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Naked in the Wind

Posted on: December 17th, 2021
by David Ganje

I continue to be in a state of puzzlement. My dad would sometimes tell me I was young and naïve. I am now considerably older and by the looks of it still naïve. I always thought South Dakotans said, ‘local control is better.’ This as I was taught is a good maxim for government.

A maxim is a moral rule, principle, or a particular behavior pattern of mankind. I have considered, naively, that local government control is desirable.

Local government control applies to wind farm ordinances. County ordinances covering the development and operation of wind farms are not exclusive of course; the state has adopted a series of statutes and rules administered by the PUC and to an extent the SD GF&P which also apply. Yet the more local government participates in the process the better the representation of residents. Only some counties in South Dakota have adopted local wind farm ordinances also known also as wind energy ordinances.

Wind energy projects create siting issues. The physical placement and configuration of wind turbines, roads, fences, collection lines and the like must be considered. Relevant questions include a project’s impact on existing land use, on a neighbor’s land use, and the environment. These are local issues.

A few months ago on behalf of a landowner client I submitted an extensive letter to a county commission in the state advocating the adoption of a wind energy ordinance. The county had none. I have in the past been accused of being a tree hugger. This criticism is an ad hominem distraction. Neither I nor my client are opposed to wind energy development. I am a third-generation businessman, and in my work have represented natural resource developers.

In the letter to the county, I discussed several things to consider including turbine setbacks, the development application and approval process, decommissioning, infrastructure, and safety. In some counties unfamiliarity with wind technology has kept county leaders from addressing wind development. Contrariwise some counties, like Lincoln County, have adopted significant restrictions on wind energy development.

Creating a county oversight and permitting process, that is – writing a basic wind farm ordinance setting down “rules of the road” gives wind energy projects an affordable, streamlined, and accountable system for legal permitting. On the other hand, open range (meaning no requirements) in which a county has no guidelines is an unsuitable system for a county that has adopted a comprehensive plan.

In Ag and ranch country there are risks in doing nothing. Please consider the matter of abandoned wells and orphaned non-tax-paying gas wells in Harding County. This problem challenges Harding County leaders on questions of how to re-establish a tax base and what party is to clean up all the unused infrastructure.

In a 2013 article in the South Dakota Law Review the author discussed property rights and the preservation of local control in the context of state surface drainage practices. The author said that keeping local oversight is important to county commissions because each county wants to know where related activity occurs within its boundaries; and further wrote that many citizens appreciate local ordinances because these ordinances ensure that a project applicant would, 1. notify the county and the affected landowners and 2. that a public hearing would be scheduled before a proposed project begins. The author’s comments apply equally to a wind energy ordinance. Wind energy ordinances establish reasonable parameters on local planning issues and make the project development process and its operations clearer to residents and the public.

Published in the Rapid City Journal, Dec 3, 2021

Naked In The Wind

Posted on: March 12th, 2019
by David Ganje

Wind energy development is known as green energy.  Green energy is sexy.  Everybody wants to jump on the bandwagon but few want to pay for the ride.   A wind farm produces green energy.  A wind farm itself is not green.  It is steel, wires, underground cabling, electrical components and concrete.  This describes the infrastructure of a government-permitted wind farm.  Larger wind farm projects in South Dakota are subject to PUC jurisdiction regarding the permit application process and wind farm project oversight.  This opinion piece focuses on projects under the jurisdiction of the PUC.  Discussion of projects under the jurisdiction of the various wayward counties is left for another day.

In the eyes of a lawyer, which is not very romantic, when a wind farm contains steel, wires, underground cabling, electrical components and concrete we have potential legal liability.  Wind farm infrastructure is not owned by the landowner.  It is owned by the wind farm operator.  A landowner has no right to control or interfere with a wind farm. Who may be liable and to what extent is always an interesting legal question.  A court calls this the allocation of liability.  It is best not to become involved in a question on the allocation of liability.  General liability insurance coverage is one way in which liability risks are reduced.

The natural desire of a wind farm operator to protect its investment as well as a property owner’s natural desire to protect his land from liability are compatible ideas.  Alas, the state of South Dakota is negligent; it does not require liability insurance coverage by wind farms.  The conflicting and coexisting state policy of both encouraging green energy development and practicing laissez-faire wind farm oversight is dead wrong.   A landowner, farmer or rancher on whose land a wind farm sits is the odd-man-out under the state’s current wind farm permitting process.

A government-permitted wind energy project creating electrical power is the definition of a wind farm.  A wind farm is a public project permitted and overseen by the PUC because of its significant impact on the state and its people.  Wind farm projects have a beginning, a middle and an end.  The beginning is the development and construction stage, the middle is the operational phase and the end is the end.  (The end of wind farm operations, whether by abandonment of the turbines, bankruptcy, or shut down by an operator is ‘The funeral’ of the operating project.)  All three stages offer potential risks arising from claims or accidents related to wind turbines, wind farm operations and wind farm infrastructure.  Importantly, these risks exist whether the wind farm is operating or not.

While I note the chief financial beneficiary of a newly written liability insurance policy is at first glance the insurance agent who wrote the policy, all the same – insurance should have an important role in PUC permitting and in the PUC’s project oversight.  South Dakota law does not require that a wind farm carry general liability insurance.  Wisconsin and North Dakota law require this.  General liability insurance provides two areas of coverage for an insured party, that is, for the wind farm operator.  A general liability policy covers bodily injury and property damage.  Now to be clear, wind farm operators often have some insurance coverage. For example, a wind farm’s lender might require insurance.  Yet when a loan is paid off such a lender’s insurance requirement would end.

