Wind Energy Industry Impacts in Oklahoma November 2015

Transcription

1 R E S E A R C H F O U N D A T I O N R E P O R T Wind Energy Industry Impacts in Oklahoma November Prepared by Dr. Shannon L. Ferrell and Joshua Conaway, Oklahoma State University Department of Agricultural Economics

2 Acknowledgments This project represents an unprecedented collection of data about the Oklahoma wind energy industry, and would not have been possible without the assistance of a number of state and county personnel who went far above and beyond their duties in assisting with the collection and analysis of this information. Ms. Kylah McNabb with the Oklahoma State Energy Office was incredibly generous in sharing information she had compiled over the course of 12 years regarding Oklahoma s wind energy industry and also shared the benefit of her experience as a wind resource researcher and project developer. Her assistance was absolutely vital to compiling the portrait of Oklahoma s wind energy industry presented in Section 1. Importantly, though, Ms. McNabb s assistance was foundational to the project team s understanding of all the issues researched through this project. Compiling the historical ad valorem tax data and building a sound ad valorem forecast model the core of this report s Section 2 would have been impossible without the assistance of Gary Snyder (OSU Center for Local Government Technology Assessor Training Accreditation Program), Wade Patterson (Garfield County Assessor), Doug Brydon (Deputy Director of the Oklahoma Tax Commission s Ad Valorem Division), and Dr. Notie Lansford (Director of the OSU County Training Program). Each made contributions of advice, experience, insight, data, and personal contacts enabling our project team to collect an exhaustive dataset on wind energy system ad valorem tax revenues over 20 counties and to build the forecast model. Further, the project team extends its sincere gratitude to all county treasurers and assessors who, in addition to their ordinary duties, compiled the tax data forming the foundation of Section 2 s analysis. Several of these county officers also devoted significant time to explaining the practical mechanics of the assessment and taxation of wind energy systems and to helping the team validate its research, and we are especially grateful to them: Bab Coker (Roger Mills County Treasurer), Cassie Springer (Roger Mills County Deputy Treasurer), Julie Louthan (Dewey County Assessor), Kelly Taylor (Deputy Assessor, Beckham County), Lynette Ingraham (Harper County Assessor), Sonya Coleman (Woodward County Treasurer), Janet Roulet (Custer County Treasurer), Rhonda Brantley (Comanche County Treasurer), and Stan Jennings (Caddo County Treasurer). A mapping project of the scope and detail required for the research presented in Section 3 had never been attempted for Oklahoma (and, based on research to date, anywhere else), and the results achieved required hundreds of man-hours in pain-staking, detailed work. Mr. Joshua Conaway, Ms. Paige Harjo, and Mr. Brian Highfill completed what at first seemed an insurmountable task, and did so with exceptional precision and speed. In so doing, they also created a resource that will provide value to Oklahomans for years to come. Additional thanks are also owed to Mr. Conaway who contributed to the economic analysis of land use trade-offs included in Section 3 of this report. Finally, Dr. Shelly Peper Sitton very graciously provided valuable editorial and layout support for this report. Funding The State Chamber of Oklahoma Research Foundation funded this project through a research contract. Author s Note Data for Figures 2 and 3 appearing on page 9 are current as of June 30,. All other data contained in this report reflect the most current publicly available information as of May 1,. 2

3 Contents Figures...4 Executive Summary Section 1: Oklahoma s Wind Energy Industry The History of Oklahoma s Wind Energy Industry Oklahoma s Wind Energy Industry Today The Future of Oklahoma Wind Energy...11 Section 2: Wind Energy s Contributions to Ad Valorem Revenues Oklahoma s Ad Valorem Tax System Wind Energy s Contribution to Oklahoma Ad Valorem Revenues Historical Payments to Counties Forecast Payments to Counties The Oklahoma Qualifying Manufacturing Concern Exemption and Exempt Manufacturing Reimbursement Program Forecast Reimbursement Fund Obligations for the Wind Industry Assessment Methodologies for Oklahoma Counties Conclusions and Recommendations Regarding Ad Valorem Issues...24 Section 3: Spatial Issues and Land Use in Oklahoma s Wind Energy Industry Mapping Methodology Summary of Spatial and Land Use Findings Spacing, Compatibility of Land Uses, and Setback Issues Wind Energy and Agricultural Land Uses Wind Energy and Petroleum Development Setback Issues Conclusions Regarding Spatial Issues and Land Use...35 Section 4: Wind Energy s Impacts to Oklahoma Utility Ratepayers...35 Section 5: Conclusions...35 Appendix: Research Methodology

4 Figures Figure 1: Oklahoma Installed Wind Energy Capacity, Figure 2: Oklahoma Wind Energy Projects...9 Figure 3: Summary of Oklahoma Wind Energy Projects...9 Figure 4: Oklahoma Electrical Power Production by Source, January...10 Figure 5: Oklahoma Wind Power Production...11 Figure 6: SPP Priority Projects Map...12 Figure 7: Proposed Route of Plains & Eastern Clean Line HVDC Transmission Project Figure 8: Historic Ad Valorem Revenues and Property Values for Wind Energy Systems, Figure 9: Acre Equivalencies for Average Wind Turbine Ad Valorem Revenues...16 Figure 10: Total Historic and Forecast Ad Valorem Revenues...17 Figure 11: Historical and Forecast Ad Valorem Revenues from Wind Energy Systems, by County and Source...18 Figure 12: Location of Existing Oklahoma Wind Energy Projects Relative to Population Loss or Below Non-Metropolitan County Average Population Gains Figure 13: Total Education Revenues from Wind Energy Systems...19 Figure 14: Composition of School Funds Paid over Forecast Model, Figure 15: OTC Ad Valorem Reimbursements by Industry Sector, Figure 16: Total Historical and Forecast OTC Ad Valorem Reimbursements...23 Figure 17: Combined Historical and Forecast Ad Valorem Tax Payments by Source...23 Figure 18: Examples of Project Elements...25 Figure 19: Summary of Wind Energy Project Land Use...26 Figure 20: Equivalent Area of All Oklahoma Wind Energy Projects...27 Figure 21: KODE Novus I Project Wind, Irrigated Agriculture, and Intensive Animal Production...28 Figure 22: Blackwell Wind Farm Road Configuration...29 Figure 23: Increases in Per-Acre Revenues to Agricultural Land from Wind Energy Systems Figure 24: Examples of Cattle and Wind Turbines...31 Figure 25: KODE Novus I Project, Wind and Petroleum Development...32 Figure 26: Setback Radii to Avoid Collision in Event of Mutual Derrick and Turbine Collapse Figure 27: Distance of Existing Wind Energy Projects from Nearest Hospital, Airport, and School...34 Figure 28: Map of Radii from Hospitals, Airports and Schools to Nearest Wind Turbine Figure 29: Oklahoma Tax Commission Depreciation Schedule...40 Figure 30: OTC Cost Approach Model Asset Value...41 Figure 31: Ad Valorem Revenue Collections by System Life Year, Cost Approach Model, Prototype Turbine

5 Executive Summary In the past 12 years, Oklahoma has grown from having no utility-scale wind energy capacity to now having nearly 4,000 megawatts of capacity, making it the fourth-largest wind energy state in the United States. With projects currently under construction, Oklahoma is projected to have more than 5,000 megawatts of capacity by the end of. Possessing one of the nation s largest wind resource potentials and an increasingly robust electrical transmission grid, Oklahoma stands poised to be one of the nation s leading producers of wind-generated electrical power. A separate study estimates the wind industry has created more than 1,600 direct, full-time jobs in Oklahoma. Oklahoma now produces roughly 17 percent of its power from wind, compared to the U.S. average of 6.5 percent (which includes all renewable sources other than hydroelectric power). In many counties, the equipment installed in wind energy projects represents a significant increase in the taxable property base, which has led to corresponding increases in revenues for local schools and county services. Including both historical payments and payments forecasted for planned projects, the wind energy industry is projected to pay approximately $1 billion in ad valorem taxes. With the corresponding OTC payments, the wind industry is predicted to pay nearly $1.2 billion to education funds, including local and county school funds and the Oklahoma CareerTech system. A review of the tax records for all existing Oklahoma wind energy projects reveals those projects already have increased the tax base and ad valorem revenues in those counties by installing equipment with a current appraised value of $3.3 billion dollars. From the first tax year in which revenues were received from Oklahoma s first utility-scale wind energy projects (2004) through the most recently-available data for the 2014 tax year, wind energy systems in Oklahoma resulted in the payment of nearly $134 million in ad valorem taxes to Oklahoma counties, including both Oklahoma Tax Commission ( OTC ) reimbursements and developer tax payments to counties. Over the span of the entire model, which includes both Oklahoma s first wind energy projects (installed in 2003) and the forecast projects (whose last year of projected life is 2043), owners of wind energy projects will pay approximately $1 billion dollars in ad valorem taxes. Every dollar paid in Reimbursement Fund distributions yields $1.69 in owner-paid tax revenues to local governments and schools. A separate study estimates royalty payments to Oklahoma landowners where wind farms are located total more than $22 million annually. In addition, the ability to conduct livestock and crop operations coextensively with wind energy projects provides significant additional returns to landowners. Importantly, the increased revenue provided to school districts containing wind energy projects benefits not only those districts, but districts across the state as well. The calculation of state aid to local school districts takes into account a number of the district s revenue sources. If, after those sources are tallied, the district s projected per-pupil revenue exceeds 150 percent of the projected state average per pupil revenue, the amount of state aid supplied to that district is reduced proportionately. This means more state funds are available for the support of all Oklahoma schools. The results of this project show Oklahoma wind energy projects occupy far less land than suggested by industry estimates. Turbine spacing allows ample and diverse land uses within project footprints, and existing wind projects largely avoid locations such as hospitals, airports, and schools by wide margins. 5

6 On average, the total land use of Oklahoma wind energy projects including turbines, roads, and substations, is 0.46 acres per megawatt or 0.87 acres per turbine. These numbers are significantly less than those estimated by industry sources (which suggest a land use of three acres per megawatt of capacity). The mapping project indicates wind energy development should pose few or no barriers to oil and gas development in the same area. The observations of the mapping project, coupled with operational information about the construction and operation of wind energy projects, suggest wind energy development should pose few or no barriers to oil and gas development in the same area. Oklahoma s wind energy projects physically occupy a very small footprint, particularly in respect to their generating capacity. The total area occupied by the projects measured totaled to slightly more than two 640-acre sections of land, or an area roughly the size of downtown Oklahoma City. Turbines are spaced sufficiently to allow a variety of land uses to coexist on the same property, including a wide range of agricultural and petroleum uses. If current patterns of land use continue, there will likely be few problems with setbacks of wind turbines from facilities such as hospitals, airports, and schools. Oklahoma s two investor-owned utilities have estimated their use of power from wind energy projects will save ratepayers nearly $2 billion. 6

7 Section 1 Oklahoma s Wind Energy Industry In the past 12 years, Oklahoma has grown from having no utility-scale wind energy capacity to now having nearly 4,000 megawatts of capacity, making it the fourth-largest wind energy state in the United States. With projects currently under construction, Oklahoma is projected to have more than 5,000 megawatts of capacity by the end of. Possessing one of the nation s largest wind resource potentials and an increasingly robust electrical transmission grid, Oklahoma stands poised to be one of the nation s leading producers of wind-generated electrical power. 1.1 The History of Oklahoma s Wind Energy Industry One can hardly think about Oklahoma without thinking about wind, and the proof is in our state song: Oklahoma! Where the wind comes sweeping down the plain. Oklahoma s wind resource has always played a vital role in the development of our state. In our days as a Western territory, wind-powered water pumps the iconic windmills instinctively associated with the Old West allowed settlers to pump water out of deep aquifers, making productive land out of areas that might not see settlement otherwise. 1 What many people do not realize, however, is the arrival of wind-powered electrical generation was almost simultaneous to the wind-powered water pump, with the first sales of windmills designed for residential electric power generation occurring in the 1890s. 2 Nearly a century later, the American utility-scale 3 wind power industry began to take shape. Several scholars consider early 1980s California (in the wake of the energy crisis of the 1970s) to be the birthplace of the modern American wind energy industry. 4 Its market for electrical power, availability of transmission capacity near dense wind resources, and energy policies made California the leading state in U.S. wind energy until In the mid- to late 1990s, the deregulation of electrical markets, dramatic improvements in turbine efficiency and increasing instability in natural gas prices led power companies and investors nationwide to look at wind once more. Utility-scale wind power development depends on a number of factors beyond the quality of the available wind resources, including the regional market prices for electrical power, accessibility to electrical transmission lines with the capacity to carry the power generated by a project, and the state and federal policy environment. 6 The mix of these factors in California made that state the leader in U.S. wind energy until 2006, when Texas would overtake it and move on to a commanding lead. 7 Much of Texas explosive growth may be attributed to the fortunate circumstance that one of its largest and most dense wind resource areas is bisected by one of its largest electrical transmission lines. 8 Aggressive state programs to build transmission capacity in areas most likely to stimulate wind power development most notably the Competitive Renewable Energy Zone (CREZ) projects 9 also attracted development to Texas. Policies and markets drove much of California s wind power growth; resources coupled with transmission capacity and beneficial policies drove much of Texas wind power growth. This leads to the interesting case of Iowa, which frequently swaps positions with California as the state with either the second- or third-largest wind capacity despite having a smaller wind resource potential than many other states with more installed capacity. A leader in renewable energy production (as home to over 25 percent of the U.S. ethanol production capacity and a major biodiesel production state 10 ) and a leading state with respect to farmer investment in renewable energy projects, Iowa sought to leverage those advantages with a number of state policies supporting wind power development, including a requirement for utilities to offer renewable power options to customers, 11 a Renewable Portfolio Standard ( RPS ), 12 and a state renewable energy tax credit. 13 The factors that made California, Texas, and Iowa early leaders in utility-scale wind development looked much different in Oklahoma. The market for power in Oklahoma in the early 2000s was much different than that of California or even Texas in that Oklahoma has historically paid the lowest cost for electricity of any of its neighboring states. At the same time, most of Oklahoma s best wind 7

8 resources were located in the part of the state with the lowest population density, meaning they were also in the portions of the state with the least electrical transmission capacity. Nevertheless, the quality of Oklahoma s wind energy resource in two areas relatively close to existing high-capacity transmission lines attracted Oklahoma s first utility-scale wind energy projects in 2003 with the installation of the Oklahoma Wind Energy Center in Harper and Woodward Counties and the installation of Blue Canyon Phase I in Comanche and Caddo Counties. 1.2 Oklahoma s Wind Energy Industry Today The construction of the Oklahoma Wind Energy Center and Blue Canyon Phase I projects marked the beginning of an almost-continuous pattern 14 of growth in Oklahoma s wind energy industry, and since that time, Oklahoma has grown to rank fourth among U.S. states in installed wind energy capacity. 15 Figure 1: Oklahoma Installed Wind Energy Capacity, ,000 Oklahoma Installed Wind Energy Capacity, ,346 5,000 Installed Wind Energy Capacity (MW) 4,000 3,000 2,000 1,811 3,134 3,134 3,782 1,480 1,130 1, Oklahoma s wind power industry has grown from zero capacity in 2002 to 3,782 megawatts by 2014, making it the fourth-largest wind power state in the United States. Source: data: Energy Information Administration, Oklahoma State Electricity Profile 2012, available at (last accessed May 1, ); 2013 and 2014 data: AWEA, Oklahoma Wind Energy Fact Sheet, available at FileDownloads/pdfs/Oklahoma.pdf (last accessed April 30, ); estimate: Oklahoma Department of Commerce State Energy Office. 8

