Biden Proposals Could Unlock US Offshore Industry

By Simon West
 
U.S. President Joe Biden’s fast and furious start to his first term, marked by a slew of executive orders aimed at tackling the climate crisis, will have given project logistics plenty to chew on.

The industry’s legendary cool-headed approach to business means talk of energy revolutions and green new deals is unlikely to cause alarm, but if Biden is able to overcome a divided legislature, and, crucially, win a second four-year term in 2024, then the U.S. energy landscape could look very different by the end of the decade.

In the election run-up, Biden had vowed to turn the U.S. into a clean energy superpower, unveiling an economy-boosting US$2 trillion infrastructure proposal targeting carbon-free electricity by 2035 and net-zero emissions economy-wide by 2050.

Within days of taking office on Jan. 20, he began putting his money where his mouth was, rejoining the Paris climate agreement and calling for new regulations on carbon sequestration, the electrification of the federal fleet, and much more.

The president also took a swipe at fossil fuels. New leasing on federal lands for oil and gas development was frozen pending a review, the permit for the Keystone XL crude pipeline revoked and fossil fuel subsidies cut.

“We have already waited too long to deal with this climate crisis. We cannot wait any longer,” Biden said on Jan. 27. “It is time to act.”

For project cargo and heavy-lift specialists, a pledge to expand renewable generation and build more clean power plants on public lands will boost cargo-carrying opportunities, especially in wind with its bulky components and giant turbines.


Offshore Wind Promise

Onshore wind is big business in the U.S., with capacity already exceeding 120 gigawatts, or GW, according to the Energy Information Administration, or EIA. Another 12.2 GW is slated to come online this year, with the states of Texas and Oklahoma accounting for more than half of new capacity.

The offshore wind sector though is barely out of the starting gate. Just one project is up and running in U.S. waters – the 30-megawatt, or MW, five-turbine Block Island Wind Farm off the Northeast state of Rhode Island.
With so much potential, the administration has set a goal of doubling U.S. offshore wind leases in public waters by 2030, an expansion that could generate billions of dollars in investments, said industry lobby group the Business Network for Offshore Wind, or BNOW.

A sticking point delaying buildout, according to the BNOW, is the federal government’s uncertain leasing and permitting process for offshore projects, which is managed by the Department of the Interior’s Bureau of Ocean Energy Management.

Delays have led to a backlog in rubber-stamping construction and operations plans for several large-scale facilities along the East Coast, whose shallow waters and a gently sloping continental shelf are ideal for installing fixed-bottom platforms for turbines.

The auctioning of offshore wind lease areas, last carried out in December 2018, also needs to be stepped up, the BNOW said. As part of their clean energy commitments, East Coast states have pledged to procure 30 GW of additional offshore capacity by 2035, but federal authorities have so far leased enough acreage for just 21 GW. Some 11.6 GW of capacity has already secured a financial mechanism.

While light on specifics, Biden’s executive order on offshore wind did include an instruction to his Department of the Interior to review siting and leasing processes, a call welcomed by the industry.

“We will see how the details shake out, but this is a very encouraging sign that the administration is working to address these issues,” Brandon Burke, director of policy at the BNOW, said to Breakbulk.

“Ideally, the U.S. federal government would focus on advancing construction and operations plan approvals for the 10 utility-scale offshore wind projects in the queue, increasing transparency and predictability in the permitting process and creating consistency and frequency in leasing expansion.”


Ready for the Green Light

Developers are also upbeat on the government’s commitment to offshore wind.

Danish energy group Ørsted, operator of the Block Island Wind Farm, has been awarded almost 3 GW of offshore capacity along the U.S. East Coast through five projects, but permitting issues and the Covid-19 pandemic have delayed development.

The biggest of those is Ocean Wind off the coast of southern New Jersey, one of the largest offshore wind farms in the U.S., with 1.1 GW of installed capacity. Commercial operations are expected to begin by the end of 2024.

“In the U.S. the permitting processes had been challenging in the last period. But we’re seeing early signs that make us more optimistic now,” CEO Mads Nipper said in a conference call with investors on Feb. 3.

A new 30 percent investment tax credit for offshore wind facilities that begin construction before Jan. 1, 2026, passed by Congress in December, would also benefit the fledging industry, Nipper said.

Project cargo specialists who cut their teeth supporting the buildout of offshore wind in Europe are now ready to bring their expertise stateside.

“The shift towards renewable energy can be felt everywhere, but the industry is especially excited about the U.S. right now,” said Christoph Puschmann, managing director at United Wind Logistics, a Hamburg-based ship owner focused on offshore wind.

The company was contracted to transport turbine foundations for the 800-MW Vineyard Wind project off the coast of Martha’s Vineyard, the first utility-scale offshore wind farm in the U.S. That contract was cancelled amid continuous delays, in part due to concerns about the facility’s impact on commercial fishing, but Puschmann said he was confident of signing new deals with the developers for the growing market.

Vineyard Wind, a 50:50 joint venture between Avangrid Renewables and Copenhagen Infrastructure Partners, resubmitted its construction and operation plan in January after an initial application was cancelled by the Trump administration in December. The project is slated for start-up in 2023.

“It seems the difficulties surrounding the fisheries are dealt with and that big projects are starting to take off,” Puschmann said.


