Wyoming’s tax on wind energy, the only one of its kind in the nation, isn’t likely to go away anytime soon.
The Wyoming legislative committee that voted down revisions to state wind taxes doesn’t plan to revisit the matter before the upcoming session, according to two of its members.
But others are hopeful lawmakers will reconsider the issue. At stake are millions of dollars in taxes that some worry will drive wind energy projects out of Wyoming.
In January, Wyoming began imposing a $1 per megawatt hour generation tax for projects that have been operating for three years — the only such tax in the country. Lawmakers also allowed a sales and use tax exemption for wind energy to expire.
Last fall, Gov. Matt Mead and others proposed keeping the sales tax exemption in place, while imposing a 2 percent impact fee instead of the generation tax. The Legislature’s Joint Revenue Interim Committee killed the measure in October.
Legislators felt the wind industry would be paying very little in taxes if the exemption remained, said Rep. Pat Childers, a Republican from Cody and the revenue committee’s co-chairman.
“They need to pay a tax rate that other companies do,” he said.
Tax and slump hit projects
The tax changes add millions in costs to companies seeking to develop wind turbine projects in Wyoming. When the Power Co. of Wyoming started developing plans for the 1,000-turbine Chokecherry and Sierra Madre Wind Energy Project in Carbon County, it estimated paying between $292 million and $438 million in taxes over 20 years. Under the current tax structure, it would pay an estimated $675 million to $821 million.
Adding further uncertainty to wind development is the possibility that a federal tax credit for wind projects will expire at the end of the year. If Congress allows the tax credit to expire, the American Wind Energy Association trade group predicts total wind investment will drop from $15.6 billion this year to $5.5 billion in 2013. Wind-supported jobs would be cut nearly in half, to an estimated 41,000, next year.
The tax uncertainty comes amid a slowdown in wind farm development in Wyoming. State regulators approved permits for 353 wind turbines in 2010. They permitted only 62 turbines in 2011 and none so far this year, according to figures from the Wyoming Department of Environmental Quality’s Industrial Siting Division. The Power Co. of Wyoming, however, is expected to apply for a permit for its project in November.
The tax situation is only one factor that’s slowing wind development, said Dave Picard, a lobbyist for the Wyoming Power Producers Coalition, which represents independent power producers in the state including many wind farm developers.
The lack of transmission lines and customers, along with the still struggling economy, are also factors, he says.
Costs mean tough calls
Wind advocates say Wyoming’s current tax structure imposes huge up-front costs that are difficult to absorb before projects even go into production. Mead’s alternative tax proposal was designed to address the issue by keeping the sales tax exemption in place, while still providing money for local governments through a 2 percent impact fee.
Under that proposal, the Chokecherry and Sierra Madre project would have paid an estimated $545 million to $691 million over 20 years, according to the power company’s estimates.
The company will consider the tax structure and several other factors, including the state of the market, before deciding whether to build the project on land south of Rawlins. The company is committed to completing the permitting process, said Vice President Roxane Perruso.
“The bottom line is, at the end of the day, it has to be economically viable and all of these factors play into that decision,” she said.
Mead has said the heavier tax burden could drive wind companies to states with lower taxes on wind. That argument, however, failed to sway a majority of the revenue committee when they considered the issue last year.
Wind allies fight uphill
Although the committee doesn’t plan to revisit the issue, an individual lawmaker could always sponsor a bill that would essentially re-introduce the governor’s proposal, Childers said. But the lack of committee support means the measure would have a tough time succeeding in next year’s legislative session.
Shawn Reese, Mead’s policy director, believes there is support for revising the state’s wind taxes. But proponents need to address fears that tax changes would result in wind turbines covering huge swaths of Wyoming countryside. They must also do a better job explaining how wind energy complements Wyoming’s ample natural gas resources, he said.
Wind farms could be paired with a natural gas power plant that can provide energy when the wind isn’t blowing, Reese explained.
“Our preference is to put the natural gas power plant close to the wind source,” he said.