[Federal Register Volume 81, Number 158 (Tuesday, August 16, 2016)]
[Notices]
[Pages 54591-54598]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-19552]


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DEPARTMENT OF THE INTERIOR

Bureau of Ocean Energy Management

[Docket No. BOEM-2016-0045]


Atlantic Wind Lease Sale 7 (ATLW-7) for Commercial Leasing for 
Wind Power on the Outer Continental Shelf Offshore North Carolina 
(Kitty Hawk)--Proposed Sale Notice and Request for Interest; MMAA104000

AGENCY: Bureau of Ocean Energy Management (BOEM or ``the Bureau''), 
Interior.

ACTION: Proposed sale notice and request for interest for commercial 
leasing for Wind Power on the outer continental shelf offshore North 
Carolina (Kitty Hawk).

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SUMMARY: This is the Proposed Sale Notice (PSN) for the sale of one 
commercial wind energy lease on the Outer Continental Shelf (OCS) 
offshore Kitty Hawk, North Carolina, pursuant to 30 CFR 585.216. BOEM 
proposes to offer Lease OCS-A 0508 for sale using an ascending-bid 
auction. In this PSN, you will find information pertaining to the area 
available for leasing, proposed lease provisions and conditions, 
auction details, the lease form, criteria for evaluating competing 
bids, award procedures, appeal procedures, and lease execution. BOEM 
invites public comment during a 60-day comment period following 
publication of this notice. The issuance of the proposed lease 
resulting from this sale would not constitute an approval of project-
specific plans to develop offshore wind energy. Such plans, expected to 
be submitted by the auction winner, would be subject to subsequent 
environmental and technical reviews prior to a decision to proceed with 
development. This document is also a Request for Interest (RFI), 
pursuant to 30 CFR 585.212, to assess if there has been a change in 
competitive interest in the area encompassing proposed lease OCS-A 0508 
since the publication of the North Carolina Call for Information and 
Nominations (Call) (77 FR 74204) on December 13, 2012. If BOEM 
determines that competitive interest in the proposed lease area (OCS-A 
0508) still exists, BOEM will proceed with the competitive process set 
forth in 30 CFR 585.211 through 585.225. If BOEM determines competitive 
interest in the proposed lease area (OCS-A 0508) no longer exists 
because only one potential lessee is interested in the area, BOEM may 
proceed with the non-competitive process set forth in 30 CFR 
585.231(d)-(i) following the receipt of the acquisition fee specified 
in 30 CFR 585.502(a).

DATES: Comments should be submitted electronically or postmarked no 
later than October 17, 2016. All comments received or postmarked during 
the comment period will be made available to the public and considered 
prior to publication of the Final Sale Notice (FSN).
    Everyone wishing to participate as a bidder in the proposed Kitty 
Hawk lease sale must respond to this notice by the end of the 60-day 
comment period. Prospective bidders whom BOEM has already determined 
are qualified to hold an OCS lease for commercial wind energy 
development offshore North

[[Page 54592]]

Carolina must submit a response to this notice affirming their 
continued interest in the proposed lease area. Those who are not yet 
qualified, but wish to participate as bidders in the proposed lease 
sale, must submit qualification materials by the end of the 60-day 
comment period. All qualification materials must be postmarked no later 
than October 17, 2016.

ADDRESSES: Potential auction participants, Federal, state, and local 
government agencies, tribal governments, and other interested parties 
are requested to submit their written comments on the PSN in one of the 
following ways:
    1. Electronically: http://www.regulations.gov. In the entry 
entitled, ``Enter Keyword or ID,'' enter BOEM-2016-0045 then click 
``search.'' Follow the instructions to submit public comments.
    2. Written Comments: In written form, delivered by hand or by mail, 
enclosed in an envelope labeled, ``Comments on North Carolina PSN'' to: 
BOEM Office of Renewable Energy Programs, 45600 Woodland Road, VAM-
OREP, Sterling, Virginia 20166, (703) 787-1320.
    3. Qualifications Materials: Those submitting qualifications 
materials should contact William Waskes, BOEM Office of Renewable 
Energy Programs, 45600 Woodland Road, VAM-OREP, Sterling, Virginia 
20166, (703) 787-1320, or [email protected]. If you wish to protect 
the confidentiality of your qualification materials, clearly mark the 
relevant sections and request that BOEM treat them as confidential. 
Please label privileged or confidential information with the caption 
``Contains Confidential Information'' and consider submitting such 
information as a separate enclosure. Treatment of confidential 
information is addressed in the section of this PSN entitled 
``Protection of Privileged or Confidential Information.'' Information 
that is not labeled as privileged or confidential will be regarded by 
BOEM as suitable for public release.
    4. Interest Affirmation Materials: Potential bidders who submitted 
nominations in the response to the Call, have been qualified for this 
sale, and wish to participate in the sale should contact William 
Waskes, BOEM Office of Renewable Energy Programs, 45600 Woodland Road, 
VAM-OREP, Sterling, Virginia 20166, (703) 787-1320, or 
[email protected]. If you wish to protect the confidentiality of 
your materials, clearly mark the relevant sections and request that 
BOEM treat them as confidential. Please label privileged or 
confidential information with the caption ``Contains Confidential 
Information'' and consider submitting such information as a separate 
enclosure. Treatment of confidential information is addressed in the 
section of this PSN entitled ``Protection of Privileged or Confidential 
Information.'' Information that is not labeled as privileged or 
confidential will be regarded by BOEM as suitable for public release.

