Wind energy projects are often touted for the job creation and tax revenue boost they can bring to rural areas. So it may come as a surprise to see that, in recent legal filings, local counties voiced opposition and alarm over Ameren’s plans for a wind farm in northwestern Missouri.
Their stance didn’t have to do with opposition to wind energy, but rather with what they see as a flawed tax policy in Missouri for revenue from utility-owned energy projects such as wind farms. Under Missouri law, experts say those types of facilities currently send revenue to the state level for eventual redistribution across entire utility service territories, instead of pumping it directly to the county where they sit.
As Missouri electric utilities turn to owning in-state wind production for the first time, that question of where the ensuing tax revenue ends up is new to the state – one that, unless addressed by proposed legislation in Jefferson City, could remain a key stumbling block for the technology if it is to gain broader support and momentum.
For places such as Atchison County in the far northwest corner of the state – the wind-swept home of 5,000 people wedged between Nebraska and Iowa – the tax arrangement for local wind projects makes a world of difference, particularly when it comes to funding schools and emergency services including ambulance and fire districts.
“It’s mostly agricultural land, and there’s very little commercial or industrial development of any kind,” said Ivan Schraeder, a lawyer who represented Atchison County in its recent legal challenge of Ameren’s push to own the Brickyard Hills wind project planned for the area. “Wind power is their economic development. They are pro-wind power and pro-green energy. … This could change their life drastically.”
Plans for Ameren to own and operate the not-yet-constructed, 157-megawatt Brickyard Hills project breezed unanimously past regulators at a Missouri Public Service Commission meeting earlier this month.
“I am in support of the order and would love to see more wind generation in Missouri,” PSC Commissioner Scott Rupp said at the March 6 meeting.
But as shown in Atchison County, Missouri’s current tax policies are not exactly leading local communities to roll out the welcome mat for utility-owned wind farms.
“There was a lot at stake,” Schraeder explained, when Ameren entered the picture there. Had the Brickyard Hills project remained under private ownership – as is the case with current wind farms in northern Missouri – the developers would have paid a “reasonably good” property tax on each tower situated in the county, he said. But that would not be the case under an investor-owned utility such as Ameren.
“It effectively was a tax transfer from local control to state distribution to where Ameren operates – not from where it’s gaining its power,” Schraeder said.
Nearby DeKalb County also intervened in the challenge, aiming “to protect its wind farms if Ameren wanted to move in,” Schraeder said.
The counties reached settlements with Ameren that included agreements for the St. Louis-based utility to pay to cover some county and school district services, if proposed legislation does not succeed in altering where wind project tax revenue goes.
Even though the Atchison County settlement resolved the issue for the Brickyard Hills project, the emerging question about how to tax wind farms still applies for the rest of the state.
“The legislature has just not kept up with green energy in terms of its tax consequences,” said Schraeder. “Particularly for local government.”
He said different states used their own methods of taxing wind, but most do it based on the rate of power generation.
“Iowa and Kansas tax on the amount of energy generated,” Schraeder said. “Those taxes are then distributed in some fashion back to the locals, from where the power comes.”
He said things were “way behind the curve” in the Show-Me State.
“Missouri has not provided updating of some of its power laws to reflect modernization and new methods of delivery,” he said. Questioning the matter of wind farm taxation in Atchison County, he added, “is the first time that it’s been confronted here in Missouri. It’s not going to be the last.”
That’s because advances in wind turbine technology are expanding the territory where projects can be cost effective, elevating Missouri’s appeal for wind farm developers.
Although Missouri is nearly encircled by leading states for wind power – Iowa, Oklahoma, Kansas and Illinois all rank in the top six of installed capacity, according to the American Wind Energy Association – it does not have the same overall wind resources. But northern reaches of the state have growing potential, as shown by the recent interest from some of the major in-state energy utilities.
That’s a new development. Traditionally, Kansas City Power and Light has looked to out-of-state locations, such as Kansas, for its wind power. And only since late 2017 have Ameren and Empire District Electric Co. – a southwestern Missouri utility that serves customers around Joplin and Springfield – launched their own big pushes for wind energy.
The local taxation issue, though, has caught the attention of some in other parts of northern Missouri where Ameren is targeting wind projects. State Sen. Cindy O’Laughlin, R-Shelbina, represents a district that includes Schuyler and Adair counties, where Ameren has plans for an even larger, 400-megawatt wind farm that it would own. O’Laughlin introduced Senate Bill 72, currently before the legislature, that would ensure that revenue from wind projects stayed local.
“Our rural counties are fairly destitute,” O’Laughlin said. “We’re losing our tax base, we’re losing our population. I think I could make an argument that it’s because there’s been almost no investment.” O’Laughlin expressed hope that, if passed, her bill could help change that.
She said such a measure also seemed fair financially, because it would provide compensation for area residents who have their surroundings changed visually by wind turbines.
“There are various types of people who want green energy but they don’t want it on their land,” O’Laughlin said. “It’s my feeling that if you’re willing to change your landscape forevermore, you should also be the ones to profit from it.”
Some renewable energy advocates believe the current tax structure is, to some extent, “an obstacle” to the adoption of more wind power in Missouri.
“We just want to make sure that the laws are going to be encouraging these kind of projects,” said James Owen, the executive director of Renew Missouri, which pushes for increased use of renewables. He added that the issue of county- versus state-level taxation “is relatively new” and probably hadn’t cost Missouri the development of renewable energy projects in recent years.
“I’m from a rural county, I know that we are hurting right now,” he said. “(If this bill passes) I think that will put some of these local communities at ease.”
Owen said such a measure could potentially be contested by broader swaths of county governments leery of losing out on revenue that would become focused within select wind-producing counties.
O’Laughlin’s bill in the legislature has passed the senate but has sat in the house for multiple weeks without formal action. O’Laughlin said she had not detected pushback, perhaps because the redirected revenue that would become concentrated in certain counties does not exist yet and therefore isn’t a current stream of funding that would be taken away.
But with or without the bill’s passage, the wind projects in northern Missouri are moving forward. Others will surely follow, given the competitiveness of wind energy prices and renewable energy goals from Ameren and other utilities.
O’Laughlin, at least, thinks some tax reform will eventually need to click into place to facilitate their growth.
“I imagine if they want to have more wind farms, they’re going to have to consider something similar,” she said.
|Wind Watch relies entirely
on User Funding