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posted on 29 August 2016

Do We Now Need Wind Compacts?

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Random Thoughts from the High Desert

The taxing of wind energy by Wyoming raises questions of what is legitimate for government to tax. Can government tax the air that we breath? Does wind belong to a particular state or is it a resource that should be shared by neighboring states? If so, the legal concept of a "Compact" among states to equitably allocate a resource may be appropriate to consider.

Wyoming Wind Potenital

Who Owns the Wind

This blatant seizure of a shared natural resource raises many new questions.

Information on on Wyoming's appropriation of wind can be found here and here and here and here and many other places.

Everyone knows that wind is caused by many factors including the rotation of the earth and the attempts by nature to equalize temperature and pressure and topography. Since it is variable and not fixed, it is not the natural endowments that were present when lands went from Territorial Status to Statehood nor natural endowments that were transferred to the residents of these States. So is wind the property of the State of Wyoming? Is it properly taxable? And then there is the question of motive. Is such taxation an effort to (a) increase revenues for the operation of the State of Wyoming, (b) have renewable energy be less competitive to fossil fuels, or (c) simply extract revenue from out-of-state customers given that the energy produced is mostly exported. As such, are there Commerce Clause implications? Is the Wyoming Legislature interfering in interstate commerce?

Wyoming does not operate in a vacuum. There are neighboring states. One category of agreement among states in the U.S. is the category called Compacts.

Here is a good LINK for more information on Compacts.

Quoting from that source, compacts are:

Permanent Arrangements SINCE a state is forbidden by the Constitution to impair the obligation of contracts, it cannot unilaterally renounce an interstate compact except as agreed by the parties. Consequently, the interstate compact is the instrument best suited for the establishment of permanent arrangements among the states. Its original role was of this character-the determination of state boundaries or of jurisdiction along them through self-executing agreements to continue in perpetuity except as the parties might agree to their modifications. Now, as then, the compact, because of its assurance of permanence, is the vehicle for establishing boundaries or territorial jurisdiction in boundary areas. Instances of the use of compacts for these boundary-jurisdictional purposes have been less numerous in modern times. The interstate compact is equally effective in the formulation of other arrangements where a high degree of stability is desired. Since the famous Colorado River compact of the 1920's, and despite the somewhat chequered career of that agreement as illustrated by the long controversy between California and Arizona, the interstate compact has established itself as the preferred and most widely utilized method for effecting the allocation of waters of interstate streams. Interstate park compacts also are motivated in part by the desire to employ a mechanism that will prevent the alienation of lands from the park purpose to which they are dedicated. The flood control compacts of the East -the Connecticut, Merrimack and Thames,* seek to establish interstate arrangements to reimburse upstream communities for a portion of the tax loss occasioned by the construction of flood control reservoirs. Permanence is necessary in such arrangements so that the affected communities may be assured of continued funds from the downstream beneficiary states.

It is useful to consider the overall wind resources of the United States. This map is one way to assess that. There are many other ways. More information on Wyoming's potential can be found at Wyoming Wind Potential

Wind Resources

Can Wind Farms in One State Impact Neighboring States?

Wind Farms extract kinetic energy and affect a wind speed vacuum i.e. a momentum deficit downwind. It is not clear how far downwind the impact is. Does it cross state lines? It is also not clear what percentage of the removable energy is 'depleted' by each wind turbine. Is it significant? Is it even measurable?

Is the wind potential of states east of Wyoming impaired by the wind energy industry of Wyoming? If so perhaps a wind apportionment compact is needed? It may be difficult to determine how much wind each turbine 'uses' but if the wind is being taxed, it is easy to know how much tax revenue related to wind energy is being severed from the overall wind supply.

Thus it may well be that a wind compact is needed to equitably appropriate the revenues from the severing of wind from the natural process that causes the generation of wind.

Something to think about perhaps.

Would a Wind Compact be Effective?

When you look at a map of the area covered by the Rio Grande, Compact you can see why Compacts are so important.

Map of Rio Grande Compact

There are parts of three states involved: Colorado, New Mexico and Texas. Mexico is involved via a separate "Convention" and areas just below the Compact Boundary in Texas are involved by what are called Warren Act Contracts. So a large number of people are protected by this Compact. The Colorado River Compact covers eight states. So Compacts are a very important tool for apportioning resources.

To understand the significance of a Compact, I call your attention to the litigation currently taking place between Texas and New Mexico and Colorado. It is in the early stages but the first report of the Water Master appointed by the U.S. Supreme Court has been filed. It is long but can be read here. It illustrates how binding a Compact is.

We are not the first to recognize the potential need for an Interstate Wind Compact. Here is an earlier discussion of this possibility.

At this point, as far as I know, there is no active dispute between Wyoming and South Dakota and Nebraska but one can expect that will evolve over time as wind power increases its share of the energy pie.

As government seeks to broaden its tax base, there may be other resources taxed which raise questions. The law has addressed those resources which have been used for many years. Thus there are fairly clear guidelines with respect to precipitation and water but recently questions have arisen relative to deep brackish water, stormwater, and storage of water as well as carbon dioxide in what is called pore space the small openings in soil and mineral layers which can hold liquids or gas. This article is a good reference on the legal status of pore space. It is only recently that who owns pore space has become an issue. What about sunlight. Who owns sunlight? We are likely to find that many things where ownership has in the past not been an issue may increasingly be an issue. The wind situation in Wyoming just happens to be one where it is already being taxed and thus the questions this raises are ripe for discussion.

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