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Landowners advised: Consider wind-energy development
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By CHUCK CLEMENT, Staff Reporter
| 10/01/2009 |
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Wind power, renewables, green energy, cap-and-trade, carbon credits -- they're terms that South Dakota landowners must mull over in coming years, especially if developers show up on their doorsteps to lease their property for erecting electricity-generating windmills.
Landowners have many issues to consider, starting with getting involved in a wind-energy project in the first place. If they do sign contracts, the contractual options to build on a piece of property can last five years. Then an actual lease for operating a windmill can typically last 20 to 30 years.
Many experts believe that wind-generated electricity will come into its own during the next several decades. About half of the electricity currently generated in the United States originates from coal-fired power plants. However, those plants are viewed as dirty and major producers of carbon dioxide.
But few people doubt that the need for electricity will grow in the future, and producers might face requirements to make renewable energy part of their production mix.
Bob Sahr, general counsel for East River Electric Power Cooperative, said as much during a Tuesday night meeting in Madison between some of the state's experts on wind energy and area residents. Sahr advised landowners to use caution before signing any contracts with wind-energy developers who will probably show up more and more in South Dakota.
"It's very likely that Congress, in some way, shape or form, is going to have utilities produce some of their electricity from renewables," Sahr said.
Sahr spoke to about 50 people who attended the "Wind Energy and Your Farm" meeting after presentations from Jeff Rud, an East River power supply specialist; Steve Wegman of the S.D. Wind Energy Association; and Matt Bult of the S.D. Wind Application Center at South Dakota State University.
Rud provided information about the history and current operations of East River Electric as a wholesale provider of electricity to rural electric co-ops. East River currently operates in a 40,000-square-mile service region covering 41 counties in eastern South Dakota and 22 counties in western Minnesota. East River's all-time peak demand hit 560 megawatts during the winter of 2008.
Rud said that East River's electricity supply consists of 24 percent federal hydropower produced from Missouri River dams and 76 percent generated by Basin Electric, a North Dakota power cooperative. According to Rud, East River's electricity came from a mix of fossil fuels and wind energy, and the cooperative was interested in renewable energy even if it came from a small operation.
"We haven't shut the door to customer-owned generation in our territory," Rud said.
East River was involved in two customer-owned wind projects in eastern South Dakota at the Oaklane Colony near Alexandria (two turbines) and Sanborn Central School at Forestburg (one small turbine).
Wegman spoke largely about the different avenues for landowners in setting up wind generation on their property -- leasing land to a wind company or utility, joining a landowner cooperative or association, and individual ownership. In any case, Wegman advised that property owners should know their rights, stay current with industry information, and get legal advice before signing a contract.
He said land leases offer owners lower risk, but they also offer lower rewards. During the late 1990s, the average payment was $2,000 annually per windmill for turbines producing 600 to 750 kilowatts.
Today, turbines in the 1.5 megawatt to 3 megawatt production range provide bigger payments. Property owners can receive an initial payment or signing bonus, pre-operation fees and operating fees. The operating fees could involve fixed payments ranging from $3,000 to $6,000 per megawatt, royalty payments from 2 percent to 3 percent of revenue, or a combination of the two fees.
Wegman said typical lease agreements are complex and legally-binding documents involving long-term commitments ranging from 20 to 40 years.
According to Wegman, landowner associations can provide a useful resource when property owners are interested in inviting utility companies to develop their area.
"You'll find that a lot of wind-energy developers are reluctant to come to South Dakota because they don't know anyone and they don't know about our resources," Wegman said.
He said a landowner association can help market a region to developers. The first landowner association started two years ago in Wyoming.
"People have to understand that this is a young business; it's only 12 years old," Wegman said. "(The developers) haven't developed a real set of principles yet because it's so new.
``Landowner associations help undeveloped areas get noticed. It's an opportunity for them to get their flag up in the air."
Bult offered information concerning how privately-owned windmill turbines could assist farm and livestock operations varying from small- and large-scale grain farms to dairies and hog production facilities. One of his examples demonstrated how a turbine with an output of 2 kilowatts to 10 kilowatts could benefit a farm that consumes about 2,000 kilowatt-hours of electricity per month.
He also spoke about different funding sources for private development, such as the Value-Added Producer Grant program for farms, Rural Energy for America Program grants, and the federal 30 percent investment tax credit.
According to Wegman, opportunities are available to South Dakotans in the renewable energy sector. He said that modern societies need "good, affordable, dependable energy."
The S.D. Wind Energy Association has a Web site at www.sdwind.org and SDSU's Wind Application Center is located at http://wac.sdwind.org on the Internet.
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©Madison Daily Leader 2009
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