Farm Horizons, February 2013
Lawsuit filed recently against wind turbine developer
By Ryan Gueningsman
Minnesota Attorney General Lori Swanson recently filed a lawsuit against a developer that failed to keep its promises to Minnesota farmers who invested in wind turbine energy systems, sometimes failing to deliver and maintain operational systems or make good on the company’s sales promises and revenue projections.
“These are big investments. We don’t want to see a company make promises it can’t or doesn’t keep,” Swanson said.
The lawsuit was filed against Renewable Energy SD, LLC (“RESD”), a South Dakota company, and its founder, owner, and president, Shawn R. Dooling.
The company marketed wind turbine energy systems as a winning proposition to farmers, who paid the company $119,000 or more for the projects, according to a press release from the attorney general’s office.
The company promised farmers that the systems would essentially pay for themselves through a combination of federal grants and a state electricity buy-back law that requires local utility companies to pay retail rates for excess energy generated from a small wind turbine and delivered to the power grid.
The federal American Recovery and Reinvestment Act of 2009 was passed during the economic recession and provides federal cash grants to purchasers of small wind turbines.
For those who qualify, the so-called “1603 Grants” cover 30 percent of the cost of new and functional wind turbines. Dooling formed RESD two months after passage of the federal grant program.
The Minnesota “net metering” law requires local utility companies to pay farmers at retail prices for energy transmitted from a turbine energy system to the power grid.
RESD told farmers that the federal grants would cover 30 percent of the cost of their purchase. The company represented that all or most of the remaining 70 percent would be covered by money made by the farmer in selling energy back to their local utility company under the “net metering” law.
In sales presentations, RESD provides farmers with detailed financial projections showing how much money the farmer will generate each month from selling their excess electricity generated from the turbine system back to their local utility. This typically ranged from about $700 per month to about $1,300 per month.
Farmers have reported that RESD misrepresented numerous key points to them, including:
• That the company will timely install a functional turbine energy system. In some instances, the company failed to complete the turbine energy system.
In other instances, a turbine energy system was installed but soon failed to function, putting the farmer’s federal grant eligibility at risk.
• That the company will maintain the operability of the wind turbine energy system during its lifetime.
In some instances, the company did not maintain or service the turbine energy system.
• That the turbine energy system will produce sufficient revenue under Minnesota’s net metering law to pay for the farmers’ bank loans used to finance the turbine system.
In some instances where a turbine energy system was installed and became operational, it failed to generate the promised revenue.
• That the company will pay the interest on farmers’ bank loans used to acquire the turbine systems.
In some instances, after failing to deliver working turbine systems, the company promised to pay the interest due under the bank loans used by the farmers to acquire the turbines until they became operational, but then failed to do so.
• That the turbine energy system will meet the requirements to qualify for federal grants, which will never need to be paid back.
RESD acted as the farmers’ fiduciary with the federal government, obtaining a power of attorney from farmers to handle all aspects of the federal grant application and qualification process.
The federal grants require the turbine system to be operational for five years after its completion. The federal government can recoup funds if grant requirements are not met. In some instances, farmers may cease to qualify for grants if their turbines are not functional.
The company has promoted itself as a comprehensive “turn-key” wind energy development company that handles wind energy development projects from beginning through the life of the turbine system, including providing feasibility analyses, return on investment analyses, financial forecasting, site review, engineering and design, operational assurance review, turbine system commissioning, and grant applications.
At least four farmers have filed individual lawsuits against RESD in state or federal courts in Minnesota. The company has a “D-” rating from the Better Business Bureau.
RESD’s certificate of authority to transact business in Minnesota lapsed Aug. 12, 2012, when the company failed to file renewal paperwork, according to Swanson. It has done business in Minnesota since that date without proper registration.
The lawsuit was filed in Hennepin County District Court and alleges violations of the consumer protection and corporate registration laws.
Watch for an update in the next Farm Horizons.