9 Figure 2: Oklahoma Wind Energy Projects The map above depicts Oklahoma s 30 existing wind energy projects consisting of over 2,000 wind turbines. For a more detailed discussion of the layout of Oklahoma s wind energy projects and the mapping process, see Section 3 and Appendix 3 below. Figure 3: Summary of Oklahoma Wind Energy Projects Name Operational Location (county & nearest town) Oklahoma Wind Energy Center Blue Canyon: Phase I Weatherford Wind Energy Center Blue Canyon: Phase II Centennial Wind Farm Sleeping Bear Wind Farm Buffalo Bear Wind Farm Red Hills Wind Farm Blue Canyon V OU Spirit Wind Farm (Keenan I) Elk City Wind Energy Center Minco Wind Farm Keenan II Elk City II Blue Canyon VI Taloga Wind Farm Minco II Wind Farm Crossroads Wind Farm Big Smile Wind Farm at Dempsey Ridge Rocky Ridge KODE Novus I Wind Project Chisholm View Wind Project Canadian Hills Wind Farm Blackwell Wind Farm (OSU) KODE Novus II Minco III Origin Wind Energy Project Mammoth Plains Wind Energy Center Seiling Wind Seiling Wind II Osage Wind TOTALS Under Construction Arbuckle Mountain Balko Wind, LLC Breckinridge Wind Project Chilocco II Goodwell Wind Project Kay Wind Project Kingfisher Wind Little Elk TOTALS Harper & Woodward Counties (Woodward) Comanche & Caddo Counties (Lawton) Custer County (Weatherford) Comanche & Caddo Counties (Lawton) Harper County Harper County Harper County Roger Mills & Custer Counties (Elk City) Comanche & Caddo Counties Woodward County (Woodward) Roger Mills & Beckham Counties (Elk City) Grady County (Minco) Woodward County (Woodward) Roger Mills & Beckham Counties (Elk City) Caddo County (Apache) Dewey County (Taloga) Grady and Caddo Counties Dewey County (Canton) Roger Mills & Custer Counties (Dempsey) Kiowa and Washita Counties Texas County Garfield and Grant Counties (Enid) Canadian County (north of El Reno) Kay County (Blackwell) Texas County Grady and Caddo Counties Murray Counties Dewey and Blaine Counties Dewey County Dewey County Osage County Murray County Beaver County Garfield County Kay County Texas County Kay County Kingfisher County Washita County Capacity # of (MW) Turbines Online Turbine Type Developer Owner GE 1.5 MW NEG Micon 1.65 MW GE 1.5 MW Vestas 1.8 MW GE 1.5 MW Suzlon 2.1 MW Suzlon 2.1 MW Acciona 1.5 MW GE SLE 1.5 MW Siemens 2.3 MW Siemens 2.3 MW 1.6 MW Siemens 2.3 MW 48 GE 1.5 MW; 18 GE 1.6 MW Vestas 1.8 MW Mitsubishi 2.4 MW GE 1.6 MW 95 Siemens 2.3 MW; 3 3.0MW direct drive Gamesa 2.0 MW GE 1.6 MW DeWind 2.0 MW D GE 73 Senvion 2.05 MM92; 62 Mitsubishi 2.4 MWT102 Siemens 2.3 MW DeWind 2.0 MW D9.2 GE 1.6 MW Vestas V MW GE 1.7 MW GE 1.7 MW GE 1.7 MW GE 1.79 MW NextEra Energy Resources Zilkha Renewable Energy; Kirmart Corp. NextEra Energy Resources Goldman Sachs Chermac Energy Corporation; Invenergy Edison Mission Group; Chermac Energy Corp. Edison Mission Group Acciona EDP Renewables North America LLC CPV Renewable Energy NextEra Energy Resources NextEra Energy Resources CPV Renewable Energy NextEra Energy Resources EDP Renewables North America LLC Edison Mission Group NextEra Energy Resources RES Americas Acciona TradeWind Energy DeWind TradeWind Energy Apex Energy, Inc. OwnEnergy DeWind NextEra Energy Resources RES Americas; TradeWind Energy NextEra Energy Resources NextEra Energy Resources NextEra Energy Resources TradeWind Energy NextEra Energy Resources EDP Renewables North America LLC; Infigen Energy NextEra Energy Resources EDP Renewables North America LLC Oklahoma Gas & Electric NRG Energy NRG Energy Acciona EDP Renewables North America LLC Oklahoma Gas & Electric NextEra Energy Resources NextEra Energy Resources CPV Renewable Energy; GE Energy Fin. Serv. NextEra Energy Resources EDP Renewables North America LLC NRG Energy NextEra Energy Resources Oklahoma Gas & Electric Acciona Enel Green Power N. Am. DeWind GE Energy Fin. Serv.; Enel Green Power N. Am. Apex Energy Inc. NextEra DeWind NextEra Energy Resources Enel Green Power NextEra Energy Resources NextEra Energy Resources NextEra Energy Resources Enel Green Power N. Am Vestas V MW GE 1.85 MW GE 1.7 MW GE 1.7 MW Vestas V MW Siemens 2.3 MW Vestas V MW Vestas V MW EDP Renewables North America LLC Apex Energy TradeWind Energy PNE Wind USA TradeWind Energy Apex Energy Apex Energy TradeWind Energy EDP Renewables North America LLC D.E. Shaw Renewable Investments, LLC NextEra Energy Resources PNE Wind USA Enel Green Power N. Am. Southern Company First Reserve Enel Green Power N. Am. Oklahoma s wind energy industry now consists of 30 projects in 19 counties, with projects currently under construction in several of these counties and at least one additional county. Source: Kylah McNabb, Oklahoma State Energy Office 9

10 Oklahoma s wind energy industry now makes significant contributions to the electrical power needs not only of Oklahoma, but also surrounding states as well. Oklahoma set a target of producing 15 percent of its electrical power from renewable sources by 16 and exceeded that goal in In fact, Oklahoma now produces roughly 17 percent of its power from wind, compared to the U.S. average of 6.5 percent (which includes all renewable sources other than hydroelectric power). 17 Figure 4: Oklahoma Electrical Power Production by Source, January Oklahoma Electrical Production by Source, January Natural Gas-Fired 44% Coal-Fired 37% Wind 17% Hydroelectric 2% This figure presents the percentage of power actually generated from the respective sources. Note natural gas-fired electrical generation often serves as a compliment to wind-driven generation. Source: EIA Oklahoma state energy profile data, available at (last accessed May 1, ) 10

11 Figure 5: Oklahoma Wind Power Production Oklahoma Wind Power Production ,862 Power Generated from Wind Sources (thousand megawatt hours (MWh)) ,712 1,849 2,358 2,698 3,808 5,605 8,158 11, The amount of power generated by Oklahoma s wind energy systems continues to grow, owing to increased capacity and wind capacity factors above the national average. EIA Oklahoma state energy profile data, available at (last accessed May 1, ). 18 Oklahoma s wind energy industry has provided a significant source of economic benefits to Oklahoma. Beyond the ad valorem tax revenues paid to counties and schools and the electrical utility savings to Oklahoma ratepayers (both of which are discussed at length later in this report), Oklahoma s wind energy industry has also provided the following benefits according to a study conducted by Economic Impact Group, LLC: 19 Investment of more than $6 billion in the construction and development of wind energy projects Royalty payments to Oklahoma landowners of more than $22 million annually Creation of more than 1,600 direct full-time jobs 1.3 The Future of Oklahoma Wind Energy Even though Oklahoma has made significant strides in developing its wind power potential, the capacity for significant growth still remains. Practically, the limiting factor for Oklahoma s wind power development is not its wind resource, 20 but rather the capacity of its transmission grid to convey that power to market, and the market for wind power itself. The Southwest Power Pool coordinates the 11

12 projects. This analysis was guided by the Strategic Planning Committee (SPC) to be presented to stakeholders and the BOD for review in April The list of projects the BOD requested staff to study in Phase II of the Priority Projects effort is referred to as Group 1 throughout this report and is listed below and illustrated in Figure 1: power grid for Oklahoma, Arkansas, Kansas, Nebraska, and parts of Louisiana, Missouri, and Texas. Since Group much 1 of the SPP region encompasses areas of high wind resource, it has planned for a number of additional Spearville transmission Comanche line projects Medicine to connect Lodge areas of Wichita with large (765 current kv construction or planned and wind 345 energy kv operation) projects with Comanche areas of electrical Woodward power District demand. EHV Further, (765 kv Clean construction Line Energy and Partners 345 kv operation) continues development Hitchland of a 700-mile Woodward high voltage District direct EHV current (345 kv (HVDC) DCT1) transmission line designed to transport wind energy generated in the southern Great Plains to demand centers in the eastern United States. Valiant NW Texarkana (345 kv) Buildout of these lines will likely trigger additional wind energy development nearby. Cooper Maryville Sibley (345kV) Riverside Tulsa Reactor (138 kv) Figure 6: Southwest Power Pool Priority Projects Map This map depicts high-voltage transmission projects already approved by SPP or with priority for feasibility analysis. Figure 1: Priority Projects (Group 1) 1 DCT refers Source: to Southwest double-circuit Power Pool, SPP Priority Projects Phase II Report, (2010), available at spp.org/publications/priority%20projects%20phase%20ii%20report.pdf 7 (last accessed May 1, ). 12

13 Figure 7: Proposed Route of Plains & Eastern Clean Line HVDC Transmission Project The High Voltage Direct Current (HVDC) Plains and Eastern Clean Line project would transport wind-generated power from Oklahoma, the Texas Panhandle, and southwest Kansas to the Tennessee Valley Authority. Source: Clean Line Energy Partners Plains & Eastern Clean Line Project, available at plainsandeasterncleanline.com/site/page/interactive-map (last accessed May 1, ). Section 2 Wind Energy s Contributions to Ad Valorem Revenues In many counties, the equipment installed in wind energy projects represents a significant increase in the taxable property base, which has led to corresponding increases in revenues for local schools and county services. Including both historical payments and payments forecasted for planned projects, the wind energy industry is projected to pay approximately $1 billion dollars in ad valorem taxes. 2.1 Oklahoma s Ad Valorem Tax System Ad valorem 21 taxes, as the name implies, are based on the value of the items taxed. In Oklahoma, all personal and real property is subject to ad valorem tax at the county level unless the property is subject to some form of exemption. 22 Three primary factors determine the amount of tax owed for a given piece of property: the property s value, the county s assessment ratio, and the millage rate for jurisdiction containing the property. With a limited number of exceptions, the task of determining the market value of property falls to a county assessor. 23 One important exception is property owned by public service corporations, such as electrical utilities; such property is assessed by the State Board of Equalization. 24 Once the assessing entity (either the county assessor or the State Board of Equalization) determines the fair market value of an asset, that value is multiplied by the county s assessment ratio to determine the gross assessed value of the property. Article X, Section 8 of the Oklahoma Constitution limits the range of assessment ratios from 10 to 15 percent of fair cash value for most personal property 25 and percent for property owned by a public service company. 26 Any applicable deductions are applied to the gross assessed value to determine the property s net assessed value. 13

14 The property s net assessed value is then multiplied by the millage rate 27 applicable to the tax district (typically defined by a local school district) containing the property. In most cases, the majority of county ad valorem taxes paid consist of millages for local schools. 28 For example, counties can impose a four mill levy on all non-exempt property in the county with the funds generated by the levy apportioned to the school districts in the county in proportion to their average daily attendance. A combination of other levies can also provide funds to local school districts, Career Tech districts, and community colleges. County governments can also impose millages for a number of county needs, facilities, and services such as emergency medical services, fire protection, road improvement, and solid waste handling. Understanding how ad valorem taxation works provides the foundation for understanding the impact of Oklahoma s wind energy industry on revenues for schools and county governments. 2.2 Wind Energy s Contribution to Oklahoma Ad Valorem Revenues Since the assessed value of property represents the single largest variable in ad valorem tax revenues, the introduction of a high-value asset such as wind energy facilities can create a significant impact on those revenues. A review of the tax records for all existing Oklahoma wind energy projects reveals those projects already have increased the tax base and ad valorem revenues in those counties by installing equipment with a current appraised value of $3.3 billion dollars in those counties. Further, if those projects currently planned for construction in Oklahoma indeed come into operation, these impacts to county revenues would be significantly amplified Historical Payments to Counties As an initial step in the research of ad valorem payments made to Oklahoma counties by wind energy projects, county tax records for all 23 existing Oklahoma wind energy projects with county tax records (and excluding projects that were centrally assessed) were obtained. 29 Since ad valorem tax units generally follow school districts, these 23 projects were divided into separate units for each of the school districts they touched, resulting in 65 historic units. These records provided information on the gross and net assessed values of the personal property associated with each project. For the purposes of this research, only personal property values were evaluated since most wind energy projects owned no (or only a negligible amount of ) real property. 30 By applying the respective counties assessment ratios, the market value of the wind energy projects property were also determined. From the first tax year in which revenues were received from Oklahoma s first utility-scale wind energy projects (2004) through the most recently-available data for the 2014 tax year, wind energy systems in Oklahoma resulted in the payment of nearly $134 million in ad valorem taxes to Oklahoma counties, including both Oklahoma Tax Commission ( OTC ) reimbursements and developer tax payments to counties. 14

15 Historic Ad Valorem Revenues and Property Values for Wind Energy Systems Figure 8: Historic Ad Valorem Revenues and 2004 Property 2014Values for Wind Energy Systems, $40,000,000 $35,000,000 $36,339,731 $32,435,831 $4,000,000,000 $3,500,000,000 Annual Ad Valorem Revenues $30,000,000 $25,000,000 $15,000,000 $5,000,000 $1,096,189 $1,063,054 $4,058,301 $3,906,333 $4,856,962 $6,938,834 $9,661,555 $13,440,732 $20,026,105 $3,000,000,000 $2,500,000,000,000 $1,500,000,000 $1,000,000,000 $500,000,000 Total Asset Value for Installed Wind Energy Systems Total OTC reimbursements Total owner paid taxes Total property value Oklahoma s wind energy industry currently has an estimated $3.3 billion of installed generation equipment, resulting in nearly $134 million in ad valorem payments to counties. Note: A number of wind energy projects were installed in the latter portion of 2014, and as a result, the tax and valuation information for those projects will first appear in s data. The slight decrease in tax revenues and property value for 2014 reflects the depreciation and resulting decrease in tax revenues from previously installed projects, without the offsetting increase from these 2014-installed projects. As this data suggests, wind energy systems can provide a significant increase to the tax base of a county, particularly rural counties. To illustrate this point, the table below presents the number of acres required to provide the same annual ad valorem revenue as the average wind energy turbine in the respective regions of the state with existing wind energy projects or projects under construction given their average land values 31 and millage rates. 32 As shown, each wind turbine provides the ad valorem tax base of hundreds of acres of unimproved land. 15

16 Figure 9: Acre Equivalencies for Average Wind Turbine Ad Valorem Revenues Panhandle West Northwest Southwest North Central South Central Northeast Beaver Blaine Beckham Alfalfa Caddo Craig Ottawa Cimarron Custer Comanche Canadian Carter Creek Pawnee Texas Dewey Greer Garfield Cleveland Lincoln Pottawatomie Ellis Harmon Grant Garvin McIntosh Rogers Harper Jackson Kay Grady Muskogee Seminole Major Kiowa Kingfisher Jefferson Nowata Tulsa Woods Roger Mills Logan Love Okfuskee Wagoner Woodward Tillman Noble McClain Okmulgee Washington Washita Oklahoma Stephens Osage Payne Average values per acre (unimproved land) Average total millage Annual ad valorem revenue per acre Annual ad valorem revenue per turbine Equivalent unimproved acres Turbine "Per Acre" Annual Ad Valorem Revenue Region Pasture Cropland Pasture Cropland Pasture Cropland Panhandle $ 558 $ 1, $ 34 $ 61 $ 86,403 2,547 1,418 $ 86,403 West Northwest $ 1,327 $ 1, $ 109 $ 157 $ 116,243 1, $ 116,243 Southwest $ 1,081 $ 1, $ 84 $ 137 $ 110,708 1, $ 110,708 North Central $ 1,955 $ 2, $ 174 $ 189 $ 126, $ 126,801 South Central $ 1,736 $ 2, $ 164 $ 201 $ 134, $ 134,075 Northeast $ 1,908 $ 2, $ 177 $ 228 $ 131, $ 131,669 The tables above illustrate the number of acres of unimproved agricultural land required to generate the same amount of ad valorem tax revenue as the average wind turbine in Oklahoma. As discussed in more detail in section 3 below, much of the historic growth of Oklahoma s wind energy industry occurred in counties that either lost population or experienced only nominal growth between the 2000 and 2010 Censuses, underscoring the importance of these contributions made by wind energy projects to those counties. However, the historic tax contributions of wind energy projects are small in comparison to the potential future contributions of the industry in the state Forecast Payments to Counties By the end of 2014, Oklahoma had 3,782 megawatts of installed wind energy capacity. However, as of early, wind energy developers had filed applications with the Southwest Power Pool ( SPP ) to connect an additional 4,914 megawatts of wind energy capacity in Oklahoma. 33 All of these projects, if constructed, would more than double the wind energy capacity of the state. Thus, understanding the full impact of the wind energy industry requires an examination of its future in Oklahoma Methodology of forecasting Appendix 1 provides a detailed description of the methodology used to forecast future ad valorem tax revenues from both current and planned Oklahoma wind energy projects. In summary, tax records for existing Oklahoma wind energy projects provided the estimated market value of existing projects, and Energy Information Administration data provided the estimated value of planned projects. Both existing and planned projects were depreciated using the method applied by the OTC in calculating reimbursements for the five-year manufacturing exemption (discussed in section 2.3 below), which uses a 12-year lifespan for moving components of the turbines and a 25-year lifespan for the non-moving components. Current (tax year 2014-) assessment ratios and millage rates were applied to existing projects and held constant over the remaining lifespan of the equipment to forecast future ad valorem 16

