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Wind farms in Oklahoma: Are tax incentives worth the price?  

Credit:  By MICHAEL OVERALL World Staff Writer | Tulsa World | February 10, 2015 | www.tulsaworld.com ~~

One side considers it a corporate welfare program that the state can no longer afford. The other describes it as an investment that will pay off in the long-term.

The debate will play out this year in the Oklahoma Legislature, where lawmakers are reconsidering the taxpayer-funded incentives that have lured more than two dozen wind developments to the state in recent years.

The industry has drawn lawmakers’ attention with campaign contributions, giving more than $100,000 to candidates’ committees since 2012. It has also formed several political action committees and doled out contributions to at least 69 candidates since the 2006 election.

As lawmakers debate whether to continue granting incentives to the industry, the Tulsa World asked two experts to make the case for and against the subsidies.

On the pro-incentive side, Oklahoma State University professor Stephen Stadler serves as the official state geographer, advising the governor and legislators on any subject that involves geography – including where to find the strongest winds. In the early 2000s, as part of the Oklahoma Wind Power Initiative, he helped chart the first detailed “prospecting” map of wind patterns in the state.

“The people who put up wind farms have followed basically our original ideas,” he said.

On the anti-incentive side, businessman Richard Mosier has served on the Claremore school board for 12 years, which inspired him to research wind development as a potential source of education funding. What he discovered, however, turned him into a fierce critic of wind subsidies, and he is now part of the Oklahoma Property Rights Association, which lobbies against wind developments.

Don’t wind developments boost funding for rural school districts?

Richard Mosier: Not as much as claimed. And not for long.

One incentive that Oklahoma offers a wind development is a five-year exemption to property taxes. During that time, instead of collecting ad valorem from the wind development, the state of Oklahoma compensates a school district from general revenue funds, he said.

“It’s just moving money from one pocket to the other,” he said, “robbing Peter to pay Paul.”

Even after the property tax exemption expires, the state often collects significantly less money than expected because wind turbines depreciate quickly and developers can protest the property-value appraisals.
As tax revenues turn out to be less than expected, school districts can have cash-flow problems and find themselves slashing budgets, he said. And the wind development will keep depreciating.

“It’s simply not a long-term solution for school funding,” he said.

Stephen Stadler: Wind developments go into rural areas that have seen little, if any, economic development in recent years. If not wind projects, what else will go into these communities?

“You’re certainly going to collect more taxes than you would if the development wasn’t there,” he said. “There’s no doubt that you’re going to make more back from having the industry here than not having it here.”

If Oklahoma has such a great wind resource, do energy companies really need incentives to invest here?

Stadler: Other states will continue to offer incentives regardless of what Oklahoma does.

“When you don’t incentivize,” he said, “you’re going to be at some sort of disadvantage. It’s a gesture that says, ‘We’re open to doing business with you.’”

Also, developers pass on the cost savings to consumers in the form of lower electricity rates, he said.

“If the Legislature wants to look at all tax incentives in this state, that’s one thing. But I kind of think they’re not going to get rid of anything to do with oil and gas.”

Mosier: First of all, the industry is growing rapidly, and tax credits are based partly on production. The more megawatts generated, the more the state pays. And how many megawatts are produced depends partly on something that nobody can control or predict – the wind.

“There’s no way for the state of Oklahoma to budget how much we’re going to spend on that tax credit. Everybody’s guessing. And guessing is no way to run a state budget.”

Secondly, after the initial construction is finished, a wind development creates only a handful of jobs. It will never be the major employer that the oil and gas industry has become, he said.

Stadler: Construction alone can pump tens of millions of dollars into a rural economy, and the benefits will be felt for many years to come.

“And,” he said, “that’s not counting the property owners who are paid for the leases. That money gets spent and invested and taxed.”

Should taxpayers consider the benefits of “clean energy” when deciding the value of wind incentives?

Stadler: Wind generation provides roughly 15 percent of Oklahoma’s electricity, Stadler said. If development doesn’t keep up with growing demand, fossil fuels will have to make up the difference.

“When we look down the road,” he said, “no matter how we do it, there’s no one solution” to the increasing demand for energy. “It’s ‘all of the above.’ We have lots of wind in Oklahoma, and somehow we ought to develop it.”

And the threat to migratory birds – often raised as a concern about wind energy – can be minimized by careful placement of the turbines to avoid the birds’ flight paths. Other environmental impacts are negligible.

Mosier: Carbon emissions continue to increase even as the wind industry thrives.

“The easiest way to sell anything these days,” he said, “is to say, ‘We’re saving the environment. We’re going to stop global warming.’ Prove it. In the meantime, you are changing Oklahoma. You’re changing the entire vista across the state.”

Should the visual impact of the giant turbines be considered a form of “environmental impact?”

Stadler: Oil and gas developments – not to mention cellphone towers – have already changed the landscape.

“But that is a visual impact that people are used to seeing,” he said.

Wind turbines are new, but people will get used to them, too.

“It has nothing to do with the wise use of a resource,” he said. “It’s, ‘I don’t want to look at these things.’ You don’t like the way the turbines look? I don’t know what to say. I can’t change that. But it’s here and it’s not going away.”

How big could the wind industry get in Oklahoma?

Stadler: “Several times what it is now.”

The actual amount of “tap-able” wind, he said, would generate “much, much, much more” than all the electricity currently used in the state.

But tapping it will mean more wind developments in the eastern part of the state, where the population is denser.

“You start running into more neighbors who are going to be vocal and say no,” he said.

Mosier: Tax exemptions and tax credits for wind energy cost the state nearly $49 million last year. By 2018, the price tag will reach $77 million, according to estimates from the Oklahoma Tax Commission.

“The question,” Mosier said, “isn’t how big the industry can get, but how big can we afford for it to get?”

Source:  By MICHAEL OVERALL World Staff Writer | Tulsa World | February 10, 2015 | www.tulsaworld.com

This article is the work of the source indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

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