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County prevails in wind case

“The cost of monitoring and mitigating the environmental risk this project poses to bats, even if continued at the maximum levels suggested by the Conservancy for the 20-year life of the project, would amount to approximately 2.5 percent of the project’s annual revenues during the first three years of its operation and less than 1.5 percent of revenues thereafter.”

MONTEREY – As she watched two eagles soar above Allegheny Mountain, Patti Reum was fearful about whether her home and business would be viable a year from now. And whether or not she and her husband want to continue live here.

Friday, when the Virginia Supreme Court upheld Highland County’s actions granting a conditional use permit for 400- foot towers that would loom over her Bear Mountain Retreat and Conference Center, Reum, who was one of the neighboring landowners who brought the lawsuit, was left angry and confused.

“I just want to know why these technicalities weren’t understood before now,” Reum said. “Why has it taken months, and still no one is even looking at this case? It doesn’t surprise me, but no one’s really seeing what we’re saying here. The judicial branch just doesn’t want to get involved in local governments. All that work, energy, money … and how many years? To me, it seems a true shame.”

While anger and confusion were typical response of those in opposition, the other side was elated.

Spokesman for the developer Frank Maisano issued a statement Friday. “This is an important victory for Virginia’s first renewable wind project in Highland County,” he said. “It is made even more important by Gov. Kaine’s announcement this week outlining his aggressive clean energy goals for the commonwealth. Virginia must have renewable power from wind and Highland County will be where the road to a cleaner, renewable energy future in Virginia begins. This decision clearly rejects the notion that you can oppose these clean energy projects just because you don’t like them. It reaffirms what we suspected all along – that Highland County and its supervisors worked very hard to make sure they made an informed decision that dotted the ‘I’s’ and crossed the ‘T’s.’ After doing the extensive homework, as well

Balding knobs on Allegheny Mountain are another step closer to becoming home to Virginia’s first industrial wind power utility. Tamarack and Red Oak Knob are situated on the McBride family’s 4,000 acres in Highland’s westernmost region. On a clear day, the view from the 4,200-foot-high elevation extends all the way to the Blue Ridge Mountains looking east, and Spruce Knob, W.Va., looking west. The closest industrial wind energy facility to Highland is in Tucker County, W.Va., and already industrialized area (Recorder file photos). as sitting through countless hours of divisive public hearings, it surely is a relief that they acted properly all long. It is just too bad they were forced to spend muchneeded county resources on the project opponents’ frivolous lawsuit. It certainly proves the old adage that no good deed goes unpunished.”

Maisano has spoke on behalf of many industrial wind energy companies, include Highland New Wind Development, the one owned by H.T. “Mac” McBride and his family, which plans to construct the facility here.

Lucile Miller, who owns property in the Laurel Fork watershed downstream from the McBrides’ property, was also party to the lawsuit against the county. She said she, too, was depressed for a few hours, and then began to think about all the good things that have been accomplished by the strong push she and others have made to get citizens across the state, and East Coast, to understand the potential impacts of industrial wind energy.

“Of course I’m disappointed,” she said. “But when this all first started I found myself getting sick about it all, and then I realized I can’t do that because you can’t be effective if you do that. You’ve got to let it go and take the next step.”

Miller, too, was not surprised by the court’s decision. “We’ve managed to hold it (the project) off this long, turbines are harder to get now, more folks know now about the real environmental impacts, and now we have folks all across the country looking at the right protocols,” she said. “When this (decision) came down, (Highland officials) started saying the board of supervisors is ready now to really expedite this thing through. But we’ve accomplished holding it off this long, and the SCC would have issued a permit much sooner if we hadn’t done this.”

Miller said there has been some criticism from legal scholars about the court’s opinion, and hopes that asking for reconsideration, a move the citizens’ attorney is prepared to make, will be successful.

McBride could not be reached for comment this week, but told other news sources he was relieved by the court’s decision. Despite the strong opposition, the 80-year-old Harrisonburg resident has maintained preserving his 4,000 acres in Highland for his children and grandchildren has been a primary motivator, in addition to his hopes this kind of renewable energy will be good for Virginia. “Given the condition of the world, with our reliance on fossil fuels and with global warming becoming a big issue, I thought people would see this as a good project and support,” McBride told the Virginia Pilot last week. “I sure was wrong about that.”