17 tax payments for those projects; for planned projects (whose school districts, and thus current millage rates, could not be determined), current county assessment ratios and average millage rates were used to forecast future ad valorem tax payments Forecast Results Over the span of the entire model, which includes both Oklahoma s first wind energy projects installed in 2003 and the forecast projects whose last year of projected life is 2043, owners of wind energy projects will pay approximately $1 billion dollars in ad valorem taxes. Figure 10: Total Historic and Forecast Ad Valorem Revenues Total Historic and Forecast Ad Valorem Revenues Annual Tax Revenues $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $1,096,189 $1,063,054 $4,058,301 $3,906,333 $4,856,962 $6,938,834 $9,661,555 $13,440,732 $20,026,105 $35,846,009 $32,012,180 $37,935,301 $49,115,238 $52,143,963 $50,430,276 $104,201,185 $97,352,946 $90,785,593 $84,110,172 $77,850,435 $71,698,509 $65,552,819 $60,320,448 $55,483,394 $50,602,434 $46,283,554 $43,837,644 $40,500,779 $38,613,513 $36,547,185 $34,147,770 $31,968,073 $28,718,293 $26,134,725 $21,700,974 $21,059,029 $18,666,056 $14,826,854 $13,171,998 $12,525,781 $1,600,000,000 $1,400,000,000 $1,200,000,000 $1,000,000,000 $800,000,000 $600,000,000 $400,000,000 $200,000,000 Cumulative Tax Revenues Total OTC reimbursements Total owner paid taxes Cumulative payments to counties Historical and forecast payments resulting from wind energy payments are projected to total approximately $1.5 billion. 17

18 The figure below presents historical tax payments 34 received by counties from wind energy projects and forecast tax payments, broken out by county and by source (OTC reimbursements under the fiveyear manufacturing exemption or payments made directly by project owners to the respective counties). Figure 11: Historical and Forecast Ad Valorem Revenues from Wind Energy Systems, by County and Source Historical Revenues Forecast Revenues Overall Totals OTC OTC OTC Owner Paid Taxes Total Owner Paid Taxes Total County Reimbursements Reimbursements Reimbursements Owner Paid Taxes Total Beaver $ $ $ $ 47,131,923 $ 84,411,590 $ 131,543,513 $ 47,131,923 $ 84,411,590 $ 131,543,513 Beckham $ 657,435 $ $ 657,435 $ 16,697,373 $ 29,347,704 $ 46,045,077 $ 17,354,808 $ 29,347,704 $ 46,702,512 Blaine $ $ $ $ 1,239,274 $ 2,085,081 $ 3,324,354 $ 1,239,274 $ 2,085,081 $ 3,324,354 Caddo $ 8,734,758 $ 1,975,834 $ 10,710,592 $ 4,568,671 $ 19,124,327 $ 23,692,998 $ 13,303,429 $ 21,100,161 $ 34,403,590 Canadian $ 9,093,267 $ $ 9,093,267 $ 62,404,126 $ 119,325,551 $ 181,729,677 $ 71,497,393 $ 119,325,551 $ 190,822,944 Comanche $ 8,786,986 $ 1,877,660 $ 10,664,646 $ $ 12,646,350 $ 12,646,350 $ 8,786,986 $ 14,524,010 $ 23,310,996 Custer $ 8,530,650 $ 4,008,487 $ 12,539,137 $ 10,210,987 $ 26,758,191 $ 36,969,178 $ 18,741,637 $ 30,766,677 $ 49,508,314 Dewey $ 4,709,009 $ 26,490 $ 4,735,499 $ 30,718,549 $ 59,519,028 $ 90,237,577 $ 35,427,558 $ 59,545,518 $ 94,973,076 Garfield $ 6,902,905 $ $ 6,902,905 $ 18,975,133 $ 43,269,971 $ 62,245,103 $ 25,878,038 $ 43,269,971 $ 69,148,008 Grady $ 7,816,137 $ $ 7,816,137 $ 11,463,635 $ 31,966,352 $ 43,429,987 $ 19,279,772 $ 31,966,352 $ 51,246,124 Grant $ 1,101,623 $ $ 1,101,623 $ 9,688,630 $ 18,113,169 $ 27,801,798 $ 10,790,253 $ 18,113,169 $ 28,903,421 Harper $ 7,677,653 $ 2,897,916 $ 10,575,569 $ 52,218,626 $ 97,435,891 $ 149,654,517 $ 59,896,279 $ 100,333,807 $ 160,230,086 Kay $ 2,392,035 $ 12,571 $ 2,404,606 $ 37,454,864 $ 66,974,558 $ 104,429,422 $ 39,846,899 $ 66,987,129 $ 106,834,028 Kiowa $ 6,464,434 $ 2,662,906 $ 9,127,340 $ 7,864,869 $ 21,431,584 $ 29,296,453 $ 14,329,303 $ 24,094,490 $ 38,423,793 Murray $ $ $ $ 19,208,942 $ 32,319,089 $ 51,528,031 $ 19,208,942 $ 32,319,089 $ 51,528,031 Osage $ $ $ $ 23,326,560 $ 38,946,939 $ 62,273,498 $ 23,326,560 $ 38,946,939 $ 62,273,498 Roger Mills $ 24,298,729 $ 1,554,291 $ 25,853,020 $ 4,626,871 $ 49,116,980 $ 53,743,851 $ 28,925,600 $ 50,671,271 $ 79,596,871 Texas $ 3,546,316 $ $ 3,546,316 $ 33,881,100 $ 62,869,405 $ 96,750,505 $ 37,427,416 $ 62,869,405 $ 100,296,821 Washita $ 3,613,591 $ 415,493 $ 4,029,084 $ 3,626,334 $ 11,691,353 $ 15,317,687 $ 7,239,925 $ 12,106,846 $ 19,346,771 Woodward $ 11,796,210 $ 1,352,869 $ 13,149,079 $ 49,279,498 $ 104,345,867 $ 153,625,366 $ 61,075,708 $ 105,698,736 $ 166,774,444 Ad valorem tax payments to some Oklahoma counties exceed $100 million over the span of the historical and forecast data. Importantly, several of the historical and forecast projects reside in counties either losing population or gaining less population than the non-metropolitan county average in Oklahoma between the 2000 and 2010 Censuses. Thus, the wind energy industry has the potential to make significant ad valorem contributions to counties where there may be downward pressure on other sources of ad valorem revenue. Figure 12: Location of Existing Oklahoma Wind Energy Projects Relative to Population Loss or Below Non-Metropolitan County Average Population Gains Several Oklahoma counties with population losses or growth rates below the non-metropolitan average also contain wind energy projects, bolstering ad valorem tax revenues. 18

19 As mentioned above, several factors could influence the actual future payments of ad valorem taxes, including whether those projects with approved SPP interconnection agreements are built, the assessment methods applied to the wind energy equipment by county assessors, and the millages applicable to the school districts in which the projects are located Impacts to education funding Millages for the support of local school districts comprise the majority of ad valorem tax revenues; concordantly, the largest single beneficiary of the ad valorem taxes paid by the wind energy industry over the span of the historical and forecast model are local school districts. Over the entire span of the historical and forecast model, the Oklahoma wind energy industry (with the corresponding OTC payments) is predicted to pay nearly $1.2 billion to education funds, including local and county school funds and the Career Tech system. Of these funds, more than $918 million will be paid in millages to local school districts, more than $78 million will be paid in the form of counties 4-mill levies (which are redistributed to local school districts in proportion to their average daily attendance), and more than $174 million will be paid in millages attributable to Career Tech schools. Figure 13: Total Education Revenues from Wind Energy Systems Annual Education Revenues $90,000,000 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $642,065 $911,775 $3,317,639 $3,234,209 $4,111,897 $5,710,177 $8,670,314 $11,010,283 $16,592,703 Total Education Revenues from Wind Energy Systems $28,583,543 $25,419,756 $33,561,602 $40,211,912 $42,213,308 $40,484,673 $79,567,785 $74,304,684 $69,281,406 $64,185,957 $59,426,605 $54,773,253 $50,126,658 $46,162,340 $42,501,936 $38,843,924 $35,527,233 $33,677,888 $31,110,624 $29,677,445 $28,090,019 $26,241,222 $24,559,338 $21,977,329 $19,983,993 $16,349,677 $15,859,703 $14,057,924 $11,467,377 $9,585,906 $9,405,040 $1,400,000,000 $1,200,000,000 $1,000,000,000 $800,000,000 $600,000,000 $400,000,000 $200,000,000 Cumulative Education Revenues County Schools (4 mill) Total Local School District Total Career Tech Total Cumulative Education Revenues Over the span of the historical and forecast data, payments from Oklahoma s wind energy industry and OTC reimbursements to educational funds total approximately $1.2 billion. 19

20 Composition of School Funds Paid over Forecast Model, Figure 14: Composition of School Funds Paid over Forecast Model, $918,696,203 $78,067,907 $174,657,013 County Schools (4 mill) Total Local School District Total Career Tech Total Payments received by local schools are projected to total nearly $1 billion, with payments received by the Career Tech system totaling nearly $175 billion. This source of funding could provide significant benefits to school districts, particularly in a number of rural districts facing declining asset values or decreased revenues from mineral severance taxes. Importantly, the increased revenue provided to school districts containing wind energy projects benefits not only those districts, but districts across the state as well. The calculation of state aid to local school districts takes into account a number of the district s revenue sources. If, after those sources are tallied, the district s projected per-pupil revenue exceeds 150 percent of the projected state average per pupil revenue, the amount of state aid supplied to that district is reduced proportionately. 35 This means more state funds are available for the support of all Oklahoma schools. Further, given the nature of the long-term power purchase contracts under which windgenerated electricity is sold and the relatively long life of wind energy assets, wind energy facilities can provide relatively stable sources of school revenue for significant periods of time. 2.3 The Oklahoma Qualifying Manufacturing Concern Exemption and Exempt Manufacturing Reimbursement Program In 1985, while enduring the throes of simultaneous downturns in both the petroleum and agriculture sectors, Oklahoma voters approved State Question No. 588, which added Article X, Section 6B to the Oklahoma Constitution. Seeking to lure new manufacturing assets and the attendant jobs they create to the state, this amendment created a five year exemption from ad valorem taxation on any real or personal property 36 owned by a qualifying manufacturing concern, defined as a concern that (1) Is not engaged in business in this state or does not have property subject to ad valorem tax in this state and constructs a manufacturing facility in this state or acquires an existing facility that has been unoccupied for a period of twelve (12) months prior to acquisition; or (2) Is engaged in business in this state or has property subject to ad valorem tax in this state and constructs a manufacturing facility in this state at a different location from present facilities and continues to operate all of its facilities or 20

21 acquires an existing facility that has been unoccupied for a period of twelve (12) months prior to acquisition and continues to operate all of its facilities. 37 Thus, qualifying manufacturing concerns must build or construct a manufacturing facility. The amendment authorized the Oklahoma Legislature to enact statutes defining manufacturing facility, also noting that a manufacturing facility that qualifies for the ad valorem tax exemption provided by this section, pursuant to the definition of manufacturing facility then applicable, shall be eligible for the exemption without regard to subsequent changes in the definition of the term manufacturing facility[.] 38 Consequently, the Oklahoma Legislature enacted a statutory definition of manufacturing facility encompassing a number of different sectors. Facilities must generally show defined amounts of payroll increase attributable to the facility in question, minimum capital investment, and must fit within specified North American Industrial Classification System ( NAICS ) codes. 39 Specifically, wind power facilities fitting within NAICS code may qualify if they can demonstrate a net increase in annualized payroll at the facility of at least Two Hundred Fifty Thousand Dollars ($250,000.00) or a net increase of Two Million Dollars (.00) or more in capital improvements while maintaining or increasing payroll. 40 Besides wind power and general manufacturing concerns (which often fall under the more general definitions of the statute), several other industrial sectors have specific requirements, including distribution centers and data processing facilities. 41 Recognizing the potential loss of ad valorem revenue for counties containing such qualifying manufacturing concerns could offset the economic development gains sought by five-year exemption, the amendment also directed the Oklahoma Legislature to create a means of reimbursing units of county and local government funded by ad valorem taxes for the loss of revenue caused by the exemption. Concordantly, also in 1985, the Oklahoma Legislature created the Ad Valorem Reimbursement Fund [t]o reimburse counties of this state for loss of revenue due to exemptions of ad valorem taxes for new or expanded manufacturing or research and development facilities 42 (hereinafter referred to as the Reimbursement Fund). Counties containing property subject to the five-year exemption can apply to the OTC for reimbursement of the funds foregone as a result of the exemption. 43 The Reimbursement Fund, in turn, is funded by an apportionment calculated as 1 percent of total income tax revenue received by the state. 44 Reimbursement claims by industrial sector often vary as macroeconomic forces, federal and state development incentives, and other factors influence the development of specific types of facilities eligible for reimbursement. Trends in payments from the Reimbursement Fund by sector are illustrated in Figure 15 below. 21

22 OTC Ad Valorem Reimbursements by Industry Sector Figure 15: OTC Ad Valorem Reimbursements by Industry Sector, $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000, Wind Electrical Generation Data Processing Distribution Traditional Manufacturing Large Manufacturing OTC reimbursements reflect growth trends in various industries. The graph above starts with 2004 as that year marked the first reimbursements made on behalf of wind energy projects in the state (installed in 2003). As the graph illustrates, reimbursements to various sectors fluctuate over time. The very start of the wind energy industry in Oklahoma coincided with the end of a significant expansion of electrical co-generation facilities in the state. The late 1990s and early 2000s saw the construction of a number of electrical co-generation plants in the wake of incentives for such facilities created by the Public Utility Regulatory Policies Act 45 and the federal deregulation of natural gas markets coupled with low natural gas prices. Similarly, Oklahoma s wind energy industry continues in the early phases of growth, marked by a larger proportion of projects still within the fiveyear exemption period Forecast Reimbursement Fund Obligations for the Wind Industry As discussed in Section , this project forecasted future ad valorem tax payments based on a cost-approach valuation model using the OTC depreciation schedules to estimate the future value of both existing and planned wind energy projects within the state. The forecast models provided data on both expected payments by the owners of wind energy projects and payments to counties out from the Reimbursement Fund, as illustrated in Figures 10 and 11 in section above. Figure 16 below shows only the historic and projected Reimbursement Fund distributions, without payments made directly to counties by wind project owners. As discussed above, the methodology used to forecast future growth in Oklahoma s wind energy industry necessarily squeezed the installation of a significant amount of capacity into the year, with those projects first triggering tax obligations in and thus leaving the five-year exemption window after. Accordingly, Reimbursement Fund obligations are projected to grow (with a notable exception in as the projects installed in 2013 and 2014 begin to exit the five-year exemption period) through that year. Over the entire period of the forecast model, total Reimbursement Fund 22

23 expenditures total approximately $561 million; however, the total taxes paid by wind project owners over the same period would total over $948 million, meaning every dollar paid in Reimbursement Fund distributions would yield $1.69 in owner-paid tax revenues to local governments and schools. Figure 16: Total Historical and Forecast OTC Ad Valorem Reimbursements $90,000,000 Total Historical and Forecast OTC Ad Valorem Reimbursements $83,201,767 $600,000,000 $80,000,000 $72,281,969 $500,000,000 Annual OTC Reimbursements $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $1,019,897 $1,053,363 $4,047,108 $3,895,022 $4,843,840 $5,837,520 $8,735,233 $10,588,028 $17,373,296 $31,801,660 $26,926,771 $31,669,168 $39,357,339 $38,569,517 $27,304,531 $57,892,415 $49,505,500 $44,803, $400,000,000 $300,000,000 $200,000,000 $100,000,000 Total OTC reimbursements Cumulative OTC Reimbursements With the last projects in the forecast model constructed in, OTC reimbursement obligations Combined Historical and Forecast Ad Valorem Tax Payments by Source would end after, for a total of approximately $561 million. Combined Historical and Forecast Ad Valorem Tax Payments by Source Cumulative OTC Reimbursements Figure 17: Combined Historical and Forecast Ad Valorem Tax Payments by Source $948,483, % $948,483, % $560,707, % $560,707, % Wind energy project owners are forecast to pay approximately 63 percent of the total ad valorem Total OTC reimbursements Total owner paid taxes revenues to counties from wind energy systems, meaning each dollar of OTC reimbursements leads to payments of $1.69 to counties. Total OTC reimbursements Total owner paid taxes 23

