Local Company Connects Farmers, Ranchers to Wind Energy Investment

Lubbockites have been blown back by the wind from time to time, but some are seeking to capitalize on those gusts with wind farms. One company is working to get landowners a bigger piece of the action.

Tri Global Energy, LLC, is a development company based in Dallas with an office in Lubbock that approaches potential wind farm investors on behalf of farmers and ranchers.

David McCulley, head of project management and landowner relations for the Lubbock regional office, said with wind energy quickly becoming a popular low-cost energy option, Tri Global partners with landowners interested in having wind farms on their property and ensures them their part of the revenue produced from the project.

“Each wind farm project that we have is not a corporate wind farm, it is a land owner- and community-owned type project,” McCulley said. “It’s designed that way to benefit the landowners and the communities quite a bit more. We’re the developer-facilitator. We help get the organization of the project put together; it becomes its own LLC, and we basically are partnered with them to assist them with all of the details about developing it.”

McCulley said the role of Tri Global is to ensure the projects gather enough capital to get the multi-million dollar machines spinning, which they do by recruiting tax equity and sponsor equity investors to provide financial backing for the wind farms.

“You would go out to these big-money investment groups and say, ‘here’s your return on doing this, here’s the payout,’ and you get someone to finance and construct it,” McCulley said, estimating that an average wind farm requires $450 to $500 million from concept to construction.

McCulley said Tri Global was born when CEO John Billingsley read the lease for a potential wind farm on his property and didn’t find the terms to be in his interest as a Lubbock farmer, and decided there was a market for providing the community a part of the windy wealth.

“He thought there was a better way to serve the landowners, since that’s who he was,” McCulley said of his boss. “He felt a real connection to this area and to what farmers and ranchers deal with. He thought, ‘there’s got to be a way where they get a little bit bigger piece of the pie.’”

Tri Global’s website says the company was founded early in 2009 with the goal of improving the traditional business model to better serve property owners, investors, and corporations.

Traditionally, a negotiation between the energy company and a landowner results in royalties from leasing the land, electricity development, and ‘surface damages’ to the land, according to Zollie Steakley, a Sweetwater, Texas-based legal expert in the wind energy industry. Tri Global aims to improve the model by acting as negotiator between a property owner and an energy company and not only ensuring that landowners receive more royalties for building turbines on their land, but also making them part owners in the project, Steakley said.

“What that even means is that landowners own a part of the wind energy company itself, once the debt for putting up the turbines has been paid – of course that’s an enormous debt – but once it’s paid, that means there’s a huge influx of additional money to the landowners,” Steakley said.

Steakley said he represents landowners and landowners’ groups and formerly worked with Tri Global in negotiating on behalf of his landowner clients, and then later served on Tri Global’s board.

McCulley said Tri Global is designed to find investors for three forms of renewable energy – wind, solar, and hybrid energy, although wind energy is their primary focus in the windy farmlands of Texas.

“We don’t have any solar or hybrid activity to date, everything’s wind right now.” McCulley said. “We’re designed to be able to do all three, but we have only branched off into the wind thus far. So whether it’s Dallas or here in our regional field office, all of our focus is wind.”

Wind energy is a major component of Tri Global Energy’s strategy, although the company is also designed to accommodate solar and hybrid energy production.

Despite focusing solely on wind projects in the region and the challenges that come with those endeavors, McCulley said developing wind energy projects is going to be beneficial to those investing in them as well as those who wish to broaden their utility horizons.

“You have utility companies who might be traditionally buying their power from coal generation plants or nuclear facilities or hydroelectric or whatever they are, and they say, ‘Look, we want to diversify on our portfolio where we get our energy or electricity from.’ So they look at wind and they know that’s low-cost. So what we’re seeing now is big utility companies are starting to buy into wind farms – either building them, buying them, or buying the power from them – to really diversify their portfolio.”

McCulley said wind energy is becoming a large part of the local economy, with roots in agriculture making way for wind energy’s future in the area.

The South Plains region is just one part of the larger region in the United States ideal for wind energy production, with conditions suited for wind turbines and farms, he said.

“I think for us, we’re really excited about the fact that what we’re doing is in an area where a lot of farms [are] – and about 30 to 35 percent of Lubbock’s economy is tied to agriculture,” McCulley said. “If water is a concern for these farm operations, if commodity prices are tight, if expenses to run a farming operation are high, it’s getting more and more difficult for these landowners to make a living.”

Farmers, ranchers, and landowners can benefit from the investment into wind energy, McCulley said, because of the future of farming and how the renewable energy aids landowners in trying to keep their land during economic down times.

