I've Got a Question?

I received a call yesterday afternoon from a landowner in our association (side note, I love getting calls from landowners; it helps me to keep perspective on what our association is really all about). This particular landowner owns land in Floyd County, Texas and wanted to know several things about how development is progressing in the area. One question he had in particular got my wheels turning. Let me back up and tell you how we got to that question.

The first question I got was one that I get all the time: are developers looking to develop in the area? The simple answer to that one was yes, yes they are. The more complicated answer is that while yes they are looking to develop in the area they are all sort of at a stand still while waiting for the transmission line build-out to come along.

So the next question was a very logical one: what is the status of the transmission lines? Once again, easy answer to this one is they are currently being planned. What's the more detailed answer you ask? Well, transmission companies throughout Texas are currently working on coming up with several different routes in which the lines could be built. They are working with community leaders and landowners to develop a primary and several alternative routes that they will submit to the Public Utility Commission of Texas (PUCT). The PUCT will then choose which route they will build. Construction of the entire system is scheduled to be complete by 2013.

The next question was a very straight forward one: so, the lines are going to be built? The answer to this one was simple again. Yes, the lines are going to be built including a line that is planned to cross the Northeast corner of Floyd County.

Here comes the wheel turner. If the developers are interested in the area and they know that the lines will be here eventually why aren't they already out here securing the land? This was one of those moments when I had to stop and say, "well, I am not sure."

Now before I go any further let me stop and give a disclaimer. I know that there are developers in the area who are talking with landowners and even some landowners who have their land leased, but a lot of that type of stuff is done under the radar. Developers don't necessarily want to broadcast the possibility of developing a wind farm until it's pretty set in stone. Even for those landowners who haven't been talking with developers in our area, it is very possible that developers have their eye on your land.

With that said, I was pretty curious about that question myself. I guess you could say I am a little biased though; I would like for all of our landowners to secure their land with wind developers and I would like for it to happen today. Putting aside my biases, I realized that there must be some logical reasons why developers are slow to jump on the opportunity to secure land with great wind potential like what we have here in the Caprock Plains Region of Texas. Who better to answer this question than a developer who is in this exact situation.

After my discussion with a developer interested in development in the area, I found a little clarity. This is what I got out of that discussion:

First of all, wind developers want to make sure that lines are up, operating and open before they move forward with a project. When developers build a project in a specific area they have to request an interconnection into that grid for a certain amount of MWs that they think their project will provide. For ERCOT and SPP this process takes time and there are lots of studies that have to take place to find out what kind of power generation will affect the lines it goes into as well as the other lines down the road. Until they get farther along with the CREZ process they aren't exactly sure how it will affect the grid. The CREZ lines will allow for more wind farms to be built but it will also help with congestion problems. As the congestion areas are taken care of and developers are convinced that new lines will continue being built and on schedule then we will be more likely to see development pick back up.

One other issue is money. Developers looking at large scale developments will generally lease about 10,000 acres. When they are paying $3 to $4 an acre it can really add up, especially when they are looking at 2012 and 2013 as a projected completion date for the lines. It turns into quite a bit of money the developer is out way in advance of ever seeing a return. Wind developers are also still a little skeptical of the time frame for the transmission lines and are generally waiting to make sure the build-out continues as scheduled.

Needless to say, after my discussion with the developer I feel much more prepared to answer that question next time it comes up. And next time it won't require so many wheels turning!

Until next time...