I am now obliged to make my case for project-wide wind farm general liability insurance.  If there are one or two sceptics out there among my numerous followers, my honorable readers should know I am not a lobbyist for and do not represent insurance companies.  I propose a correction in the deficient and inequitable policy and practice of the PUC.  The PUC should by law and or policy require project-wide general liability insurance.  In my discussion in favor of insurance coverage I will:  a.) first report the current lay of the land; b.) and then report the lay of the land as it should be.

The current lay of the land:  Is an operator uninsured, underinsured or inadequately insured?  Does the wind farm maintain a level of insurance providing for the type of loss or claims common to an operation?  The PUC has no answer.  South Dakota does not require that a wind farm maintain project-wide general liability insurance coverage.  Both North Dakota and Wisconsin do.  A recent wind farm permit approved in 2019 by the PUC will be used as an illustration.  This wind farm development and operation was approved with 42 permit conditions to be met by the operator.  These conditions were placed on it by the PUC.  None of the 42 conditions required project-wide general liability insurance.  The lengthy official application and approval file shows no indication of such insurance coverage.  Naked in the wind.

The lay of the land as it should be:  A wind farm operator should maintain general liability insurance relating to claims for property damage and/or bodily injury which may arise out of the development, construction, operation and closure of the wind energy project.  A wind farm operator should maintain the required insurance coverage until such time as the PUC authorizes the termination of the coverage.  The amount of coverage and required terms of the insurance should be set by the PUC in the course of its public process when considering a permit application.  The amount of insurance coverage and required terms of insurance coverage should be described in an order granting a permit.  Cancellation by an operator of the required insurance coverage should be prohibited.  Property owners on whose land a permitted wind turbine or turbines are located should be named as additional insureds on the required insurance policy.  The insurance policy should contain an endorsement obligating the insurance company to provide the PUC with at least 30 days prior written notice of any cancellation. No more than 15 days after the granting of a permit but before construction is started the permit holder should deliver a full and complete copy of the required insurance policy to the PUC.  An insurance policy received by the PUC under these provisions should remain a part of the public record, not be sealed, and not be subject to proprietary or confidential claims by an operator.

Conclusion:  The reasoning of government is a most uncertain thing. Will the state demonstrate leadership as well as equity and decide to change the law and its current practice of not requiring general liability insurance?  Come see me in two years and we will cry together.

David Ganje of Ganje Law Offices practices in the area of natural resources, environmental and commercial law

Proposed Campbell County Temporary Zoning ORDINANCE #2019-1

Posted on: January 28th, 2019
by David Ganje

To:  Campbell County Commissioners

 

From:  David L Ganje, attorney   //   605 385 0330

davidganje@ganjelaw.com

 

Re: Proposed Campbell County Temporary Zoning ORDINANCE #2019-1  (called in this memo the “proposed ordinance”) ((reference also made to the first memo I sent to the Commissioners, which is on file with Campbell County Auditor and is dated August 15th, 2018))

