January 2017: Clean Line Post-Election Update...

Happy (belated) New Year from Ali and Dave!

We sincerely hope you had a wonderful, Clean Line-free holiday season. Unfortunately, with the holidays coming to a close, we all have to remain informed and vigilant. Remember, while many of you only found out about this project in late 2014, Michael Skelly and crew have been actively attempting to execute this boondoggle since 2009... maybe earlier. It's hard to say with certainty exactly when the idea for this first arose. As we have written about before, Jimmy Glotfelty (cofounder of Clean Line) lobbied Congress in 2003 during his stint at the Department of Energy (DOE) in support of the very same provisions (Section 1221 & 1222) that his company is attempting to utilize now. We thought we would take this opportunity to provide you with an update, as well as a few things you should be paying attention to as we move through 2017:

Donald Trump, Scott Pruitt, and Rick Perry

Donald Trump:

As a rule, we keep politics out of this issue. It is not a political issue. It is a private property and states' rights issue. However, as all of us are aware, we had an election last year. Hate it or love it: Donald Trump was sworn in as President of the United States of America on January 20. Elections have consequences. As a good friend of ours stated a couple days after the election: "I'll bet Clean Line woke up and sh*t their pants on November 9." We tend to agree. To say the results of the election were anything less than unexpected would be an understatement. Jimmy Glotfelty has already attempted to set the stage for a change in conversation at the TVA board:

"Election Day was a big sea change in America," Jimmy Glotfelty, executive vice president for Clean Line Energy Partners, told the TVA board last week. "But we believe that just because we've gone from Democrats to Republicans (in the White House) that does not change the need for jobs and low-cost energy in America and we believe we will provide that. We've been before this board for the past seven years and our project dynamics have not changed."

But the truth is that no one can say right now what the Trump presidency means for Clean Line, which is due in part to the very nature of the project. Yes, it represents private investment in infrastructure, but it also represents an example of gross federal overreach in which the Department of Energy virtually ignored not only state law, but an established state PSC ruling.

With past comments like these, it will be interesting to see what his position is:

Scott Pruitt:

As some of you may remember, Scott Pruitt is the Oklahoma Attorney General. During the comment periods for both the NEPA review and the Section 1222 "review", his office issued scathing comments in landowners' and states' favor in opposition to the process being used to advance this project.

Why is that important? Because Scott Pruitt has been nominated to become the next EPA Administrator. He has been a staunch opponent of the "Clean Power Plan" (CPP). The CPP has been a primary justification by Clean Line for the "necessity" of their line. Under a Trump administration, the CPP will likely be nullified. Love it or hate it, it is what it is.

If you're interested in viewing Mr. Pruitt's confirmation hearing, you can do so here (Part 1):

and here (Part 2):

Rick Perry:

Why is former Texas Governor Rick Perry involved in this? Because he has been nominated to be the next Secretary of the Department of Energy. He is sort of a wild card. While he is mostly an oil and gas person, he also supported the so-called "Competitive Renewable Energy Zone" (CREZ) transmission expansion for wind energy in Texas. Many environmental-types seem to see this as a positive attribute in Perry for renewable energy. Others see this support as having been less about wind energy, and more about an economic opportunity for Texas. The CREZ lines were concocted and approved IN Texas, FOR Texas. Whether or not support for larger projects like Clean Line's translates to support from Mr. Perry at the federal level remains to be seen. He is known for being a staunch states-rights advocate. In fact, Mr. Perry wrote in a 2009 blog post:

The Founding Fathers understood that a one-size-fits-all approach just doesn’t work, especially in a country the size of America, and it certainly doesn’t work for Texas. Our economic strength, compared to the federal budget mess and other states’ troubles, is evidence that Texans know what’s best for Texas. 

The Constitution simply does not empower the federal government to override state laws without restraint. 

I agree with Texas’ 7th governor, Sam Houston, who once said, “Texas has yet to learn submission to any oppression, come from what source it may.”

We didn’t like oppression then and we certainly don’t like it now. Unfortunately, pressure is increasing from a federal government that is growing increasingly oppressive in its size, its intrusion into the lives of our citizens, and its interference with the affairs of our state.

Also:

In his book, he sets out a view that the founders intended a federal system that allowed “people of like mind” in the states to make their own decisions about how to live, while the national government’s role was properly focused on national security. “From marriage to prayer, from zoning laws to tax policy, from our school systems to health care, and everything in between,” he wrote, “it is essential to our liberty that we be allowed to live as we see fit through the democratic process at the local and state level.”

