Statoil to quit work on $120 million offshore wind project in Maine

Posted Oct. 15, 2013, at 12:42 p.m.
Last modified Oct. 15, 2013, at 7:11 p.m.

BANGOR, Maine — Norwegian company Statoil announced Tuesday that it was pulling the plug on its $120 million offshore wind pilot project in Maine, citing uncertainty about state regulations.

It will instead put its resources toward pursuing an offshore wind project it has been developing in Scotland.

“Obviously, this is a huge disappointment,” Paul Williamson, executive director of the Maine Ocean & Wind Industry Initiative, said Tuesday. “As the University of Maine pointed out in its support letter [for Statoil’s project], having Statoil in the state of Maine was like attracting a Google or an Apple to the state.”

The multinational oil and gas company — traded on the New York Stock Exchange and has a market cap of $72.4 billion — said in its release that it would “demobilize all activities and resources” in Maine.

“Changes in the framework conditions in the state, uncertainty around the commercial framework and the schedule implications of project delays made the project outlook too uncertain to proceed,” the release stated.

Statoil proposed the Hywind Maine project in 2011, in response to a request for proposals the Maine Public Utilities Commission issued in 2010 as it looked for an offshore wind project to support with ratepayer subsidies. Although the University of Maine has also been working on developing an offshore wind project, Statoil was the only company prepared to submit a proposal at that time. The PUC in January 2013 finalized a term sheet with Statoil, though no formal contract had been signed.

In June, the Legislature, at the behest of Gov. Paul LePage, passed a law that forced the PUC to delay negotiations on a contract with Statoil and reopen the RFP process it closed in 2011.

LePage has long opposed the Statoil project. He vetoed an omnibus energy bill that lawmakers worked on for most of the legislative session and then withheld his support until the Legislature passed the aforementioned law. LePage argued that Statoil’s project did not provide enough benefits to Maine, and that UMaine should have a chance to lobby the PUC for ratepayer support.

With the PUC process reopened, UMaine formed a for-profit company called Maine Prime Technologies to represent its interests in offshore wind technology. That spin-off company then joined with Cianbro and Emera, the owner of Bangor Hydro Electric Power Co., to form a company called Maine Aqua Ventus I, which submitted a proposal to the PUC on Aug. 30.

In a statement issued Tuesday afternoon, LePage reiterated his past concerns that the Statoil proposal did not offer Maine enough clear-cut benefits for what it would cost ratepayers.

“The administration has been perfectly clear through the regulatory process that the term-sheet offered by Statoil was ironclad in its cost — placing a $200 million burden on Mainers by way of increasing electric costs,” LePage said in the prepared statement. “Additionally, the corporation was ambiguous in its commitment to growing Maine’s economy.”

The partners behind Maine Aqua Ventus I issued a statement, reiterating their commitment to pursue an offshore wind project in Maine.

“We are regional institutions committed to developing a Gulf of Maine resource for the benefit of the region,” the statement said. “We are here to stay and look forward to competing against other projects nationally and helping to realize Maine’s full offshore wind development opportunity.”

UMaine currently has a pilot project in Castine Harbor, which recently became the first offshore wind turbine in the Americas to provide electricity to the power grid.

Statoil will officially withdraw its application before the PUC, Ola Aanestad, Statoil North America’s vice president of communications, said Tuesday.

The decision doesn’t change the PUC’s current deliberations on the Maine Aqua Ventus I application, which will be evaluated on the existing standards, according to Tom Welch, chairman of the PUC.

Statoil’s official withdrawal “basically eliminates a future set of questions we’d otherwise have to answer,” Welch said Tuesday.

At the end of 2012, Statoil and UMaine received $4 million grants from the U.S. Department of Energy to support development of their respective pilot projects. Statoil will begin a dialogue with the DOE on the status of the grant, Aanestad said. He added that Statoil will continue to look for opportunities to develop an offshore wind project in the United States.

“This is a young market, and we hope we’re in it for a long time, and so we won’t rule out anything for the future,” Aanestad said.

Williamson said he remains confident that the state’s abundant natural resources and UMaine’s efforts will attract investment and spur the creation of an offshore wind energy industry in Maine. Still, an opportunity has been lost, he said.

“While we remain bullish that Maine’s natural resources will eventually attract investment, it does cause some concern and disappointment because Statoil represented an opportunity to put Maine first in the market,” he said. “Without Statoil’s investment, we still have an opportunity to be first to market with the university’s project, but having two offshore wind projects in Maine would have been big elements in creating the entire industry here. Now the opportunity is less likely that Maine will be the birthplace of this industry.”

Statoil’s decision did not come as a complete surprise.

Annette Bossler, an international business consultant based in Bremen, follows the global offshore industry. In July, after the Legislature forced the PUC to reopen the bidding process, she told the BDN that Statoil was pursuing a similar Hywind pilot project in Scotland.

“Statoil has options. Maine, on the one hand, is a very good market because of the wind resources we have, but you need to have the reliable commitment to have a big company say, ‘this is where we’re going to spend the money.’ Because there are other places in the world you could do this,” Bossler said at the time.

Bossler, who published a report in May on the global offshore wind industry, said at least $1 billion will be invested around the world in the next few years by offshore wind technology developers and predicted in July that the LePage administration and Legislature had threatened the state’s opportunity to receive a significant part of that investment.

In a statement, U.S. Rep. Chellie Pingree, D-Maine, called Statoil’s decision to pull out of Maine “extremely disappointing.”

“It’s unfortunate that this major international company was made to feel unwelcome in Maine, and I’m hopeful that this won’t be a major setback in the future development of a new offshore wind industry in our state,” she said. “The University of Maine has a strong record on clean energy technologies, and I’m optimistic that their continued efforts can help make great progress in establishing Maine as a real leader in the renewable energy sector.”

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