Cover Story

Winds of Change

by Nathan Stubbs

Acadiana businessmen Harold Schoeffler and Herman Schellstede see a billion-dollar industry in wind turbines that could help offshore oil extraction and green energy production.

At his Surrey Street auto dealership, Schoeffler Cadillac owner Harold Schoeffler is used to extolling the wonders of modern mechanics. But more and more of his recent meetings involve selling dreams bigger than driving home one of the new XLR convertibles parked in the display room. He and his newfound partner, Herman Schellstede, a New Iberia-based oilfield veteran, have formed Wind Energy Systems Technology LLC, an ambitious company with plans to harvest wind energy ' which researchers have pinpointed as an enormous resource just off Louisiana's coast.

It's not just a pipe dream. The benefits of wind energy already have corporate titan Chevron-Texaco rethinking its strategy for the Gulf of Mexico. And if wind energy takes hold, it could spawn a multi-billion dollar industry for Louisiana.

The project is a natural extension of 65-year-old Schoeffler's lifelong crusade to nourish and protect Louisiana's environment. He's the chairman of the local chapter of the Sierra Club and in the past 25 years has championed the causes of local crawfishermen and black bears alike in numerous lawsuits. He's taken on big oil too, supporting Clean Water Act lawsuits that forced petroleum companies to stop dumping waste into wetlands. In an unlikely twist, Schoeffler's new company could help make oil and gas companies more profitable.

Inside his office at Schoeffler Cadillac, he clutches a miniature model wind turbine, a silver monument with propellers similar in design to the wings of an airplane. The turbine's head swivels according to the direction of the wind. "And the prop pitch changes to meet varying wind conditions," says Schoeffler. "The pitch will change just like a variable pitch prop on an aircraft."

The dimensions of an actual turbine, which would be placed on existing abandoned oil platforms in the Gulf of Mexico, are staggering. Each fiberglass turbine blade is 125 feet long and weighs 3,400 pounds. A wind turbine's total diameter exceeds the length of a football field, and a single unit weighs about 300 tons.

The enormous scale is of small concern to Schoeffler. He says an entire 250-foot steel tower can be assembled on platforms in the Gulf of Mexico with readily available parts and labor. "We already have the infrastructure here to do this," he says, adding that turbine assembly would be no more difficult than the construction already commonplace on oil rigs.

In addition, Schellstede and Schoeffler believe Louisiana's existing oilfield infrastructure holds the potential to revolutionize the fledgling production of offshore "wind farms" worldwide and put local developers at the forefront of green energy generation.

"We have the technology to make this happen in other parts of the world," Schoeffler says, "which is great news for our ports and our fabricating facilities." There currently aren't any U.S. offshore wind farms, and existing sites in countries like Denmark and Germany have struggled to remain secure underwater. Schoeffler and Schellstede are betting the stabilizing steel "jackets" used to hold the pilings on oil platforms in the Gulf will eliminate this problem. Special long line anchors and "dynamic positioning" technology now employed for floating oil platforms could also allow deep-sea wind turbines.

The idea of putting wind turbines on abandoned offshore oil platforms came after a heated exchange with a local oilfield executive who bought a car from Schoeffler. The man berated Schoeffler about "the environmental wackos" who were making it so expensive to take down offshore oil platforms that it was making the entire business unprofitable. Out of the blue, Schoeffler responded that maybe the oil companies should put wind turbines on them and generate green energy. "He told me that wind turbine wouldn't be powerful enough to charge a 12-volt battery on the shore," Schoeffler says. "So, I started doing a little research on it."

Schoeffler found a 2003 Stanford University study that identified Louisiana's Gulf Coast as one of the greatest uncharted reservoirs of wind power. The study examined annual wind measurements from nearly 1,800 sites across the country and is the most comprehensive study on wind power potential to date. "The winds over possibly one quarter of the United States are strong enough to provide electric power at a direct cost equal to that of a new natural gas or coal power plant," the report concluded. Of all the states, Louisiana's coast was second only to Alaska's in the number of optimal sites.

Schoeffler took his idea and findings to Schellstede, president of Herman Schellstede & Associates and a three decade-plus specialist in oilfield engineering and design. The two men formed their fledgling company, WEST, in early 2004, and say their vision for a renewable energy industry is especially timely considering the uncertainty of the oil and gas industry.

"You can go all over the West," Schoeffler says. "And you see these ghost towns where there were gold mining towns or copper mining towns. When the product is gone, the town's gone. That's where we are in South Louisiana. When the oil's gone, we're going to be gone."

An exaggeration? Perhaps. But wind energy is being taken seriously by a number of disparate entities ' including the state Legislature.

"This is all virgin territory," says Monique Edwards, an attorney with the state Department of Natural Resources. Edwards is working with other interested state officials, including Gov. Blanco's office, on drafting legislation that would give the state authority to regulate wind energy. In addition to implementing standards for placing wind farms in state waters, a state wind energy bill could set state lease rates for the wind farms and royalty payments on any energy produced. Since it is an emerging industry, DNR expects royalty payments would start low, around 4 percent and increase with time. (Oil companies pay about a 13 percent royalty to DNR on the value of oil extracted in state waters.) Even though this year's state legislative session is scheduled to deal primarily with fiscal matters, WEST and Chevron-Texaco's wind energy initiatives could help make a wind energy bill a priority. "We also recognize that wind energy would be another economic tool that can be utilized," Edwards says.

A recent DNR report on wind energy states, "As oil and gas production in the state continue to decline, offshore wind energy could help Louisiana maintain its leadership role in the energy industry." In addition to potentially blossoming into its own industry, the report makes the case that converting abandoned offshore oil platforms into wind farms could go a long way in resuscitating the state's oil business.

