Last month, the Oklahoma Incentive Evaluation Commission met for the first time to weigh the benefits of tax credits. Facing a $1.3 billion budget shortfall, the legislature is looking for ways to cut costs, and that has wind energy subsidies back in the crosshairs.
With nearly 3,000 wind turbines statewide, Oklahoma ranks fourth in the nation for wind power capacity, according to the American Wind Energy Association.
Wind Coalition Executive Director Jeff Clarke, who represents the interests of energy companies that deal in renewable sources and fossil fuels, said cutting energy investment incentives would be a mistake.
“In Oklahoma, we have the cheapest electricity in the country and it’s because of wind and natural gas,” Clarke said. “We need to keep growing the oil and natural gas industry in Oklahoma, but we can’t put all our eggs in one basket. The best way to do that is to diversify our energy mix. If you have too many eggs in one basket, that’s a recipe for disaster.”
And it’s not just about wind. Clarke said investment needs to continue across the board to ensure Oklahoma’s energy future.
“When the Saudi oil minister comes to Houston and says, ‘The future is solar,’ we need to wake up,” Clarke said. “My guys are in natural gas, they’re investing in everything, but the best way to have cheap power to grow the economy is by more investment and energy diversification.
“The only way to avoid being at the whim of OPEC whenever they decide to open up the spigot is to invest in diversity. That means wind, oil and natural gas, solar, all of the above.”
Clarke said the infighting between energy industries sends the wrong message to potential investors.
“When Oklahoma’s economy is on its back, it’s time to say we are open for business,” he said.
• Public opinion: A poll released this week from SoonerPoll.com put the following question to 410 Oklahomans:
The Oklahoma legislature has announced a $1 billion or more budget deficit in this year’s state budget, requiring cutbacks in education, health care and all state agency budgets. Knowing this, do you support or oppose continued Oklahoma taxpayer subsidies for the wind energy industry?
The results show that 64 percent of those polled oppose continued subsidies for the wind industry.
Soonerpoll.com founder Bill Shapard said the poll was commissioned by the Oklahoma Property Rights Association, a group that has been critical of wind turbines they believe to be encroaching on property owners.
“The oil and natural gas subsidies have already been lowered,” Shapard said. “That had already been dealt with, but tax subsidies for the wind industry have not changed since they were created. These tax subsidies were passed for the wind industry when our state was not facing a $1.3 billion budget shortfall. So, that’s the reason we ask these questions, because nobody’s talking about these subsidies and what role they should continue to play.
“Most of the state’s energy is produced from coal. That’s the dirty little secret. Fifty percent is coal, 30 percent is natural gas and 20 percent is wind and solar.”
Mike Bergey, president and CEO of Norman-based Bergey Windpower, said the poll is misleading.
“I don’t think the question is fair,” he said. “I think if you list the whole deficit and then one subsidy that has been under attack by the fossil fuel industry, I don’t think that’s fair.”
Bergey said it wouldn’t surprise him if the state legislature killed wind subsidies, but said he hopes they would be put on moratorium instead.
“Given the dire budget situation, I think it’s entirely fair to put all the tax credits on a moratorium, whatever it takes to take care of our state budget and take care of top priory issues, but I don’t think the government should be a puppet for the oil and natural gas industry.”
• Subsidies vs. tax credits: Subsidies and tax credits are often lumped together, but they are different beasts. They both rely on state or federal funds, but tax incentives reduce tax burden, while subsidies act as direct payments.
“The state actually pays wind companies to produce energy,” Oklahoma Oil and Gas Association President Chad Warmington said. “There’s a big difference between that and what the oil and natural gas tax structure looks like in Oklahoma.”
Oil and gas companies pay a 7 percent flat tax on production, but there are incentivized credits for things like new wells that allow producers to pay 2 percent on production from new wells for a 36-month period.
“The difference with wind is, every time that turbine spins and produces electricity, the state creates a credit that they pay out,” Warmington said. “They’re not even refundable anymore. You can just cash in and you get a check from the state.”
New wind turbines also are allowed an ad valorem (according to value) tax credit that prevents an increase in property taxes for a period of five years. The state pays the difference of the land’s increased value tax to the respective county.
Like Bergey, Warmington doesn’t believe the playing field is fair, but for different reasons.
“It’s all together a different scheme,” Warmington said. “I don’t think it’s fair, but it’s one of those things that the legislature has to work through, and I think they’re taking a pretty strong look at it this year and I think the wind industry is pretty aware of the economic climate and the value of those incentives.
“There’s going to be a fight over what that means. It’s exacerbated by $30-a-barrel oil. When the price was up, there was money to go around, but now everything is being scrutinized.”
Bergey said because the wind industry is relatively new and in competition with an entrenched oil and gas industry, the playing field has never really been fair, but incentives in Oklahoma have made growth possible.
That’s growth that he said benefits Oklahomans more directly. From his perspective, it comes down to a question of private vs. public benefit.
“The wind subsidies benefit the utility companies,” Bergey said. “Because of the tax credits, they’re able to buy power at lower rates. That has served to keep electric rates in Oklahoma from climbing more than other states. So, the average citizen who buys electricity is getting a benefit. And that’s not the case for oil and natural gas credits, which tend to go to shareholders and corporate officers.”
Warmington agreed that it’s a question of benefit analysis, but that’s where the accord ends.
“Is there enough net benefit from wind? I think with oil and natural gas, it’s pretty clear,” Warmington said. “I mean, 23 percent of state taxes are paid by the oil and natural gas industry, one in five jobs. It’s inarguable the impact that oil and natural gas has in Oklahoma … I think that’s what the legislature is considering now. If we didn’t pay the wind industry to produce, would they do it?”
Clarke said continued investment is the only way to prevent future economic fallout akin to what the state is experiencing. But Shapard said the reality of the bottom line points to more cuts anywhere the legislature can find them.
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