Due Diligence Summary — Buyer Beware

Are you an executive for a wind energy development company? Are you an attorney, accountant, analyst or banker working for such a company? Are you an analyst for or a partner in an alternative investment vehicle looking for exposure to wind?

Who is this man and if this project is so great, why is he trying to sell it to you?

If you answered yes to any of these questions, you may have already heard from this gentleman, Milton R. “Milt” Howard. Mr. Howard is a Vice President of Duke Energy’s Renewables Division. Mr. Howard has spent the better part of the last two years trying to turn large portions of Benzie and Manistee counties into a large industrial wind generation facility, a.k.a, the “Gail Windpower Project”.

According to an online profile, Milt “derives immense satisfaction from envisioning growth, making it happen and generally ‘creating something from nothing’.”

What size bonus do you think Mr. Howard will get if he is successful in selling you the black hole down which Duke Energy’s shareholders have been throwing money for much of the last two years? Better yet, do you think YOU will still be around to get your bonus when this happens to you (Make sure you listen to the interview with Mr. Howard.)?

If you are an individual engaged in conducting due diligence on Duke Energy’s “Gail Windpower” project, we thought you might appreciate some help. Here are some of the things Mr. Howard and his colleagues might be telling you, some questions you should be asking them in in response, as well as some additional questions and issues you should consider before trying your hand at “making something out of nothing”.

The first thing Mr. Howard may be telling you is that Duke gave up because they couldn’t get a power purchase agreement and maybe you will be able to get one at some point in the future. This is patently false. In response to questions from a Michigan business publication, here’s what Duke’s chief local proponent/volunteer (we’ll learn more about him later) said: ” ‘[Duke] could not keep throwing good money at a situation that was not going to fly.’ He said a small, well financed faction that did not want the Windpower project to be completed, ultimately was the deciding factor.”

You may also want to ask Mr. Howard why, if there insufficient demand for renewable energy in Michigan, Duke is continuing full speed ahead with its other industrial wind energy project, the “Hillsdale” wind project. Here is some recent correspondence between Duke and Reading Township that suggests that Duke might be having some trouble with that project as well. Maybe Duke is willing to offer you a discount if you pick up two of its failures.

Mr. Howard will tell you that Duke is selling 13,000 acres of land in Benzie and Manistee Counties, enough contiguous land for an industrial wind facility. About those leases. Ask Mr. Howard why Duke has never recorded these leases or memoranda thereof in the courthouses of Manistee and Benzie counties. Ask Duke why it has never returned countersigned copies of the leases back to the lease signers. Then ask a first-year law student whether a binding legal obligation has been created by a document to which only one of two counterparties has agreed to be bound.

Mr. Howard may be telling you the project has widespread political support. Duke might show you nonbinding resolutions from Benzie and Manistee counties in support of renewable and wind energy. Here’s the thing. Ask Mr. Howard whether or not zoning is controlled at the county level in Manistee and Benzie counties. Once you find out that it is not, ask Duke about the status of industrial windpower-related zoning ordinances in the four affected townships. Mr. Howard might be busy “creating something out of nothing” somewhere else. We’ll save you some time. The county boards of commissioners have absolutely nothing to do with permitting wind energy projects in the area for the proposed “Gail Windpower” project.

Wind turbine construction will not be permitted in Arcadia township until such time as the township completes a revision of its comprehensive plan and writes a new wind energy ordinance. Pleasanton and Blaine townships are in the process of writing wind energy ordinances and both communities are considering strongly protective ordinances with height restrictions, setbacks and noise restrictions. Joyfield township has declared a one year-moratorium while it writes a master plan and considers zoning and other methods of properly regulating industrial wind power.

Mr. Howard will tell you that Duke’s timing wasn’t right and that you might have better luck because of political support for wind energy in the state legislature. He might tell you that industrial wind energy has a lot of support in the state legislature. He might tell you that a citizen initiative on the ballot in the state to expand Michigan’s renewable portfolio standard to 25 percent will create new demand for wind energy, the absence of which was responsible for Duke’s failure. In fact, we hear that Duke’s number one volunteer is running for the Michigan House of Representatives (see below).

