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WIND POWER: GENERATING ELECTRICITY AND LAWSUITS · PDF file 489 WIND POWER: GENERATING ELECTRICITY AND LAWSUITS by Brit T. Brown1 and Benjamin A. Escobar2 Synopsis: Whether imagined

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  • 489

    WIND POWER: GENERATING ELECTRICITY AND

    LAWSUITS

    by Brit T. Brown1 and Benjamin A. Escobar2

    Synopsis: Whether imagined or real, fears over the declining reserves of traditional hydrocarbon fuels and worsening emission-induced global warming have increased both the economic and social costs associated with the world’s traditional fuel supplies to the point where alternative energy, including wind energy, is becoming increasingly attractive. The apparent benefits of wind energy, including the fact that it is clean, renewable, and socially acceptable, have spurred political endorsement and subsidy, just as advancing technology has increased cost competitiveness. These combined trends are freeing up capital and opening up markets for significant increases in wind power generation.

    The relatively explosive growth of wind energy is, however, increasingly facing opposition in the courts, legislatures, and controlling state and federal agencies, thereby tempering political and investor enthusiasm. As wind developments continue to consume real estate, much of which lies in close proximity to communities or pristine lands, opposition is certain to increase. Thus far, however, favorable factors are propelling wind energy developments forward despite the opposition.3 I. Introduction ................................................................................................... 490 II. Wind Energy Matures in the U.S. ................................................................ 492 III. Early Land-Based Litigation....................................................................... 493

    A. Aesthetic and Environmental Impact ................................................ 493 B. Moratorium on Wind Energy Development ...................................... 496 C. Intellectual Property .......................................................................... 497 D. Contractual Disputes ......................................................................... 499 E. Conditional Permit to Construct a Wind Farm .................................. 501

    IV. Offshore Wind-Related Litigation and Legal Issues .................................. 502 A. Currently Proposed Offshore Wind Developments........................... 502

    1. The Cape Wind Project............................................................... 502

    1. Brit Brown represents energy industry and other clients in pre-trial, trial, arbitration, and administrative proceedings. His practice focuses on both complex commercial and tort-related disputes. Mr. Brown holds both MBA and JD degrees from the University of Houston. A native Texan with a deep understanding of the energy industry, both regionally and globally, Mr. Brown assists clients with his ability to synthesize business and policy trends into an understanding of the litigation issues that are just around the corner. 2. Benjamin Escobar brings the perspective of an MIT-trained chemical engineer to the practice of law. He focuses on litigation where presentations of scientific, engineering, or statistical concepts are important to the client’s case. Mr. Escobar has substantial trial, appellate, arbitration, and agency experience in many types of disputes in the energy and other industries. Mr. Escobar is also licensed to practice before the U.S. Patent & Trademark Office. 3. The authors would also like to acknowledge Reginald Snyder, whose efforts contributed to this article.

  • 490 ENERGY LAW JOURNAL [Vol. 28:489

    a. Alliance to Protect Nantucket Sound v. U.S. Dep’t of the Army.................................................................................... 503

    b. Ten Taxpayer Citizens Group v. Cape Wind Associates, LLC...................................................................................... 505

    c. Current Status of the Cape Wind Project .............................. 506 2. Long Island, New York............................................................... 507 3. Texas Gulf Coast......................................................................... 508

    a. Galveston, Texas ................................................................... 509 b. Padre Island, Texas ............................................................... 510

    B. Future of Offshore Wind-Related Litigation ..................................... 510 C. Lease Agreement Disputes ................................................................ 513

    1. Rent/Royalty Payments............................................................... 513 2. Transmission of Electricity ......................................................... 514

