RICHMOND - Tuesday, Highland New Wind Development moved yet another step closer to getting a state certificate to build Virginia's first commercial wind energy facility in Highland County.

Following State Corporation Commission's decision in March to remand the case to its hearing examiner for further review on environmental concerns, months of testimony have been submitted and reviewed.

This week, the hearing examiner, Alexander J. Skirpan, submitted another report to commissioners, this time recommending "robust" monitoring of the potentially adverse impacts to wildlife, for the expected 20-year life of the project.

Skirpan was to look at two key points: Whether a monitoring and mitigation plan was needed by law for the project; and whether a specific plan could be developed that would meet state standards.

Skirpan had previously concluded HNWD's project be approved by the SCC. But commissioners wanted to know what kind of details a monitoring and mitigation plan would include, rather than leaving those issues up to the Virginia Department of Game and Inland Fisheries, and HNWD.

The SCC had also asked that 16 points be addressed in detail in such a plan. "There are several areas of agreement between the parties concerning post-construction monitoring and mitigation," Skirpan concluded this week. Generally, he said, those include:
• There should be at least two years of monitoring;
• The plan should be adaptive;
• Triggers proposed by DGIF should be incorporated into the plan;
• Currently, curtailing operations (turning the turbines off during certain parts of the day in certain seasons) is the only effective means of reducing bat fatality rates; and
• The plan should provide for continuing oversight, with the SCC retaining jurisdiction to resolve disputes.

Skirpan said though respondents in the case disagreed on particulars, the underlying issues are cost and uncertainty.

"In addition to the specifics of post-construction monitoring and mitigation, (HNWD) differs sharply with most other parties over whether it should be required to file for an incidental take permit with U.S. Fish and Wildlife," he said.

Costs of monitoring
HNWD had offered to make $304,000 available for monitoring and mitigation costs, if 38 megawatts are installed, and an additional match of up to $150,000 of funding from other sources - committing up to $454,000 for monitoring and mitigation, Skirpan noted. "Assuming an additional $150,000 is provided by other sources, such as DGIF, Highland Wind estimated that a total of $604,000 would cover two years of monitoring at about $95,000 per year, with the remainder available for mitigation measures," he said. "Highland Wind calculated mitigation costs based on lost revenues for curtailments at specific wind speeds during specific periods of time. As envisioned by Highland Wind, it would be up to a technical advisory committee (TAC) to determine the precise allocation or use of total available funds."

DGIF and The Nature Conservancy recommended more expensive monitoring and mitigation plans that would include a level of monitoring and mitigation over the life of the project. DGIF had said monitoring costs should be capped at $150,000 a year for the first three years (which would pay for daily carcass searches), and capped at $100,000, $50,000 or $25,000 the rest of the time, depending on how many birds or bats were killed by the turbine blades.

DGIF said mitigation expenses should be capped at $234,000 based on how often the turbines had to be turned off.

The Nature Conservancy said monitoring costs should fall between $125,000 to $150,000 for each of the first three years and less than $50,000 per year after that, Skirpan noted. The conservancy said mitigation expenses shouldn't be more than $75,000 a year.

HNWD had submitted testimony of Jeffrey Paulson to address the effects of these expenses on HNWD's project. Paulson said the project is financially viable, but additional expenses make it less so. "Mr. Paulson testified that investors are more comfortable if costs are capped and are a known quantity that appears reasonable in the context of the project," Skirpan said. "Mr. Paulson recommended that some degree of proportionality be built into any cost cap to adjust the cap to reflect the actual installed capacity of the project."

Also, HNWD submitted testimony from Sen. Frank Wagner, who said objectives of the Virginia Wind Energy Plan, a proposal he successfully got passed in the General Assembly, should be taken into consideration. Those include energy issues that would advance the "health, welfare, and safety" of Virginia residents, which includes supporting renewable forms of "green" energy.

"The testimonies of Mr. Paulson and Sen. Wagner raise the issue of whether the costs of the post-construction monitoring and mitigation plan should be based upon Highland Wind's ability to pay," Skirpan said, adding there was nothing in the law that required the SCC to consider HNWD's ability to pay for monitoring and mitigation.

"Therefore, I find that the monitoring and mitigation plans should not be determined based upon Highland Wind's ability to pay or whether such added cost would render the project financially not viable," he wrote.

"Nonetheless, I agree with Sen. Wagner that the objectives and policies of
the Virginia Energy Plan, as well as the positive environmental aspects of this project, should be taken into consideration in designing a postconstruction monitoring and mitigation plan. Thus, in designing a post-construction monitoring and mitigation plan, the plan should focus solely on the
negative environmental impacts and risks posed by the project. In addition, the plan should be designed to provide investors with a quantifiable cap in costs that is proportional to the size and revenues of the project."

Birds and bats
Skirpan maintained his original position that HNWD's project represents a "significant risk to bats, and a lesser risk to birds."

New evidence, including the National Research Council's Environmental Impacts of Wind-Energy Projects and the West Virginia Public Service Commission's decision to deny certification of the Liberty Gap wind project in West Virginia "further support the finding that Highland Wind's proposed project represents a significant risk to bats," Skirpan said, adding, "I
find that the post-construction monitoring and mitigation program should include provisions for monitoring that may continue for the life of the project, depending upon bat and bird fatalities; and include ongoing mitigation measures, such as the curtailment of operations at low wind speeds. While actual amounts expended should be much less, I find that absolute caps for
monitoring and mitigation costs should be as follows":

• Year 1: $150,000 for monitoring;
• Year 2: $150,000 for monitoring and 0.85 percent of Year 1 revenues for mitigation; and
• Remaining life of the project: 1.75 percent of the prior year's revenues for monitoring and 0.85 percent of the prior year's revenues for mitigation.

