My Voice: Solidify future of wind energy in S.D.

Source: By David Ganji, Argus Leader • Posted: Friday, July 24, 2015

South Dakota has enormous potential for wind energy development. Twenty-six percent of all electricity produced in South Dakota in 2013 — only Iowa produces a larger share of its total electricity from wind.

Wind has practical benefits for the state: in 2014, it is estimated that wind paid out $2.4 million in lease payments to landowners. The Argus Leader reports that “each megawatt of installed wind power led to an additional $11,000 in personal income and .5 jobs per county.” While optimistic, it highlights the benefits of wind.

Uncertain tax schemes pose challenges for wind, however. For 23 years, wind has received a federal tax credit, but year-to-year renewal is always uncertain. The tax credit expired in 2000, 2002, 2004 and 2014 for example, but was renewed retroactively. In other years, Congress left the renewal decision on the table until the very last minute. This uncertainty results in a “boom-bust” cycle. When the credit is secure, developers develop — when it’s uncertain, developers stop. In 2013, for example, uncertainty in the credit’s renewal was accompanied by a 92 percent decline in new wind projects. In 2014, Congress didn’t enact a statute extending the credit until December 2014, but the effective date was retroactive to Jan. 1, 2014. In 2015, the credit has not yet been extended for new projects.

In S.D., wind was subjected to a complicated tax scheme with yearly tax increases and a rebate program tied to a project’s age. Under a new scheme, effective this year, the Legislature eliminated the entire rebate program and established just two different tax rates — a rate for projects existing before April 1, 2015, ($.00065 pkh) and a lower rate for projects existing after ($.00045 pkh). This new scheme is steadier (there is no rate variation based on either mandated increases or a project’s age) and supposedly cheaper in the long run for wind projects (particularly new wind projects). The Rapid City Journal reports that prior to 2015, wind was paying about $5 million more over its life span in S.D. than elsewhere.

Another difficulty wind faces is the low price of purchased electricity in S.D. The region has comparatively little demand for electricity and new projects drive prices lower. Some states require that utilities purchase and distribute energy produced by wind. S.D.’s program is voluntary, so there is no guaranteed feasible market here. For good or ill, governments are integrally involved in the promotion, taxation and regulation of wind energy development. Taking a minimal role, which S.D. is now doing, does not cut the mustard if the state wishes to become a real wind energy state. If wind could sell to pricier markets like Chicago or the eastern seaboard, development would make more sense. This is the purpose of the proposed Rock Island Clean Line — essentially a gigantic transmission line across Iowa that would connect electrical providers in S.D. to the Chicago market. If development of the Clean Line is successful, wind in S.D. will be greatly benefited.

These issues haven’t stopped some courageous developers however. For example, the Lincoln County Dakota Power Community Wind (DPCW) project seeks to add 500 turbines in what would be the single largest wind farm in South Dakota. Some estimate the project could increase the state’s wind generating capacity by 50 percent.

DCPW has run into difficulties from local citizens however. The project put up a single meteorological tower to assess wind, but citizens prevented DCPW from obtaining permits for more. Opposition was led partly by “WE-CARE.” Complaints ranged from noise and strobe lighting, reduced property values, and discouraging young family move-ins. Proponents of wind claim that proper set-backs from residential properties eliminate most of these concerns. But it is clear that some communities are concerned enough to halt these impressive, lucrative projects.

Other questions bear on wind’s development. The legal rights of wind resources have not been well defined. Wind flows over the land similar to how minerals are found under the land. It is well established that mineral rights can be separated from the land under which they are found, but it is not as clear whether wind rights can be separated from the land over which they flow. A resolution to this question may have a significant impact on the sort of wind development and living arrangements we see develop in S.D.

One must always be careful to separate fact from fiction as regulatory agencies and non-governmental organizations have a vested interest in being optimistic about their unique sector. Job growth is often a cited benefit, but typically whatever jobs come to a project area are temporary: once a project is completed, it takes substantially fewer workers to maintain a billion-dollar wind project than it would to maintain a billion-dollar shopping mall.

David Ganji, Rapid City, of Ganje Law Offices, practices in the area of natural resources, environmental and commercial law in South and North Dakota.