1. Auction Format and Fiscal Terms New York Task Force Meeting April 28, 2016 1

2. Auction Overview Sale will be conducted using an internet-based auction system Bidding for wind energy area will be on a cash bonus basis The auction is an ascending clock auction Will be conducted over a series of rounds with escalating prices based on demand in each round Allows for price discovery Discourages harmful bidding practices 2

3. Bid Deposit and Minimum Bid 3 BOEM requires a bid deposit to participate in the auction The proposed minimum bid is $2/acre $450,000 is required in advance of the auction Bidding will start at $162,260

4. Round Structure BOEM publishes the asking priceBidders place bids Live bid: meets BOEM’s full asking price for the current round Exit bid: greater than last round’s price but less than current round Round closesAuction continues so long as there is more than 1 live bidIf the auction continues, BOEM posts the following information to bidders: The number of live bids The next round’s asking price Repeat 4

5. Asking Prices The initial asking price in Round 1 is the minimum bid When two or more bidders submit live bids, we raise the price in the next round Increments are set by BOEM during the auction and may be different for successive rounds 5

6. Auction Example 6

7. 7 RoundBidder 1Bidder 2Bidder 3Bidder 4 Auction Example

8. 8 RoundBidder 1Bidder 2Bidder 3Bidder 4 1) Who wants the lease area for $300,000? Auction Example

9. 9 RoundBidder 1Bidder 2Bidder 3Bidder 4 1) Who wants the lease area for $300,000? Yes Auction Example

10. 10 RoundBidder 1Bidder 2Bidder 3Bidder 4 1) Who wants the lease area for $300,000? Yes 2) For $450,000? Auction Example

11. 11 RoundBidder 1Bidder 2Bidder 3Bidder 4 1) Who wants the lease area for $300,000? Yes 2) For $450,000?Yes Auction Example

12. 12 RoundBidder 1Bidder 2Bidder 3Bidder 4 1) Who wants the lease area for $300,000? Yes 2) For $450,000?Yes 3) For $600,000? Auction Example

13. 13 RoundBidder 1Bidder 2Bidder 3Bidder 4 1) Who wants the lease area for $300,000? Yes 2) For $450,000?Yes 3) For $600,000?Yes X Exit Bid: $550,000 Auction Example

14. 14 RoundBidder 1Bidder 2Bidder 3Bidder 4 1) Who wants the lease area for $300,000? Yes 2) For $450,000?Yes 3) For $600,000?Yes X Exit Bid: $550,000 4) For $750,000? Auction Example

15. 15 RoundBidder 1Bidder 2Bidder 3Bidder 4 1) Who wants the lease area for $300,000? Yes 2) For $450,000?Yes 3) For $600,000?Yes X Exit Bid: $550,000 4) For $750,000?Yes X Exit Bid: $700,000 X Auction Example

16. 16 RoundBidder 1Bidder 2Bidder 3Bidder 4 1) Who wants the lease area for $300,000? Yes 2) For $450,000?Yes 3) For $600,000?Yes X Exit Bid: $550,000 4) For $750,000?Yes X Exit Bid: $700,000 X Result: Auction Example

17. 17 RoundBidder 1Bidder 2Bidder 3Bidder 4 1) Who wants the lease area for $300,000? Yes 2) For $450,000?Yes 3) For $600,000?Yes X Exit Bid: $550,000 4) For $750,000?Yes X Exit Bid: $700,000 X Result:Winner Auction Example

18. Post-Auction Review “allow the Attorney General, in consultation with the Federal Trade Commission, 30 days to review the results of the lease sale.” 18 Following the auction, BOEM will announce the provisional winner In accordance with the Act at 43 U.S.C. 1337(c), and before the acceptance of bids and the issuance of leases, BOEM will:

19. Fiscal Terms

20. First year’s payment due within 45 days of lessee receiving lease Subsequent payments due on lease anniversary on portion of lease not authorized for commercial operations Initial payment due upon approval of the COP Subsequent payments due annually thereafter until lease terminates Annual Rent Annual Project Easement Rent

21. Fiscal Terms Initial fee due within 45 days of commercial operations Subsequent payments due annually thereafter until commercial operations cease Prior to lease issuance the Lessee must provide assurance for initial financial obligations on the lease 21 Annual Operating Fee Financial Assurance Requirements

