The first meeting of the interim Wind Power Generation Committee was called to order by Chair David Munson at 8:04 a.m., July 12, 2001, in LCR 1&2 of the State Capitol, Pierre, South Dakota.

A quorum was determined with the following members answering the roll call: Senators Elmer Diedtrich, Paul Symens, Drue Vitter, and David Munson; and Representatives Burt Elliott, Art Fryslie, Gary Hanson, Don Hennies, Jeff Monroe, Sam Nachtigal, and Larry Rhoden. Senator Patricia de Hueck and Representatives Dale Hargens, Jim Peterson, and Bill Van Gerpen were unable to attend.

Staff members present included David Becker, Senior Fiscal Analyst, and Rhonda Purkapile, Senior Legislative Secretary.

A list of guests present during all or part of the meeting is on file with the master minutes.

(NOTE: For sake of continuity, the following minutes are not necessarily in chronological order. Also, all referenced documents are on file with the Master Minutes.)

Mr. Jim Wilcox, XCEL Energy, spoke from prepared remarks (Document #1). Mr. Wilcox reported that XCEL Energy was formerly known as Northern States Power. The company has customers in twelve states, and serves 70,000 customers in South Dakota, primarily in the Sioux Falls area.

Mr. Wilcox testified that the advantages of wind power are that it is replenishable and environmentally very clean. Because the wind is intermittent, additional sources of energy are necessary for back-up power when the wind does not blow, which increases the capital costs.

Mr. Wilcox reported that in 1893, there were over 80 manufacturers of wind machines, primarily used for pumping water in the Plains states. Because so much hydropower is available on the Eastern Seaboard, there was not much development of wind machines in that area. With the advantage of electricity, the use of wind for pumping water became unnecessary.

Mr. Wilcox testified that an early technical problem with wind machines was matching the synchronism necessary to generate power. They can now use an asynchronous generating machine that can speed up and slow down the rotation to maintain continuous rotation and convert that to synchronous needed to generate power.

Mr. Wilcox reported that wind velocity is very important in deciding where to locate a wind machine. Machines are designed to start in a 9 mile per hour wind and stop at a 65 mile per hour wind. He noted that air density is also quite variable.

Mr. Wilcox stated that 400 ton of the tower is below ground and 100 ton of the tower is above ground so the towers do not tip over.

Mr. Bob Miller, S.D. Electric Utility Companies, testified that the Florida Power and Light Company is a big player in the wind energy business. They are out right now negotiating letters of intent with the land owners and are currently planning to continue to watch the developments with Amendment E in the courts. If they can have a lease-hold interest in the land, then they plan to move forward and will probably spend upward of $100 million in South Dakota.

Mr. Miller stated that South Dakota has one of the best wind resources in the United States but is in serious trouble with regard to developing that resource until Amendment E and the contractor?s excise tax have been dealt with.

Mr. Miller presented the committee with information on net billing (Document #2) and with proposed legislation to provide for tax refunds for construction of new or expanded commercial power production facilities (Document #3).

Mr. Jim Nichols, Lincoln County Commissioner, Lake Benton, Minnesota, testified that Lake Benton has the largest wind farm in the world. He encouraged the committee to not rush to hand out a lot of property tax breaks for the development of wind farms. Lake Benton collects a lot of property taxes on its wind farm, and these wind farms also create a lot of good jobs.

Mr. Nichols stated that the market for wind energy is not in South Dakota. He presented the committee with a list of U.S. wind capacity for Spring 2000 (Document #4), noting that South Dakota is listed at 392,000 megawatts. If South Dakota were to completely build to its potential, it would cost $392 billion.

Mr. Nichols reported that the cost of wind energy has decreased dramatically, making it more economically feasible for power plants to purchase. Most states with population bases are currently short of electricity, which will make people try to tap into cheaper power sources. He stated that South Dakota needs a power contract and a transmission line to get their product (wind generated electricity) to the market where it is needed. Mr. Nichols stated that if there is a power contract and a transmission line, the developers will come to South Dakota. Transmission lines are not expensive or difficult to build because they can follow county roads. He presented the committee with a map denoting a transmission line from Wyoming to Illinois (Document #5).

Mr. Nichols advised against property tax breaks and subsidies. He stated that if these companies are going to be in a state?s counties, the state wants them to pay property taxes. Also, larger companies do not need the tax breaks or subsidies.

Dr. Ronald Spahr, University of Illinois, Springfield, Illinois, spoke to the committee about the Zion/Transamerica Grid & Generation (TAGG) Project. This project will have a transmission line from Los Angeles, California, to Zion, Illinois, with coal as a back-up source of power. This single project is more than double anything done with wind power today. With this project, it will be possible to diversify peak loads. It is hoped to have the financing lined up within the next few months, and then the siting and permitting will begin within the next year, with construction beginning as soon as possible thereafter. Dr. Spahr noted that the power lines would be direct current (DC) transmission lines, so the right-of-way needed for the lines would be much less than usual. The two power lines would be spread out ten miles apart, so reliability of the system would be much greater. He noted that the biggest threat to the lines would be from tornadoes. Dr. Spahr noted that ten counties in South Dakota have signed up for this project. If a county agrees to a transmission line, they will also get turbines.

