Wind farms a cash crop for rural Kansas counties

July 13, 2012 by  
Filed under Green Energy News

Kansas is finally putting all that wind to good use.

The Sunflower State is the second windiest in the nation, but for a variety of reasons hasn’t taken full advantage of that with the construction of wind farms. At the end of 2011, it ranked 14th nationally in commercial wind power generation, according to the American Wind Energy Association.

That will change to an extent this year. By the end of the year, the state will more than double the amount of wind energy generated here to 2,660 megawatts from 21 wind farms across central and western Kansas and could break into the top 10 states.

It’s something Gov. Sam Brownback has made one of the keystones of his economic platform. He has even taken a high-profile stand supporting a crucial federal wind-power tax subsidy – putting him at odds with many others in his party.

But what’s the real benefit of wind farms?

Wind farms provide a pretty strong spending bump during construction, which takes nine to 12 months, but only a few direct jobs for local residents after construction. What they mainly provide is cash, in the form of lease payments to farmers and contributions to local governments – just how much depends on how well the local government negotiated. In other words, they can make rural communities financially, but might not do much to counteract the slow depopulation of rural Kansas, said local officials.

What’s nice about them, said Kansas Commerce Secretary Pat George, is that they are one of the few categories of economic development that benefit rural parts of the state. Manufacturing tends to land in larger cities. In a few cases, wind gives the state an advantage.

In the recruitment of the $250 million Mars Chocolate plant, which ultimately went to Topeka, the company required a location that provided a certain percentage of its power from renewable sources, and Kansas was able to say it had that, he said.

Wind farms may not be the perfect economic development project, but they’re pretty good. Anytime a project can pump a few million extra dollars a year into a small county, it will create an opportunity for good things – a restaurant, a gas station, a farm equipment dealer, George said.

“With wind power under construction well north of a $1 billion this year, any time you can get that investment, especially in the rural counties, it helps,” George said.

Gray County

Gray County, between Dodge City and Garden City, had one of the first big wind farms in Kansas; it started operating in 2001 near Montezuma. It employs four or five people, and for a small town such as Montezuma, five high-paying jobs are appreciated, said county commissioner David Loucks.

This year, the county will see three more wind farms open, and things are a bit crazy with several hundred construction workers sleeping, eating and spending money in the area, Loucks said.

Going forward, not only will landowners see about $2 million a year in lease payments from the four wind farms, over the life of the projects, local governments will see a $1.2 million contribution every year. That’s significant in a county of 6,100 people and a county budget of about $8 million, he said. Just as importantly, it’s helped lead to rising property values – along with boosts from strong crop prices and renewed interest in oil leases.

Some local schools were able to buy iPads that they ordinarily wouldn’t have considered before, he said.

“It makes the whole county more prosperous,” Loucks said. “And maybe that means somebody is more willing to open a nice restaurant if you have 15 or 20 people working nearby.”

But he cautioned that local governments and local landowners get only the deal they negotiate. When the first wind farm was built, commissioners agreed to a provision in which the county government got $350,000 per year in lieu of taxes with an option to renegotiate that in 10 years. Well, 10 years went by and the current commissioners discovered that the option to renegotiate the contributions belonged to the company. The company, Florida-based wind giant NextEra Energy, decided that no financial contribution was a better deal.

The commissioners threatened to tax the wind farm, but discovered that wind farms are, by state law, exempt from property tax.

NextEra agreed to start making contributions again only when it decided that it wanted to build a second wind farm, the 99-megawatt Ensign wind project, and needed county approvals, Loucks said. Now it has agreed to contribute $2,400 per megawatt of capacity per year for both farms, or roughly $500,000 per year.

NextEra said this week that the important fact is that the company and county have reached a mutually agreeable settlement for the life of the wind farms.

Cloud County

Johnita Crawford, a commissioner in Cloud County has a similar take after four years with the 201-megawatt Meridian Way Wind Farm.

It provides a few jobs, about $540,000 a year in lease payments to local farmers – $8,000 per year, per turbine, she said – and, next year, $300,000 in contributions to local governments.

She said the money for local governments, by contract, can’t go into the county’s general fund, but must be spent on economic development, cultural or safety projects. Last year, it went to help build unmanned, card-operated gas stations in three tiny towns in the county. This year, the money is going to renovate the Brown Grand Theatre in Concordia.

She had some regrets over the deal negotiated by the earlier commission. It would have been better to have the benefits spread more evenly, she said.

“If we were to do it over, we would do it different,” she said. “I think we would have negotiated before they started work. I think maybe (the commissioners) were very eager to get them here.”

Turning off the tap

Even if a wind farm is no rural panacea, it’s strong economic development in small counties that have seen shrinking economic bases for decades.

The future is potentially wide open. Several power transportation companies are in the midst of building higher-capacity power lines through western Kansas in part to carry Kansas wind energy east.

Edward Elam, administrator for Ford County, where Dodge City is located, said his county got a wind farm last year and will get two new ones this year. If federal law were to stay as is, Ford County would probably double that number in the next three to five years.

More of western Kansas would fill up, he said, because of the wind and power lines.

But federal law probably won’t stay as it is. The Production Tax Credit – the 2.2 cents/kilowatt-hour tax credit for wind energy production that Brownback supports – expires on Dec. 31 and has little support among conservative Republicans in the U.S. House of Representatives.

Rep. Tim Huelskamp, R-Fowler, who represents all of western Kansas and much of central Kansas, opposes the tax credit.

“When it was started in 1992, it was supposed to be temporary, and has been reauthorized as ‘temporary’ in subsequent years; two decades later, the time has come for wind to stand on its own,” he said in an emailed statement. “With America quickly approaching $16 trillion in debt,

Washington cannot and should not spend copious amounts of money to attempt to make one sector of energy more ‘viable’ than another. Let’s allow the free market to prevail.”

George, the commerce secretary, said renewal doesn’t look very promising.

“But you never say never,” he said.

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