22. Annual Rent Payment Wind Energy AreaNew York Size (acres)81,130 Rental Payment$ 243,390 Payment Formula = Leased Acreage * $3/acre Subsequent rent payments would reflect any adjustments for relinquished acreage or phased development at the time a payment is due Last rent payment prior to the start of commercial operations will not be pro-rated

23. Annual Project Easement Rent Payment = $70 per statute mile * statute miles in 200- foot wide transmission easement, and greater of $5/acre or $450 for any additional easement required, per year

24. Annual Operating Fee Formula is based on the anticipated annual power output, valued at the preceding year’s regional wholesale power price, multiplied by an operating fee rate F=M*H*C*P*r Annual Operating Fee Nameplate Capacity [MW] Hours per Year [8,760] Capacity Factor [0 to 1] Power Price [$/MWh] Operating Fee Rate [0 to 1]

25. Annual Operating Fee Nameplate capacity is the planned available capacity measured in megawatts (MW) Based on COP to reflect installation, repowering, and decommissioning activities on the lease 25 F=M*H*C*P*r Annual Operating Fee Nameplate Capacity [MW] Hours per Year [8,760] Capacity Factor [0 to 1] Power Price [$/MWh] Operating Fee Rate [0 to 1] Generation at continuous full power operation (MWh)

26. Annual Operating Fee 26 F=M*H*C*P*r Annual Operating Fee Nameplate Capacity [MW] Hours per Year [8,760] Capacity Factor [0 to 1] Power Price [$/MWh] Operating Fee Rate [0 to 1] The capacity factor is the share of anticipated generation relative to its generation at continuous full power operation Value is set to 0.4 for the first 6 years of commercial operations Value is adjusted in 5-year intervals thereafter to reflect actual metered generation over the preceding five years Anticipated Annual Power Output (MWh)

27. Annual Operating Fee 27 F=M*H*C*P*r Annual Operating Fee Nameplate Capacity [MW] Hours per Year [8,760] Capacity Factor [0 to 1] Power Price [$/MWh] Operating Fee Rate [0 to 1] Power price is determined at the time each payment is due based on the latest available regional wholesale spot price ($/MWh) as reported by FERC, adjusted for inflation Estimated Market Value [$]

28. Annual Operating Fee 28 F=M*H*C*P*r Annual Operating Fee Nameplate Capacity [MW] Hours per Year [8,760] Capacity Factor [0 to 1] Power Price [$/MWh] Operating Fee Rate [0 to 1] Operating fee rate is the share of the estimated market value of the power produced payable to the lessor The operating fee rate is 0.02 through the life of the commercial operations on the lease

29. Annual Operating Fee Example: 500 MW project 29 F=M*H*C*P*r Annual Operating Fee Nameplate Capacity Hours per Year Capacity Factor Power Price [$/MWh] Operating Fee Rate F=500*8,7600.4*40.00*0.02 F=$ 1,401,600

30. Financial Assurance Additional assurance required to cover all decommissioning, operating fees, and other obligations as the lease progresses Prior to approval of a SAP Prior to approval of a COP Commencement of installation of commercial facilities Past due payment amounts or any other monetary obligations Adjustments to financial assurance amounts $100,000 initial financial assurance due prior to lease issuance in the form of a bond or other approved form

31. Questions and Comments

32. Key Items for Discussion Auction format – nonmonetary factors? Wholesale power price index - NYC Zone J (NYISO) electric region? Minimum bid - $2/acre 32 Task Force Input on the draft PSN due COB May 5, 2016 – Please send to erin.trager@boem.gov

33. Questions and Comments Contact: Wright Frank Wright.Frank@boem.gov Bill Anderson william.anderson@boem.gov

34. Extra Slides 34

35. Historical Auction Results 35 Date State No. of Areas Offered Total Acreage Offered (acres) No. of Rounds Total in Bonus Bids Jul ’13RI-MA2164,75011$ 3,838,288 Sep ’13VA1112,7996$ 1,600,000 Aug ’14MD279,70719$ 8,701,098 Jan ‘15MA4742,9782$ 448,171 Nov ’15NJ2343,8337$ 1,886,955

36. Virginia Auction September 4, 2013 36

37. Rhode Island – Massachusetts Auction July 31, 2013 37

38. New Jersey November 9, 2015 38