Wind project decision another step closer 

Whether Highland County becomes home to the state’s first industrial wind energy utility is a decision up to the three members of the State Corporation Commission, who have a two-year record of testimony in hand. The SCC has no deadline by which it must grant a permit to Highland New Wind Development, if it chooses to do so.

Given SCC hearing examiner Alexander Skirpan’s recommendation for approval, and the commissioners’ previous report last spring, the company is likely to get the goahead. But the conditions placed on the permit remain to be seen, and are still a point of contention between HNWD, county citizens, and the state agencies involved.

On the heels of Skirpan’s second report to the SCC, those formally engaged in the case have submitted their comments on his findings. All but the Highland citizens recommend approval based on Skirpan’s conclusions, but with the same eye toward making sure conditions are adequately and fairly placed to monitor and mitigate potential harm to the environment and wildlife. HNWD continues to balk at the amount of money the state has recommended it spend on those studies.

Department of Game

and Inland Fisheries

Virginia’s Department of Game and Inland Fisheries said it supports Skirpan’s report, including his recommendations, and “urges” the SCC to accept those findings. The agency did, however, point to some aspects it believes require correcting, including citing its own revised report on monitoring and mitigating damages. Because Skirpan relied on a different attachment, it said, “several statements or recommendations set forth … are neither consistent with the text of the report, nor with the department’s recommendations as presented,” it said.

The inconsistencies the agency noted include clarifications on fatality rates that are used to determine compliance with take limits that were adjusted; and continued funding of monitoring after year nine of the project. It cited its most recent recommendation, which stated, “After year nine the annual rate of funding will be determined by DGIF by the most-recently documented mortality level, with annual funding not to exceed the fund rates established above. Thus, DGIF may direct no monitoring after year nine.”

DGIF stressed its willingness to assist the SCC in implementing recommendations if they are adopted. “The department remains available to assist in finalizing permit conditions, monitoring protocols and schedules for this project with respect to its impact on wildlife, and it looks forward to working with (HNWD) in that endeavor.”

Highland citizens

Anthony Gambardella, attorney representing Highland residents and landowners Ralph H. Swecker, Christopher T. Swecker, Pendleton Stokes Goodall III, McChesney Goodall III, William Stokes Goodall, Wayne Stokes Goodall, and Gregory Warnock, said these citizens still urge the SCC to require HNWD get environmental permits before it considers whether to grant a permit to the developer.

“The report demonstrates that the project has a ‘reasonably certain’ impact to species that are protected under the Endangered Species Act. The report acknowledges that the project presents risks to endangered species but then ignores the recommendations of state and federal wildlife agencies and other expert testimony by failing to require that HNWD obtain an incidental take permit pursuant to the ESA,” he said. “Further, the report’s apparent conclusion that there must be a taking before HNWD can be required to comply with the ESA is misguided. Environmental permits, including an incidental take permit, are a condition precedent to the commission granting authority to construct the facility.”

Since HNWD has not developed a habitat conservation plan nor sought an incidental take permit, citizens said the SCC should deny the permit, or require the company get a permit before construction begins. “The record is replete with evidence that the project, if constructed, will result in a take of an endangered species,” Gambardella wrote. “The parties universally agree that the HNWD plant will be within the typical migratory distance of at least two endangered bats – the Virginia big eared bat and the Indiana bat. One Virginia big eared bat hibernacula is within four miles of the project site. Moreover, the record contains compelling evidence that the project will harm these endangered species if it is built … Despite the overwhelming evidence of the likelihood of a take occurring, and in direct contrast to the federal and state wildlife agencies position, the hearing examiner stated that ‘I do not find that the record supports requiring Highland Wind to enter into a habitat conservation plan or seek an incidental take permit.’ The hearing examiner’s unsupported conclusion ignores the record in this case, the applicable law, and the precedent set by the West Virginia Public Service Commission on a site that is less than 10 miles from HNWD’s proposed turbine project (Liberty Gap).”