FOR FURTHER INFORMATION CONTACT: Will Waskes, BOEM Office of Renewable 
Energy Programs, 45600 Woodland Road, VAM-OREP, Sterling, Virginia 
20166, (703) 787-1320 or [email protected].

    Authority:  This PSN and RFI is published pursuant to subsection 
8(p) of the OCS Lands Act (43 U.S.C. 1337(p)) (OCSLA), as amended by 
section 388 of the Energy Policy Act of 2005 (EPAct), and the 
implementing regulations at 30 CFR part 585, including 30 CFR 
585.211, 585.212, and 585.216.

Background

Area for Proposed Leasing

    The area described for leasing in this PSN, the Kitty Hawk Leasing 
Area (LA), is the same as the Kitty Hawk Wind Energy Area (WEA) that 
BOEM announced on August 11, 2014. The Area Identification announcement 
is available at: http://www.boem.gov/North-Carolina/.
    The Wilmington East and Wilmington West WEAs, which were also 
announced on August 11, 2014, have been realigned with the planning and 
leasing process for the South Carolina Call Areas. BOEM believes that 
by realigning the leasing process for these areas, a number of existing 
issues can be addressed in a holistic manner. For example, the entire 
Wilmington West WEA, a portion of the Wilmington East WEA, and the 
South Carolina Grand Strand Call Area (80 FR 73818) are all located 
within the newly expanded North Atlantic right whale (NARW) critical 
habitat (81 FR 4838). Further, the State of North Carolina and a number 
of coastal localities in southern North Carolina have expressed 
concerns regarding potential visual impacts that could result from wind 
development offshore North Carolina. Many of these communities have 
requested that BOEM remove from leasing consideration all areas within 
24 nautical miles (nm) of their respective locations, which would 
include all of Wilmington West, a portion of Wilmington East, and a 
portion of the Grand Strand Call Area. This is in contrast to South 
Carolina, where coastal localities such as the City of North Myrtle 
Beach have indicated that they are in favor of offshore wind 
development even if it would be located close to shore. Finally, 
because the Wilmington West WEA is contiguous with the Grand Strand 
Call Area, wake effects could impact the productivity and viability of 
multiple offshore wind developments within these areas.

Environmental Reviews

    On January 23, 2015, BOEM published a Notice of Availability (NOA) 
of an Environmental Assessment (EA) for commercial wind lease issuance 
and site assessment activities on the Atlantic OCS offshore North 
Carolina with a 30-day public comment period (80 FR 3621). In response 
to the NOA, BOEM received 195 comments, which are available at http://www.regulations.gov, Docket No. BOEM-2015-0001. Many of the comments 
focused on mitigation measures to protect wildlife, specifically marine 
mammals. Based on the comments received in response to the EA, public 
outreach, information meetings, and new information received, BOEM 
decided to make revisions to the EA originally published in January 
2015. As a result of the analysis in the revised EA, BOEM issued a 
Finding of No Significant Impact (FONSI) on September 18, 2015 (80 FR 
56494). The revised EA and FONSI can be found at: http://www.boem.gov/North-Carolina/.
    BOEM also considered the comments received when developing 
mitigation measures that will be enforced through the terms, 
conditions, and stipulations in Addendum C of the proposed lease (OCS-A 
0508). These mitigation measures are designed to reduce or eliminate 
impacts from survey activities. They are based on the best available 
science and BOEM's Endangered Species Act (ESA) consultation with the 
National Marine Fisheries Service (NMFS). Additional mitigation 
measures related to the installation and operation of meteorological 
towers and/or buoys will be included as terms and conditions of the 
lessee's Site Assessment Plan (SAP) approval. BOEM will continue to 
work with interested stakeholders and reassess mitigation measures as 
research and data become available.
    In addition, BOEM has concluded consultations under the ESA and the 
Magnuson-Stevens Fishery Conservation and Management Act (MSFCMA) 
covering the proposed lease sale, associated site characterization 
surveys, and subsequent site assessment activities. BOEM will initiate 
consultations with the States of North Carolina and Virginia under the 
Coastal Zone Management Act (CZMA)

[[Page 54593]]

concurrent with the publication of this PSN.
    In order to guide its consultation under section 106 of the 
National Historic Preservation Act (NHPA) for renewable energy 
activities offshore North Carolina, BOEM executed a programmatic 
agreement (PA) with the State Historic Preservation Officer of North 
Carolina and the Advisory Council on Historic Preservation. The PA 
provides for consultation to continue throughout BOEM's commercial 
leasing process and the decisionmaking process regarding the approval, 
approval with modification, or disapproval of a lessees' SAP, 
Construction and Operations Plan (COP), or other plan. In addition, the 
PA allows for phased identification and evaluation of historic 
properties. The PA can be found at: http://www.boem.gov/South-Atlantic-Renewable-Energy-Activities/.
    On May 7, 2015, BOEM completed its section 106 review for the 
undertaking of issuing commercial leases within the North Carolina WEAs 
and published a Finding of No Historic Properties Affected For the 
Issuance of Commercial Leases within the Kitty Hawk, Wilmington East 
and Wilmington West Wind Energy Areas For Wind Energy Development on 
the Outer Continental Shelf Offshore North Carolina. The Finding can be 
found at: http://www.boem.gov/NC-WEAs-Lease-Issuance/.
    Additional environmental reviews and consultations will be 
conducted upon receipt of the Lessee's SAP and COP.

