Offshore

Louisiana approves its first offshore wind agreements

Louisiana approves its first offshore wind agreements

Governor John Bel Edwards and Louisiana Department of Natural Resources (DNR) Secretary Tom Harris announced that the State Mineral and Energy Board approved the state’s first-ever wind operating agreements in state offshore waters at its December meeting.

The board gave the nod to a 6,162-acre property agreement for Diamond Offshore Wind Louisiana (DOW Wind) off the coast of Terrebonne and Lafourche Parishes and a 59,653-acre agreement for Cajun Wind off the coast of Cameron Parish. DOW Wind will be built by Mitsubishi’s Diamond Offshore Wind, and Cajun Wind will be constructed by Vestas’ Steelhead Americas.

DNR secretary Harris noted that the two agreements have different payment structures to the state, which could be blueprints for future projects. The DOW Wind plan covers a smaller area but pays more in up-front costs and rental fees per acre than the larger Cajun Wind project, which has a lower per-acre fee for up-front and rental payments but a higher energy royalty over the length of the agreement. The DOW Wind property agreement paid $308,101 up-front on its 6,100-acre contract; Cajun Wind paid $357,923 on its 59,000-acre agreement. DOW Wind is paying 1.5% of gross revenues in energy royalty over the life of the agreement, while Cajun Wind is paying 2.2%. 

“One agreement offers more on the front end, while the other pays more over time,” Harris said. “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.”

Legislation passed in recent years clarifying and codifying rules on leasing state offshore areas for wind energy projects helped Louisiana draw interest from operators, Harris said. 

“It gave potential operators and developers a readily understandable set of rules to work by in planning these kinds of projects,” Harris said. “That kind of predictability is very important when you are asking companies to commit the kind of investment we are going to be seeing off our shores.” 

Edwards said that wind energy projects are a natural fit for Louisiana’s working coast, which already has major infrastructure and a network of support industries with decades of experience in designing and operating complex projects in the offshore environment. 

In 2022, Gov. Edwards submitted the Louisiana Climate Action Plan, which offered a series of recommendations that can lead Louisiana to achieve net-zero greenhouse gas emissions by 2050. This includes adding five GW of offshore wind generation capacity by 2035.

Earlier this year, four tracts of federal waters in the Gulf of Mexico off the coasts of Texas and Louisiana, ranging in size from nearly 57,000 acres (23,100 hectares) to over 495,000 acres (200,230 hectares), were designated for development of wind energy by the Biden administration. The announcement followed the first Gulf sale of leases for wind development earlier this year. That sale drew a $5.6 million bid from one company for one Gulf tract, a modest start for wind energy in the region, which lags behind the Northeast in offshore wind power development.

Entergy Louisiana and Diamond Generating Corporation signed an agreement in 2022 to evaluate and potentially deploy offshore wind projects in the Gulf of Mexico off the Louisiana coast. In April, Entergy Louisiana CEO Phillip May appeared on the Factor This! podcast to discuss his outlook for solar, energy storage, green hydrogen, offshore wind, and more.