News21 A Journalism Initiative of the Carnegie and Knight Foundations

Flash presentation produced by Kayla Webley.

Pampa, TX -- The old railroad town of Pampa first struck oil in the 1920s. By the late 1970s, this isolated outpost in the Texas Panhandle had grown into a booming oil town with a population of nearly 30,000.

Mineral reserves added to the riches on hundreds of acres of ranchland, business thrived, and major oil companies employed most of the residents.

Pampa remains a piece of the oil landscape in Texas. Even today, refineries account for about one-fourth of the nation's crude oil refining capacity, processing a massive 4.6 million barrels a day — more than twice what’s processed daily in Saudi Arabia.

Texas still leads the nation in oil production. But big oil is no longer the only big energy industry here. Speculators and businesses look across the wide-open plains of the Panhandle, its flatlands whipped by stiff, steady gusts, and they see green in the wind farms going up where oil wells have begun to dry out.

And the “open for business” sign may again hang on doors in Pampa where the oil bust of the 1980s, when the price of oil dropped drastically, meant more than 10,000 people left town for jobs elsewhere and never returned.

“It’s like an oil well in the sky,” laughed Marjorie Bischel, who with her husband, owns a 645-acre stretch a dozen miles west of Pampa. “This is dry country, you know. You don’t have no rain, you do not raise a crop. But we have plenty of wind out here in the Texas Panhandle.”

The Bichsel’s modest farmhouse, set back from Highway 60, is smack in the middle of the White Deer Wind Farm. Here, 80 wind towers surround the couple’s home, with 11 on their property and the rest on their neighbors’.

“This is just a way to help us survive, to have these wind towers.” Marjorie Bischel said. “You don’t worry as much.”

The towers are 197 feet high, looming almost 19 stories above the Bichsel’s roof, and have a propeller span of 184 feet. That’s more than 9 pick-up trucks lined up. You can hardly hear them as they turn, with antelopes and jackrabbits running wild on the open land between the towering turbines.

For the couple, the wind farm is a blessing. Never mind that one turbine was missing its propeller and generator. It caught on fire, they said, and the fire department didn’t have the equipment to reach that high to extinguish the blaze.

“We just sat there and watched it burn,” Robert Bichsel said.

The owners of these wind towers, though, might surprise. Shell Energy, a familiar player in Texas’ big oil scene, owns the turbines on the Bichsel farm. And in the next town of Pampa, T. Boone Pickens, of BP Capital and Mesa Petroleum —and the quintessential Texas tycoon dubbed “the Oracle of Oil” — is investing between $10 billion and $12 billion to build the world’s largest wind farm.

Pickens, with his deep pockets and plenty of sway here the land of big everything — oil, money, estates, and wind — is leading a field of businessmen eager to harness this power source and, in the process, redefine the state and possibly the nation’s energy equation. In fact, Pickens’ penchant for wind is echoed across the U.S., from the folks in Pampa to the Mayor of New York City to Democratic presidential nominee Barack Obama.

And this major investment is moving full speed ahead despite uncertainty about the future of the production tax credit, a federal subsidy to wind developers that is meant to ensure such ventures are profitable. Transmission of wind energy has also been a problem in the past, and one that Pickens plans to overcome by building his own transmission lines, even as the Texas Public Utility Commission recently approved almost $5 billion worth of transmission lines to be added to the state’s power grid.

Pickens’ four-phase project, based out of Pampa, is expected to come online in 2014. If he makes the deadline, the farm will produce enough energy to power 1.3 million homes (more than 4,000 megawatts), and will be more than five times as big as the current largest wind farm in the world, which is about 250 miles south of Pampa in Sweetwater. Compare that with a traditional 500-megawatt coal plant, which can power roughly 150,000 homes.

The turbines themselves will be spread across the northern counties on hundreds of thousands of acres of land leased from large landowners. Pickens has already ordered the turbines from General Electric for the first phase of the project.

Today’s steep energy prices are benefitting Pampa, where the population plunged to just 17,000 in the oil bust. Over the past 10 years, as the town added 2,000 residents, sales tax revenue has increased steadily. But the Pickens project promises to provide an additional $1.6 billion per year in economic gains to the area when the plants are operational, according to an Economic Impact Study by Resource Economics of Austin.

Danny Martin has been a pipeline operator for a local oil company for 31 years and has lived here all his life. “Oh yeah, it was different when I was growing up,” said Martin, 60, who also commands the local VFW Post 1657.

“Downtown,” he said, “was thriving pretty good, and that’s where everyone came on a Saturday. When I started [in the oil fields] you just about could guarantee that you could retire, and retire good, and live happily ever after. But the oil company I’ve worked for has sold out nine times. So the retirement’s not gonna be there when I retire, it’s not gonna be the same.”