While we don't have much indication as to which side Mr. Perry will ultimately fall on RE: Clean Line, we are paying attention. We stand ready to work with the new DOE Secretary (whether Perry or someone else) on this important issue. We are hopeful Mr. Perry, if confirmed, will bring the same respect and zeal for states' rights to the Department of Energy.

If you're interested in listening to Mr. Perry's confirmation hearing, it can be viewed here:

Tax Credits for the Wind Industry

Federal Production Tax Credit Down 20% in 2017:

As you may know, Congress passed an extension to the Production Tax Credit (PTC) for the wind industry in late 2015. However, a year-over-year PTC reduction will occur until the end of 2019:

The tax credit is phased down for wind facilities and expires for other technologies commencing construction after December 31, 2016. The phase-down for wind facilities is described as a percentage reduction in the tax credit amount described above: 

• For wind facilities commencing construction in 2017, the PTC amount is reduced by 20% 
• For wind facilities commencing construction in 2018, the PTC amount is reduced by 40% 
• For wind facilities commencing construction in 2019, the PTC amount is reduced by 60%

Oklahoma's Budget Deficit and In-State Wind Tax Credits:

As many of our readers may know (Oklahoma's, especially), Oklahoma has, by state standards, a massive budget deficit. From a recent article:

(Reuters) - Oklahoma's budget deficit will be $868 million next year, higher than recent estimates as sustained low oil prices, tax cuts and corporate tax credits continue to weigh on the state's finances, the Oklahoman newspaper reported on Tuesday. 

Governor Mary Fallin estimated just days ago that the state would face a $600 million gap for the 2018 fiscal budget year, but Finance Secretary Preston Doerflinger told reporters at a news conference on Tuesday that the hole will be deeper.
A $900 million budget shortfall would represent nearly 15 percent of its expected $6 billion in spending power. 

With less money to spend, state lawmakers could choose to make cuts to government services like education and health care or raise taxes. 

"I think it's important for everybody to realize you're not cutting your way out of this situation," Doerflinger said. "We have to have a serious conversation about revenue."

One of the "corporate tax credits" weighing on Oklahoma's budget is a state tax credit for wind energy. Tax credits paid by taxpayers to (mostly out-of-state) wind companies have ballooned in the past few years:

"Oklahoma is bankrupt and unable to pay its bills because of $1 billion worth of tax cuts, hundreds of millions of dollars in gross production tax giveaways to the oil and gas industry, and $2 billion worth of tax credits and exemptions to wealthy corporations, all of which this governor supported," said House Democratic leader Rep. Scott Inman, of Oklahoma City. "That's the reason we're in this mess. To get out of it, we need to roll back those irresponsible tax plans, not raise taxes on working families." 

Another likely target for revenue will be some of those hundreds of millions of dollars in incentives Inman spoke of — specifically a credit for the production of wind energy that an independent consulting group has recommended be capped or ended. Payments under that program have skyrocketed from $3.7 million in 2010 to more than $113 million in 2014.

Numbers were not available for 2015 and 2016, but many, many more wind turbines have been constructed in Oklahoma in those two years. That number would have to be much higher for 2016. What do you think the 2,000 additional wind turbines Clean Line would like to see constructed in the Oklahoma panhandle would do to that figure? Our opinion: since wind tax credits account for at least 15% of Oklahoma's budget deficit, lawmakers in that state are going to be required to get serious about capping or eliminating them in the 2017 session. Will they wind up with a result that is fair to Oklahoma taxpayers? Who knows. In this age of "pay-to-play" politics, we would say that nothing would be surprising.

Relation to Clean Line:

So, how does this relate to the Plains and Eastern (P&E) project? Quite simply, as the years progress, Clean Line's "delivered product" becomes more expensive and less financially appealing to end-use utilities. The price of delivered energy on P&E to an end-use utility (such as TVA, Georgia Power, etc) is composed of the price a wind generator can produce the energy for, added to the cost of delivery Clean Line will charge to deliver the electricity to the TVA system, plus whatever TVA would charge to wheel that electricity through their system to them. If the cost of the electricity rises on the generation end, the cost of the electricity on the receiving end rises, as well. So, how does this relate to the TVA?

