The Bureau of Land Management faces a problem and wants to shake up the rules around wind farm approvals. The problem is straight-forward on its face, but difficult to reconcile logically: Why are so few new large-scale wind projects being built? Despite the fact that nearly everyone - environmentalists, government regulators, and business interests -wants to build more wind farms, precious few are making it over the goal line.
Since 2009, the Obama Administration has approved 46 wind farm projects that would cover a proposed 216,356 acres of public land. Yet only 15 of these 46 projects have made it into operation. The rest are stuck in limbo with years of mandatory environmental analysis ahead or have been cancelled outright.
Against this backdrop, it is little wonder that renewables are still only a tiny fraction of total power output. The Power Company of Wyoming exemplifies exactly this issue with its massive 1,000 turbine windfarm still waiting for construction to begin almost a decade after it was proposed and with $50 million in administrative costs sunk into the project.
The BLM's solution to this issue is to change the way it deals with land allocation. Essentially the government has two methods for dealing with private use of public land: first-come, first-served, and competitive bidding. The former method is used for cases like power line right of ways and engineered ditches. The latter is used for natural resource leases like oil and gas rights. Currently, wind farms operate on the former system. The BLM is proposing to switch to leasing windfarm acreage under the latter system as it does with O&G properties.
Essentially, the BLM believes this will speed up the process of building windfarms because it can pre-select areas most likely to get a quick environmental project approval and then auction off those properties in a competitive process. In theory, that may speed up the process, but it also means that the lease tracts will cost significantly more, which in turn will likely lead to fewer project proposals in the first place.
The proposed new rules virtually guarantee more revenue for the government, assuming that agreeable tracts can be found to build wind farms on. Part of the problem with renewable projects have consistently been a NIMBY attitude. Nearly everyone likes the idea of renewable solar and wind farms, as long as they are located somewhere else. Local environmentalists have consistently risen up time and again to protest about new local area renewables projects despoiling local views or hurting local frogs, turtles, bugs, and birds. Related: Proving Them Wrong: How The U.S. Oil And Gas Industry Survived
The BLM system can only address that to a degree - in order to actually auction off tracts of land for lease, regulators must identify which tracts they are willing to see renewable energy farms built upon. Thus far, the BLM has identified 19 proposed tracts for solar power, but none for wind.
Environmentalists are generally supportive of the new rules from the BLM as those rules would theoretically identify the least objectionable areas for development. By contrast, the industry is predictably against the new rules given the increase in costs associated with those rules. It's unclear what the eventual rule will be, but with only 15 of 46 approved wind farms actually making it into operation in the last 7 years, it is clear that the current system is not working.
The alternative to the BLM system is instead what many wind power producers appear to be banking on - wind power development is increasingly being done on existing private lands like farms which have wind open space and are likely to face far fewer environmental hurdles. It is possible then that the BLM is building a system and no one will come to use it. Only time will tell.
By Michael McDonald of Oilprice.com
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Michael is an assistant professor of finance and a frequent consultant to companies regarding capital structure decisions and investments. He holds a PhD in finance… More
Comments
Roughly 10,000 square miles of land taken from other uses for decades if not centuries.