  1. PROPOSED ORDINANCE CONTAINS INAPPROPRIATE SUBJECTS. As a whole, the proposed ordinance was not reviewed by those in charge. Extensive subjects are included in the temporary ordinance which are not a part of a temporary, emergency ordinance under South Dakota law. The ordinance covers several subjects immaterial to wind energy development. Under state law, temporary ordinances are not to be comprehensive. A temporary zoning ordinance “regulates uses and related matters as constitutes the emergency.”[i] The immediate issue before the commission is the proposed phase 2 of a wind energy project. Yet the proposed ordinance addresses “Bed and Breakfast Establishments,” “Concentrated Animal Feeding Operations,” “Asphalt Mixing Plants,” and other non-wind farm matters. The proposed ordinance contains improper subjects “not necessary to protect the public health, safety, and public welfare.” This is particularly true because Campbell County does not yet have, and has not yet publicly considered or adopted, a written comprehensive zoning plan for the county. It is unusual for a law-drafter to put in more language than is necessary when writing a law. The proposed ordinance leaves me puzzled and concerned.  That which “constitutes an emergency” is not 99 pages of stuff dealing with bed and breakfasts, CAFOs, asphalt plants and the like.
  2. PROPOSED ORDINANCE IS A FULLY INTEGRATED ZONING ORDINANCE. The 99 page proposed ordinance cannot be legally adopted. It is a fully integrated planning and zoning ordinance — it even presents itself as such. It is not an emergency, temporary ordinance.  By way of illustration, the following language is found in the proposed ordinance, “WHEREAS, the Planning Commission and Board of County Commissioners has given due public notice to a hearing relating to zoning districts, regulations, and restrictions, and has held such public hearings.” Not only is this false—no such public hearings will be held before February 7th, 2019—these procedures are not for temporary zoning ordinances, they are for a fully integrated zoning ordinances, which are comprehensive. The word ‘temporary’ only shows up once in the whole ordinance — in its title. Just as problematic, the proposed ordinance asserts a comprehensive plan has been adopted by the county. This has not occurred. The county has not adopted a comprehensive plan. These statements and assertions are false. A fully integrated zoning ordinance cannot be enacted under the state’s temporary zoning statute.
  3. THE COMMISSION CANNOT ADOPT THE PROPOSED ORDINANCE. Because the proposed ordinance contains subjects unrelated to an emergency and holds itself out to be a fully integrated zoning ordinance, it is not a “temporary zoning ordinance.” The county did not follow lawful procedures for ordinance adoption. SDLC Chapter 11-2 requires two separate and publicly noticed meetings for a county to enact a general zoning ordinance that is not temporary.  First, after public notice, “[t]he planning commission shall hold at least one public hearing on the … zoning ordinance [and] … submit its recommendation to the board.”[ii] Second, “[a]fter receiving the recommendation of the planning commission[,] the board shall hold at least one public hearing on the … zoning ordinance[.]”[iii] These two provisions require at a minimum two public meetings for zoning ordinance adoption.  Without correct content and procedures an ordinance is invalid, and it may be challenged.[iv]
  4. ONLY THE PHASE 2 PROJECT DEVELOPER WAS CONSULTED ON PROPOSED ORDINANCE. It is inappropriate that the commissioners held no public meetings or public working meetings with residents on the proposed ordinance yet consulted with a project developer (sometimes called an operator or facility owner). On January 18th, a representative of the county, its zoning expert, told me the Campbell County Commissioners sought the advice of c­­ounty residents, the county state’s attorney, and the developer for the phase 2 wind farm project on the ordinance. My clients are not aware of any county resident that was approached by the commissioners. I know I was not approached by the commissioners, even though I submitted for my clients an extensive memo that addressed the ordinance last August. I am concerned about a conflict of interest for commissioners should a wind farm developer later seek a permit from the same county officials, some of whom may have worked with the developer in the writing of the very same proposed ordinance.
  5. FAILURE IN ORDINANCE WRITING PROCESS — NO PUBLIC ADVICE. On the subject of a new wind ordinance, in the August memo referenced above, I asked the commission not to do everything at the last minute: “Campbell County in July outsourced to a consulting agency the preparation of a wind farm zoning ordinance. I understand the county wishes to adopt an emergency and temporary ordinance. While commissioners will be the ones to formally adopt any ordinance after normal county public notice procedures, it is respectfully submitted that the process would be well served by requiring that the consultants themselves seek public input from landowners and residents at the early drafting stage, rather than wait until final ordinance readings.” In this memo, I also asked the commission to make efforts to educate the public early in the process: “I respectfully suggest the commission regard in a comprehensive manner, and help the public understand, any proposed ordinance as well as related land use issues …. Uncertainty… often leads to controversy.” The recent 99 page proposed ordinance was just sprung on the public. Why weren’t there any commission work sessions open to the public for a committee or the commission to discuss the ordinance terms? Why didn’t the county’s hired expert hold any public listening sessions? In August of 2018, I invited the commissioners to contact me. Neither I nor my clients heard from them. Neither I nor my clients heard from any special committee members the commissioners appointed either. Finally, on January 16th, 2019, the commission issued a 99 page proposed ordinance and—at the same time—set one public hearing for it. Interested residents and landowners experienced radio silence concerning the language of a proposed ordinance from July 2018 until the proposed ordinance was filed and presented to the public for the first time on January 16th, 2019. While the commission may argue it is acceptable to hold only one public meeting at the end of a serious lawmaking process, I observe here a disregard by the county for any meaningful participation in the lawmaking process by interested county residents.
  6. PROPOSED ORDINANCE IS 99 PAGES. We have a handsome number of legal issues in the proposed ordinance. The commission should nevertheless please understand I was not hired to write an ordinance. Please further understand it is not my charge to either rewrite the proposed ordinance or to critique the whole 99 pages. Therefore, I will, wherever possible, only address the current emergency zoning issue at hand, which means the proposed ordinance’s language and terms related to wind energy. In addressing the various legal issues the commission should please recall that an emergency and temporary ordinance should “protect the public health, safety, and public welfare.”
  7. SETBACK PROVISIONS IN PROPOSED ORDINANCE ARE INADEQUATE. We start with paragraph 5.24.03.2. of the proposed ordinance, entitled “setbacks.” The proposed language provides for a greater setback from a town than it does from a rural residence. That is unsupportable – a home is the same wherever a home is.[v] Further, a relevant portion of the proposed ordinance states, “Distance from existing off-site residences, shall be at least one thousand (3,960) feet.” The numbers (3,960) do not reflect the stated distance (one thousand feet). The preceding quoted language is vague, void, and not enforceable. Equally as important, the suggested setback distances in the proposed ordinance are inadequate. I submit the correct distance from off-site residences in the proposed ordinance should be “one and a half (1 ½) miles.” A distance of a mile or more is found in South Dakota[vi] and in other jurisdictions[vii]. “If there is a consensus among independent authorities, it is for more distant setbacks, measured in miles. The same pattern is shown in jurisdictions that have taken the time to research the topic and reach their own independent conclusions.”[viii] The proposed ordinance only protects “existing” off-site residences and measures this setback from a “primary building.” The word “existing” causes ambiguity in the proposed ordinance (i.e., how do we know if a residence is “existing,” who determines if a residence is “existing,” etc.?) It also prejudices future non-commercial construction and development of rural private property. What if my clients, or any private citizen, wants to construct a residence on a property after the ordinance is adopted? Future construction is not protected by the current ordinance terms.
