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Possible end of tax credit leaves future renewable energy sources up in the air

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Indiana Lawyer Focus

Newton County lawyer Dan Blaney has a blunt reaction to the potential end of a federal subsidy that has enabled the rise of wind energy in his part of the state. “We’re in trouble,” he said.

Blaney has helped Benton County government, landowners and others in northwest Indiana, where the state’s greatest concentration of wind farms has developed with a big impact on the local economy.

blaney Blaney

But lately, most everything has stopped. Not much wind business is stirring in the Morocco office of Blaney & Walton. “Nobody’s broken any ground or done any construction” on wind turbines in northwest Indiana, he said. “Without that incentive, these wind developers and bankers, they don’t want to get involved.”

In Benton and White counties alone, more than 750 towering turbines are in place across thousands of acres, with a capacity to generate more than 1,000 megawatts of electricity, according to the American Wind Energy Association. That’s sufficient to meet the needs of more than 41,600 homes.

But the federal Renewable Electricity Production Tax Credit for wind energy expires Dec. 31. It provides a federal subsidy of 2.2 cents per kilowatt hour generated for 10 years after a wind turbine is in operation. Most turbines are expected to have a lifespan of at least 30 years.

The looming expiration of the tax credit, meanwhile, is producing a whirlwind of activity at the Wildcat Wind Farm under development north of Elwood in rural Madison and Howard counties. E.ON Climate and Renewables is building the farm, and

communications manager Matt Tulis said the pace of construction is stepped up because the company can only claim the tax credit for turbines that are generating electricity by Dec. 31.

“We’re confident we can get it finished in time,” Tulis said. The $400 million project includes 125 turbines generating up to 200 megawatts of electricity.

But E.ON’s bigger designs for the Wildcat farm are on hold. It had proposed construction of three phases extending across thousands of acres into Tipton and Miami counties. “We are interested in doing more phases in that area. We like the wind resource, we like the transmission availability there,” Tulis said. “The production tax credit will definitely have an influence on future phases.”

Bingham Greenebaum Doll LLP partner Mary Solada represents E.ON, and she said without the tax credit, new wind projects are unlikely.

“I think it would decimate the industry,” Solada said. “From everything I’ve heard and read and talked to folks in the industry, the economic model in the industry today assumes the tax credit.”

That model might change in time, but in the current climate, wind power is facing multiple challenges. “It’s kind of like a perfect storm of bad things,” Solada said, listing the expiration of the tax credit, a downturn in manufacturing, and the emergence of inexpensive and abundant natural gas.

“It’s good for consumers, but for people who generate power, it’s not very good,” she said.

Indiana is among the top 15 states in wind power generation, according to the AWEA, and there appears to be bipartisan consensus, at least among some key lawmakers, to extend the credit. Republican Sen. Charles Grassley of Iowa, the No. 3 state for wind power, has urged renewal of the tax credit that was signed into law in 1992 by President Bill Clinton and later renewed by President George W. Bush.

“I expect we’ll probably find out at the eleventh hour whether the federal subsidies expire or continue,” said Bob Clark, a partner in the environmental group at Taft Stettinius & Hollister LLP in Indianapolis who has worked on wind energy matters.

Indiana Republican Sen. Dan Coats is the lone Hoosier in Congress seated on an energy committee. Spokeswoman Tara DiJulio said, “This is all being looked at in a larger picture with the fiscal cliff package.

“At this time, when it comes to any extension of the credit, (Coats) believes we need to be looking at it as part of reforming the overall tax code,” DiJulio said. “The senator is supportive of alternative and renewable energy, but they must prove themselves to be competitive on their own merits without perpetual federal subsidies.”

solada Solada

Kent Frandsen, an attorney with Parr Richey Obremskey Frandsen & Patterson in Indianapolis, has helped negotiate on behalf of landowners where wind farms were built. He said the expiration of a subsidy was a “theoretical concern” that wouldn’t impact existing farms.

Still, he said the rise of wind power carries complications that should be addressed in leases, and landowners are best served by having numbers on their side to negotiate the best deal and get terms in writing. It also is to the benefit of developers, since they’d prefer not to deal with dozens of leases each with differing terms.

