Oklahoma would become the second state to impose a tax on wind power, and its tax would be the nation’s highest, under a proposal announced Monday by Gov. Mary Fallin.
In her executive budget, Fallin proposed a 0.5 cent per kilowatt hour tax on electricity from wind generation. She also wants to sunset existing tax incentives for the wind industry earlier than planned.
The proposals brought praise from groups opposing wind incentives, but wind industry representatives said they could chill future investment in the state.
Fallin’s budget said those changes would lead to $36.6 million in new revenue to help offset an estimated $870 million shortfall in the 2018 fiscal year.
The idea of taxing wind production has been floated before at the Capitol, including last year when some oil and gas executives also said state wind incentives were too generous. The Legislature did not take any action to curtail the wind incentives or enact a new tax last year.
Fallin’s budget book said the growth of the wind industry in Oklahoma means it no longer needs tax breaks. The state ranks fourth in the nation for wind capacity, and Oklahoma got about 20 percent of its electricity from wind in 2016.
“This industry was incentivized sufficiently to now be a major player in the Oklahoma energy industry, and a major winner of now-unnecessary incentives,” the budget document said.
It’s unclear from Fallin’s budget proposal how the governor would implement earlier sunsets for wind incentives. A five-year property tax exemption for wind turbines ended Jan. 1. The zero-emissions tax credit is scheduled to end Jan. 1, 2021. Together, those incentives amounted to about $90 million in 2015.
Fallin’s office did not provide additional details on the proposal Monday.
In a report issued in November, the state’s Incentive Evaluation Commission recommended the zero-emissions tax credit either be capped or reconfigured to end by Jan. 1, 2018. The commission also recommended existing claimants should continue to be eligible for the credit until Jan. 1, 2021.
As a new tax, Fallin’s wind production tax would require passage by three-fourths of the House and Senate.
The proposed Oklahoma wind tax would be five times that of Wyoming, the only state that currently has a tax on wind production. Wyoming has assessed a 0.1 cent per kilowatt hour tax on wind generation. Last year, Wyoming lawmakers didn’t advance a bill that would have tripled that tax rate to 0.3 cent per kilowatt hour.
Wind industry groups, Oklahoma’s two biggest electric utilities and groups opposed to wind incentives said Monday they were still waiting for details on Fallin’s proposals.
“Wind energy has been an economical resource for our customers, and any additional tax imposed on existing wind farms will have a direct impact on Oklahoma citizens,” said Stan Whiteford, a spokesman for Public Service Co. of Oklahoma.
OG&E spokeswoman Kathleen O’Shea said the utility recognized the difficult budget decisions facing lawmakers. But she said OG&E would be concerned if any changes to current claimants of wind tax incentives were enacted.
“We would not be in favor if someone already has them and they’re automatically stopped,” O’Shea said.
Meanwhile, The Wind Coalition, which represents wind producers in the state, said the tax proposal would raise electricity bills but give a free pass to electricity from energy sources, like coal, imported from other states.
“Creating a less competitive energy environment via taxation only hurts consumers while reducing the competitiveness of one of Oklahoma’s most viable industries,” said Jeff Clark, executive director of The Wind Coalition. “Raising electricity rates and ending the state’s commitment to renewables also drives away needed investment in Oklahoma by manufacturing and high-technology facilities, who also provide jobs and pay taxes.”
But Jonathan Small, president of the Oklahoma Council of Public Affairs, said ending state incentives for wind would have little effect on investment in the state. He said wind projects were more reliant on a more generous federal production tax credit for wind.
“If we don’t cap them or end them, Oklahomans are going to be stuck subsidizing it for some time,” Small said of the state’s zero-emissions tax credit, which can be carried forward for up to 10 years.
Rep. Casey Murdock, a Republican lawmaker from the Panhandle, said he was disappointed by the governor’s proposal.
“Under such a proposal, tax revenues would be diverted from our schools and our local communities to the state capitol,” Murdock said in an email. “In addition, this misguided policy will increase the cost of electricity for Oklahomans. The lack of a comprehensive economic plan hinders our ability to draw much-needed, new investment into Oklahoma’s economy.”
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