“So they see this, in many cases, as almost like a lifeline, because if they put, whether it’s oil and gas or it’s wind [on their land], if they’re getting royalties,” McCulley said. “Then if they’re not growing crops, and they’re not running their tractor up and down and the costs associated with it, and they don’t have anyone there to operate it, they’re still getting revenue – that means that they can hold onto it and pass it down.”

Job retention is another benefit of wind energy in the area, according to the Wind Powering America Initiative. According to the Department of Energy’s wind energy program, rural areas – like the South Plains – keep the jobs created from wind farm construction and Tri Global’s landowning clients also keep lease revenue – as much as $4,000 per turbine per year.

Steakley said Tri Global’s estimate of revenue that landowners can keep is a conservative number, explaining that there are several ways – royalties, minimum royalties, surface damages, etc. – that landowners earn money from the wind projects, and several ways for revenue amounts to vary.

“[In] every lease I’ve ever negotiated, there’s a percentage of the income generated from the sale of electricity [that] goes to the landowner,” Steakley said. “The remaining part goes to the wind energy company. That percentage varies from lease to lease, and frankly, from year to year, because it goes up.”

Steakley estimated that landowners who lease to energy companies who agree on a common 4 percent royalty of income from sales of electricity can earn anywhere between $8,000 to $12,000 per year per turbine.

Wind farms vary in size, but Steakley said an average wind farm has at least 100 turbines and 10,000 t0 20,000 acres in land with a turbine placed at intervals of 10 to 15 acres, but placement of turbines also depend on the topography of the land.

“But if you had a perfect piece of land, that had perfect wind on it, perfect transmission, you could put one about every 10 to 15 acres,” Steakley said. “Of course, there is no such ‘perfect land,’ but that gives some people an idea. You can’t just put them right next to each other, you have to space them out, because of the disruption of the wind and things like that.”

While the investment is large – an individual turbine can cost an estimated $2 million, including construction and function costs, according to Steakley – the payout is considerable as well. 

According to its website, Tri Global leases approximately 600,000 acres of wind energy developments that generate 6,200 megawatts of wind energy. When the projects are fully constructed, landowners’ wind farms in Texas, Kansas, and New Mexico can produce the potential energy equivalent of nearly 2 million homes.

Steakley said megawatts, the unit used to measure the amount of electricity generated in one month from wind turbines, is generally considered to be the amount of electricity required to power 600 average homes for one year, and there are different turbines that produce different amounts of energy.

“There are different ones that generate different amounts,” Steakley said. “The one that was used at the very beginning of this [industry] was what’s called a 1.5-megawatt generator, a GE (General Electric) generator. Now they make many that are 2-megawatt, or 3-megawatt or 1.7, they make a bunch of different ones.”

McCulley said the Lubbock area also benefits from its location on the border of three major power grids in the United States.

Steakley said this region is prime territory for wind energy production, and the technology created for this industry supplements that.

“The good news, particularly up in the Panhandle, there’s very few days where there’s no wind,” Steakley said. “And you’ve got to realize also, these things [the turbine blades] are about 100 yards or more up in the air, and at that height, there’s virtually never no wind. So there’s always enough to turn the turbines, that doesn’t take but about six or eight miles an hour to turn them.”

While the landscape of renewable energy is still progressing and changing, the majority of America, including Texas, has adopted strategies to produce more sustainable energy, McCulley said.

“Governor Perry’s website has a page or two on there about the strategy he feels is important for Texas for energy, and what he’s saying is we need to have diversification,” McCulley said. “We also want to have a certain percentage of our energy development in the state that’s attributed to renewable. So there are about two thirds of the states in the United States [who] have adopted renewable energy policies.”

While it’s becoming easier to get involved in renewable energy schemes like wind, McCulley said he doesn’t expect wind to surpass traditional forms of energy, just supplement them.

“In Texas, and Colorado to a certain degree, but Texas in particular, there’s a big push for wind to supplement a lot of that,” McCulley said. “You should probably never expect to see wind overtake other things. What it’s going to always be though, is a renewable and a green component of the overall production. It will be a player, a contributor. So for Texas, and a lot of other states, it’s to get a form of balance.”

Steakley said he sees booming wind energy business in the future due to changing demands in energy.

“Bottom line is it’s going to get better,” Steakley said. “There is a demand for energy increases; the demand for energy from all sources will increase. And that’s going to mean that everybody who can generate any sort of energy or electricity, there will be a demand for it, and that will be a booming business.”

Lubbock landowners can benefit from wind energy, and McCulley said Tri Global recognizes that potential.

McCulley said Tri Global Energy has recognized the importance of wind energy to the region, and to the region’s people.

“So obviously economics-wise,” he said, “and when you get down to the personal level – what it means to the people out here who are doing these things, this is big stuff for them.”