Reum and her husband have a business dependent upon a clientele primarily interested in the wildlife and natural ecosystems their property provides access to, and they remain convinced having 20-some turbine towers on the ridge overlooking their place will have a negative impact on their naturalist center.

“Astronomers, birders, hikers, those who seek solace in nature … I’ve worked really, really hard, against a lot odds, to get this business successful and I’ve worked to make that my market,” Reum said. “These people come for the quiet, peace, the nature. They’re not going to want to be woken up in the night by the flashing lights and the noise (from wind turbines.”

As the decision was made public Friday, Reum had not even been aware of it until reporters statewide started calling. Reum and Brody were entertaining 130 guests last weekend, many of whom were also overnighting at other county establishments.

“I don’t have a free bed from now until I close for the season, and I’m even doing some winter stuff this year,” she noted. “Now, McBride’s saying these things could be up by fall 2008 … I’ve already got bookings then. I have to see if I can hold out another year, and then, I don’t know. I guess I don’t really know if our business is going to die until it’s dead, so I just try to keep going.”

Reum is also angry about how often Highland residents opposed to the project are classified as “NIMBYs” (not in my back yard) by larger media and the developer’s spokesmen. “You’re trying to stand up for something you believe in, and you’re doing something you think is right, but you’re constantly being put down for it,” she said. “It’s not just about the view, but no one seems to get that. What I really want to know is, why does McBride have so much power? What is it the McBrides have? How do they get so much money and all this backing from New York P.R. firms (Maisano)? Why do they always get what they want?”

She is also concerned Highland supervisors will be delighted with the decision in spite of how it may affect one of the county’s successful tourist destinations. “The board of supervisors is going hip, hip, hooray, but they shouldn’t be,” she said. “They should care just as much about how this is going to put one of their own county places, Bear Mountain, out of business. Right when Monterey is going in the direction it should be, (supervisors) have ruined it. What’s worse is, McBride has already said he wants to grow (his wind company). How many others are going to be impacted when he expands?”

Supervisor Robin Sullenberger said he understands that sense of frustration.

“We were advised all along the Supreme Court would look at this from a procedural standpoint, not on the merits of the project, and I realize that’s going to leave some (residents) disappointed,” he said.

Sullenberger was the only dissenting vote in the 2-1 decision to grant HNWD’s permit. “There’s still a lot of residue over this issue,” he added. “But I think we move on from here and wait to see what the State Corporation Commission does … “It’s a decision that doesn’t leave everyone feeling the issues have been totally addressed.”

He feels confident in the conditions supervisors placed on HNWD’s permit, and in the ability of the “technical committee” consisting of county administrator Roberta Lambert and building official Jim Whitelaw, charged with making sure HNWD meets those conditions. In addition, he said, if any issues arise they cannot adequately address, the county is prepared to hire expertise necessary to help. “I’m sure (HNWD) will be very careful” to make sure those conditions are expressly met, he added.

“I’m glad it’s been resolved, and the way I look at it, it’s my first responsibility to defend the county,” he said.

According to Lambert, the county has spent nearly $240,000 on the case to date, and not all the legal bills are in yet.

Sullenberger said he doesn’t know what he would say to Reum and Brody at this point. “Their concerns are justified,” he said. “They’ll need to monitor the situation and see if their business continues in the same fashion … that’s the world we live in and I know it’s something that causes them concern. This process has to play out, and they have to make a determination as to their long-term plans … hopefully the impact will be less than they fear, and maybe it will even be positive.”

Reum remains skeptical, however. “This wasn’t a decision on the merits of the case,” she said. “This was on technicalities. Why weren’t these things understood before now? Why did it take months to wait for this decision and (justices) aren’t even looking at the case? It doesn’t surprise me, but now it’s clear the judicial branch doesn’t want to get involved in local governments. It’s too depressing – all that work, energy and money, and how many years? To me it seems a true shame. It gives our local government the sense they did something right, but there’s a lack of decision making power at the Supreme Court. That’s all it is. (Highland supervisors) haven’t won anything, they just got lucky. Now we’ll never know if they did anything right.”

What happened?

“I can’t tell you how sick I feel,” said Reum’s and Miller’s attorney, David Bailey, just hours after the court’s opinion was rendered.