Jones Act Challenges

United Wind Logistics and other non-U.S. shippers will still have to contend with the Jones Act, which Puschmann said is creating difficulties for stakeholders. In a “Buy American” executive order signed on Jan. 25, Biden reaffirmed his support for the century-old law that says goods and equipment can only be shipped between U.S. ports by vessels that are built, owned and manned by U.S. citizens.

The act was extended last year to cover offshore renewable energy production, prohibiting foreign-flagged vessels from transporting cargo between American ports and wind farms located in U.S. waters.

Keeping to the rules means shippers such as United Wind Logistics are forced to either contract U.S.-flagged boats to move components from the hub port to the installation vessel, or take cargo directly to the installation vessel themselves from bases in Europe or Asia, bypassing the need to dock in the U.S.

“This is quite challenging though because wherever offshore wind plants are built, it is not the best weather,” Puschmann said.

U.S.-based breakbulk movers, meanwhile, working on offshore and onshore projects, will be buoyed by Biden’s pledge to earmark some of his US$2 trillion stimulus plan for the country’s aging transport infrastructure.

The previous administration’s own US$2 trillion infrastructure proposal fell apart in 2019 after Trump reportedly refused to work with Democrats while the investigation into Russian interference during the 2016 election was underway.

“The industry has been calling for upgrades to highways, inland waterways, bridges, ports and access to port facilities for many years to enable the flow of project cargo imports, exports and deliveries to U.S. jobsites,” said Dennis Mottola, a global logistics consultant and former corporate logistics manager at Bechtel.

Project cargo executives speaking to Breakbulk also welcomed the planned investment, which Biden wants to deploy in his first four-year term. Leonard Headrick, director of industrial projects at Bolloré Logistics, said roads in the U.S. had been “neglected,” while Jim Shapiro, director at Baltimore-based Thunderbolt Global Logistics, said an overhaul of inland waterways was a priority.

“A lot of breakbulk cargo moves on barges to the inland, so it is as important as anything else in this country to have the inland waterways fully operational, properly dredged and properly maintained,” Shapiro said.


Hurdles in Congress

Biden’s climate-driven agenda will likely face obstacles in Congress. Although executive orders require no Congressional oversight, without legislative action, many of the new directives could be easily reversed by future administrations.

The Democrats’ control of both chambers of Congress gives the president leverage, but a 50:50 split in the Senate – with Vice President Kamala Harris holding the tie-breaking vote – means passing major legislation will be a challenge. And if the Democrats slip up in midterm elections in 2022, Biden could be looking at a two-year window to get his proposals approved.

“If he loses one seat in the Senate, he loses his majority, and that will be more difficult for him to get his programs going. So there is a lot at stake in the first two years,” Shapiro said.

Many in Congress are concerned about the impact of energy transition on the economy and jobs, with Biden’s actions such as the cancellation of the Keystone XL pipeline attracting criticism from industry groups. The 1,179-mile pipeline owned by Canada’s TC Energy was designed to ship some 830,000 barrels per day of heavy crude oil from Alberta to Nebraska, then on to refineries on the U.S. Gulf Coast. The project had been revived by Trump in 2016.

American Fuel and Petrochemical Manufacturers, a downstream trade group, said revoking the permit for Keystone XL would jeopardize the project’s “economic, environmental and energy-security gains.” The pipeline would provide more than 10,000 high-paying union jobs during its construction phase, the AFPM said.

“The executive order halting Keystone XL is a good example of the challenges the industry is likely to face,” John Thieroff, vice president and senior analyst at Moody’s Investors, told Breakbulk.

“Pipelines have been coming under rapidly increasing pressure over the past decade, and that is likely to grow further during the current administration. Preventing the movement of oil and gas once it is produced is often easier than preventing it from being drilled and developed, but you can effectively achieve the same result.”


‘Delaying the Inevitable’

But Keystone XL aside, no other infrastructure permits have been revoked. And Biden’s 60-day freeze on new oil and gas leasing on federal lands affects just 22 percent of total U.S. oil production and 12 percent of natural gas production, according to the EIA. The pause does not curb drilling on private or state lands.

The Department of the Interior said oil companies had stockpiled millions of acres of leases on public lands and waters following a fire sale by Trump in his final days of office. Onshore and offshore, the oil and gas industry is sitting on some 7,700 unused, approved permits to drill.

Artem Abramov, partner and head of shale research at Rystad Energy, said major shale producers such as EOG Resources, Devon Energy and Occidental Petroleum could maintain activity at prospective assets in Delaware and New Mexico for another three to six years.

“Then, they will be able to reallocate capital and rigs to adjacent state and private leases and maintain low-cost activity for another 8-10 years in New Mexico. Finally, they have plenty of options in their portfolio on the Texas side of the Permian Basin, so long-term implications for them would be fairly marginal if the ban ends up being permanent.”

The impact of Biden’s actions on upstream activity may not be felt for some years, but the slow-burn transition to more sustainable forms of energy has begun, and for project logistics, this will spell more opportunities. Were the president to renege on his campaign promises now, he would just be delaying the inevitable.

“The future holds deep changes and we have to be prepared for what is to come,” said Daniel Berasategui, CEO of Noatum Project Cargo.

“While we continue to serve oil and gas companies, we are also increasing our renewable energy services portfolio with a greater focus on offshore wind. As the saying goes, when one door closes, another opens.” 


Colombia-based Simon West is a freelance journalist specializing in energy and biofuels news and market movements in the Americas.

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