USA Trends and Developments Contributed by: Seward & Kissel LLP, Seward & Kissel LLP
whose vessels trade into the EU and are subject to the EU Emissions Trading Scheme (EU ETS) have added new terms to their contracts in order to fairly allocate emission allowance costs. Sale and purchase contracts for those vessels should include an EU ETS clause to ensure the sharing of emissions data even after the sale of those vessels, to allow vessel owners to meet their EU ETS reporting requirements. While it is certain that the maritime industry will need to change in order to meet the IMO tar - gets as well as emission reduction regulations imposed by governmental authorities, how such change is implemented continues to evolve. Offshore Wind Developments: Continued Project Development and Ongoing Tax Incentives Interest in advancing the US offshore wind industry continues, despite some regulatory uncertainty; the development and use of wind turbines poses certain practical and legal chal - lenges in light of the Jones Act, which regulates maritime commerce and requires goods shipped between US ports to be transported on ships that are built, owned and operated by US citi - zens or permanent residents. In addition, the US Outer Continental Shelf Lands Act of 1952 (as amended, OCSLA), as applied in the offshore wind context where vessels are moored or anchored to the outer continental shelf, greatly extends the reach of the Jones Act beyond the territorial sea. Jones Act-compliant vessels are more expensive to build and operate, but – with proper planning and structuring – less expensive non-Jones Act vessels may be used for certain aspects of offshore wind. As things stand now, the infrastructure neces - sary to service offshore wind projects is gener - ally lacking. For example, there is currently no
Jones Act-qualified offshore wind turbine instal - lation vessel available; the CHARYBDIS is under construction to support Dominion Energy’s off - shore wind project, but at a significant cost and a long build time. Companies have used various methods to address the unavailability of vessels necessary to install and fix wind turbines (though usually at significant cost), including: • using a double-installation method where turbines are carried by a Jones Act-quali - fied vessel/barge and transferred over to a foreign-flagged installation vessel, which then performs the installation; • sourcing the components from a foreign port; or • transporting the components to a foreign port before returning to the installation site. Given the high capital costs of offshore wind, there continues to be a need for vessel owners to access non-US capital. The Jones Act regu - lates how these non-US stakeholders may struc - ture their investment by imposing restrictions on their ownership and control of the vessel-owning entity (and other entities in the same group struc - ture). There are notable ways to increase the amount of capital a non-US investor may com - mit beyond a simple minority investment (ie, not more than a 25% stake), including through the use of tiering, non-voting warrants, time char - ters and joint ventures (eg, the CREST Wind joint venture involving Crowley and ESVAGT, and the American Offshore Services joint venture involv - ing Northern Offshore Services and US-based investment firm OIC). It is also worth noting that the Inflation Reduction Act (IRA) included a number of tax incentives intended to promote investment in the industry. The tax credit opportunities set out under the IRA are available to taxable business entities and
614 CHAMBERS.COM
Powered by FlippingBook