The oil fields are still hanging on, Martin said, and there is still plenty of work. City Manager Trevlyn Pitner agreed that the unemployment rate in Pampa — just under 3 percent — is quite low given a national average of 5.7 percent and a state average of 4.7 percent. But evidence of Pampa’s past collapse is all around. A giant mall sits abandoned outside of town, and in the old downtown district, busted windows are boarded up along the brick-paved streets.

Times are changing. Again.

The future of the Panhandle no longer rests solely with the oil fields, quickly depleting, or the ranching lands above them on the plains of the Llano Estacado, the high flat region where Pampa lies. Stark, futuristic turbines are a new cash crop, and they’re sprouting up throughout this swath of the great state, which has the largest wind-powered generation capacity in the world.

Salem Abraham is a former business partner and neighbor of the deep-pocketed Pickens; he trades in futures for his investment company, Abraham Trading. His office, quite fittingly, is housed right on top of a steakhouse in tiny Canadian, east of Pampa.

While trading is his primary business, Abraham too sees the potential for wind in the region. He has worked for AEP (American Electric Power) to sign up his neighbors to host yet another wind farm in the area. He explained that Pickens, and developers like him, target large landowners; Abraham’s family, for example, has a 30,000-acre ranch with a ridge that houses 3 miles of wind turbines.

“The fewer people they have to deal with the easier it is,” Abraham said. “And Boone knows the landowners out here; they trust him.” So folks like the Bichsels with their small family farm are no longer your typical wind ranchers. Projects are starting to happen on a grander scale, and so are the land leases that come with them—which have become more lucrative in the seven years since the Bichsels signed up for wind turbines.

The Pickens leases will start with landowners receiving 4 percent annual royalties the first four years, 4.5 percent the next four years, and five percent after that.

JD Consulting, LLC, which is assisting Pickens in his endeavor, has said that depending upon the size and number of turbines, royalties for the Pampa Wind Ranch could range from $50,000 to $80,000 a year per landowner. The Bichsels, with their 11 turbines receive 4 percent royalties on the profits from the energy produced by their turbines each month.

Not a bad cut of the pie, but not everyone’s so sold.

“We're getting down here, to the point where we have to fish or cut bait,” Pickens told local landowners last August at a town hall meeting. “If you want to sell wind and sign up with us, you've got to know now that the best deal you are going to get on wind is going to be with us. I promise you that is the case.”

Abraham points out, though, that wind farms still may not be the best option for the Panhandle landowner. “With energy prices the way they are, the revenue from one oil well is the same as for 60 wind towers,” he said.

However, most Pampa residents are removed from these dealings. Off camera, some remain hesitant about Pickens and his plan to renew Pampa’s economy. Unlike the landowners that Pickens’s operation is dealing with directly, residents of Pampa like Martin haven’t heard much about the wind farm but what the local paper, the Pampa News, has reported.

“I don’t know much about it; I haven’t talked to them,” Martin said, before expressing his tentative hopes for the future of Pampa. “The way they’re talking, I think it’s great if they do what they say they’re going to do, bring a lot of people into town. I hope it works out.”

Pampa Mayor Lonny Robbins and City Manager Trevlyn Pitner, though, were bursting with excitement for their town at the local drugstore’s soda fountain. For his part, Pitner said he estimates the Pickens project alone will net 1,200 to 1,400 jobs in the construction phase. After that, he said, some 700 sustained jobs should come with the wind techs, engineers, maintenance crews and ancillary businesses. With other wind farms in the area added to the equation, the economic impact on Pampa, he said, would be huge.

“For years we’ve complained around this area about the wind, and I guess we’d have to say that the good Lord had something to do with this. He made this a windy place,” said Robbins, who doubles as the pastor of the local church. “We didn’t know it was such a commodity, but now it looks like it’s going to be an incredible source of income and future growth.”

In cities with big wind production like Sweetwater, which generates 785 megawatts, growth in all sectors has been rapid with new business startups, an inundated housing market and exploding job growth. The population here grew by 2,000 people with the construction of new wind towers.

Sweetwater’s local government, in fact, has warned the folks in Pampa to get ready. It’s boom time, according to Sweetwater, where they’re still catching up to a rushed housing market and demand for retail. With such high employment in Pampa, the wind projects will likely bring many people into the Panhandle for work.

And Pampa is trying to convince investors to help welcome them. Attendance at the last local Chamber of Commerce meeting, where one of Pickens’ representatives spoke to local business owners, topped 150 people, and Pampa’s economic development committee is busy trying to recruit more builders and service providers to help them manage the expected growth.