24 As one will note from referring back to Figure 16, the five-year limit on the ad valorem exemption and the corresponding reimbursement obligation by the Reimbursement Fund will naturally eliminate itself over the lifetime of a project Assessment Methodologies for Oklahoma Counties Pursuant to the law creating the Reimbursement Fund, all properties subject to the five-year exemption are assessed by the OTC; after the exemption has expired, assessment of the properties falls to the county assessors. 46 However, discussions with all county assessors for counties with existing wind energy projects indicate no consensus exists as to the proper methodology for valuing wind energy systems. Some county assessors believe the OTC methodology is binding on the counties; although assessors do have an obligation to apply consistent valuation methodologies, 47 the assessment methods established by OTC for various assets such as that for wind energy systems as stated in the Oklahoma Business Personal Property Valuation Schedule are not binding on county assessors. Other county assessors believe the OTC methodology depreciates wind energy systems too rapidly and industry conditions and asset characteristics weigh in favor of either a more gradual depreciation while still using the Cost Approach or another method, such as the Income Approach. Still other assessors believe all three valuation methods should be used together each year to develop a value for the wind energy system. The challenge posed by this lack of consensus is that while county assessors obviously operate only within their respective counties, wind energy companies frequently operate across counties. Inconsistency between the OTC and county assessors, and among county assessors, have led to a number of tax protests by wind energy facilities when county-assessed values do not follow the OTC methodology. 2.4 Conclusions and Recommendations Regarding Ad Valorem Issues Wind energy systems have already provided significant additional revenues to counties, and have the potential to make even larger contributions in the future. Oklahoma schools both those with wind energy projects in their districts and counties, and those across the state stand to benefit significantly from the additional ad valorem revenues provided by wind energy projects. Conversations with OTC staff, county assessors, and county treasurers indicate some policy issues to be resolved surrounding the valuation of wind energy systems and the Reimbursement Fund. The Reimbursement Fund has been underfunded for a number of years, and reform of its funding mechanism may be needed to accommodate any new qualifying manufacturing concerns, whether those facilities are wind power projects or other eligible facilities. Alternative valuation methods for wind energy systems, such as the Income Approach, might also reduce obligations of the Reimbursement Fund by smoothing the value of wind energy projects over their lifespan instead of providing significant depreciation in the early years of the projects. A facilitated dialogue among county assessors, the OTC, and wind energy developers could also lead to development of a consensus regarding valuation of wind energy systems in Oklahoma, providing greater certainty for both counties and developers while also reducing the potential for tax protest proceedings. Section 3: Spatial Issues and Land Use in Oklahoma s Wind Energy Industry The topics of how much land wind energy projects occupy and their potential impacts on other land uses continue to see vigorous discussion, but little research exists to inform this discussion. As a result, this research study undertook a first-of-its-kind project in mapping all utility-scale wind energy systems in Oklahoma for which aerial imagery was currently available. The results of this project show Oklahoma wind energy projects occupy far less land than suggested by industry estimates. Turbine spacing allows ample and diverse land uses within project footprints, and existing wind projects largely avoid locations such as hospitals, airports, and schools by wide margins. 24

25 3.1 Mapping Methodology Appendix 3 contains a discussion of the methodology used to map the wind project elements. In short, the planimetry tools of the Google Earth Pro software package were used to trace and measure all wind energy system components (turbines, roads, and supporting systems such as substations, maintenance and operation buildings, transformers, etc.) for which aerial imagery was available. Examples of some project elements are shown in Figure 18 below. In total, 1,687 turbines, 396 road segments, and 78 support systems and structures were individually traced in the course of the mapping project for a total of 2,161 map elements created for this project. Figure 18: Examples of Project Elements The photo on the left shows an example of delineation of a turbine road segment and the associated turbine pad (shaded in orange) from the Big Smile Project; note also the co-location of the turbines and the oil well pad. The photo on the right shows an electrical substation trace for the KODE Novus II project in Texas County (shaded in orange). 3.2 Summary of Spatial and Land Use Findings On average, the total land use of Oklahoma wind energy projects including turbines, roads, and substations, is 0.46 acres per megawatt or 0.87 acres per turbine. These numbers are significantly less than those estimated by industry sources, which suggest a land use of three acres per megawatt of capacity.48 25

26 Figure 19: Summary of Wind Energy Project Land Use Capacity (MW) Avg. Turbine Spacing (ft.) Turbines (ac) Avg. pad size Roads (ac) Support Systems (ac) Total Land Used (ac) Project Location Predominant land use Turbines Big Smile Dempsey Ridge SW Roger Mills County Pasture Blackwell Wind Farm NW Kay County Crop Blue Canyon I SW Caddo, N Central Comanche Counties Rocky, limited grazing Blue Canyon II SE Kiowa, SW Caddo Counties Rocky, limited grazing Blue Canyon V N Central Comanche County Rocky, limited grazing Blue Canyon VI SW Caddo County Rocky, limited grazing Buffalo Bear Central Harper County Pasture Canadian Hills Wind Farm NW Canadian County Mixed crop and pasture Centennial Wind Farm South Central Harper County Pasture Chisholm View Wind Project NE Garfield, SE Grant Counties Crop Crossroads Wind Farm NE Dewey County Pasture Elk City Wind Energy Center SW Roger Mills County Pasture Elk City II S Central Roger Mills / NE Beckham Counties Pasture Keenan II Wind Project SW Woodward County Pasture Minco I, II, and III NW Grady, SW Canadian, NE Caddo Counties Pasture KODE Novus I SE Texas County Pasture KODE Novus II S Central Texas County Pasture Oklahoma Wind Energy Center N Central Woodward, SE Harper Counties Pasture OU Spirit Wind Farm SW Woodward County Pasture Red Hills Wind Farm SE Roger Mills County Pasture Rocky Ridge Wind Project S Central Washita, N Central Kiowa Counties Mixed crop and pasture Sleeping Bear Wind Project SE Harper County Pasture Taloga Wind Farm SE Dewey County Crop Weatherford Wind Energy Center SE Custer, NE Washita Counties Mixed crop and pasture Total Averages Oklahoma s wind energy projects occupy significantly less land than industry estimates suggest. Total land use per MW (ac) Total land use per turbine (ac) Many concerns have been voiced about the footprint of wind energy projects, suggesting they take up a significant amount of space, particularly relative to other energy sources. However, the total area of all wind energy projects measured in the project 1,350 acres could fit inside the area of downtown Oklahoma City bordered by I-40, I-235, Northwest 10 th Street, and Western Avenue. Further, this area represents a combined generation capacity of 3,126 megawatts or 2.3 megawatts/acre, making wind energy land use per unit of generating capacity comparable to that for other sources of electrical power. All existing Oklahoma projects reside in predominantly rural areas, although some projects such as Canadian Hills (Canadian County) and the Minco I, II, and III projects (Canadian, Grady, Caddo Counties) exist in rural areas into which urban growth continues. The predominant land use types surrounding projects were pasture and crop production, with some projects (primarily the Blue Canyon projects) in rocky outcrops, likely used for limited grazing applications. 26

27 Figure 20: Equivalent Area of All Oklahoma Wind Energy Projects The area of downtown Oklahoma City (bordered in red) represents 1,348 acres, roughly the same area of all Oklahoma wind energy projects combined. 3.3 Spacing, Compatibility of Land Uses, and Setback Issues As the area of all wind turbines were measured, the distance between each turbine and its closest neighboring turbine was also measured. On average, turbines were spaced 1,248 feet (or slightly less than ¼ mile) apart. However, it should also be noted that this spacing is largely dependent on the topography of the project, the size of the turbines used, and the location s wind profile.49 The project with the smallest average spacing (the Oklahoma Wind Energy Center in Woodward and Harper Counties) had an average turbine spacing of 602 feet, and the project with the largest average spacing (the Buffalo Bear Project in Harper County) had an average turbine spacing of 2,257 feet Wind Energy and Agricultural Land Uses In all areas, observation of land uses surrounding the wind energy project elements conformed tightly to the elements, suggesting little impact to land uses beyond the areas directly occupied by the elements themselves. In fact, in the course of the mapping project, many land uses were found to co-exist with wind energy projects. For example, the KODE Novus I and KODE Novus II projects in Texas County present an excellent example of how wind energy can provide a complimentary land use to both intensive agricultural production and petroleum production. 27

28 Figure 21: KODE Novus I Project Wind, Irrigated Agriculture, and Intensive Animal Production The KODE Novus I project illustrates how wind projects can allow intensive agricultural use of land. Shown in this picture are center-pivot irrigation systems and confinement swine operations. In the figure above, wind energy project elements (including turbines, roads, and one laydown area located at the top center of the image) are shown interspersed among center-pivot irrigation systems, dryland crop systems, and hog production facilities. Importantly, this picture demonstrates how coordinated planning among wind developers and landowners can maximize benefits to both parties. For example, in this particular segment of the KODE Novus I project, the developer placed turbines on the periphery of the irrigation pivots. Thus, an intensive agricultural use of the land was preserved, while also providing the landowner the additional returns of wind energy royalties from less-productive dryland farming applications. Turbine roads were also configured to minimize the amount of road area needed to access all turbines, reducing overall land use impact. Another example of turbine access road configuration maximizing the use of pre-existing public roads and section lines to minimize loss of agricultural land comes from the Blackwell Wind Farm, shown in Figure 22 below. 28

29 Figure 22: Blackwell Wind Farm Road Configuration Use of county roads and section / quarter lines for turbine access roads can reduce the amount of land lost from agricultural production. Lastly, wind energy development appears to impose little negative impact on livestock production. In observations of aerial imagery from the project, cattle were frequently noticed in close proximity to the turbines, as confirmed by observations of landowners and project developers. With the ability to conduct livestock and crop operations coextensively with wind energy projects, the wind energy projects can provide significant additional returns to rural landowners that dramatically offset any potential revenue losses from the removal of land occupied by wind energy systems. One way to illustrate these gains is to compare the net change in per-acre returns to landowners caused by the installation and operation of a wind energy project on agricultural land. One proxy for the per-acre returns to agricultural land is the cash rental rate for land in a similar production system. Cash rental rates for a variety of crop and pasture systems were obtained from the Oklahoma Cooperative Extension Service lease rate surveys. 50 These rates were used to estimate the revenue forgone from the loss of land caused by the installation of one megawatt of capacity (0.46 acres, as shown in Figure 19 above) and one turbine (calculated by multiplying the per-megawatt land use of 0.46 acres by the weighted average capacity of an Oklahoma wind energy turbine 1.78 megawatts). As shown below, royalty revenue to the landowner outweighs any losses of revenue from the occupation of agricultural land by wind energy systems by over $5,500 dollars on a per-megawatt basis or over $9,900 on a per-turbine basis. 29

30 Figure 23: Increases in Per-Acre Revenues to Agricultural Land from Wind Energy Systems Per acre cash rental rate Ag land revenue foregone Royalty revenue gained Per megawatt Net gain in landowner revenue Per megawatt Per turbine Per megawatt Per turbine Crop System Per turbine Dryland Wheat Northwest $28.10 $ $ $ 5,606 $ 9,979 $ 5,593 $ 9,956 Southwest $32.07 $ $ $ 5,606 $ 9,979 $ 5,592 $ 9,953 North Central $38.48 $ $ $ 5,606 $ 9,979 $ 5,589 $ 9,948 East $32.19 $ $ $ 5,606 $ 9,979 $ 5,592 $ 9,953 Dryland Grain Sorghum $29.66 $ $ $ 5,606 $ 9,979 $ 5,593 $ 9,955 Dryland Alfalfa $41.00 $ $ $ 5,606 $ 9,979 $ 5,588 $ 9,946 Other Dryland Crops $39.38 $ $ $ 5,606 $ 9,979 $ 5,588 $ 9,947 Other Irrigated Crops $66.25 $ $ $ 5,606 $ 9,979 $ 5,576 $ 9,925 Ag land revenue foregone Royalty revenue gained Net gain in landowner revenue Pasture System Per acre cash Per Per rental rate megawatt Per turbine megawatt Per turbine Per megawatt Per turbine Native Pasture Northwest $8.76 $ 4.03 $ 7.17 $ 5,606 $ 9,979 $ 5,602 $ 9,972 Southwest $12.83 $ 5.90 $ $ 5,606 $ 9,979 $ 5,601 $ 9,969 North Central $14.20 $ 6.53 $ $ 5,606 $ 9,979 $ 5,600 $ 9,968 East $13.03 $ 5.99 $ $ 5,606 $ 9,979 $ 5,600 $ 9,969 Bermuda Pasture Southwest $17.91 $ 8.23 $ $ 5,606 $ 9,979 $ 5,598 $ 9,965 North Central $20.25 $ 9.31 $ $ 5,606 $ 9,979 $ 5,597 $ 9,963 East $18.56 $ 8.53 $ $ 5,606 $ 9,979 $ 5,598 $ 9,964 Royalty revenue assumptions Turbine capacity factor 40% Percent of nameplate capacity Price of power sold $ 0.04 Power purchase agreement (PPA) price for wind power Landowner royalty percentage 4% Percentage of gross revenues (power sales only) Increased revenues from wind turbine royalties significantly outweighed revenues lost from the removal of land from agricultural production caused by installation of wind energy systems. 30

31 Figure 24: Examples of Cattle and Wind Turbines Observations from a number of Oklahoma wind energy projects suggest cattle are not bothered by the wind energy equipment. Image on left courtesy of Western Farmers Electric Cooperative, image at top right from Google Earth Pro view of Keenan II project, with cattle grazing in area and image on bottom right courtesy of Apex Wind Energy, Wind Energy and Petroleum Development The ability of wind energy development to co-exist with petroleum development poses another frequently-asked question. The KODE Novus I project also provides an excellent example of how wind and petroleum development can indeed occur in the same area. In Figure 25 below, one can easily see 18 oil and gas well pads interspersed among 29 wind turbines, 51 with the minimum turbine-to-well pad spacing of 242 feet. Another example of how closely wind turbines and petroleum operations can work is shown in Figure 18 above (taken from the Big Smile Project in Roger Mills County). 31

32 Figure 25: KODE Novus I Project, Wind and Petroleum Development A number of petroleum well pads are interspersed among wind turbines in the KODE Novus I project (and extending into the Noble Great Plains Project in Texas), showing how wind and petroleum development can coexist. The observations of the mapping project, coupled with operational information about the construction and operation of wind energy projects, suggest wind energy development should pose few or no barriers to oil and gas development in the same area. The period of greatest concern for potential interference would be during the operation of a drilling rig when certain minimum spacing may be required to avoid potential hazards of a derrick or turbine coming into contact during a collapse of either structure, but as Figure 26 below demonstrates, even assuming the direct outward collapse of both structures (a worst-case scenario and an extremely remote possibility), ample room would exist on most parcels for both land uses to be accommodated, as the wellbore center and turbine base would only have to be 570 feet apart to avoid any collision. Further, beyond turbine foundations which may vary from 20 to 40 feet in depth and buried electrical connector lines which are generally shallower than ten feet, 52 wind energy projects have minimal subsurface uses that would interfere with collection lines or other petroleum infrastructure. 32

33 Figure 26: Setback Radii to Avoid Collision in Event of Mutual Derrick and Turbine Collapse 165 feet 140 feet 570 feet 430 feet At most, to avoid a worst-case scenario in which an oil derrick and wind turbine both simultaneously collapse directly toward each other, the turbine base and wellbore would be located 570 feet apart Setback Issues The location of wind turbines relative to homes, businesses, and other potentially sensitive sites continues to generate debate about wind energy development. Concerns about the impact of turbines ranging from acoustic and aesthetic impacts to infrasound and wind turbine syndrome continue to permeate the wind energy debate. Importantly, though, a reading of the peer-reviewed scientific literature shows there is no clear evidence that wind turbine syndrome exists, but rather suggests reports of the alleged ailment are more likely linked to psychosomatic responses to aesthetic issues and social influences. 53 Setbacks from areas such as schools, hospitals, and airports continue to pose a policy concern for some constituencies, however, and in response to these concerns, the Oklahoma Legislature enacted Senate Bill 808, signed by Governor Fallin on April 17,. Among its provisions, Senate Bill 808 restricts construction of wind turbines within 1.5 nautical miles from an airport, public school, or hospital. 54 To estimate the impact of the new law, the distances from Oklahoma s existing wind energy projects to the nearest airport, public school, and hospital were calculated. Of all the potential setback sites, only two Weatherford Elementary School West and the Concho School on the Cheyenne- Arapaho Tribal Complex were within a setback distance defined by Senate Bill 808. This suggests that if current wind energy development trends continue, setbacks from these facilities should not significantly hamper wind energy development. 33

