Governors' Wind Energy Coalition

BOSTON — Cape Wind, a massive wind farm proposed in Nantucket Sound, has been dealt a setback that threatens its finances and throws into doubt whether it will become the nation’s first such offshore project.

NStar and National Grid, the two largest utilities in Massachusetts, which had agreed to buy three-fourths of the wind farm’s power, said late Tuesday that they were canceling their contracts because Cape Wind had failed to meet a Dec. 31 deadline to complete financing and begin construction.

“Unfortunately, Cape Wind has missed these critical milestones,” NStar said in a statement. “Additionally, Cape Wind has chosen not to exercise their right to post financial security in order to extend the contract deadlines. Therefore the contract is now terminated.”

Cape Wind, however, disputed NStar’s statement and said that provisions in the contract extended the deadline for the $2.6 billion project. The company vowed to push ahead, with the matter probably heading for court.

“We will pursue every option available to us to move this project forward and supply our power to this supply-constrained region,” a Cape Wind spokesman, Mark Rodgers, said in an email. The wind farm intends to harness breezes from Nantucket Sound and produce 75 percent of the power for Cape Cod, Martha’s Vineyard and Nantucket.

Cape Wind, on the drawing boards for 14 years, has a tortured history. The project had divided politicians and environmentalists, and was inundated with lawsuits from well-financed opponents who said its 130 turbines would mar the seascape and end up raising electricity costs, not lowering them.

The last of the legal hurdles appeared to have been cleared last year, and Cape Wind issued several positive announcements about its financing. But CommonWealth magazine reported last month that the project was running out of time.

If Cape Wind does collapse it would affect more than the electrical grid. The company has arranged to be the first tenant at a massive port facility in New Bedford, Mass., where the state has invested $100 million to create a staging area for construction of offshore wind farms.

Leading the opposition has been William I. Koch, a billionaire industrialist whose better-known brothers underwrite conservative causes. His group, the Alliance to Protect Nantucket Sound, issued a statement Wednesday hailing the withdrawal of the utilities as a “fatal or near-fatal blow to this expensive and outdated project” which would save ratepayers “billions of dollars in electric bills.”

James Gordon, the president of Cape Wind, singled out the alliance as the cause of its woes in letters he sent to the utilities explaining that the deadlines had been suspended because of forces beyond his control — that is, the relentless lawsuits.

The alliance’s litigious strategy to undermine Cape Wind, he said, was “extraordinarily unusual, unexpected, and significant” and “completely beyond Cape Wind’s control.”