While many in the Oklahoma Legislature seem to have an appetite for pulling state revenue from the wind industry, two separate proposals are receiving separate reactions among wind companies. The result is a difference of opinion within an industry often viewed as monolithic.
If the Legislature is adamant about drawing dollars from the wind industry, companies with established projects currently receiving state tax credits have said they would prefer a new “gross production tax” on future wind farms’ electricity production.
Conversely, some companies planning future projects say a new production tax would disrupt their business models, but limiting payouts for previously authorized tax credits would not affect future development.
The House has a bill on its floor agenda this week that would eliminate the refundability of state tax credits for wind companies. Those credits have been sunsetted already, meaning new wind developments do not qualify for them. But hundreds of millions of dollars remain to be paid out over the next decade, and some lawmakers want to eliminate their refundability altogether.
Mark Yates, Oklahoma director of the Wind Coalition, said that would be a bad idea for multiple reasons.
SB 888 by Sen. Josh Brecheen (R-Coalgate) and Rep. Jeff Coody (R-Grandfield) is the bill on the House calendar that concerns Yates. Amended in a House committee to place a hard cap on wind-energy tax credits, SB 888 would eliminate their refundability beginning Jan. 1, 2019. It would only need 51 votes to pass the House.
The “future tax structure” Yates referenced involves an alternative proposal that would add a new gross production tax on the electricity generated by new wind energy projects. Such a measure would need 76 votes to pass the House, something Senate Majority Floor Leader Greg Treat (R-OKC) said he believes is unlikely.
Murdock, however, said the industry already contributes a lot at local levels. He opposes capping wind tax credits and creating a new GPT.
“I think both are problematic. I want to see the growth of wind in this state. I think the caps are devastating to existing projects,” he said. “I think because they sell the energy where it’s a 20-year contract, these tax credits are figured in with their financing and with their bid price on what they bid electricity into the grid. By capping them, I think it messes with their financing, and I don’t think that’s fair to them when they were counting on this payment.
While Branan may not care where lawmakers slice in search of a pound of breezy flesh from wind companies, individuals within the industry do.
“Based on the taxes that have been proposed, different taxes would have different impacts,” said Ron Flax-Davidson, chairman and CEO of PNE Wind USA, the American division of PNE Wind Group, a German energy company.
Flax-Davidson said PNE is in the middle of financing discussions on a wind farm project in Kay County, though he declined to provide a specific location for the development. Since Oklahoma ended its tax credit program for new wind development, PNE would not be affected by the proposed caps on existing wind credits. But Flax-Davidson said a new GPT on wind energy would derail his company’s Oklahoma project if it were not grandfathered in with a start date of at least Jan. 1, 2021.
Flax-Davidson said PNE is not a member of Yates’ Wind Coalition, which does represent many of the existing wind operators in Oklahoma. While Yates said the Wind Coalition would prefer to see a new GPT instead of a tax-credit cap, he argued that a GPT would also be an impediment.
But Yates is quick to note that Oklahoma’s “subsidies” for any new project have been eliminated in recent years. Now, he is trying to protect the refundable payments promised by the state for past projects, which would be eliminated under SB 888 and capped at $35 million per year in HB 3710.
But Branan questioned Yates’ claim that existing projects would “default” on their loans.
Yates noted that the bluster between the two energy industries has been witnessed by lawmakers.
Rep. David Perryman (D-Chickasha) has filed two amendments on SB 888: One that would dedicate savings from the bill to the Education Reform Revolving Fund, and a second that gutted the entire bill and replaced it with language creating a production tax on new wind energy developments in 2019 and beyond.