Plains & Eastern Clean Line Appears Doomed In Arkansas

Michael Skelly, president of Clean Line Energy Partners, likes to say anything worth doing takes 10 years.

But after putting nearly nine years and more than $100 million of investors’ money into a $2.5 billion power transmission project across Oklahoma and Arkansas, Skelly’s electric dream has shorted out.

The Plains & Eastern Clean Line, meant to carry 4,000 megawatts of wind energy from the Oklahoma Panhandle to just north of Memphis, will not cross through Arkansas any time soon, and perhaps not ever.

After years of scouting routes, wooing landowners and wrangling with state regulators and federal officials, the private infrastructure project — which would have dotted 12 Arkansas counties with 200-foot-high transmission towers — has been partially sold and abandoned by potential customers.

“Everybody knows that if you can delay a project, you can hurt it or force a different outcome,” said Skelly, who heads the Houston-based partnership that developed the project. “We’re ending up with an outcome that’s just fine for us business-wise, but not as good for Arkansas.”

Skelly talked with Arkansas Business two weeks after Clean Line sold the Oklahoma portion of the direct-current project — about 420 miles of the 720-mile planned route — to NextEra Energy Resources of Florida.

The sale is the positive business outcome Skelly mentioned. But that outcome followed a Tennessee Valley Authority decision not to buy power from the line, effectively killing plans to deliver Plains wind power to a terminal north of Memphis.

Clean Line is holding onto easement agreements it made with Arkansas landowners in case something revives the project. But longtime opponents like Julie Morton of Van Buren are elated. “It looks like to me that the investors have turned off the faucets,” Morton said in an email. “Skelly et al. could be buried alive and still claim they were breathing. Self-delusion is their drug of choice.”

‘Market Doesn’t Need It’
Clean Line labored against political headwinds for years, resistance that flew in the face of arguments that the project would have a $660 million economic impact on Arkansas and generate hundreds of jobs. The state’s congressional delegation in Washington — all Republicans — unanimously opposed the line, citing states’ rights and landowners’ anger.

The delegation sent a letter to Energy Secretary Rick Perry on Tuesday calling for the federal government to halt its role in the project. The letter said the NextEra sale and TVA’s exit as the “most significant potential energy customer” have altered the project significantly enough to void an agreement Clean Line struck with the Department of Energy after hitting a regulatory wall in Arkansas.

“I have always had concerns about the demand for and legality of this transmission line,” said Rep. Rick Crawford, whose 1st District in east Arkansas includes four of the 12 counties crossed by the line’s route. “A project like this should be able to stand up on its own merits, so if the market doesn’t need it, and Arkansans are rejecting it, I think that speaks volumes.”

Clean Line pulled out of its interconnection agreement with the TVA after the federal utility declined to commit to buying electricity at about 2 cents per kilowatt hour, Skelly said. Power at that price lures most utilities, but the TVA was reluctant to embrace a 3,500-megawatt block of electricity over the long term, reasoning that it already had strong generation resources and was on track to meet clean-energy goals, TVA President Bill Johnson said.

The 3,500 megawatts are three times the generation of an average TVA nuclear plant, and enough juice to power a million homes, the agency said. “We’ve always been in position to offer them affordable energy,” Skelly said. “They never really said no, but they never said yes.”

The lack of a buyer was the ultimate blow to a project, which was once scheduled for completion by 2020. But it had faced major hurdles from its inception in 2009.

The Arkansas Public Service Commission in 2011 rejected a bid to define Clean Line as a utility, effectively blocking its path across Arkansas. So Clean Line Partners shifted to the alliance with the DOE, which gave conditional approval to the line in 2016. The federal agency declared the transmission line a necessary infrastructure project under provisions of the Energy Policy Act of 2005, a move that also asserted federal powers of eminent domain.

A Federal Case
Some landowners, objecting to the prospect of having the line cross their land against their will, sued in federal court, but just before Christmas, U.S. District Judge D.P. Marshall Jr. of the Eastern District of Arkansas ruled in favor of Clean Line.

The judge wrote that whether the Energy Policy Act authorizes obtaining easements through eminent domain is a “vexed question.” But he found that the plaintiff landowners faced only the prospect of having their land rights taken, because no property had yet been condemned. The plan for the line “surely casts a shadow,” he wrote, but “as frustrating as that shadow is, uncertainty isn’t injury-in-fact.”