Bailey lost his case at the state Supreme Court level, but has decided to request a rehearing.

County supervisors’ decision to grant the permit to Highland New Wind Development for what could be Virginia’s first industrial wind utility was upheld by court on points of law that had nothing to do with the merits of the power project. The court ruled Bailey should have named the Highland County Board of Supervisors as party to the case, instead of just “Highland County.”

A second case, combined with the first, was brought by landowners who sued the county planning commission on the process of reviewing the project application against the comprehensive land use plan. The court ruled those citizens had no standing to bring the suit because Virginia law says only the applicant can do that, not a third party.

The court’s opinion did not address any issue related to whether the wind utility application was properly assessed by supervisors. “In these appeals, two issues assigned as cross-error determine the outcome of the cases,” said Justice Barbara M. Keenan, who wrote the opinion.

The points of law the court on which the court ruled were the only matters justices discussed, and both meant a defeat for those who challenged the way local officials handled HNWD’s application. “I try not to get personal, but this hit me hard,” Bailey said. “It really hurts to have things thrown out on technicalities,” he said.

By this week, Bailey had decided to file a petition for a rehearing from the court. “It is a long shot because the court usually gets it right the first time. However, this is an interpretation of law that runs contrary to the court’s usual position and I intend to call that to their attention.”

The Supreme Court can consider rehearing cases, and does so usually if there is new information involved. Bailey said the new information is “various statutory provisions that the court overlooked that give authority for zoning to the locality.”

“Most people know that although these cases were brought against the wind project, they were never really about the turbines,” Bailey added. “They were about the process of rezoning land. The Supreme Court has now given localities even more leeway … now we know no one can really challenge a planning commission. Both are pretty difficult to swallow.”

He said on the first issue, naming the board of supervisors to the suit is something every attorney will now know has to be done. “But you can’t fix the planning commission situation,” he said. “The court has now made the (planning) process even more perfunctory, and it will be up to the General Assembly to change that.”

Brian Brake, a Harrisonburg attorney who represented HNWD in the case, said while his firm was pleased with the outcome, he understood it was disappointing to the opposition not to get more from the Supreme Court justices on the details of the arguments. But it’s not unusual for the court to render opinions based on technical points of law, he said.

The first question the court had to consider, he explained, was whether the lawsuit was properly filed. “They said no, and so the rest becomes moot,” Brake said. Because the court concluded the suit was not properly filed, the justices could not address the rest of it, he said.

Essentially, the statute that provides for the right to sue on a zoning issue states those suing must file the suit against the local governing body within 30 days. The suit that was brought, however, did not name the Highland County Board of Supervisors. Clearly, Brake said, the legislature, in writing the statue, was contemplating the need to name the local governing body specifically. “So when you want to contest a zoning decision, you have to sue the governing body … when the legislature adopted that law, they meant a board of supervisors, not any other entity … It’s pretty specific, and only applies to a challenge to a zoning ordinance or an amendment to a zoning ordinance, or granting or failing to grant a conditional use permit.”

As to the purpose of being so specific in the law, Brake said, “I don’t know for sure what the legislature was thinking, but it makes sense to sue the board of supervisors, not the county … there is a separate statute that addresses challenges for the county or locality … Unfortunately there are a lot of details contained in laws, and a lot of technicalities that can cause problems.”

On the second issue, a challenge by landowners on the planning commission’s determination that the project fit with Highland’s comprehensive plan, the so-called 2232 review, Brake said the law is specific on that matter as well. “Normally, you don’t have the right to bring lawsuits against governing bodies unless the law specifically gives you that right.” The statue, he explained, is specific about who can appeal a 2232 review, and it’s the entity requesting the permit, but not anyone else.

Bailey said there’s been a huge movement in the General Assembly the last few years in land use. “Local governments have to take full responsibility for their planning,” he said, noting county and city officials are clearly the “most important guardians of the process.”

Comprehensive plans, required for each locality in Virginia to guide land use development, are “just a nudge above worthless … they’re worth the paper they’re printed on and not much else,” he added. “For citizens, it’s really hard to participate. These (land use) decisions are left pretty much to individuals on a board of supervisors.”

