Iowa Supreme Court Issues Two Rulings on Palo Alto Wind Energy Project

On May 3, 2019, the Iowa Supreme Court issued two separate rulings concerning a wind energy project in Palo Alto County. In the first case, landowners challenged whether the Iowa Legislature gave the Iowa Utilities Board (IUB) the authority to interpret what a “single site” is.  In the second case, landowners disputed the legality of the ordinance granted by the Board of Supervisors.

Case #1: Mathis v. Iowa Utilities Board, et al

In the first case concerning the Palo Alto wind energy project, the plaintiffs alleged that the Iowa Utilities Board (IUB) incorrectly interpreted the word “facility” under Iowa Code § 476A.1(5). If a project is a single site and does not meet the minimum power output requirements, it does not need to obtain a certificate of public convenience, use, and necessity. Whenever there is a common gathering of wind turbines, IUB has found it to be a single site. Wind farms can extend many miles; however, in this particular case, the proposed wind energy project would be about 80 square miles (or 50,000 acres). The plaintiffs claim that this project was a “facility” or “single site” within the Iowa code definition and was, therefore, under the jurisdiction of the IUB. IUB ruled this was not a “facility” because under the common gathering line standard, it did not meet the minimum output requirements. It was, therefore, under the authority of the county supervisors.

Previous Iowa Utilities Board Rulings

Iowa law defines a “facility” to be a combination of plants which has a total capacity of twenty-five megawatts of electricity or more. Iowa Code § 476A.1(5). The plaintiffs claimed the project could not go forward because it was a facility and facilities need a certificate of public convenience, use, and necessity from the IUB. In one of the first administrative cases addressing the definition of “facility,” the IUB found that wind turbines dispersed over 15 or 20 miles were not considered facilities because all turbines in a common gathering line did not have more than 25 megawatts of power capacity. Zond Dev. Corp., Docket Nos. DRU-97-5, DRU-97-6, at 5, 6. IUB’s reasoning in Zond had been used in nearly 20 cases since 1997.

In the case at hand, the lower court found that IUB’s determination of the word facility was rational and reasonable. Additionally, the lower court noted that since 2001 the Iowa Legislature has broadened IUB’s authority. The landowners appealed to the Iowa Supreme Court.

Iowa Supreme Court Analysis

The Iowa Supreme Court analyzed the Federal Energy Regulatory Commission’s (FERC) rule regarding the definition of facilities and found it used a middle of the road standard. While a facility is more than a single site, it is difficult to draw the exact line that constitutes a facility. The Court reasoned Iowa’s law concerning the definition of facilities should have a similar approach to the FERC. Additionally, Iowa Code § 476A.15 allows the IUB to waive any energy facility certificate requirement. Because the state encourages alternative energy, Iowa Code § 476A.15 should be interpreted in such a way to limit ILUB’s regulatory burden on this sector.

The Court also noted that in the years since Zond, the Legislature made no attempt to amend the law to create a different interpretation. While the legislature amended chapter 476A in other ways, such as authorizing the advance ratemaking principles, it made no amendment to the definitions. The Court viewed this inaction as approval of IUB’s interpretation of the definition.

The Iowa Legislature used an approach similar to Zond when creating wind energy production tax credits. Iowa Code chapter 476B uses the phrase “connected to a common gathering line” to describe a qualified facility under that chapter. The law also focused on the capacity of a common gathering line.

The Court held the common gathering line standard to be the better test for determining whether a project was a facility or single site. The common gathering line standard was in line with the policy goal of promoting alternative energy and is supported by the Legislature’s failure to change the law, despite the many cases involving IUB’s definition interpretation.

Case #2: Mathis v. Palo Alto County Board of Supervisors

In the second case, the plaintiffs allege the Palo Alto Board of Supervisors did not have the authority to amend a zoning ordinance concerning a wind energy project. After two different renewable energy companies inquired into Palo Alto wind energy zoning, the Board of Supervisors decided to update the county’s 2003 zoning ordinance. One company, Invenergy, wanted to develop a wind energy project that would be owned and operated by MidAmerican.

The Palo Alto county attorney drafted a new ordinance using similar ordinances from other Iowa counties as a guide. Both Invenergy and MidAmerican wanted changes to the initial ordinance to proceed with the project and asked that: 1) the proposed setback distance of 2,640 be changed to a 1,000-foot setback; 2) the provision prohibiting any shadow flicker be changed to allow up to 50 hours per year; and 3) several other changes be made.

While the Board did not implement all of the requested changes into the ordinance, it did change the setback distance to 1,500 feet from cemeteries and prohibited more than 30 hours of shadow flicker per year on a residential structure. After several public readings of the ordinance, the Board approved it.

The next year, Invenergy and its subsidiary, Palo Alto Wind Energy (PAWE), submitted an application to build a wind energy project. The Board held several meetings regarding the application and communicated with the Iowa Department of Natural Resources (DNR) and state archeologist on recommendations to limit the environmental and cultural harm of the project. An acoustician submitted a report claiming the project could exceed the 50 decibels of sound required by the ordinance. After receiving this information, as well as other written and oral comments, the Board granted the application with a 3-2 vote.

Legal Claims

Several month later, the plaintiffs brought a lawsuit claiming 1) the ordinance was arbitrary, capricious, unreasonable, and void; and 2) the application was arbitrary, capricious, unreasonable, and void. Specifically, the plaintiffs claimed Invenergy and MidAmerican wrote the ordinance and that the application violated the ordinance.

The record shows that the county attorney wrote the ordinance. While the two companies did make requests for changes, the lobbying effort did not make the ordinance unlawful. The Board did make some changes after hearing Invenergy and MidAmerican’s request but it did not accept all of them. Testimony from the Board showed they did their own research and came to their own conclusions when creating the ordinance.

The Court next considered whether the Board’s decision to grant the application was arbitrary or capricious. The plaintiffs claimed the application should not have been granted because Invenergy and PAWE, which submitted the application, were not the “Owner/Developer.” The ordinance requires the request for a site plan be submitted by the Owner/Developer but also allows ownership to transfer at any time with the Board’s consent. The current owner of the project submitted the application while fully disclosing its intent to transfer the project; therefore, substantial compliance was achieved.

The Board did not act arbitrarily or capriciously when it failed to implement the DNR and state archeologist recommendations. The Iowa DNR provided letters regarding several wind energy projects stating that while it did not regulate wind farms, it recommended a buffer area of one mile between a wind turbine and wildlife conservation areas, as well as other special measures. The record showed that the Board did look at these recommendations but then chose not to implement them. However, there is no evidence this was done arbitrarily or capriciously.

Finally, the plaintiffs claimed the Board arbitrarily and capriciously disregarded the acoustician’s report. Invenergy and PAWE conducted tests and found the potential noise levels to be from 27.4 to 49.9 decibels. The report by the acoustician reanalyzed these test to conclude a wind turbines noise level can fluctuate by five decibels which could set it over the maximum 50 decibels. The record showed the Board acknowledged this finding but relied on the ordinance to order the wind turbines to change their operations if they went over the maximum 50 decibels requirement.

The Court granted the defendants motion for summary judgment. There was no evidence the Board acted arbitrarily or capriciously in its decisions to amend the ordinance or grant the application.