"Thus, for most of the project life, the maximum amount that may be incurred for monitoring and mitigation is 2.6 percent of revenues," he said.
"Setting the maximum caps based upon a percentage of revenues from the prior year is designed to address Highland Wind's concern that some degree of proportionality be built into the caps. In addition, because mitigation costs are likely to be lost revenues, use of a percentage rather than a fixed number maintains the desired relationship between revenues and the maximum cap.

Finally, the above monitoring and mitigation caps do not include charges for raptors, which should be assessed separately based on actual observed fatalities.

Further more, he said, "I find that even if it is assumed that maximum monitoring and mitigation costs will be incurred each year, the project will meet its targeted debt service. That is, I find the project should be financially viable and meet required coverage ratios."

Role of state agencies
Skirpan concluded DGIF should play a significant role in monitoring and mitigation, but disagreed with HNWD's suggestion that an advisory committee (TAC) made up of several agencies, oversee that process.

"I do not believe the Commission has the authority to order U.S. Fish and Wildlife, West Virginia DNR, or the other conservation groups to participate (in a TAC)," he said. "That means, the makeup of the TAC would have to remain open, or the commission would have to establish a condition that would be beyond (HNWD's) control. Furthermore, DGIF's lack of direct experience with wind facilities is not a compelling reason to form a TAC. As it demonstrated in developing triggering or take recommendations, DGIF may consult with experts from other organizations when necessary. DGIF is charged with the management and protection of Virginia's wildlife resources and has demonstrated a willingness to play a key role in the implementation of an effective monitoring and mitigation plan. I find that DGIF should be relied upon to play such a role."

Monitoring procedures
"To a certain extent, the level of monitoring boils down to cost. That is, if the commission sets the monitoring cost ceiling based upon my recommendation above, and relies upon DGIF rather than the formation of a TAC, there remains little if any difference between Highland Wind and DGIF," Skirpan said.

"In this case, the initial monitoring should be designed to determine bird and bat fatalities and the date, time, temperature, wind speed, and weather condition, for the purpose of implementing operational or other mitigation measures. Furthermore, if bird and bat fatalities are high enough to trigger mitigation measures, additional monitoring is required to determine if the mitigation measures performed as anticipated, or if other mitigation measures are required. Thus, I find that DGIF's proposed daily monitoring, correlated with nightly meteorological data, should be conducted from April 1 through Oct. 31 for the first two years of operation. Although DGIF proposed that daily searches be conducted at a minimum through the first three years of operation, a two-year period permits the establishment of an initial base period, and permits (HNWD) to undertake mitigation measures and have those thoroughly assessed. After the initial two-year period, the level of monitoring will depend upon actual results," he said. While everyone involved seemed to agree the only way to mitigate harm to wildlife was to turn the turbines off at certain times, and that those times should be based on site-specific data, there was disagreement on the amount of money that should be incurred by HNWD for this.

"To maintain proportionality, I recommend that mitigation costs be capped at 0.85 percent of the prior year's revenues," Skirpan concluded. "Subject to that cap, if fatality triggers are exceeded, DGIF may direct mitigation measures based on the best available information. The (SCC) should stand ready to resolve any disputes regarding mitigation procedures and schedules that may arise between Highland Wind and DGIF. Finally, Highland Wind should have the option of implementing mitigation measures in addition to those covered by this plan."

Endangered species
DGIF, among others, had strongly recommended HNWD get an "incidental take" permit from the U.S. Fish and Wildlife Service, and create a Habitat Conservation Plan, in case any endangered species were killed by the spinning blades. Skirpan said, however, there was nothing that legally required the company to do so. HNWD, Skirpan noted, said it would comply with all state and federal laws regarding endangered species but that it "maintained that because of the historic record of no endangered species ever being killed by a wind farm in the Eastern United States, the cost and time required to develop a Habitat Conservation Plan is unwarranted."

That said, however, Skirpan noted DGIF's testimony that HNWD risks "costly shut-downs and penalities" without the permit. "Highland Wind witness Paulson presented testimony on the difficulty of financing a project in the face of risk and uncertainty, especially where there is no limit on potential costs," Skirpan said.

"Given the proximity of two endangered bat species and the robust monitoring that should be required for this project, Highland Wind's failure to enter into a Habitat Conservation Plan and seek an Incidental Take Permit is likely to make it more difficult to finance the project.

Nonetheless, I do not find that the record supports requiring Highland Wind to enter into a Habitat Conservation Plan or seek an Incidental Take permit," he said.

Access to the site HNWD said it would provide access to the site to approved employees or agents of DGIF, the SCC, and U.S. Fish and Wildlife for bird and bat monitoring and observations, with 48- hour notice to the company and its attorney. "Highland Wind is seeking a Certificate of Public Convenience and Necessity, which must be based upon a finding that the proposed facility is in the public interest. Highland Wind offers no explanation as to why it is in the public interest to limit access to the site of governmental agencies that are charged with protecting the public's interest.

Consequently, I find that the site must be accessible, without limit, to state and federal agencies operating within the scope of their authority," Skirpan said.

What's next?
Parties to HNWD's case before the SCC now have 21 days from Tuesday to submit any comments on Skirpan's report. After comments are received, the SCC commissioners are expected to approve a permit for the developer, with conditions similar to the ones outlined by the hearing examiner. There is no deadline for that decision.