As Governor John Bel Edwards of Louisiana closes out his term by the end of the year, he has taken strides in finalizing various projects under his interest. In a joint announcement with Tom Harris, the Louisiana Department of Natural Resources (DNR) Secretary, Edwards said the State Mineral and Energy Board levied an approval of wind operating agreements in the state’s offshore waters. As a significant step in embracing alternate energy, these are the first agreements made on the subject for the state and include a 6,162-acre tract off the coast of Lafourche and Terrebonne Parishes for Diamond Offshore Wind Louisiana (DOW Wind). The board also released another 59,653 acres near the coast of Cameron Parish in another agreement with Cajun Wind.
Considering the agreements are the first of their kind for the state, Harris suggested they could serve as a blueprint that will be structured in the future. Each currently includes unique payment structures. While DOW Wind’s agreement costs $308,101, it commands more upfront costs and rental fees per acre in addition to 1.5 percent of gross revenues in energy royalties over the agreement’s lifespan. Cajun Wind’s contract carries a price tag of $357,923 and a higher energy royalty paid 2.2 percent over the agreement’s lifespan.
“One agreement offers more on the front end, while the other pays more over time,” said Harris. “These being the first wind energy operating agreements for the state, we were breaking new trails in negotiating these agreements, and I believe we have established that we can be flexible in how we set up payment structures while still ensuring that the state and its people are appropriately compensated for using our resources.”
Coastal Louisiana did not immediately attract interest in renewable energy. According to Harris, the legislature developed and clarified rules directed at leasing agreements in the state’s offshore waters for wind energy projects.
“It gave potential operators and developers a readily understandable set of rules to work on in planning these kinds of projects,” said Harris. “That kind of predictability is essential when you ask companies to commit the kind of investment we are going to be seeing off our shores.”
Celebrating the interest and immediate success, Edwards reasoned that Louisiana is a viable option for wind energy projects. With an already established robust infrastructure and support industries within a possible network, Louisiana’s history in the design and operation of large-scale projects makes the state a sold option for future growth of the wind energy industry.
This latest step in exploring renewables fits Louisiana’s future. Edwards submitted the Louisiana Climate Action Plan in 2022. It offers multiple recommendations for achieving net-zero greenhouse gas emissions by the year 2050, with the addition of five GW of offshore wind generation by 2035 being one of the methods for accomplishing the goal.
The interest in wind energy grew early this year when the Biden administration designated four tracts of federal Gulf of Mexico waters as potential options for wind energy projects. Ranging in size from approximately 57,000 acres to more than 495,000 acres, the available water designated is right off the coasts of both Louisiana and Texas. The $5.6 million mid-for-one tract spotlighted a bright future for wind energy in the area but is still overshadowed by the Northeast’s offshore wind power project portfolio.
With big names like Entergy Louisiana and Diamond Generating Companies signing agreements previously to investigate offshore wind possibilities, the recent lease agreements will likely draw other big players to the table. While the energy sector continues to embrace the renewable sector, Louisiana’s offshore industry is well-positioned to join the race. As more acreage becomes available, Louisiana’s renewable industry success promises a financially viable future.
Nick Vaccaro is a freelance writer and photographer. In addition to providing technical writing services, he is an HSE consultant in the oil and gas industry with twelve years of experience. Vaccaro also contributes to SHALE Oil and Gas Business Magazine, American Oil and Gas Investor, Oil and Gas Investor, Energies Magazine and Louisiana Sportsman Magazine. He has a BA in photojournalism from Loyola University and resides in the New Orleans area. Vaccaro can be reached at 985-966-0957 or nav@vaccarogroupllc.com.