Bailey believes even if the court had not ruled in the county’s favor on naming the proper party to the suit, it’s not likely he would have won on the planning commission suit. The court left standing that special conditions for utilities (2232 reviews) can be done later, after permits are approved.

Bailey said the court’s decision surprised him because the court agreed to hear the appeal so quickly. “Then, to have it dismissed on procedural issues (surprised him also),” he said.

Brake said the citizens’ request for another hearing with the court could happen, but noted of 383 requests last year, only 17 were granted. The Supreme Court typically decides to grant rehearings only when there is new information, some fact that wasn’t available the first time, or something has changed, for instance at the federal court level, Brake explained.

The message Supreme Court sends with Friday’s opinion, Bailey said, is that “your remedy is at the ballot box,” adding the court will likely continue to interpret statues very narrowly unless things are changed by the General Assembly.

“By some long shot, if they agree to reconsider, we will hold it off even longer,” Miller added. “And we can hope by then for a new board of supervisors” in the Nov. 6 general elections.

“After we all get through crying in our beers, I hope (Highland citizens) won’t be so depressed not to unseat the board of supervisors,” Bailey said. “You need a new set on the board, because who knows what’s coming next.”

What happens next?

Building the facility is estimated to cost $65 million, and estimated to gross at least $5.7 million a year for the McBrides’ company over 20 years, and perhaps more than $6 million annually according to other interpretations of the figures.

HNWD indicates if the State Corporation Commission grants a permit for the project, which is expected to happen within the next month or so, it can get the utility built by this time next year. The conditions the state attaches to a permit, however, are still under consideration by the SCC hearing examiner, who will submit a report to the three commissioners who make the decision.

Following the last round of testimony on whether a plan for monitoring and mitigating potential damage to the environment, one of the sticking points was how much study was needed, for how long, and whether HNWD could afford them or should bear the entire costs of assessments. The developer has said it cannot pay more than a total of $454,000 for more studies, and that only 2-3 years into the project should require monitoring. Spending more than that, it said, could “doom” the project.

Virginia’s Department of Game and Inland Fisheries has proposed studies that could cost up to $150,000 a year for the first three, and depending on results, anywhere from $25,000 to $100,000 for the rest of the 20-year life-span of the plant. It suggests capping costs at $234,000 a year.

The Nature Conservancy suggested something closer to $125,000 to $150,000 for the first three years, and about $75,000 a year thereafter.

HNWD said having to spend too much on environmental assessment could drive off potential investors, who would see less of a return for their money.

The Conservancy argued in a post-hearing brief inadvertently released by the SCC that HNWD stands to make some $4.2 million a year net profit after amortization, and concludes that figure may be underestimated by as much as $1.2 million a year. Therefore, it said, the company should be able to afford what it proposes, which amounts to about $100,000- $150,000 a year on studies the first three years, then about $75,000 a year for the rest of the time.

The Conservancy asked the SCC to consider two exhibits from HNWD in determining the projected costs of monitoring and mitigation, introduced during the confidential testimony of HNWD’s expert financial witness, Jeffrey Paulson.

One of them, TNC said, “is obviously intended to be a financial pro forma covering revenues and expenses. During the first 12 years of the proposed project, the document indicates gross revenues of $5,740,990 for each of the first five years and $5,792,249 for each of the next seven years. The difference between the estimated revenue for the first five years and the estimated revenue thereafter relates entirely to a nominal increase in Renewable Energy Credits.”

Renewable energy credits allotted from the federal government to boost the wind industry provide an incentive for renewable power developers by reducing how much they might pay in taxes. The credits are sold to other power companies who need them to offset standard electrical facilities that can pollute the environment.

The other exhibit from HNWD was provided in response to the Conservancy’s request for a document reflecting the projected revenue loss of turning off some of the turbines certain times of the year.

TNC compared the information in the exhibits in the context of Paulson’s live testimony and called that comparison “revealing.”

One of the documents used a purchased power agreement rate of $0.0475.

But Paulson testified, “… The market has improved somewhat, in part because of things like the renewable energy credit pricing in New Jersey. Now that may not last. But for the energy component itself, you know, the range of pricing could currently fall any where from $48-$49 per megawatt hour on up. It will depend on a lot of factors. I would say maybe the mid-fifties, but it depends on a lot of factors.”

