California’s first upcoming offshore wind lease sale, scheduled for December 6, 2022, is the next major step forward for clean energy in the Golden State.

By Nikki Buffa, Jennifer K. Roy, Janice M. Schneider, Daniel P. Brunton, Nathaniel Glynn, and Brian McCall

The Bureau of Ocean Energy Management (BOEM) and the State of California have taken significant steps to advance offshore wind development in the lead-up to BOEM’s upcoming auction for the first renewable energy lease sale in federal waters offshore California. The BOEM lease sale will involve a number of new facets not seen in other recent lease sales in New York and North Carolina, including revised bidding credits and lease stipulations. In anticipation of the lease sale, California is developing a permitting roadmap to streamline the state approvals process for any resulting offshore wind projects.

On the federal side, the Biden Administration is deploying significant resources and funding to boost development of floating offshore wind technologies that will be essential off the Pacific Coast. While BOEM’s upcoming lease sale and California’s actions to support offshore wind development represent an important moment for the offshore wind industry, many challenges remain to capture the full resource potential off California’s coast.

In recent months, both the federal and California governments have acted to advance offshore wind projects off the coast of California, culminating in BOEM setting the first-ever lease sale auction for five lease areas in the Morro Bay and Humboldt Wind Energy Areas (WEAs) on December 6, 2022. Forty-three entities qualified to participate in the auction, demonstrating the deep interest in pursuing projects off California’s coast.

In determining potential bids for the lease areas, bidders will need to consider some of the unique challenges that come with developing a wind project offshore California, including potential lease area restrictions, technological challenges, and permitting uncertainty.

Setting the Stage for the First California Sale

On October 18, 2022, BOEM announced that it would hold its first-ever offshore wind energy lease sale on December 6, 2022, for areas on the Outer Continental Shelf (OCS) off the coast of California. The Final Sale Notice (FSN), including the details of the lease sale, was published in the Federal Register on October 21, 2022. This publication follows BOEM’s Proposed Sale Notice (PSN) released in May 2022 and detailed in this Latham Client Alert.

In response to public comments on the PSN, BOEM made some key changes reflected in the FSN.

1. Sale Format. In the PSN, BOEM contemplated offering the two WEAs in two separate regional auctions that would run simultaneously — a North Coast auction and a Central Coast auction — where each qualified entity could bid for and ultimately acquire one lease area per region, for a possible total of two lease areas. BOEM ultimately decided to conduct the auction similarly to how it has conducted its past offshore wind auctions: a single auction will be held in which all the lease areas will be offered. In each round of the auction, a bidder can bid for at most one of the offered leases at a time. A bidder can switch between different lease areas from round to round, but it must bid in each round, and no bidder can acquire more than one lease in the auction.

2. Increased Bidding Credit for Lease Area Use Community Benefit Agreement (CBA). The PSN described BOEM’s plan to structure the lease sale as multiple-factor bidding auctions, using a combination of a monetary factor and non-monetary factors. One such credit is for a Lease Use CBA by which bidders can obtain a credit for committing to establish a CBA with a community or select a stakeholder group whose use of the proposed lease areas — or whose use of resources harvested from the lease area — is expected to be impacted by offshore wind development. The FSN increased the Lease Use CBA bidding credit from 2.5% to 5% of the cash bid, highlighting BOEM’s interest in ensuring that wind projects developed offshore California continue to take into consideration stakeholders with interests in the lease areas.

3. New Bidding Credit for General Community Benefit Agreement. On top of the Lease Area Use CBA bidding credit, the FSN includes a new 5% bidding credit for bidders who have committed to a qualifying General CBA that was not included in the PSN. Bidders can obtain this credit for committing to enter into a CBA to address activities resulting from lease development that are not otherwise addressed by the Lease Area Use CBA for potential impacts on the marine, coastal, and/or human environment. Combined with the 5% Lease Use CBA bidding credit, along with the 20% workforce training / supply chain development credit discussed in this Latham Client Alert, bidding credits could be worth a total of 30% of a bidder’s cash bid.

4. Refined and New Lease Stipulations. The FSN includes refinements to certain lease stipulations identified in the PSN along with several new stipulations.

