Sunday, April 21, 2013

Rural Economic Discrimination & Clean Line Energy

Recently, I exchanged tweets with a person from the American Wind Energy Association (AWEA).   He was boasting about the great strides being made with onshore wind generation.   I made some comment about the lack of gains with off shore wind.   His final comment was something like “it would be great to have more offshore wind but offshore is just not economical compared to onshore.”  

That’s not a direct quote but basically what he said and it’s true.   As long as new transmission for onshore wind is cheap, off shore wind will never develop.   This leads to another question. Why is onshore transmission for wind so economical?   The answer lies within Rural Economic Discrimination.

Clean Line Energy is proposing several high voltage DC transmission lines across the Midwest to wheel wind energy from the western side of Iowa, Kansas and Oklahoma to the eastern coastal states.   They’ve hired companies like HDR Engineering to make up some fancy reports explaining the most economical corridor for these powerlines is through the center of agriculture farm ground.   The company desires a Right of Way from 500 to 750 miles long for these three projects, taking up anywhere from 12,000 to 16,000 acres of right of way.  

The company’s southern project, Plains & Eastern Lean Line (P&ECL) runs through Oklahoma and Arkansas, stopping somewhere just across the Mississippi River just inside Tennessee.   This is one of Clean Line’s longer proposed projects running about 750 miles.   Clean Line Energy is proposing a price of $2,300 for this Right of Way.   In contrast, Clean Line Energy’s proposed Rock Island Clean Line’s initial offer for a Right of Way purchase is $8,400 per acre for an identical 3,500MW   HVDC powerline.  Why the vast difference in price for a Right of Way from Arkansas to Illinois?

Clean Line Energy is attempting to take advantage of local economics for land.   Put simply, land sells less in Arkansas than northern Illinois and Iowa.   Therefore the company is attempting make a significant savings and purchase the Right of Way for as little as possible.   With no regard to the economic value of a 750 mile long Right of Way or potential return on equity (ROE), the company is committing a form of Rural Economic Discrimination.  

The value of the land as a 750 mile contiguous right of way is ignored.   The potential Return on Equity is ignored and not disclosed.   Transparency is kept to a minimum as the company attempts to distort and hide the true potential value of the Right of Way.   Consequently, the land owner’s property is forever diminished as the company attempts to buy the Right of Way by only considering current market prices for the land.   Even still, using the company’s numbers, why should a Right of Way be worth almost a quarter of the value in Arkansas than in Illinois?  The land is just as valuable to the company and will offer the same ROE in both states.  This is clearly an open bias and discrimination to the residents affected in Arkansas.

In Illinois, Clean Line Energy used a company called HDR Engineering to create a study explaining why the primary route selected is the best route.   Countless hours are claimed to be spent developing this route.   Major cities and small towns are avoided as much as possible to limit the affected exposure to as few people as possible.   Unfortunately, this form of rural economic discrimination has been a constant problem.   Major opposition is avoided with the cities who benefit the most as Right of Ways go around them as far as possible, but those living within the path are told they need to sacrifice for the benefit of the community at large.

As projects grow larger, the community supposedly benefiting from the project becomes even larger to justify the project.  For projects such as the Rock Island Clean Line and Clean Line’s two other projects, the “community” who receives the benefit becomes the entire eastern half of the United States, or everything east of the Mississippi River.   Again, the ones being told to sacrifice are those living in rural areas.  

No premium for the Right of Way is considered to these residents and landowners because they are forced to live and work around a project its creators even admit to intentionally avoid larger more economically developed areas.    Unfortunately, the cost of the Right of Way is discounted when it passes through less populated areas because the total number people affected is less and the fair market value of the land is less.

Clean Line Energy freely admits this, but the company spins this form of Rural Economic Discrimination as a good thing…by avoiding those living in larger urban areas.   They explain the company is being sensitive to those living near Interstate 80, the Quad Cities, and other towns avoided.  The truth is, Clean Line is being biased towards the path of least opposition and lower cost to purchase the Right of Way.   Again, to counteract this form of Rural Economic Discrimination, there should be a premium paid to those who must live, work, and own land under and around proposed utility Right of Ways like Clean Line’s proposals.  

Are there alternate routes that affect less people than running Right of Ways through rural farmland?   Yes.  The public has requested Clean Line Energy consider burying the powerline, placing the powerline along federal property, such as along the Interstate 80 corridor, or even burying the line along the I-80 Corridor.   Again, all of these options are considered nonviable by the company as being too costly.   Having alternatives become “too costly” is always the argument for making Rural Economic Discrimination acceptable.

Projects will never consider alternatives until the companies are forced to pay for this discrimination.   Once companies are forced to confront Environmental Justice and pay a fair market value that includes compensates for discrimination, the companies will then look at more costly alternatives more costly.   Should the price for a Right of Way be any less through rural land than along an interstate corridor?

No.  The price of a Right of Way through rural lands should be based on the economic value to the company plus damages to those affected regardless of living in lightly populated rural areas or more densely populated cities.  Discrimination and biased towards rural communities is a loss companies should be required to compensate.  Those affected on “Route A” through agriculture land should receive the higher potential price as those affected on proposed “Route B” passing through a higher population to reduce the effects of Rural Economic Discrimination.  

Finally, in cases of wind energy, alternate projects need to be considered.   As mentioned in the beginning of this commentary, there are always alternatives.   Clean Line Energy has positioned themselves as providing value-added wind energy by wheeling it from western Iowa to the urban centers in the eastern states.   To move the wind energy from western Iowa, massive transmission lines must be built through Iowa and Illinois.   While the off shore wind energy is right there next to the consumers who need it along eastern states, the cost of off shore projects are considered higher.   Onshore wind projects with hundreds of miles of transmission are only considered viable because of Rural Economic Discrimination with low cost of Right of Ways through agricultural lands.   When farm land owners are paid a proper fair compensation for their Right of Ways, offshore wind projects will become viable.  

What is the value of a Right of Way?  

Its value is not the market value of the land.   Any Right of Way value should take proper considerations for the companies potential Return on Equity, damages to the land, loss of economic use, plus the damages created by Economic Discrimination, whether it is discrimination by avoiding urban centers.   Alternatives that are more costly but do not discriminate should be seriously considered when determining a fair value for a Right of Way.  

Having a Right of Way follow an interstate corridor is more arbitrary and does not discriminate based on economics.   Offshore wind does not discriminate economically, but placing a powerline Right of Way through rural lands strictly because the Right of Way is cheaper and it affects less people is discrimination to those who live and work around it and compensation should be made accordingly.   If this makes interstate corridors more attractive or other options like offshore wind more economically attractive, then good.   No one should suffer economically from proposed utility Right of Ways because they chose to live in rural areas and a company desires to place a utility line through the path of least coast and least resistance.   The value of a powerline through Arkansas should be the same as the value of a powerline through Illinois.   The value of a powerline through rural Illinois should not be at a discount to the value along the I-80 corridor where more cities are affected.  

What is the value of a Right of Way being bought by a privately owned venture capital company?  It’s worth a lot more than $8,400 per acre.   When one considers Rural Economic Discrimination, $50,000 per acre is a good figure for the company to start negotiations and go up from there.

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