34 Figure 27: Distance of Existing Wind Energy Projects from Nearest Hospital, Airport, and School Project Oklahoma Wind Energy Center Blue Canyon: Phase I Weatherford Wind Energy Center Blue Canyon: Phase II Centennial Wind Farm Sleeping Bear Wind Farm Buffalo Bear Wind Farm Red Hills Wind Farm Blue Canyon V OU Spirit Wind Farm Elk City Wind Energy Center Minco Wind Farm (1, 2, & 3) Keenan II Elk City II Crossroads Wind Farm Big Smile Wind Farm at Dempsey Ridge Blue Canyon VI Taloga Wind Farm Rocky Ridge Wind Project: Phase I KODE Novus I Wind Project Chisholm View Wind Project Canadian Hills Wind Farm Blackwell Wind Farm (OSU) KODE Novus II Closest Hospital Woodward Regional Hospital Reynolds Army Community Hospital Weatherford Regional Airport Tri County Hospital (Carnegie) Harper County Community Hospital Woodward Regional Hospital Harper County Community Hospital Great Plains (Elk City) Medical Center Reynolds Army Community Hospital Woodward Regional Hospital Cheyenne Hospital El Reno Hospital Woodward Regional Hospital Great Plains (Elk City) Medical Center Seiling Hospital Cheyenne Hospital Tri County Hospital (Carnegie) Seiling Hospital Hobbart Hospital Guymon Hospital St. Mary's (Enid) Medical Center El Reno Hospital Blackwell Hospital Guymon Hospital Distance (mi) Closest Airport Mooreland Municipal Airport Ft. Sill (Henery Post) Air Field Weatherford Municipal Airport Carnegie Municipal Airport West Woodward Airport West Woodward Airport Buffalo Airport Elk City Airport Ft. Sill (Henery Post) Air Field West Woodward Airport Mignon (Cheyenne) Airport El Reno Airport West Woodward Airport Elk City Airport Seiling Airport Mignon (Cheyenne) Airport Carnegie Municipal Airport Thomas Airport Hobbart Airport Guymon Airport Pond Creek Airport Okarche Municipal Airport Blackwell Tonkawa Airport Guymon Airport Distance (mi) Closest School Mooreland Public School Apache High School Weatherford Elementary (West) Carnegie Jr. High School Laverne High School Woodward High School Laverne High School Elk City Public School Apache High School Fargo High School Sweetwater Public Schools Minco High School Fargo Elementary School Elk City High School Seiling Public Schools Cheyenne High School Apache High School Thomas Fay Custer School Hobbart Middle School Prarie Elementary (Guymon) School Kremlin School Concho School Deer Creek Lamont School Prarie Elementary (Guymon) School Distance (mi) Among existing turbines, only two hospitals, airports, or schools were located within 1.5 miles of the nearest utility-scale wind turbine. Figure 28: Map of Radii from Hospitals, Airports and Schools to Nearest Wind Turbine In the figure above, red circles represent the radius from a hospital to the nearest turbine, blue circles represent the radius to the nearest airport, and white represents the radius to the nearest school. 34

35 3.5 Conclusions Regarding Spatial Issues and Land Use Oklahoma s wind energy projects physically occupy a very small footprint, particularly in respect to their generating capacity. As this project mapped all wind energy systems for which aerial imagery was available, the total area occupied by those projects totaled to slightly more than two 640-acre sections of land, or an area roughly the size of downtown Oklahoma City. Turbines are spaced sufficiently to allow a variety of land uses to coexist on the same property, including a wide range of agricultural and petroleum uses. If current patterns of land use continue, there will likely be few problems with setbacks of wind turbines from facilities such as hospitals, airports, and schools. Section 4: Wind Energy s Impacts to Oklahoma Utility Ratepayers The public discussion of wind energy includes a number of potential advantages posed by this energy source, ranging from its lack of greenhouse gas (GHG) emissions to creation of local jobs and technological innovations. Of course, utilities and other for-profit entities hold deep interest in how wind energy affects both their profits and their ratepayers bills. In this regard, Oklahoma s abundant wind energy resources have provided important benefits both to Oklahoma utilities and their customers. All four of Oklahoma s largest generation and transmission ( G&T ) utilities Oklahoma Gas and Electric (OG&E), American Electric Power Public Service Company of Oklahoma (AEP-PSO), Western Farmers Electric Cooperative (WFEC) and the Grand River Dam Authority (GRDA) have integrated wind energy projects into their utility portfolios. While calculating the precise amount of ratepayer savings from all Oklahoma wind energy projects would require a detailed analysis of all OCC rate cases involving Oklahoma s existing wind energy projects, samples of information from a handful of those cases indicate the savings to Oklahoma ratepayers are indeed significant. Oklahoma s two investor-owned utilities have estimated their use of power from wind energy projects will save ratepayers nearly $2 billion. For example, OG&E has estimated its wind energy fleet will save ratepayers a total of more than $1 billion over the lifespan of its wind energy facilities. 55 In its testimony to the Oklahoma Corporation Commission regarding the planned Balko, Seiling and Goodwell projects, AEP-PSO estimated ratepayers would realize a savings of $723.9 million. 56 Additionally, GRDA has estimated the savings associated with its wind energy projects at approximately $300 million. 57 Although specific calculations regarding ratepayer savings were not available, WFEC has added wind power to its portfolio to benefit ratepayers as a hedge against volatility in fuel prices, a hedge against potential future regulatory costs for fossil fuels, and to provide diversity to its generation technology mix. Market data suggests wind power will continue to provide increased ratepayer savings, as the cost of wind energy generation equipment continues to decrease, 58 and the cost of wind-generated electrical power continues to decrease as well. 59 At the same time, a number of market and policy factors continue to add uncertainty to the future costs of other generation fuels. Of greatest note in recent times, the continued efforts by EPA to implement its Clean Power Plan have caused much speculation about how the electric utility sector will respond, and to what extent additional pollution control equipment will be required for existing generation assets. If significant additional controls are required, wind energy systems could provide an important price hedge since wind energy systems do not require such controls and have set fuel costs in the sense that their only fuel costs are the lease payments to landowners for accessing the wind on their property. Section 5: Conclusions In a relatively short period of time, Oklahoma has gone from having no utility-scale wind power projects to having the fourth-largest installed wind power capacity in the nation, and now produces approximately 17 percent of its electrical power from wind. Oklahoma stands poised for further growth 35

36 of its wind industry, but a historical analysis of other leading wind energy states suggests the policy environment of a state can play an important role in that state s wind development. Wind energy projects have made significant contributions to the tax base of several counties, notably including several counties with population losses or growth rates below the state average. The current market value of wind energy projects in the state stands at $3.3 billion, leading to ad valorem payments to counties of $134 million to date (including both OTC reimbursements and payments directly to counties by project owners). Over both the historical period and the life of all of the projects included in the project s forecast model, owners of wind energy projects will pay approximately $1 billion in ad valorem taxes. Coupled with OTC reimbursements, the ad valorem tax payments of Oklahoma s wind energy industry will mean payments of nearly $1.2 billion to education funds, including local and county school funds and the Career Tech system. Importantly, the increased revenue provided to school districts containing wind energy projects benefits not only those districts, but districts across the state as well. Because the state education funding formula takes into account local revenue sources (such as wind energy projects), tax revenues from wind energy projects can increase the amount of state aid available to other schools. While wind energy projects have significant impacts to ad valorem tax revenues, their land use has much less impact than industry estimates suggest, with an average land use of 0.46 acres per megawatt (or 0.87 acres per turbine) compared to the industry estimate of 3 acres per megawatt. When added together, the total land use of all existing Oklahoma wind projects sums to only 1,350 acres an area approximately the same size as downtown Oklahoma City. The observations collected through the mapping project also show wind development poses few or no barriers to agricultural or petroleum uses of the same property. Similarly, if current patterns of land use continue, there will likely be few problems with setbacks of wind turbines from facilities such are hospitals, airports, and schools. Estimates by Oklahoma s two investor-owned utilities indicate their use of wind power from wind energy projects will save ratepayers nearly $2 billion. The relative stability of wind power pricing resulting from the fact that its only fuel cost is scheduled payments to landowners can provide an importance tool to manage price risk for utility ratepayers. In conclusion, Oklahoma s relatively young wind energy industry has made important contributions to the state and stands poised to make even greater contributions in the future. 36

37 Appendix: Research Methodology Ad Valorem Tax Methodology Evaluating the impact future wind energy projects may have on ad valorem tax revenues in Oklahoma requires establishing a significant number of parameters regarding the projects locations, capacities, initial costs and depreciation, and the ad valorem tax environment in which they are located. Predicting the future of any industry poses daunting challenges, as even projects well-along in the development pipeline face innumerable variables in input and output markets, capital availability, and both state and federal policies. To provide a conservative estimate of the future of Oklahoma s wind energy industry, forecast models were completed for all existing projects, all projects either under construction at the time of the research, and all projects with SPP interconnection requests listed as on schedule or on suspension. All existing projects for which separate tax records could be obtained were forecast to the end of an assumed 25-year lifespan to comport with the OTC methodology. As mentioned above, some projects cut across school districts, and thus each portion of a project within a different school district was treated as a separate unit, meaning 65 existing units were included in the model. Projects under construction include those projects with physical development of their locations underway. These projects were assumed to come into service at some point in, first triggering ad valorem reimbursements in. Where information on specific school districts and millage rates was available, this information was applied to these projects. Thirteen construction units were included in the model. Projects with SPP interconnection agreements listed as on schedule or on suspension possess approved requests to provide power to the SPP grid. To reach this stage of the SPP interconnection process means the project has completed a significant (and costly) amount of feasibility analysis for the project, has demonstrated the ability to complete the project and deliver power by a specified future date, and has secured the rights to all of the land necessary to deploy the project. 60 Projects listed as having an interconnection agreement on schedule remain on the timetable for power delivery established in their application, while projects listed as having an interconnection agreement on suspension anticipate some delay in that timetable. In either case, approved agreements must begin delivering power within three years; for this reason, the forecast model deployed all projects on or before (within three years of ). An additional reason for placing these projects in service in is the Plains & Eastern Clean Line Project is anticipated to be online that year, 61 and that the addition of such significant additional transmission capacity will trigger the buildout of several planned wind energy projects. The SPP interconnection application database also provides the approximate location (generally by county) of the proposed projects and the capacity of those projects; this information was also used for each forecast project in the model. Fourteen of these units were included in the model. In total, combining all historical, under construction, and on schedule / on suspension projects resulted in a total of 92 units for the forecast model. Establishing an initial cost of the equipment comprising each forecast project defines the initial point for the depreciation function of the project, which in turn drives the estimates of ad valorem revenue for the project. The cost of wind energy generation equipment can vary significantly depending on the manufacturer and turbine model selected, to say nothing of the significant market forces operating on the costs of such equipment. For existing projects, county tax records provided a starting point for estimating the initial cost of the project; dividing the assessed value of the project by the county assessment ratio to provide a market value for the equipment in year 1 of its life, and dividing this number by the year 1 factors in the OTC depreciation schedule (discussed below) was used to estimate the year 0 or initial value of the equipment. For forecast projects, the estimate contained in the U.S. Department of Energy Office of Energy Efficiency and Renewable Energy 2013 Wind Technologies 37

38 Market Report 62 presented the number generally regarded as the most reliable estimate of installed wind energy equipment costs at this time, estimated at $1,750,000 per megawatt of nameplate capacity. 63 All forecast projects used this value for the cost of their installed capacity. In Oklahoma, school districts define the boundary units for ad valorem taxation 64 with all property within that district paying the millage rate for that district. For existing projects, county tax records indicated the amount of wind energy asset value within each school district and the millages applicable to that district. Without the ability to predict future millages, the forecast model assumed that all millages remained constant for the predicted life of existing projects. Since the SPP queue database provided only county-level location information (and not locations specific enough to identify the school district or districts within which the projects would lie if constructed), the millage applied was the county average millage as calculated in the most recent (tax year 2014-) county database maintained by the OTC Ad Valorem Division. Selecting a depreciation method for the forecast model obviously represents a critical piece to the research since it defines the values of the future projects and their ad valorem tax payments. However, the correct method of valuing wind energy equipment over its lifetime poses one of the most contentious issues in the taxation of these projects. In briefest summary, assessors and other property appraisers generally use three methods to estimate the value of an asset. The first method, the Cost Approach, attempts to determine the cost of the asset either by taking the asset s initial cost (either by construction or acquisition cost) and applying a depreciation factor based on the estimated lifespan of the asset and its value over that lifespan relative to its initial cost. The second method, the Sales Comparison Approach (sometimes called the comparable sales approach) estimates an asset value by the cost of similar assets sold in arms-length sales between willing sellers and buyers. The third method, the Income Approach, estimates the present value of an asset as a function of the income to be produced by the asset divided by a desired rate of return (discount rate), in the functional form V = I/R where V is the current asset value, I is the annual income attributable to the asset (assuming the annual income remains relatively constant) and R is the required rate of return for the asset. 65 All three valuation methods face significant challenges when applied to utility-scale wind energy systems. The Sales Comparison approach relies on data from sales of similar assets, and the robustness of this method comes from larger numbers of such sales. At this point in the development of the U.S. wind energy industry, significant databases of such sales do not exist, and available sales figures are almost always inextricably bound up with sales of other assets, goodwill, and other intangible property, and other corporate assets that makes determining the value of the wind energy equipment itself difficult to discern. This leaves the Cost Approach and the Income Approach. The Income Approach could provide a viable method for wind energy system valuation as the revenues from a wind energy project could be determined from the power purchase agreement ( PPA ) terms and rate information available through SPP, the Oklahoma Corporation Commission ( OCC ) and other public sources. Given the nature of long-term PPAs, the revenue function of the project should provide a relatively predictable value adding stability to the model. Additionally, the asset values provided by the Income Approach are generally lower in the first years of the asset s life, and are generally higher later in the asset s life, than those provided by the Cost Approach. This could mean comparatively lower ad valorem revenues in the early years of an asset s life, but comparatively higher revenues later in the asset s life as well. Although the Cost Approach was ultimately selected as the method for the forecast model, the Income Approach could indeed provide a viable alternative. This leaves the Cost Approach, and it should be noted that the Cost Approach carries significant limitations as a method for valuing utility-scale wind energy systems. First, even the Cost Approach relies, to some extent, on the availability of equipment sales data to help establish a depreciation curve for equipment. As mentioned in the discussion of the Sales Comparison Approach above, this data is scarce for U.S. wind energy projects. Second, any depreciation schedule established as part of a Cost Approach 38

39 methodology must contend with the issue of functional obsolescence. Functional obsolescence refers to the fact that future advancements in technology will accelerate the depreciation of current assets value because future assets will be more efficient or productive (for example, today s smartphone will lose value quickly as more advanced smartphones are constantly entering the marketplace). Continuing improvements in wind energy technology continue to drive down the price of equipment, while that equipment continues to grow more efficient. 66 At the same time, though, existing assets can continue to generate a predictable income stream despite the existence of newer and better systems (a consideration weighing in favor of the income approach). Ultimately, the Cost Approach was chosen for the forecast model, principally because it is the method used by the OTC in its guidance document Oklahoma Business Personal Property Valuation Schedule, 67 which in turn provides the basis for calculation of the ad valorem reimbursements to counties (as discussed in section 2.3 below). The Cost Approach represents a fit to the OTC s obligations to administer the ad valorem reimbursement fund (discussed in section 2.3 below) as eligibility for such reimbursements are based on the investment cost of the property. 68 Since both determining future obligations for ad valorem reimbursements from the state and determining future payments by wind facility owners to counties were both central objectives of this research, utilizing the Cost Approach facilitated creation of a forecast model that could simultaneously address both objectives. OTC s research into wind energy system valuation led to the conclusion moving components such as turbine blades, transmissions, and generators (sometimes referred to as nacelle components since they are attached to or contained by the turbine s nacelle) should be assigned an expected lifespan of 12 years, and are thus depreciated according to the 12-year property depreciation schedule. 69 Similarly, nonmoving components such as turbine towers, connecting lines, transformers, and other such equipment (defined for this project as non-nacelle components) should be assigned a lifespan of 25 years. 70 Since it may be difficult to separate the value of these nacelle and non-nacelle components (particularly if the systems were part of a bulk purchase of components by the wind energy developer), OTC adopted the policy of ascribing 60 percent of the total project value to nacelle components and 40 percent to non-nacelle components. 71 As a result, the forecast model calculated the value of nacelle components by multiplying the initial ( year 0 ) value of the projects by the corresponding 12-year or 25-year values in the OTC depreciation tables. Both historical and forecast projects were assumed to have a 25-year lifespan, both to fit the OTC depreciation methodology and to accommodate the facts that several industry sources have estimated turbine equipment to have a 25-year lifespan and that many of the PPAs held by wind energy projects are for a 20- to 25-year span

