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Water Systems: A Twofold Look into Physical Security & Cyber Security

Posted on: July 6th, 2014
by David Ganje

Water Systems: A Twofold Look into Physical Security & Cyber Security WEBINAR IEPA# 0000—Illinois Section, American Water Works Association

12/12/14 Water Systems: A Twofold Look into Physical Security & Cyber Security WEBINAR IEPA# 0000

When: Thursday September 4th, 2014

From 12:00 -1:00 PM CDT

Where: Your home or office computer

Presenter: David Ganje

Contact: Marianne Perino

Phone: 866-521-3595


Registration Information: Online registration is available until: 12/12/2014




Water Systems: A Twofold Look into Physical Security & Cyber Security

CEU TYPE: Technical


IEPA#: 0000

Summary: A security threat to a water system may include the deliberate elimination/destruction of the safe water supply or the disruption of the delivery of the safe water supply for residential, commercial, industrial and agricultural purposes. System threats can come from within a water systems organization or from the outside. External threats include terrorist activities and civil disobedience. Threats may range from trespassing, tampering and vandalism to sabotage, theft and terrorism; these threats may be of a physical nature or they could be non-physical such as a cyber attack. Terrorist threats have been made against water systems. In most instances, the specifics of such attacks are unknown to most systems operators. Hazards from these threats include loss of power and communications, SCADA (supervisory control and data) cyber attack, explosions, intentional fires, chlorine release, broken water mains, chemical or biological contamination, pump failure, dam failure or storage tower failure. The focus of this presentation will address: conducting an on-site security audit using recommended national systems as well as local public and private resources. David Ganje, Ganje Law Offices

REGISTRATION & HOURS: This webinar will begin at 12:00pm and conclude by 1:00pm CST. Earn up to 1 PDH or RTC hour. After registering with Illinois Section AWWA, attendees will be furnished via email with all materials and links needed to participate in the webinar. Questions? Call 866-521-3595 Ext. 3

Midwest Water Technology Conference

Posted on: May 29th, 2014
by David Ganje

 Midwest Water & Wastewater Technology Conference





When: Thursday,   June 5, 2014
Visit Exhibitors from 7:30 to 8:30 AM
Where: Map this event »
College of Lake County, C-Building
19351 West Washington Street
Grayslake, Illinois  60030
United States
Contact: Lisa   Hoffhines
Phone:      866-521-3595 ext. 2






T-CON:   Midwest Water & Wastewater Technology ConferenceABOUT   THE CONFERENCE:The   Midwest Water & Wastewater Technology Conference is the new and improved   technology conference for industry professionals sponsored by the Illinois   Section AWWA, Central States Water Environment Association, Illinois Water   Environment Association and the College of Lake County. The Technology   Conference incorporates multiple learning tracks related to the planning,   design, implementation, and operation of water and wastewater-based   technologies. The multi-track approach makes the conference ideal for utility   managers, IT professionals, as well as operations and field staff. If you can   only attend one technology conference this year, this is the one to attend!


7:00-7:30am C006 Exhibitor     Set-up
7:30-8:15am C006 Breakfast     | Registration | Visit Exhibit Booths
8:15-8:30am C005 T-CON     Welcome and Opening Remarks
8:30-9:30am C002,     C003, C005 Technical     Sessions
9:30-10:00am C006 Morning     Break | Visit Exhibit Booths
10:00-12:00pm C002,     C003, C005 Technical     Sessions
12:00-1:00pm C002,     C003, C006 Lunch     | Visit Exhibit Booths
1:00-2:00pm C002,     C003, C005 Technical     Sessions
2:00-2:30pm C006 Afternoon     Break | Visit Exhibit Booths
2:30-3:15pm C005 Keynote     Speaker
3:15-3:30pm C005 Raffle     for iPad Air and MORE! | Closing Remarks