Additional Participation in the Proposed Lease Sale

    Any parties wishing to participate in the proposed Kitty Hawk lease 
sale that have not already been legally, financially, and technically 
qualified to hold a lease for commercial wind development offshore 
North Carolina must submit the required qualification materials by the 
end of the 60-day comment period for this notice. Guidelines to 
prospective lessees on BOEM's requirements to qualify for and hold a 
renewable energy lease on the OCS and the type of information that 
should be submitted to demonstrate your legal, technical, and financial 
qualifications can be found at: http://www.boem.gov/Renewable-Energy-Program/Regulatory-Information/QualificationGuidelines-pdf.aspx. 
Documentation you submit must be provided to BOEM in both paper and 
electronic formats. BOEM considers an Adobe PDF file stored on a 
storage media device to be an acceptable format for submitting an 
electronic copy. Please note that it may take a number of weeks for 
BOEM to assess a potential bidder's legal, technical, and financial 
qualifications. BOEM advises potential bidders who plan to participate 
in a sale to establish their qualifications promptly. It is not 
uncommon for BOEM to request additional materials establishing 
qualifications following an initial review of the qualifications 
package. BOEM cannot determine a potential bidder to be qualified 
without a complete qualification package. Potential bidders who BOEM 
has not determined to be qualified before the FSN is published will not 
be allowed to participate in the proposed sale.

Request for Interest

Affirmation of Interest Received in Response to the North Carolina Call 
for Information and Nominations of Interest for the Kitty Hawk WEA

    Legally, technically, and financially qualified entities who 
submitted a nomination in response to the North Carolina Call must 
respond to this notice and indicate whether: (1) They wish to continue 
with their Call nomination for the Kitty Hawk WEA; or (2) they wish to 
withdraw their Call nomination from further consideration. If such 
entities do not respond by the comment period deadline associated with 
this notice, BOEM will deem their nominations submitted in response to 
the North Carolina Call to be withdrawn, and they will not be able to 
participate in the proposed lease sale. BOEM is issuing this Request 
for Interest due to the large amount of time that has elapsed since its 
initial solicitation of commercial interest through its Call in 
December 2012 and the experience of past lease sales, in which a 
significant number of companies that expressed competitive interest in 
response to the Call choose not to submit a Bidder's Financial Form 
(BFFs) or Bid Deposits.
    Deadlines and Milestones for Bidders: This section describes the 
major deadlines and milestones in the auction process from publication 
of this PSN to execution of the lease pursuant to this proposed sale. 
This process is organized into five stages: (1) The PSN comment period; 
(2) from the end of PSN comment period to publication of the FSN; (3) 
the FSN waiting period; (4) conducting the auction; and (5) from the 
auction to Lease Execution.

The PSN Comment Period

     Submit Comments: The public is invited to submit comments 
during this 60-day period, which will expire on October 17, 2016.
     Public Seminar: BOEM will host a public seminar to discuss 
the lease sale process and the auction format. The time and place of 
the seminar will be announced by BOEM and published on the BOEM Web 
site at http://www.boem.gov/North-Carolina/. No registration or RSVP is 
required to attend.
     Submit Qualifications Materials: All qualifications 
materials must be received by BOEM by the end of the 60-day PSN comment 
period, October 17, 2016. This includes materials sufficient to 
establish a company's legal, technical, and financial qualifications 
pursuant to 30 CFR 585.106-107.
     Submit Interest Affirmation Materials: In order to 
participate in the proposed Kitty Hawk lease sale, potential bidders 
whom BOEM has determined to be legally, technically, and financially 
qualified to hold an OCS lease for commercial wind energy development 
offshore North Carolina, must submit a response to this notice 
affirming their continued interest in participating in the proposed 
lease sale by the end of the 60-day comment period, October 17, 2016.

End of PSN Comment Period to FSN Publication

     Review Comments: BOEM will review all comments submitted 
in response to the PSN during the comment period.
     Finalize Qualifications Reviews: BOEM will complete any 
outstanding reviews of bidder qualifications materials submitted during 
the PSN comment period and requested by BOEM prior to the publication 
of the FSN. The final list of eligible bidders will be published in the 
FSN.
     Prepare the FSN: Should BOEM determine that competitive 
interest still exists in leasing the Kitty Hawk WEA, and BOEM decides 
to move forward with a lease sale, BOEM will prepare the FSN by 
updating information contained in the PSN where appropriate.
     Publish FSN: If BOEM decides to move forward with a lease 
sale, BOEM will publish the FSN in the Federal Register.
    FSN Waiting Period. During this period, qualified bidders must take 
several steps before participating in the auction.
     Bidder's Financial Form (BFF): BOEM must receive each 
qualified bidder's completed and signed BFF no later than the date 
listed in the FSN. Typically, this deadline is approximately 14 
calendar days after publication of the FSN in the Federal

[[Page 54594]]