40 Figure 29: Oklahoma Tax Commission Depreciation Schedule Section X January DEPRECIATION-FIXTURES AND EQUIPMENT ECONOMIC LIFE DEPRECIATION - PERCENT GOOD Effective Typical Life Expectancy in Years Age Oklahoma Tax Commission Ad Valorem Tax Division, Oklahoma Business Personal Property Valuation Schedule, 145, available at (last accessed April 29, ). For existing projects, the year 0 value was calculated by taking the market value of the equipment (reverse-calculated by applying the respective counties assessment ratios to the gross assessed value indicated in the tax records), applying the OTC s 60/40 rule to determine the proportion of that value assignable to nacelle and non-nacelle components, and then dividing those values by the year 1 factors from the OTC deprecation table to reverse-calculate a year 0 initial cost of the project. Actual assessed values were used to calculate system values for any time periods for which tax records were available; for all future years, the year 0 value was multiplied by the indicated factor from the OTC table. In some cases, this resulted in a significant change in system values between year 5 (the last year in which the system would be eligible for the ad valorem reimbursement, with the system value determined strictly by the OTC Cost Approach methodology) and year 6 (when the county began local assessment of the system); the potential sources of this disjunction are discussed below in section 2.3. Historic data was used for all existing projects ad valorem payments data; to forecast future ad valorem revenues, the last known millages for the project were held constant for the remainder of the project s life. For forecast projects, the U.S. Department of Energy Office of Energy Efficiency and Renewable Energy 2013 Market Report value of $1,750,000 per megawatt of capacity was used as the year 0 value for the project, and the OTC 60/40 value split with 12-year and 25-year lifespans for nacelle and non- 40

41 nacelle components, respectively, were applied county average millage rates as reported by OTC 73 were applied to determine the overall ad valorem taxes paid by the respective projects. To break out payments to education funds as discussed in section below, county average millage rates (for the county in which the project is to be located) for these respective funds (county 4-mill, school general, school building, school sinking, Career Tech general, Career Tech building, and Career Tech sinking) were used since there was not sufficient information to locate the forecast projects within a specific school district. As a demonstration of these methods, the results for a hypothetical 2.0 megawatt turbine, using an assessment ratio equal to the overall average assessment ratio of all Oklahoma counties with existing wind energy projects and a millage rate equal to the overall average over the same counties is depicted in Figures 29 and 30. Figure 30: OTC Cost Approach Model Asset Value $4,000,000 OTC Cost Approach Model Asset Value $3,500,000 $3,000,000 Wind Energy System Value $2,500,000 $1,500,000 $1,000,000 $500, Year of System Life Total value Nacelle value (60%) Non nacelle value (40%) 41

42 Figure 30: OTC Cost Approach Model Asset Value Ad Valorem Revenue Collections by System Life Year, Cost Approach Model $40,000 $450,000 $35,000 $400,000 $30,000 $350,000 Tax Payments $25,000 $20,000 $15,000 $300,000 $250,000 $200,000 $150,000 Cumulative Payments to County $10,000 $100,000 $5,000 $50, Year of System Life OTC Reimbursements County collected payments Cumulative payments to county Figure 31: Ad Valorem Revenue Collections by System Life Year, Cost Approach Model, Prototype Turbine 42

43 $12,000,000 Beaver County Forecast Model Total Wind Energy Ad Valorem Tax Receipts (Personal Property) $140,000,000 Tax Payments $8,000,000 $6,000,000 $4,000,000 $3,961,421 $3,799,159 $3,646,653 $9,983,169 $9,431,186 $8,872,184 $8,277,748 $7,702,856 $7,079,723 $6,430,196 $5,861,894 $5,414,284 $4,906,650 $4,523,689 $4,315,685 $4,064,621 $3,893,131 $3,698,248 $3,500,638 $3,322,057 $3,158,102 $2,993,055 $2,854,170 $2,791,546 $2,728,376 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $1,471,609 $1,444,357 $1,417, Cumulative Payments to County Total OTC reimbursements Total owner paid taxes Cumulative payments to county Beaver County Education Revenues from Wind Energy Systems Annual Education Revenue $9,500,000 $8,500,000 $7,500,000 $6,500,000 $5,500,000 $4,500,000 $3,500,000 $2,500,000 $1,500,000 $3,439,769 $3,288,419 $3,102,672 $2,930,683 $8,242,094 $7,745,837 $7,251,943 $6,735,048 $6,238,791 $5,708,034 $5,163,517 $4,687,899 $4,301,716 $3,871,892 $3,540,848 $3,359,308 $3,143,267 $2,996,228 $2,835,430 $2,674,632 $2,527,593 $2,385,072 $2,242,551 $2,123,030 $2,063,269 $2,003,509 $1,242,036 $1,219,035 $1,196,034 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 Cumulative County Education Revenues $500,000 $(500,000) County Schools Total Local School District Total Cumulative County Education Revenues 43

44 Tax Payments $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $1,500,000 $1,000,000 $500,000 $7,075 $143,334 $168,092 $176,723 $162,211 $143,491 Beckham County Forecast Model Total Wind Energy Ad Valorem Tax Receipts (Personal Property) $134,534 $125,719 $117,458 $3,830,340 $3,611,211 $3,409,418 $3,194,084 $2,978,262 $2,740,190 $2,502,118 $2,287,402 $2,072,590 $1,841,394 $1,648,997 $1,558,811 $1,447,118 $1,382,577 $1,318,132 $1,254,501 $1,186,235 $1,079,191 $996,482 $934,202 $903,062 $871,922 $840,782 $825,212 $809,642 $50,000,000 $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $15,000,000 $5,000,000 Cumulative Payments to County Axis Title Total OTC Reimbursements Total county collected taxes Cumulative payments to county Beckham County Education Revenues from Wind Energy Systems $45,000,000 Annual Education Revenue $3,500,000 $3,000,000 $2,500,000 $1,500,000 $1,000,000 $3,150,147 $2,969,893 $2,803,903 $2,626,816 $2,449,318 $2,253,540 $2,057,763 $1,881,191 $1,704,541 $1,514,415 $1,356,196 $1,282,029 $1,190,182 $1,137,106 $1,084,108 $1,031,783 $975,674 $887,425 $819,440 $768,225 $742,618 $717,010 $691,403 $678,599 $665,795 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $15,000,000 Cumulative County Education Revenues $500,000 $5,541 $117,043 $137,246 $146,173 $134,017 $118,561 $111,134 $103,823 $96, $5,000,000 County Schools Total Local School District Total Career Tech Total Cumulative County Education Revenues 44

45 Blaine County Forecast Model Total Wind Energy Ad Valorem Tax Receipts (Personal Property) $3,500,000 Tax Payments $300,000 $250,000 $200,000 $150,000 $100,000 $278,633 $262,894 $248,321 $232,582 $216,844 $199,356 $181,869 $166,130 $150,392 $133,487 $119,497 $113,085 $104,924 $100,261 $95,598 $90,934 $86,271 $80,442 $74,613 $69,950 $67,618 $65,286 $62,955 $61,789 $60,623 $3,000,000 $2,500,000 $1,500,000 $1,000,000 Cumulative Payments to County $50,000 $500, Total OTC reimbursements Total owner paid taxes Cumulative payments to county Blaine County Education Revenues from Wind Energy Systems $3,000,000 Annual Education Revenues $250,000 $200,000 $150,000 $100,000 $229,230 $216,281 $204,292 $191,344 $178,396 $164,009 $149,623 $136,675 $123,726 $109,819 $98,310 $93,035 $86,321 $82,484 $78,648 $74,811 $70,975 $66,179 $61,384 $57,547 $55,629 $53,711 $51,792 $50,833 $49,874 $2,500,000 $1,500,000 $1,000,000 Cumulative Education Revenues $50,000 $500, County Schools Total Local School District Total Career Tech Total Cumulative County Education Revenues 45

46 Caddo County Forecast Model Total Wind Energy Ad Valorem Tax Receipts (Personal Property) $3,000,000 $2,842,977 $40,000,000 $2,500,000 $1,500,000 $1,000,000 $500,000 $239,795 $248,791 $582,554 $569,943 $555,181 $588,604 $443,260 $354,300 $1,866,172 $2,419,016 $2,169,069 $2,020,415 $1,871,661 $1,715,500 $1,570,767 $1,432,076 $1,286,954 $1,152,244 $1,065,472 $998,103 $942,984 $901,702 $861,285 $820,860 $730,433 $682,305 $594,480 $567,832 $548,923 $530,024 $516,700 $507,042 $206,165 $35,000,000 $30,000,000 $25,000,000 $15,000,000 $5,000,000 Total OTC reimbursements Total county collected revenues Cumulative payments to county $3,000,000 Caddo County Education Revenues from Wind Energy Systems $35,000,000 Annual Education Revenues $2,500,000 $1,500,000 $1,000,000 $500,000 $191,767 $218,535 $489,809 $497,300 $482,344 $514,507 $378,828 $403,344 $1,668,425 $2,557,266 $2,227,982 $2,004,192 $1,867,272 $1,729,881 $1,585,471 $1,451,255 $1,322,885 $1,188,750 $1,063,760 $982,678 $920,748 $869,441 $831,332 $793,967 $756,593 $676,061 $631,408 $552,932 $527,876 $510,308 $492,749 $480,221 $471,263 $199,483 $30,000,000 $25,000,000 $15,000,000 $5,000,000 Cumulative Education Revenues County Schools Total Local School District Total Career Tech Total Cumulative County Education Revenues 46

47 Canadian County Forecast Model Total Wind Energy Ad Valorem Tax Receipts (Personal Property) $250,000,000 Annual Tax Revenues $16,000,000 $14,000,000 $12,000,000 $8,000,000 $6,000,000 $4,000,000 $4,681,987 $4,411,280 $4,104,741 $3,687,267 $3,441,790 $3,269,010 $14,385,996 $13,489,117 $12,676,455 $11,725,177 $10,855,430 $10,038,372 $9,179,300 $8,454,221 $7,731,112 $6,956,734 $6,304,208 $5,946,027 $5,514,926 $5,247,147 $5,016,916 $4,786,808 $4,556,763 $4,297,302 $4,037,940 $2,893,172 $2,790,319 $2,694,101 $2,597,883 $2,549,774 $2,501,665 $200,000,000 $150,000,000 $100,000,000 $50,000, Cumulative Tax Revenues Total OTC reimbursements Total county collected revenues Cumulative payments to county Canadian County Education Revenues from Wind Energy Systems Annual Education Revenue $12,000,000 $8,000,000 $6,000,000 $4,000,000 $4,233,833 $4,056,990 $3,754,668 $3,378,337 $3,151,416 $2,986,337 $11,174,579 $10,465,844 $9,824,173 $9,067,284 $8,383,486 $7,760,589 $7,099,806 $6,548,993 $5,999,886 $5,412,355 $4,915,391 $4,633,503 $4,297,443 $4,085,792 $3,908,507 $3,731,325 $3,554,198 $3,358,507 $3,162,900 $2,146,320 $2,069,295 $1,997,940 $1,926,585 $1,890,908 $1,855,230 $160,000,000 $140,000,000 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 Cumulative County Education Revenues County Schools Total Local School District Total Career Tech Total Cumulative County Education Revenues 47

48 Comanche County Forecast Model Total Wind Energy Ad Valorem Tax Receipts (Personal Property) $25,000,000 Annual Tax Revenues $1,500,000 $1,000,000 $500,000 $365,634 $365,097 $369,302 $409,858 $395,139 $391,246 $1,726,376 $1,578,576 $1,762,980 $1,888,608 $1,411,830 $1,218,204 $1,112,649 $1,021,632 $930,615 $833,535 $751,998 $710,184 $658,890 $628,173 $600,690 $573,207 $545,724 $513,796 $481,867 $371,478 $359,353 $347,229 $335,104 $329,042 $322,979 $15,000,000 $5,000, Cumulative Tax Revenues Total OTC Reimbursements Total county collected taxes Cumulative payments to county Comanche County Education Revenues from Wind Energy Systems $25,000,000 Annual Education Revenues $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $316,473 $313,279 $316,821 $356,889 $341,729 $340,108 $1,473,416 $1,348,614 $1,608,267 $1,635,291 $1,219,282 $1,052,034 $960,894 $882,331 $803,769 $719,977 $649,592 $613,463 $569,155 $542,611 $518,879 $495,148 $471,416 $443,861 $416,307 $320,453 $309,994 $299,535 $289,075 $283,846 $278,616 $15,000,000 $5,000,000 Cumulative Education Revenues $200, County Schools Total Local School District Total Career Tech Total Cumulative County Education Revenues 48

49 Annual Tax Revenues $3,500,000 $3,000,000 $2,500,000 $1,500,000 $1,000,000 $500,000 $1,531,579 $1,423,801 $1,373,127 $1,629,593 $1,743,885 $1,423,711 Custer County Forecast Model Total Wind Energy Ad Valorem Tax Receipts (Personal Property) $1,203,515 $1,166,042 $1,043,883 $921,039 $826,037 $775,565 $713,869 $2,970,986 $2,809,555 $2,656,143 $2,496,298 $2,329,923 $2,149,139 $1,974,885 $1,827,089 $1,679,293 $1,522,902 $1,399,079 $1,337,694 $920,530 $881,095 $841,660 $749,254 $710,831 $662,802 $614,772 $576,349 $557,138 $537,926 $518,714 $509,108 $499,503 $60,000,000 $50,000,000 $40,000,000 $30,000,000 Cumulative Tax Revenues Total OTC reimbursements Total county collected revenues Cumulative payments to county Annual Education Revenues $2,500,000 $1,500,000 $1,000,000 $500,000 Custer County Education Revenues from Wind Energy Systems $1,238,912 $1,162,876 $1,168,930 $1,341,166 $1,330,806 $1,151,392 $980,209 $959,731 $912,138 $757,877 $679,638 $638,248 $587,597 $2,363,520 $2,235,292 $2,113,356 $1,986,398 $1,854,037 $1,710,331 $1,572,029 $1,455,068 $1,338,107 $1,214,394 $1,116,612 $1,067,991 $725,542 $694,479 $663,416 $589,926 $559,673 $521,857 $484,042 $453,789 $438,663 $423,536 $408,410 $400,847 $393,284 $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $15,000,000 Cumulative Education Revenues $5,000, County Schools Total Local School District Total Career Tech Total Cumulative County Education Revenues 49

50 Dewey County Forecast Model Total Wind Energy Ad Valorem Tax Receipts (Personal Property) $100,000,000 Annual Tax Revenues $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $1,588,124 $1,649,076 $1,498,299 $6,337,385 $6,016,813 $5,644,388 $5,254,929 $6,205,321 $5,714,689 $5,231,077 $4,802,021 $4,402,631 $3,974,012 $3,612,688 $3,395,061 $3,146,202 $2,951,920 $2,766,920 $2,620,464 $2,474,925 $2,334,594 $2,194,262 $2,077,064 $2,006,160 $1,550,586 $1,481,074 $1,437,956 $1,405,987 $90,000,000 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 Cumlative Tax Revenues $1,000,000 $312,154 $301,006 $295,432 $289, Total OTC reimbursements Total county collected revenues Cumulative payments to county Dewey County Education Revenues from Wind Energy Systems Annual Education Revenues $6,000,000 $5,000,000 $4,000,000 $3,000,000 $1,265,924 $1,302,761 $1,186,037 $4,880,210 $4,645,801 $4,357,496 $5,222,283 $4,875,723 $4,491,697 $4,113,565 $3,777,682 $3,465,043 $3,129,519 $2,845,892 $2,673,065 $2,476,283 $2,320,894 $2,173,510 $2,058,295 $1,943,443 $1,833,924 $1,724,405 $1,632,707 $1,576,604 $1,216,129 $1,160,869 $1,126,243 $1,100,945 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 Cumulative Education Revenues $1,000,000 $261,190 $251,862 $247,198 $242, County Schools Total Local School District Total Career Tech Total Cumulative County Education Revenues 50

