Wind Farm At Muskegon County Wastewater Site One Step Closer To Reality; Lease Signed, Development to Begin

Andrew Trzaska | October 25, 2011

With a vote Tuesday from the public works board and the full board, development of a wind farm on the county’s wastewater site is one step closer to realization.

Both groups approved terms of a lease agreement Tuesday with Muskegon Wind, LLC.  This newly-formed company is a partnership of two companies — Scandia Wind Offshore and Gamesa Energy USA LCC, an American subsidiary of a Spanish company.

The County previously gave authorization to negotiate with Gamesa/Scandia on these terms  back in July.

This wind farm development will be strictly on land and will not include components in Lake Michigan as previously proposed in other areas including Oceana County.

The facility is slated to be from 50 to 100 megawatts of generating capacity, and will be on the wastewater land but could possibly extend to private properties as well if landowners are interested.

Three stages of the farm’s lease were detailed in documents obtained from Muskegon County:

1)    A Development term – 5 years long with the possibility for two 1-year extensions

2)    A Construction term – Up to 3.5 years, but typically lasts a year.

3)    An Operations term – 25 years with the option to extend another 25 years.

The maximum length of the lease could reach up to 60.5 years if these three terms take the maximum amount of time.  Along with some lump sum payments, the county will generally charge rent at a rate of $5 per acre for the 11,000 acre site for the first two terms.

Upon reaching the Operations term, the county will get 5.5% of the gross revenues from the sale of electricity from the farm for the first 10 years.  After year 10, the rate will change to 6.5% of gross revenues.

Concerns, Support Both Voiced

Before the public works board and full council eventually passed the resolution unanimously, some concerns were expressed about the contract. The two largest were about the length of the contract and how revenues are generated for the county through taxes.

Drain Commissioner Dave Fisher expressed concerns that the contract was not negotiated in a two-stage process.

“A 50 year contract [of operation] makes me nervous,” said Fisher. “I believe the economic advantages for this are huge… but I’m concerned what might come up in these first four years.”

County attorney for the wind farm negotiations Rodger Kershner indicated that locking in the whole lease was required to attract Muskegon Wind LLC because of all the up-front costs of planning, wind studies, equipment and finding a utility to sell their energy to.

County Wastewater Director Mark Eisenbarth also noted that there are protections for the county aside from the previously mentioned rent-and-revenue terms.

According to a contract summary obtained from the County, “In the event that there are operational difficulties… the Lease also provides for a minimum rent in each year of from $4,000 increasing to more than $8,000 per MW (megawatt) of generating capacity installed on the property.”

If Muskegon Wind LLC should terminate the lease or the lease term expires on its own and the farm does not continue, Muskegon Wind will remove all buildings and return the site to its original state.  Also detailed in the lease are terms dictating that Muskegon Wind, LLC will pay for damages to crops or people on the site if they occur due to their activities and they will provide the County casualty and workers’ compensation insurance on these terms.

Eisenbarth also noted that the county had approval rights over all structures and infrastructure built on the property

On the revenue issue, Moorland Township Supervisor Chuck Krepps pointed out that two bills in the state house might remove the personal property tax, which helps partially generate revenue for the county through the lease agreement.

Egelston Township supervisor Mike Thompson showed support from his township yet echoed Krepps on the personal property tax issue:

“I’m excited, I think our township’s people are excited by the improvements coming to our township,” said Thompson. “I’d appreciate it if you watched the government for us on this.”

Public Works board chair and district 5 commissioner Marve Engle noted that it would be the board’s responsibility to let the county know the effects they might be causing.

Several county commissioners across party lines urged those concerned to look at the other economic benefits of the deal.  District 4 commissioner Jim Derezinski and District 7 commissioner Scott Plummer both explained that the economic activity this would bring to the area would still be a benefit to the county.

“Even with [the tax change possibilites], this is still good for the county and its spinoff, said Derezinski.  “In the worst-case scenario, we are still doing a lot for the customers of the sewer system and the spinoffs of this.”

Plummer noted that it could bring manufacturing and service jobs to the area, further developing the county’s economy.

Looking to complete a process that has stretched over 7 years, District 3 commissioner John Snider thought the deal had been assessed well enough:

“We’ve waiting too long for this… let’s not be Don Quixote and joust at windmills.”

The economic impact could in fact show up in unexpected places, like county sewer bills.

Jerry Bartoszek, vice chair of the county’s wastewater users group noted that revenues from this development could offset sewer cost increases.  Recently the county increased rates over 20%.

“Any revenue we can get to further enhance revenues… we are in support of.”

Soon, Muskegon County and Muskegon Wind will formally sign the lease agreement and the Development stage will begin.