The Untold Story of Wind Turbine Permitting at Record Hill

In view of Angus King’s intention to seek election to the US Senate, and in light of recent revelations about the lack of justification for the Federal Loan Guarantee that Record Hill Wind sought and was granted,  I am reposting (1) the following blog post as well as (2) my comment to the DOE during the public comment period on the loan application, and (3) the relevant section of the report titled, The Department of Energy’s Disastrous Management of Loan Guarantee Programs” issued by the U.S. House of Representatives Committee on Oversight and Government Reform,  Darrell Issa (CA-49), Chairman. 
1.Previous blog post from 2/24/11Eileen Adams’ story in the Sun Journal (Record Hill looking for federal guarantee on its loan  –  2/22/11) about the Record Hill Wind federal loan guarantee application omitted some important details about the evolution of this project, and how RHW principals Angus King and Rob Gardiner have represented this project to the DEP and the people of Roxbury.
DEP rules require that evidence of financial capacity to construct and operate must be demonstrated in the application. By signing the DEP application the applicant swears that the information submitted is true. However, one of the conditions of the loan guarantee program is that without the guarantee the project could not be built. If the project cannot be built without the loan guarantee it stands to reason that no adequate financing for the project exists. Therefore, it appears that RHW misrepresented its financial capacity to the DEP.
So why did the DEP issue a permit for this project and why have miles of heavily blasted roads been built across fragile mountain slopes in Roxbury? The draft permit issued by the DEP contained a standard condition stating that evidence of financing must be demonstrated prior to the commencement of construction. Mysteriously, when the final permit was issued 5 days later, the word “construction” had been changed to “operation”.
When I asked the DEP why this standard condition was changed I received no response, but copies of emails in the case file indicate the project coordinator (Beth Callahan) in response to my inquiry, asked Record Hill Wind to update its financial capacity. In his email response to the DEP Rob Gardiner referred to the improper condition with the mysteriously changed word, indicating he was relying on it to move the project forward and that while financing was not yet arranged, it would be in place before operation of the project commenced.The DEP then informed Gardiner that there was a drafting error in the final permit and that financial capacity must be shown prior to construction as required by law. In response, King and Gardiner submitted a letter from Northern Trust Bank stating that Bayroot, the majority partner and landowner in the Record Hill Wind project, had sufficient funds on deposit to build the project, but cautioned that the funds were not committed to this project and could be withdrawn at any time, which clearly did not satisfy the financial capacity requirements of the DEP rules. Nevertheless DEP accepted this letter as evidence of financial capacity.
When appellants challenged this letter in their appeal of the permit, King and Gardiner agreed to a stipulation to voluntarily shut down construction, and provide additional evidence of financial capacity prior to resuming construction – which has not yet occurred.The Law Court is currently deliberating on the appeal of the permit for this project, and the applicant’s financial capacity is one of the issues under appeal. Unfortunately, the Court is not aware of the loan guarantee application because this fact was not admissible during the proceeding, which was limited to the record established in the earlier appeal of the DEP permit to the BEP.The citizens of Roxbury deserve some answers to the questions raised by the DEP permitting process and the failure of King and Gardiner to demonstrate the ability to finance their project. Roxbury narrowly voted, 87 to 81, to change its comprehensive plan and zoning ordinance to allow wind turbines on the ridges based on the promises of King and Gardiner that they had the financial ability to pay their full share of property taxes, rather than seek a TIF agreement as most wind developers do, and to provide 500 kilowatts of “free electricity” every month to every residence in the town. Now it has become obvious that these were speculative gestures, empty promises, lacking, at the time,  the financial commitments needed to fulfill them.
King and Gardiner’s difficulties in obtaining financing for their project, and the desperation exhibited by their application for a taxpayer funded federal loan guarantee, are ample evidence that the people of Roxbury have been tricked into giving away their mountain tops, and the tranquil beauty of their town, to a pair of smooth talking hucksters.Steve Thurston2.Following is my testimony on 3/31/11 to the DOE case manager regarding RHW’s application for a Federal Loan Guarantee:Dear Mr. Marhamati,I am a 5th generation occupant of my family’s property on Roxbury Pond.  The proposal to put 22  turbines, all within line of sight to Roxbury Pond, on the ridge overlooking the pond, has been a source of outrage, anxiety, depression, and fear for many members of my family and many of the families who own property on Roxbury Pond.  There was a nearly unanimous vote of the property owners’ association to oppose this project in the permitting process.