Register. BOEM will consider extensions to this deadline only if BOEM 
determines that the failure to timely submit the BFF was caused by 
events beyond the bidder's control. Blank BFFs can be found at: http://www.boem.gov/North-Carolina/. Once the BFF has been processed, bidders 
may log into pay.gov and submit bid deposits. BOEM will only accept an 
originally executed paper copy of the BFF, and will not consider for 
this auction BFFs submitted for previous lease sales. The BFF must be 
executed by an authorized representative as shown on the bidder's legal 
qualifications. Each bidder is required to sign the self-certification 
in the BFF, in accordance with 18 U.S.C. 1001 (Fraud and False 
Statements).
     Bid Deposits: Each qualified bidder must submit a bid 
deposit of $450,000 no later than the date listed in the FSN. 
Typically, this deadline is approximately 30 calendar days after the 
publication of the FSN. BOEM will consider extensions to this deadline 
only if BOEM determines that the failure to timely submit the bid 
deposit was caused by events beyond the bidder's control.
     Mock Auction: BOEM will hold an online Mock Auction that 
is open only to qualified bidders who have met the requirements and 
deadlines for auction participation, including submission of the bid 
deposit. Final details of the Mock Auction will be provided in the FSN.
    Conduct of the Auction. BOEM, through its contractor, will hold an 
auction as described in the FSN. The auction will take place no sooner 
than 30 days following publication of the FSN in Federal Register. The 
estimated timeframes described in this PSN assume the auction will take 
place approximately 45 days after publication of the FSN.
    From Auction to Lease Execution. There are several steps between 
the conclusion of the auction and execution of the lease.
     Bid Deposit Refund: BOEM will refund the bid deposit of 
any bidder that did not win the lease. BOEM will provide a written 
explanation of why the bidder did not win.
     Department of Justice (DOJ) Review: The DOJ has 30 days in 
which to conduct an antitrust review of the auction in consultation 
with the Federal Trade Commission, pursuant to 43 U.S.C Sec.  1337(c).
     Delivery of the Lease: BOEM will send three lease copies 
to the winner, with instructions on how to sign the lease. The first 
year's rent is due 45 days after the winner receives the lease copies 
for execution.
     Return the Lease: Within 10 business days of receiving the 
lease copies, the auction winner must post financial assurance, pay any 
outstanding balance of their bonus bid (i.e., winning monetary bid 
minus bid deposit), and sign and return the three signed lease copies.
     Execution of the Lease: Once BOEM has received the lease 
copies and verified that it has received all other required materials, 
BOEM will execute the lease if appropriate.
    Area Proposed for Leasing: The area available for sale will be 
auctioned as one lease, Lease OCS-A 0508 (Kitty Hawk LA). The Kitty 
Hawk LA consists of 122,405 acres. A description of the proposed lease 
area can be found in Addendum A of the proposed lease, which BOEM has 
made available with this notice on its Web site at: http://www.boem.gov/North-Carolina/.

Map of the Area Proposed for Leasing

    A map of the proposed Kitty Hawk LA, GIS spatial files, and a table 
of the boundary coordinates in X, Y (eastings, northings) UTM Zone 18, 
NAD83 Datum, and geographic X, Y (longitude, latitude), NAD83 Datum can 
be found on BOEM's Web site at: http://www.boem.gov/North-Carolina/.
    A large scale map of the area, showing boundaries of the area with 
numbered blocks, is available from BOEM upon request at the following 
address: Bureau of Ocean Energy Management, Office of Renewable Energy 
Programs, 45600 Woodland Road, VAM-OREP, Sterling, Virginia 20166, 
Phone: (703) 787-1300, Fax: (703) 787-1708.
    Withdrawal of Blocks: BOEM reserves the right to withdraw portions 
of the proposed lease area prior to its execution of the lease based 
upon relevant information provided to the Bureau.
    Lease Terms and Conditions: BOEM has made available proposed terms, 
conditions, and stipulations for the OCS commercial wind lease to be 
offered through this proposed sale. If and when the lease is issued, 
BOEM reserves the right to require compliance with additional terms and 
conditions associated with approval of a SAP or COP. The proposed lease 
is on BOEM's Web site at: http://www.boem.gov/North-Carolina/. The 
lease includes the following seven attachments:

 Addendum A (Description of Leased Area and Lease Activities)
 Addendum B (Lease Term and Financial Schedule)
 Addendum C (Lease Specific Terms, Conditions, and 
Stipulations)
 Addendum D (Project Easement)
 Addendum E (Rent Schedule post COP approval)
 Appendix A to Addendum C (Incident Report: Protected Species 
Injury or Mortality)
 Appendix B to Addendum C (Required Data Elements for Protected 
Species Observer Reports)

    Addenda A, B, and C provide detailed descriptions of lease terms 
and conditions. Addendum D will be completed at the time of COP 
approval or approval with modifications. Addendum E will be completed 
after COP approval or approval with conditions.
    BOEM is soliciting comments on the provisions of Addendum C that 
require the submission of SAP and COP survey plans. Specifically, BOEM 
is interested in whether potential lessees and other stakeholders find 
the timeframes associated with those requirements to be reasonable, and 
whether those provisions could be written in a manner that better 
describes the realities associated with offshore wind survey efforts 
(e.g., referring to ``survey mobilizations'' instead of ``SAP surveys'' 
and ``COP surveys'' specifically).
    Plans. Pursuant to 30 CFR 585.601, the leaseholder must submit a 
SAP within 12 months of lease issuance and a COP at least 6 months 
before the end of the site assessment term of the lease.
    Financial Terms and Conditions: This section provides an overview 
of the annual payments required of a lessee that are described in the 
proposed lease, and the financial assurance requirements that will be 
associated with the lease if it is awarded.
    Rent. Pursuant to 30 CFR 585.224(b) and 585.503, the first year's 
rent payment of $3 per acre is due within 45 days of the date the 
lessee receives the lease for execution. Thereafter, annual rent 
payments are due on the anniversary of the Effective Date of the lease 
(the ``Lease Anniversary''). Once commercial operations under the lease 
begin, BOEM will charge rent only for the portions of the lease not 
authorized for commercial operations, i.e., not generating electricity. 
However, instead of geographically dividing the lease area into acreage 
that is ``generating'' and ``non-generating,'' the fraction of the 
lease accruing rent will be based on the fraction of the total 
nameplate capacity of the project that is not yet in operation. This 
fraction is calculated by dividing the nameplate capacity not yet 
authorized for commercial operations at the time payment is due by the 
anticipated nameplate capacity after full