    Sub-paragraph 5.24.03.2.b. should read: “Distance from off-site residences, business, churches, and buildings or structures, shall be at least one and one-half (1 ½) miles. Distance to be measured from the wall line of the neighboring principal buildings to the base of the WES turbine.”
  1. PROPOSED ORDINANCE DOES NOT PROTECT ROADS. County road haul agreements are contracts between the county and a developer. These standard agreements REQUIRE permitted wind farm developers or those completing other county permitted activities to restore public roads back to their original condition.[ix] Written road haul agreements are useful and are quite common throughout the state. The boilerplate (one might call it form language) Campbell County language in the proposed ordinance DOES NOT require a road haul agreement.[x] This Campbell County language was unsuccessfully used a few years ago in another South Dakota county; in 2016, Codington County adopted identical ordinance language.[xi] But in 2018, Codington County experienced road problems and amended its ordinance.[xii] Road damage needed to be addressed in the ordinance. The template language did not protect the county and its residents from road damage, which was allegedly caused by wind farm development.[xiii] The exact language Campbell County wants to adopt failed to protect Codington County roads because it did not require a road haul agreement. Why would Campbell County adopt the same “cut and paste” language without considering its history? Why the county take did six months to write and pay others to write an ordinance whose form language all but guarantees problems from the get-go? The Campbell County language is a cut and paste job from other ordinances. The danger of “cutting and pasting” from other old ordinances is one of the risks I mentioned in the August memo. That advice was ignored by Campbell County ordinance drafters.
    The following ordinance language is reasonable: Along with a written and county approved county road haul agreement, it is required, at the time of permitting a project, that a project applicant must prove financial assurance is in place to promptly repair damaged county roads. 
  1. NO REQUIREMENT FOR SITE PLAN AND ENGINEERING DRAWINGS. The proposed ordinance does not have a requirement for a developer to submit a site plan and engineering drawings when the developer files a conditional use permit application. The only requirement is to submit a site plan and engineering drawings “for the feeder lines before commencing construction.” Under the proposed ordinance, the public has no information on the technical terms and nature of a proposed new project even though the county could still “approve” such a project.
    The following is missing in the proposed ordinance: a conditional use permit application for a project shall include a completed site plan and related engineering drawings.
  1. SERIOUS DECOMMISSIONING PROBLEMS IN PROPOSED ORDINANCE. Under the proposed ordinance, a decommissioning plan IS NOT to be publicly filed until “120 days after construction is completed.” Under this ordinance term, a wind farm would be fully completed and then, and only then, would the developer tell the public how it handles the project’s “end game.”[xiv] Further, the ordinance provides NO PUBLIC REVIEW, hearing, and approval process for a decommissioning plan. The developer sets the terms without consideration of a public hearing and approval process. The public and county should have a right to understand and approve the specifications a developer has in its written decommissioning plan at the same time the developer seeks approval for the very project. It is a little late for the car owner to buy car insurance after he has had an accident.[xv] The construction of any wind development project is significant.[xvi] Under the proposed ordinance, for example, the developer only has an obligation to remove underground cables, foundations, buildings, and ancillary equipment to a depth of four (4) feet. Contemporary turbines are larger than in the past, electrical requirements are critical, more roads are necessary, and wiring and cabling of substations is expensive and requires a lot of construction activity.[xvii] Should all of this development be approved by the county without the public first being told how it will all be dismantled by the operator if and when dismantling becomes necessary? If a developer knows its plan, does the economic tests for project feasibility like a cost-benefit analysis, and takes the advice of engineers and experts who have reviewed and approved a proposed project, then that developer will also have sufficient project information and technical savvy to — at the same time as applying for a permit — disclose how the developer plans to decommission its project.
  2. NO PUBLIC NOTICE AND HEARING FOR SOIL EROSION PLANS. The proposed ordinance does not require any public participation or county approval—all following a public hearing with requisite notice— on the important matter of a soil erosion, dust management, and sediment control plan.[xviii] The ordinance merely requires a developer “file” a soil plan. Further, under the proposed ordinance the plan need not be filed at the time of the permit application. The proposed ordinance, throughout, consistently allows for modest disclosure without an effort to provide due process for county residents and property owners.
  3. NO ADEQUATE BONDING REQUIRED FOR WIND ENERGY PROJECTS.  The proposed requirements for financial assurance are nonexistent. The proposed ordinance states, “After the tenth (10th) year of operation of a [wind farm], the Board may require a performance bond. . . .” The Board is not required to set a bond or required to ask for financial assurance of any type. The county has the authority to waive the requirement entirely or set it too low to really matter. Financial assurance by the developer should be required at the time the project is approved. Projects involving some government oversight are usually regulated because of a project’s environmental or property rights impact. The purpose of regulation is to safeguard the public in the event of a problem arising from such a project. End-of-life decommissioning is a common contingency event.  Proper planning, evolving around the full life of a proposed project, is key.  But government is not always well endowed with the skills to protect the public from end-of-life events. What if a project is abandoned or bankrupt in year one, two or three? And indeed what are the financial criterion for the county in setting the financial amount for a project? There are none under the proposed ordinance. Recent experiences in South Dakota on this subject spotlight this problem. A few years back, a state-licensed grain company (in the old days we called them grain elevators) by the name of Anderson Seed Company went belly up. Authority for setting bonds was then and still is given to the S.D. PUC. The bond for Anderson was set at $100,000 — $2.6 million was lost. The insolvency of the company resulted in a little over 4 cents on the dollar paid back to those parties who lost money in the insolvency. The bond was inadequate. The payout to the innocent grain sellers/producers was inadequate. The end-of-life planning was not well done. This experience resulted in a change in the law, but that change is itself an incomplete effort at planning a project end-of-life, that is, a decommissioning event.
  4. NO LIABILITY INSURANCE REQUIREMENT IN PROPOSED ORDINANCE.  The proposed ordinance has no insurance requirements for a wind farm operation or wind farm construction. Why would Campbell County not require general liability insurance on a large construction project and also not have the county named as an additional insured? The U.S. Department of Energy recommends local wind ordinances have an insurance provision.
    One recommendation states there “shall be maintained a current general liability policy covering bodily injury and property damage. Certificates shall be made available to the county.”
  1. PROPOSED ORDINANCE DOES NOT REQUIRE ANY INDUSTRY STANDARDS.     The proposed ordinance does not require inclusion of wind industry standards for construction, operation or demolition of a wind farm project, other than those required for aircraft safety.  However the Campbell County proposed ordinance requires industry standards for other non-wind projects. Why would a wind farm project get a free pass on industry standards when other non-wind farm projects to be approved by the county do not get a free pass on industry standards?
    An acceptable industry standard for a wind energy facility would state, “The design of a Wind Energy Facility shall conform to applicable industry standards, including those of the American National Standards Institute.  The Applicant shall submit certificates of design compliance obtained from relevant certifying organizations.”
  1. CONCLUSION AND ADVISORY NOTE.  This memo does not cover all legal issues that exist on the proposed ordinance. You are respectfully advised that issues, statements, and questions presented herein do not constitute a complete statement of, or a waiver of, any legal rights my clients may have now or in the future.

