'Peak' of the ridge -Barnes County group pursues community wind

VALLEY CITY, N.D. -- As a grain farmer and partner in a family seed business, Bill Noeske has made a lot of decisions in his 51 years.

But Noeske thinks all of those decisions pale in comparison with the one he made in summer 2007 to pursue a locally owned wind tower network to generate electricity and income for him and his neighbors.

Noeske is chairman of the board for Peak Wind Development L.L.C., one of the latest and largest forms of community-owned wind projects in the region. The group has amassed commitments from landowners in the Barnes County area in what's called the Glacial Ridge Project. The company now has some 30,000 contracted acres committed with some 80 landowners.

The project is east of Valley City, N.D., and runs about three or four miles wide and 20 miles north and south -- all just north of Interstate 94.

Instead of going ahead with other developers in the area, this project has chosen to keep as much local control as possible, trying to distribute more returns for more people and include a share-cropping function.

The process could take two or three years to build, but this group isn't as concerned about the speed as much as whether the project gets done right -- affecting generations to come.

"I feel that this is the most important decision I'll make in my lifetime," Bill Noeske says. "Our contract here is going to run 30 to 40 years. Think of how many thousands of people this will affect. This energy development is coming to North Dakota. It's inevitable, and it's going to be here for decades."

Off-peak to offbeat

The Noeskes are fourth-generation farmers in this community.

They stand on the shoulders of their forefathers and live and work in a family legacy. The Noeskes came to state of North Dakota in 1881. In 1886, they homesteaded the 80 acres where Bill still lives. The home place stands on a ridge about five miles east and five north of Valley City.

The Noeskes have been devoted co-op people for decades. They include presidents of farm supply and elevator cooperatives, as was their father, Ralph. They've served on both local Farmers Union and Farm Bureau boards. Brad has been on the North Dakota State Crop Improvement board of directors. The family created Noeske Seed Farm in the mid-1980s. In 1992, they built their existing seed plant, which handles wheat and soybean seed. They clean seed for Croplan Genetics and AgriPro and are seed sales representatives for Pioneer. They ship seed to North Dakota, South Dakota, Minnesota as well as to Canada and Ukraine. They were founding associates in North Dakota State University's Roughrider Genetics program.

The Noeskes started seriously looking at wind power generation as early as 2006, but initially as a "small wind" concept.

They'd been using off-peak electrical rates from their local rural electric cooperative to get a better rate for their expanding business.

"Ten years ago, our off-peak worked great, but it's problematic during drying season. We have 500 horsepower of single-phased motors on the farm," Bill Noeske says.

The off-peak rate program -- where electricity is cut when peak power usage hits certain levels -- wasn't working as well for him as it had initially.

"In the past two or three years, we've noticed that the power cuts out more frequently and for long periods of time," Noeske says. "That can be a problem when you're drying grain and cleaning grain and the power was being cut off."

The Noeskes were increasingly using a smaller diesel generator as supplemental power.

"We decided we had two choices -- either produce our own electricity or get out of the off-peak program and go from 4 cents to 7 cents per kilowatt hour pricing," Noeske says. "We decided if we have to pay for power at 7 cents a kilowatt, we could pay for one of these (wind turbine) things fairly quickly -- maybe in less than 10 years."

And the Noeskes figure electrical energy prices -- although currently fairly economical, compared with other energy -- will continue to rise.

About the same time, Bill's daughter, Stephanie, was home from North Dakota State University in Fargo, where she is pursuing a pharmacy degree.

"She'd watched the Al Gore movie ("An Inconvenient Truth") and told me we should consider a wind turbine for the farm. It was comical, but she said we should do something about this," he recalls.

Noeske and his brothers hadn't really focused on wind power, but the idea shouldn't have been entirely new.

On Jan. 25, 2002, Minnkota Power Cooperative of Grand Forks, N.D., installed a 900-kilowatt turbine about four miles straight south of them. That tower produces power for the Infinity Wind Energy project.

The Noeskes were busy enough with their own farm, but they noticed the data that the Infinity project was encouraging.

"Data from that tower goes onto the Internet, and you can see that on this ridge we have some of the best wind in the world. The proof was there already, so we really didn't have to analyze it."

But they did.

Starting small, growing tall

The Noeskes calculated what their farmstead-business power needs were and then decided to get a turbine that would double that.

They tentatively settled on a one-half-megawatt machine -- a Fuhrlaender FL 250.

"We figured use a quarter megawatt, so we could have consumed about half of thattower and sold half of it on the grid," Bill Noeske says.