Citizens said the issue of whether a take has occurred before is irrelevant. What’s important, they say, is that takes are reasonably certain to occur. “In other words, the essential purpose of the ESA is to conserve and protect endangered species before they are rendered extinct,” Gambardella argued. “The emphasis on conservation and the prevention of harm is the logical extension of the ESA and any suggestion that an actual taking must occur before an individual can be compelled to comply with the ESA would directly contradict the primary purpose of the ESA. The broad and sweeping nature of the ESA is reemphasized in the definitions of its core terms.

“The language and legislative history of the ESA, as well as applicable case law support our holding today that a showing of a future injury to an endangered or threatened species is actionable under the ESA,” he said.

“Throughout the course of these proceedings, HNWD has ignored the application of the ESA and the repeated warnings and recommendations of the wildlife agencies,” they concluded. “It can no longer do so … This commission should not ignore the legal requirements under federal and state law. This case is virtually identical to the Liberty Gap action and should be treated precisely as it was.”

Highland New Wind

Development

For its part, HNWD remains concerned about the costs of monitoring and mitigation, and continues to argue the expenses for studies would put the project in danger of not getting investors.

The plan for caps outlined by Skirpan, it says, “will likely prevent the project from becoming a reality for Virginia. The only testimony in this case as to financial viability was provided by Jeffrey Paulson, who repeatedly stated that costs at the level now recommended by the hearing examiner would financially impair, if not kill, the project.”

HNWD argued the “positive attributes” of its utility “continue to be ignored or underemphasized in the discussion as to how to balance the wildlife concerns for birds and bats. A wind farm provides a substantial source of electricity while maintaining clean air and clean water that benefit wildlife and human beings, particularly in comparison to the environmental impact of fossil fuel electric generation. The positive attributes of wind power minimize adverse environmental impacts in the generation of electricity. The applicant hopes that the commission, after balancing the positive attributes of the project against the bird and bat concerns, will determine that the project, on balance, is positive for the environment, and, further, that the commission will evaluate and establish a monitoring and mitigation program with that focus at the forefront of its considerations.”

HNWD calls the expenses recommended by Skirpan for monitoring “unprecedented.” It says Skirpan’s recommended cap, 2.6 percent of gross revenue from the project annually, is too high compared to the potential harm from the project. It asks the SCC to decrease the financial requirement overall.

“No other wind generation project in this country has been burdened with the recommended level of monitoring and mitigation costs,” HNWD said. “The hearing examiner’s conclusion that financial viability of the project is irrelevant to a determination of an appropriate monitoring and mitigation plan is incorrect. If the project is not built due to undue expenses imposed to address specific environmental concerns which prevent financing, then the significant positive environmental benefits arising from the project are lost and Virginia’s stated energy policy is defeated.”

HNWD said the standard nationwide so far is for only two years of monitoring.

Furthermore, it said, the Virginia Energy Plan requires the SCC to take “discretionary action with regard to energy issues.”

HNWD said the SCC’s “appropriate legal conclusion, contrary to the hearing examiner’s recommendation, is that Virginia should not impose the most stringent monitoring and mitigation standards in the country on this project in order to chart new territory in a regional if not national concern about future cumulative bat fatalities. Virginia’s stated policy strongly favors construction of this project. Every potential investor in the wind market will lose interest in the project and instead focus on every other wind generating opportunity because the project is (i) small (ii) burdened with the cost of an unexpedited approval process and (iii) saddled with an unprecedented and burdensome monitoring and mitigation plan.”

HNWD insists the issue of bird and bat kills has been “disproportionate” to the positive impacts it says its project would provide. Of 41 pages of commentary and 60 pages of attachments from the Department of Environmental Quality, it said, only six of those focused on the positive environmental attributes of wind utilities. “With that same focus, the Department of Conservation and Recreation supported all of DGIF’s proposals related to wildlife preservation with no effort to consider the value of wind power as a source of electricity,” HNWD said. “The remand hearing was focused on a single issue – development of a post construction monitoring and mitigation plan – and (HNWD) has from the beginning of the permit process supported the development of such a plan as a condition of the permit. (HNWD) continues to support the adoption of a reasonable plan and expects that the plan will be similar to those adopted in other states, which have thoroughly explored this issue. Those plans are limited in time and financially tai- lored to the size and scope of the potential harm of the project. (HNWD) did not expect a monitoring and mitigation plan to be the most expensive and intrusive plan in the Mid-Atlantic region or for it to become the tipping point for the economic viability of the project.