 

Thank you.

 

Endnotes (Matters The Commission Should Also Read And Consider)

[i] SDCL § 11-2-10.1 (2018) (South Dakota’s temporary zoning statute).

[ii] SDLC § 11-2-18 (2018).

[iii] SDLC § 11-2-19 (2018).

[iv] See Wedel v. Beadle County Com’n, 2016 S.D. 59 (S.D. 2016) (citation omitted).

[v] See Robert Bryce, Wind power is an attack on rural America, Los Angeles Times (Feb. 27, 2017) (“Rural residents are objecting to wind …. They don’t want to live next door to industrial-scale wind farms. They don’t want to see the red-blinking lights …, all night, every night for the rest of their lives. Nor do they want to be subjected to the audible and inaudible noise ….”), at https://www.latimes.com/opinion/op-ed/la-oe-bryce-backlash-against-wind-energy-20170227-story.html.

 

[vi] See David Ganje, Wind turbines ordinances revisited, Capital Journal (Nov. 8, 2017) (discussing South Dakota’s Lincoln and Walworth County setbacks, which exceed one mile) (“A[n] expert in property valuations … used a [] two-mile minimum as a benchmark for turbine setbacks.”), at https://www.capjournal.com/opinions/columnist/wind-turbine-ordinances-revisited/article.html.

[vii] Trempealeau County, Wisc. (1-mile setback from all homes and workplaces); Mason County, Ky. (1-mile setbacks at property line, shadow flicker limitations, decommissioning); Sumner, Me. (1-mile setback from property line, low-frequency noise/shadow flicker limitations, decommissioning). Each county name is a link to the actual ordinance.

[viii] See Tony Fleming, Wind Ordinance Debate: The 1,000-foot Set-Back Standard (Are environmentalists underregulating themselves?), Master Resource (Jan. 23, 2012), https://www.masterresource.org/wind-offset-distance/wind-ordinance-offset-debate/.

[ix] See Paul W. Wilke, Road Use Agreements to Mitigate Impacts of Energy Developments on Low Volume Roads, Applied Research Ass’n (2017) (On average, 43 truckloads are needed to build 1 wind tower foundation, 35 truckloads for the main crane of each wind tower, 25 truckloads for support cranes for each wind tower, and 313 truckloads per mile of road built), at https://www.countyengineers.org/assets/Presentations/2017/wed 2pmfinan wilke.pdf.

[x] Campbell County Ordinance #2019-1 § 5.22.03 (2018).

[xi] Codington County Amended Ordinance # 68 § 5.22.03 (2018), at https://www.codington.org/wp-content/uploads/2018/04/Ordinance-68-Wind-Energy-Systems-1.pdf.

[xii] Id. at § 5.22.03.1.f.ii. (Requiring road agreement approved by county); id. at § 5.22.03.15.ii.b., d., g., h., i. (Amending mitigation and CUP application requirements to address problems with haul roads).

[xiii] See J.T. Fey, County working on road haul agreement with Apex Energy, Watertown Public Opinion (Aug. 8, 2018) (The commissioners had dealt with another road haul issue before.”) J.T. Fey, Concerned citizen raises question about road damage, Watertown Public Opinion (July 27, 2018) (“[D]amage to a Codington County road has one citizen concerned about … construction on wind towers ….”).

[xiv] See Joshua Conaway, Be Aggressive with Wind Energy: Blow Away the Decommissioning Fears, 2 Oil & Gas, Nat. Resources & Energy J.621 (2017) (“Without proper regulations, a strong likelihood exists that these turbines will remain in place long after their useful lives have expired.”), at http://digitalcommons.law.ou.edu/onej/vol2/iss6/3.

[xv] See David Ganje, Wind Energy Development Memo // Decommissioning (2018), at http://www.windaction.org/ganje-memo-on-decommissioning.

[xvi] See Hayes Stripling, Wind Energy’s Dirty Word: Decommissioning, 95 Tex. L. Rev. 123 (Nov. 2016) (There is no easy answer for when a surety bond should be required. But “[w]hat is clear is that …  security [should] be in place on or before a project’s payout date.”), at http://texaslawreview.org/stripling.

[xvii] Id. (Avg. of 10 WES decommissioning cost $129,000 per turbine, ranging from $27,000 to over $650,000 per turbine.); see also Conaway supra note XIV (“These costs, if allocated on a per-turbine basis, are $25,899 and $92,463 respectively per turbine, solely for road removal.”) (emphasis added).