51 $6,000,000 Garfield County Forecast Model Total Wind Energy Ad Valorem Tax Receipts (Personal Property) $80,000,000 Annual Tax Revenues $5,000,000 $4,000,000 $3,000,000 $3,577,272 $3,325,633 $3,126,989 $2,927,034 $5,019,057 $4,667,218 $4,324,969 $3,995,551 $3,666,132 $3,307,992 $2,986,609 $2,777,377 $2,545,725 $2,349,324 $2,176,897 $2,066,805 $1,942,328 $1,832,284 $1,722,239 $1,626,532 $1,559,498 $1,482,875 $1,406,252 $1,353,555 $1,320,038 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 Cumulative Tax Revenues $1,000,000 $537,033 $517,853 $508,263 $498, Total OTC reimbursements Total county collected revenues Cumulative payments to county Garfield County Education Revenues from Wind Energy Systems Annual Education Revenues $5,000,000 $4,000,000 $3,000,000 $3,113,480 $2,897,306 $2,724,602 $4,556,161 $4,293,688 $3,991,622 $3,697,579 $3,415,048 $3,132,516 $2,825,459 $2,550,428 $2,372,614 $2,175,266 $2,008,964 $1,862,720 $1,768,626 $1,662,498 $1,567,947 $1,473,396 $1,391,337 $1,334,261 $1,269,162 $1,204,063 $1,159,479 $1,130,941 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 Cumulative Education Revenues $1,000,000 $449,294 $433,248 $425,225 $417, County Schools Total Local School District Total Career Tech Total Total Education Revenues Cumulative County Education Revenues 51

52 Annual Tax Revenues $3,500,000 $3,000,000 $2,500,000 $1,500,000 $1,000,000 $1,285,379 $2,094,833 $2,347,479 $2,088,446 $1,865,973 $1,726,040 $1,579,029 $1,439,762 $3,271,907 Grady County Forecast Model Total Wind Energy Ad Valorem Tax Receipts $3,023,810 $2,792,102 $2,597,549 $2,426,114 $2,250,761 $2,089,565 $1,940,696 $1,791,828 $1,629,788 $1,483,770 $1,396,128 $1,310,587 $1,258,755 $1,206,923 $1,160,043 $1,117,689 $808,237 $60,000,000 $50,000,000 $40,000,000 $30,000,000 Cumulative Tax Revenues $500,000 $526,014 $493,138 $476,700 $460,262 $443,824 $435,605 $427, Total OTC reimbursements Total county collected revenues Cumulative payments to county Grady County Education Revenues from Wind Energy Systems $50,000,000 $3,000,000 $2,500,000 $1,500,000 $1,000,000 $500,000 $1,207,550 $1,835,821 $2,090,341 $1,839,761 $1,644,190 $1,520,293 $1,390,504 $1,267,909 $2,713,168 $2,503,637 $2,308,668 $2,148,194 $2,006,215 $1,862,930 $1,731,428 $1,609,729 $1,488,031 $1,355,196 $1,234,932 $1,161,749 $1,091,732 $1,048,854 $1,005,977 $967,701 $933,191 $651,649 $418,266 $392,124 $379,054 $365,983 $352,912 $346,377 $339,841 $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $15,000,000 $5,000,000 County Schools Total Local School District Total Career Tech Total Total Education Revenues Cumulative County Education Revenues 52

53 Grant County Forecast Model Total Wind Energy Ad Valorem Tax Receipts (Personal Property) Annual Tax Revenues $2,500,000 $1,500,000 $1,000,000 $500,000 $572,609 $529,014 $499,476 $467,537 $435,598 $2,263,068 $2,122,316 $1,992,940 $1,855,770 $1,716,309 $1,571,027 $1,441,362 $1,319,807 $1,205,415 $1,083,228 $980,529 $928,497 $862,482 $819,852 $779,512 $743,752 $707,992 $664,437 $623,172 $589,703 $452,106 $436,517 $420,927 $413,132 $405,337 $35,000,000 $30,000,000 $25,000,000 $15,000,000 Cumulative Tax Revenues $5,000,000 Total OTC reimbursements Total county collected revenues Cumulative payments to county Grant County Education Revenues from Wind Energy Systems $30,000,000 Annual Education Revenues $1,500,000 $1,000,000 $500,000 $476,011 $437,934 $429,132 $419,614 $1,841,766 $1,750,312 $1,664,849 $1,574,463 $1,484,077 $1,384,022 $1,285,718 $1,201,053 $1,115,320 $1,025,732 $951,119 $915,443 $870,781 $843,408 $816,035 $789,344 $764,018 $732,702 $701,386 $676,743 $664,080 $335,454 $323,474 $317,483 $311,493 $25,000,000 $15,000,000 $5,000,000 Cumulative Education Revenues Axis Title County Schools Total Local School District Total Cumulative County Education Revenues 53

54 Annual Tax Revenues $14,000,000 $12,000,000 $8,000,000 $6,000,000 $4,000,000 Harper County Forecast Model Total Wind Energy Ad valorem Tax Receipts (Personal Property) $155,606 $164,980 $165,776 $162,665 $1,189,355 $1,465,074 $1,543,240 $1,522,279 $1,523,110 $1,501,338 $1,182,146 $934,419 $847,781 $758,569 $680,476 $12,378,252 $11,672,260 $11,027,880 $10,337,791 $9,648,402 $8,886,728 $8,120,291 $7,426,447 $6,738,067 $6,011,179 $5,372,692 $5,090,803 $4,739,990 $4,537,640 $4,086,325 $3,831,658 $3,635,163 $3,389,544 $3,143,925 $2,947,429 $2,849,182 $2,750,934 $2,652,687 $2,603,563 $2,554,439 $180,000,000 $160,000,000 $140,000,000 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 Cumulative Tax Revenues Total OTC reimbursements Total county collected revenues Cumulative payments to county Annual Education Revenues $12,000,000 $8,000,000 $6,000,000 $4,000,000 Harper County Education Revenues from Wind Energy Systems $133,825 $144,102 $144,375 $146,705 $1,055,760 $1,250,857 $1,323,225 $1,135,955 $1,334,600 $1,289,016 $1,013,953 $801,374 $727,069 $650,585 $583,714 $10,639,763 $10,032,906 $9,479,078 $8,885,865 $8,293,266 $7,638,556 $6,979,741 $6,383,360 $5,791,698 $5,166,926 $4,617,378 $4,375,095 $4,073,573 $3,899,646 $3,511,163 $3,293,820 $3,124,906 $2,913,764 $2,702,621 $2,533,708 $2,449,251 $2,364,794 $2,280,337 $2,238,108 $2,195,880 $160,000,000 $140,000,000 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 Cumulative Education Revenues County Schools Total Local School District Total Career Tech Total Cumulative County Education Revenues 54

55 Kay County Forecast Model Total Wind Energy Ad valorem Tax Receipts Annual Tax Revenues $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $1,000,000 $1,250,909 $1,153,697 $1,090,634 $3,665,006 $5,142,067 $4,830,409 $7,907,095 $7,400,577 $6,891,657 $6,352,899 $5,843,555 $5,357,665 $4,852,892 $4,405,611 $4,047,983 $3,705,696 $3,421,437 $3,245,729 $3,048,730 $2,899,312 $2,748,832 $2,591,256 $2,444,742 $2,318,259 $2,205,970 $1,846,466 $1,792,822 $1,746,274 $1,135,502 $752,270 $738,076 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 Cumulative Tax Revenues Total OTC reimbursements Total county collected revenues Cumulative payments to county Kay County Education Revenues from Wind Energy Systems $120,000,000 Annual Education Revenues $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $1,000,000 $959,689 $996,192 $971,166 $4,181,855 $5,283,026 $4,966,641 $7,338,477 $6,863,061 $6,378,386 $5,869,516 $5,392,602 $4,937,591 $4,461,923 $4,045,697 $3,732,582 $3,424,310 $3,176,861 $3,015,212 $2,836,640 $2,696,365 $2,551,303 $2,400,599 $2,263,589 $2,152,779 $2,053,250 $1,732,229 $1,684,691 $1,642,794 $902,519 $597,919 $586,637 $100,000,000 $80,000,000 $60,000,000 $40,000,000 Cumulative Education Revenues County Schools Total Local School District Total Career Tech Total Cumulative County Education Revenues 55

56 Kiowa County Forecast Model Total Wind Energy Ad valorem Tax Receipts (Personal Property) $45,000,000 Annual Tax Revenues $2,500,000 $1,500,000 $1,000,000 $500,000 $947,219 $895,721 $896,132 $905,935 $732,907 $697,062 $658,489 $1,860,899 $1,532,976 $1,408,771 $1,299,346 $1,216,604 $1,120,905 $2,203,729 $2,061,228 $1,923,607 $1,776,734 $1,637,156 $1,520,071 $1,400,061 $1,308,871 $1,217,680 $1,121,609 $1,041,651 $989,041 $724,558 $687,552 $659,289 $631,026 $602,763 $573,992 $545,221 $292,791 $283,031 $273,271 $263,512 $258,632 $253,752 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $15,000,000 $5,000,000 Cumualtive Tax Revenues Total OTC reimbursements Total county collected revenues Cumulative payments to county $2,500,000 Kiowa County Education Revenues from Wind Energy Systems $35,000,000 Annual Education Revenues $1,500,000 $1,000,000 $500,000 $739,139 $698,954 $686,488 $697,181 $562,969 $535,507 $508,045 $1,490,073 $1,221,799 $1,143,872 $1,055,816 $988,333 $910,447 $1,971,864 $1,845,277 $1,723,418 $1,593,196 $1,469,278 $1,363,057 $1,254,168 $1,169,773 $1,085,379 $996,257 $921,971 $874,778 $662,765 $629,314 $603,134 $576,954 $550,773 $523,501 $496,228 $283,649 $274,194 $264,739 $255,284 $250,556 $245,829 $30,000,000 $25,000,000 $15,000,000 $5,000,000 Cumulative Education Revenues County Schools Total Local School District Total Career Tech Total Cumulative County Education Revenues 56

57 Murray County Forecast Model Total Wind Energy Ad Valorem Tax Receipts (Personal Property) Annual Tax Revnues $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $1,500,000 $1,000,000 $2,591,310 $4,172,478 $3,939,369 $3,702,645 $3,458,694 $3,198,479 $2,927,421 $2,672,627 $2,428,675 $2,173,881 $1,938,965 $1,792,594 $1,676,942 $1,582,976 $1,510,694 $1,438,412 $1,366,130 $1,283,006 $1,192,653 $1,113,143 $1,062,545 $1,026,404 $990,263 $964,965 $946,894 Murray County Education Revenues from Wind Energy Systems $45,000,000 $3,500,000 $3,000,000 $2,500,000 $1,500,000 $1,000,000 $1,963,734 $3,161,968 $2,985,314 $2,805,921 $2,621,051 $2,423,856 $2,218,444 $2,025,357 $1,840,487 $1,647,400 $1,469,377 $1,358,455 $1,270,812 $1,199,603 $1,144,827 $1,090,050 $1,035,274 $972,281 $903,811 $843,557 $805,213 $777,825 $750,437 $731,265 $717,571 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $15,000,000 $500,000 $284,837 $5,000, $60,000,000 $50,000,000 $40,000,000 $30,000,000 Cumulative Tax Revenues $500,000 $375, Total OTC reimbursements Total owner paid taxes Cumulative payments to county Annual Education Revenues Cumulative Education Revenues County Schools Total Local School District Total Career Tech Total Cumulative County Education Revenues 57

58 $2,396,805 $4,162,569 $3,946,629 $3,728,556 $3,503,202 $6,000,000 Osage County Forecast Model Total Wind Energy Ad Valorem Tax Receipts (Personal Property) $70,000,000 Annual Tax Revenues $5,000,000 $4,000,000 $3,000,000 $2,907,991 $5,050,354 $4,767,795 $4,484,170 $4,190,189 $3,879,077 $3,552,433 $3,242,920 $2,948,939 $2,643,538 $2,356,334 $2,169,256 $2,032,355 $1,914,184 $1,827,078 $1,739,973 $1,652,868 $1,554,342 $1,445,460 $1,348,000 $1,283,737 $1,240,184 $1,196,631 $1,164,500 $1,142,724 $60,000,000 $50,000,000 $40,000,000 $30,000,000 Osage County Education Revenues from Wind Energy Systems $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $1,500,000 $3,263,729 $3,013,336 $2,777,064 $2,551,711 $2,316,944 $2,098,432 $1,959,305 $1,853,374 $1,764,765 $1,697,994 $1,631,222 $1,564,451 $1,488,266 $1,404,802 $1,330,751 $1,282,807 $1,249,421 $1,216,036 $1,192,063 $1,175,371 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $1,000,000 $678,591 $500, Total Tax Revenues $1,000,000 $538, Total OTC reimbursements Total owner paid taxes Cumulative payments to county Annual Education Revenues Cumulative Education Revenues County Schools Total Local School District Total Career Tech Total Cumulative County Education Revenues 58

59 Roger Mills County Forecast Model Total Wind Energy Ad Valorem Tax Receipts (Personal Property) $7,000,000 $6,123,280 $6,166,238 $90,000,000 $80,000,000 Annual Tax Revenues $6,000,000 $5,000,000 $4,000,000 $3,000,000 $1,000,000 $1,510,962 $3,072,612 $3,689,570 $5,290,358 $5,104,875 $4,688,626 $4,264,435 $3,838,783 $3,449,109 $3,138,598 $2,846,540 $2,636,079 $2,499,647 $2,362,581 $2,255,941 $2,140,550 $2,020,989 $1,905,729 $1,802,854 $1,712,770 $1,640,874 $1,596,306 $1,555,907 $1,012,481 $761,586 $508,592 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 Cumulative Tax Revenues Total OTC Reimbursements Total county collected taxes Cumulative payments to county Roger Mills County Education Revenues from Wind Energy Systems $6,000,000 $70,000,000 $5,000,000 $4,735,104 $4,781,278 $60,000,000 $4,000,000 $3,000,000 $1,000,000 $1,189,933 $3,264,791 $2,875,444 $4,004,261 $3,947,416 $3,624,216 $3,295,343 $2,965,028 $2,662,997 $2,424,863 $2,200,732 $2,040,213 $1,934,921 $1,829,626 $1,746,939 $1,657,160 $1,564,152 $1,474,786 $1,395,933 $1,326,987 $1,271,842 $1,237,592 $1,206,570 $767,734 $573,740 $377,926 $50,000,000 $40,000,000 $30,000, County Schools Total Local School District Total Career Tech Total Total Education Revenues Cumulative County Education Revenues 59

60 Texas County Total Wind Energy Ad Valorem Tax Receipts (Personal Property) $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $1,000,000 $1,849,939 $1,696,377 $1,616,485 $4,157,232 $3,904,512 $3,651,265 Annual Tax Revenues $7,339,904 $6,863,901 $6,387,842 $5,887,832 $5,423,419 $4,984,736 $4,523,400 $4,137,712 $3,823,934 $3,477,023 $3,204,649 $3,032,372 $2,835,285 $2,695,228 $2,558,931 $2,422,633 $2,297,399 $2,185,164 $2,072,928 $1,589,787 $1,545,644 $1,501,502 $893,135 $876,595 $860,056 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 Cumulative Tax Revenues Total OTC reimbursements Total county collected revenues Cumulative payments to county Texas County Education Revenues from Wind Energy Systems Annual Education Revenues $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $1,000,000 $1,967,383 $1,411,470 $1,356,874 $3,474,222 $3,280,034 $3,087,084 $6,155,964 $5,777,013 $5,398,017 $5,000,272 $4,629,237 $4,272,193 $3,898,079 $3,583,212 $3,327,850 $3,045,071 $2,823,970 $2,686,767 $2,529,035 $2,417,424 $2,306,782 $2,196,140 $2,094,653 $2,002,851 $1,911,049 $1,315,516 $1,278,989 $1,242,462 $739,051 $725,365 $711,679 $100,000,000 $90,000,000 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 Cumulative Education Revenues County Schools Total Local School District Total Career Tech Total Cumulative County Education Revenues 60

61 Washita County Forecast Model Total Wind Energy ad Valorem Tax Receipts (Personal Property) Annual Tax Revenues $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $174,976 $162,169 $156,238 $160,533 $158,513 $131,885 $97,070 $1,547,001 $1,440,699 $1,378,300 $1,286,471 $1,199,738 $1,102,577 $1,007,753 $922,188 $836,624 $745,138 $668,085 $631,407 $586,217 $561,039 $535,862 $510,684 $486,254 $455,903 $386,486 $362,803 $350,962 $339,120 $327,279 $321,358 $315,437 $25,000,000 $15,000,000 $5,000,000 Cumulative Tax Revenues Total OTC reimbursements Total county collected revenues Cumulative payments to county Washita County Education Revenues from Wind Energy Systems $18,000,000 Annual Education Revenues $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $150,398 $138,928 $133,401 $137,350 $135,730 $112,709 $83,080 $1,276,525 $1,188,852 $1,137,393 $1,061,464 $989,948 $909,804 $831,683 $761,178 $690,673 $615,299 $551,762 $521,433 $484,136 $463,363 $442,590 $421,817 $401,691 $376,696 $317,879 $298,400 $288,661 $278,921 $269,182 $264,312 $259,442 $16,000,000 $14,000,000 $12,000,000 $8,000,000 $6,000,000 $4,000,000 Cumulative Education Revenues County Schools Total Local School District Total Career Tech Total Cumulative County Education Revenues 61

