|In the United States.|
By Adam Blair
December 19, 2011
Back in January I wrote about a natural gas boom taking place in the U.S. Northeast and the many economic, social, and environmental impacts communities should be prepared to address. For this article I want to direct your attention further south to the State of Texas. Texas has a long and proud history of energy production, beginning at the turn of the 20th Century with oil and followed by decades of natural gas drilling. While the state has in many ways adapted to and even embraced the boom-bust cycle that characterizes most forms of resource extraction, this new boom may be just as unfamiliar to Texans as natural gas is to Yankees. The main difference this time around: wind energy is the culprit.
Wind—a renewable resource that cannot be depleted—is seen as the clean and green alternative to fossil fuels but a resource that, similar to petroleum, can provide a supplemental income to those fortunate enough to own land. And what communities must be prepared for in terms of cumulative impacts are in many ways similar to those associated with conventional forms of fossil fuel extraction. This is why organizations like the Sweetwater Enterprise for Economic Development (SEED), located in the center of West Texas wind activity, are doing more to capture the wealth being generated by this burgeoning industry. In October I sat down with Ken Becker, executive director of SEED, to not only get a better idea of how their office is approaching economic development in the region and what the impacts have been thus far, but to also gain insight into who is winning and who is losing during this process. Our conversation follows.
Want to tell me a little bit about what you do before we get into things?
What we try to do—it’s really two, three main areas—we try to take existing companies…and keep ‘em. You can work all day long and try to get new people in but if you’re losing more on the back end than what you’re getting on the front end then you’re fighting a losing battle. So we want the one’s that are here to stay and find out ways that we can help them. We also want to work with anybody here that wants to expand. And then of course we’re always looking for new companies.
Instead of looking at wind as a cottage-type industry that’s just gonna be here for a while, we all of a sudden say, ‘This is going to be one of our major industry sectors.’ And even today in a downturn economy, we have over 350 people still working in the wind business just in Nolan County. And those are direct wind jobs; they’re not the second-, third-, forth-tier jobs that we also have. Those are direct jobs tied just to the industry itself.
So you’re really embracing wind as a base industry?
We have, and it’s gone beyond the landowners. Of course, they had to be some of the early ones to embrace it, but we also have a judge and county commissioner from Nolan County that saw the potential of what it was gonna do and worked up a tax abatement program that fit very well into the developers that are gonna put these in. They offered a ten-year abatement, which is the most you can offer. What they did is staged it; they said that the first five years we’ll give you an abatement on the value at 60 percent. And then the second five years, when you’re already starting to recoup some of your costs, we’re going to drop that to 40 percent. So it’s a win-win for everybody. The developer got a reduced tax burden from the start; the taxpayers got an increased valuation.
When the abatement program was designed, did you have critics who just viewed it as a handout?
There always is with any kind of abatement. You had some who thought it was too much; some who thought it wasn’t enough. There was actually counties north of us that needed the investment in their county so much I think the county commissioners up there gave 100 percent abatement for 10 years. No taxes at all. Our county felt like we need to kinda give them a leg up. We needed an incentive to get them here, but once they’re here we know that the long-term investment is going to be beneficial for us.
So when you take what the county commissioners did, not only increasing our overall valuation, but now created a tremendous number of jobs and, heaven forbid even if the industry ever closed and didn’t expand much beyond where it’s at, we have 1,300 turbines that have to be maintained. And we have many companies that started right here to maintain those turbines and some of those companies not only do things here but they travel all over the United States to work on turbines.
What were some other impacts that you noticed during construction phases?
Some of the major impacts were, at the time, if you owned a house for sale, as long as it wasn’t too overpriced it probably didn’t sit very long. I think one of the things we thought would happen but probably didn’t is that we didn’t have a lot of new homes built to accommodate that. I think the biggest reason why was that we came out of a major drought so we had a number of houses that were available.
Employment became an issue for a while; we were down in the low 4 percent. And we got to that point where it was hard to find someone to go to work, some of the jobs that used to start out at $7 or $8 an hour all the sudden had to pay $9, $10, $11 an hour because it was costing you more to get the bodies that you needed.
Even jobs outside the industry?
What happened was the industry pulled so many people that—we’re only a county that had 6,200-6,300 people, and 1,000 of ‘em are working in one industry that’s brand new—so even if you took every person that was on employment, which was at the time was probably only 300-350 people, you had to have a bunch of other people. You had people that would go out there and do nothing but pick up trash as they were constructing these things and start out at $15 an hour. So your hotel industry, your janitorial industry, was struggling because that is an area that normally pays lower in a community and it’s probably a $7, $8, $9 job; all of a sudden they had to increase it because of that.
In regard to the vacancies you have in your downtown here, have you used some of the additional tax revenue to start a downtown revitalization program or something similar?
No, we haven’t; our organization can’t do that. We’re actually governed by the state and what we can do, our organization can really only put money into what they call ‘primary jobs,’ and a primary job by the State of Texas definition is where you produce a service or a product that is sold in outlying areas and those funds are brought back to your community. So a restaurant is not something that you can do. A retail spot is not something that you can do. Because when you look at it from that point of view, if you have five restaurants, and you add two more, you haven’t made the pie any bigger. All you’ve done is cut it up into seven slices instead of five. What our intent is is to make the pie bigger. So even though you’re cutting it up into more slices, the pie’s so much bigger that each slice is worth more than it was before.
Do you want to quickly just talk about 1) what some of the obstacles have been to developing this industry, and then 2) if, in your opinion, you feel that anyone is losing out in this game?
I see very few negative things that have come out of this. Everybody in our community now is making a better living than they were before, which creates an opportunity for them to spend more money. And unemployment is down. You have people that have had ranches that have been handed down from generation to generation that were truly on the bring of losing their ranches because the drought situation almost broke them and if they didn’t have any oil production they didn’t have no outside income. Well all a sudden this wind income and production created an opportunity for them to keep their land and, you know, some ranches that were in the family for some one hundred-plus years. Things like that are so good to see.
West Texas, a struggling and depopulating region, may be gaining a second wind, quite literally. And for that there are many reasons to be optimistic. As development continues, however, important questions over the redistribution of wealth are bound to arise. A rising tide will only lift all boats if the needs of those likely to lose out—be it the uneducated, landless, or small business-owning—are not addressed.
Given the influx of new employees and their families, state and local policies aimed at helping small businesses and improving the quality of life in rural West Texas communities could actually improve an area’s ability to attract firms and their investment. And while wind development is still uneconomical without federal subsidies, local counties endowed with bargaining chips like adequate transmission infrastructure, a solid labor force, and healthy wind speeds could reconsider the generous tax incentives that are now the status quo.