The spectre of wind projects destroying the viewshed,  polluting the nighttime soundscape, devaluing our property and forever altering the mountain with blasted cuts and massive fills for access roads is a heavy burden for Roxbury Pond property owners to bear.  However, if these are insufficient grounds for the DOE to reject the application, there are more important reasons that reach far beyond the concerns of the affected community.The application of Record Hill Wind LLC for a DOE loan guarantee should be rejected because the applicant has provided evidence to the State of Maine that they do not need the loan guarantee to construct and  operate the project since they have $127 million in the bank and  the ability to self finance the project.   In a filing with Maine Dept of Envioronmental Protection,  Robert Gardiner,  President of Record Hill Wind LLC provided required evidence that Record Hill Wind LLC had the financial capacity to construct the wind project.  In the cover letter to James Cassida,  Gardiner said, “Record Hill possesses sufficient funds to complete construction without any additional source of capital.”
As evidence of these funds Record Hill LLC provided documentation showing $127 million on deposit at Mascoma Bank of Lebanon NH.  (See attached copy of DEP submission).As a taxpayer I am appalled that the DOE would consider using my money to provide collateral for this project.   Not only does RHW LLC have the money it needs to construct the project, by admission eliminating the need for the loan guarantee,   it has partnered with the Yale Endowment Fund.  US taxpayers should under no circumstances be asked to assume the investment risk for the Yale Endowment Fund, which reportedly has assets of more than $8 billion.I also question the “load control” technology that forms the basis for RHW LLC to qualify for a loan guarantee in the first place.
What evidence has been provided that allows DOE to conclude that there is anything groundbreaking about the turbine controller in these Siemens turbines?  GE also boasts “load control” technology for its turbines.  What is the difference between the two?  Is it fair to ask the US taxpayer to subsidize the research and development efforts of either of these companies?  Shouldn’t their shareholders take the risk for the success of their products?There are other technologies which are far more deserving of government support.  Projects which involve electric storage technologies, reduce the cost of solar power, develop more efficient heating and cooling processes, improve the environental impacts of hydrofracking for natural gas,  make coal more environmentally friendly, etc should have a higher priority than wind power.  Wind projects, without a storage solution, are of little use to the electric grid.   The Record Hill Wind project with an installed capacity of 50 MW,  will only generate about 12.5 MW on average at a 25% capacity factor.   This small amount of electricity may easily be absorbed by the grid without any effect whatsoever on grid operation, since the ISO-NE grid operates with a 125 MW tolerance for supply and demand imbalance.   It is well understood that wind generation, because of its unpredictability and intermittent production, must be “followed” with sufficient spinning reserves to regulate the constantly changing output.
The ISO-NE wind integration study is clear that accurate wind forecasts, grid scale storage, and massive and very expensive transmission construction are all necessary to allow wind generation to be effectively utilized.  Since none of these necessary components of wind generation are in place,  and likely won’t be during the lifetime of any turbines now being constructed,  it is premature at best to encourage wind power, especially in Maine and other places with high value landscapes.  The cost to the taxpayer,  to the residents of rural communties subjected to the impacts of wind turbines, and to future generations who will never have to opportunity to appreciate the unspoiled natural beauty of Maine’s mountain landscapes far outweigh the perceived benefits of Maine’s rush to wind power.For these reasons the Record Hill Wind LLC application for a US taxpayer backed federal loan guarantee should be denied.Sincerely,Steve Thurston3.