62 Annual Tax Revenues $14,000,000 $12,000,000 $8,000,000 $6,000,000 $4,000,000 Woodward County Forecast Model Total Wind Energy Ad Valorem Tax Receipts (Personal Property) $2,614,636 $2,940,440 $2,766,912 $2,826,315 $3,145,507 $2,947,666 $2,706,396 $2,484,757 $12,256,329 $11,454,037 $10,726,658 $10,054,198 $9,361,687 $8,649,285 $7,941,542 $7,309,678 $6,677,242 $5,995,473 $5,334,139 $5,043,369 $4,715,976 $4,512,077 $4,307,974 $4,118,865 $3,933,852 $3,005,966 $2,792,598 $2,622,989 $2,537,212 $2,341,553 $2,257,926 $2,216,113 $2,174,299 $180,000,000 $160,000,000 $140,000,000 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 Cumulative Tax Revenues $335,154 $284,186 $286,896 $282,176 $291,790 $286,887 $233, Total OTC reimbursements Total county collected revenues Cumulative payments to county $12,000,000 Woodward County Education Revenues from Wind Energy Systems $140,000,000 Annual Education Revenues $8,000,000 $6,000,000 $4,000,000 $235,859 $238,185 $232,557 $243,244 $239,074 $195,009 $2,122,725 $2,435,981 $2,272,074 $2,083,251 $2,562,184 $2,358,875 $2,162,074 $1,982,185 $9,542,108 $8,912,142 $8,342,908 $7,822,681 $7,285,174 $6,735,823 $6,189,511 $5,699,677 $5,208,866 $4,678,251 $4,157,877 $3,930,634 $3,676,948 $3,519,199 $3,361,451 $3,215,984 $3,072,949 $2,302,582 $2,138,230 $2,007,478 $1,941,494 $1,813,513 $1,748,744 $1,716,360 $1,683,976 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 Cumulative Education Revenues County Schools Total Local School District Total Career Tech Total Cumulative County Education Revenues 62

63 The results of the historical data collection and forecast modeling for each county with either an existing or planned wind energy project are provided below. Mapping Methodology While most local residents can describe the location of wind energy projects in their area, at the time this research commenced no comprehensive map of Oklahoma wind energy project locations had been compiled. Thus, determining the location of all Oklahoma utility-scale wind energy projects posed the first task for the research. Using the compilation of information provided by the State Energy Office located within Oklahoma Department of Commerce and information from Oklahoma Cooperative Extension Service staff, the approximate locations of all existing Oklahoma wind energy projects were estimated. Next, Google Earth Pro software was used to locate each project. Google Earth Pro uses a combination of both satellite imagery sources (such as Landsat and DigitalGlobe imagery) and aerial orthophotographic sources that are composited with a number of other data layers to create an interactive Geographic Information System (GIS) interface. In most cases, Google Earth Pro imagery was sufficiently new to include all existing projects except those constructed in 2014 (specifically, Seiling I and II [Dewey and Woodward Counties], Mammoth Plains [Dewey and Blaine Counties], and Origin Wind [Murray County]). After the general area for each project was located, Google Earth Pro s measurement tools were used to determine the area of every element of each respective project, which were categorized into turbines, roads, and support systems. Turbine areas were defined as the area immediately adjacent to a turbine s foundation and which represented a material deviation from the pattern of the road leading to the turbine. Roads were defined as the areas identifiable as roads leading specifically to a wind project element such as a turbine, transformer, or substation. Support systems were defined as electrical substations associated with a wind energy project, maintenance and operation ( M&O ) buildings, electrical transformers, equipment laydown yards, or any features other than turbines or roads readily identifiable with a wind energy project. For all areas, the area assigned to a feature (turbine, road, support system) were defined by marking the line where a clear disturbance of the surrounding vegetation existed. This method naturally depends on the resolution of the imagery available, but also depends on the terrain and condition of the vegetation demarcation lines were more difficult to establish in areas of exceptionally rocky terrain with limited vegetation and in areas most severely affected by the recent drought. When vegetation lines were difficult to discern, other factors such as areas clearly graveled or overlaid with some other contrasting material were used to establish the borders of project features. Each project element (turbine, road, support system) was traced as precisely as possible given the resolution of the available imagery by describing each element using Google Earth Pro s polygonal 63

64 measurement tool, which provides both the perimeter of each traced object and the area within that perimeter. 74 Endnotes 1 See D. Hays and B. Allen, Windmills and Pumps of the Southwest, 2 (1983). 2 See T. Lindsay Baker, A Field Guide to American Windmills 45 (University of Oklahoma Press, 1985). 3 Hereinafter, utility scale refers to turbines or projects consisting of turbines with a nameplate capacity of 500 kilowatts (kw) or more. The smallest size of turbine used in Oklahoma utilityscale projects is 1.5 megawatts (MW). 4 P. Gipe, Wind Energy Basics: A Guide to Home and Community-Scale Wind Energy Systems, 2d Ed. (Chelsea Green, 2009), 91 5 See J.F. Manwell, McGowan, J.G., and Rogers, A.L., Wind Energy Explained: Theory, Design and Application. Wiley, West Sussex. See also Gipe, See, generally, S. Ferrell, R. Rumley Wind Energy Leases: A Handbook for Farmers and Ranchers. Oklahoma Cooperative Extension Service Circular E U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, U.S. Installed Wind Energy Capacity. 8 E. Smith, DeWolf, S., Wetsel, R., Texas Wind Law. Matthew Bender, New Providence. 9 See, generally, Public Utility Commission of Texas, CREZ Program Overview, available at (last accessed May 1, ). 10 American Council on Renewable Energy, Renewable Energy in Iowa, available at acore.org/files/pdfs/states/iowa.pdf (last accessed May 7, ). 11 Iowa Code, Iowa Code A Renewable Portfolio Standard requires utilities to incorporate a specified amount of renewable energy capacity or power purchases/sales into their operations. 13 Iowa Code 476B. 14 Those few periods marked by relatively flat growth in Oklahoma s wind energy industry coincide with national trends caused by uncertainty about the federal Production Tax Credit ( PTC ). Inconsistency in policy regarding the PTC has caused a number of intensive wind energy development cycles followed by marked slowdowns, underscoring the importance of clear development policy in stabilizing the growth of the industry. See Phillip Brown, Congressional Research Service, R42576, U.S. Renewable Electricity: How Does the Production Tax Credit Impact Wind Markets? (2012). 15 American Wind Energy Association (AWEA) Fourth Quarter 2014 Market Report, House Bill 3028 (signed May, 2010). 17 EIA Oklahoma state energy profile data, available at (last accessed May 1, ). 18 Wind power production is a function of both the installed capacity of wind turbines and the wind resource in a given year. The percentage of a wind power project s rated capacity that is actually produced in electrical power is referred to as its capacity factor. Interviews with operators of Oklahoma wind energy projects indicates projects in the state typically operate at a capacity factor of approximately 40 percent, which is at the high end of the national range of 20 to 40 percent (see EIA, Monthly Generator Capacity factor Data Now Available by Fuel and Technology, available athttp:// (last accessed May 12, )). 19 K. Dean and R. Evans, The Statewide Economic Impact of Wind Energy Development in 64

65 Oklahoma: An Input-Output Analysis by Parts Examination, Economic Impact Group, LLC (2014). 20 The National Renewable Energy Laboratory estimates the technical potential for Oklahoma s wind energy capacity at 517,000 megawatts. See A. Lopez, B. Roberts, D. Heimiller, N. Blair, and G. Porro, U.S. Renewable Energy Technical Potentials: A GIS-Based Analysis, National Renewable Energy Laboratory,, 14, available at (last accessed May 1, ). 21 Latin for according to the value commonly used to refer to a tax based on the value of the item taxed Okla. Stat Okla. Stat Okla. Stat. 2841(A). As discussed in more detail within section 2.2, determining the value of a very large and technically complex asset like a wind energy project poses a significant challenge. The complexity of this task has led to a number of theories as to how to determine the value of wind energy systems, which has in turn led to a number of tax protest cases regarding the projects. 25 Oklahoma Constitution, Article X, 8(A)(1). 26 Oklahoma Constitution, Article X, 8(A)(3) sets the assessment ratio for public service company property at the values in place on January 1, 1996, which was percent. 27 A mill is a thousandth of a dollar, or in other words, one-tenth of a cent. For example, a tax of exactly four mills would mean a tax liability of $0.004 per dollar of net assessed value. 28 See generally Oklahoma Constitution Art. IX, 9, 10 for the authorized levies (and their corresponding limits) for school districts, Career Tech, and community colleges. An thorough discussion of these millages can be found in the publication School Finance Technical Assistance Document, Oklahoma State Department of Education (2013) available at (last accessed April 28, ). 29 Oklahoma Gas and Electric Co. (OG&E), which falls under the definition of a public service corporation for the purposes of 68 Okla. Stat. 2841(A), directly owns three wind energy projects: Centennial (Harper County), OU Spirit (Woodward County), and Crossorads (Dewey County). As a result, separate tax documents were not available for these projects. Thus, no historical or forecast data was obtained for these projects. 30 Almost universally, wind energy developers lease the land upon which the wind power facilities are located. 31 Average values for pasture and cropland were taken from the OSU Regional Cropland and Pasture Values Survey, available at (last accessed May 6, ). 32 Millage rates for each region were calculated as the average of the effective millage rates over all counties in each region, as reported by the OTC. 33 This number represents the total capacity of SPP interconnection requests listed as either on schedule for connection or on suspension for connection as of the query to the SPP interconnection application database made on March 19,. 34 That is, payments made through the tax year Okla. Stat (B)(3)(c). 36 Okla. Const. Art. X, 6B(A). 37 Okla. Const. Art. X, 6B(B). 38 Okla. Const. Art. X, 6B(D). It should be noted the statute enacted pursuant to this directive, 68 Okla. Stat. 2902, has been amended 40 times since it initial enactment in See, generally, 68 Okla. Stat. 2902(C)(4). 65

66 40 68 Okla. Stat. 2902(C)(8). 41 See 68 Okla. Stat. 2902(B)(1)(c),(e) Okla. Stat. 193(A)(1), first enacted by HB 1536, c. 14, 4 (1985) Okla. Stat. 193(B) Okla. Stat. 2352(2)(d). It should be noted that this appropriation became insufficient to meet the obligations of the Reimbursement Fund in 2002, and payments from the fund have been in arrears since that time. Conversations with staff in the OTC Ad Valorem division and county treasurers indicate, payments to counties with wind energy projects qualifying for reimbursement have been delayed by approximately one year, with payments for tax year 2013 made in late Pub.L , 16 U.S.C. 824a-3 () Okla. Stat. 193(A). 47 See 68 Okla. Stat See American Wind Energy Association, Wind Energy and the Environment, on file with author. 49 With all other factors held constant, projects with relatively even terrain permit spacing of turbines at operationally-optimum spacing without having to avoid canyons, draws, and other areas of low wind resources. Similarly, larger turbines create larger wake zones downwind meaning turbines must be placed farther apart to avoid interfering with each other s optimal performance. Areas with fairly steady winds out of a given direction (which, for most of Oklahoma, is north and south) mean turbines can be placed closer together without potentially entering each other s wake zones. 50 D. Doye and R. Sahs, Oklahoma Cropland Rental Rates: , Oklahoma Cooperative Extension Service Current Report CR-230 (2013), available at docushare/dsweb/get/document-5994/cr-230web12-13.pdf (last accessed May 6, ), and D. Doye and R. Sahs, Oklahoma Cropland Rental Rates: , Oklahoma Cooperative Extension Service Current Report CR-216 (2013), available at docushare/dsweb/get/document-8705/cr-216web12-13.pdf (last accessed May 6, ). 51 Figure 25 encompasses not only the KODE Novus 1 project, but also part of the Noble Great Plains Windpark in Texas. 52 Technical data compiled from conversations with Oklahoma project developers. 53 See, e.g. A. Farboud, Crunkhorn, R. & Trinidade, A. 2013, Wind turbine syndrome : fact or fiction?, Journal of Larynology and Otology, vol. 127, no. 3, pp ; Chapman, S. 2012, Wind turbine syndrome: a classic communicated disease, Australasian Science, vol. 33, no. 8, pp Oklahoma Senate Bill 808 (2)(A) (). 55 Oklahoma Corporation Commission Cause PUD , direct testimony of Jesse B. Langston on behalf of Oklahoma Gas and Electric Company ( July 28, 2011). 56 Oklahoma Corporation Commission Cause PUD , direct testimony of Jon R. Maclean on behalf of Public Service Company of Oklahoma (October 24, 2013). 57 Correspondence with Dan Sullivan, Chief Executive Officer, Grand River Dam Authority, October 24, U.S. Department of Energy Office of Energy Efficiency and Renewable Energy, 2013 Wind Technologies Market Report (2013), 47-51, available at downloads/2013-wind-technologies-market-report (last accessed April 29, ). 59 U.S. Department of Energy Office of Energy Efficiency and Renewable Energy,

67 Wind Technologies Market Report (2013), 58-59, available at downloads/2013-wind-technologies-market-report (last accessed April 29, ). 60 See, generally, Southwest Power Pool, Generator Interconnection Procedures (GIP) including Generator Interconnection Agreement, available at transmission/studies/attachment%20v%20gip_gia%20effective%202-1_.pdf (last accessed April 29, ). 61 See Clean Line Energy Partners, Plains & Eastern Clean Line: Frequently Asked Questions (), available at docs/ _webiste_faqs.pdf (last accessed April 29, ). 62 U.S. Department of Energy Office of Energy Efficiency and Renewable Energy, 2013 Wind Technologies Market Report (2013), available at wind-technologies-market-report (last accessed April 29, ). 63 U.S. Department of Energy Office of Energy Efficiency and Renewable Energy, 2013 Wind Technologies Market Report (2013), ix, available at downloads/2013-wind-technologies-market-report (last accessed April 29, ). 64 Although public service corporations are centrally assessed, their tax obligations are also defined by the school districts in which their assets lie. 65 These three methods are summarized in the International Association of Assessing Officers ( IAAO ) publication IAAO Standard on Valuation of Personal Property, on file with the author. 66 See, generally, U.S. Department of Energy Office of Energy Efficiency and Renewable Energy, 2013 Wind Technologies Market Report (2013), pp. 47 et seq., available at eere/wind/downloads/2013-wind-technologies-market-report (last accessed April 29, ). 67 Oklahoma Tax Commission Ad Valorem Tax Division, Oklahoma Business Personal Property Valuation Schedule, available at (last accessed April 29, ). 68 See, e.g., 68 Okla. Stat. 2902(B)(1)(d). Cash valuation (cost approach) is also required by the OTC regulations at Okla. Admin. Code 710: Oklahoma Tax Commission Ad Valorem Tax Division, Oklahoma Business Personal Property Valuation Schedule, 140, 146, available at advform/busppvalschedfinal.pdf (last accessed April 29, ). 70 Oklahoma Tax Commission Ad Valorem Tax Division, Oklahoma Business Personal Property Valuation Schedule, 140, 146, available at advform/busppvalschedfinal.pdf (last accessed April 29, ). 71 Interview with Doug Brydon, Deputy Director, Oklahoma Tax Commission Ad Valorem Division, March 19,. 72 S. Ferrell, Oklahoma Wind Energy Leasing Handbook, Oklahoma Cooperative Extension Service Publication E-1033 (2012), OTC county average millage rates on file with author. 74 When measuring objects using aerial or satellite imagery, the utmost accuracy is assured by using imagery that has been orthorectified meaning the imagery has been adjusted to account for the fact that it is a two-dimensional, flat representation of a three-dimensional spherical surface. Not all Google Earth Pro imagery is orthorectified, but given the majority of the imagery used for the purposes of this project was satellite imagery and the areas being measured were very small, consultation with GIS experts suggested the errors in measurement would be acceptably small. 67

68 WE MEAN BUSINESS PO Box 53217, Oklahoma City, Oklahoma