  • Foreign Interest. The FSN includes a new lease stipulation “to protect national defense capabilities and military operations” that would require the lessee to provide the Department of Defense (DoD) with information about its ownership interests, material vendors, contractors, and any foreign entities and persons allowed to access the wind turbine structures and data systems at least 14 days before taking any actions in the lease area. Any security concerns that the DoD identifies must be resolved before access is allowed to any foreign persons or representatives of foreign entities or use of wind turbines or other permanent onsite equipment manufactured by a foreign entity.
  • CFIUS. The FSN added a new lease stipulation regarding required notice to the Committee on Foreign Investment in the United States (CFIUS), in which a proposed lessee, even if in compliance with BOEM’s regulations mandating that leases be held by US entities, is a foreign-controlled business entity under the regulations at 31 CFR part 800. In that situation, approval of any assignment of lease interest that is subject to this stipulation would only take place after CFIUS provides notice that it has concluded all action under Section 721 of the Defense Production Act of 1950, as amended, with respect to the assignment.
  • California Coastal Commission (CCC) Conditions. The FSN includes several new stipulations that follow the CCC’s Coastal Zone Management Act consistency determinations for Morro Bay and Humboldt WEAs. These include: (i) limiting vessel speeds to 10 knots during all lease characterization activities; (ii) marine mammal monitoring measures; (iii) a site-specific Spill Prevention and Response Plan that provides a plan for a worst-case-scenario spill and cleanup; (iv) a critical operations and curtailment plan that defines the conditions for which work will be suspended because of an inability to safely operate; (v) an anchoring plan that must be submitted to BOEM as part of any survey plan that requires vessel anchoring that describes how sensitive habitats, cables, and pipelines will be avoided; (vi) avoiding intentional contact with hard substrate, rock outcroppings, seamounts, or deep-sea coral/sponge habitat; (vii) conducting geophysical surveys with low-energy equipment, as defined by 2 CCR 2100.03(g); (viii) coordinating with the CCC to minimize impacts to coastal resources and provide information required for future consistency certifications; and (ix) using an independent fisheries liaison to coordinate and communicate site activities with fishing stakeholders.

5. Updates to Potential Future Restrictions. As discussed in this Latham Client Alert, the PSN identified some uncertainty about potential future restrictions that could limit or condition the use of the WEAs. The FSN provides an update on these potential restrictions.

  • US Coast Guard Port Access Route Study. The US Coast Guard recently released a draft Pacific Coast Port Access Route Study (PAC-PARS) that evaluates access routes for the movement of vessels between ports along the Pacific Coast. The draft PAC-PARS recommends a voluntary “fairway” for coastwise vessel traffic along a 15-nautical-mile-wide thoroughfare that will traverse near, but not through, the Humboldt and Morro Bay lease areas. But the FSN points out that the PAC-PARS study did not consider issues related to vessel anchorage needs, and the US Coast Guard is undertaking a national review of anchorage regulatory standards that could prompt potential recommendations from the Coast Guard relating to allowances for anchoring in certain portions of the lease areas.
  • US DoD Activities. As discussed in this Latham Client Alert, in May 2021, the DoD, US Department of Interior (Interior), and California announced an agreement finding that the proposed lease areas in the Morro Bay WEA are suitable for development, with the inclusion of site-specific lease and permitting stipulations. The FSN elaborates on what those stipulations may require, including a curtailment protocol to avoid conflicts with electromagnetically sensitive activities conducted in the area. The FSN notes that any such required curtailments should not be disclosed to anyone without the prior consent of DoD.

When Can BOEM Issue Leases?

To comply with the Inflation Reduction Act (IRA), BOEM cannot issue an offshore wind lease unless:

  • an offshore oil and gas lease sale has been held during the previous one-year period ending on the date of the issuance of the offshore wind lease; and
  • the sum total of acres offered for lease in offshore oil and gas lease sales during the one-year period ending on the date of the issuance of the offshore wind lease is not less than 60 million acres.

The FSN is clear that this provision of the IRA has no effect on BOEM’s ability to hold the auction. Just two days after issuing the FSN, BOEM issued a Proposed Notice of Sale for an offshore oil and gas lease in the Gulf of Mexico (Lease Sale 259).[1] BOEM has scheduled Lease Sale 259 for March 28, 2023, three days before the statutory deadline in the IRA, including the majority of the Gulf of Mexico OCS Region Western and Central Planning Areas, which is well above the statutory minimum acreage requirement to subsequently issue the California offshore wind leases.

California’s Preparation for Offshore Wind

Parallel to BOEM’s federal efforts, California’s AB 525 provides a state-level framework for developing offshore wind energy off the California coast. AB 525 requires the California Energy Commission (CEC) to develop a strategic plan that establishes what long- and short-term steps are necessary to advance the state’s offshore wind energy infrastructure. To inform the strategic plan, the CEC must produce a series of interim deliverables.