Presentation Title
Can You Recover After A Disaster With     Your Control System?
Comparison of Ammonia And DO Aeration     Control Strategies To Optimize Energy And Process At Low Capital Cost: A     Case Study
Drawing The Curtains On Windows XP –     What Does The End Of Win XP Mean For SCADA Systems?
Geocentric Web Mapping Solutions In     GIS
Going Beyond The Meter: Expanding     Traditional Data Collection Methodology To Increase Revenues
How GIS Has Helped The City Of     Chicago And The Department Of Water Management (DWM) Embark On A Very     Aggressive Plan To Replace 880 Mile Of Water Main In 10 Years!
How To Select An Economical And     Secure Remote Terminal Unit (RTU) Delivery System For WWTPs And Pump     Stations
Identifying And Locating Existing     Backflow Prevention Devices Inside A Building Using Bluetooth Smart     Technology
Increasing The Resiliency: Standby     Power Generation
Integrating SCADA with Other Plant     Systems
Internet of Things – Enabling A New     Level Of Control, Reporting And Efficiency
Making Your Water Department     Paperless With Laserfiche ECM
Master Metering Using A SCADA System
Mobile Data Collection, Visualization     And Execution
Mobile Interfacing Within     Water/Wastewater
Quick Tour Of ArcGIS Online And     Practical Uses For Water / Wastewater
SharePoint 2013 – Technical Overview
Speaking Their Language: Public     Engagement Through Social Media For Public Works
Understanding Pressure, Temperature,     And Flow Instrumentation
Using SCADA To Reduce Energy     Consumption And Operate More Efficiently
Water Systems: A Twofold Look Into     Physical Security And Cyber Security
Water/Wastewater Tablet Success For     Less Than $1000




Water Systems Security

by David Ganje


INTRODUCTION……………………………………………………………………………………………………….. 1

BRIEF HISTORICAL OVERVIEW……………………………………………………………………………… 1

WATER SECURITY……………………………………………………………………………………………………. 2

  1. Physical Security …………………………………………………………………………………………..      3
    1. i.              Milwaukee & Cryptosporidium…………………………………………………………….. 4
    2. ii.            WaterWorks: Physcial Security…………………………………………………………….. 6
  2. Cyber-Security……………………………………………………………………………………………….      9
    1. i.              WaterWorks: Cyber-Security………………………………………………………………… 11



Ass’n of State Water Admins., Security Vulnerability Self-Assessment Guide for Small Drinking Water Systems, Nat’l Rural Water Ass’n (May 30, 2002), available at



Presentation to the Illinois Chapter of the American Water Works Association.


© 2014. All Rights Reserved. David L. Ganje.


I. Introduction

This article discusses current security issues surrounding water treatment and waste facilities. The sources of attack are myriad, but manifest via physical attacks and cyber-attacks. A physical attack on a water treatment and waste facility occurs when an individual or group causes physical damage to the facilities, structures infrastructure, systems, or the water itself on site. A cyber-attack occurs remotely and disrupts the computer systems that control the treatment and waste facility. Whether the attack be physical, cyber, or some combination, the goal is the same: to harm, even kill, the local population and cause panic. This article will give a brief historical overview of American water systems, discuss the current water security concerns of both physical and cyber-security, and make some practical recommendations for enhanced security.


South Dakota Weighs in on the Dormant Mineral Laws

Posted on: May 21st, 2014
by David Ganje

A recent South Dakota Supreme Court decision, Holsti v. Kimber, 2014 S.D. 21, has shed light on two areas of the state’s dormant or abandoned mineral interests act (see South Dakota Codified Laws § 43-30A et. al.): first, what constitutes “use” (S.D.C.L. § 43-30A-3) and “nonuse” (S.D.C.L. § 43- 30A-2) of a mineral interest in order for a claimant to keep ownership; and second, who may claim and exercise that “use.”    North and South  Dakota’s Dormant/Lapsed Mineral Act are substantially similar.  This case adds to the body of case law discussing this important natural resources law. Though some questions remain unanswered following the decision, the Court’s decision discusses what a mineral interest owner may do to prevent lapse of one’s mineral interest and what a mineral interest owner may do to maintain his interest in a mineral estate. This case is the first time the South Dakota Court has addressed head on the state’s dormant mineral interest law.

South Dakota defines a mineral interest as “any interest, in oil, gas, coal, clay, gravel, uranium, and all other minerals of any kind and nature, whether created by grant, assignment, exception, reservation, or otherwise, owned by a person other than the owner of the surface estate.” (S.D.C.L. § 43-30A-1 (emphasis added)). A mineral interest is considered abandoned if it is “unused” for twenty-three years (twenty years in North Dakota) and a statement of claim is not recorded within that time. (S.D.C.L. § 43-30A-2; N.D.C.C. § 38-18.1-02). Upon abandonment, the surface estate owner may succeed to the mineral interest of another claimant, and unite the two estates. (S.D.C.L. § 43-30A-6).

