Regulatory uncertainty ranks high among the risks for investors in early stage renewable energy projects. So it should be welcome news that a recent federal district court ruling has not only cleared the way for construction and operation of the long-litigated Cape Wind project, it will also encourage investment and serve as a roadmap for future offshore wind energy facilities.

Cape Wind is a proposed 130-turbine, 468-megawatt offshore wind energy facility in Nantucket Sound off Cape Cod. The project’s developer, Cape Wind Associates LLC, began preliminary work on siting and design in 2000. It first filed for a permit with the U.S. Army Corps of Engineers in November 2001.

Since then, Cape Wind has worked with state and federal agencies to obtain the authorization required to become the first offshore wind energy project in the United States. Progress had been staggered by challenges to government approvals and permits under a variety of environmental statutes and administrative law procedural requirements. These statutes include the National Environmental Policy Act, Endangered Species Act, Migratory Bird Treaty Act, Clean Water Act, Rivers and Harbors Act, Outer Continental Shelf Lands Act and National Historic Preservation Act.

The plaintiffs, a collection of interest groups and individuals, the town of Barnstable and the Wampanoag Tribe of Gay Head (Aquinnah), had challenged the government’s decisions on navigational safety, availability of alternate locations and technologies, historic preservation, Native American artifacts, effect on sea turtles and migratory birds, and the adequacy of the environmental impact statement and biological opinions.

On March 14, the U.S. District Court for the District of Columbia moved the project forward by finally deciding a number of those issues. The court generally upheld the agencies’ decisions approving the project and – most significantly – offered clarity on the complex issue of regulatory permitting.

Most recently, on May 3, the U.S. District Court for Massachusetts dismissed a constitutional challenge to the Massachusetts Department of Public approval of a purchase power agreement (PPA) between Cape Wind and NSTAR Electric Company. Because PPAs ensure the purchase of energy and are the primary sources of revenues, the Cape Wind-NSTAR agreement will serve as a model for developing future agreements.

Considering the strong support for renewable energy development by the Obama administration and the decade of work already devoted to the project, it is anticipated that agencies will work quickly to resolve any further outstanding issues the courts require for the project to begin.

Boost For New Offshore Wind Energy Projects

Only 12 days after the D.C. District Court’s ruling, Cape Wind announced that it had secured an additional $600 million in financing from The Bank of Tokyo-Mitsubishi UFJ. There is no doubt that the recent legal victory played an important role in the timing of this financing decision. Cape Wind had previously received pledges of $600 million from the Danish state-owned export credit agency EKF, $200 million from a Danish Pension Fund, and $100 million from engineering company Siemens AG, and all were conditional on a finalized financing package, which is now much more promising.

After the arduous series of litigations and environmental reviews, developers and government agencies now understand what is required to comply with the applicable statues and obtain the requisite permits. In addition to spurring investment in offshore wind energy development, the Cape Wind decision will help guide state and federal agencies as project applications move through the lengthy review process.

Ripple effects are already underway. Two projects expected to benefit from the decision are the Deepwater Wind Block Island facility and Deepwater Wind ONE offshore wind facility. The Block Island facility is a five-turbine, 30-megawatt offshore wind center proposed to be located approximately three miles southeast of Block Island in Rhode Island state waters.

Deepwater Wind plans to begin transmission construction as early as this year and offshore construction in 2015, with the hope of passing the Cape Wind project to become the first U.S. offshore wind energy facility. Deepwater Wind submitted its final state and federal permit applications for the Block Island facility in late 2012.

With construction slated to begin as early as 2017 and commercial operations by 2018, the Deepwater Wind ONE offshore wind facility is a planned 150- to-200-turbine, 900- to-1,200-megawatt project, located off the coast of Montauk, N.Y. Many regulatory approvals will be guided by the lessons learned during the Cape Wind project review process.

 Although some regulatory risk may always exist, the path forward to successful permitting of many renewable wind energy projects along the Northeast and Mid-Atlantic coasts is suddenly and significantly more transparent, with goals well within view. The industry has the Cape Wind project, veteran of now-historic regulatory battles, to thank for this clarity.

Jerome C. Muys Jr. and Van P. Hilderbrand Jr. are environmental law attorneys in Sullivan & Worcester’s D.C. office. Email: jmuys@sandw.com; vhilderbrand@sandw.com