2 Rivers council approves 4-year extension for Hawk Energy option, adds $150,000 minimum annual payment

The 2 Rivers City Council on Jan. 20 approved a first amendment to a real estate purchase option with Hawk Energy Storage LLC, extending the developer's option to purchase a roughly 9.4-acre parcel in the Woodland Industrial Park and adding a $150,000 minimum annual payment tied to property tax or payments-in-lieu-of-taxes.

The amendment, approved unanimously on a roll-call vote, also raises the annual option fee paid by Hawk from $47,000 to $55,000 in the first year of the extension, with increases of $1,500 in each following year up to the extended expiration in July 2028. The agreement retains the city's long-standing per-acre purchase price of $11,000 for land in the industrial park.

Council and staff framed the extension as a pause while the project awaits a shifting regional transmission plan led by the Midcontinent Independent System Operator (MISO). City Manager Greg (first name used in meeting transcript) said the developer, represented in prior reviews by Tenaska, withdrew a prior interconnection request after MISO's phase 2 study produced unexpectedly large network-upgrade costs.

Greg told the council that Tenaska and Hawk had earlier estimated about $9 million in make-ready costs but later saw an increase of roughly $32 million in network upgrade costs in the phase 2 study. He said the developer wants to re-enter the MISO queue when regional transmission upgrades make the project more feasible.

The amendment also modifies the agreement's Section 13 to: (1) define the taxed components under current Wisconsin statutory language; (2) remove references to personal property, which is now exempt; and (3) commit the developer to a minimum annual revenue stream to the city of $150,000 per year (indexed to the urban CPI) if property-related receipts (property tax, PILOT or any state public utility distribution to the city) fall short. The agreement allows the minimum payment to be reduced in a year only by the actual amount of any public utility distribution received by the city.

Greg summarized the change as an attempt to protect the city's fiscal interests if the battery storage facility is completed and becomes subject to property valuation or other state distributions. He described the project as potentially "a big deal if it happens," reflecting the council's recognition of the project's possible revenue and infrastructure implications.

Council discussion touched on the trade-offs of holding the parcel under option versus marketing the lot for other industrial use. Council members asked whether the option prevents other buyers from purchasing the land and whether the city could reclaim the lot if the developer stopped paying the option fee; staff responded that the option is an annual arrangement and that termination by mutual agreement or nonpayment provisions would allow the city to recover the property for other buyers.

The council recorded a unanimous vote in favor. The motion to approve the first amendment to the real estate purchase option agreement and the corresponding memorandum for recording was moved by Bonnie Schimelunis and seconded by Darla LeClaire. Amanda (city clerk) conducted the roll call; all members present voted yes.

The developer has described the planned facility previously as a utility-scale battery energy storage system (150 megawatts, 600 megawatt-hours) that would connect near the nearby substation. Staff said Tenaska and Hawk want more time to pursue re-entry to MISO's interconnection process and that regional transmission investments could change the project's required network upgrades.

The amendment will be finalized in coordination with the city's outside counsel to ensure the revised Section 13 language appears consistently in both the option agreement and the recorded memorandum.