In order to maintain ownership of a mineral interest and avoid lapse, the mineral interest must be “used.” (See S.D.C.L. § 43-30A-3). “Use” under the statute may include any one of eight statutorily defined “uses.” (Id.) One such “use” relevant to this case, includes:


Any conveyance, valid lease, mortgage, assignment, order in an estate settlement proceeding, inheritance tax determination affidavit, termination of life estate affidavit, or any judgment or decree that makes specific reference to the mineral interest is recorded . . . .


(S.D.C.L. § 43-30A-3(4)). It is the burden of the mineral interest holder to maintain his interest. (See Holsti, 2014 S.D. 21 at ¶ 12 (citing Texaco, Inc. v. Short, 454 U.S. 516, 529-30 (1982)). Upon lapse, the burden shifts to the surface estate owner (the landowner) to take steps to succeed in the mineral interest. (See S.D.C.L. § 43-30A-6). In Holsti, the issue before the Court was whether the mineral interest holders fulfilled their burden to maintain their interest in the mineral estate. (See ¶ 11).

The facts of the case: in 1967, Severt Kvalhein (“Kvalhein”) conveyed real property to Gordan Holsti and recorded the deed. (Holsti at ¶ 2). In the sale, Kvalhein reserved fifty percent of the mineral rights for himself. (Id.). Two years later, in 1969, Kvalhein died and his estate was devised to eight heirs, each heir taking a one-eighth interest in the minerals. (Id.).

In 2007, Mr. Holsti conveyed his surface estate to his sons (“the Holstis”). (Id. at ¶ 3). In December 2011, the Holstis published a notice of lapse of mineral interest in the official county newspaper in accordance with the statutes to recover mineral interests. (Id.; see S.D.C.L. § 43-30A-6.). No one responded by recording a statement of claim asserting ownership of the mineral interest. (Holsti, at ¶ 3). The Holstis filed a quiet title action in May 2012 alleging abandonment of the mineral interest due to “nonuse.” (Id. at ¶ 4).

Kvalhein heirs (“the heirs”) answered and rejected the argument that the mineral interest was abandoned. (Id. at ¶ 5). In their defense, the heirs referenced several 1978 oil and gas leases, a 1994 statement of claim by one of the heirs, and two mineral deeds recorded by one of the heirs in 1998 and 2011. (Id.).

The Court looked to whether the Kvalheim heirs had a valid mineral interest at all. The trial court had decided they did not have a valid interest because no document was recorded evidencing transfer of the mineral interests to the heirs and reasoned that “use” of a mineral interest could only be done by a “record owner.” (See id. at ¶ 9). The Supreme Court rejected that reading of the statute, and found that the heirs did not need a recorded written document conveying Kvalheim’s mineral interest to them. (Id. at ¶ 15).  The Court found the Kvalheim’s last will and testament, though unrecorded, was sufficient to convey the mineral interest to the heirs upon Kvalheim’s death. (Id., at ¶ 15; S.D.C.L. § 43-30A-1).

Once the Court determined the heirs had an interest in the mineral estate, it next turned to whether or not that interest had been abandoned due to “nonuse,” or if the heirs had satisfied the law’s “use” requirements. (Holsti, at ¶ 16). The circuit court found the 1978 oil and gas leases recorded by the heirs were insufficient because they did not make specific reference to the mineral deed recorded by Kvalheim in 1967. (Id.). The Supreme Court disagreed. (Id.). Because the language of the statute does not specifically use the words “record holder” or “original deed” the Court held the only two requirements for a recorded oil and gas lease to satisfy “use” were: 1) a specific reference to the mineral interest in question and 2) recording in the county register of deeds office. (Id.). Because the heirs’ oil and gas leases specifically referred to the legal description of the minerals and because the leases were recorded in the proper county’s register of deeds office, the Court found the leases to be sufficient as “use.” (Id.). (In a similar 2013 case decided by the North Dakota Supreme Court, Estate of Christeson v. Gilstad, the North Dakota Court also found that a legal mineral interest owner by inheritance, but not a record owner, could record an oil and gas lease to preclude abandonment of the mineral interest. (829 N.W.2d 453 (N.D. 2013)).

