Cape Wind’s future called into question
As recently as last fall, Cape Wind officials were vowing that by the end of 2014 workers would start digging the trenches and laying the cables to erect 101 massive wind turbines in Nantucket Sound, a $2.5 billion project meant to be the nation’s first off-shore wind farm.
As of Tuesday, when National Grid and Northeast Utilities terminated their contracts to buy power from Cape Wind, it was unclear whether the developer would ever break ground.
Even Governor Deval Patrick, a longtime proponent of the project, was unsure whether Cape Wind would produce a single kilowatt of energy. Asked Wednesday whether the project could still survive, Patrick told reporters, “I don’t know.”
The latest setback, which the utilities blamed on Cape Wind’s inability to secure financing, cheered opponents but worried those who see the project as a model to promote other offshore wind farms around the country. The utilities’ withdrawal also raises questions about the future of a $113 million venture in New Bedford to assemble and deploy wind turbines. What was clear Wednesday was that the project, already subject to years of federal and state reviews and onerous legal battles, faces continued litigation.
Officials at Cape Wind did not return calls for comment Wednesday, but they said in a statement that they intend to press on and insisted their contracts with utilities remain in effect.
“We do not regard these . . . terminations as valid,” said Mark Rodgers, a spokesman for Cape Wind. “Despite the fact that there is a contract dispute awaiting resolution, the contracts remain in force. We are determined to bring the benefits of the Cape Wind project to the citizens of Massachusetts, and we will pursue every option available to us to do so.”
The utility companies this week said they were terminating their contracts, which were signed in 2012, because Cape Wind had failed to meet a Dec. 31 deadline to obtain financing, start construction, or put up financial collateral to extend the contract.
In letters dated Dec. 31 to both utilities and state regulators, Cape Wind president James Gordon asked the companies to put off terminating the contracts, citing “extended, unprecedented, and relentless litigation by the Alliance to Protect Nantucket Sound,” a persistent opponent of the project.
Gordon wrote that the lawsuits had impeded Cape Wind from meeting the required milestones and argued that the litigation triggered a so-called force majeure clause in the contract that extended the deadlines for Cape Wind.
Officials at the utility companies rebutted that argument, saying that force majeure clauses in contracts typically apply to unforeseeable natural disasters or labor strikes, rather than lawsuits and political opposition.
“The challenges alluded to by Cape Wind were ongoing and well known to the parties at the time the agreement was entered into and were not the type of events that would excuse Cape Wind from performing its obligations,” said Caroline Pretyman, a spokeswoman for Northeast Utilities.
Jake Navarro, a spokesman for National Grid, added: “We don’t share Cape Wind’s reading of the contract. It seems a pretty straightforward case of Cape Wind not meeting the critical milestones, and that’s the reason the contract was terminated.”
In the developer’s contract with National Grid, force majeure is defined as an “unusual, unexpected, and significant event” beyond the control of the party seeking to use the provision. But the contract also states that force majeure cannot be used for a “failure to satisfy contractual conditions or commitments, or lack of or deficiency in funding or other resources.”
Lawyers with experience reviewing energy contracts said it was unlikely that force majeure would be a winning argument in court.
“Force majeure is an act of god, something you could have never foreseen,” said George Dean, a former assistant attorney general who ran the office’s utilities division. “I can’t imagine anyone is surprised that there was opposition. That is certainly not unexpected.”
Charlie Harak, manager of the energy unit at the National Consumer Law Center in Boston, said he had not seen the relevant provisions, but said that force majeure generally applies to events “such as floods, hurricanes, riots, strikes, and wars.”
Cape Wind’s contract with National Grid provided for the utility to buy 50 percent of Cape Wind’s power. Northeast Utilities later signed on for 27.5 percent of the energy generated.
Cape Wind had raised about $1.5 billion for the project, Rodgers said in a telephone interview last fall. But the developer had yet to secure sufficient financing to break ground.
The project has parried some 26 lawsuits since it was first proposed 14 years ago.
Many of those were filed by Audra Parker, president of the Alliance to Protect Nantucket Sound, which is funded mainly by Bill Koch, a wealthy Florida businessman and major political donor to conservative causes who has a home in Osterville.
Cape Wind “can’t move forward without the contracts,” Parker said. “This is very serious, a huge problem for them.”
She added that Cape Wind’s failure to put up more than $1 million in collateral to extend the agreements suggested deeper problems for the developer. “Either they don’t have it or had no confidence that the project would succeed,” she said.
Among those happy to see the contracts voided was Robert A. Rio, the senior vice president of governmental affairs of the Associated Industries of Massachusetts, who has long argued that Cape Wind power would be more expensive than other energy sources. But Rio said he was not sure whether Cape Wind would find a way to continue.
“I don’t know if there’s any other way to get this financed, but we’re just glad to see the ratepayers off the hook,” he said.
Environmental advocates held out hope that Cape Wind would find a way forward. They maintain that the project will spur additional offshore wind farms and reduce the nation’s reliance on fossil fuels, which are a chief cause of greenhouse gases that cause climate change.
“This cat has nine lives, and it’s not dead until it’s dead,” said Jack Clarke, director of public policy at Mass Audubon. “This is certainly a blow to the project, but I wouldn’t say it’s over yet.”
Others suggested that even if Cape Wind does get scrubbed, it might not be a blow to the company’s ambitions for promoting renewable energy.
At the end of the month, the federal government will auction four offshore wind leases across 742,000 acres of sea south Martha’s Vineyard. Those waters would be well beyond the view from shore and allow for the use of much larger, more powerful turbines than Cape Wind has planned to build. The energy from those leases could power as many as 1.4 million homes, according to the US Bureau of Ocean Energy Management.
“The future of offshore wind is still strong,” said Sean Mahoney, executive vice president of the Conservation Law Foundation.
The potential loss of Cape Wind would be a significant setback for New Bedford, where the state spent $113 million building a facility to assemble and deploy offshore wind turbines. But Mayor Jon Mitchell insisted that the project is not critical to the city’s new Marine Commerce Terminal.
“It’s a multidimensional facility capable of supporting a broad array of maritime uses,” Mitchell said.
And, the mayor said, New Bedford is well positioned to capitalize on the other wind energy projects in the offing.
“We stay the course in the long run,” he said.