Skelly sees the ruling as im-portant even though the Plains & Eastern line is now sidetracked. “Look, we have a serious infrastructure deficit in this country and, as we’ve seen, it’s extra difficult to build big projects,” he said. “We consider this a major victory that a federal court has upheld this authority. It may be that we can’t use it, but if somebody builds a future project, they’ll have this authority to get the project done.”

The judge noted that Clean Line had planned to deliver power not only to the TVA, but also to Southwest Power Pool and the Midcontinent Independent System Operator, organizations that oversee the electrical grid and power markets and have major operations in Little Rock. But no deals ever came to pass, a fact weighed into Clean Line’s decision to sell the Oklahoma portion to NextEra.

Uncertainty about the DOE’s long-term commitment under President Donald Trump was another factor.

Rep. Steve Womack represents Pope County, where a substation near Hector was planned to convert 500 megawatts and power some 160,000 Arkansas homes.

Nevertheless, he welcomed news that the transmission line plan was in trouble. “Clean Line’s persistence in Arkansas has been a historic example of blatant federal overreach into citizens’ property rights, and is one particular example that our state has fought for fair recognition on since day one,” he said in a statement to Arkansas Business. He added that he would continue working with the delegation “until the issue is ultimately resolved in our favor.”

Sen. John Boozman agreed. “Considering the lack of input from the State of Arkansas and local governments, including rejection by the Arkansas Public Service Commission, it’s not surprising the project is failing to gain momentum,” the senator said in an email.

Clean Line representatives and supporters — including the Sierra Club, the Arkansas Advanced Energy Association and the Southern Wind Energy Association — have puzzled over the fierce political resistance in Arkansas. After regulators in Oklahoma and Tennessee approved the line, Mario Hurtado, a Clean Line executive vice president, was surprised to hit a buzzsaw in Arkansas. “Usually Republicans are very pro-business,” he said a little more than a year ago. “The position they’ve taken here is anti-business.”

Disputed Economic Impact
Billed as the largest private wind energy project in the country and the first major domestic overhead direct-current line in decades, the Plains & Eastern Clean Line would have had a $660 million impact in the state over 30 months of construction, according to an analysis by the Center for Business & Economic Research at the University of Arkansas. Clean Line also said it would make $147 million in tax payments over the 40-year life of the project to the 12 counties the line crosses.

It expected to pay landowners $30 million over the decades for the right to cross their land with lines and towers. “We signed easements for more than half of the route, and the terms of those easement agreements aren’t public,” Skelly said. He added that if the project never materializes, the payment obligations set forth in the agreements are reduced.

Opponents of the line have called the UA economic impact numbers inflated, and they raised environmental concerns of their own, pointing out that the route would cross the Mulberry River, Big Piney Creek, the Little Red River and several other scenic or fragile areas.

The Arkansas Department of Parks & Tourism laid out its environmental worries in a 2016 letter to the DOE, but project supporters say a diligent environmental-impact review by the DOE offered no reason to halt the line.

In the end, the TVA’s reluctance to buy power and the need to get something concrete back for investors played into the sale to NextEra. On Dec. 23, Clean Line and NextEra announced the deal, with both companies keeping the sale price private.

“We’re happy with the outcome for business purposes, and excited about a lot of economic development in Oklahoma, but we’re disappointed that we won’t be delivering this energy to Arkansas, at least not directly for the time being,” Skelly said. “The payments we would have made, the jobs we would have brought and the tax money we would have paid will be delayed or may never come to pass.”

Morton, who campaigned against the Clean Line project online and in commentaries published by the Southwest Times Record and Arkansas Business, said that as NextEra takes over the Oklahoma end and the TVA exits the picture to the east, the project across Arkansas is moot.

“This line has been unplugged from any supply source on the western end and from any sales point on the eastern end. The people of Arkansas are left on an isolated, floating island, with easements connected to nothing.”

NextEra has no timeline for building the Oklahoma portion of the line, but the route might eventually be an option for delivering energy from another Oklahoma endeavor, the Wind Catcher Energy Connection, according to Steve Stengel, a NextEra spokesman.

Wind Catcher’s plans call for a 300,000-acre wind farm and a 350-mile power line to carry the electricity to Tulsa. Some 2,000 megawatts would go to customers in eastern and southwestern Oklahoma and parts of Texas and Louisiana, as well as to some western Arkansas customers of Southwestern Electric Power Co.

Swepco is partnering in the project with the Public Service Co. of Oklahoma; both are units of American Electric Power, one of the nation’s largest electric utilities, serving 5.4 million customers in 11 states.

