Using Property & Liability Rules to Save Offshore Wind from Death by Delay
Posted on Feb 18, 2025Liam F. Heffernan
Offshore wind energy has been viable for over thirty years, and close to fifteen years ago the first offshore wind turbine in the United States became operational.[1] Today, the National Renewable Energy Laboratory estimates that offshore wind projects in the United States have the potential to produce three times our yearly energy consumption.[2] Despite this fact and a growing appetite for renewable energy, the offshore wind industry still hasn't taken off. In the early 2000’s, Cape Wind, located off Cape Cod, Massachusetts, was supposed to be the United States’ first major offshore wind project.[3] Instead, highly motivated local interest used litigation to delay the project and drive up the costs of the project.[4] After fifteen years of extensive permitting and litigation, Cape Wind terminated its remaining agreements and failed.[5] Twenty years later, offshore wind still faces the same issues.[6] This blog post explores how property law’s rights and liabilities framework can help promote the development of offshore wind.
Renewable energy companies, and particularly offshore wind companies, often face tight margins, and many projects have been stalled or scrapped due to extensive litigation and conflict between the energy companies and local interests.[7] For offshore wind, there are often a variety of local interests at play. Tourism industries fear that projects will be an eyesore, fishing industries are concerned about the safety of their equipment and potentially reduced fishing zones, environmental groups worry about the impact on local ecosystems, and homeowners may simply not want wind turbines in their backyard.[8] The First Circuit recently issued a decision affirming the environmental impact processes undergone by some of these projects, but there is ongoing litigation about both economic and environmental impacts.[9] Even when these challenges are ultimately unsuccessful in court, they can force delays long enough that once promising projects are abandoned due to skyrocketing costs. For some parties, using litigation to push projects beyond the point of economic viability may even be the primary goal.[10] The federal government recently auctioned off more leases to renewable energy companies looking to tap into offshore wind power. The relatively low winning bids reflect speculation that, if these issues go unresolved, there may soon be more political pressure to make them even more difficult to pursue or cancel them altogether.[11] When offshore wind first rose to prominence, much of the surrounding literature focused on increased efficiency in the permitting process and using centralized control to make these projects viable.[12] This approach, however, doesn’t reflect the importance of local interests and their ability to bring projects to a halt. One of the keys to making offshore wind a viable energy source will be finding a way to stop the endless legal challenges before they begin, and that requires more than a streamlined and accelerated regulatory framework.
Creative property law proposals, such as community benefit agreements or classified unitization, come closer to the mark but are likely still insufficient methods of promoting offshore wind development. Community benefit agreements, also coming about in the early 2000’s, include contractual provisions meant to benefit local interests, and they give these local interests an increased say and bargaining power in what goes on in their community.[13] These agreements, however, are sometimes made by insiders to benefit small groups of people, and they often do not go far enough.[14] The amount of money included in these community benefit agreements is also often dwarfed by the amount companies pay in federal auctions to receive their leases in the first place.[15] Because renewable offshore wind energy is still a nascent industry, these companies often operate on thin margins.[16] The existing structure, where companies write their community benefit agreements with the high costs of leasing and permitting in mind, disadvantages those who would actually receive the benefits of any community benefit agreement. Classified unitization has also been proposed as a solution for problems with onshore wind development.[17] Classified unitization differs from typical unitization in that it differentiates the varying levels of property rights in play. While this may be an effective strategy for that problem, unitization would not be an effective way to deal with the issues of constant litigation slowing down offshore wind projects. First, the voting that must take place in many cases to force pooling would recreate a gridlock economy and enable holdouts, especially when projects are changed or amended in any way.[18] Second, the real property interests involved in onshore wind projects provide a much stronger basis for unitization than the attenuated, ‘one-stick-out-of-a-bundle’ property interests held by fishing businesses in federal waters.[19]
