Oklahoma to end tax credit that propelled wind production
Posted April 17
OKLAHOMA CITY — A state tax credit that helped propel Oklahoma to third in the nation in its capacity to generate electricity from wind is coming to an end, but it will be years before state coffers see results of the change.
Gov. Mary Fallin on Monday signed legislation that rolls back a 10-year tax credit for electricity generated by zero-emission facilities that was launched in 2003.
Under the measure, zero-emission facilities must be operating by July 1 this year to qualify for the credit, instead of Jan. 1, 2021. It is one of several revenue proposals that Oklahoma lawmakers are considering as they struggle to close an estimated $868 million budget shortfall.
"The zero emissions tax credit was key to the growth of wind energy in Oklahoma, and I'm grateful to the industry for their ambitious successes, as well as their willingness to work with the state to address our challenging budgetary circumstances," Fallin said in a statement.
But closing the window of eligibility will have no short-term impact on state tax collections, according to fiscal analysts. The first tax year that the change will be fully in effect is 2027.
Even then, the revenue generated by wind facilities won't "move the needle very much on the state budget," said Dr. Stephen Stadler, a board member of the Oklahoma Renewable Energy Council. He said lawmakers should roll back other tax credits and incentives, including generous subsidies provided to the oil and natural gas industry.
"Can we afford those subsidies?" he asked. "Things are not even. It's not a level playing field."
Oklahoma provides about $1 billion in business tax breaks each year and participation in the zero-emission tax credit program has skyrocketed, pushing claims under the program from $3.7 million in 2010 to more than $113 million in 2014, according to a report to the Oklahoma Incentive Evaluation Commission by Public Financial Management, a consulting firm.
Plans for additional wind energy facilities indicate the incentive's impact will remain high. Payments through the program could be at least $120 million this year, estimated Richard Mosier, an attorney in Claremore and a member of WindWaste, a nonprofit organization critical of the wind energy industry.
"The growth of the wind industry in Oklahoma has been exponential," Mosier said. "It was pretty clear to us that we couldn't afford it. It was going to be a drain on the state treasury."
In 2016, Oklahoma ranked third for installed wind capacity and total wind energy generation, behind Texas then Iowa, according to the American Wind Energy Association.
Oklahoma had 3,394 wind turbines that produced 6,645 megawatts of electricity — enough to power about 1.8 million average U.S. homes — with another 552 megawatts under construction, according to the association. Wind producers have invested more than $12 billion in Oklahoma, creating up to 9,000 jobs and paying almost $134 million in property taxes since 2004.
In 2011, the Legislature set a goal of 15 percent of electricity generated within Oklahoma to come from renewable energy by 2015. Last year, wind energy alone provided more than 25 percent of in-state electricity production, according to Wind Energy Association data.
"The zero-emissions tax credit did what it was supposed to do — help the wind industry get off the ground in Oklahoma," said Republican Senate President Pro Tem Mike Schulz of Altus. Schulz said eliminating the credit would provide certainty to the wind industry and long-term stability for the state budget.
"This bill is about prioritizing expenses during a contraction cycle in state revenues," said Republican House Speaker Charles McCall of Atoka. "The savings from this bill will help us return our state to solid financial footing so that we can invest more in education, public safety and other priorities."
Oklahoma will likely remain attractive to wind energy producers even after the tax credit ends, industry officials said. Producers have made substantial investments in other states without tax credit programs, including Texas and Kansas.
"The industry's already here, and I believe the industry will continue to be here," Stadler said. "The wind resource is so good that you can go in there without anything Oklahoma is doing and make a profit."
AP reporter Adam Kealoha Causey contributed to this report.