$32M bonding authority approved for wind farm

A new electricity cooperative dedicated to “green” energy cleared a major hurdle when it received nearly $32 million in tax-free bonding authority from the federal government for a wind farm.

But significant hurdles remain before the co-op realizes its goal of supplying Montanans with power that doesn’t pollute.

“It’s by no means a done deal,” said Russ Doty, executive director of Green Electricity Buying Cooperative.

The co-op needs to change state law to allow co-ops to own wind machines. Then it needs to nail down the financing, secure access to transmission lines and buy the wind machines. And the co-op needs members.

Undaunted, Doty quotes the co-op’s motto: “We want to see everybody get a piece of the clean energy boom.”

GEBC is making progress. In addition to obtaining the bonding authority, the co-op has signed contracts to lease land in Yellowstone and McCone counties for two 10-megawatt wind farms.

Proposed changes in state law have been drafted and will be sponsored by Sen.-elect Dave Wanzenried, D-Missoula, when the Legislature convenes in January, Doty said.

The measure is attracting support from other legislators, industry and development groups, Doty said. Montanans “want Montana energy,” he said. “They’re still angry about deregulation.”

GEBC was formed in March to pursue wind power, biomass and other renewable energy projects. The wind-farm proposal is the co-op’s first.

Doty, a lawyer and chief executive of New World Wind Power LLC, is based in Billings; GEBC’s directors live throughout the state. Doty, a retired human-resources specialist with the U.S. Postal Service, ran unsuccessfully in 2004 as a Democrat for the Montana Public Service Commission. He served as a state representative in the 1960s.

GEBC’s board president is Pat Dopler of Red Lodge, a small-business owner and contractor who works on energy-efficient projects. Board members include Steve Corrick of Missoula, who is the business-development manager for Corrick Real Estate; Vern and Patricia Klingman of Billings, a retired couple active in community affairs; and Tracy Velazquez of Bozeman, who ran unsuccessfully for Congress in 2004 and is a consultant for nonprofit groups.

GEBC is organized so all profits will be reinvested and distributed to members. All board members are customers of NorthWestern Energy, an investor-owned utility.

State law allows certain consumers in the service areas of investor-owned utilities to form a cooperative to serve as suppliers or promoters of alternative and conservation programs. Persons eligible to join the co-op are those who are Montana residential and small commercial utilities customers. Montana law prohibits members of rural electric co-ops from joining.

To join, members can complete a form on GEBC’s Web site and send in as little as $25. GEBC is planning a marketing campaign to encourage memberships.

“We have enough financing to supply about 6,000 people with wind power,” Doty said.

The monetary commitment from memberships will help raise $500,000 in startup financing to pay for engineering studies and other expenses, he said.

Members may pay a little more for wind power in the beginning, but over time they should pay less as the co-op pays off the projects and returns profits to its membership, Doty said. He estimated that GEBC members initially will pay about 2 cents more for a kilowatt of power produced by wind machines than by burning fossil fuels.

“We’ve got the financing, but we don’t have the infrastructure,” Doty said.

GEBC is working on that through proposed legislation to allow it to own wind machines. Current law limits co-ops to buying and supplying power. If the proposed legislation fails, Doty said, the co-op will have to forfeit the $31.7 million in bonding authority. The bonding allocation would go back to the IRS for reallocation to another project, he said.

The co-op has five years to do its project under the federal financing plan. Doty said the co-op has to issue the bonds within a certain period of time and to make its first payment a year later.

The zero-interest bonding authority comes through a new program called Clean Renewable Energy Bonds, or CREBs, which was crafted with help from Sen. Max Baucus, D-Mont., as part of the 2005 energy bill.

Montana received $72 million in financing, or almost 10 percent of the total amount available, for 34 wind power projects planned by small cities and counties in the northeastern and southeastern parts of the state.

With CREBs, the co-op can issue up to $31.7 million in zero-interest bonds. The purchaser of the bonds receives a tax break at a percentage determined by the IRS. The bond issuer pays no interest on the bonds but makes annual payments on the principal.

The co-op is working with a bonding expert in Kansas City, Mo., Doty said. It also is negotiating for wind machines. The original plan called for using 2.1-megawatt wind machines to produce a total of 20 megawatts of power at two sites. Depending on the availability of machines, the co-op may use smaller machines and install more of them, Doty said.

Wind power would be fed into power lines near both projects in Yellowstone and McCone counties, Doty said. The Yellowstone County site is about halfway between lines owned by the Yellowstone Valley Electric Cooperative and NorthWestern Energy.

Which lines GEBC will use will depend on negotiations with the Yellowstone Valley cooperative, NorthWestern and regulatory agencies, Doty said. Federal rules require a utility to transmit and distribute power over its lines for another utility.

The co-op has signed leases on private land for about $4,000 a year. GEBC has a contract with Ed and Evelyn Popelka to lease land north of Billings. The Popelkas declined to comment on the project.

The co-op also has contracted with Towe Farms on property about 30 miles south of Fort Peck in McCone County. That family cattle operation is headed by Tom Towe, a Billings lawyer who also represents GEBC and is a member.

“I’m a very strong supporter of green energy. I think we ought to try and move in that direction,” Towe said.

Towe Farms had been asked previously about leasing land for a wind farm by out-of-state interests, Towe said. The family was interested, but the developers never followed through.

The wind machines are compatible with the ranching operation and will not take much land out of grazing, he said.

Towe said he’s willing to pay a few cents more for electricity knowing it comes from wind power.

“The whole idea is we know we are not contributing to global warming. Our electricity is coming from an alternative energy source,” he said.

Towe also likes the idea of a co-op because any profit goes to members. The co-op can lock in a long-term power rate, which should go down when the loan is paid, he said.

“I think that’s a big benefit in addition to the good feeling,” Towe said. “I have great confidence everything is doable and workable.”