Windmills on Ice Mountain - Gamesa Wind Turbines

[Ice Man]

T. Boone Pickens’ decision to build a “Wind Farm” shows why the Wind
Production Tax Credit (PTC) should NOT be extended

http://www.windaction.org/documents/16951

Right now, wind industry lobbyists are pushing the US Congress to extend the highly lucrative
wind “Production Tax Credit” (PTC) – an action that could shift another $3 billioni in tax burden
from “wind farm” owners to ordinary taxpayers.

A recent decision by Texas oil billionaire, T. Boon Pickens, reported by Reuters on April 18,
2008, shows why the Congress should end the wind Production Tax Credit.

According to the Reuters story,ii Pickens expects “…to turn at least a 25 per cent return” on his
plan to spend $10 billion to build the world’s biggest “wind farm,” consisting of 2,700 turbines
and totaling 4,000 megawatts of generating capacity.

Mr. Pickens probably can make a 25% return by building a costly “wind farm” – but at the
expense of millions of ordinary taxpayers and electric customers.
His decision shows dramatically what Congress and other federal and state officials have been
slow to recognize; i.e., “wind farms” are being built primarily for their lucrative tax benefits and
subsidies – not because of their environmental or energy benefits.
Contrary to wind advocates claims, “wind farms” are not environmentally benign, their
environmental advantages are greatly overstated, and their adverse impacts are significant.
A 25% return with little risk.

Mr. Pickens’ plan to earn a 25% return on a $10 billion investment in wind may sound risky but
with huge federal and state tax breaks and subsidies now available, there is little risk.
Detailed information -- e.g., on his financial and tax situation and plans for financing the venture
-- would needed to determine whether Mr. Pickens can achieve his expected 25% return.
However, calculations based on facts about five of the currently available federal and Texas tax
breaks and subsidies show that his claim is realistic.

1. Wind Production Tax Credit (PTC). First, he would receive the Wind PTC, currently $0.02
per kilowatt-hour (kWh) for electricity produced during the 1st 10 years of operation, which
the Congress is being pressed to extend beyond its current December 31, 2008, expiration
date. By itself, this tax credit would reduce his tax liability over 10 years by $2.45 billion.iii

2. Accelerated Depreciation. Second, his $10 billion “wind farm” investment would qualify for
the exceedingly generous 5-year, double declining balance accelerated depreciation for
federal income tax purposes.iv That means that the following amounts would be deducted
from his otherwise taxable income and would further reduce his federal income tax liability;
specifically:

Deduction from taxable income Further reduction in income
Tax Year % of Capital investment Amount tax liability (in addition to PTC)
1st 20% $2,000,000,000 $ 700,000,000
2nd 32% $3,200,000,000 $1,120,000,000
3rd 19.2% $1,920,000,000 $ 672,000,000
4th 11.52% $1,152,000,000 $ 403,200,000
5th 11.52% $1,152,000,000 $ 403,200,000
6th 5.76% $ 576,000,000 $ 201,600,000
Totals 100% $10,000,000,000 $3,500,000,000

Note that these deductions from otherwise taxable income and from tax liability could be taken
regardless of whether the $10 billion “wind farm” investment is financed with debt or equity.v
Note also that, in addition to the further reduction in tax liability, this generous accelerated
depreciation deduction for federal income tax purposes has two other huge benefits; specifically:

a. Prompt recovery of all the owner’s equity investment. Quite likely, the equity investment
would be no more than 50% with the remaining borrowed to reduce its cost. If Mr.
Pickens provided equity of 50% (i.e., $5 billion), the table above shows that he would
recover thru depreciation deductions all of his equity investment in less than 2 years and
in just over 1 year if the project begins operation late in the first tax year. With no
remaining equity investment, his return on equity would be infinite.

b. A large interest free loan. The depreciation deduction continues even though all equity
has been recovered. Thus, Mr. Pickens would, in effect, be receiving an interest free
loan, courtesy of US taxpayers for an amount equal to the debt financing.
If Mr. Pickens were unable to use all the tax deductions, schemes are available to “sell” the
tax credits to other firms that have tax liabilities that they wish to avoid.

3. Texas franchise tax break. Tax breaks for “wind farms” are not limited to those provided by
the federal government. Texas allows a corporation to deduct the cost of a “wind farm” from
the Texas franchise tax in one of two ways: (1) the total cost of the system may be deducted
from the company’s taxable capital; or, (2) 10% of the system’s cost may be deducted from
the company’s income. Both taxable capital and a company’s income are taxed under the
franchise tax, which is Texas’s equivalent to a corporate tax.vi Details on Mr. Pickens
financial and tax situation would be needed to estimate the value of this tax break.