[[Page 54595]]

installation of the project (as described in the COP). The annual rent 
due for a given year is then derived by multiplying this fraction by 
the amount of rent that would have been due for the lessee's entire 
lease area at the rental rate of $3 per acre.
    For example, a 122,405 acre lease (the size of the entire Kitty 
Hawk LA); will have a rent payment of $367,215 per year if no portion 
of the leased area is authorized for commercial operations. If 300 
megawatts (MW) of a project's nameplate capacity is operating (or 
authorized for operation), and the approved COP specifies a maximum 
project size of 500 MW, the rent payment will be $146,886. This payment 
is based on the 200 MW of nameplate capacity BOEM has not yet 
authorized for commercial operations. For the above example, this would 
be calculated as follows: 200MW/500MW x ($3/acre x 122,405 acres) = 
$146,886.
    If the lessee submits an application for relinquishment of a 
portion of its lease area within the first 45 calendar days following 
the date that the lease is received by the lessee for execution, and 
BOEM approves that application, no rent payment will be due on that 
relinquished portion of the lease area. Later relinquishments of any 
portion of the lease area will reduce the lessee's rent payments 
starting in the year following BOEM's approval of the relinquishment.
    The lessee also must pay rent for any project easement associated 
with the lease, commencing on the date that BOEM approves the COP (or 
modification thereof) that describes the project easement. Annual rent 
for a project easement that is 200 feet wide and centered on the 
transmission cable is $70 per statute mile. For any additional acreage 
required, the lessee must also pay the greater of $5 per acre per year 
or $450 per year.

Operating Fee

    For purposes of calculating the initial annual operating fee 
payment and pursuant to 30 CFR 585.506, an operating fee rate is 
applied to a proxy for the wholesale market value of the electricity 
expected to be generated from the project during its first twelve 
months of operations. This initial payment will be prorated to reflect 
the period between the commencement of commercial operations and the 
Lease Anniversary. The initial annual operating fee payment is due 
within 45 days of the commencement of commercial operations. 
Thereafter, subsequent annual operating fee payments are due on or 
before each Lease Anniversary.
    The subsequent annual operating fee payments are calculated by 
multiplying the operating fee rate by the imputed wholesale market 
value of the projected annual electric power production for the 
project. For the purposes of this calculation, the imputed market value 
is the product of the project's annual nameplate capacity, the total 
number of hours in the year (8,760), the capacity factor, and the 
annual average price of electricity derived from a historical regional 
wholesale power price index. For example, the annual operating fee for 
a 100 MW wind facility operating at a 40% capacity (i.e., capacity 
factor of 0.4) with a regional wholesale power price of $40/MWh and an 
operating fee rate of 0.02 would be calculated as follows:
[GRAPHIC] [TIFF OMITTED] TN16AU16.000

    Operating Fee Rate. The operating fee rate is the share of imputed 
wholesale market value of the projected annual electric power 
production due to BOEM as an annual operating fee. For the proposed 
Kitty Hawk LA, BOEM will set the fee rate at 0.02 (i.e., 2 percent) for 
the entire life of commercial operations.
    Nameplate Capacity. Nameplate capacity is the maximum rated 
electric output, expressed in MW, that the turbines of the wind 
facility under commercial operations can produce at their rated wind 
speed as designated by the turbine's manufacturer. The lessee will 
specify in its COP the nameplate capacity available at the start of 
each year of commercial operations on the lease. For example, if the 
lessee specifies 20 turbines in its COP, and each is rated by the 
design manufacturer at 5 MW, the nameplate capacity of the wind 
facility would be 100 MW.
    Capacity Factor. The capacity factor compares the amount of energy 
delivered to the grid during a period of time to the amount of energy 
the wind facility would have produced at full capacity. The amount of 
power delivered will always be less than the theoretical 100 percent 
capacity, largely because of the variability of wind speeds, 
transmission line loss, and down time for maintenance or other 
purposes.
    The capacity factor is expressed as a decimal between zero and one, 
and represents the share of anticipated generation of the wind facility 
that is delivered to the interconnection grid (i.e., where the lessee's 
facility interconnects with the electric grid) relative to the wind 
facility's generation at continuous full power operation at nameplate 
capacity. For the proposed lease area, BOEM has set the capacity factor 
for the year in which commercial operations commence and the six full 
years thereafter at 0.4 (i.e., 40 percent). At the end of the sixth 
year, BOEM may adjust the capacity factor to reflect the performance 
over the previous five years based upon the actual metered electricity 
generation at the delivery point to the electrical grid. BOEM may make 
similar adjustments to the capacity factor once every five years 
thereafter. The maximum change in the capacity factor from one period 
to the next will be limited to plus or minus 10 percent of the previous 
period's value.
    Wholesale Power Price Index. Pursuant to 30 CFR 585.506(c)(2)(i), 
the wholesale power price, expressed in dollars per MW-hour, is 
determined at the time each annual operating fee payment is due, based 
on the weighted average of the inflation-adjusted peak and off-peak 
spot price indices for the PJM Dominion zone for the most recent year 
of spot price data available. The wholesale power price is adjusted for 
inflation from the year associated with the published spot price 
indices to the year in which the operating fee is to be due, based on 
the Lease Anniversary and using annual implicit price deflators as 
reported by the U.S. Department of Commerce Bureau of Economic 
Analysis. BOEM proposes to use the PJM Dominion power price as the 
price in its operating fee formula. BOEM is soliciting further comments 
on the merits of other electric power prices, including prices from 
other hubs within the PJM Virginia Power Company electric region that 
may be used in lieu of or in combination with the current proposed 
power price.

