Politics

July 4, 2013

$120M Maine offshore energy project put on hold

Statoil, a Norwegian oil company, cites a new Maine law as the reason, because it overturns an agreement on electric rates the company will be allowed to charge.

By Steve Mistler smistler@pressherald.com
Staff Writer

AUGUSTA — A Norwegian company is suspending its proposed $120 million wind-power pilot project off the Maine coast, blaming the decision on a political maneuver employed to pass a sweeping energy law late in the legislative session.

click image to enlarge

Norwegian company Statoil had planned to install floating wind turbines off Boothbay Harbor that would be similar to this Hywind test turbine, now producing power off Norway.

Trude Refsahl / Statoil

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Read Statoil's letter to the Maine Public Utilities Commission

The multinational oil and gas company Statoil notified the state Public Utilities Commission on Wednesday that it is halting development of Hywind Maine, a commercial-scale wind park with four floating turbines that would be installed 12 miles off Boothbay Harbor. In his letter to the commission, Statoil Vice President Johannes Nordli cited risks and uncertainty raised by passage of a law that reopened the bidding process to establish rates charged for power from the project. The company said it will re-evaluate the project this fall.

The state had already approved a rate proposal by Statoil in January. Gov. Paul LePage objected to that decision, saying the agreed-on rate was too high.

In June, LePage vetoed a sweeping energy bill, but urged Republicans to vote to override his veto if the Legislature first passed a law allowing the University of Maine to bid on the wind project.

Under Statoil’s plan, power would have been sent to the mainland by 2016 through underwater cables. Supporters of the project said it could make Maine a global leader in research and development of offshore wind power.

Democratic leaders said the law to reopen bidding was couched as a deal to benefit UMaine’s offshore wind development proposal, which would include two turbines to be built off Monhegan Island.

But the new law reneged on an agreement ratified in January when the Public Utilities Commission voted 2-1 to approve Statoil’s rate proposal. Democrats say the new law was motivated more by LePage’s opposition to wind power than a desire to help UMaine.

LePage has been a frequent critic of wind energy, saying it is too expensive. In 2012, he rejected a $20 million bond for offshore wind research and development that would have benefited the university.

On Wednesday, Senate President Justin Alfond, D-Portland, said the new law was “politics at its worst” and that it threatened the state’s potential to become a leader in offshore wind energy.

“This is a very sad day for the state of Maine,” he said.

The LePage administration countered that Statoil had already announced that it would delay the project while it waited to see if it won a $50 million grant from the U.S. Department of Energy.
Patrick Woodcock, the governor’s energy director, said Wednesday that the letter to the PUC raised other questions about Statoil.

“If they (Statoil) are so willing to jettison this project ... was this the best partner in developing an offshore wind industry in Maine?” Woodcock said.

Statoil said it is suspending the project because rate-bidding has been reopened. Nordli wrote that the company could not “continue to spend its resources on this project without certainty” that its previously ratified rate contract will be finalized.

Under the new law, that can’t happen until after the UMaine submits its bid in September – the university did not submit a bid three years ago when the PUC collected proposals.

In the interim, supporters of the Statoil project worry the company will take its project to another location – a possibility that Nordli referenced in his letter to the commission.

Democratic leaders blamed political maneuvering by the LePage administration. Alfond said Wednesday that Republicans in the Senate would have blocked the omnibus energy bill if the UMaine provision wasn’t passed, and to vote against the provision would have made it appear that Democrats were supporting a foreign oil company over UMaine.

“We ran out of options,” said Alfond, who voted against the change. But several Democrats sided with Republicans to ensure passage of the larger energy bill, which was intended to reduce power costs to Mainers.

Lawmakers finalized the deal on June 26, and the governor wrote a letter urging the Senate to override his veto. It did so unanimously. The next day, Republican senators wearing UMaine ties posed for pictures in the Senate chamber.

Democratic leaders said the bill was a poison pill for Statoil.

“(Reopening the bid process) made no business sense at all for our state,” Alfond said. “It sends a terrible signal to the rest of the country and world that Maine was changing the rules of the game midstream. Unfortunately, some of our worst fears have come true.”

Alfond said that he and Sen. Seth Goodall, D-Richmond, were contacted by Statoil on Wednesday morning.

Nordli, in his letter to the PUC, said Statoil would re-evaluate the project this fall.

Woodcock said the governor had several concerns about the Statoil contract, including its rate agreement and the “lack of (a) tangible benefit.” He said the contract was loaded with “intentions, but no specifics” for job creation.

Woodcock also has argued that UMaine’s project wasn’t ready to send to bid two years ago, when Statoil presented its project for the PUC’s review, as required by the Ocean Energy Act.

He said giving UMaine’s project another opportunity is good for Maine ratepayers because it creates competition between two different technologies and perhaps would result in lower rates for offshore wind power.

Many renewable-energy advocates feared that reopening the bid would deal a significant blow to the state’s offshore wind industry.

In emails provided to lawmakers after the governor’s veto, several in the energy industry worried that the state could lose an opportunity to become a pioneer if Statoil leaves.

“If they undo the (contract with Statoil), it may never be redone, with the university or anyone else,” wrote Stephen Von Vogt, president of Maine Marine Composites.

Kathleen Redmond-Miller, Statoil’s manager for the Hywind project, wrote that the university is already positioned to provide a “crucial research role” in Hywind, but could lose that opportunity if Statoil pulls out.

“This decision would slam the door shut on a $120 million investment in Maine, and it would also send the signal to the global development community that Maine is not open for business for renewable energy development,” she wrote.

Steve Mistler can be contacted at 620-7016 or at:

smistler@mainetoday.com

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