“There are issues that come up that you have to deal with, what you might call after-effects,” Frandsen said. Those range from the impacts of turbines on farming operations to the heavy cranes used to raise the turbines that can crack subterranean drainage tiles.

In the land leases he’s drafted for a group of about 40 landowners in Benton County, he’s tried to address those and other theoretical concerns.

“What happens if the wind company goes out of business 10 or 20 years from now?” he said. “If the government doesn’t continue to subsidize these companies, it seems to me there’s a risk some of these companies will fail, and who will be there to remove them and the six feet of concrete put in the ground to support these turbines?”

To address such concerns, the plant developer agreed with landowners to put money in escrow in case the turbines needed to be removed at a later date, Frandsen said.

Wind energy detractors point to the high cost of turbines, their limited capacity to operate in high winds, and the uneven ability to store or transmit the power they generate. Critics say the subsidy makes the cost of a kilowatt hour of electricity produced by wind generation far more expensive than traditional fossil-fuel electricity generation.

But Blaney, from his vantage point in the small town of Morocco, sees it differently.

“Here’s what it means,” Blaney said. “Each wind tower provides the farmer from $5,000 to $10,000 and up per year.” Some landowners have as many as 27 turbines operating, and their footprint doesn’t remove much acreage from production. “In farming, when times are tough, that would mean the family farm.”

County governments will reap millions in property taxes, even after tax abatements, he said. Steelworkers in Lake County and ancillary businesses around the state benefit and create jobs, he said. “It provides employment in these rural counties, not a large number, but probably 30 to 40 employees in Benton County work in the wind industry.”

Blaney said his understanding is that the federal subsidy covers about 30 percent of the big up-front investment in wind power. That’s not unlike the government aid that other energy sources and infrastructure received at their inception, he said.

He hopes the winds shift again and conditions are favorable to further development of a clean, renewable source of energy. Lately, though, the only such work has been a few agreements with landowners to provide leases if future development occurs.

“I don’t believe the wind industry can be developed without the intervention of the federal government,” Blaney said.•
 

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  1. I have been on this program while on parole from 2011-2013. No person should be forced mentally to share private details of their personal life with total strangers. Also giving permission for a mental therapist to report to your parole agent that your not participating in group therapy because you don't have the financial mean to be in the group therapy. I was personally singled out and sent back three times for not having money and also sent back within the six month when you aren't to be sent according to state law. I will work to het this INSOMM's removed from this state. I also had twelve or thirteen parole agents with a fifteen month period. Thanks for your time.

  2. Our nation produces very few jurists of the caliber of Justice DOUGLAS and his peers these days. Here is that great civil libertarian, who recognized government as both a blessing and, when corrupted by ideological interests, a curse: "Once the investigator has only the conscience of government as a guide, the conscience can become ‘ravenous,’ as Cromwell, bent on destroying Thomas More, said in Bolt, A Man For All Seasons (1960), p. 120. The First Amendment mirrors many episodes where men, harried and harassed by government, sought refuge in their conscience, as these lines of Thomas More show: ‘MORE: And when we stand before God, and you are sent to Paradise for doing according to your conscience, *575 and I am damned for not doing according to mine, will you come with me, for fellowship? ‘CRANMER: So those of us whose names are there are damned, Sir Thomas? ‘MORE: I don't know, Your Grace. I have no window to look into another man's conscience. I condemn no one. ‘CRANMER: Then the matter is capable of question? ‘MORE: Certainly. ‘CRANMER: But that you owe obedience to your King is not capable of question. So weigh a doubt against a certainty—and sign. ‘MORE: Some men think the Earth is round, others think it flat; it is a matter capable of question. But if it is flat, will the King's command make it round? And if it is round, will the King's command flatten it? No, I will not sign.’ Id., pp. 132—133. DOUGLAS THEN WROTE: Where government is the Big Brother,11 privacy gives way to surveillance. **909 But our commitment is otherwise. *576 By the First Amendment we have staked our security on freedom to promote a multiplicity of ideas, to associate at will with kindred spirits, and to defy governmental intrusion into these precincts" Gibson v. Florida Legislative Investigation Comm., 372 U.S. 539, 574-76, 83 S. Ct. 889, 908-09, 9 L. Ed. 2d 929 (1963) Mr. Justice DOUGLAS, concurring. I write: Happy Memorial Day to all -- God please bless our fallen who lived and died to preserve constitutional governance in our wonderful series of Republics. And God open the eyes of those government officials who denounce the constitutions of these Republics by arbitrary actions arising out capricious motives.