By exercising their rights as mineral interest holders and recording oil and gas leases in 1978, the Kvalheim heirs reset the clock back to zero on the twenty-three year test for abandonment. (See SDCL 43-30A-2). Therefore, from the last recorded lease in 1978, the heirs had twenty-three years in which the surface estate owners could not claim abandonment. Before the expiration of this twenty-three years (1978-2001), two Kvalheim heirs recorded documents sufficient to toll the clock again: in 1994, one heir recorded a valid statement of claim (Holsti, at ¶ 18); and in 1998 and 2011 two mineral deeds were recorded conveying the mineral interest between heirs. (Id. at ¶ 17). The Court found both the statement of claim and mineral deeds constituted a “use” under the law and precluded abandonment. (Id. at ¶ 17-18). The Court did not decide and instead remanded to the circuit court an additional issue: whether these two “uses” by some of the Kvalhein heirs were sufficient to preserve the other six heir’s mineral interests. (Id. at ¶ 19).

In their holding, the Court discussed who may be a mineral interest holder and what they may do to satisfy the burden of “using” their mineral estate. This clarification is to the benefit of mineral interest holders because non-record holders, that is parties who claim mineral interest rights but have no deed of record, may still protect their interests (it nevertheless a better practice to record an interest).


Chronological Timeline of Events

Kvalheim & heirs/Defendants


1967: Severt Kvalhein conveyed real property to Gordan Holsti, but reserved 50% of the mineral rights for himself. The deed was recorded in Harding County, South Dakota.
1969: Severt Kvalhein died, and devised his estate to his eight heirs; therefore, each heir individually inherited 6.25% of the property’s total mineral interest.
1978: Multiple oil and gas leases were recorded in Harding County by several of Kvalhein’s heirs (including: Nina Grev and Sylvia & Jerome Hjelmeland).
1994: Nina Grev, a Kvalhein heir, filed and recorded in Harding County a statement of claim related to the mineral interest.
1996: Gordon Holsti published a notice of lapse of mineral interest in the official Harding County newspaper once a week for three weeks, which notices and affidavit were recorded in the Harding County Register of Deeds Office.
1998: Jerome Hjelmeland, a Kvalhein heir, conveyed his 6.25% mineral interest to his wife, Sylvia Hjelmeland, by “Mineral Deed” which was recorded in Harding County.
2007: Gordon Holsti conveyed his surface estate to his sons, John and Mark (“the Holstis).
June 2011: Sylvia Hjelmeland conveyed her 6.25% mineral interest to her two children, Katherine and Gregory, and recorded the deed in Harding County.
December 2011: The Holstis published a notice of lapse of mineral interest in the official Harding County newspaper, once a week for three weeks, as required. No notice was mailed to Kvalheim, because he died in 1969 a single man. No inquiry was made into who was the owner of Kvalheim’s mineral interest following his death.
May 2012: The Holstis brought a quiet title action alleging Kvalheim’s mineral interest lapsed due to nonuse and that Gordan had succeeded Kvalheim’s mineral interest in 1996 due to his published notice of lapse; or, alternatively, that they had succeeded Kvalheim’s mineral interest in 2011 based on their publication of the notice of lapse.

South Dakota vs New York ‘Wind Farm Tax’ Comparison

Posted on: May 12th, 2014
by David Ganje

South Dakota

New York

Property Tax Exemption &

Alternative Taxation Scheme


Facilities with less than 5MW

-$50,000 or 70% (whichever is greater) of assessed value of new property is exempt from real property tax


Facilities with more than 5MW

-Annual tax on est. capacity calculated at $3 per k/Wh

-Annual 2% tax payable on gross receipts

-Rebate eligibility

-50% of construction of transmission lines

-90% rebate of gross receipts paid for 5 years

-50% rebate of gross receipts paid for next 5 years



For facilities with less than 5MW of capacity

SD offers a property tax exemption of either $50,000 or 70%, whichever is greater, of the increased assessed value of the property as a result of the construction/installation of renewable energy production facilities.