4. Texas Renewable Portfolio Standard (RPS) and Renewable Energy Credits (RECs). In
addition to all the tax breaks, Texas has virtually assured big profits for “wind farm” owners
by requiring that a growing percentage of the electricity sold in Texas must come from
“renewable” energy, which, in Texas is almost exclusively wind. The Texas’ RPS and REC
schemes assure that revenue received by “wind farm” owners for their electricity and
renewable energy credits will exceed normal market prices. The higher costs forced on
electric distribution companies are passed along to electric customers in their monthly bills --
apparently with the blessing of the state’s political leaders and regulators.

5. Transmission Capacity – Another generous subsidy for Texas “wind farm” owners. Most of
Texas’ “wind farms” are located distant from the areas where electricity is needed. Texas
political leaders and regulators have mandated that additional transmission capacity will be
built and that the cost be borne by electric customers in their monthly bills, not by the “wind
farm” owners who are profiting so handsomely.vii This requirement amounts to another huge
subsidy for “wind farm” owners. Adding transmission capacity to serve distant “wind farms"
is very costly. First, the estimated cost of building the transmission capacity ranges from
$3.78 billion to $6.38 billion.viii Second, significant amounts of electricity is lost as it moves
over transmission lines, especially over long distances so not all the electricity that the “wind
farm” produces ever reaches electric customers. Third, wind farms use transmission capacity
inefficiently, resulting in high unit cost for the electricity that is eventually received.ix
When all the tax breaks and subsidies are considered, Mr. Pickens’ 25% return on his investment
looks very realistic.

Texas is not alone in making “wind farms” hugely profitable for owners and costly for taxpayers
and electric customers. Various other states have adopted similar tax breaks and subsidies.
Those tax breaks and subsidies – adopted initially to help a “new” technology get a foothold in
energy markets rapidly attracted a powerful industry constituency with millions of dollars to
spend for lobbying, campaign contributions, and misleading advertising.
Harmful wealth transfers and misdirected capital investments.

For more than a decade, wind industry lobbyists and other wind energy advocates have greatly
overstated environmental and energy benefits of wind energy and understated its adverse
environmental, ecological, economic, scenic and property value impacts. Only during the last 3
years have the facts begun to emerge about the low quality and value of electricity from wind
turbines, the high economic cost, and the adverse environmental, ecological, scenic and property
value impacts.

Those facts are gradually making their way into the media but have yet to penetrate the US
Congress and state governments. Instead, members of Congress and state officials parrot false
and misleading claims from lobbyists and, even now, are proposing to extend huge, unwarranted
tax benefits and subsidies for the industry.

These officials seem either not to recognize what they have done or not to care that federal and
state wind energy policies, tax breaks and subsidies for the wind industry are:

• Transferring hundreds of millions of dollars annually from the pockets of ordinary taxpayers
and electric customers to a few large corporations that own “wind farms”-- or that buy tax
credits from wind farm owners who cannot use them. These include US firms such as the
FPL Group that apparently has been able to escape paying any federal income tax in some
years despite large profits, as well as several Wall Street and foreign-owned firms (e.g.,
Iberdrola, Shell, BP, Babcock & Brown) that wish to reduce the federal corporate income tax
that they would otherwise have to pay on profits from other operations.

• Misdirecting billions of capital investment dollars to energy projects (“wind farms”) that
produce very little electricity – which electricity is low in quality and real value. Electricity
from wind turbines is intermittent, volatile, and unreliable. The electricity is low in real
value because it is most likely to be produced at night in colder months, not on hot weekday
late afternoons in July and August when electricity demand is highest. Further, because wind
turbines are so unreliable, they cannot substitute for the reliable generating capacity required
to meet growing electricity demand or replace old generating units.
Absent the huge tax breaks and subsidies for “wind farms,” billions in capital investment
dollars could be available for more productive purposes.

Perhaps a recent analysis by the US Energy Information Administration (EIA) will begin to “get
through to” members of Congress.x That analysis shows that subsidies for wind energy in 2007
averaged over all the electricity produced by wind turbines in 2007 results in an astounding
federal subsidy of more than 2.3 cents per kilowatt-hour.xi EIA’s analysis did not include state
subsidies.

Wind energy is a clear example of the great power of lobbyists and the lack of representation in
Washington DC and state capitals for the interests of ordinary citizens, taxpayers and consumers.

