With the government and energy companies gradually shifting priorities to develop alternative fuels, farmers and ranchers will be able to utilize existing land to earn royalties.
For instance, the emerging field of wind turbine technology involves harnessing the wind for electricity. The United States is building the first utility-scale wind turbine factory in Champaign, Illinois, in the heart of the Corn Belt. North Dakota, Kansas and Texas have enough harnessable wind to meet the entire nation's electricity needs. For farmers and ranchers in these regions, the turbines can be scattered about a farm or ranch without interfering with the use of the land for farming or cattle grazing. For ranchers with prime wind sites, income from wind can easily exceed that from cattle sales.
The wind boom can rejuvenate rural communities throughout the nation. Each wind turbine, occupying a quarter-acre of land, can easily yield a farmer or rancher $2,000 in royalties per year while providing the community with $100,000 of electricity.
The science of wind turbine technology draws heavily from the aerospace industry. Major corporations such as ABB, Royal Dutch Shell, and Enron, the embattled energy giant, are moving into this field.
The Bonneville Power Administration (BPA), a U.S. federal agency power supplier, requested proposals last spring for sites having wind-generating capacity, principally in Colorado, Iowa, Minnesota, Oregon, Pennsylvania, Texas and Wyoming. A 300-megawatt wind farm under construction in the Oregon/Washington border, currently the world's largest, can supply 105,000 homes with electricity.
Oil companies recognize that there is a need for an energy transition. William Ford, chairman of Ford Motor Company, was quoted by Time magazine in 1998 saying he expected to preside over the demise of the internal combustion engine. And ARCO chief executive Michael Bowlin said in an energy conference in February 1999, that the beginning of the end of the age of oil was in sight. He went on to discuss the need to shift from a carbon-based energy economy to a hydrogen-based one.
All auto manufacturers are now working on a new, highly efficient fuel cell engine that would be powered by hydrogen. Daimler Chrysler plans to market hydrogen fuel cell-powered cars by 2003. Ford, Toyota, and Honda will probably not be far behind in producing trucks, tractors and automobiles fueled by hydrogen. Royal Dutch Shell is already opening up hydrogen stations in Europe. And this ties into farmers and ranchers, again, for wind-generated electricity can be used to electrolyze water and produce hydrogen. Hydrogen can be exported in liquid form, much as natural gas is now compressed into liquid form for shipping in tankers, thus generating a world market and added royalties.
There is an energy revolution under way in which wind will likely become a cornerstone of the future energy economy. According to recent articles in the Financial Times, farm and ranching organizations such as the Corn Growers Association are lobbying for development of wind power. In the future economy hydrogen is likely to be the dominant fuel, replacing oil, much like oil replaced coal and coal replaced wood. That means that we can see a future in which U.S. farmers and ranchers will supply not only much of the country's electricity, but much of the hydrogen for future automobiles.
Development of wind turbine technology and the eventual shift to a hydrogen powered automobile promises to help rural farmers and ranchers earn significant source of supplemental income. In the future, energy companies may well be located in the Corn Belt rather than in areas where coal and iron ore are found, benefitting the entire regional economy. And the future hydrogen economy can use the existing distribution network of pipelines used to distribute natural gas.
The future farmer and rancher may well supply not only much of the country's electricity, but much of the hydrogen for its fleet of automobiles as well. People who are interested in using their land for these purposes may also find additional tax benefits under various provisions of the Tax Code. Also, improvements to one's farm or ranch increase the fair market value of the property, and this is an important factor in evaluating whether the activity is operated "for profit" within the meaning of IRS Regulations.
John Alan Cohan is a lawyer who has served the horse, farming and livestock industries since 1981. He serves clients in all 50 states, and can be reached by telephone at (310) 557-9900 or via e-mail at email@example.com.