April 29, 2016
Oklahoma, Opinions

Wind debate: Incentives blowing a hole in Oklahoma’s budget

By Jeffrey McDougall | Published: April 29, 2016 | The Oklahoman | newsok.com

Overly generous. That’s how the head of one of the nation’s largest wind energy trade associations recently described the wide array of tax incentives that the state of Oklahoma has given to the wind industry.

Among our nation’s four largest wind energy-producing states – Texas, California, Iowa and Oklahoma – Oklahoma’s package of tax credits for wind energy development is excessive and unrivaled. Oklahoma checks almost every possible box, as we are the only state to offer a zero-emission tax credit, an ad valorem tax exemption, an investment tax credit and a manufacturers sales tax exemption, all with no cap on the subsidies wind energy developers receive from state government. Oklahoma is also the only state where subsidies are paid on energy production as opposed to sales, and we are the only one of those states where wind energy development isn’t overseen by state regulators.

The result of an unregulated and uncapped wind industry has been detrimental to state government and to Oklahoma’s economy as a whole. Lawmakers facing a budget crisis of historic proportions lose another $200 million each year because of tax credits for wind energy development listed above. In “Wind chill?” (News, April 24), Oklahoma Secretary of Finance Preston Doerflinger put it in simple words when referring to the overly generous tax incentives for wind, calling them “a huge liability at a time we just can’t afford it.”

As these overly generous subsidies are being called into question, the only leg the wind industry is purportedly standing on is that it is helping local schools. This could not be a more disingenuous argument. According to the wind industry’s own research, state reimbursements – not wind companies – are responsible for the vast majority of “wind industry payments” to schools.

Yet the wind industry is taking credit for ad valorem reimbursements the state makes for the first five years of wind developments, which is also the highest valuation period for these projects. If the state has been reimbursing county school districts for wind’s ad valorem taxes, then this hasn’t expanded the total funds to school districts at all – it has just forced the state to transfer dollars from the General Revenue Fund that otherwise would have been earmarked for school districts across the state to those rural districts near wind facilities. Robbing Peter to pay Paul does nothing to help education.

Production tax parity on all forms of Oklahoma energy would prevent the state from picking winners and losers when it comes to energy production and, in the case of wind energy, prevent an untaxed, oversubsidized and unregulated energy source from further eroding the foundation of the Sooner State economy.

As Doerflinger pointed out, the wind subsidy “worked like a charm, and now it’s time for it to go.” It is time to end the blank check that wind development has received from state government and let wind start paying its share of energy taxes.

McDougall is president of Oklahoma City’s JMA Energy Co. and chairman of the Oklahoma Independent Petroleum Association.