[xviii] Lisa Linowes, The Incompatibility of Wind and Crop ‘Farming’, Master Resource (July 1, 2013) (“[F]armers tell us that the ground is never the same…. The [once] fertile soil around the towers is … compacted resulting in lower crop yields. Since compaction is assumed to be a construction-related impact, crop-loss payments are often time-limited …. However, … the massive cranes [are] brought back … throughout the life of the project. And it’s not limited to existing roads or turbine pads….”), https://www.masterresource.org/linowes-lisa/incompatibility-wind-crop-farming/.

Memo to Commission on Wind Farms

Posted on: September 8th, 2018
by David Ganje

To:  Campbell County Commissioners

From:  David L Ganje attorney   //   605 385 0330

davidganje@ganjelaw.com

Re:   Campbell County’s prospective comprehensive plan, temporary zoning ordinance and proposed Campbell County Wind Farm Phase 2

Date:    August 15th 2018

 

 

 

By way of introduction, I represent Campbell County landowners Larry and Bea Odde and Donna Rossow.

  1. Wind farms are a significant structural and economic part of a county.  Each county naturally has the right to encourage the development of privately operated wind farms. A county, by virtue of South Dakota law, may also have the obligation of watchful care over wind farms within its borders.  My clients are certainly not opposed to wind energy projects.  My clients are however concerned about property rights and protections, wind energy ordinances, and Campbell County’s consideration of infrastructure projects.
  2. Infrastructure is described as physical improvements in a county such as road systems, water systems, bridges and some utilities.  This includes physical structures that are essential to a community.  Infrastructure has environmental, social and economic benefits as well as costs to a county. One does not usually think of private business as owning and operating infrastructure, yet it does.   Privately owned infrastructure includes wind farms and electrical utilities. A wind farm is private infrastructure.  Infrastructure does not consist of a small business enterprise which would only affect a piece of property off in a corner somewhere.  Due to infrastructure’s broader effect on a county, it is subject to more than just private property rights.  A wind farm is private enterprise with public consequences.   Commissioners have the right, and a legal duty, to oversee the planning, development and maintenance of certain infrastructure within a county.
  3. The state of North Dakota regulates the siting of a wind energy facility greater than 500 kW.  That is not the case in South Dakota.  The South Dakota Public Utilities Commission (PUC) does not regulate the legal siting terms and conditions of a wind energy facility producing under 100 MW of electricity.  In SD a “wind energy facility” is defined as a system designed for or capable of generation of 100 MW or more of electricity.  A wind energy facility is the same thing as a wind farm.  The county commission will take notice that neither the existing Campbell County Wind Farm Phase 1, nor the proposed new Phase 2 equal 100 MW of electrical capacity generation per the developer’s information.  Phase 1 and Phase 2 are both outside of the PUC’s siting authority.  This leaves only one lead agency to oversee and manage the project siting process for a wind farm in Campbell County:  the Campbell County Commission.
  4. Wind energy projects, also known as wind farms, create a number of siting issues.  The physical placement and configuration of wind turbines, roads, fences, collection lines and the like must be considered. Relevant questions include a project’s impact on existing land use, a neighbor’s land use, and the environment.  For example, authorizing a wind farm in close proximity to a residence may create a claim for inverse condemnation or a regulatory taking of private property. A regulatory taking, that is, a taking by government rulemaking, may occur if a land-use regulation “goes too far.”  The commission is challenged to create a balance between private property rights and the government’s power to regulate in the public interest.
  5. Campbell County is naked. The county has no comprehensive plan and has no zoning ordinances.  A comprehensive general plan lays out the physical development of the county. In South Dakota a comprehensive plan is required for the purpose of protecting the development of the county; to protect the county’s tax base; for planning land use that will make adequate provisions of transportation, roads, water supply, drainage, sanitation, education, recreation, or other public requirements; to reduce governmental expenditure; and to conserve and develop natural resources.  Zoning ordinances are adjunct to, and must be in accordance with, a county’s comprehensive plan.  Without a comprehensive plan zoning ordinances cannot be adopted.  The only exception to this restriction is the passage of a so-called emergency temporary ordinance.
  6. The Phase 1 Campbell County wind farm became a public matter in approximately 2010.  At that time the county did not have a comprehensive plan, a wind energy ordinance or a procedure for obtaining special use permits.  The Phase 1 wind farm became operational in December of 2015.  At that time the county did not create a county comprehensive plan, wind energy ordinance or a procedure for obtaining special use permits.   A new proposed Campbell County wind farm referred to as Phase 2 has been proposed since approximately March of this year.  Yet, at this time the county still does not have a comprehensive plan, a wind energy ordinance or a procedure for obtaining special use permits.  The county commission in July of this year hired a consulting agency to help write a temporary ordinance or comprehensive plan.  It is of concern that Campbell County with its natural and physical features does not have wind energy regulations on the books.
  7. My clients may have believed that Consolidated Edison Development, Inc. operates Phase 1.  Department of Revenue papers received by the County Auditor in April of 2018 indicate that Campbell County Wind LLC is the entity paying taxes on Phase 1.  A company that owns or holds property under a lease and who operates the same for the purpose of furnishing electricity is the party that pays taxes.  A November 2015 federal filing by Campbell County Wind Farm, LLC reports that Campbell County Wind Farm, LLC is a Delaware limited liability company and that it “will own and operate” a 98 MW wind energy project located in Campbell County, South Dakota.
  8. One South Dakota official was recently quoted as saying that wind energy development in the state is a “gold rush.”  I wonder whether that state official understands the connotation of a gold rush.   A gold rush creates huge challenges and can leave a government with a bucketful of problems.  In a gold rush there are often no established rules or laws in the area and no established infrastructure to deal with the influx of activity.  A comprehensive plan as well as zoning ordinances, if written fairly, create good rules of the road.  A gold rush is like a community with no road signs, no speed limits and no traffic rules.  Thinking of zoning ordinances as writing a traffic code for the county makes sense.  A plan and ordinances can be written to protect people and property, and to keep things moving smoothly.  A plan and ordinances should establish county oversight, safety, uniformity and a road map which wind farm operators can read and follow.
  9. Campbell County in July outsourced to a consulting agency the preparation of a wind farm zoning ordinance.  I understand the county wishes to adopt an emergency and temporary ordinance. While commissioners will be the ones to formally adopt any ordinance after normal county public notice procedures, it is respectfully submitted that the process would be well served by requiring that the consultants themselves seek public input from landowners and residents at the early drafting stage, rather than wait until final ordinance readings. Letting another party write your local laws may be somewhat akin to letting a stranger use your credit card.  Please consider that lawyers as a group are said to be the second oldest profession.  But now that I think about it perhaps consultants as a group are really the second oldest profession– not lawyers.  The commission will of course be the government body taking final ownership of the local zoning and planning law and its effects on the county.
  10. When poor wind farm government oversight is in place, real operational consequences arise. In a workshop a few years ago a speaker at the Michigan Association of Planning discussed problems a wind farm created in Altamont Pass California.  Apparently the older technology wind turbines caused a great number of bird deaths.  The turbines were shut down in 2015.  I do not here suggest or imply that this would be the case with Campbell County Wind Farm Phase 1 or Phase 2.  Rather I provide the speaker’s comments on possible wind farm oversight issues.  The presentation indicated that there was no environmental analysis before turbines were first installed; that there was a fragmented regulatory scheme letting the government avoid responsibility for solving the problem; and that the industry avoided taking responsibility and did not address the Altamont problem proactively.
  11. South Dakota has no state environmental regulations on the siting of wind turbines.  And, except for language in projects which may be under the joint jurisdiction of the PUC and local governments, wind power siting and permitting processes varies by county. Suggested guidelines are provided in a jointly issued statement by the state Game, Fish and Parks and the state Bat Working Group Organization.  The following issues should be considered in a permit application:  1) Land Use 2) Natural and Biological Resources 3) Noise 4) Visual Resources 5) Public Interaction 6) Soil Erosion and/or Water Quality 7) Health and Safety 8) Cultural, Archaeological, and Paleontological Resources 9) Socioeconomic, Public Service, and Infrastructure 10) Solid and Hazardous Wastes 11) Air Quality and Climate.
  12. Local laws are best tailored for each county.  Lincoln County is different than Walworth County.  And, yes, Walworth County may be different than Campbell County. The Walworth ordinance dealing with wind energy says that a decision to grant a wind permit is an administrative matter.  It is not.  The South Dakota Supreme Court in 2009 ruled that a conditional use permit application (a common process for wind farm approval) is quasi-judicial.  Such ordinances are subject to a constitutional due process of the law review.  This requires that a county be visibly fair to all parties affected by the permitting decision.  Wind farm permits are exceptional permits because one might get approval in an area where regular zoning rules would not allow it.  Due process in South Dakota requires a.) reasonable notice to all parties effected, and  b.) an opportunity to be heard at a meaningful time and in a meaningful manner.  The current ordinance fails on both counts.
  13. The challenge for the county is to not create a chilling effect on new wind energy development and yet to protect the community, property owners, property values and the environment. One method occasionally used to write a new zoning ordinance is problematic. This problematic method is the adoption by a county of ordinance language based on that of another or several other sister counties. Adopting boilerplate central resource terms for suggested ordinance language is also not the best answer.  In 2009 the PUC published and placed on the web a recommended general model wind farm siting ordinance.  In an opinion piece on wind ordinances I previously critiqued part of the PUC recommended model language.  Several months later the PUC withdrew the model ordinance.

