Wyoming lawmakers on Monday once again resurrected a discussion over an increased electricity tax levied on companies generating renewable energy in the state.
Long championed by Sen. Cale Case, the Republican co-chairman of the Legislature’s Joint Revenue Committee, the tax could provide a much-needed alternate revenue source for the cash hungry state, proponents say. But the renewed possibility of an electricity tax could spell trouble for the state’s utility companies and independent power producers. Many say the tax would hike costs for consumers and deter renewable energy investment in the state.
“I really believe that a green future is the only way the planet is going to make it,” Case said. “Wind and solar are going to be very important pieces of that. My only thing is … I do want to get more from Wyoming. I’m not anti-wind or solar in this. I just think we need a fair deal.”
There’s no specific proposal or bill on the table yet this interim session. Committee members dedicated the afternoon to conversing with Montana lawmakers in a comparative study of the neighboring state’s electricity taxes. Lawmakers also listened to extensive public comment from industry representatives along with Wyoming residents.
Lawmakers instituted the state’s $1 per megawatt hour (MWh) wind generation tax in 2012. Since then, the revenue committee has repeatedly raised the possibility of boosting the tax, but none of the attempts have been successful.
On Monday, the Joint Revenue Committee resurrected the conversation on hiking the electricity tax. But economic conditions have dramatically changed since the topic was last debated in the fall. The state has been forced to reckon with a possible $1.5 billion revenue decline between March 2020 and June 2022. In addition to the economic recession catalyzed by the COVID-19 pandemic, the state’s mammoth coal industry continues to experience a precipitous structural decline. Oil and gas markets have also crashed and a full recovery will likely take time.
Breaking down the taxes
Once wind facilities have been up and running in Wyoming for three years, the state levies the $1 per MWh wind generation tax. That comes in addition to sales and property taxes.
Raising the tax to $4 per MWh would bring the state an additional $1.4 billion over the course of 20 years. But that assumes the higher costs do not repel developers or stall projects, the University of Wyoming’s Center for Energy Economics and Public Policy found. Wyoming ranks fourth when it comes to the lowest cost for wind development in the West, trailing New Mexico, Montana and Colorado, according to the center’s research.
In comparison, Montana levies a $0.20 per MWh electricity generation tax on electrical energy generated. Renewable energy sources can apply for temporary property tax exemptions, but Montana also imposes a $0.15 per MWh electricity transmission tax.
Meanwhile, wind infrastructure has been growing in Wyoming.
In 2000, of the 45.5 million megawatts of electricity generated in the state, 95.8% of electricity came from coal and less than 1% was sourced from wind and solar energy. Nearly two decades later, coal production has chipped in 84.3% to that total amount of electricity generated statewide, and wind and solar’s contribution has risen to 10.2%.
According to the American Wind Energy Association, Wyoming had 1,816 megawatts of wind capacity installed and 4,341 megawatts under construction as of the second quarter in 2020.
The Power Company of Wyoming is developing a colossal wind farm south of Rawlins called the Chokecherry and Sierra Madre Wind Energy Project. Once completed, the wind farm is expected to provide up to 3,000 megawatts of energy, doubling the state’s wind energy production. A new transmission line, TransWest Express, will transport energy to consumers throughout the Rocky Mountain region.
As an independent power producer, Power Company of Wyoming must compete against other renewable energy generators in the Western market, explained Kara Choquette, communications director at Power Company of Wyoming. Wyoming wind conditions may be some of the most favorable for wind energy development in the nation, but that doesn’t guarantee developers will come.
What’s more, only an estimated 8% of Wyoming land has the potential for wind generation after taking into account technical restrictions. Companies must avoid developing in sage grouse core area, national parks, tribal land and municipalities, among others. That doesn’t include other site-specific permitting requirements and buffer zones.
Including Monday’s conversation, the committee has formally discussed the possibility of an electricity tax 12 times since May 2016, according to Choquette. Most recently, the committee voted in favor of the Legislative Service Office drafting a bill in September on the matter.
The state’s regulatory uncertainty and existing wind generation taxes may already be hindering wind development in the state, several developers said.
“The state of Wyoming has an opportunity to be a leader, and in order to do so, there needs to be discipline exercised by elected officials with regard to promoting stable policy,” said Stephanie Williams, of Interfax Energy. The company is developing a wind farm in Albany County. “The continual effort to levy multiple taxes on a single business sends that signal to financial markets, making it very hard for us to get a mortgage on our project.”
“You’ve all talked about certainty,” Case said in response. “… And you know, I can certainly understand that, but now we are in the most uncertain place, perhaps in our history.”
Not all feedback was in opposition to the proposal.
Anne Brande, a fourth-generation Wyoming business owner, backed an increase in taxes on wind energy.
“Renewable energy companies, with little to no track record, are targeting my county,” Brande said. “These companies are only two years old and have no successful project completed. I consider that a concern. I feel that Wyoming has an opportunity to slow down haphazard development and encourage good development. … Let’s put Wyoming first and generate some income for us.”
Correction: A precious version of this article incorrectly stated the estimated amount of additional revenue raising the tax to $4 per MWh on electricity would bring the state. Raising the tax to $4 per MWh would bring in an additional $1.4 billion over the course of 20 years.