  3. From back in the day before secularism got a stranglehold on Hoosier jurists comes this great excerpt via Indiana federal court judge Allan Sharp, dedicated to those many Indiana government attorneys (with whom I have dealt) who count the law as a mere tool, an optional tool that is not to be used when political correctness compels a more acceptable result than merely following the path that the law directs: ALLEN SHARP, District Judge. I. In a scene following a visit by Henry VIII to the home of Sir Thomas More, playwriter Robert Bolt puts the following words into the mouths of his characters: Margaret: Father, that man's bad. MORE: There is no law against that. ROPER: There is! God's law! MORE: Then God can arrest him. ROPER: Sophistication upon sophistication! MORE: No, sheer simplicity. The law, Roper, the law. I know what's legal not what's right. And I'll stick to what's legal. ROPER: Then you set man's law above God's! MORE: No, far below; but let me draw your attention to a fact I'm not God. The currents and eddies of right and wrong, which you find such plain sailing, I can't navigate. I'm no voyager. But in the thickets of law, oh, there I'm a forester. I doubt if there's a man alive who could follow me there, thank God... ALICE: (Exasperated, pointing after Rich) While you talk, he's gone! MORE: And go he should, if he was the Devil himself, until he broke the law! ROPER: So now you'd give the Devil benefit of law! MORE: Yes. What would you do? Cut a great road through the law to get after the Devil? ROPER: I'd cut down every law in England to do that! MORE: (Roused and excited) Oh? (Advances on Roper) And when the last law was down, and the Devil turned round on you where would you hide, Roper, the laws being flat? (He leaves *1257 him) This country's planted thick with laws from coast to coast man's laws, not God's and if you cut them down and you're just the man to do it d'you really think you would stand upright in the winds that would blow then? (Quietly) Yes, I'd give the Devil benefit of law, for my own safety's sake. ROPER: I have long suspected this; this is the golden calf; the law's your god. MORE: (Wearily) Oh, Roper, you're a fool, God's my god... (Rather bitterly) But I find him rather too (Very bitterly) subtle... I don't know where he is nor what he wants. ROPER: My God wants service, to the end and unremitting; nothing else! MORE: (Dryly) Are you sure that's God! He sounds like Moloch. But indeed it may be God And whoever hunts for me, Roper, God or Devil, will find me hiding in the thickets of the law! And I'll hide my daughter with me! Not hoist her up the mainmast of your seagoing principles! They put about too nimbly! (Exit More. They all look after him). Pgs. 65-67, A MAN FOR ALL SEASONS A Play in Two Acts, Robert Bolt, Random House, New York, 1960. Linley E. Pearson, Atty. Gen. of Indiana, Indianapolis, for defendants. Childs v. Duckworth, 509 F. Supp. 1254, 1256 (N.D. Ind. 1981) aff'd, 705 F.2d 915 (7th Cir. 1983)

  4. "Meanwhile small- and mid-size firms are getting squeezed and likely will not survive unless they become a boutique firm." I've been a business attorney in small, and now mid-size firm for over 30 years, and for over 30 years legal consultants have been preaching this exact same mantra of impending doom for small and mid-sized firms -- verbatim. This claim apparently helps them gin up merger opportunities from smaller firms who become convinced that they need to become larger overnight. The claim that large corporations are interested in cost-saving and efficiency has likewise been preached for decades, and is likewise bunk. If large corporations had any real interest in saving money they wouldn't use large law firms whose rates are substantially higher than those of high-quality mid-sized firms.

  5. The family is the foundation of all human government. That is the Grand Design. Modern governments throw off this Design and make bureaucratic war against the family, as does Hollywood and cultural elitists such as third wave feminists. Since WWII we have been on a ship of fools that way, with both the elite and government and their social engineering hacks relentlessly attacking the very foundation of social order. And their success? See it in the streets of Fergusson, on the food stamp doles (mostly broken families)and in the above article. Reject the Grand Design for true social function, enter the Glorious State to manage social dysfunction. Our Brave New World will be a prison camp, and we will welcome it as the only way to manage given the anarchy without it.

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