California is Taking Critical Steps to Plan for Offshore Wind Development and Associated Infrastructure

This year, 2023, is a critical year in planning for offshore wind development in California. In 2023, the state will release its strategic plan, including the identification of additional sea space for future lease sales; finalize a permitting roadmap; and advance an offshore wind infrastructure improvements program to support the development of necessary port facilities and infrastructure.

Strategic Plan

In September 2021, Governor Newsom signed California State Assembly Bill 525 (AB 525) into law, requiring the California Energy Commission (CEC) to develop a strategic plan for offshore wind energy developments to be installed off the California coast in federal waters. Submission of the strategic plan is due, by statute, to the California Natural Resources Agency (CNRA) and State Legislature by June 30, 2023. The strategic plan will address a number of issues, including those specified in this legislation:

• Identification of suitable sea space for wind energy areas in federal waters sufficient to accommodate the offshore wind planning goals for 2030 (2-5 GW) and 2045 (25 GW);
• Economic and workforce development;
• A plan to improve waterfront facilities that could support a range of floating offshore wind energy development activities;
• Transmission planning, to include an assessment, in consultation with the California Public Utilities Commission (PUC) and Independent System Operator, of the transmission investments and upgrades necessary to support the offshore wind planning goals for 2030 and 2045;
• Permitting, to include the permitting roadmap discussed separately below; and
• Information on potential impacts on coastal resources, fisheries, Native American and Indigenous peoples, and national defense, as well as strategies for addressing those potential impacts.

CEC is expected to carry out targeted outreach with key stakeholders in the first quarter of this year and hold wider public workshops this spring on the strategic plan. The public process offers an important opportunity to influence the substance of the strategic plan that will shape California offshore wind development in the coming years and decades—including, significantly, the sea space locations under consideration for future lease sales. Even after the submittal of the strategic plan to CNRA and the State Legislature this summer, more work is expected to follow, such as additional expert research and analysis, engagement with key constituencies, including Indigenous communities, and, potentially, implementing legislation and regulations.

Conceptual Permitting Roadmap

Assembly Bill 525 also requires the CEC to develop a conceptual permitting roadmap “that describes timeframes and milestones for a coordinated, comprehensive, and efficient permitting process for offshore wind energy facilities and associated electricity and transmission infrastructure off the coast of California.” CEC has released a draft permitting roadmap for public comment—and will accept public comments through February 10.

The draft permitting roadmap covers several key topics:

• Background on how US Department of Interior Bureau of Ocean Energy Management (BOEM) requirements interact with state and local requirements—and the intent of the state and local entities to ensure as seamless a process as possible. For example, the California Coastal Commission may need to review, and the State Lands Commission and Department of Fish and Wildlife permits may be required, if additional analysis or site assessment activities are required during BOEM’s Phase 3 process.
• A framework for federal, state, and local agency coordination—through formalized memoranda of understanding and agreement—that provides a set a of principles from which to work, including a commitment to the development of a single permit application checklist that lessees can utilize when seeking required permits and approvals for their projects and the creation of a dispute resolution mechanism.
• An overview of the key agencies involved in permitting or reviewing work necessary for the development of an offshore wind project and their specific jurisdictions.

It is important to note that the conceptual permitting roadmap is intended to be dynamic, and therefore will be updated as relevant new information arises about transmission, ports and waterfront facilities, and project details and requirements. Additionally, the conceptual permitting roadmap, specifically, is designed so that it can be implemented without new laws or implementing regulations.

Offshore Wind Infrastructure Improvements

Along with the development of the offshore wind generation sites, California must install and upgrade port and waterfront facilities that can support offshore wind development. The 2022 Budget Act appropriated $45 million,¹ in the form of grants, contracts, loans, and rebates, for offshore wind infrastructure development. That funding is limited to specific eligible entities: port authorities, California port authorities, port operators, port commissions and their respective authorized agents, other California waterfront facilities, and other entities that demonstrate a commitment to California offshore wind energy investments and are partnered with a California waterfront facility. The funding allocated pursuant to the program can be used for a variety of purposes as described in California Public Resources Code §25666:

1. Category I Activities that support the development of individual or regional retrofit concepts and investment plans.
   
   Category I Activities may include planning, feasibility analysis, business case development, environmental analyses, engineering and design work, and other offshore wind energy related planning and development activities.
2. Category II Activities that support final design, engineering, environmental studies and review, and construction of retrofits.
   
   Category II activities may support a range of retrofit activities to support deployment of offshore wind energy, including land expansion for component assembly, staging, and transportation, facility updates such as adding laydown and storage areas, increasing heavy-lift crane weight and height capabilities, and other improvements to support the long-term operation and maintenance of offshore wind generation facilities, and other offshore wind energy related design and development activities.
3. Cost share funding to an eligible applicant that receives a federal award for purposes consistent with Category I or II activities. The statute refers to moneys allocated for this purpose as Category III funds.
4. Preliminary engineering and environmental review work, including taking actions and preparing material to comply with the California Environmental Quality Act and federal environmental laws.

The program’s scope and criteria guiding where and how money will be allocated and distributed is still to be determined. Similar to the strategic plan, CEC is expected to undertake targeted outreach and public workshops this year to discuss the approach to distributing these funds. It is possible that the program may launch as soon as the third quarter of 2023, but that will be dependent on the outreach, engagement, and planning phases.

It is also important to note the state’s projected budget situation for fiscal year 2023/2024. Governor Newsom’s proposed budget for 2023/2024 currently projects a $22.5 billion deficit, but that number may change by the time the budget bill is passed this summer. At this time, the proposed budget does not call for reductions to the funding appropriated for offshore wind infrastructure improvements, however, that is subject to change. The budget context will make the CEC’s planning for this program, and the public engagement and comment period, all the more important as it could influence how much funding is protected in the budget, if it is reduced at all, and how the funding will be prioritized.

Conclusion

Taken together, the strategic plan, conceptual permitting roadmap, and offshore infrastructure improvement program—all to be crafted, finalized, or potentially launched in 2023—form the foundation for offshore wind development in California and the state’s approach to achieving its offshore wind goals of 2-5 GW of power generation by 2030 and 25 GW of power generation by 2045. CEC’s targeted outreach and public processes for all three elements provide the engaged stakeholders a significant opportunity to influence and inform these developments. California takes public engagement and input from key stakeholders seriously in its policymaking process. Arnold & Porter’s Sacramento policy team stands ready to help clients ensure their views and expertise are heard and put to use in these ongoing developments.

* Yuvaraj Sivalingam is employed as a Policy Advisor at Arnold & Porter's San Francisco, CA office. Mr. Sivalingam is not admitted to the practice of law.

© Arnold & Porter Kaye Scholer LLP 2023 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.