Are floating offshore wind turbines “ships” under maritime law?

File image courtesy of Untrakdrover / CC BY SA 3.0

Posted on Dec 15, 2019 2021 5:35 pm by

Keith Billotti and Hoyoon Nam

Wind energy at sea is an essential tool in the transition to 100% renewable energy in the United States. The U.S. government has pledged to promote offshore wind projects (OSW) in the hope of having 30 gigawatts (GW) of offshore wind power generation capacity installed by 2030 and 110 GW of power generation capacity. offshore wind power by 2050. To put this in context, the total global production capacity of offshore wind power was around 32 GW at the end of 2020. These ambitious targets will require an increase in offshore wind projects.

Ongoing offshore wind projects are being planned and developed in places with shallower water depths (20-50m) on the east coast. While there are many reasons developers start offshore development in these areas, one reason is that fixed-bottom foundations, which are the most proven foundation technology, are often considered the best fit. at shallower water depths. However, in order to account for the expected surge in offshore wind development, projects will need to be built in locations with deeper water depths (i.e. the West Coast and Gulf of Maine). One way the developers plan to make full use of these deeper water depths is by leaning on a floating foundation. While still in the early stages of development, floating offshore offers the possibility of accessing wind energy resources that were previously thought inaccessible.

From a legal point of view, an open question regarding a floating wind turbine is whether such a structure is a “ship” under applicable maritime law and whether it is necessary or even possible to be registered as such. . By analogy, a mobile offshore drilling unit (used for oil and gas exploration) is registered and regulated as a vessel in various jurisdictions, even though it is not a mode of transport and therefore would not be. not considered a ship in the sense of the word. It appears that at least one classification society is able to “classify” floating wind turbines, which has enabled some ship flag jurisdictions (including the Republic of the Marshall Islands and Norway) to register them.

The implications of a structure characterized as a ship are numerous, including regulatory, environmental and fiscal implications. However, perhaps a notable and significant consequence is that in connection with the financing of such a structure, a ship mortgage can be registered to perfect the surety of the financier. Depending on the structure of the financing, a ship mortgage would provide better clarity in the prime status of the financier’s security interest than, for example, a UCC financing statement which is typically used to perfect a security interest on the equipment. One would expect that the clarity of the financier’s safety could lead to additional financing alternatives for the construction of the offshore mobile units (and other offshore wind structures).

As the technology and specifications of floating wind turbines are refined and the industry evolves and matures, market practices will develop, but it is encouraging to see that industry participants and pavilion registers have already taken the necessary steps to provide a framework within which floating wind turbines could be mortgaged in a manner familiar to the financier.

The West Coast is an important and necessary location for increasing the offshore wind capacity of the United States. Although it is an evolving technology, the mobile floating turbine can be an essential tool in overcoming the challenges surrounding the geography of the West Coast. Project sponsors and other parties involved will need to monitor technological and legal developments to ensure the success of the projects.

Keith Billotti is a partner and co-director of the Capital Markets group of Seward & Kissel. His practice includes all aspects of corporate and US securities law for domestic and foreign clients, primarily in the shipping, offshore drilling and hedge fund industries. Keith regularly represents large established shipping and offshore drilling companies.

Hoyoon Nam is a partner of the Corporate Finance Group of Seward & Kissel. He is mainly dedicated to the representation of financial institutions and borrowers in connection with bank financing and restructuring operations with a particular emphasis on matters of interest to customers in the transport industry.

This article is sponsored by Seward & Kissel LLP.

Top image: Floating offshore wind prototype (Untrakdriver / CC BY SA 3.0)

The opinions expressed here are those of the author and not necessarily those of The Maritime Executive.