Clean Line and the Tennessee Valley Authority

As discussed above, the "prime time" to sign up for capacity on Clean Line's proposed transmission line was by the end of last year. And, Clean Line and others have parsed no words in attempting to push TVA to sign a contract for electricity on Plains and Eastern. Take, for example, this fluffy article from Dave Flessner that seemed to imply that TVA was right on the brink of signing a contract with Clean Line before year's end:

The Tennessee Valley Authority is studying whether to contract this year to buy into what would be one of the biggest wind energy projects in the country. 

Despite last week's election of a new president who has pledged his support for more fossil fuel power generation, TVA President Bill Johnson said the utility is still studying whether to ink a deal in the next six weeks to buy at least some of the wind-generated power windmills a Houston group is trying to transfer across the middle of America. 

Clean Line Energy Partners LLC is planning to build high-voltage, long-distance transmission lines to carry power generated by windmills in Texas and Oklahoma to the Tennessee Valley. The development group wants to reach a deal with TVA to buy its power before the end of this year to take advantage of maximum federal tax incentives for wind generation that will not be as generous after this year.

Or, this earlier article by Mr. Flessner with an equal amount of fluff (there seems to be a pattern with him):

Jimmy Glotfelty, executive vice president for Clean Line Energy Partners, told the TVA board last week that it could deliver wind-generated power from Oklahoma and Texas up to 60 percent of the time at around 3 to 3.5 cents per kilowatt-hour, which is cheaper than some of TVA's other energy costs. Such wind-generated power could be available in two to three years after new wind turbines are erected in Oklahoma and Texas, where the wind blows more steadily than in the Southeast, and after Clean Line builds its proposed 700-mile line from the panhandle of Texas to Memphis. 

The cost will be cheaper this year because the maximum federal production tax credits, worth the equivalent of 2.2 cents per kilowatt-hour, will begin to decrease after Jan. 1."We continue to have strong discussion with utilities in the Southeast and we continue to have productive talks with TVA because we believe this is a very competitive source of clean energy which we think would add value to their portfolio," Glotfelty said.

(If you're interested in watching Mr. Glotfelty plead as an ordinary citizen for TVA to purchase their "product" before the end of 2016 at their August 2016 board meeting, click here and fast forward to minute 138:00 or 2:18:00, or at their November 2016 board meeting by clicking here and fast forwarding to minute 35:00 or 0:35:00.)

Environmental groups have also been lobbying TVA hard to sign a contract with Clean Line by the end of 2016. Back in August, Dr. Stephen Smith of the "Southern Alliance for Clean Energy" even went so far as attempting to offer the Plains and Eastern transmission project as a potential aid in the solution to the Zika virus (it's hard to make this stuff up, folks). In November, Allie Brown (also of SACE) had this to say:

Clean Line’s transmission project is a no-brainer for TVA and other Southern electric companies to buy into. It will help diversify our energy mix, create tens of thousands of jobs, protect natural resources, and provide health benefits by decreasing pollution from fossil-fuel generation in our region. 

Critical deadlines regarding the federal production tax credit for wind power are fast approaching. Fortunately, contracts for wind power can be signed today, but can take delivery as late as December 2020, and still qualify for the important tax incentive. We strongly encourage TVA’s board of directors to immediately contract for at least 1,000 megawatts of wind power on the Plains and Eastern Clean Line. We need your help to urge TVA to buy wind power from Clean Line today:

SACE even created this nifty petition.

This guy even threw his hat into the ring with an op-ed entitled: "Tennessee Valley Authority should get into wind power". Leaving out the obvious fact that TVA is already "into wind power," the opinion piece seemed to be neatly crafted with all of Clean Line's dead-horse talking points. Accident? Probably not. The op-ed was printed after December 31, however, so it's doubtful anyone at TVA actually read it.

Clean Line STILL Has No Publicly Available Contracts:

Despite all the fluff and bluster, Clean Line has still yet to release a single publicly available contract for transmission capacity on Plains and Eastern from TVA or anyone else. As with any business, customers draw more customers, so it seems highly unlikely that Clean Line wouldn't have released information about a major contract with TVA. As we have become accustomed, it seems incredibly hard for them to keep positive news on the proverbial "down low". It would also seem unlikely, with credits being reduced, that a rising "delivered product" price for Clean Line would provide increased incentive for an end-user contract in 2017.

But what do we know? We're just "misinformed" landowners.