Financial Assurance

    Within 10 business days after receiving the lease copies and 
pursuant to 30 CFR 585.515-516, the provisional winner of the Kitty 
Hawk LA must provide an initial lease-specific bond or other approved 
means of meeting the lessor's initial financial assurance requirements. 
The provisionally

[[Page 54596]]

winning bidder may meet financial assurance requirements by posting a 
surety bond or by setting up an escrow account with a trust agreement 
giving BOEM the right to withdraw the money held in the account on 
demand. BOEM encourages the provisionally winning bidder to discuss the 
financial assurance requirement with BOEM as soon as possible after the 
auction has concluded.
    BOEM will base the amount of all SAP, COP, and decommissioning 
financial assurance requirements on cost estimates for meeting all 
accrued lease obligations at the respective stages of development. The 
required amount of supplemental and decommissioning financial assurance 
will be determined on a case-by-case basis.
    The financial terms described above can be found in Addendum B of 
the proposed lease, which BOEM has made available with this notice on 
its Web site at: http://www.boem.gov/North-Carolina/.
    Bid Deposit: A bid deposit is an advance cash payment submitted to 
BOEM in order to participate in the auction. Each qualified bidder must 
submit a bid deposit of $450,000 no later than the deadline provided in 
the FSN. Any qualified bidder who fails to submit the bid deposit by 
this deadline may be disqualified from participating in the auction. 
Bid deposits will be accepted online via pay.gov.
    Following the auction, bid deposits will be applied against bonus 
bids or other obligations owed to BOEM. If the bid deposit exceeds a 
bidder's total financial obligation, the balance of the bid deposit 
will be refunded to the bidder. BOEM will refund bid deposits to non-
winners.
    Bidder Financial Form: Each bidder must fill out the BFF referenced 
in this PSN. BOEM has also made a copy of the form available with this 
notice on its Web site at: http://www.boem.gov/North-Carolina/. BOEM 
recommends that each bidder designate an email address in its BFF that 
the bidder will then use to create an account in pay.gov (if it has not 
already done so). Bidders may then use the Bid Deposit Form on the 
pay.gov Web site to leave a deposit.
    BOEM will not consider BFFs submitted by qualified bidders for 
previous lease sales to satisfy the requirements of the proposed Kitty 
Hawk lease sale. BOEM will also only consider BFFs submitted after the 
deadline if BOEM determines that the failure to timely submit the BFF 
was caused by events beyond the bidder's control. BOEM will only accept 
an original, executed paper copy of the BFF. The BFF must be executed 
by an authorized representative who has been identified in the 
qualifications package on file with BOEM as authorized to bind the 
company.
    Minimum Bid: The minimum bid is the lowest price BOEM will accept 
as a winning bid. BOEM has established a minimum bid per acre of $2.00 
or $244,810 for the proposed lease sale.
    Auction Procedures: The following is a summary of the auction 
procedures that BOEM proposes to use if it proceeds with the proposed 
Kitty Hawk lease sale.

Summary of Auction Format

    As authorized under 30 CFR 585.220(a)(2) and 585.221(a)(1), BOEM 
intends to conduct the proposed lease sale using an ascending bidding 
auction with cash as the bid variable. Using an online bidding system 
to host the auction, BOEM sets an initial asking price for Lease OCS-A 
0508 and increases that price incrementally until no more than one 
active bidder remains in the auction. A bid submitted at the full 
asking price for the lease in a particular round is referred to as a 
live bid. During each round, active bidders may: (1) Submit a live bid 
indicating that they are interested in acquiring the lease at the 
current round's stated asking price, or (2) submit an exit bid (see 
below for discussion of exit bids). All bids are considered binding 
until BOEM has determined the winning bid.
    A bidder remains active in the auction as long as it continues to 
meet BOEM's asking price in each round. If more than one live bid is 
received in a round, BOEM increases the asking price incrementally and 
conducts another auction round. BOEM would raise the asking price 
following any round in which two or more bidders submitted live bids. 
The auction concludes at the end of the round in which the number of 
live bids received falls to one or zero.
    Asking price increments are in BOEM's sole discretion. They will be 
determined round-by-round and based on a number of factors, including, 
but not necessarily limited to, the number of bidders remaining in the 
lease sale, the expected time needed to conduct the auction, and the 
number of rounds that have already occurred. BOEM reserves the right to 
increase or decrease bidding increments as necessary.
    Between rounds, BOEM will disclose to all bidders eligible to bid 
in the next round: (1) The number of live bids in the previous round of 
the auction (i.e., the level of demand); and (2) the asking price in 
the upcoming round of the auction.
    If a bidder is not willing to meet the asking price in the upcoming 
round, the bidder may submit an exit bid and then exit the auction. 
Bidders exiting the auction are allowed to submit one exit bid at an 
offer price greater than the asking price in the previous round, but 
less than the asking price in the current round. Exit bids allow 
bidders to express precisely the maximum price they are willing to 
offer while also minimizing the chance of ties. If a bidder does not 
submit any bid at all in the current round, BOEM will treat the bidder 
as having submitted an exit bid in the current round at the previous 
round's asking price. If a bidder exits the auction by placing an exit 
bid (or by not submitting any bid at all) in the current round, it will 
not be allowed to submit bids in any subsequent round. BOEM will not 
consider exit bids for the purpose of determining whether to increase 
the asking price or to end the auction.
    After the final round of the auction, BOEM will determine the 
provisionally winning bidder to be the bidder with the highest bid, 
whether the bid was a live bid or an exit bid. If there is a tie, BOEM 
will resolve the tie by randomized means. The provisionally winning 
bidder may be disqualified if it is subsequently found to have violated 
auction rules or otherwise engaged in conduct detrimental to the 
integrity of the competitive auction.
    The auction winner for the proposed lease sale will have 10 
business days from receiving the lease to post financial assurance, pay 
any outstanding balance of its bonus bid, and sign and return three 
copies of the lease. BOEM reserves the right not to issue the lease to 
the provisionally winning bidder if that bidder fails to timely sign 
and pay for the lease or otherwise fails to comply with applicable 
regulations or terms of the FSN. In that case, that bidder will forfeit 
its bid deposit. If a bidder fails to timely pay the full amount due, 
BOEM may consider this to be an indication that the bidder is no longer 
financially qualified to participate in other lease sales under BOEM's 
regulations at 30 CFR 585.106--107. If a winning bidder does not sign 
the lease pursuant to the proposed lease sale, BOEM reserves the right 
to identify the next highest bid submitted during the proposed lease 
sale and offer the lease pursuant to this bid.