 

 

I respectfully suggest the commission regard in a comprehensive manner, and help the public understand, any proposed ordinance as well as related land use issues effected by any proposed plan.  Uncertainty among landowners and residents often leads to controversy.  The particular language of an ordinance is always where the rubber meets the road.  I look forward to looking at the proposed ordinance language from you and your consultants.  Part of my job is to help my clients ask better questions. This memo is given for discussion purposes and is not intended as a complete assessment of any legal matters considered.  If you would like to discuss the memo or have any questions please feel free to contact me.  Thank you.

 

 

 

 

 

 

 

 

 

 

 

 

 

South Dakota vs New York ‘Wind Farm Tax’ Comparison

Posted on: May 12th, 2014
by David Ganje

South Dakota

New York
Property Tax Exemption &

Alternative Taxation Scheme

 

Facilities with less than 5MW

-$50,000 or 70% (whichever is greater) of assessed value of new property is exempt from real property tax

 

Facilities with more than 5MW

-Annual tax on est. capacity calculated at $3 per k/Wh

-Annual 2% tax payable on gross receipts

-Rebate eligibility

-50% of construction of transmission lines

-90% rebate of gross receipts paid for 5 years

-50% rebate of gross receipts paid for next 5 years

 

Translation

For facilities with less than 5MW of capacity

SD offers a property tax exemption of either $50,000 or 70%, whichever is greater, of the increased assessed value of the property as a result of the construction/installation of renewable energy production facilities.