But skepticism from investors could mean Pampa too will be playing catch-up in the future. With only a couple years before the first turbines come online, the growth in the town does not yet reflect the anticipated influx of people and business.

While much of the $1.6 billion the operation is anticipated to bring to the area will go to large landowners as royalties, additions to the tax rolls of school districts in the investment zone could total $2.4 billion by 2018. Schools in Texas are funded primarily through local property taxes.

So sure, the oil magnate and cowboy typecasts still hold true across much of this land, where BBQ joints and steakhouses abound, drilling operations leave the smell of crude oil in the air, and cowboy hats and boots are something of a uniform.

But massive white towers with their leisurely turning blades are beginning to rise on the mesas and plains of North Texas. And the pioneering spirit of these descendants of cowboys and oil prospectors is turning with them, towards a renewable energy future for the state and the nation.

 

Up in the Air

Despite the encouraging estimates, the residents of Pampa could be right to be somewhat hesitant. Pickens may well be spending billions on this plant. But with true Texas swagger, he appears unfazed by the significant political and engineering roadblocks that could stand in his way.

The wind industry nationwide has been dependent for years on the federal production tax credit, which provides a credit of 2 cents per kilowatt hour to producers of renewable energy. Last year, this amounted to $690 million in subsidies. The tax credit is set to expire in December, and politics around other energy policies such as windfall profits taxes on oil companies are getting in the way of its renewal.

In May, the Democratic U.S. House passed a bill extending the subsidy, but Republican members in the Senate blocked the bill, hesitant to raise taxes — especially on the oil industry — to stretch the life of the subsidy. Instead, they have proposed extending the subsidies in new compromise legislation that also includes language to allow more drilling for oil and gas offshore. House Speaker Nancy Pelosi and presidential hopeful Senator Barack Obama have both said recently that they would consider such a compromise.

Last time the subsidy was set to expire in 2006, it was renewed at the last minute, as the 109th Congress was coming to a close. But before that, it had been allowed to expire three separate times, slowing growth significantly each time. The subsidy, for example, expired in 2003, and in 2004, installation of wind capacity dropped by 77 percent, according to the American Wind Energy Association.

But Pickens seems sure that Congress will come around. While the subsidy’s tentative future is, he says, admittedly nerve wracking, the consequences of not renewing the credit are too large for Congress to ignore. Pickens has estimated that the country spends $700 billion each year for foreign oil.

And Pickens, who would not comment for this story, told the Associated Press in June that "People may say I'm foolish to have that kind of confidence in Congress, but I do because the $700 billion is so overwhelming. We're going to have to go to all the alternatives that we can."

Salem Abraham, who is working with American Electric Power to build a wind farm nearby, repeatedly notes another challenge faced by wind farm developers: transmission.

“If you can’t get transmission, you’ve got nothing,” he said. “We’ve got to the point where it’s like there’s a guy out there drowning, and you’ve got 20 engineers have a conference to decide the most efficient way to save the drowning guy.” Transmission to larger cities has long been a problem, forcing wind farms to set up shop closer to high capacity transmission lines, rather than in areas where the wind gusts the strongest.

On July 18 the Texas Public Utilities Commission, an agency under the Texas legislature whose commissioners are appointed by the governor, approved a $4.9 billion plan to build transmission lines hundreds of miles from the existing grid, which covers most of the rest of the state, into the Panhandle and to Pampa.

These lines would boost Texas transmission capacity to 18,000 megawatts and has been called “the biggest investment in the clean and renewable energy in U.S. history.” And the projection is for them to be completed quickly — within four to five years. But even that timeframe is not speedy enough for the 80-year-old Pickens, who plans to have 1,000 megawatts online by 2011.

Pickens has said he plans to just build his own private transmission lines. He can do so because of an amendment passed in the Texas Legislature last session, which gives the project the power of eminent domain, allowing his company to seize land in the path of his planned construction like a utility could. It’s a reality that upsets many landowners in North Texas.

Building these lines could cost Pickens $200 million to $400 million for the first phase, and up to $2 billion total, and would be a significant departure from Texas’s publically regulated power grid, which is generally paid for by consumers.

“From what we understand,” said Monty Humble, Pickens’s lawyer, “we have two options. One, we can request that the lines be regulated and be eligible for cost recovery through the PUC; or two, we can treat them as necessary interconnect lines, which are still subject to oversight.”

Interconnect lines, which are usually small and are built simply to connect a power source to the larger grid, are typically built privately, Humble said. But none that have been built before approach the size and distance of this one.

Pickens could apply for a permit to sell the use of his private power line, and his returns would be regulated. But the PUC says it is unclear of their role in such a project. They do not, however, regulate the construction of wind turbines.

“Anyone can build one anywhere,” said PUC spokesman Terry Hadley.