Additional Information Regarding the Auction Format

Bidder Authentication
    For the proposed online auction, BOEM will require two-factor 
authentication. Prior to the auction, BOEM will send several bidder

[[Page 54597]]

authentication packages to the bidders shortly after BOEM has processed 
the BFFs. One package will contain digital authentication tokens for 
each authorized individual. The tokens will be sent to the primary 
point of contact indicated on the BFF. This individual is responsible 
for distributing the tokens to the individuals authorized to bid for 
that company. Bidders are to ensure that each token is returned within 
three business days following the auction. An addressed, stamped 
envelope will be provided to facilitate this process. In the event that 
a bidder fails to submit a bid deposit or does not participate in the 
proposed auction, BOEM will de-activate that bidder's token and login 
information, and the bidder will likewise be asked to return its tokens 
within three business days following the auction.
    The second package contains login credentials for authorized 
bidders. The login credentials will be sent to the address provided in 
the BFF for each authorized individual. Bidders can confirm these 
addresses by calling 703-787-1320. This package will contain user login 
information and instructions for accessing the Auction System Technical 
Supplement and Alternative Bidding Form. The login information, along 
with the tokens, will be tested during the Mock Auction.
Timing of Auction
    The FSN will provide specific information regarding when bidders 
can enter the auction system and when the proposed auction will start. 
Once bidders have logged in, they should review the auction schedule, 
which lists the start, end, and recess times of each round in the 
auction. Each round is structured as follows:

 Bidding round begins;
 Bidders enter their bids;
 Bidding round ends and the recess begins;
     During the recess, the number of live bids received in the 
previous round and the next round's asking price are posted;
     Bidders review the previous round results and prepare 
their next round's bids; and
     Next bidding round begins.

    The first round will last about 30 minutes, though subsequent 
rounds may be shorter. Recesses are anticipated to last approximately 
10 minutes. The descriptions of the auction schedule and asking price 
increments included in the PSN and FSN are tentative. Bidders should 
consult the auction schedule on the bidding Web site just before and 
during the auction for updated times. BOEM anticipates the proposed 
auction will last one or two business days, but bidders are advised to 
prepare to continue bidding for additional business days if necessary, 
to resolve the auction.
    BOEM and the auction contractor will use the auction platform 
messaging service to keep bidders informed on issues of interest during 
the proposed auction. BOEM will use the messaging system for auction 
schedule changes and other updates during the auction.
    Bidders may place bids at any time during the round. At the top of 
the bidding page, a countdown clock will show how much time remains in 
the round. Bidders have until the scheduled ending time to place bids. 
Bidders should bid according to the procedures described in both the 
FSN and the Auction System Technical Supplement. No information about 
bidding during a given round is available until the round has closed 
and results have been posted, so there is no tactical advantage to 
placing bids early or late in the round.
    The timing of the auction will be elaborated on and clarified in 
the Auction System Technical Supplement which is available on BOEM's 
Web site at: http://www.boem.gov/North-Carolina/ if and when the FSN is 
published in the Federal Register. The Auction System Technical 
Supplement will describe auction procedures that are incorporated by 
reference into the FSN, except in the unexpected circumstance that any 
of the information in the Auction System Technical Supplement is 
inconsistent with the FSN, in which case the provisions of the FSN will 
take precedence.
Alternate Bidding Procedures
    Alternate Bidding Procedures enable a bidder who is having 
difficulties accessing the Internet to submit its bid via fax using an 
Alternate Bidding Form available on BOEM's Web site at: http://www.boem.gov/North-Carolina/.
    In order to be authorized to use an Alternative Bidding Form, a 
bidder must call the help desk number listed in the Auction Manual 
before the end of the round. BOEM will authenticate the caller to 
ensure he/she is authorized to bid on behalf of the company. The bidder 
must explain the reasons for which he/she cannot place a bid using the 
online bidding platform. BOEM may, in its sole discretion, permit or 
refuse to accept a request for the placement of a bid using the 
Alternate Bidding Procedures.
    If bidders need to submit an Alternate Bidding Form, they are 
strongly encouraged to do so before the round ends.
    Rejection or Non-Acceptance of Bids: BOEM reserves the right and 
authority to reject any and all bids that do not satisfy the 
requirements and rules of the proposed auction, the FSN, or applicable 
regulations and statutes.

Anti-Competitive Review

    This sale is subject to Federal antitrust laws. Accordingly, 
following the auction, but before the acceptance of the bid and the 
issuance of the lease, BOEM will ``allow the Attorney General, in 
consultation with the Federal Trade Commission, 30 days to review the 
results of the lease sale.'' 43 U.S.C. 1337(c). If a provisionally 
winning bidder is found to have engaged in anti-competitive practices 
in connection with this sale, BOEM may reject its bid.
    Anti-competitive practices may include, but are not limited to:

 An express or tacit agreement among bidders not to bid in an 
auction, or to bid at a particular price;
 An agreement among bidders not to bid against each other; and
 Other agreements among bidders that have the potential to 
affect the final auction price.