 

Example

Value of property before installation of wind energy system: $10,000

Value of property after installation of wind energy system: $100,000

Increased value of the property: $90,000

Property Tax Exemption: $63,000

(70% of the increased value of the property)

 

For facilities with more than 5MW of capacity

SD offers an alternative taxation scheme in lieu of all taxes on real property which requires the generator to pay (1) an annual tax of the k/Wh capacity of the farm and (2) an annual tax on gross receipts of the wind farm. Following the payment of these taxes the company may be eligible for a rebate of up to 90% of the gross receipts for an initial 5 year time period and then a 50% rebate of the gross receipts paid for the next five years. No company may receive a rebate after this 10 year period. The SD Secretary also has the discretion to simply provide a tax credit to the developer as opposed to complying with the taxation scheme. This would be equivalent to the determined rebate eligibility calculated by the tax scheme as to avoid the complexity of the process, and cut down on the amount of transactions between the developer and the government.

 

Example

Company pays two sets of taxes:

(1)-annual tax on the k/Wh capacity of the farm

(2)-annual tax on all gross receipts

 

Rebate eligibility is only available for the second set of taxes paid – the annual tax on all gross receipts. 90% for the first five years of operation, and 50% for the next five years. (10 year maximum rebate eligibility)

 

For example:

 

Within the first 5 years of operation:

Total annual tax on gross receipts paid: $100,000

Total Rebate Eligibility: $90,000/year

 

The next consecutive 5 years of operation:

Total annual tax on gross receipts paid: $100,000

Total Rebate Eligibility: $50,000/year

 

*No rebate eligibility beyond 10 years

 Property Tax Exemption

 

-Exemption on property containing solar or wind energy systems designed to generate energy*

-100% property tax exemption

-Localities may opt-out of offering exemption

-15 year exemption limitation

 

Translation

NY offers a 100% property tax exemption of the increased assessed value of the property as a result of the construction/installation of approved wind energy farms. There is a 15 year limitation on this exemption.

 

*Solar or wind energy system means an arrangement or combination of solar or wind energy equipment designed to provide heating, cooling, hot water, or mechanical, chemical, or electrical energy by the collection of solar or wind energy and its conversion, storage, protection and distribution. (NY CLS RPTL §487)
Reinvestment Payment Program

For Renewable Energy Sector  

 

Project Qualification Amounts

-New/expanded facilities: must exceed $20 million

-Equipment upgrades: must exceed $2 million

 

Eligible Reinvestment Payment

-Up to 100% of the 4% sales and use tax paid on the project by the project owner

 

Translation

Companies who either expand/build new facilities or invest in equipment upgrades can apply for a reinvestment payment of up to 100% of the sales and use tax they paid on the project. This is a one-time reinvestment payment based on the receipts of the project.

 

 

 

 Renewable Portfolio Standard Program

 

Main Tier – Large Commercial Wind Farms

-Competitive bidding process

-NYSERDA publishes a RFP which any commercial generator can bid on and once all bids are collected and assessed, NYSERDA will award as many contracts as the RFP requires to fulfill the RFP

 

Customer Tier – Wind Turbine Incentive Program 

-Facilities with less than 2MW capacity

-Maximum $1 million/site/customer

-Standard incentives paid to eligible installers for annual energy output under a fixed payment structure

-First 10,000k/Wh paid at $3.50 per k/Wh

-Next 115,000k/Wh paid at $1 per k/Wh

-Above 125,000k/Wh paid at $0.30 per k/Wh

 

Translation

For commercial wind farm energy producers

NYSERDA offers a competitive bidding process which allows companies to bid on projects to fulfill State energy needs. Once NYSERDA collects all the bids for a specific project, they will award contracts to companies who satisfy their requirements, so long as funding is available to compensate each company.

 

Example

(1)-NYSERDA publishes requests for proposals (RFP’s), stating the need for 50MW of energy with a $5 million budget (budget is unknown to the companies)

(2)-Companies submit proposals/bids to NYSERDA containing how much energy they can produce and at what cost.

(3)-NYSERDA awards contracts to fulfill the 50MW with a maximum spending allowance of $5 million

 

For Example:

 

If five companies submit bids with the ability to produce 10MW of energy for $1million – each company will be awarded a contract from NYSERDA to satisfy their proposal. If one company submits a bid with the ability to produce 10MW of energy for $4million – that company would most likely receive the benefit of the entire contract.

 

For facilities with less than 2MW’s of capacity

NYSERDA provides a standard offer under which they will pay customer-generators a certain dollar amount for every k/Wh of energy produced from the installed system.

 

Example

Customer wishes to build a system which can produce 10,000k/Wh of energy. Customer finds an approved, eligible installer who installs equipment. NYSERDA offers standard payment of $3.50/kWh for the first 10,000k/Wh produced. Customer would be entitled to a benefit of $35,000. Under the program requirements this payment is paid to the installer, who in turn, must pass the incentive, in its entirety, to the customer-generator.

 
 

Corporate Tax Rate: NONE

  

Corporate Tax Rate: 7.1%
 

Personal Income Tax Rate: NONE

  

Personal Income Tax Rate: Scaled from 4%-8.82%
Sales & Use Tax Rates

 

Base: 4%

Maximum Local Rate: 4%

 

 Sales & Use Tax Rates

 

Base: 4%

Maximum Local Rate: No maximum set