“No evidence has been introduced that the environmental harm will be biologically significant,” it continued. “When balanced against the environmental harm of generating electricity with fossil fuel, the project should be positively encouraged rather than left teetering on a financial precipice due to an overly broad and expensive monitoring and mitigation program.”

In addition to those arguments, HNWD also said it was withdrawing its offer to set aside 50 acres of spruce thickets as a mitigation measure since no other party involved expressed interest in that offer.

Furthermore, the company said, DGIF should not be given the authority to direct daily operations of the utility. “The project is not a scientific experiment, and cannot be used in that manner,” HNWD said. “The involvement of a third party in actual physical operation of the project may adversely affect not just financial performance but also equipment warranties and related insurance protections.

“The hearing examiner’s openended approach toward access to the project’s site does not give adequate consideration to the nature of the project or its site,” the company added. “The project will, of course, be located on private property and the operator of the project should receive notice of any governmental visit.”

HNWD said access should be more tightly controlled for safety reasons, as the property may also be leased to gas drillers, hunters, farmers and loggers. “Each user needs to know of the presence of the others. In addition, maintenance activities involving the turbines will be regularly undertaken and it is critical that maintenance personnel be aware of any persons on the property to avoid any risk of injury or interference with their work. project insurance providers will expect that safety procedures be implemented to prevent such risk of injuries,” HNWD said.

SCC staff

SCC staff also commented on Skirpan’s report, saying “the commission recognized that Highland New Wind LLC’s proposed wind turbine facility posed significant potential environmental impacts.” Staff members mostly pointed to the possible conditions SCC placed on the permit, and the fact that whatever they are, they may not be the same kinds of conditions that would be placed on any other Virginia wind energy project.

“The record establishes that the proposed location of the HNWD facility, western Highland County, has unique natural features, vegetation, and wildlife,” staff said. “HNWD seeks approval for a project that, in terms of capacity, number of turbines, and surface area impacted, is relatively small in comparison to other projects, which are described in the record. Consequently, the mitigation measures and monitoring plan that the commission might adopt for the HNWD project may not be readily applicable to any future project in Virginia.

“For example, the hearing examiner devoted considerable attention to developing a formula that resulted in a dollar cap on expenditures for monitoring and measuring reductions in operations. In the report on remand … the hearing examiner discussed the advantage of setting a cap on these expenditures. While a cap may be appropriate for this unique project, a similar cap on the expenditure for monitoring and mitigation for future projects that might come before the commission may not be warranted … The location, size, and design of a future project may pose environmental impacts and risks that preclude capping the costs of monitoring and mitigation. Likewise, the calculation of the cap on monitoring and mitigation that is recommended in the report … reflects the record developed in the case now before the commission.

“The assumptions on economic, financial, and operating conditions, tax policy, and technology in this record may not apply to future applications. The findings which supported the formula are unique to this project. Changes in economic conditions and tax policy as well as the nature and size of a future project could lead the commission to determine that greater expenditure for monitoring or mitigation or no cap on mitigation and monitoring expenditures are necessary conditions for a future project.”

Further more, staff noted, the information on the effects of wind utilities continues to expand, and with additional knowledge, other projects may be considered differently.

SCC staff also cautioned commissioners to clarify the DGIF’s role in monitoring the project if it’s built. “The agency made a major contribution to the record developed in this proceeding,” they said. “While the staff would not suggest that DGIF will not discharge its statutory responsibilities to study, to protect, and to promote the wellbeing of wildlife in Virginia, the agency’s commitment to major responsibilities as the monitor of the HNWD project is unclear.”

