Removing Osage Wind farm leaves school district with huge funding gap

Located in northwestern Osage County, the district’s high school and middle school facilities — nearly 100 years old — had seen their better days.

A corner of one building was supported, in part, by a multi-ton jack to prevent collapse.

Natural gas to the school buildings had been shut off due to line leaks, forcing the cafeteria staff to use slow cookers and electric skillets to cook breakfast and lunch for students.

The school auditorium flooded nearly every time it rained. Once the water was so deep that the Fire Department was called to help pump it out.

Classroom floors and hallways were covered with plywood because the floors underneath had warped and weakened over time.

The school’s property insurer and the state fire marshal were both saying time was running out to fix the problems.

But there was hope for the school district, which extends over 500 square miles in northwestern Osage and eastern Kay counties.

An 84-turbine wind farm had begun operation in 2015, and much of it was in Shidler Public Schools’ figurative backyard.

The 150-megawatt wind farm was built on 8,400 acres leased from surface estate owners in Osage County.

The project was expected to bring in $1 million per month for the wind farm owner, Osage Wind LLC, according to court records associated with the project. For the school district, the wind farm project was expected to bring in nearly $500,000 a year in additional revenue in the form of property taxes, franchise fees and other payments.

Based on the anticipated new revenue stream, Shidler school district voters on Feb. 2, 2019, approved by a 71% margin a nearly $17 million bond issue to construct a new high school and middle school.

In addition, the bonds financed construction of a new cafeteria, kitchen, safe room, library, lighted parking lots, turf courtyard, practice gym and meeting spaces for all patrons.

“It honest to goodness saved our school district,” Shidler Schools Superintendent Rick Rogers said, referring to the wind farm.

But now with nine years’ worth of payments left to retire the debt, Rogers said he has to rethink how the district of 180 students in kindergarten through 12th grade will repay the bonds after a federal judge in December ordered the removal of the wind farm.

“I’m feeling badly that we made a promise with the commitment from our partners at (Osage Wind owner) Enel that they were going to be unlike a lot of companies that protest their taxes down to a point where schools are waiting for years to get their money.

“They’ve been a good, solid company to help us,” Rogers said.

Definition of mining at crux of issue

After more than 14 years of litigation, a federal judge ruled Dec. 20 in favor of the United States and the Osage Nation, or more specifically the Osage Minerals Council, by granting a permanent injunction against the wind farm and ordering its removal. The Osage Minerals Council is an independent agency within the Osage Nation government.

Defendants in the case are Osage Wind LLC, wholly owned by Enel Kansas LLC, which is wholly owned by Enel Green Power North America Inc., according to court records.

Federal Judge Jennifer Choe-Groves, with the U.S. Court of International Trade, issued the ruling while sitting by designation in Tulsa federal court.

Prior to the ruling, the wind farm had survived two federal district court challenges before a federal appellate court reversed a lower court decision and ruled for the tribe and the United States.

At issue was Osage Wind’s use of materials excavated at the 84 wind turbine sites.

Osage Wind excavated sand, soil and rock while digging holes for the turbines. Some of the rock was crushed and used as backfill to support the wind turbines, according to court records in the case.

The 10th U.S. Circuit Court of Appeals, in its 2017 ruling for the tribe and federal government, said Osage Wind’s crushing of some excavated rock for use as a structural support for each wind turbine constituted mining and therefore required a lease issued by the Osage Nation’s Minerals Council.

The U.S. Supreme Court subsequently turned down Osage Wind’s request to review the appellate court ruling.

The area now known as Osage County was designated by Congress in 1872 as a reservation for the Osage Nation.

Under the Osage Act passed in 1906, Congress severed the surface estate rights from the mineral estate rights.

Osage Nation members were allotted surface estate rights while the mineral estate was reserved for the benefit of the Osage Nation.

The Osage Nation could issue leases for oil, gas and other minerals with the approval of the secretary of the interior.

But Osage Wind never obtained a mining lease — either before or after the 10th Circuit ruling.

As a result, Choe-Groves determined that the wind farm had and continues to trespass on the Osage Mineral Estate in part because the continued use of rock as fill material for tower support falls within the definition of mining, triggering the need for the lease.

Trial to determine damages amount

Choe-Groves has set a May 20 trial date to consider how much in damages to award the plaintiffs.

The federal government and Osage Minerals Council have urged the court to adopt a damages estimate of nearly $26 million.

Osage Wind, meanwhile, has asked the court to adopt one of two damages calculations that places the value of the material used at between $68,993 and $247,979.

In considering whether to order removal of the wind farm, Choe-Groves had to weigh protecting the sovereignty of the Osage Nation against Osage Wind’s claims that removal would result in revenue lost to local schools, income for the six surface estate owners and renewable energy for 50,000 homes.

In addition to Shidler Public Schools, neighboring Woodland Public Schools also receives tax funding from the wind farm, according to Rogers, who previously worked there. A spokesperson at Woodland Public Schools could not be reached for comment.

Rogers, meanwhile, said he hopes his district’s concerns aren’t lost in the ongoing debate over damages after revenue generated from the wind farm “just completely turned things for the positive.”

In addition to financing improvements to the middle and high school, revenue from the Osage Wind project, coupled with a sizable private donation from an anonymous alumnus, was combined to complete a $1.6 million renovation to the elementary school in the summer of 2023 at no cost to district taxpayers.

Rogers outlined for the Tulsa World the basic terms of the bond issue.

Currently, the Osage Wind project pays $495,000 of the district’s annual $1.22 million bond payment for the new facilities, or about 40% of the total cost.

Rogers said he came forward with Shidler Public Schools’ story in hopes that it would let the public know the ruling’s impact on those outside of the Osage Nation and the wind farm company.

“The other side of the story needed to be told, because if people know they are going to have to pay the equivalent of an additional half a million dollars a year — they can’t afford that,” Rogers said.

Rather than reallocate the bond payment to the property owners in the school district, Rogers said he more than likely will have to seek refinancing that extends the bond payments out more years.

Local attorneys representing Osage Wind declined to outline the economic impact of removing the wind farm or otherwise comment on the case. The Osage Minerals Council chairman could not be reached for comment.

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