Editor’s Note: Wind power is a growing source of energy production in Oklahoma that is drawing close scrutiny at the state Capitol. Is wind production beneficial to Oklahoma’s economy and communities? Should the state continue to provide the industry with tax incentives? We invited four active participants in the wind debate to contribute guest blog posts on the subject. Making the case for wind power are Johnson Bridgwater and Whitney Pearson of the Sierra Club, Oklahoma Chapter and Jeff Clark of the Wind Coalition; making the case for greater industry regulation and a curb on tax breaks are Frank Robson of the Oklahoma Property Rights Association and Windwaste, and former Congressman Ernest Istook.
Wind: Oklahoma’s clean, abundant, low-cost energy resource (Johnson Bridgwater and Whitney Pearson)
The state of Oklahoma is at an energy crossroads, with the option to boost its growing clean energy economy or stay tied to an outdated energy system. Some utility companies are on the path toward a modern electricity future. If others will take that road, Oklahoma will see a multitude of benefits.
Oklahoma currently gets nearly 15 percent of its energy from wind, and has the opportunity to dramatically increase that amount. The majority of Oklahoma’s energy currently comes from fossil fueled power plants that threaten public health with pollution that impacts the air we breathe and the water we drink.
Oklahomans do not have to make a choice between their health and reliable, affordable energy. That is because Oklahoma is blessed with some of the nation’s best wind energy resources. Wind power is capable of meeting more than thirty times the state’s current electricity needs.
Oklahoma wind is a proven low-cost energy resource. For example, in 2013, Public Service Company of Oklahoma (PSO) signed new purchase agreements for nearly 600 megawatts (MW) of wind. These agreements were based on estimates that customer costs would be reduced by $53 million in the first year alone, with annual savings growing over the length of the 20-year contracts. PSO’s president noted that “…these contracts were based on extraordinary pricing opportunities that will provide substantial savings for our customers,” and that “…another benefit is the diversity that an additional 600 megawatts of Oklahoma wind energy will bring to our fuel mix.” The availability of low-cost, long-term contracts for wind power can displace the need to spend hundreds of millions of dollars upgrading old coal-fired power plants.
As a state that is blessed with immense clean energy potential, we must keep our burgeoning clean energy industry growing and cease short-sighted efforts to cripple it. There is no principled basis on which the state of Oklahoma can consider doing away with wind incentives without also addressing the many incentives for the fossil fuel industry. To single out a resource that provides such important environmental and economic benefits to the state would be a counterproductive use of the state government’s limited resources.
The price tag for oil and gas tax breaks in one year alone in Oklahoma exceeds $500 million, while tax incentives for wind energy total $120 million over twelve years. According to a study by the New York State Energy Research and Development Authority, wind energy produces 27 percent more jobs per kilowatt-hour than coal plants and 66 percent more jobs than natural gas plants.
Incentives for the wind industry have generated millions in capital investment, goods and services, and labor income for Oklahoma, while at the same time ultimately leading to lower electric bills for businesses and residents. Oklahoma’s wind power also helps us bring much-needed diversity to our economy by attracting companies like Google who want to power their businesses with clean energy.
It is well-known that our water and our crops are a precious economic commodity in Oklahoma, and our current energy mix impairs our state’s resources. Wind turbines, unlike fossil-fueled power plants, do not need substantial quantities of water in order to generate electricity. Consequently, the American Wind Energy Association estimates that wind projects in Oklahoma save more than 2.3 billion gallons of water every year.
Wind not only is an economic driver for the state of Oklahoma, but it also puts us on a path to a better quality of life. Building more wind power creates new jobs, lessens the need for dirty, unhealthy, fossil fuel energy and gives Oklahoma a competitive advantage in attracting new companies to the state. It is more important now than ever for our state leaders to embrace policies that keep wind energy growth inside Oklahoma instead of losing out to Texas or Kansas. As the nation shifts away from an over-reliance on fossil fuels and focuses on creating modern energy systems, Oklahoma must keep pace.
Frank Robson is a rancher, banker, lifelong resident of Oklahoma and supporter of public education. Frank is a member of the Oklahoma Property Rights Association and Windwaste. Join the conversation at www.facebook.com/WindWaste ; www.twitter.com/WindWaste or @WindWaste
Oklahoma faces a looming $300 million budget deficit which requires greater scrutiny of the $1.7 billion the state gives away each year on tax credits, incentives and exemptions.
Oklahoma has authorized multiple subsidies to encourage industrial wind power development in the state. These subsidies, coupled with the mammoth federal production tax credit, have successfully encouraged the development of over 3,100 megawatts of wind generating capacity in Oklahoma. Oklahoma taxpayers should be asking: When is enough, enough?. The Oklahoma Tax Commission’s latest estimates for the cost of state wind power subsidies over the next five years exceed $330 million. These numbers are likely understated as the Wind Coalition has stated plans for a 100 percent increase in capacity over the next five years.