Glenn R. Schleede
18220 Turnberry Drive
Round Hill, VA 20141-2574
540-338-9958

Endnotes:
i Joint Committee on Taxation analysis of H.R. 3221 as passed the Senate on April 10, 2008.
http://www.house.gov/jct/x-33-08.pdf
ii Chris Baltimore, Billionaire Texas oil man makes big bets on wind.
http://news.yahoo.com/s/nm/20080418/us_ ... ns_wind_dc
iii Assuming a 35% capacity factor, 4,000 MW of wind capacity would produce about 12,264,000,000 kWh of
electricity per year or 122,640,000,000 kWh during the first 10 years of operation.
iv Referred to by the IRS as Modified Accelerated Cost Recovery System (MACRS). See IRS Publication 946.
v Note also that the US Congress, in the Economic Stimulus Act of 2008, added a 50% 1st year “bonus” deduction
for 2008 investments. The effect of this additional “bonus” would permit “wind farm” owners to deduct 60% in the
1st , 16% in the 2nd, 9.6% in the 3rd, 5.76% in the 4th and 5th and 2.88% in the 6th tax years.
vi Texas Statutes § 171.107; http://www.seco.cpa.state.tx.us/re_ince ... htm#171107
vii http://www.dsireusa.org/library/include ... TX&Current
PageID=1&RE=1&EE=0
viii http://www.ercot.com/meetings/board/key ... t_to_PUC_-
_Woodfin_Bojorquez.pdf
ix Enough transmission capacity must be available to handle the full rated capacity of the wind farm but wind
turbines produce electricity only when the wind blows in the right speed range (start producing around 6 mph,
achieve rated capacity around 32 mph, cut out around 56 mph. Thus the output is intermittent, highly volatile and
unreliable, with the turbines often producing less than rated capacity or not at all.
x Wall Street Journal, May 12, 2007, p. A14; EIA, http://www.eia.doe.gov/oiaf/servicerpt/ ... index.html
xi EIA, http://www.eia.doe.gov/oiaf/servicerpt/ ... /chap5.pdf, Table 35, page 106.

[Ice Man]

T. Boone Pickens’ decision to build a “Wind Farm” shows why the Wind
Production Tax Credit (PTC) should NOT be extended

http://www.windaction.org/documents/16951


For more than a decade, wind industry lobbyists and other wind energy advocates have greatly
overstated environmental and energy benefits of wind energy and understated its adverse
environmental, ecological, economic, scenic and property value impacts. Only during the last 3
years have the facts begun to emerge about the low quality and value of electricity from wind
turbines, the high economic cost, and the adverse environmental, ecological, scenic and property
value impacts.

Those facts are gradually making their way into the media but have yet to penetrate the US
Congress and state governments.

Perhaps those facts will penetrate Tyrone Borough Council.

[Ice Man]

I bet Borough Council would love to see this on Ice Mt:

http://www.windaction.org/videos/16908

[150thBucktailCo.I]

There's only 1, ONE reason that Boone Pickens is buying windmills.... not for the betterment of the USA, but as a way for him to make even more money off the government and taxpayer by way of increased government subsidies and tax breaks that he can put towards his ever increasing fortune.

[Ice Man]

Although not related to Council's consideration of INDUSTRIAL-SCALE turbines on Ice Mt, the following nevertheless is interesting:

Home wind turbines in UK warming the planet: study

LONDON (Reuters) - Many wind turbines mounted on homes in British cities are contributing to global warming, not fighting it, according to a new study.

And although many environmentally-friendly homeowners also hope to cut their bills by generating their own power, most micro-turbines will never save as much money as the equipment costs, according to the study by the Building Research Establishment Trust.

"In large urban areas such as Manchester, even with very favorable assumptions about efficiency, lifetime and maintenance, micro-wind turbines may never pay back their carbon emissions," the report says.

"Even in the most favorable location considered in the study, there is no financial payback within the expected life of the systems, with the current system and electricity costs."

The study analyzed the likely performance of three of the most common household wind turbines in Manchester and Portsmouth in England and Wick in Scotland.

In many cases -- and across most of Manchester -- more climate-warming carbon dioxide is produced in the manufacture, installation and maintenance of the turbines than they save by generating "green" power over their expected lifetime.

"These studies have shown a large variation in the expected CO2 payback periods from a few months in good locations to situations where they never pay back, in poor locations," the report says.

Only those climate-conscious homeowners in the best locations in the two smaller cities studied can expect to save more carbon dioxide than their turbines are responsible for producing.

(Reporting by Daniel Fineren; editing by James Jukwey)

[Ice Man]

There's only 1, ONE reason that Boone Pickens is buying windmills.... not for the betterment of the USA, but as a way for him to make even more money off the government and taxpayer by way of increased government subsidies and tax breaks that he can put towards his ever increasing fortune.

