New Jersey’s taxpayers may be on the hook for hundreds of millions of dollars following a major offshore wind developer’s decision to cancel two projects off the blue state’s coast, Politico reported Thursday.

Orsted announced Tuesday night that it would be cancelling its Ocean Wind 1 and 2 projects, and the company now owes New Jersey $300 million because of the cancellations, according to Politico. Democratic New Jersey Gov. Phil Murphyand numerous state Democrats are trying to save face by insisting that the company will pay the balance in full, but language in agreements between the company and the state could allow Orsted to sidestep at least some of its debt to New Jersey.

The company previously agreed to pay $200 million to build wind-related facilities in southern New Jersey and set aside $100 million to pay the state in the event it cancelled its projects, according to Politico. In exchange for those commitments, the state government passed a law in July designed to save Ocean Wind 1 by allowing Orsted to keep hundreds of millions of dollars in federal tax credits that the company would have otherwise had to pass on to the state’s ratepayers.

The precise language in the deal, approved by the state’s Board of Public Utilities, would excuse the company from paying the $100 million if it does not obtain the necessary permits for construction, despite making “commercially reasonable efforts” to do so. One of the issues that held up construction was difficulty obtaining a federal air quality permit, the application for which the Environmental Protection Agency (EPA) determined to be incomplete, according to Politico.

Orsted is evaluating whether it will be able to get out of paying the state the $100 million performance security fee, a company spokesperson told Politico. That evaluation comes as S&P has indicated that it may decrease Orsted’s credit rating in light of the cancellations, according to Reuters.

Murphy hinted Tuesday that there may be a conflict brewing with the company when he stated that his administration would “take all necessary steps to ensure that Orsted fully and immediately honors its obligations” to pay the balance after its “outrageous” decision to walk away from the projects.

Several New Jersey Republicans, including Rep. Chris Smith, criticized Murphy for the situation the state now finds itself in following Orsted’s cancellations.

“Instead of continuing to use the coercive power of the state to prop up these egregiously flawed projects and bankrolling them with taxpayer dollars, the Biden and Murphy Administrations should heed one of the foundational aspects of our democracy—consent of the governed—and listen to the local residents, environmentalists and recreational and commercial fishermen who have been raising serious concerns about the irreparable harm of these projects,” Smith told the Daily Caller News Foundation.

Neither Orsted nor Murphy’s office responded immediately to requests for comment.

Nick Pope on November 2, 2023

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