The incentives for industrial wind jeopardize funding for our most basic and vital services – education, public safety, and services for the underprivileged.
Currently, wind farms qualify for three major state-sponsored subsidies.
Zero Emissions Tax Credit: Taxpayers are obligated to pay $5 for every megawatt hour of electricity produced during the first ten years of electrical production. The Energy Information Agency reports 10.88 million megawatt hours of wind-generated electricity was produced in Oklahoma in 2013 and 9.69 million megawatt hours through the first ten months of 2014. Annual costs could exceed $54 million this year.
- Ad Valorem Tax Exemptions: The Tax Commission projects the cost of this exemption to be $210 million for the next five years. A special loophole was created for the wind industry, releasing them from the jobs creation requirement that every other industry must meet to qualify for this exemption. The state government replaces the lost revenue by directing a portion of state income tax collections to reimburse schools, counties, fire districts and others that will ultimately lose funding. Last year, an additional appropriation of more than $30 million was required to help balance this account. The Tax Commission will use this year’s collections to finally pay all that is due. Industrial wind accounted for more than 50 percent of the cost to the ad valorem reimbursement fund of the Manufacturers exemption in 2013; without legislative action, the total will increase in 2015 and subsequent years.
- Investment Tax Credits: Wind developers qualify for a 1 percent investment tax credit on their qualified property. The cost of the credit could be $305 million over the next five years, based on the industry’s own assessment of $6.1 billion invested, of which less than 8 percent was actually spent in Oklahoma. Wind developers have not yet claimed these credits as they have had no taxable income due to favorable depreciation rules. However, the credit remains available.
Oklahoma taxpayers are facing an unfunded liability that intensifies with each blank check we write to support the development of industrial wind facilities. Oklahoma has 29 industrial wind projects currently in operation, and as many as 25 more in various stages of planning or construction.
Our investments are used to subsidize wind developers from Italy, Portugal, Spain and Germany. We are also subsidizing the cost of power for people in Texas, Kansas and other neighboring states and as far away as Tennessee and Georgia.
In addition to questionable tax policies, there is no effective oversight of the placement of the massive 400-500 foot tall turbines and there is a lack of proper funding to decommission abandoned sites.
While renewable energy can play an important role, the true success of an industry is measured by its ability to be profitable without government subsidies. At a minimum, its success shouldn’t come at the expense of Oklahoma’s future.
Oklahoma is at a crossroads: We can fund education, public safety, roads and bridges and other essential services or we can continue to give our tax dollars to large multinational corporations. It is our choice.
Jeff Clark is executive director of The Wind Coalition, an advocacy organization representing wind developers throughout America’s wind corridor of Arkansas, Kansas, Louisiana, Missouri, Nebraska, Oklahoma and Texas. To learn more visit www.windcoalition.org.
When the wind comes sweeping down the plain is no longer just a signature lyric from Oklahoma’s famous state song. It is synonymous for what Oklahomans once thought of as just an annoying component of Mother Nature. Since 2003, the signature howling winds of Oklahoma have enjoyed a renaissance, so-to-speak, thanks to their development as a leading generator of electricity, and the many economic attributes their power drives.
Oklahoma has always been an energy state and today the wind industry is a thriving contributor to the state’s energy production and economy. Wind energy provides nearly 15 percent of Oklahoma’s electricity supply – enough to power more than one million American homes – while creating jobs and providing millions of dollars in royalties and tax revenue to county governments, school districts, and rural landowners. Furthermore, wind energy is abundant, affordable, reliable, emission free, and perhaps most importantly, consumes no water. Generating electricity through wind power is allowing Oklahoma to be more energy independent while growing the economy and providing Oklahoma home and business owners with notable savings on their electric bills.
The steady progression of wind development across Oklahoma over the past several years correlates to proactive business incentives from the state of Oklahoma. Our state is receiving a major return on investment with a vast majority of Oklahomans reaping benefits as well. According to the Oklahoma Tax Commission, from its 2003 inception through 2012, the state of Oklahoma has provided the wind industry – through zero emission tax credits – less than $60 million with only $29 million claimed to date. With regards to ad valorem exemptions and reimbursements to school districts through tax abatement, only $56 million has been invested.
What has the state and its taxpayers received in return for their approximate $120 million investment? How about more than $6.1 billion of capital investment from the wind industry? High quality jobs have been created to the tune of over $340 million in labor income since 2003. Over $40 million in sales and property tax revenue for county governments and school districts are now an annual occurrence, and rural landowners are the beneficiaries of $30 million in annual royalty payments. Take into account the minimum 20-year lifespan of an individual wind development project, and the economic end result is a major boost to a broad cross section of Oklahoma’s economy.
