Commissioners move it ahead by one step at regular session 101818

[Editor's Note: These two Grant County Commission sessions on Oct. 16 and 18, 2018, will be covered in a multi-part series of articles, combining the actions where appropriate.]

By Mary Alice Murphy

During discussion at the October work session on Oct. 16, 2018, on the November meeting dates, commissioners agreed to hold a combined work-and-regular-sessions meeting on Tuesday, Nov. 13, 2018, at 9 a.m. at the Grant County Administration Center.

The first item of business on the work session agenda was a presentation by Bob Karsted, wind farm project manager of Scout Clean Energy, and Mike Greczyn, a consultant with Altis, on the proposed development of the Great Divide Wind Farm LLC project in southern Grant County off Separ Road.

It was noted that an attorney with Rodey Law Firm would attend the Thursday regular session to discuss the bond issue. On Tuesday, however, an attorney from the firm was available on the telephone.

Karsted said Scout Clean Energy was based in Boulder, Colo. It is a utility-scale clean energy firm that was spun off from Harvest Energy. "We generally team together with various companies on each project. Our most recent project just went operational in the panhandle of Oklahoma. We plan a 250 MW (megawatt) facility here. We have 10 projects in development, which will provide more than 2000 MW, the equivalent of 2 gigawatts."

He said the size of the project will encompass almost 2,400 acres that are owned by only a few owners. "In Oklahoma, we had the opportunity to interconnect. We had local support in an area of a strong wind source."

Great Divide Wind Farm LLC began in 2016 to take advantage of the largest undeveloped viable wind footprint in Grant County. "Not only is it a good wind resource, but it gives us the opportunity to tap into a nearby transmission line. The location is 14-16 miles east-northeast of Lordsburg. "

The property has four meteorological towers, and will have three 60-foot towers and 1 100-foot tower, gathering wind data. "We estimate the wind will provide enough energy for 100,000 New Mexico homes. The number of wind turbines will be 60-100. There will be an 18-to-24-month construction time frame, with job creation of 275-300 temporary jobs and 10-15 permanent jobs after completion."

Greczyn said environmental studies on the project had begun in 2017. "We are doing avian and raptor studies. We would like completion of the project by October 2020 Halloween. A lot of the employment will be temporary here in the area. That is subject to your gross receipts tax, providing about $2 million to the county. We anticipate up to $400 million in financing."

The Rodey Law Firm attorney on the telephone, David Buchholtz, described what would happen at the Thursday regular commission meeting. "The resolution is an intention to go forward with the process. The decision will be subject to an ordinance going forward. We propose an industrial revenue bond to avoid tax liabilities. This first step is not a commitment by the county to spend or borrow money. The county has no obligation to put together the financing, which will come through the auspices of the developer. The resolution puts the project technically in the name of the county and then under an IRB lease to the developer. That is sometimes off-putting, but it is common practice in New Mexico. The structure is not unusual. The documents are written to protect the county. The requirement is also that the school district it impacts has to agree to the payment-in-lieu-of-taxes provision (PILOT). The school districts that are involved would have to agree to the PILOT. The developer is represented by independent counsel and will be taking the lead in preparing documents that we will also review. We also represent the Silver City Consolidated Schools in bond matters, but not in this issue, where they are represented by their regular counsel."

He said the issues will be negotiated between the time of the passage of the resolution and before the passage of the full ordinance.

Buchholtz said if the turbines cross into Cobre School district boundaries, the district would have to also agree to the conditions.

County Manager Charlene Webb said the county has already done the research and only Silver Schools District has jurisdiction over the property under consideration.

Commissioner Harry Browne asked if Aldo Leopold Charter School would also have to agree, as it receives property tax revenue through the county and through the state with SB9 and HB33.

Buchholtz said he didn't think so, but he said it was an important enough question that he would look into it.

Browne asked if the lease had a termination date.

"Yes," Buchholtz said, "but I don't know if it has been negotiated yet. The statute requires that it be no longer than 30 years, and the term of the lease is what determines the length of the property tax abatement. But the abatement can possibly be negotiated for a shorter term. At the end of the term, the property is ceded to the developer and goes back onto the property rolls.

"Technically, the county is the lessor and leases it to the developer, which pays lease payments to the county," Buchholtz continued. "At the end of the lease, the property goes back to the developer."

Webb noted that in her past experience the term of the lease coincided with the term of the bond.

Browne asked if the county had an estimate of how much loss of county revenue would occur due to the abatement.

"We're working on that," Webb replied. "The idea is for the county not to lose money."

Buchholtz said starting with the preface that right now before development, very little property tax is being collected. If the developer goes ahead without an IRG, we can calculate the property tax. "My 30,000-foot view is, for instance, you have $1,000 in property tax for $100,000 property value, with the $400 million investment, it would bring about $4 million a year. Property tax abatement does provide an inducement to develop. The PILOT payment is generally much more than the property tax being collected now without development, but significantly less than what the developer would pay without an IRB. There is also an avoidance of gross receipts tax and compensating tax. Most of the abatement will impact the state more than the county. Certain gross receipts taxes on certain construction activities is payable and will benefit the county."