The tower would cost roughly $750,000. The price "scared a guy," but with all of the incentives for production tax credits and fast depreciation, it "really knocks that price in half."

The farm is on single-phase power, so the Noeskes had to figure out how to convert that, using several converters, from single-phase to three-phase power.

"The Canadians have made an inverter to go the other way, but it's kind of a prototype and kind of expensive. We'd have been one of the first ones in the nation to do that," Bill Noeske says.

The Noeske brothers were wrestling with this decision -- some days yes, some days no -- when they started to get calls from their neighbors who had heard they were looking into wind.

Paul and Brion Henderson, who live six miles east of the Noeskes, near Oriska, N.D., called. The Hendersons are well known in the area for their association with Evergreen Cooperative, which operates off their farmstead and supplies fertilizer, anhydrous and seed. Curt Marshall, whose family farms in the area, manages Evergreen Cooperative and also was interested in wind. Steve Winter, whose family farms just east of the Noeskes, came into the project.

It seemed that everybody in the neighborhood was looking into wind.

"And everything pointed to a wind farm," Noeske says.

Blowing past 20 megawatts

The first thought was to build a 20-megawatt wind farm -- about 10 to 15 of the larger towers available today.

Among others, the Noeskes approached John Deere, which is known for participating as an equity partner in 10- to 20-megawatt community ownership projects. After the project's tax credits and returns-on-investment were finished, the company would "flip" the ownership back to the community.

The group initially had thought about a 2,000-acre project, but that soon grew, particularly as Marshall spread the word to customers of Evergreen.

"In a month's time, this thing exploded to 20,000 acres," Noeske says. "Boom, you know, you're talking about a $400 million to $500 million project. We needed a partner that could handle that."

In September 2007, the group started working toward putting together the Peak Wind Development L.L.C. as a formal company, and the seven neighbors became its board of directors. (Peak is named for a nearby community where an elevator now remains, five miles east of Valley City.)

In October 2007, they filed an "interconnect request" to connect 200 megawatts of power to the grid. This is done with Midwest Independent Service Organization, the independent, nonprofit organization based in Carmel, Ind. Its operations centers are in Carmel and St. Paul. MISO ensures operations of nearly 94,000 miles of interconnected high-voltage power lines and the transmission of more than 100,000 megawatts of energy in the Midwest.

The Peak Wind limited liability company was officially completed Dec. 15, 2007.

The board assembled a variety of experts. It hired Jay Haley of EAPC Engineering, Grand Forks, N.D., for general project advice and for erecting wind analysis towers. While board members knew their wind resource was good, you need specific proof to show to people who needed large loans for large projects.

In January, Haley helped them arrange for data collection towers. Data flows into Haley's data models in Grand Forks through a cell phone connection.

The minute-by-minute data confirms what they already know.

Most wind farms are rated in the efficiency ratings of the upper 30s -- referring to the percentage of maximum potential for that generator if it went full-bore, 24 hours a day, seven days a week.

"If you're over 40, you're in an elite status," Noeske says. "Initially, we were in the lower 40s."

They hired Marshall McCullough the Ohnstad Twitchell law firm of West Fargo, N.D., for help with business filings. McCullough's associate, Brett Brudvic of Mayville, N.D., worked on zoning.

They got help in transmission line analysis and layout with Kadrmas, Lee and Jackson Inc. of Valley City and with Excel Engineering of Minneapolis.

Significantly, they hired Lisa Chavarria of the Stahl Bernal & Davis of Austin, Texas, as a consultant. Chavarria had negotiated hundreds of wind contracts in that state with a variety of developers. They'd gotten in contact with her in summer 2007 when the they'd had been approached by other wind developers who were building large projects it the area.

"The worst thing that could happen is getting a project done and leaving something for generations to come that you don't want," says Winter, one of the board members. "That's the worst thing."

In mid-2007, the Noeskes began talking to a bona fide wind attorney.

"Since this was such a new industry to North Dakota, we wanted someone who specializes in this," Bill Noeske says. "We figured, place is going to get covered with turbines. We wanted to participate with a company that has our same goals and respect for the landowners."

Of course, all of this has cost money. The board members each kicked in funds to put up three wind data collection towers at $30,000 each. The seven board members have invested hundreds of thousands of dollars.

"More than a combine, but less than a combine and a header," Marshall says.

They also needed a partner.

Glacial Ridge and 'RES'

After talking to several companies, the Barnes County farmers settled on a company called Renewable Systems Americas, or RES.

RES develops builds, owns and operates wind farms across the nation and world. Originated in 1982 in the United Kingdom, RES has North American headquarters in Broomfield, Colo. One of its four regional North American offices is in Minneapolis.