Maintaining energy prices at a cost-efficient level for homeowners, commercial and manufacturing consumers is paramount to long-term economic stability. The cost of wind energy is quite low; however, more importantly, due to its renewable status, its price is stable and will never rise. It may fall due to improved technologies but it will never rise. Three major utility companies have taken notice, as they can now guarantee customers long-term price security. Oklahoma Gas & Electric’s 2011 wind power purchase is estimated to save its customers over $1 billion by completion of the contract. The 100 megawatts of wind power purchased by The Grand River Dam Authority in 2013 will save its customers $50 million, and Public Service Company of Oklahoma’s purchase of 600 megawatts last fall will save its customers $53 million in the first year alone and over $720 million total.
Wind power is a vital member of Oklahoma’s energy sector, and its position as an economic engine for Oklahomans is only going to increase. The state of Oklahoma is a strong partner as are dozens of county governments, communities, school districts and thousands of Oklahoma landowners. They each recognize the long-term economic impact of this clean, abundant, affordable, and water-free natural resource. The Wind Coalition and its members pledge to continue to work diligently with our colleagues to ensure the wind industry is the best it can be in Oklahoma.
Ernest Istook is former Congressman from Oklahoma’s 5th District and now writes for The Washington Times. Part of his work is online at www.istook.com
Deceptive claims about wind power are common, just as they are common in everything else that is highly political.
When you spy one of Oklahoma’s 1,711 giant windmills, keep in mind that state taxpayers already gave its owners $700,000 per windmill for each of them. They will be paid more each year, so the eventual subsidy easily will exceed $2-million apiece.
The Oklahoma Tax Commission (OTC) told legislators last fall that state subsidies so far totaled $120 million for those 1,711 windmills. During the next five years an additional $210 million will be doled out for ad valorem (property) tax breaks, plus another $80 million according to the amount of electricity generated (based on $5 per megawatt hour). As high as it is, OTC’s figure is low-balled,: In 2013 alone the generation subsidy ran about $52 million; that would be $260 million over five years, not $80 million. Plus, more projects are planned.
Yet Oklahoma’s generous subsidies are only a fraction of the federal subsidies that the wind industry also receives.
These subsidies are how wind power advocates concoct claims about affordability to consumers. Because the windmills already received state and federal subsidies, the electricity rates on consumers’ bills appear lower; but that is only because big chunks of the costs were already covered by taxpayers and don’t show on the bills.
A similar accounting gimmick is used when public universities claim savings by using only wind-generated power. The University of Oklahoma contracted with OG&E to pay an extra $13 per megawatt hour on top of the state subsidy. Based on 160,000 megawatts used annually at its Norman campus, OU pays $2 million more per year than it would otherwise. When OU claims to have lowered its energy costs, it conceals that it pays a higher per unit rate. The claimed savings come from other expenditures on energy efficiency and certainly not from lower electric rates.
All the subsidies are on top of what electric utilities pay the windmill owners for the electricity itself. It creates what industry insiders call a “fantastic” return on investment. No wonder they claim they spent $6 billion (mostly to out-of-state suppliers) to cash-in by creating Oklahoma wind farms. As mega-billionaire Warren Buffett says, “We get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.” And Buffett is getting wealthier thanks to the bonanza offered him by Oklahoma.
The ad valorem savings to wind farms result in never-received property tax bills. Those bills instead are sent to the State of Oklahoma which is obligated to reimburse local schools and local government which otherwise would get about $45 million yearly from the wind farms.
Who gets these state tax credits? OTC has published the list online, detailing about $52 million for 2013 alone.
Because the credits are “transferable” they often are sold to those who need to offset income even if they were not wind investors. Starting in 2014, instead of selling and transferring their credit, investors can get a state check for 85 percent of the amount even if they have no offsetting Oklahoma income tax liability.
The combined federal and state subsidies for wind are massive. They are a prime example of the crony capitalism that masquerades behind the banner of green energy. The giant windfarms also disrupt their neighbors with their enormous sonic and vibration outputs. Oklahoma lacks setback requirements or other consideration for adjacent landowners.
One spokesman for Oklahoma’s wind giveaways claims they should keep on cashing-in as long as any energy incentives exist. It’s too common for advocates to justify their bonanza by claiming it as payback for subsidies to other industries. That’s poppycock. Anyone who believes a giveaway program is wrong should work to end it rather than grabbing for a piece of the action. The time to end Oklahoma’s wind giveaway is already past-due.
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