Value of property before installation of wind energy system: $10,000

Value of property after installation of wind energy system: $100,000

Increased value of the property: $90,000

Property Tax Exemption: $63,000

(70% of the increased value of the property)


For facilities with more than 5MW of capacity

SD offers an alternative taxation scheme in lieu of all taxes on real property which requires the generator to pay (1) an annual tax of the k/Wh capacity of the farm and (2) an annual tax on gross receipts of the wind farm. Following the payment of these taxes the company may be eligible for a rebate of up to 90% of the gross receipts for an initial 5 year time period and then a 50% rebate of the gross receipts paid for the next five years. No company may receive a rebate after this 10 year period. The SD Secretary also has the discretion to simply provide a tax credit to the developer as opposed to complying with the taxation scheme. This would be equivalent to the determined rebate eligibility calculated by the tax scheme as to avoid the complexity of the process, and cut down on the amount of transactions between the developer and the government.



Company pays two sets of taxes:

(1)-annual tax on the k/Wh capacity of the farm

(2)-annual tax on all gross receipts


Rebate eligibility is only available for the second set of taxes paid – the annual tax on all gross receipts. 90% for the first five years of operation, and 50% for the next five years. (10 year maximum rebate eligibility)


For example:


Within the first 5 years of operation:

Total annual tax on gross receipts paid: $100,000

Total Rebate Eligibility: $90,000/year


The next consecutive 5 years of operation:

Total annual tax on gross receipts paid: $100,000

Total Rebate Eligibility: $50,000/year


*No rebate eligibility beyond 10 years

Property Tax Exemption


-Exemption on property containing solar or wind energy systems designed to generate energy*

-100% property tax exemption

-Localities may opt-out of offering exemption

-15 year exemption limitation



NY offers a 100% property tax exemption of the increased assessed value of the property as a result of the construction/installation of approved wind energy farms. There is a 15 year limitation on this exemption.


*Solar or wind energy system means an arrangement or combination of solar or wind energy equipment designed to provide heating, cooling, hot water, or mechanical, chemical, or electrical energy by the collection of solar or wind energy and its conversion, storage, protection and distribution. (NY CLS RPTL §487)

Reinvestment Payment Program

For Renewable Energy Sector  


Project Qualification Amounts

-New/expanded facilities: must exceed $20 million

-Equipment upgrades: must exceed $2 million


Eligible Reinvestment Payment

-Up to 100% of the 4% sales and use tax paid on the project by the project owner



Companies who either expand/build new facilities or invest in equipment upgrades can apply for a reinvestment payment of up to 100% of the sales and use tax they paid on the project. This is a one-time reinvestment payment based on the receipts of the project.




Renewable Portfolio Standard Program


Main Tier – Large Commercial Wind Farms

-Competitive bidding process

-NYSERDA publishes a RFP which any commercial generator can bid on and once all bids are collected and assessed, NYSERDA will award as many contracts as the RFP requires to fulfill the RFP


Customer Tier – Wind Turbine Incentive Program 

-Facilities with less than 2MW capacity

-Maximum $1 million/site/customer

-Standard incentives paid to eligible installers for annual energy output under a fixed payment structure

-First 10,000k/Wh paid at $3.50 per k/Wh

-Next 115,000k/Wh paid at $1 per k/Wh

-Above 125,000k/Wh paid at $0.30 per k/Wh



For commercial wind farm energy producers

NYSERDA offers a competitive bidding process which allows companies to bid on projects to fulfill State energy needs. Once NYSERDA collects all the bids for a specific project, they will award contracts to companies who satisfy their requirements, so long as funding is available to compensate each company.



(1)-NYSERDA publishes requests for proposals (RFP’s), stating the need for 50MW of energy with a $5 million budget (budget is unknown to the companies)

(2)-Companies submit proposals/bids to NYSERDA containing how much energy they can produce and at what cost.

(3)-NYSERDA awards contracts to fulfill the 50MW with a maximum spending allowance of $5 million


For Example:


If five companies submit bids with the ability to produce 10MW of energy for $1million – each company will be awarded a contract from NYSERDA to satisfy their proposal. If one company submits a bid with the ability to produce 10MW of energy for $4million – that company would most likely receive the benefit of the entire contract.


For facilities with less than 2MW’s of capacity

NYSERDA provides a standard offer under which they will pay customer-generators a certain dollar amount for every k/Wh of energy produced from the installed system.



