Business

TENSIONS OVER WIND POWER IN OKLAHOMA ERUPT INTO WAR

Posted February 16, 2018 10:27 p.m. EST

The fossil fuel and renewable power industries have fought a low-grade conflict for years, maneuvering in state capitols and Congress to gain advantage in tax and energy policies that might increase or protect market share.

But in Oklahoma, the long-simmering tensions have broken out into a war over wind power that has eliminated the state's renewable energy tax-credit program and threatens to further undermine financial support for the burgeoning wind industry.

In the latest development, a plan backed by oil and gas interests to impose new taxes on wind energy failed to gain the necessary three-fourths majority in the state House this week.

The vote was a rare victory for wind power in a yearlong battle pitting it against Oklahoma's political establishment and the state's powerful oil and gas industry. Wind energy executives and advocates, however, say the fight is far from over; they expect the Legislature to try again to impose new taxes on wind power and move to cut existing incentives.

The driving force behind the campaign against wind, industry officials said, is Harold Hamm, a chief executive of one of the nation's biggest independent oil companies who was an energy adviser to Donald Trump's presidential campaign.

Hamm, the CEO of Continental Resources of Oklahoma City, is backing the Windfall Coalition, an anti-wind group that last year ran television and radio ads blaming the state's massive budget shortfall on state tax breaks for Oklahoma's wind industry. Hamm is also a supporter of Step Up Oklahoma, a coalition of businesses and civic leaders that proposed the failed package of taxes on the wind, oil and gas, and other industries to help close the budget gap.

Jeff Clark, head of the Wind Coalition, a trade group, said Hamm's aim is to cripple wind industry in Oklahoma. "He will not be happy until it's all gone," Clark said.

Hamm did not respond to several requests for comment. Step Up Oklahoma said in a statement that the coalition proposed a reasonable package to help balance the budget and was disappointed by its failure.

Rick Mosier, a commercial real estate developer, Step Up supporter and founder of another anti-wind energy group called Wind Waste, said business leaders didn't want to kill the wind industry, just end its preferential treatment.

"Everybody has to contribute for the state to move forward," Mosier said.

More attacks to come?

Oklahoma is not the only state where traditional energy interests have tangled with the emerging renewable industry. In Texas, wind energy has been less controversial, largely because the state does not offer renewable energy incentives. Utilities here, however, have successfully opposed net metering laws, which would make solar energy more attractive by allowing owners of rooftop systems to sell excess power into the grid.

In Arizona, regulators killed net metering in 2016. In Ohio, lawmakers are considering rolling back renewable energy standards, which require utilities to buy a share of their power from wind, solar and other renewable sources.

Karl Rabago, executive director of the Pace University Energy and Climate Center in New York, said he expects the attacks on renewable energy to intensify as wind and solar increase market share and federal energy policy under Trump seeks to promote oil, natural gas and coal. Last year, for example, Environmental Protection Agency Administrator Scott Pruitt, a former Oklahoma attorney general and a political ally of Hamm, proposed killing incentives for wind and solar to help natural gas and coal.

"Adding to the costs of clean energy just as it is finally starting to break through to being really competitive is clearly a strategy that they are using," Rabago said. "It just seems like the baby is showing signs of crawling, so kill it before it walks."

Oklahoma is one of the nation's biggest oil and gas producers, but it also boasts a thriving wind energy industry, second only to Texas in generating capacity. Last year, wind in Oklahoma generated a whopping 31.3 percent of the state's electricity, nearly double the share of Texas' wind production and three times wind's national share.

Oklahoma, seeking to provide an economic boost to poor rural communities, lured wind companies to the state with two main incentives - a five-year exemption for local property taxes and a tax credit for zero-emissions electricity generation. Fifteen years after creating the incentives, the wind industry is the largest taxpayer in 14 Oklahoma counties, most of them rural, and generates about 9,000 direct and indirect jobs in the state, according to the Wind Coalition.

Wind began to come under fire in 2015 as oil prices plunged and tax collections followed, creating state budget problems. Hamm and other oil and gas executives, however, pointed the finger at wind energy incentives, which cost the state about $116 million in 2016, as a cause of the shortfalls.

By this month, Oklahoma was running two concurrent legislative sessions to fill a $600 million hole in the current budget and a $878 million hole in the budget for the next fiscal year.

Blaming wind for budget gap

Hamm is a billionaire who made much of his fortune in North Dakota's Bakken shale oil boom. He advised Trump - who dubbed him "the king of energy" - during the 2016 campaign and served as chairman of Pruitt's 2014 re-election campaign for Oklahoma attorney general.

His company's political action committee has contributed nearly $180,000 to Oklahoma legislators since 2015, campaign finance records show.

In 2016, Hamm and his allies formed the Windfall Coalition, a nonprofit that is registered with the Oklahoma secretary of state under the names of two of Continental Resources government relations employees and shares an address with Hamm's company in downtown Oklahoma City. The Windfall Coalition has paid for TV and radio ads - featuring former Oklahoma Gov. Frank Keating and former Oklahoma University football coach Barrry Switzer - that claim Oklahoma's massive budget shortfall was "caused in a large part by payments to wind companies," most of them from out of state.

The Windfall Coalition did not respond to requests for comment.

Chad Warmington, head of the Oklahoma Oil and Gas Association, a trade group, said the incentives for the wind industry are generous, but the state's financial problems mostly stem from the oil bust that hammered a state budget heavily dependent on oil and gas. Nearly a quarter of Oklahoma's revenue comes from the oil and gas industry, which made it particularly vulnerable the steep plunge in crude prices between 2014 and 2016.

In July 2017, the state allowed its zero-emission tax credit for wind to expire, meaning the state incentive is no longer available for new projects, although federal tax breaks are. Earlier this month, lawmakers proposed legislation that would cap the cumulative amount of tax credits that all existing wind farms can claim each year to no more than $18 million - a reduction of more than 80 percent reduction from the $74 million claimed in 2016.