‘Big Boys’
“Our proposing a big project helped move the conversation,” Skelly said. “Last summer after AEP announced their project, NextEra expressed interest in the Oklahoma portion of the Plains & Eastern Line, and that culminated in the purchase.”

Stengel said that NextEra, which partnered with Entergy Arkansas to build major solar plants near Stuttgart and Lake Village (Chicot County), is now the second-largest wind-power developer in Oklahoma. Its statewide projects will require transmission options.

“The Oklahoma portion of the Clean Line Plains & Eastern line might be a better fit for Wind Catcher; it might make more sense than their existing route,” Stengel said in a telephone interview. “For those two reasons, we thought it made sense to make the acquisition.”

Asked what all the late-2017 developments mean to Clean Line as a business, Skelly acknowledged that some players have left the company, including former DOE official Jimmy Glotfelty, a company founder who was an executive vice president. Clean Line has four other transmission projects on the drawing board in the United States, all far from completion.

“Look, our investors are big boys, and we are too,” Skelly said, acknowledging that he’s still drawing a paycheck. “People put together projects and sometimes they work and sometimes they don’t. The question, I think, is what does this mean for Arkansas and Tennessee? Utilities are feeling the push for renewable power.”

He pointed to Fayetteville, which recently announced its commitment to run all city operations on renewable energy by 2030, and Wal-Mart Stores of Bentonville, a leading corporate promoter of sustainable power.

“We’re still here at Clean Line, working away on other projects,” Skelly said. “Some of the people who were working in Arkansas are now focusing on the Oklahoma piece. But again, I don’t really think this is really about Clean Line. We started the company because it’s a challenge to build energy infrastructure. And we have a partial victory here.”

Opponents like Morton, who describes herself as an “independent landman” with more than 30 years of experience, are looking for the coup de grâce. They have joined the lawmakers in calling for Perry to terminate the DOE’s participation agreement with Clean Line.

“In spite of the obvious failure of Clean Line to complete the Plains & Eastern project, Clean Line is keeping their Arkansas assets, just in case in some dull and distant future, someone, anyone, will buy power using these incomplete assets,” Morton said. “The fact is, this project was never necessary.”

Clean Line, Messy Politics: Project Faced Hurdles Every Step of the Way

The Plains & Eastern Clean Line project has stirred political passions in Arkansas, as well as ambivalence, since the 720-mile transmission line was proposed in 2009.

State economists and job-hungry leaders touted the $660 million in economic activity the project could bring even as state regulators and Arkansas’ Republican members of Congress fought it.

The state Public Service Commission in 2011 refused to define Clean Line as a utility under state law, leading the company to recruit the federal Department of Energy as a backer. That, in turn, stirred opposition from the congressional delegation. Meanwhile, former Gov. Mike Beebe’s administration was trumpeting manufacturing jobs. “Arkansas has more eggs in the wind basket than anywhere else in terms of state public policy,” Beebe said at the time. “Even if we’re not going to have wind farms … we can still be involved in manufacturing.”

Clean Line lined up Arkansas-based suppliers, tapping General Cable of Malvern to deliver $135 million in conductive wires, and Sediver, a French company, to supply $60 million worth of glass insulators. General Cable has since shut down its Arkansas plant.

Sediver built a $15 million factory in West Memphis, creating dozens of jobs, but it’s likely to supply far fewer insulators now that Clean Line will end at the Arkansas line. “If the line is half as long, they’re going to sell half as many insulators,” Clean Line Energy Partners President Michael Skelly said.

The Arkansas Economic Development Commission gave Sediver a $340,000 grant, a cash rebate for creating jobs and sales tax incentives. But after the Democratic Beebe administration gave way to the Republican administration of Gov. Asa Hutchinson in 2015, the AEDC distinguished its support for Sediver from the idea that it supports the Clean Line project.

“We now have our own view of the project,” former AEDC spokesman Scott Hardin told Arkansas Business in 2016.

Sediver representatives didn’t respond to a request for comment.

Hutchinson himself has conceded that the Clean Line might benefit Arkansans, but he was always cautious, avoiding any direct declarations of support. Seven companies with a total of more than 4,000 employees in Arkansas promoted Clean Line in a letter to the governor in November 2016. The companies included Sediver, AFCO Steel and LM Wind Power, which makes wind-turbine components in Little Rock. Last week, the governor was withholding comment until the Clean Line picture clears.

NextEra Energy Inc., which bought the line’s Oklahoma section last month, hopes to serve parts of Oklahoma and Kansas with future wind power. “In Oklahoma, we’ve not since our involvement experienced any opposition,” spokesman Steve Stengel said.