In response to committee questions, Dr. Spahr indicated that it is four times as expensive to put power lines under ground as above ground.

Mr. Rick Halet, XCEL Energy, testified that wind energy is expected to be an ever increasing part of the resources of XCEL Energy in the future. The company has power purchase agreements for wind energy in Minnesota, Colorado, Wyoming, and New Mexico. The company also owns several turbines in Colorado. Mr. Halet noted that occasionally questions will arise with regard to environmental issues, interference issues, and aesthetics, but they have found that there are really no problems in these areas. One of the biggest issues with wind energy is the intermittence of the wind. Most people are not willing to change their living habits according to wind patterns. The challenge in the system is creating the power when the demand is there.

Mr. Halet reported that as turbines increase in height, the wind patterns change. Price is a big driving force in the selection process of where projects will be located. A two-mile-per-hour change in wind speed will cause a 20 percent difference in the power produced.

Mr. Dave Blair, General Counsel, East River Electric Power Company, testified that East River Electric and Basin Electric will be the owners of two wind towers to be installed by Chamberlain this summer. They are anticipating construction completion by October 2001. Mr. Blair stated that South Dakota?s production potential in wind energy far outweighs its consumption potential. The main issue is getting this product to market. There are areas in South Dakota that are better for wind production than others, he noted. Mr. Blair stated that the wind energy boom has been caused by technological advances and the wind friendly policies from states and the federal government.

Mr. Randy Parry, City of Howard/Miner County Community Revitalization (MCCR), testified that wind generation is a new opportunity that the MCCR wants to look at for economic development. Mr. Parry noted that the average wind speed in Miner County is 15 miles per hour. The MCCR has put up a turbine in Howard and will be erecting two more towers in two other communities. It cost about $65,000 to erect the turbine in Howard.

Mr. Tony Rogers and Mr. Ronald Neiss, Rosebud Sioux Tribe and Rosebud Sioux Tribe Utilities Commission, testified that the tribe received a $500,000 grant from the U.S. Department of Energy for a demonstration project to erect a turbine by the Rosebud Casino. The tribe is doing this in the hope of encouraging other tribes to look into wind power generation for economic development purposes. This is a renewable resource that does not pollute and is safe for the environment. The tribe does not expect to make any money from this demonstration project and hopes to sell the power to Ellsworth Airforce Base.

Mr. Ken Hach, Clipper Windpower, presented the committee with copies of legislation from North Dakota and Minnesota with regard to wind generation (Document #6). Mr. Hach testified that, as a development company, their goal is to develop, own, and operate wind farms. They know that the wind is in the Dakotas, but not the market. Wind can offer some fantastic opportunities for economic development in South Dakota. Mr. Hach reported that Rolling Thunder is a 3,000 megawatt project in the Wessington Springs, Miller, Highmore area. They are looking to export this project, primarily to the East. Mr. Hach said that his company needs the wind resource, access to the land, the power purchase contract, and the transmission line to complete a project.

Mr. Lyle Plosky, Director, CENDAK Winds, testified that CENDAK Winds is a cooperative that just formed last November for the purpose of purchasing and installing wind turbines. The cooperative wants to own the turbines, work with experienced developers and existing electric partners, and keep the profits in South Dakota.

Chair Munson recessed the committee at 11:50 a.m. for lunch and reconvened the committee at 1:05 p.m.

Dr. Mike Ropp, South Dakota State University, spoke from prepared remarks (Document #7). Dr. Ropp testified that more than 1,300 new power plants are expected to be needed by the year 2020; however, no new plants are currently coming on-line. South Dakota has a large capability of generating and exporting electricity with wind generation and this would also provide for economic development. Current maps and all other studies are based on computer models. Most of the existing data is in private hands and considered a competitive asset. The need for a database of measured wind speeds will be addressed by the Wind Resource Assessment Network (WRAN). Dr. Ropp noted that they have been working with East River Electric on this project and will be placing monitoring equipment to collect data on wind on their towers. Dr. Ropp added that he is setting up a collaboration effort with South Dakota School of Mines and Technology (SDSM&T) and they are trying to get more funding to expand the WRAN to some sites West River.

In response to committee questions, Dr. Ropp indicated that solar power is an extremely beneficial technology, but currently it costs five times more than wind power.