Schoeffler estimates one-third of approximately 6,000 platforms in the Gulf of Mexico can be converted to wind farms. Those wind farms could save oil and gas companies the millions of dollars they now spend to dismantle offshore platforms. One hundred and fifty platforms were removed last year from the Gulf at an expense of about $400 million, Schoeffler says. Keeping the structures in place also leaves open the opportunity for the oil and gas companies to return at some point, with advanced techniques, to recover oil and gas that may have been previously unprofitable to extract.

"This can change the whole economics of the oil industry offshore," Schoeffler says. "Because the [abandoned] fields are worthless. You've got a field that in terms of what it can produce in oil and gas might be worth $20 million or $30 million but you've got $50 million in take-out costs. So, it's revenue neutral. But with [wind turbines] sitting aboard, it's a whole new ball game. Now you have the energy to go after the oil that's left."

Offshore wind farms could help oil and gas companies realize massive savings in fuel costs. Most offshore oil and gas companies now ship out diesel fuel to run generators on their platforms and rigs; Shoeffler says those total power expenses can cost up to almost 50 cents per kilowatt-hour. DNR and Schoeffler's estimates put wind power costs between 5 and 9 cents per kilowatt-hour.

These potential savings have already caught the eye of oil and gas monolith Chevron-Texaco. Jerry Lomax, vice president of Emerging Energy for Chevron-Texaco Technology Ventures, a corporate division set up in 2001 to explore alternative energy options, says the company has been seriously looking at converting some of its existing gulf platforms into wind farms and plans to decide how much it will invest in the idea by the end of 2005. Chevron-Texaco does not currently have a stake in any domestic wind farms, but does own a 22.5-megawatt facility in the Netherlands. Lomax sees a variety of options with Gulf wind power.

"There's an interesting opportunity there," he says. "We think that our offshore experience will help us with figuring out how to do wind offshore profitably."

Lomax adds his preliminary studies have shown that it may not only be economical to supply offshore facilities with wind power, but wind energy could deliver cheaper electricity rates to coastal cities such as Grand Isle and Venice.

That line of thinking only scratches the surface of Schoeffler's ultimate ambition. He not only wants to get into the offshore energy business, he hopes to sell wind energy to Louisiana utility providers such as LUS and Entergy.

However, as long as offshore wind energy remains unproven, it's unlikely the state would endorse that plan. "This might be the only realistic opportunity we have to accomplish green energy in Louisiana," says local Public Service Commissioner Jimmy Field. "And I think we should explore it, but it's got to be realistic and economical."

Field says he wants to see Schoeffler and others complete a successful pilot program supplying power in the Gulf of Mexico before they even begin talking about plugging wind energy into the state's main energy grid. Entergy is the majority owner of the grid, and the company is planning to increase its nuclear energy capacity in the region.

"It's our belief and understanding that wind is going to come in more expensive than those other alternative energies," says Jeff Williams, manager of corporate environmental initiatives for Entergy. After factoring in the high cost of transporting offshore wind energy inland, Williams says it's unlikely that wind power could compete against other utility providers.

"We're generally supportive of renewables," Williams says. "It's really a matter of price right now. We have an overcapacity situation. What it comes down to is, 'Is wind sustainable and supportable?' and that's not really our question to answer."

Cleco is taking a similar wait-and-see approach. "The company is open to any viable energy source the [Public Service] Commission approves," says Cleco spokeswoman Fran Phoenix. "We would want to know if there's sufficient wind and the cost."

Wind turbines may be generating a lot of excitement from green energy advocates and piquing the interest of state government officials, but no company has committed financial backing to the proposal. In order to afford the project's exorbitant start-up costs, WEST must first be able to guarantee customers for the nonexistent turbines.

"Until we line up a purchaser, there's no wind turbines going up," Schoeffler admits. He says WEST is negotiating with potential purchasers, including providers looking to put liquefied natural gas terminals in the Gulf.

The price of erecting the 300-ton renewable-resource power generators is estimated at more than $1 million for every desired megawatt of power. WEST's initial plan calls for a single 50-megawatt wind farm of 10 turbines at a cost of approximately $90 million. By contrast, Lafayette Utilities System is building four new natural gas generators, which will produce a total of 180 megawatts of energy, for $130 million.

LUS Director Terry Huval says that while LUS is not rushing to invest in wind energy, he could see the utility as a likely purchaser of wind power in the future ' especially if Louisiana adopts regulations now existing in 12 other states that require utilities to have a small percentage of their energy come from renewable resources. Wind energy companies are also currently eligible for significant federal tax breaks set to expire at the end of 2005. It is uncertain whether they will be renewed.

Even if renewable energy wasn't required and cost more than LUS' current rates, Huval doesn't discount its appeal. "I suspect there are some customers in Lafayette that would be willing to pay more for their electricity knowing that it came from a renewable resource like wind," he says. Austin Energy, the public utility in Austin, Texas, offers its customers renewable energy for marginally higher costs. The company says the program helps support green energy generated from a wind farm south of Midland and only costs its customers about $5 more per month. However, any offshore wind farms will have significantly higher transmission costs than existing wind facilities on land.

Schoeffler is still convinced that, all things considered, offshore wind energy is economically viable today and envisions the Gulf, in 10 years time, lined with nearly 1,000 turbines generating around 5,000 kilowatts of energy.

Sitting behind his desk at his car dealership, Schoeffler is the consummate salesman. He's sold luxury cars to oilfield executives for years. Now he hopes to sell them on the benefits ' and potential profits ' of wind energy.

"You know, you look at the numbers, it'll happen," says Schoeffler. "This country will wake up to the benefits of wind energy. We're five or six years behind Europe right now. We have this infrastructure that's readily easily adaptable to wind power, we have this fantastic wind resource. The wind power will come."