Property law’s rights and liabilities framework has the potential to promote offshore wind development while still benefitting all parties involved. Community benefit agreements and classified unitization fall short of solving this problem, but looking to creative property solutions can still prove useful. In 1972, Professors Calabresi and Melamed developed a framework for considering rights and liabilities often spread across different disciplines like property and torts into one, consolidated framework.[20] In the classic example, ordinary people enjoy a right to clean air or water, but polluters may pay damages to infringe on this right. The framework thus simplifies a complex relation of claims and rights between the parties into a manageable system. To show how this solution would work in practice, we can look at the example of local fishing interests impacted by offshore wind projects. Fishing industries face decreased revenues and increased costs as a result of these projects, with turbines encroaching on their turf and posing a safety risk to their boats and equipment, especially at night or in poor conditions.[21] Additionally, many of the proposed sites for offshore wind projects are in federal waters, so it is up to the federal government to issue permits and auction off leases. Using the Calabresi & Melamed framework, however, we can assign fishermen some initial entitlement that reflects their right to enjoy a productive use of the waters and fish there. Then, the companies funding offshore wind projects, much like the ordinary citizens in the classic pollution example, could overcome this property interest by paying damages to the affected fishermen. Calabresi & Melamed refer to this as protecting an initial entitlement with a liability rule, and here it has the added benefit of respecting the first in time rights and local customs of the fishermen.[22]
This solution has the potential to reinvigorate offshore wind and make it a truly competitive offering as we seek to shift to renewable forms of energy, but it comes with one obvious question: who pays? Really, this asks how much money is being paid, where is the money coming from, and, not to be forgotten, what parties are on either side of the transaction. Some of these questions may sort themselves out. For example, renewable energy companies bidding on a lease for a new project site will factor in payments they have to make to local interests and bid less. In contrast, who gets paid and how much will likely need to be determined by looking into the actual economic effects of offshore wind projects on things like fishing and tourism revenues or home values. Before any of those questions, though, we must accept that the status quo isn’t working for offshore wind and commit to a new solution. This framework may not turn out to be perfectly suited to these problems, but it is at least a chance to promote a renewable energy source while also directly benefiting impacted communities.
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[1] See Making Green Energy Affordable, 1991-2001 The First Offshore Wind Farms, Ørsted, https://orsted.com/en/what-we-do/insights/white-papers/making-green-energy-affordable/1991-to-2001-the-first-offshore-wind-farms (last visited Jan. 5, 2024); see also Tatiana Schlossberg, America’s First Offshore Wind Farm Spins to Life, N.Y. Times, Dec. 14, 2016, https://www.nytimes.com/2016/12/14/science/wind-power-block-island.html.
[2] Anthony Lopez et al., Nat’l Renew. Energy Lab’y, Offshore Wind Energy Technical Potential for the Contiguous United States at 16 (2022).
[3] See Press Release, U.S. Dep't of Interior, Salazar Signs First U.S. Offshore Commercial Wind Energy Lease with Cape Wind Associates, LLC (Oct. 6, 2010), https://www.doi.gov/news/pressreleases/Salazar-Signs-First-US-Offshore-Commercial-Wind-Energy-Lease-with-Cape-Wind-Associates-LLC (citing Cape Wind as the beginning of a new era and an important milestone in offshore wind development).
[4] See, e.g., Katharine Q. Seelye, After 16 Years, Hopes for Cape Cod Wind Farm Float Away, N.Y. Times, Dec. 19, 2017, https://www.nytimes.com/2017/12/19/us/offshore-cape-wind-farm.html. The President of CWA, Jim Gordon, described Cape Wind’s struggles as “repeated sudden death… where the goal posts kept moving.”
[5] Id.
[6] E.g., Wayne Perry, Three Groups are Suing New Jersey to Block an Offshore Wind Farm, Associated Press, May 3, 2024, https://apnews.com/article/offshore-wind-new-jersey-long-beach-island-87a80ce88cd32a8a891db2de1e0260bd.