You may want to know that the opponents of an industrial wind facility in this part of Michigan have some political support as well. When a bill was moving through the legislature that might have reduced local control over wind turbine siting, in a manner described by many Lansing observers as the most fast-tracked bill anyone had seen in recent memory, our supporters were able to get the objectionable parts removed. Our supporters were able to get a bill amended on third reading on the floor of the Michigan House of Representatives. If you don’t know what that means and how often it happens in the state of Michigan, ask your political advisor to explain it to you. In fact, if you have the resources to consider buying this “asset” from Duke, you probably have a lobbyist on retainer in Lansing. Pick up the phone and give him a call. Ask him about Michigan HB 4746.

Duke will tell you the region has citizens who believe in wind energy and are willing to work for free in order to help a developer such as you succeed. Maybe Mr. Howard will tell you about Duke’s number one volunteer, a lifelong advocate of industrial wind energy who is a former chairman of the Manistee County Board of Commissioners. This volunteer was even the founding president, incorporator, and first registered agent of the American Wind Energy Association. He has decided to run this fall for the Michigan legislature. (Good luck with that.) Do you think that Duke’s volunteers have things all set up and ready to go for you. Do you think they will allow themselves to be hung out to dry twice?

Duke will tell you “the project is only opposed by a small, vocal group of ‘antis’.” This is evidently the industry term for those who oppose or advocate for the responsible regulation of the erection of 519 foot wind turbines in their community in close proximity to their residences and the effects associated therewith, including noise, property value decreases, and shadow flicker, just to name a few.

Mr. Howard will tell you that these “antis” (again, his words, not ours) are a  just a small vocal minority of people in the townships on the lake. The problem with this theory is that Joyfield township is not on lake Michigan and the voters there voted to recall three members of their township board last November in response to the failure of board members to consider a discussion of industrial wind energy at township meetings. Ask the three former members of the Joyfield Township Board, who had signed wind leases with Duke and had refused to consider zoning or even discuss the proposed project in township meetings, whether or not Joyfield support the project. Ask them why they think that they were recalled by nearly 60 percent of the electorate last November.

As far as public opinion is concerned, make sure you ask Duke for a copy the survey that it commissioned from Central Michigan University in the Spring of 2011. Ask Duke about the more recent survey conducted as part of the Understanding Wind Initiative on behalf of township governments in the affected area by researchers from Macalester College in the summer of 2011. Alternatively you can follow the hyperlinks above.

Do you think that you will be able to do all of this and keep your corporate image in intact? Maybe you are convinced that investing in industrial wind energy will allow you to greenwash your corporate image. Try googling “wind energy lynching” or “Duke Energy lynching” and see what your investors will be asking about at the next shareholders’ or investors’ meeting. Better yet, take a drive down Glovers Lake Road in Pleasanton Township to see what is on display today.

How much will you have to incur in legal expenses? What are the regulatory risks involved in the project? Ask Mr. Howard how much Duke Energy’s shareholders paid their Michigan counsel, Warner, Norcross, & Judd (WNJ), last year? Maybe Warner, Norcross, and Judd’s members will agree to give you a discount. Ask Duke how many evenings a partner from WNJ had to drive from Grand Rapids to Benzie County (2.5 hours each way — in Google maps, enter the staring point as 111 Lyon St NW, Grand Rapids, MI, and the ending address as 5490 Benzie Highway, Benzonia, MI — the Joyfield Township Hall) in order to sit in on township board and planning commission meetings, including one or more  that arguably might have been held in violation of Michigan’s Open Public Meeting Law.

You may want to ask WNJ’s managing partner  just how profitable his firm’s relationship with Duke Energy was last year, and how much his firm is looking forward to continuing to work with you in order to see this project through.