  • By June 1, 2022, the CEC needed to assess and quantify the maximum feasible capacity of offshore wind along the California coast and to establish megawatt planning goals to achieve reliability, ratepayer, employment, and decarbonization benefits (Capacity Report). The final Capacity Report that the CEC approved in August 2022 established planning targets of 2 to 5 gigawatts (GW) of offshore wind by 2030 and 25 GW by 2045. These targets are consistent with Governor Gavin Newsom’s July 2022 request that the CEC set an offshore wind planning goal of at least 20 GW by 2045, highlighting the need for bold climate action.
  • By December 31, 2022, the CEC must complete a preliminary assessment of economic benefits related to seaport investments and workforces.
  • By December 31, 2022, the CEC must develop a permitting roadmap for the development offshore wind facilities (Permitting Roadmap).
  • The CEC must also identify suitable sea space sufficient to accommodate planning goals, develop a plan to improve waterfront facilities that could support a range of floating offshore wind development activities, and assess the transmission investments and upgrades necessary to support the offshore wind planning goals.

Based on the findings of these deliverables, the CEC must then develop a strategic plan for offshore wind energy developments by June 30, 2023. The strategic plan will be developed in conjunction with federal, state, and local agencies and a wide variety of stakeholders, including fisheries groups, labor unions, industry, and environmental organizations. At a minimum, the plan will address the development of the offshore wind economy and workforce; the process for identifying viable sea space; the identification of port space and infrastructure; transmission planning; permitting requirements; and potential impacts on coastal resources, fisheries, Native American and Indigenous peoples, and national defense, along with strategies for addressing those potential impacts. Importantly, while the development of offshore wind will be a long-term process, the strategic plan will prioritize near-term actions, highlighting the legislature’s desire to spur the development of offshore wind in California.

The CEC has not yet released a draft or official Permitting Roadmap, which by statute was to be completed by December 31, 2022. As multiple California agencies will play critical roles in the permitting process, the Permitting Roadmap is anticipated to be a helpful tool for private and public actors trying to navigate the offshore wind industry at the state level. For example, the State Lands Commission (SLC) and the CCC will have major influence over offshore wind projects. The SLC manages California’s 4 million acres of “Public Trust” lands and has the authority to grant lease rights for development projects upon the state’s land, including the state’s territorial sea. Thus, when an entity needs to use the state’s tides or submerged lands, such as to lay transmission export cables, it must apply for a lease through the SLC. The CCC also regulates development in the coastal zone. The coastal zone generally encompasses the area from 1,000 yards inland from the mean high tide line to three nautical miles off the coast (the state’s outer limit of jurisdiction). The CCC has jurisdiction over permitting matters in the coastal zone — including issuance of Coastal Zone Management Act (CZMA) consistency certification for federal approvals and issuance of coastal development permits for development in the coastal zone. Therefore, the CCC will have considerable influence over offshore wind energy development. The California Public Utilities Commission will also have jurisdiction over elements of offshore wind projects, such as interconnections with utility-owned transmission facilities that support connecting the power generated from the turbines to the grid.

The Permitting Roadmap’s goal is to document existing processes, identify opportunities to improve efficiency and coordination among the permitting agencies, identify process improvements within and among agencies, and develop a common understanding across agencies, developers, and other interested parties. The intent is that the Permitting Roadmap will not merely be a list of needed permits and approvals, but rather that it will create a well-coordinated and efficient permitting process, and potentially identify the agency that should lead the California Environmental Quality Act review process for offshore wind projects.

Other California state and local agencies will also play critical, and perhaps less obvious, roles in the permitting process, including the California Department of Fish and Wildlife, the California State Water Resources Control Board and its regional boards, and local jurisdictions that may need to approve onshore infrastructure. If successful, the Permitting Roadmap will lay out a clear path of the permitting process, including the progression of and timeline for reviewing offshore wind projects; help industry and government actors understand their roles in the permitting process; and facilitate the development of California’s offshore wind facilities.

Other Developments to Watch

Several additional policy developments are expected that could impact California offshore wind lease development. The first is the National Oceanic and Atmospheric Administration’s proposed Chumash Heritage National Marine Sanctuary, which was proposed for designation in November 2021. Although the offshore wind industry appears to be supportive of the sanctuary designation in concept, there have been calls for an amendment to the proposed sanctuary boundary to account for offtake cable transmission between the Morro Bay Lease Areas and onshore grid interconnection points. These boundary adjustments are important to facilitate large-scale wind development within the lease area.

During the comment period on the PSN, at least one federally recognized tribe expressed concerns that the Humboldt Wind Energy Area overlapped with ocean areas it stated had never been ceded to the federal government, and several tribes advocated for lease conditions and stipulations that benefit local Tribal Nations (e.g., community benefits, adaptive management, and monitoring). Government-to-government consultations and tribal engagement on these important issues will be key going forward, along with engagement of other stakeholders, as required under the leases.

