Wind Energy Industry Impacts in Oklahoma November 2015
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RESEARCH FOUNDATION REPORT Wind Energy Industry Impacts in Oklahoma November 2015 Prepared by Dr. Shannon L. Ferrell and Joshua Conaway, Oklahoma State University Department of Agricultural Economics 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, 2015. All other data contained in this report reflect the most current publicly available information as of May 1, 2015. 2 Contents Figures ............................................................................4 Executive Summary .. .5 Section 1: Oklahoma’s Wind Energy Industry .............................................7 1.1 The History of Oklahoma’s Wind Energy Industry .............................7 1.2 Oklahoma’s Wind Energy Industry Today ....................................8 1.3 The Future of Oklahoma Wind Energy .....................................11 Section 2: Wind Energy’s Contributions to Ad Valorem Revenues ............................13 2.1 Oklahoma’s Ad Valorem Tax System ........................................13 2.2 Wind Energy’s Contribution to Oklahoma Ad Valorem Revenues .................14 2.2.1 Historical Payments to Counties .....................................14 2.2.2 Forecast Payments to Counties ......................................16 2.3 The Oklahoma Qualifying Manufacturing Concern Exemption and Exempt Manufacturing Reimbursement Program ....................................20 2.3.1 Forecast Reimbursement Fund Obligations for the Wind Industry . .22 2.3.2 Assessment Methodologies for Oklahoma Counties ......................24 2.4 Conclusions and Recommendations Regarding Ad Valorem Issues ................24 Section 3: Spatial Issues and Land Use in Oklahoma’s Wind Energy Industry ...................24 3.1 Mapping Methodology ..................................................25 3.2 Summary of Spatial and Land Use Findings ..................................25 3.3 Spacing, Compatibility of Land Uses, and Setback Issues ........................27 3.3.1 Wind Energy and Agricultural Land Uses .............................27 3.3.2 Wind Energy and Petroleum Development .............................31 3.3.3 Setback Issues ...................................................33 3.5 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 .....................................................37 3 Figures Figure 1: Oklahoma Installed Wind Energy Capacity, 2002 - 2015 ............................8 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 2015 .....................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 . .13 Figure 8: Historic Ad Valorem Revenues and Property Values for Wind Energy Systems, 2004-2014 .........................................15 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 . .18 Figure 13: Total Education Revenues from Wind Energy Systems ............................19 Figure 14: Composition of School Funds Paid over Forecast Model, 2003 – 2043 ................20 Figure 15: OTC Ad Valorem Reimbursements by Industry Sector, 2004-2013 ...................22 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 . .30 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 . .33 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 . .34 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 ......................................42 4 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 2015. Possessing one of the nation’s largest wind resource potentials and an increasingly robust electrical transmission grid,