Dr. Ropp testified that it cost $5,200 for equipment per site for those monitoring sites in East River. Labor and installation costs were donated in East River. The operation costs will hopefully be funded through the Governor?s Office of Economic Development (GOED). He noted that this is a three-year project.

In response to questions, Dr. Ropp indicated that the power converter technology is still an area being researched and has not yet been perfected. Also, there will be a need for new transmission lines to export the product.

Mr. Ken Higgins, Cooperative Fish and Wildlife Research Unit, SDSU, presented the committee with research information on wind turbine effects on wildlife (Document #8). Mr. Higgins testified that there is not a big mortality rate of birds associated with these turbines. There is actually more bat mortality, and experts do not know exactly why. Lattice type towers are more dangerous than tubular towers. In the Plains states, turbines have been erected in strings rather than grids. Most of the birds (75 percent) fly below the rotation of the blades. There is also an avoidance of the towers from the birds. The mere presence of the towers does have some effect on the density of the birds in the area. Bird mortality will be higher with fog, heavy rain and winds, and, of course, with those same conditions at night. Mr. Higgins noted that pre-site reconnaissance can do much for the avoidance of problems such as bird deaths, etc.

Mr. Higgins reported that in South Dakota, there is a higher possibility of a threatened species flying through the state and hitting a tower because there are tens of millions of birds that migrate through South Dakota. He noted that in Minnesota, as the wind generation plant grew larger, the bird mortality rate increased. Mr. Higgins testified that research indicates thus far that wind turbines have little effect on bird mortality. Mortality on transmission lines is a little higher than on towers.

Mr. Higgins suggested that the state tack on a surcharge for this export because people tend to be willing to pay more for "green energy" because is it cleaner and does not pollute.

Mr. Bill Nevin, Department of Transportation, testified that the Department of Transportation, through the Aeronautics Commission, is charged by statute with regulating the erection of structures that might interfere with airports. This is done through a permitting process. The location and proximity to highways of structures more than 200 feet in height are becoming a concern. By administrative rule, the state trunk highway system has been designated by the Federal Aviation Administration (FAA) as VFR (visual flight rules) to assist planes in locating towns by following state highways in low visibility situations.

Mr. Bruce Lindholm, Department of Transportation, presented the committee with a map denoting the state trunk highway system (Document #9).

Ms. Michelle Farris, Public Utilities Commission (PUC), reported that the PUC has siting authority over transmission lines (these lines would require a permit). The PUC also has siting authority over transmission lines that originate or terminate outside South Dakota but that would cross South Dakota. She presented the committee with information on transmission facility siting requirements per statute (Document #10).

Mr. Keith Senger, PUC, testified that the current transmission lines were not built for long deliveries, but were built for smaller, shorter deliveries. He viewed this as the largest problem to exporting wind energy from South Dakota.

Mr. Mike McEnroe, U.S. Fish and Wildlife Service (USFWS), testified that they have a grassland easement program which tries to keep grasslands in grass. Construction of a wind turbine and maintenance roads does constitute a disturbance of grasslands. However, they do not want to be a impediment to this development. Consequently, they have told landowners that if the U.S. Fish and Wildlife Service purchases a grassland easement from them, they will likely not allow an easement for wind turbines. Draft guidelines would allow wind turbines on grassland easements at one per one-quarter section. If the turbine is no longer used, the USFWS would ask that it be removed at industry or landowners expense. The USFWS would want proper lighting for birds and updated as research suggests to steer birds away from the towers. Mr. McEnroe anticipated no problems with the wind energy industry on wetland easements.

Mr. Chuck Groth, Communications Director, South Dakota Farmers Union, presented the committee with information on wind energy easements that they have been presenting to farmers (Document #11). Mr. Groth testified that they are very supportive of the concept of renewable energy, with an interest in the opportunity of more revenue earnings for farmers.

Mr. Pat Spears, President, Intertribal Council on Utility Policy, testified that nothing will be developed of a significant size unless there is a market for the product. The tribe is looking at an intertribal business structure to generate wind energy and sell to the federal government. He mentioned that the tribes are open to working with state government on this effort.

Senator Symens requested information on studies that have been performed detailing the amount of stand-by power necessary for a wind energy project.

Representative Nachtigal asked if the statutes dealing with the state trunk highway system and visual flight rules are unique to South Dakota and requested information on what other states do with this issue.

Senator Munson noted the possibility of touring a wind turbine project. He also suggested inviting staff from the National Conference of State Legislatures (NCSL) to speak at the next meeting with regard to what other states are doing with the development of wind resources.

Senator Vitter requested information on the contractor?s excise tax.

Representative Hennies asked for information on how utilities are taxed.

Senator Symens suggested the committee receive information on the historic water generation issue and what South Dakota gave up for the dams.

Chair Munson set the next meeting for August 23.

There being no further business, Chair Munson adjourned the meeting at 3:00 p.m.