OKLAHOMA CITY – Wind farms are set to collect nearly $12 million from a tax rebate program that has more than tripled in value in the past three years and that a group advocating against the wind industry’s expansion says should be capped.
The Oklahoma Tax Commission will pay $11.9 million to producers of renewable energy – mostly wind farms – in zero-emission tax credits. The commission projects those payments will swell to $19.1 million a year by 2018.
That’s a big liability for taxpayers, said Richard Mosier, president and general counsel for Robson Properties and a member of Wind Waste, formerly the Oklahoma Property Rights Association. The Claremore-based group, which says it’s a coalition of residents across the state, concerned about what it describes as “negative impacts” of wind energy in the state.
“It’s something that the Legislature needs to look at and understand what they’ve obligated us for,” said Mosier.
The incentive was created to spur development of renewable energy. Businesses receive credits based on the amount of energy their facilities produce during the first 10 years of operation.
Companies take advantage of those credits by lowering tax payments to the state and cashing in unused credits. For example, if a company has a $100 tax credit and only owes $50 in taxes, it can sell the remainder of the credit, or $50, back to the state for 85 cents on the dollar.
The company pockets the reimbursement from the state’s income tax fund.
Tony Mastin, executive director of the Tax Commission, said the incentive is offered to all renewable energy producers, but the wind industry is the only one that really uses it. The state has relatively few producers of the other kinds of renewable energy that qualify for the program – water, solar or geothermal power.
Mosier said Oklahoma could soon be on the hook for nearly $55 million a year through the program, based on his group’s calculations.
Mastin questioned the accuracy of that estimate but agreed the cost will increase.
“I would definitely agree based upon the projection I’ve seen for wind farms that we will be paying out more than now,” he said. “But how much more, I can’t really predict.”
Until 2011, Mastin said, wind producers only claimed an average of $3.2 million a year in rebates. But wind development has grown briskly in Oklahoma. The state has 26 operational wind farms, according to the Department of Commerce, and is expected to add another half-dozen in the next 18 months.
That pace has helped quicken the growth of the incentive program. Last year’s $11.9 million payment also included unclaimed 2011 credits, which were not paid at the time because of a moratorium on all tax incentive programs due to budget issues. But Mastin said the wind industry is expanding so quickly, the 2014 payments alone are expected to exceed that two-year total.
However, he cautioned that it is difficult to know just how much wind producers will collect until they file their tax returns, because nobody knows how much energy they’re going to generate.
The wind industry’s payout is getting heightened attention as some in the Legislature call for an inquiry into wind development. Senate President Pro Tem Brian Bingman, R-Sapulpa, authored a failed bill to freeze construction of wind farms east of Interstate 35 until 2017 to allow for further study the industry.
Rep. Earl Sears, R-Bartlesville, the bill’s House sponsor, said in a statement in May that while he supports the wind industry, “it is important as the industry expands that we explore that growth in a responsible way. A deliberative discussion is needed with all interested parties so we can ensure the best policy for the state is put in place.”
The zero-emission credit is just a piece of the state’s incentives to the wind industry, noted Mosier. Wind producers also receive a five-year exemption on property taxes. Payments in that program topped $32 million last year.
Mosier said Legislators should cap the subsidies.
“The Legislature needs to look at it,” he said. “They need to understand what it’s going to be so that they can plan for it.”
But Mastin notes the states offers many tax incentives to businesses that operate in Oklahoma. Most programs aren’t capped, he said, and divvying up credits under a cap involves a complex process.
Others contend the tax credit – like the wind industry, itself – is beneficial to the state.
“I don’t think it’s in the state’s best interest to downsize our incentives that are working,” said Curt Roggow, Oklahoma policy director for the Wind Coalition, which encourages wind development in the region. “When you have an incentive package that works, you have an increased economy that comes from that.”
A former state representative from Enid, Roggow noted the industry’s benefits for Oklahoma, as described by a study his group released earlier this year. The industry pays more than $22 million a year in royalties to Oklahoma landowners, has created more than 1,600 jobs in the state, and has invested billions of dollars, according to the coalition.
Neighboring states including Kansas and Texas offer “very competitive incentive packages” to lure wind producers, he said, which makes Oklahoma’s tax credits essential to influencing profit-minded developers.
“The economic benefits of the wind farm last far beyond the expiration of the tax credit,” he said.
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