Customer wishes to build a system which can produce 10,000k/Wh of energy. Customer finds an approved, eligible installer who installs equipment. NYSERDA offers standard payment of $3.50/kWh for the first 10,000k/Wh produced. Customer would be entitled to a benefit of $35,000. Under the program requirements this payment is paid to the installer, who in turn, must pass the incentive, in its entirety, to the customer-generator.



Corporate Tax Rate: NONE


Corporate Tax Rate: 7.1%


Personal Income Tax Rate: NONE


Personal Income Tax Rate: Scaled from 4%-8.82%

Sales & Use Tax Rates


Base: 4%

Maximum Local Rate: 4%


Sales & Use Tax Rates


Base: 4%

Maximum Local Rate: No maximum set

The Wind is Transient, Taxes Are Nearly So. A Look At The World Of Wind Taxes.

Posted on: May 12th, 2014
by David Ganje

 The Wind Is Transient, Taxes Are Nearly So. A Look At The World Of Wind Taxes.


In 2012, wind power was the largest single source of new electric power generating capacity in the country and contributed roughly 43% of all U.S. new capacity generations. From 1999 through 2012, 69% of the wind power capacity built in the U.S. was located in states with renewable portfolio standards (RPS). States set levels – some of which are mandatory and others non-binding – which the State must reach regarding an increased production of energy from renewable energy sources. As of June 2013, New York (NY) has a mandatory RPS of 30% by 2015 and South Dakota (SD) has set a non-binding goal of 10% by 2015. Taxation and economic incentives are an important driving force behind an investor’s decision to invest resources and ultimately construct a commercial wind farm.

When assessing both NY’s and SD’s taxing schemes, it is important to note the general differences between the basic tax structures between the two. In SD, there is no corporate income tax, and no personal income tax. In NY, there is a 7.1% corporate income tax and a scaled personal income tax structure which can vary from a low of 4% to a high of 8.82%. In addition, both states have a 4% base sales and use tax rate. SD sets its maximum additional local rate at 4% while NY has no maximum local rate.

NY begins by offering a fifteen year real property tax exemption for property containing approved solar or wind energy systems designed to generate energy as defined by the State Energy Research and Development Authority. The statute specifically provides for a 100% exemption to be granted for the increase in the assessed value of the real property attributable to the installation of the wind energy system. An important caveat to this exemption is that each locality can, by resolution, provide no exemption. A list of local laws and resolutions which have executed this opt-out option can be found on the NY State Department of Taxation and Finance website. Although the statute currently requires construction of the system to begin by January 1, 2015, there is pending legislation to amend and extend that date to January 1, 2025.

In accordance with the RPS adopted by the NY Public Service Commission, the NYS Energy Research and Development Authority (NYSERDA) maintains a large funding program to encourage the investment and construction of renewable energy including wind power. This program is structured at two tiers of incentives. This will continue so long as there is funding in the program or the term of the offer expires. The first is for large commercial renewable energy generators and consists of a competitive bidding process which is administered by NYSERDA. Under this program, when energy is desired for the wholesale market, NYSERDA will publish a request for proposal (RFP), which any renewable energy power producer can apply for. Once all the bids are collected, NSERDA will award as many necessary contracts as they need and can afford to fulfill the requirements of the RFP. Under this incentive program, there is no guarantee of a contract; it is simply a competitive bidding process which contracts may be awarded from.

Under the second tier, entitled the “On-Site Wind Turbine Incentive Program” (PON 2439), eligible incentives are available of up to $1 million per site/customer who install new approved wind energy systems which generate less than 2 MW of energy. This program is available through December 31, 2015. In this program, incentives are paid to the certified installers who in turn must pass the entirety of the incentive to the customer who they contract with. The incentive levels come in the form of standard offers to pay a certain amount of money for each k/Wh of energy produced.  The standard incentives are based on the expected annual energy output (AEO) of the generator and are calculated in three tiers; Tier I – the first 10,000 kWh or less will be compensated at $3.50/kWh; Tier II – the next 115,000 kWh of AEO is compensated at $1/ kWh; and Tier III – any production above 125,000 kWh is compensated at $0.30/kWh all cumulating in a maximum financial incentive of $1 million per installation.