[7] See Stanley Reed & Ivan Penn, Broken Blades, Angry Fishermen and Rising Costs Slow Offshore Wind, N.Y. Times, Sept. 12, 2024, https://www.nytimes.com/2024/09/12/business/energy-environment/offshore-wind-blade-vineyard-wind.html.
[8] See Adele Irwin, Offshore Wind Energy or Domestic Seafood? How the Department of the Interior Can Facilitate Both through Self-Binding Procedures, 96 St. John's L. Rev. 517, 517 (2022). See also Jean-Baptiste Jouffray et al., The Blue Acceleration: The Trajectory of Human Expansion into the Ocean, One Earth 2 at 43 (2020). The authors describe the widespread effects of oceans being the world’s new economic frontier.
[9] Seafreeze Shoreside v. United States DOI, 123 F.4th 1, 32, 37 (1st Cir. 2024).
[10] See Allie Reed, Offshore Wind Projects at Risk Despite Wins in First Circuit, Bloomberg Law, Sept. 3, 2024, https://www.bloomberglaw.com/product/blaw/bloomberglawnews/bloomberg-law-news/X4R8GB60000000 (noting that, for opponents of offshore wind, “[d]elay is a victory.”).
[11] See, e.g., Press Release, Dep’t of Interior, BOEM Postpones Oregon Offshore Wind Energy Auction (Sept. 27, 2024), https://www.boem.gov/newsroom/press-releases/boem-postpones-oregon-offshore-wind-energy-auction.
[12] E.g., Kenneth Kimmell & Dawn Stolfi Stalenhoef, The Cape Wind Offshore Wind Energy Project: A Case Study of the Difficult Transition to Renewable Energy, 5 Golden Gate U. Envtl. L.J. 197, 199, 225 (Fall 2011) (describing Cape Wind as a bellwether whose prospects look favorable).
[13] See Community Benefit Agreements: Frequently Asked Questions, Dep’t of Energy https://www.energy.gov/justice/articles/community-benefit-agreement-cba-resource-guide-faqs (last visited Jan. 18, 2025).
[14] See Steven M. Seigel, Community Benefits Agreements in a Union City: How the Structure of CBAs May Result in Inefficient, Unfair Land Use Decisions, 46 Urb. Law. 419, 482 (Summer 2014).
[15] See Press Release, U.S. Dep't of Interior, BIDDING BONANZA! Trump Administration Smashes Record for Offshore Wind Auction with $405 Million in Winning Bids (Dec. 14, 2018), https://www.doi.gov/pressreleases/bidding-bonanza-trump-administration-smashes-record-offshore-wind-auction-405-million; See Press Release, U.S. Dep't of Interior, Biden-Harris Administration Announces Winners of California Offshore Wind Energy Auction (Dec. 07, 2022), https://www.doi.gov/pressreleases/biden-harris-administration-announces-winners-california-offshore-wind-energy-auction.
[16] E.g., Stanley Reed & Ivan Penn, A Giant Wind Farm Is Taking Root Off Massachusetts, N.Y. Times, Jun. 27, 2023, https://www.nytimes.com/2023/06/27/business/energy-environment/marthas-vineyard-wind-farm-massachusetts.html (noting how developers orchestrated a long campaign for support before starting construction).
[17] See Martin Lockman, Fencing the Wind: Property Rights in Renewable Energy, 125 W. Va. L. Rev. 27 (Fall 2022).
[18] Id. at 79.
[19] Id. at 70-71, 76-79.
[20] Guido Calabresi & A. Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 Harv. L. Rev.1089, 1089 (1972). The Model blends traditional disciplines like property and torts in order to better respond to real conflicts over scarce resources.
[21] See Kimberly E. Diamond, Extreme Weather Impacts on Offshore Wind Turbines: Lessons Learned, 27 Nat. Resources & Env’t 37, 37, 40 (Fall 2012).
[22] See James M. Acheson, The Lobster Gangs of Maine at 48 (1988).