, Muskogee, OK

June 3, 2014

Wind farms reap windfall in tax rebates

Payout this year nearly $12M; some want program reviewed

By Janelle Stecklein

— OKLAHOMA CITY — Wind farms are set to collect nearly $12 million from a tax rebate program that has more than tripled in value in the past three years, and a group advocating against the wind industry’s expansion says it should be capped.

The Oklahoma Tax Commission will pay $11.9 million to producers of renewable energy — mostly wind farms — in zero-emission tax credits. The commission projects those payments will swell to $19.1 million a year by 2018.

That’s a big liability for taxpayers, said Richard Mosier, the president and general counsel for Robson Properties and a member of Wind Waste, formerly the Oklahoma Property Rights Association. The Claremore-based group, which says it’s a coalition of residents across the state, is concerned about what it describes as “negative impacts” of wind energy in the state.

“It’s something that the Legislature needs to look at and understand what they’ve obligated us for,” Mosier said.

The incentive was created to spur development of renewable energy. Businesses receive credits based on the amount of energy their facilities produce during the first 10 years of operation.

Companies take advantage of those credits by lowering tax payments to the state and cashing in unused credits. For example, if a company has a $100 tax credit but owes only $50 in taxes, it can sell the remainder of the credit, or $50, back to the state for 85 cents on the dollar.

The company pockets the reimbursement from the state’s income tax fund.

Tony Mastin, the executive director of the Tax Commission, said the incentive is offered to all renewable energy producers, but the wind industry is the only one that really uses it. The state has relatively few producers of the other kinds of renewable energy that qualify for the program — water, solar or geothermal power.

Mosier said Oklahoma could soon be on the hook for nearly $55 million a year through the program, based on his group’s calculations.

Mastin questioned the accuracy of that estimate but agreed the cost will increase. “But how much more, I can’t really predict,” he said.

Until 2011, Mastin said, wind producers claimed only an average of $3.2 million a year in rebates. But wind development has grown briskly in Oklahoma. The state has 26 operational wind farms, according to the Department of Commerce, and is expected to add a half-dozen in the next 18 months.

That pace has helped quicken the growth of the incentive program. Last year’s $11.9 million payment included unclaimed 2011 credits, which were not paid at the time because of a moratorium on all tax incentive programs. But Mastin said the wind industry is expanding so quickly, the 2014 payments alone are expected to exceed that two-year total.

The payout is getting heightened attention as some legislators call for an inquiry into wind development. Senate President Pro Tem Brian Bingman, R-Sapulpa, was the author of a failed bill to freeze construction of wind farms east of Interstate 35 until 2017 to allow further study of the industry.

Mosier said the zero-emission credit is just a piece of the state’s incentives to the wind industry. Wind producers also receive a five-year exemption on property taxes. Payments in that program topped $32 million last year.

Mosier said legislators should cap the subsidies.

Others contend the tax credit — like the wind industry — benefits the state.

“I don’t think it’s in the state’s best interest to downsize our incentives that are working,” said Curt Roggow, the Oklahoma policy director for the Wind Coalition, which encourages wind development.

His group says the industry pays more than $22 million a year in royalties to Oklahoma landowners and has created more than 1,600 jobs in the state.

Janelle Stecklein is the Oklahoma state reporter for CNHI.

Incentives for Wind Power Producers

(in millions of dollars)

Year      Manufacturing                  Renewable                  Total

             Property Tax Break           Energy                         Incentives

2013    $32.3                                 $11.9                           $44.1

2014    $43.4                                 $13.1                          $56.5

2015    $54.5                                 $14.4                          $68.9

2016    $63                                    $15.8                          $78.8

2017    $70.1                                 $17.4                          $87.5

2018    $68.6                                 $19.1                          $87.8

Total    $332                                  $91.7                          $423.6

Source: Projections by the Oklahoma Tax Commission