    V. Conclusion ................................................................................................... 514

    I. INTRODUCTION Public pressure to lessen dependence on foreign oil has long motivated

    business and political leaders to promote diversity in sources of supply for traditional fossil fuels such as oil and natural gas,4 and has also spurred research into alternative energy technologies, such as the increased use of coal in Integrated Gasification Combined Cycle (IGCC) generation plants. In recent years, these existing policy pressures have been intensified by the public’s awareness of how man-made carbon emissions are contributing to global warming and how global warming has the potential to fundamentally alter life on the planet. Largely as a result of this increasingly accepted view of global warming’s cause and effect5 and the resulting public outcry, politicians in Washington and various state capitals are moving to facilitate the expansion of renewable fuels, including wind energy. Similarly, business investors are directing greater amounts of capital into wind energy as turbine efficiency, regulatory permitting, cost of capital, and resulting rate of return improve. Additionally, energy producers have discovered an extra benefit in the improved public relations and publicity which come from providing green energy.

    For these and other reasons, wind energy is the fastest growing source of electricity worldwide. According to the American Wind Energy Association

    4. Many political leaders are preoccupied with the highly publicized peak of oil production. According to many industry observers, worldwide peak production “will occur when we’ve used half the oil nature made for us . . . . When the peak occurs, increasing demand will meet decreasing supply, possibly with disastrous results.” DAVID GOODSTEIN, OUT OF GAS 17 (W.W. Norton & Company Ltd. 2004). The belief that peak oil is imminent is not, however, universal. To the contrary, many industry members and policy analysts believe that the world has enormous untapped reserves of traditional and untraditional energy supplies. See, e.g., PETER HUBER & MARK MILLS, THE BOTTOMLESS WELL: THE TWILIGHT OF FUEL, THE VIRTUE OF WASTE AND WHY WE WILL NEVER RUN OUT OF ENERGY (Basic Books 2005) (arguing that the energy supply is infinite); Bhushan Bahree & Jeffrey Ball, Producers Move to Debunk Gloomy ‘Peak Oil’ Forecast, WALL ST. J., Sept. 14, 2006, at A2 (quoting leading industry representatives advancing claim that the world still has ample oil reserves). 5. Not everyone concurs with this theory. See, e.g., S. FRED SINGER & DENNIS T. AVERY, UNSTOPPABLE GLOBAL WARMING 1 (Rowman & Littlefield Publishers, Inc. 2007) (suggesting that present global warming is a natural cycle not caused by carbon dioxide emissions).

  • 2007] WIND POWER 491

    (AWEA), wind generating capacity increased by 27% in 2006, with similar increases expected in 2007.6 In the United States, more than 11,600 megawatts of wind generating capacity are already installed, which is roughly enough to power 2.9 million homes. Put another way, it would take approximately forty million barrels of oil per year to generate the same volume of electricity. This impressive growth has been made possible by consumers’ willingness to pay slightly higher energy rates for green energy, state and federal subsidies in the form of tax credits and otherwise, and technological advances that have enhanced the design of wind turbines, thereby making wind-generated electricity increasingly cost competitive with electricity generated from fossil fuels.

    There is also a sense of excitement over claims of the immense potential of wind energy. For example, the University of Houston has estimated that Texas alone has the capacity to generate more than ten gigawatts (GW) of offshore wind energy,7 and the European Wind Energy Association (EWEA) projects that by the year 2020 wind-generated electricity will be sold at a rate of 2¢ per kilowatt hour (kWh), making it potentially cheaper than all other sources of electricity by that date.8

    What’s not to love? Abundant energy from a renewable source which does not contribute to global warming, does not smell or pollute our air and water, does not consume food products (as does corn based ethanol), and has the potential to become even more cost competitive as technology improves! The reality is that there are many who have condemned wind energy on environmental, aesthetic, economic, and other public policy grounds. While most citizens and politicians alike agree that there are benefits to using renewable energy and thereby delaying the exhaustion of traditional energy supplies and reducing harmful emissions, there are economic and social costs. Some argue that the costs to the government in lost revenue due to tax credits outweigh any social benefit, and also out

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