When discussing development and construction in NYS, even so called “green” development must be in compliance with the State Environmental Quality Review Act (SEQRA) requiring an assessment of each project and an ultimate determination as to any adverse environmental impacts resulting from the proposed development. This added layer of bureaucratic assessment can in some cases pose obstacles and delay projects which otherwise would be able to proceed without such a process. SD has no similar separate comprehensive state review, but does require the developer to submit a report assessing the existing environment at the time of the proposed project and, also to address any potential adverse impact their project may have on both the human and natural environment.

In SD we see a different landscape when it comes to economic incentives and tax benefits regarding commercial wind energy. SD maintains a statutory exemption from taxation on property constructed for the purpose of producing electricity via renewable energy, namely wind energy. Under this exemption, renewable energy facilities and properties with less than 5MW of nameplate capacity, or the maximum energy output the system can produce, are exempt from the real property tax under certain criterion. All property used or constructed for the purpose of producing electricity is still assessed under the existing structure, however, the first $50,000 or 70% of the assessed value of the new property, whichever is greater, will be exempt from the real property tax.

The second SD statutory incentive, for large commercial wind farms producing electric power for the first time, contains an alternative taxation scheme in lieu of all taxes on real property which have a nameplate capacity of five MW or greater. The first component is an annual tax based on the nameplate capacity of the wind farm and consists of an annual tax equal to $3/kWh on the capacity of the wind farm. This tax is imposed starting the first calendar year the wind farm generates gross receipts, however, for the first year the company is in business the tax is prorated according to when the wind farm begins operation during that year. The second component is an annual 2% tax payable on gross receipts of the wind farm. The gross receipts are calculated as the number of kilowatt-hours produced multiplied by a base electricity rate of $0.0475/kWh, with the base rate increasing by 2.5% annually thereafter.

Under the taxation scheme described above, any company requiring transmission lines or wind farm collector systems in SD for a wind farm or power generation facility is eligible for a partial rebate of the tax paid under SDCL §10-35-19. The maximum rebate is 50% of the cost of the transmission lines. In addition, there is a rebate available for the gross receipts tax; the total maximum rebate in one year is 90% of the taxes paid for the first five years of eligibility, and a 50% rebate of the taxes paid for the next five years. No wind farm may receive a rebate under these sections following this ten year period. Lastly, the SD Revenue Secretary may provide a tax credit in lieu of the full rebate payment of the gross receipts tax. This preference would operate so that instead of collecting the taxes on the gross receipts and then having to pay a developer back through the rebate program, the Secretary, at his discretion, may simply provide a tax credit up front as to simplify the process and cut down on the number of monetary transactions between the developer and the government.

SD also offers the Renewable Energy Facility Sales and Use Tax Reinvestment Program which commenced in 2013. Under this reinvestment program, applicants can apply for up to a 100% rebate of the sales and use tax paid on eligible project costs. Requirements for eligibility are that if the project is either a new project or an expansion of a facility, the total cost must exceed $20 million, and if the project consists of equipment upgrades, the total cost must exceed $2 million. Eligible project costs can include, but are not limited to, the amount paid by the project owner for the acquisition of property, costs that are associated with land, labor, equipment, and/or generator components. For rebate consideration, an application must be filed with the Governor’s Office of Economic Development within ninety days of starting construction and be in compliance with criteria listed under §26 of this special legislation. The exact rebate percentage awarded is at the sole discretion of the review board who oversees all of the projects and applications.

One last issue. Net-metering is a program which allows customers who generate excess energy to either offset their meter or in some instances receive a cash payment for the excess energy they generate back into the grid. Net-metering programs are geared toward residential customers in an effort to promote and reward individual renewable energy generators. Currently, NY has a net-metering policy requiring utility providers to offer payment or offset a customer’s bill at the avoided cost – or customer contract rate – per k/Wh of energy generated. This program applies only to units which are no larger than 2 MW in size. SD, following the passage of the Energy Policy Act of 2005, made a determination that they will not pursue a state-wide net-metering policy and most recently another effort to establish a net-metering policy was defeated in the 2014 legislature. There are no implications of these policies on a commercial wind farm as the net-metering relationship is between the residential-customer and their utility provider. These policies are not extended to the larger energy generators who simply provide power to the utility companies.