Energy tax credits: A wind-shift in the governor’s office
Finally, Gov. Ted Kulongoski seems to share a sense of urgency about containing the exploding cost of the overly generous tax breaks that Oregon gives developers of renewable energy projects. The governor has ordered a fast-track review of the Business Energy Tax Credit and has vowed to have a reform plan ready for the February session of the Legislature.
It’s about time. The governor has been among the last to fully accept that Oregon’s green energy incentives are being exploited and need to be reined in, especially for the wind projects popping up across Eastern Oregon. After the Legislature voted overwhelmingly trim $20 million from the skyrocketing tab for the BETC, Kulongoski vetoed the bill and in July said he was content to wait for the results of a leisurely year-long review of the program.
We joined legislators then in arguing that the veto was a mistake, and everything that has happened since has only proven the point. Investigations by The Oregonian have shown that state officials either deliberately low-balled or completely whiffed on the anticipated costs of the BETC, claiming that it involve only a couple million dollars a year in tax credits. In fact, the cost of the tax credits has ballooned from $10 million in 2007 to an estimated $167 million in the 2009-11 biennium to a projected $243 million in 2011-13.
The Oregonian’s Harry Esteve discovered that the state spent millions of dollars in energy tax credits on companies that went bankrupt, never operated or divided single projects into multiple facilities as a scheme to get additional tax credits. Other developers sold tax credits to non-energy businesses, including Wal-Mart, turning the BETC into a poorly regulated grant program.
Moreover, The Oregonian’s Ted Sickinger reports in today’s paper that Oregon never undertook a substantive analysis on what level of subsidy — if any — was actually necessary to attract green energy developers. Sickinger’s analysis suggests that the tax credits likely come near the bottom of the list of factors that motivate green energy developers to settle in states.
The governor first tried to stem criticism of BETC by ordering the state Department of Energy to put “sideboards” on the program. Mark Long, head of the Oregon Department of Energy, has proposed some sensible new rules that would give the state more leeway to reject applications for the credits, define what constitutes a single project and reclaim money when projects fail. Last week, Kulongoski went further and asked for a review of BETC to be completed by the end of the month. The governor said he wants recommendations on whether the BETC “is necessary for continued economic opportunity in renewable energy and, more specifically, wind energy.”
It’s our bet that the review will show that the Legislature was right the first time: the BETC is a useful and important tool, especially for coaxing green energy manufacturers to Oregon, but the credits for wind projects are too generous and too easily exploited, and should be cut by at least two-thirds and restrained in other ways.
The governor’s veto and his early hesitancy in reforming BETC has put the whole program in some peril. There’s reason to fear that important distinctions about the program, especially its critical role in bringing manufacturers to Oregon, could be lost in the politics now swirling around the BETC.
Let us be very clear about this: Tax credits are still essential to bring clean energy projects and manufacturing to Oregon. But the Legislature should reform the BETC at its next opportunity in February and the governor should sign a bill that stops scattering so many millions of tax dollars into the wind.
By The Oregonian Editorial Board
21 November 2009
Tags: Wind power, Wind energy
Some possibly related stories:
- Rein in energy tax credits
- Tax dollars blowin’ in the wind
- Phasing out wind farm tax credit divides Oregon groups
- Examine green credits
- State tax breaks for alternative energy to cost more than expected
- State lawmakers target energy tax credit costs; Benefit to large wind-power projects is likely to be reduced
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