Same for Gamesa.

[My2Cents]

In today's Mirror, "Logan Township Board of Supervisors to address noise, vibrations, location, enforcement issues." The measures that are up for adoption tonight sound outstanding. A lot of time and hard work went into drawing up these measures. If these measures are agreed to by this company, the bottom line still remains, the beauty of the landscape and all living things therein will be destroyed.
How lucky we are... so far !!! We did not sign a lease.... yet !!! We do not have to be bothered with spending extra money, taking up time with public hearings, drawing up measures designed to strengthen rules governing wind turbine operations, and all the extra cirricular activities these other townships and individuals are going through.
All of the above could very easily be happening in our area right now. Thank goodness we have educated people in and around this area who are in the know and paying attention. Thank goodness our Council is not jumping to this company's demands. I think it's terrible for this company to come into our community and make a statement to the public insinuating our community has done it's share and our council has not. Insinuating our Council isn't acting fast enough for them and, we the people, are to URGE them to act on this now.

[sandstone]

Thank goodness we have educated people in and around this area who are in the know and paying attention. Thank goodness our Council is not jumping to this company's demands. I think it's terrible for this company to come into our community and make a statement to the public insinuating our community has done it's share and our council has not. Insinuating our Council isn't acting fast enough for them and, we the people, are to URGE them to act on this now.

There are 2 main reasons why Gamesa is putting the pressure on Borough Council to quickly vote YES to the Ice Mt windplant proposal:

1. Gamesa fears that the federal production tax credit for industrial windplants will be decreased or eliminated, thus rendering such a small windplant uneconomical.

2. Gamesa fears that Borough Council will vote YES to natural gas well placement on Ice Mt which would bring in MUCH more $$$$ than a windplant would, eliminating the incentive of Gamesa's relatively small monetary compensation while retaining the aesthetic skyline backdrop to Tyrone with MUCH less forest fragmentation.

[cruiser1]

Let Gamesa and all their flunkies dangle in the wind while the council ruminates over the gas drilling lease. No need to rush into this-the wind will always be there. The federal tax credit might not though because wind energy is so expensive and inefficient. Will Gamesa still be here without the tax credit? No. We must remember that the tax credit that Gamesa gets is just greater debt that will be placed upon our children to pay. Wind farms don’t make good neighbors!

[150thBucktailCo.I]

There's only 1, ONE reason that Boone Pickens is buying windmills.... not for the betterment of the USA, but as a way for him to make even more money off the government and taxpayer by way of increased government subsidies and tax breaks that he can put towards his ever increasing fortune.

Same for Gamesa.

Exactly. I completely agree.

[sandstone]

Let Gamesa and all their flunkies dangle in the wind while the council ruminates over the gas drilling lease. No need to rush into this-the wind will always be there. The federal tax credit might not though because wind energy is so expensive and inefficient. Will Gamesa still be here without the tax credit? No. We must remember that the tax credit that Gamesa gets is just greater debt that will be placed upon our children to pay. Wind farms don’t make good neighbors!

An important point to note about deep gas wells in the Marcellus Formation is that they can drill vertically down and then angle the drill horizontally, so that gas from as far as a mile away can be captured. Thus, one or two wells could capture all or most of the gas beneath the Tyrone Borough property on Ice Mountain. This would be FAR less disruptive than 15 industrial-scale wind turbines.

Until all the facts about a natural gas lease are known, it would be extremely foolish for Tyrone Borough Council to vote YES to an industrial windplant on Ice Mountain.

[Bill Latchford]

Let Gamesa and all their flunkies dangle in the wind while the council ruminates over the gas drilling lease. No need to rush into this-the wind will always be there. The federal tax credit might not though because wind energy is so expensive and inefficient. Will Gamesa still be here without the tax credit? No. We must remember that the tax credit that Gamesa gets is just greater debt that will be placed upon our children to pay. Wind farms don’t make good neighbors!

An important point to note about deep gas wells in the Marcellus Formation is that they can drill vertically down and then angle the drill horizontally, so that gas from as far as a mile away can be captured. Thus, one or two wells could capture all or most of the gas beneath the Tyrone Borough property on Ice Mountain. This would be FAR less disruptive than 15 industrial-scale wind turbines.

Until all the facts about a natural gas lease are known, it would be extremely foolish for Tyrone Borough Council to vote YES to an industrial windplant on Ice Mountain.