TNC concluded if the rate when up to the mid-fifties, say $0.055, that would increase HNWD’s annual revenue by nearly $769,000. “Each increase of $.0025 in the PPA will increase annual revenues by more than $256,000,” TNC said. “Using Mr. Paulson’s estimate of current prices would produce annual revenues from power sales alone of more than $6,560, 000.

Using Paulson’s estimated value from selling renewable energy credits ($0.014 per hour) instead of the rate HNWD used in its documents ($0.014), produces another $512,000 a year.

HNWD’s document does not include renewable tax credits in its calculation of revenue “the investors in this project will receive,” TNC said, “although tax credits provide a dollar for dollar offset against federal taxes otherwise payable and are clearly one of the primary reasons, if not the primary reason, for investing in a project of this type. Including the $0.019 per kilowatt hour tax credit as income will increase this project’s annual revenues by an additional $ 1 , 9 4 8 , 0 0 0 . ” TNC said that in total, the total amount this project would generate “should realistically be increased by approximately $3,229,000 to $9,021,000. Even if the impact of the tax credits on revenues is ignored, using realistic figures for the sale of Power and Renewal Energy Credits will increase revenues by more than $1,281,000 or some 22 percent.”

The Conservancy said HNWD’s documents are “misleading” when compared in computing HNWD’s projected income because one of them ignores almost $2 million in tax credits.

“However, in computing revenue which is likely to be lost by curtailing operations, the full amount of the tax credit of $1.90 per kilowatt hour is shown as lost revenue. Had the tax credit been given the same treatment in computing revenue loss as it was given in computing income, the projected loss of income would be reduced by $15,883 in the case of a 6 meter per second curtailment, or by $1,211 in case of a 4.5 meter per second curtailment,” the brief stated.

One of the documents indicates the project will have annual debt service requirements of $3,494,990 for each of the first five years, and $4,317,249 for each of the next five years, TNC explained. “However, during his rebuttal testimony, Mr. Paulson predicted that the amortization period for this project would more likely be 12- 15 years. Any extension of the debt amortization period beyond the 10- year period used … would, of course, significantly reduce the annual debt service requirements and increase the available cash.”

At the end of the debt amortization period, whether it’s 10, 12 or 15 years, TNC said, “the net cash from operations, after payment of all expenses, is $4,248,749 per year. As indicated … this figure is almost certainly understated by at least $1,282,000.”

TNC argued that these estimates confirm “the cost of monitoring and mitigating the environmental risk this project poses to bats, even if continued at the maximum levels suggested by the Conservancy for the 20-year life of the project, would amount to approximately 2.5 percent of the project’s annual revenues during the first three years of its operation and less than 1.5 percent of revenues thereafter.”

No matter what kind of conditions the SCC places on a state permit it is likely to approve, HNWD still has a few hurdles, including applying for approval from the Federal Aviation Administration, and meeting the rest of the conditions attached to the local conditional use permit.

In the meantime, Reum is forging ahead in spite of what she sees as a certain end to her quality of life, and livelihood, on Allegheny Mountain. “I try not to think about it, but it just permeates your life and you can’t get it out of your life. We can’t get on with our lives. Our friends don’t want to hear about it anymore … it just doesn’t feel good,” she said. “Right now, I need to go document these eagles I see.”

A quick look

– H.T. “Mac” McBride, his wife, Lola, and his son, Tal, formed Highland New Wind Development LLC as sole owners of the company planning to erect 19-22 wind energy turbines on their property.

– The 4,000-acre McBride parcel has two knobs designated as sites for the towers in two separate arrays. The utility was scaled down in 2004, from a 50- to 39-megawatt facility, which would use up the bulk of the capacity left on a 69kv power line running adjacent to the site along U.S. 250

– The project could generate more than $200,000 a year in tax revenue for Highland County.

– HNWD applied for a county permit in July 2004. Highland granted on in July 2005 despite opposition from residents and landowners. The 400-foot towers would be erected in an agricultural zone, where the limit is 35 feet for structures except things like silos, which are limited to 60 feet. In April 2005, supervisors changed the height ordinance to indicate anyone building something higher than those limits must get a conditional use permit from supervisors, instead of a variance from the board of zoning appeals.

September 20, 2007