Developer nixes offshore wind farm

HOUSTON - Plans to build what would have been the nation's largest offshore wind farm in South Texas have been called off because the multibillion-dollar project didn't make economic sense, the developer said Monday.

John Calaway, chief development officer for Babcock & Brown Ltd., the Australian investment bank, said the company notified the state a month ago it was giving up its 30-year lease on nearly 40,000 acres in the Gulf of Mexico off the coast of Padre Island.

Calaway was chief executive of Houston-based Superior Renewable Energy when the agreement was announced 14 months ago. Superior was acquired by Babcock & Brown last summer.

"We just don't see the economics working offshore in Texas," Calaway said, noting the project cost would have been "in the billions."

He said offshore wind farms on the East Coast, such as a proposed project off the coast of Massachusetts, are more logical and potentially viable because of land constraints and higher energy prices in the region.

The now-defunct Texas project called for construction of about 170 turbines, each 400 feet tall, with the capacity to generate 500 megawatts of energy _ enough to power about 125,000 homes.

Babcock is moving on with an onshore wind farm in South Texas' Kenedy County, a $700 million-plus venture that calls for 157 turbines on thousands of acres, Calaway said. He noted the expense of building an offshore farm can be more than double the cost of one on land.

Like the nixed offshore project, Babcock's Kenedy County wind farm, slated to begin spinning late next year, has been criticized by some conservationists because of its potential to kill migrating birds and harm the pristine nature of the area, which is popular for hunting and fishing.

Texas Land Commissioner Jerry Patterson said he was disappointed to see Babcock drop the project, but he was confident another developer would be found because of the ideal location and the ease of doing business with only one land owner _ the state of Texas.

In fact, Patterson said he spoke to a few potential suitors at a wind conference last week in Los Angeles. He said those entities were good prospects because they've built offshore wind projects overseas.

"They want to do a little more due diligence," he said.

Land Office spokesman Jim Suydam said the offshore lease had called for an annual payment of $80,000 plus a percentage of production that could have generated anywhere from $34 million to $100 million for public schools.

The state also has leased 11,355 acres off the coast of Galveston to a Louisiana company building a similar but smaller farm. That venture, with 50 turbines, is moving forward and could be operating in the next few years, Patterson's office said.

Texas last year gained acclaim by surpassing California as the nation's top producer of wind energy, and that capacity is forecast to grow rapidly in the next several years.

In a recent report, the Department of Energy said the nation's wind-power capacity increased by 27 percent in 2006, and that the U.S. had the fastest-growing wind-power capacity in the world in 2005 and 2006.

Still, despite wind farms now operating in 36 states, wind accounts for less than 1 percent of the U.S. power supply.