Browne said, presuming the wind turbines are still functioning well at the end of the lease, the property would revert to regular property taxes and GRT.

Greczyn said the $4 million is a very rough estimate, and it is probably closer to $1 million. "We will do a deeper dive into the estimate."

Commission Chairman Billy Billings asked for clarification that the property remains in the owners' hands, to which Greczyn said: "Yes, it's still the owners' property."

Greczyn noted that the Great Divide project is different from other projects they have done on flatter land. "The difference here is the characteristics of the terrain and the number of acres that will be required, because the turbines will be farther apart than on flatter land. So, the cost of construction is higher than with standard wind projects in the eastern part of the state."

Browne asked if the project is dependent on a couple of transmission line proposals for the area.

"This project is not dependent on them," Greczyn said. "El Paso Electric has a 345kV transmission line near the Lordsburg transmission station, which will be easy for us to tap into."

Webb asked who the developer plans to sell the electricity to.

Matt Heck, Scout Clean Energy development manager, said it is an ongoing process. "It is more likely to go west than to the east, because the demand is high.

Commissioner Alicia Edwards asked at what point the process would stop if a buyer was not known.

"We have a myriad of options for buyers," Heck said. "We are starting on a project in Texas that we don't have buyers for. Purchasers can sometimes come just prior to construction. We are confident that we will have buyers. We can't invest $400 million without confidence of having a buyer."

At the County Commission regular meeting, the commissioners addressed the proposed industrial revenue bond resolution for the Great Divide Wind Farm.

Browne, for the purpose of discussion moved to advance the notice of intent.

Edwards said she had had calls and questions from constituents. "I want to begin the conversation with asking if the avian studies are public. Given the location, there are likely significant migration routes."

Karsted said Scout has done studies and has had conversations with the U.S. Fish and Wildlife Service. "I don't think any results are available yet."

"If it were to be found that migration routes would be disturbed, what would happen?" Edwards asked. "Will we get the studies before the resolution?"

Greczyn said the company had found to date no significant issues with avian populations in the area.

Browne asked what other regulations the company would have to comply with, considering the wind farm will be on private land.

"We still have a certain level of requirements and regulations to comply with," Greczyn replied. "We are also proposing to use some state land. Of the 24,000 acres, about half is public land. We are also conducting bat studies. We are sending biologists out in the field. They count birds, look at behavior, consider the season, the habitats, as well as common, threatened and endangered species."

Edwards asked how much of the energy would be sold in New Mexico.

Greczyn said it depends on the purchaser, which has not yet been determined. "It could be a combination of utilities, commercial users. The energy goes where the demand dictates."

County Commissioner Gabriel Ramos, who had been absent from the work session, asked how many employees the project would bring.

Greczyn said during construction, the need for employees would be intense, requiring 275-300 workers at its height, followed by about 10-15 permanent employees for operations of the wind farm. "The maximum number of temporary jobs will be needed for nine, 12 or 18 months. We are still researching local expenditures and availability of workers."

Ramos asked where the developer was in the process.

"If you approve today's resolution, we will have further communication with Scout Clean Energy and on the bond issues, which will take two to three months," Greczyn said. "We envision breaking ground in late spring 2019, with completion of facility construction and energy being generated by the end of October 2020, so about two years from today."

Browne asked about revenues to New Mexico. "With the IRB, the county and state wouldn't get property tax revenue for 20-30 years, depending on the term of the bond. We would get payment-in-lieu-of-taxes, gross receipts tax and payments to landowners."

Greczyn said any breakdown in revenues right now would be only rough estimates.

Commissioner Brett Kasten noted that with half the land being private, it was generating property taxes at agricultural rates. "If we negotiate for higher payments in the PILOT, we will have more revenue than currently. Right now, there are no facilities on the state land, so with the construction, the state will have tax revenue. It may be a lease with the State Land Trust. That's why I support the project."

Edwards noted the commission will approve ultimately the bond ordinance without it going to the voters. But during the ordinance process, public comment will be received.

Browne noted that, in addition to potential avian impacts, there will be other environmental impacts with the creation of roads. "Let's say studies show, for instance, a 10 percent bird kill rate. The regulatory agency says that's fine, but we don't think it's fine."

Buchholtz said two things could happen. "One, it could delay the bond issuance, and two, it could be negotiated."

Edwards noted that no one could get to that point unless the NOI was supported that day.

"Delay today would not allow progress on the ordinance approval," Buchholtz agreed.

The notice of intent to proceed with a bond ordinance process was approved by the commissioners.

The next article will cover the presentations at the regular session.

Live from Silver City

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