    BOEM will decline to award the lease if the Attorney General, in 
consultation with the Federal Trade Commission, determines that doing 
so would be inconsistent with the antitrust laws. See 43 U.S.C. 
1337(c).
    For more information on whether specific communications or 
agreements could constitute a violation of Federal antitrust law, 
please see http://www.justice.gov/atr/public/business-resources.html, 
or consult legal counsel.
    Process for Issuing the Lease: Once all post-auction reviews have 
been completed to BOEM's satisfaction, BOEM will issue three unsigned 
copies of the lease to the provisionally winning bidder. Within 10 
business days after receiving the lease copies, the provisionally 
winning bidder must:
    1. Sign and return the lease copies on the bidder's behalf;
    2. File financial assurance, as required under 30 CFR 585.515-537; 
and
    3. Pay by electronic funds transfer (EFT) the balance (if any) of 
the bonus bid (winning bid less the bid deposit). BOEM requires bidders 
to use EFT procedures (not pay.gov, the Web site bidders used to submit 
bid deposits) for payment of the balance of the bonus bid, following 
the detailed instructions contained in the ``Instructions for Making 
Electronic Payments'' available on BOEM's Web site at: http://www.boem.gov/North-Carolina/.
    BOEM will not execute a lease until the three requirements above 
have been

[[Page 54598]]

satisfied, the provisionally winning bidder's financial assurance has 
been accepted pursuant to 30 CFR 585.515, and the provisionally winning 
bidder's payment has been processed.
    BOEM may extend the 10 business day deadline for executing the 
lease on the bidder's behalf, filing the required financial assurance, 
and/or paying the balance of the bonus bid, but only if BOEM determines 
the delay was caused by events beyond the provisionally winning 
bidder's control.
    If the provisionally winning bidder does not meet these 
requirements or otherwise fails to comply with applicable regulations 
or the terms of the FSN, BOEM reserves the right not to issue the lease 
to that bidder. In such a case, the provisionally winning bidder will 
forfeit its bid deposit.
    Within 45 days of the date that the provisionally winning bidder 
receives copies of the lease, it must pay the first year's rent using 
the pay.gov Renewable Energy Initial Rental Payment form available at: 
https://pay.gov/paygov/forms/formInstance.html?agencyFormId=27797604.
    Subsequent annual rent payments must be made following the detailed 
instructions contained in the ``Instructions for Making Electronic 
Payments,'' available on BOEM's Web site at: http://www.boem.gov/North-Carolina/.
    Non-Procurement Debarment and Suspension Regulations: Pursuant to 
regulations at 43 CFR part 42, subpart C, an OCS renewable energy 
lessee must comply with the Department of the Interior's non-
procurement debarment and suspension regulations at 2 CFR 180 and 1400. 
The lessee must also communicate this requirement to persons with whom 
the lessee does business relating to this lease, by including this term 
as a condition in their contracts and other transactions.
    Force Majeure: The Program Manager of BOEM's Office of Renewable 
Energy Programs has the discretion to change any auction details 
specified in the FSN, including the date and time, in case of a force 
majeure event that the Program Manager deems may interfere with a fair 
and proper lease sale process. Such events may include, but are not 
limited to: Natural disasters (e.g., earthquakes, hurricanes, floods, 
blizzards), wars, riots, acts of terrorism, fire, strikes, civil 
disorder or other events of a similar nature. In case of such events, 
BOEM will notify all qualified bidders via email, phone, or through the 
BOEM Web site at: http://www.boem.gov/Renewable-Energy-Program/index.aspx. Bidders should call 703-787-1320 if they have concerns.
    Appeals: The appeals procedures are provided in BOEM's regulations 
at 30 CFR 585.225 and 585.118(c). Pursuant to 30 CFR 585.225:
    (a) If BOEM rejects your bid, BOEM will provide a written statement 
of the reasons and refund any money deposited with your bid, without 
interest.
    (b) You will then be able to ask the BOEM Director for 
reconsideration, in writing, within 15 business days of bid rejection, 
under 30 CFR 585.118(c)(1). We will send you a written response either 
affirming or reversing the rejection.
    The procedures for appealing final decisions with respect to lease 
sales are described in 30 CFR 585.118(c).

Protection of Privileged or Confidential Information

    BOEM will protect privileged or confidential information that you 
submit as required by the Freedom of Information Act (FOIA). Exemption 
4 of FOIA applies to ``trade secrets and commercial or financial 
information that you submit that is privileged or confidential.'' 5 
U.S.C. 552(b)(4). If you wish to protect the confidentiality of such 
information, clearly mark it ``Contains Privileged or Confidential 
Information'' and consider submitting such information as a separate 
attachment. BOEM will not disclose such information, except as required 
by FOIA. Information that is not labeled as privileged or confidential 
will be regarded by BOEM as suitable for public release.
    BOEM will not treat as confidential aggregate summaries of 
otherwise confidential information or comments not containing such 
information. Additionally, BOEM will not treat as confidential the 
legal title of the commenting entity (e.g., the name of your company).

     Dated: August 9, 2016.
Abigail Ross Hopper,
Director, Bureau of Ocean Energy Management.
[FR Doc. 2016-19552 Filed 8-15-16; 8:45 am]
 BILLING CODE 4310-MR-P