I would certainly agree much more needs to be learned about natural gas drilling. Thanks for the information SandStone. You do add a great deal of valuable input that I do appreciate. I will add that one of my major concerns would be the comparison of how Turbines only disrupt the surface and about 10 feet under ground whereas the drilling is 1000's of feet down and in all directions.

[My2Cents]

Oh my Bill.... more "leg work," more "research," more "decisions." Maybe Ice Mountain should be left completely alone!! Maybe, just maybe, Mother Nature IS trying to tell us something !! Break Wind... Pass Gas !!

[sandstone]

Oh my Bill.... more "leg work," more "research," more "decisions." Maybe Ice Mountain should be left completely alone!! Maybe, just maybe, Mother Nature IS trying to tell us something !! Break Wind... Pass Gas !!

:jester:

[Ice Man]

To the editor;

An unbiased assessment of the conservation value of Ice Mountain near Tyrone was done by the Blair County Planning Commission through the Blair County Natural Heritage Inventory about 5 years ago. As its name implies, the Blair County Natural Heritage Inventory is a catalog of our county's natural habitats, focusing on only the best natural areas remaining in the county. These areas are designated as Blair County Natural Heritage Areas and they comprise about 15% of the county. Almost all of the Blair County Natural Heritage Areas are on mountains, because the valleys have almost no remaining natural habitats left (they've been almost 100% converted to agricultural and urban uses). Most of the Allegheny Front, of which Ice Mountain is a part, does NOT have Blair County Natural Heritage Area Status, because of fragmentation by residential areas and strip mines. Ice Mountain is one of the few areas of the Allegheny Front that has earned County Natural Heritage Area status, and the only one that is described as being EXCEPTIONAL.

County Natural Heritage Areas are divided into those of exceptional, notable, and high value. Only the best of the best earn the EXCEPTIONAL title. In the Blair County Natural Heritage Inventory, Ice Mountain (Allegheny Front LCA # 1) is designated as EXCEPTIONAL.

The Blair County Natural Heritage Inventory makes recommendations regarding the management of Blair County Natural Heritage Areas. Regarding Ice Mountain (Allegheny Front LCA #1), it recommends that the area not be fragmented with additional roads.

The Executive Summary of the Blair County Natural Heritage Inventory describes Landscape Conservation Areas as “large contiguous areas that are important because of their size, open space, habitats, and/or inclusion of one or more Biological Diversity Areas.” It goes on to say;

“These large regions in relatively natural condition can be viewed as regional assets; they improve quality of life by providing a landscape imbued with a sense of beauty and wilderness, they provide a sustainable economic base, and their high ecological integrity offers unique capacity to support biodiversity and human health. Planning and stewardship efforts can preserve these functions of the landscape by limiting the overall amount of land converted to other uses, thereby minimizing fragmentation of these areas.”

Ice Mountain and its surrounding area were also designated as Greenways in the revision of the Blair County Comprehensive Plan; which was based on public comments received in 2002-2005 . Greenways are areas where the preservation of the natural landscape should be given first priority. The Areawide Comprehensive Plan for Blair County (adopted by the Blair County Commissioners in 2006) states;

“The ridge tops in Blair County are one of its defining characteristics. As one looks in any direction, the mountain ridges dominate the landscape. They demonstrate the power and constancy of the natural forces that shaped them. Development along ridge tops should be discouraged so that their imposing beauty is preserved. Ridge lines that should be conserved are the Allegheny Front and Dunning, Short, Loop, Lock, Brush, Bald Eagle, Canoe, and Tussey Mountains.”

Were a “wind farm” to be built on Ice Mountain then the “wind farm,” not the mountain, would dominate the landscape. It is hard to imagine a more shocking and obtrusive feature on the mountain than arrays of 450-foot tall towers with 140-foot long whirling blades. It's not possible to respect the status of Ice Mountain as a unique Blair County Natural Heritage Area of exceptional conservation value and then vote YES to a project that would carve it up with miles of new heavy-duty roadway, large transmission line corridors, substations, clearings for industrial wind turbines, as well as dominate the mountain with gargantuan turbines. That kind of development is inconsistent with the Blair County Natural Heritage Area designation which has been given to Ice Mountain.
Tyrone Borough Council has a responsibility as stewards of Ice Mountain to heed the recommendations of the Blair County Natural Heritage Inventory and the Blair County Comprehensive Plan. Juniata Valley Audubon asks that Tyrone Borough Council members vote NO to any proposal to convert Ice Mountain into an industrial windplant.

Sincerely,

Terry Wentz
President, Juniata Valley Audubon
P.O. Box 148
Hollidaysburg, PA 16648