Governors' Wind Energy Coalition

PETERSBURG, Neb. — Like pearly white stick figures striding across the horizon, 81 wind turbines slowly spin on the hills surrounding Petersburg.

The electricity they generate makes this northeast Nebraska farm town of 372 people the state’s wind-energy capital.

Signs of prosperity are connected to the new jobs and the lease payments provided by the two wind farms: a new housing development, a wind farm headquarters building, a new message-board town sign and a handful of new businesses.

The grocery store was once threatened with closing, but now its owner is building a new supermarket on Highway 14. Business at the lumberyard is up 20 percent, and the owners are considering expansion.

And new families, some pushing baby strollers, are moving in or moving back.

“We went from wondering, ‘How do we survive?’ to now, ‘We’re going to thrive,'” said banker Ross Knott. “We have some real opportunities now.”

But whether this small-town success story can be duplicated across the state is questionable, say those who develop these multimillion-dollar alternative energy projects.

Wind energy has long been seen as a tremendous but untapped opportunity to help rural Nebraska communities, ranchers and farmers, who lease out their land for the giant wind turbines.

As of January, neighboring Iowa had 4,322 megawatts of wind energy capacity, according to the American Wind Energy Association — ranking second nationally, behind only Texas.

By comparison, Nebraska had 337 megawatts of wind energy capacity, ranking 25th in wind development.

Yet Nebraska has the nation’s fourth-best wind resources — enough, it’s said, to provide 120 times the state’s electric needs.

Two years ago, Nebraska, the nation’s only public-power state, passed a law removing barriers for the construction of wind farms that export power. Since then, competing states have cut taxes and offered new incentives to entice developers.

Coupled with a tough credit market, lower demand for electricity and uncertainty over whether a federal production credit will be extended beyond 2012, the increased competition has taken the wind out of Nebraska’s momentum to build wind farms that would produce electricity to be exported to other states.

State legislators were told recently that Nebraska’s sales tax on wind turbines adds another 5 to 10 percent to the cost of producing wind energy. Iowa, Kansas and several other states don’t levy sales tax on turbines.

Nebraska’s higher costs drive away developers and are delaying at least three proposed wind farms totaling more than $1 billion in investment, legislators were told.

“Nebraska has every good quality sought for a wind project. Except price,” said Derek Sunderman of Kansas City-based TradeWind Energy.

Sunderman was among several developers testifying recently in support of a bill in the Nebraska Legislature to offer a sales tax break to renewable energy projects.

Projects that invest at least $75 million in a wind farm would qualify for a refund of 75 percent of their sales taxes and could qualify for a refund of the remaining 25 percent if certain conditions were met, including the purchase of at least a quarter of their equipment from a Nebraska manufacturer.

Projects of less than $75 million would qualify for a 50 percent sales tax break. And projects of all sizes would get incentives if owned by a Nebraska company or by employees.

Wind developers argue that the tax break proposal, Legislative Bill 1033, isn’t an “incentive” but just a way for the state to stay in the ballgame for big wind farms.

“This just says we have an equal chance,” said Rich Lombardi, the Nebraska lobbyist for the Wind Coalition, a nationwide group of wind developers and manufacturers.

Wind energy was among the development opportunities highlighted in the state economic development study done by the Battelle research organization in 2010, he said.

Nationally, wind farm development is slowing. Manufacturers predict layoffs because of uncertainty over whether Congress will renew a major incentive, the federal production tax credit for purchasing renewable energy.

The tax credit is set to expire at the end of the year, and an effort in Congress failed last week to include a reauthorization of the credit in the bill that extended the federal payroll tax deduction.

Three new wind farms of nearly 200 megawatts are scheduled to begin operating this year or next: a 40-megawatt Crofton Bluffs project in northeast Nebraska, and two projects near Broken Bow of 80 megawatts and 75 megawatts.

Those projects will put the state’s two largest public utilities, the Omaha and Nebraska Public Power Districts, more than halfway to their goals of having at least 10 percent of their power produced by renewable energy by 2020.

But wind farm construction in Nebraska is far behind that of Kansas and Oklahoma, which have more generous tax policies. Nearly 1,700 megawatts of new wind farms are being built in Kansas. Oklahoma is getting farms totaling 1,120 megawatts.

Tax climate does make a difference, wind developers told the Legislature’s Revenue Committee. Twenty-eight states provide sales tax exemptions for wind farms.

State Sen. Abbie Cornett, sponsor of the wind farm tax break proposal and the head of the Revenue Committee, said she’s not ready to say whether the state can afford the estimated $5.5 million cost of the bill.

The Revenue Committee must weigh the benefits of LB 1033 against other bills introduced this year to promote economic development, she said. Senators must determine how those bills fit with state spending priorities and Gov. Dave Heineman’s $130 million-a-year tax cut package.

“Nebraska is kind of playing catch-up with wind energy,” Cornett said.

In Petersburg, the benefits of wind energy development are obvious. And a third wind farm might be coming close to the town if Nebraska adopts the new tax incentives.

Chicago-based Invenergy hopes to build a 133-turbine, $448 million farm north of Petersburg, near Elgin, about 30 miles west of Norfolk.

The 200-megawatt farm would be Nebraska’s largest, but company officials say obtaining utility customers for its wind energy is hampered by the state’s tax load.

Knott, the Petersburg banker, said his community had been struggling to stay afloat until the wind farms were built over the past two years.

A shortage of students forced the town’s high school to close, and an attempt to launch a pork-processing plant outside Petersburg failed. While crop and livestock prices are soaring right now, that hasn’t always been the case.

“There’s been years when kids have been told they need to go somewhere else to make a living,” Knott said.

At least four young couples have moved to Petersburg to take jobs at the wind farms, and more positions for electricians to maintain the turbines may open in a few years.

Ashley Thieman was working as an executive secretary at Norfolk’s Northeast Community College until she took a job with Edison Mission, the company that owns the 80-megawatt Laredo Ridge wind farm west of Petersburg. Laredo Ridge’s 80-megawatt capacity is enough to power 26,000 homes.

“I figured I’d always have to work in the city,” said Thieman, a 2008 high school graduate. “There’s not a ton of opportunity for us.”

The only downsides to the wind farms are the slight noise created by the spinning turbines and the change in appearance of the rural landscape.

“I guess they’re pretty,” said 63-year-old Bruce Staashelm, an electrician, as he installed wiring in the new Rae Valley Market. “Economically, they’re great.”