Also, they said, the report would require HNWD to make payments to DGIF for the cost of monitoring. “The commission has the authority to require these payments as a condition of approval. But with that authority comes the obligation to exercise oversight. While the staff would not suggest that DGIF would misuse the funds, the commission should require some accounting. This situation could raise the issue of the commission monitoring the activities and expenditures of an executive department agency without clear statutory authority … the mitigation and monitoring plan raises a number of issues broaching on the separation of powers between the commission and the executive department. These matters and related questions should be resolved before the implementation plan can be implemented,” they said.

“DGIF could have a major impact on HNW operations. The commission should consider whether it should or must reserve some operational questions for its own determination. In this regard, the commission might consider any role for the commission staff in the monitoring program and any procedures for review of decisions and the resolution of disputes.”

The Nature

Conservancy

The Nature Conservancy essentially supports the project as long as good monitoring and mitigation measures are in place, and HNWD is responsible for paying the costs involved with studies.

“The Conservancy considers the plan to be a thoughtful and reasonable response to the commission’s charge,” said its attorney Wiley Mitchell. “The plan directly and incisively addresses the primary environmental risks identified during the several hearings held in this case, properly allocates the responsibility for implementation and funding and, as the hearing examiner’s analysis clearly demonstrates, the plan can be implemented without imposing an undue financial burden on the applicant.”

The Nature Conservancy had only two reservations.

First was Skirpan’s conclusion the maximum amount HNWD should be required to spend on monitoring and mitigation plan.

The second concern, TNC said, was Skirpan’s failure to clearly define the company’s revenue, upon which its expense caps would be based.

“In establishing a monetary cap on the costs the applicant is required to incur in complying with environmental conditions imposed by the commission, it is inappropriate and inconsistent with Virginia law to consider whether the cap is proportional to the size and revenues of the project,” Mitchell said. “The Conservancy understands the undeniable relationship between putting a reasonable cap on otherwise undefined costs and the applicant’s ability to obtain reasonable financing for the construction of the project. The Conservancy does not object to the idea of establishing a reasonable cap on the costs … provided the cap bears a reasonable relation to the actual loss of compliance.

“As the hearing examiner himself notes … the cost of minimizing an adverse environmental impact should be determined by the adverse environmental impact, not by the size of the project.”

Limiting what HNWD would pay for complying with conditions according to proportions of its revenue, TNC said, is inconsistent with state law.

“Any cap should be based on a careful, objective consideration of the actual costs the applicant is likely to incur in complying with the conditions the commission finds necessary, without regard to the size of the project, to the project’s projected revenues, or to whether the applicant can afford to pay the cost of compliance.”

That said, the conservancy still supports Skirpan’s recommended caps because it believes they are reasonably calculated to cover the costs involved. “Obviously, the Conservancy does not endorse any consideration of proportionality, with respect to size, revenues, or otherwise, in establishing appropriate caps on environmental costs and urges the commission to make it clear, should it elect to approve the hearing examiner’s recommendations, that such considerations are always inappropriate.”

TNC also argued that since the caps set by Skirpan are based on annual revenue, that should be more clearly defined. “The report makes it clear that tax credits are not to be considered in computing the amount of annual revenue, but the income items which should be considered are not altogether clear,” Mitchell said. “The project’s recurring annual revenues clearly consist of funds received from the generation and sale of power and from the sale of renewal energy credits (the so-called “Green Card” revenues). Nevertheless, the possibility of future disagreements concerning the components of ‘revenue’ will be reduced if the commission chooses to define the term precisely by making it unequivocally clear that the term includes gross receipts from the sale of power; gross receipts from the sale of renewable energy credits, and any other revenues, other than tax credits, which can properly be classified as income to the project.”

What next?

Now that all officials parties have submitted their comments on Skirpan’s report, the SCC will again review the case record and make its decision on whether to grant HNWD’s state permit to build and operate the 39-megawatt facility.

The SCC can choose to deny the permit, grant the permit as-is, or grant the permit with conditions.

By Anne Adams
Staff Writer

The Recorder

15 November 2007