Texas Wind Power Loses Oomph

Texas Wind Power Loses Oomph; State Fears Snub of Leases with Tax Credit Loss

By Nelson Antosh, Houston Chronicle -- April 8

It sounds like a wind farmer's dream -- 89 tracts of mountainous, windy land in far West Texas just waiting for sealed bids to be submitted to the state by an April 20 deadline.

But it's a wind rush that may not materialize.

That's because the expiration of a federal tax credit has halted in its tracks the zooming expansion of wind farms dotted with electricity-generating wind turbines.

Yet, despite being a little apprehensive, the Texas General Land Office is determined to go ahead with its first-ever sealed bid auction for wind farm sites.

"We wonder if anybody will show up," said land office press secretary Jim Suydam in Austin. "We may not get a single bid."

Last year, when Land Office Commissioner Jerry Patterson and his staff proposed the sale, wind turbines were still a hot topic, and the prospect of pumping more money into the Permanent School Fund looked good.

But then the federal subsidy for wind energy dried up along with the tax credit's expiration on Dec. 31.

"The industry is hogtied without it," Suydam said.

The credit's renewal is stalled in Congress as part of the disputed energy bill, which has drawn opposition over issues such as limited liability for makers of methyl tertiary-butyl ether, or MTBE.

Although the tax credit for wind power has lots of supporters, its fate has been the equivalent of an "innocent victim of a drive-by shooting," said Randall Swisher, executive director of the American Wind Energy Association.

Deals were put together with the expectation of there being a tax credit, and if it never comes back, that means companies have to find other investors, Swisher said.

The result is that the wind power boom of 2003 is turning into the bust of 2004, according to the trade group.

There is a general feeling the credit will be extended at some point later this year, but even then it will take an additional nine months for construction to resume.

Meanwhile, the state has patterned its sale after the leases for oil and gas that have been a fixture for decades.

Under its plan, Texas would get a royalty, or a percentage of the output, preferably in the form of electricity that it could sell itself.

And in order to even qualify as a bidder, a company would have to offer a royalty of at least 4 percent and pay an upfront bonus ranging from $15 to $70 an acre, depending upon the tract.

A projection of how much money would be involved was never made because it would have been a total guess, Suydam said.

Successful bidders will have two years to get the turbines turning, a tactic to keep someone from squatting on an asset.

The majority of lease blocks are clustered south of the town of Sierra Blanca in Hudspeth County. Another cluster is in Presidio County, well to the south of Marfa. Ten blocks are scattered in Culberson County, whose only major town is Van Horn.

Average size of each block is 600 acres, with the smallest being 20.6 acres and the largest being 1,280 acres. To assist bidders, the state is providing a rough estimate of the number of watts that can be generated at each location.

Generally speaking, everything west of San Angelo is great for wind, said Walter Hornaday, president of Cielo Wind Power, an Austin-based developer of wind farms. His company plans to look at some of the state's blocks, although it is too early to say if it will actually make bids.

The lack of tax credits and the current oversupply of power plants in Texas has thrown "a big wet blanket" over new projects, Hornaday said. He applauds the state's lease sale as formalizing a process to gain access to a big portion of West Texas land, while noting that the timing is bad.

Zilkha Renewable Energy, a developer of wind farms in a dozen states, has no interest in Texas at the moment and thus won't bid, said Kate Wattson of the Houston-based company. Instead, it is pushing to build what will be the world's largest single wind farm, located in central Illinois -- on condition that the tax credit comes back.

This project, atop a low hill pushed up by glaciers long ago, would have as many as 267 turbines scattered across 21,000 acres of farmland.

Far West Texas is already spotted with wind farms, typically on private land, sufficient to make Texas the second-largest wind-power state, exceeded only by California.

Texas also can boast the world's second-largest single project, based on a generating capacity of 278 megawatts, on King Mountain outside McCamey. That is enough electricity for 97,650 households, based on 1 megawatt being enough for 350 homes.

The largest is on the Oregon-Washington border and has a capacity of 300 megawatts. Zilkha's proposed project in Illinois would top them all with 400 megawatts.

One way the tax credit may be saved: Some in Congress have proposed breaking the wind tax credit out of the energy bill and moving it through as part of a corporate tax bill, Wattson said.

But even that tactic could face tough sledding because the bill contains controversial issues such as overtime and wages, she said.

A MIGHTY OFFSHORE WIND MAY PAY OFF: West Texas has its advantages, but the bigger potential for generating electric power from wind is along the Gulf Coast -- a fact that's not lost on the Texas General Land Office.

The agency is planning a lease sale of wind farm sites for this summer involving the shallow waters owned by the state as far as 10 miles from shore.

West Texas has great wind, but it is costly to build transmission lines across hundreds of miles of rugged terrain, spokesman Jim Suydam said.

In contrast, coastal areas are next door to the locations of greatest demand. The coastline regularly has a stout breeze, which picks up every afternoon about when demand peaks. That means you could sell the electricity for more, he noted.

In Europe, placing turbines offshore is the trend.

Opposition to a proposed project in the Northeast suggests that the United States may not be ready for this yet.

The flap, primarily over visual blight, could have been avoided by simply placing the turbines far enough out to where they can't be seen, says Walter Hornaday, president of Cielo Wind Power, an Austin-based developer of wind farms.

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