Biden Administration Actions to Overcome Technological Challenges of Floating Turbines

In addition to a potentially more complex regulatory environment, California offshore wind also faces the technological challenge of needing to use floating offshore wind platforms. While standard monopile offshore wind turbines can be fixed directly to the ocean floor in relatively shallow areas, these conventional turbines cannot be deployed in very deep waters, such as those off the coast of California. The floating offshore wind technology that can be deployed in these areas is in the nascent stages of development and deployment. According to Interior, only 0.1 GW of floating offshore wind has been deployed globally to date, compared with over 50 GW of fixed-bottom offshore wind generating capacity. Therefore, the Biden Administration’s recently announced floating offshore wind initiatives will be critical to developing the technologies needed to deploy offshore wind capacity in those areas of the OCS where fixed-bottom generation is impracticable, including the Pacific Coast and the Gulf of Maine. The Department of Energy (DOE) estimates that deep water areas requiring floating platforms have the potential to produce 2.8 terawatts of offshore wind energy, comprising two-thirds of the United States’ total offshore wind potential.[2]

Earlier this year, the Biden Administration announced a trio of initiatives designed to boost development of these floating offshore wind platforms.[3]

1) Floating Offshore Wind Shot

As part of DOE’s Energy Earthshots Initiative, Secretary of the Interior Deb Haaland and Secretary of Energy Jennifer Granholm announced the launch of Floating Offshore Wind Shot.[4] At present, the costs of commercial scale floating offshore wind projects are estimated to be 50% higher than those for fixed-bottom offshore wind. As such, the ultimate goal of Floating Offshore Wind Shot is to reduce the cost of floating offshore wind energy by more than 70%, to $45 per megawatt-hour by 2035.

To achieve this goal, DOE, Interior, and the Departments of Commerce and Transportation will collaborate to boost floating offshore wind design, development, and manufacturing. The agencies will engage in focused research, development, and demonstration efforts to “catalyze” cost reductions for floating offshore wind, with a particular focus on manufacturing and engineering. In particular, DOE will address key challenges to the floating offshore wind industry by supporting development of the floating offshore wind supply chain (including critical port infrastructure) and scaling up domestic manufacturing capacity. DOE will also work with the National Science Foundation on research and workforce development to support Floating Offshore Wind Shot.

2) Floating Offshore Wind Deployment Goal

Additionally, Interior announced a new goal of installing 15 GW of floating offshore wind capacity by 2035, which will provide enough renewable energy to power 5 million homes. To further this goal, BOEM will advance leasing in deep-water portions of the OCS where floating offshore wind technology will be needed, beginning with the California lease sale discussed above. The Biden Administration estimates that meeting this goal will allow the US to avoid an estimated 26 million metric tons of carbon emissions each year.

3) Investments in Floating Offshore Wind Research and Development

Finally, DOE announced the availability of nearly $50 million in funding for research, development, and demonstration projects related to floating offshore wind. These funding opportunities include a $6.85 million prize competition for participants who present optimized floating platform technologies that can be domestically manufactured at the commercial level, as well as a $3 million project funded by the Infrastructure Investment and Jobs Act to develop modeling tools that will help industry and researchers design commercial-scale floating offshore wind facilities. The largest funding allocation will be provided through phase two of DOE’s Advanced Research Projects Agency-Energy (ARPA-E) Aerodynamic Turbines, Lighter and Afloat, with Nautical Technologies and Integrated Servo-control (ATLANTIS) program, which will provide $31 million for experimental testing in ocean, lake, and tank and tunnel environments to develop new technology for floating offshore wind turbines. ARPA-E also recently announced an award of $17.5 million under the agency’s Seeding Critical Advances for Leading Energy technologies with Untapped Potential (SCALEUP) program to further research into two “disruptive” floating offshore wind turbine technologies. These funding initiatives will help boost development of offshore wind technologies, aided by the new advanced manufacturing production credit for floating offshore wind platform components, passed as part of the IRA.[5]


The US offshore wind industry, which to date has focused on the East Coast, is turning its attention to California. While challenges remain, federal and state actions to facilitate floating offshore wind development along the West Coast are designed to ensure the successful next step forward for clean energy.

Latham & Watkins will continue to monitor and report on developments in this area.

This post was prepared with the assistance of Shawna Strecker in the Orange County office of Latham & Watkins.






[5] See H.R. 5376 (2022), section 13502(b)(2)(A)(iv)(II).