted on
by the Senate, saw no public hearings and virtually no debate. The
amendment was authored by Sen. Pete V. Domenici, chairman of the Senate
Natural Resources and Energy Committee.

Last week Senator Domenici made headlines when he publicly blasted
Sen. Ted Stevens of Alaska for his amendment to a Coast Guard bill that
would hand veto power over the Cape Wind project to the Massachusetts
governor. Senator Domenici openly criticized Senator Stevens for
introducing the amendment behind closed doors with no public debate.

But the ranking senator from New Mexico had done something quite
similar last June when he inserted language into the Energy Policy Act
that was a huge boost for developer Jim Gordon, who wants to build the
nation's first offshore wind farm on Horseshoe Shoal in Nantucket
Sound. Exempting Cape Wind from public bidding requirements knocked down
a high hurdle for Mr. Gordon and his project. Offshore energy leases
with private companies are generally required to go out to bid.

The Minerals Management Service, a branch of the U.S. Department of
the Interior which assumed regulatory oversight of the Cape Wind project
from the U.S. Army Corps of Engineers last year and which was deeply
involved in the writing of the Energy Policy Act, had no hand in the
language that was written for Cape Wind. A top official at minerals
management admitted in a recent e-mail that he was somewhat blindsided
by it.

"The exemption from competitive bidding seems clear,"
wrote Walter Cruikshank, deputy director of the Minerals Management
Service, responding to an inquiry from a legislative aide about the
language in the bill. "MMS did not propose the language - it
was shared with us by committee staff after they received it. I
don't know who wrote it."

A chronology prepared by the Congressional Research Service, an
independent panel of attorneys and policy experts that provides research
services to the legislature, shows that the amendment to the bill was
introduced by Senator Domenici on June 14, 2005. An earlier version of
the bill that did not contain Senator Domenici's language was
approved by the House on April 18, 2005. In that version of the bill,
the section that addresses alternate energy uses on the outer
continental shelf contained a "savings provision" that would
allow pending projects to avoid the need to resubmit documents or
receive approval for activities that had already been permitted. Two
months later, Senator Domenici's substitute version of the bill
contained new language that elucidated a key exception: "Except
with respect to projects that meet the [terms of the savings provision,
appearing in a subsequent section], the Secretary [of the Interior]
shall issue a lease, easement or right-of-way . . . on a competitive
basis."

It was well known at the time that Cape Wind was the only project
that met the criteria in the savings provision, but the addition of
later language had the effect of grandfathering the Cape Wind project in
a completely different way - by exempting it from competitive
bidding.

Longtime legislative observers say the special provision crafted for
Cape Wind developers was a sophisticated job, intended to avoid public
scrutiny.

Signed into law in September 2005, the Energy Policy Act is
considered a key legislative measure that will shape the future for the
development of energy on the domestic front, including alternative
energy.

The Cape Wind project comes at a time when the oceans are like the
wild west of the budding alternative energy industry; as offshore wind
developers ramp up business plans, lawmakers are scrambling to catch up
and develop sensible policies and rules for use and development of the
public seabeds in state and federal waters.

Meanwhile, on another legislative front, the amendment to the Coast
Guard authorization bill granting veto power over Cape Wind to the
governor of the commonwealth has caused a small public uproar in recent
weeks, and Cape Wind developers have seized the moment as a public
relations haymaker. "This backroom amendment pushed by special
interests would unfairly target Cape Wind and undermine America's
quest for energy independence . . . the amendment would also deal a
setback to legislative transparency," declared a news advisory
that went out this week announcing the formation of a new coalition
backing Cape Wind. The coalition held a press conference yesterday with
Mr. Gordon included on the list of speakers.

Back-room politics aside, supporters of the Coast Guard amendment
say there are in fact real issues surrounding safety, navigation and
possible radar interference, both in the air and on the sea, that bear
close examination and are a sound basis for handing some control to the
commonwealth.

As the high-decibel debate continues, with plenty of posturing and
finger-pointing on all sides, it is also now known that much money is at
stake.

An analysis prepared by the Congressional Research Service and
obtained by the Gazette shows that the Cape Wind project, if it is
approved and built as now planned, would stand to benefit from some $100
million in state and federal tax credits and incentives annually.

The arm's length analysis was prepared using current policies,
regulations and cost of power as a basis.

Cape Wind, as planned with 130 turbines and a maximum capacity of
428 megawatts, would produce 1.491 million kilowatt hours per year, the
analysis found. The Internal Revenue Service is offering a federal
renewable energy production tax credit of 1.9 cents per kilowatt hour
this year. Using this number, at peak capacity, Cape Wind would qualify
for about $28.3 million in federal tax credits, the research service
concluded.

In Massachusetts the principal regulatory benchmark for wind
projects is the Massachusetts Renewable Energy Portfolio Standard, a
complicated formula that sets a minimum requirement for electricity
production from renewable energy sources, or through the purchase of
credits that represent an equivalent amount of production. Currently in
Massachusetts, each retail electricity supplier is required to use
renewable energy sources for two and a half per cent of its power
supply. Suppliers can meet the requirement in a variety of ways,
including providing the power, buying the power or making payments in
lieu of compliance.

Cape Wind plans to sell electricity to retail suppliers who need to
satisfy their two and a half per cent requirement. Under current
conditions and at full capacity of 428 megawatts, Cape Wind would have
the ability to negotiate a sale price with suppliers that could reach
nearly $82 million a year, the research service found.

Congressional researchers cautioned that their estimates are the
ceiling, and could change, especially at the state level, where a
variety of factors including total electricity production, the cost of
power and a complicated web of regulations are constantly changing.
Also, it likely would take several years for Cape Wind to reach peak
capacity, researchers said.

Cape Wind officials have declined to discuss the financial details
of the project, although they have said that they have invested more
than $20 million in the project to date.