Ask Mr. Howard to show you a copy of the eight-page, single, spaced lawyer letter that he had his lawyers write in order to counter a letter written by this “small, vocal minority.” In fact, you might be interested in reading the AWSG’s original letter to Pleasanton landowners, Duke’s eight-page, attorney-written response, and AWSG’s point-by-point response to that letter. Here is the short version of the truth on Duke Energy’s raw deal and summary of the points made by AWSG that are not disputed by Duke.

You may be interested to know about the ongoing litigation between AWSG and Central Michigan University regarding a FOIA request filed by AWSG which is pending before the Manistee County Circuit Court. The case number is 11-14283-CZ.

While you are doing your due diligence, you might want to make sure you get a copy of all communications between Mr. Howard and the townships concerned by this project. We are not sure what kind of e-mail software Duke Energy uses, but it seems that Mr. Howard may not have complete records of all of his past e-mails. Last summer he had his local employees enter into a local gas station and market and steal copies of e-mail correspondence between him and local township officials that should have been in his own inbox and outbox. When one of his local supporters decided to enter into the same establishment and steal even more documents which had been placed there for the public to view by concerned local citizens, he commended this supporter’s action. Just in case Mr. Howard does not give them to you, here are the e-mails that he had stolen from Max’s station in Arcadia. Here is some of the other correspondence between Mr. Howard and Local government officials: Duke’s FOIA request to Arcadia Township as well as a follow-up letter, Duke’s threatening letter to Pleasanton Township regarding its proposed wind energy ordinance, a redline of Pleasanton’s proposed wind energy ordinance showing Duke’s “proposed” changes, just to cite a few.

Do you really think that you will be able to keep your activities a secret? This is evidently the norm in the wind energy industry. We believe that if you got Mr. Howard on truth serum (kind of like he appears along with his dog in the picture above), he would tell you that one of the reasons he failed was that he was unable to keep the project secret from the neighboring residents before Duke could secure a power purchase agreement. This clearly is what someone from Duke told Duke’s hometown business newspaper when you read between the lines of this article which tries to explain Duke’s failure.

Ask Mr. Howard what Duke thought about the AWSG’s sunshine project which was able to get the real story behind the negotiations that led to the writing of Duke’s wind lease. As part of our research efforts, AWSG received a treasure trove of documents detailing the inside story of Duke Energy’s “negotiations” with local landowners, including how Duke paid for the lawyers who represented the landowners in their “negotiations” with Duke. (And when your boss or client starts looking into retaining Michigan counsel for your own firm, he or she might want to contact Robert W. Parker and Jonathan “Jon” Siebers at the Michigan law firm Smith, Haughey, Rice, and Roegge about their familiarity with the rules of professional conduct for Michigan attorneys, specifically, Rule 1.8(f).)  We have some more documents that we haven’t yet put on the web if you are interested.

By this point in the diligence process, you may be in need of a more general introduction to industrial wind energy. There is a movie about industrial wind energy called Windfall. It will (pun intended) blow you away. It is now out in limited release and will be available on demand and through other outlets soon enough. Don’t just take our word for it. As Duke’s number one volunteer says, do you own research. Watch the trailer. Read reviews of the movie by Roger Ebert, Salon, the Washington Post, and the New York Times. Once you have watched it you can tell Mr. Howard whether or not you agree with his characterization of it as “Alfred Hitchcock-like”.

In conclusion, the people of this region have critically examined and rejected turning it into a large industrial wind generation facility. We have come together to protect our communities, and we are not going away. Come to visit. Come to stay. Come back again and again. Just put your wind turbines somewhere else.

These are just the highlights of what’s available on our website, which you should read from the beginning, if you really think that you are eager to try your hand at making something out of nothing.

This entry was posted in Due Diligence, Duke's Pressure Tactics, Get In the Game, This is a Regional Effort. Bookmark the permalink.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s