Following is the text of the Record Hill Wind section of the report of the Committee on Oversight and Government Reformhttp://oversight.house.gov/wp-content/uploads/2012/03/FINAL-DOE-Loa…Record Hill Wind: DOE Uses the First Solar Precedent to Speed Through Another Questionably “Innovative” TechnologyDOE relied on the First Solar precedent to approve Record Hill Wind’s $102 million loan guarantee project as “innovative,” despite the project using commercial technology. DOE knew that the Record Hill project did not use significantly innovative technology. The Standard & Poor’s credit rating for the project that DOE received clearly indicates the commercial (and non-innovative) nature of the project:Record Hill has entered into a Turbine Supply Agreement for the shipment of 22 Siemens 93SWT[Siemens Wind Turbine] 2.3MW wind 64 turbines to be installed at the site.The SWT-2.3-93 turbine has been in operation in Europe since 2005, and the first turbines in the US were installed and began operations in 2006. Currently, there are a total 1,374 SWT-2.3-93 turbines operating worldwide….…Due to harsh winter conditions in Maine, the project plans to install a cold weather package on all turbines, which will keep the turbines running in cold temperatures.Siemens’ cold weather packages are currently in use on turbines in Canada, Norway, and other cold areas, and have performed to expectations. Along with a cold weather package, the project expects to make use of Siemens proprietary Turbine Load Control (TLC) technology…Given that the technology is software-based, however, and is not considered a fundamental component in the performance of the turbine, the TLC could be shuttered without damaging the turbine if it does not work properly. In this case, the turbines would continue to run similar to Siemens’ existing fleet.314(emphasis added)Much like First Solar’s “innovative” projects, the Record Hill Wind project attempted to categorize minor modifications to existing commercial technology as “innovativeness.” DOE eventually agreed with Record Hill Wind’s questionable reasoning. On December 14, 2010, Todd Shrader of DOE sent an email to several DOE personnel with the subject line “Eligibility Intepretation (sic)” that read:An eligibility issue arose during the technical evaluation of Ocotillo Express (FIPP—F1033). This project is utilizing Siemens SWG-2.3-101 wind turbine generators. It is claimed to be a commercial technology based on the wide spread use (including in this country) of the closely related Siemens SWG-2.3-93 turbines, which are essentially the same just with smaller blade lengths (101 feet vs. 93 feet). Without looking deeper into the design differences (which will occur at due diligence), I concur with the applicant that this is a commercial technology. However, for Record Hill, which is using SWG-2.3-93 turbines, it is claimed that this is a new and innovative technology, partially based on no use over 5 years in the US for these turbines. I also believe there were some differences in internal controls.However, the 101 and 93 units are essentially the same technology. Can the same technology be innovative under the Renewables Solicitation and Commercial under the FIPP’s solicitation?315(emphasis added)Later in the day, Ruth Ku of DOE replied that the same question had occurred before with a different project and that the “project was asked whether it could obtain alternative financing in the private market…the project was able to get alternative financing (e.g., with John Hancock) and I think the recommendation was for it to move its application to FIPP…don’t know where Record Hill is in its process for it to be 65 Ruth Ku forwarded her email to Douglas Schultz, a Program Manager at DOE’s Loan Programs Office. Douglas Schultz replied, “Record hill is well into due diligence with [D]avid [S]chmitzer. No reason to transfer at all. In terms of precedent of innovative and not look no further than first solar where there [sic] panels are both innovative and noninnovative given the inverter used.”(emphasis added)Ruth Ku agreed with Douglas Schultz but worried that submitting two project applications using the same technology as innovative and not innovative could cause a “policy issue for OMB.” She wrote back to Douglas Schultz stating “[I]t cld [sic] be a policy issue for OMB if record hill followed Ocotillo. Think it’s probably less of an issue if record hill was first then Ocotillo.”318 After scheming about how to get the two applications through OMB without problems, DOE allowed the Record Hill Wind project to continue as an “innovative” project.319DOE would eventually finalize a $102 million loan guarantee (guaranteed 100% by the federal government) in August 2011. (emphasis added)——————————————————————314 Record Hill Wind, LLC., Standard & Poors Credit Report, July 1, 2011 (on file with author).315 Email from Todd Shrader, U.S. Dep’t of Energy, Dec. 14, 2010 (on file with author).316 Email from Ruth Ku, U.S. Dep’t of Energy, Dec. 14, 2010 (on file with author).317 Email from Douglas Schultz, U.S. Dep’t of Energy, Dec. 14, 2010 (on file with author).318 Email from Ruth Ku, U.S. Dep’t of Energy, Dec. 14, 2010 (on file with author).319 DOE did not finalize a loan guarantee for the Ocotillo Express project.
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