RES officials first met with the Peak Wind guys in November 2007 and soon decided they were their preferred partner.

RES created a "hybrid" community project that offered not only an opportunity for input, but also a vote on key decisions, and let them design their own royalty structure for their own community.

They called the project Glacial Ridge project.

Through the development phase, Glacial Ridge has a four-person executive board -- two Peak Wind members and two RES members. Right now, the ownership is 50-50 with RES and Peak, but as the project goes into construction and operations phases, there will be options to participate separately as owners, even as landowners benefit from royalties.

"We are partnering (in a) 50-50 situation with one of the world's premier companies in wind," Noeske says. "It'll be like sharecropping, on a percentage of gross sales. We're planning that as a hedge against inflation."

One of the key advantage was RES had its own construction company and turbine availability -- turbines on order at all times. Some other companies earlier had run into problems with having the resources to acquire towers.

Among other things, RES allowed the Peak Wind to customize the royalty system to their own neighborhood. Peak Wind wanted a situation where the payments are spread out among all neighbors who are affected by the wind and towers and not based solely on the exact spot where the wind tower is based.

There will be a turbine payment, but also a "community payment" that doesn't depend on whether you physically have a turbine on your land.

Contracts are "standard" contracts, with transparency, discussed in open meetings. Those meetings started in November 2007 and then in January 2008. Participants needn't try to compare notes with others in the project because all of the deals are the same.

Actual positioning of the towers won't be known until weeks before the final layout and construction phase, which is not yet known. RES will have to file that plan with the North Dakota Public Service Commission.

"It's like an oil well. It doesn't matter where the well sits, you're still using the resources of the whole neighborhood," Noeske says. "Everybody's going to put up with the impact -- towers, lights -- so we molded this so that everybody get's paid. That's our goal."

RES officials have met several times with affected landowners. When it gets to final layout, the landowners will have input on where to put the towers.

"The landowners have a voice at the table. RES is going to have a place they want that tower, yes, but we want to incorporate section lines into the road structure and drainage," he says.

Noeske and his fellow board members decline to answer many questions about investment future opportunities. They kinds of details won't come until closer to the construction phase and all landowners would get information.

Each landowner owns shares in the development company -- Peak Wind -- but the final ownership structure isn't known. That's flexible.

Royalty structures should be comparable to what is being paid in places like Texas and very favorable to what has being paid in North Dakota up to this point.

Patience, inevitability

Peak Wind now has land that covers 30,000 acres, including some 80 landowners.

"We now have land we feel is capable of producing 300 to 400 megawatts," Noeske says. "It kind of keeps trickling in."

It isn't yet clear how big the turbines will be. There may be 200 of them, depending on the size.

Noeske says it appears to him that the United States is going to end up at 20 percent renewable electricity primarily from wind.

"We're at 1 percent now," he says, "so we're at the first phase of this."

Noeske, whose great-great-grandparents homesteaded here, says he's been humbled by the responsibility other landowners and lifelong friends have placed in his hands.

"When a neighbor comes and says, 'Count me in,' we take that pretty serious," Noeske says. "I've got to live here. My kids have got to live here. My business is here. We want it (fair) the same way they want it.

"Part of the thing you run up against is people's attitudes -- like some Rodney Dangerfield thing," Noeske says. "It's 'Who would respect Peak Wind? You guys don't know what you're doing.'"

But he says the members of his board all have run businesses, seed boards, local associations and various enterprises. They have generations worth of connections with the landowners they've enlisted.

There are four large transmission lines crossing their area, and a fifth is being built.Transmission obstacles ultimately must be solved and coordinated on a multistate level.

"We're building one two-lane over here, another over there," he says, a bit frustrated at the situation. "We should be building one six-lane road. It's kind of like patching a fence when it should be torn down."

Noeske says North Dakotans should take hold of opportunities.

"You know, the experts told us we'd be the 'Buffalo Commons,' and now we have the biggest oilfield in the West. We have wind to power a fourth of the nation. We're raising all this corn for ethanol. We've come a long ways."

He says North Dakota also produces children who get educations and then go and get hired by companies who come back into North Dakota and develop these energy resources, sometimes on behalf of people who live elsewhere.

"We are in the northern tier of states. We should be like Alaska that exports energy and has a favorable tax structure," he says.

At the very least, he's hoping Glacial Ridge will be a hedge against inflation.

"As this goes into the next generation, and the contract is renewed, it'll be on a percentage of gross," Noeske says. "If technology develops a better battery for power storage, or if transmission technology changes -- boom!"