A bill to end a taxpayer subsidy for renewable energy providers was rejected by a single vote in the Oklahoma Senate.
The primary recipient of the tax credit, which costs state taxpayers approximately $70 million per year, is the wind energy industry.
Senate Bill 888 (SB888), defeated in late April, would have ended in the current year the refundable aspect of the zero emissions tax credit, which is currently being phased out over the next 10 years.
Ending Support Early
Under the current law, electricity-generating companies earn credits of a fraction of a cent per kilowatt-hour of electricity generated with renewable technologies considered to emit no carbon dioxide, including wind, hydropower, solar, and geothermal energy sources.
The companies can use the credits to reduce their state tax liability for 10 years. However, a change made to the law in 2014 allowed companies to cash in the tax credits for 85 percent of their face value, requiring the state to send money to the companies early.
The 10 year phase-out of the tax credit began on July 1, 2017. No projects brought on line after that date can receive the credit.
Critics of SB 888 say it would have caused the state to renege on an agreement to provide incentives which successfully lured renewable energy companies to the state.
Proponents of ending the tax credits early say the incentives the state provided were far too generous, paying out 3,500 percent more than was estimated when the tax credits were offered. The repeal effort’s legislative sponsors say the incentive could end up costing the state nearly a billion dollars before it expires, money they say could be better spent elsewhere.
‘Market Is Distorted’
Byron Schlomach, director of the 1889 Institute, says Oklahoma’s renewable energy subsidies distort energy markets.
“Everybody but the company profiting pays for this tax credit scheme,” said Schlomach. “When new companies enter a state, new demands are made on existing infrastructure and institutions, but new taxes are generated as well.
“That’s not the case when tax credit schemes are involved, since they push the burden onto others in small increments so no one notices,” Schlomach said. “The market is distorted by reducing costs for one industry while costs to everyone else rise.”
Large federal tax credits for wind mean ending Oklahoma’s tax credit early will not stop the distortion of energy markets, says Schlomach.
“Oklahoma’s tax credit is dwarfed by the federal credit, which does the most damage economically,” said Schlomach. “Because of that, while still a good idea, ending the tax credit will not restore the market to normal and will only modestly lessen the heavy hand of government on consumer choice as long as the federal credit continues.
“Neither Oklahoma nor the federal government should be in the business of picking economic winners and losers,” Schlomach said. “When that happens on a widespread basis, you get the kind of economic and social problems we currently see in Venezuela, for example.”
‘The Biggest Rip-Off There Is’
Oklahoma taxpayers keep paying more and more to wind companies under the current law, and this has to change, says Oklahoma state Rep. Bobby Cleveland (R-Slaughterville).
“I’ve served two terms, and this year we’re going to pay the wind companies $69 million,” Cleveland said. “Over the next 10 years, we’re going to pay them close to a billion dollars, which is crazy. Then you have schools getting ad valorem taxes off of the wind, but 85 percent of the ad valorem taxes are coming from the taxpayers, and they don’t even realize it. It’s the biggest rip-off there is.”
Frank Keating, who was governor when the state first granted tax subsidies to the wind industry, recently told a group of current lawmakers he expected the cost of the program to be much lower than it has been, says Cleveland.
“Keating said he never expected to give them [the wind industry] more than $2 million,” said Cleveland. “A number of my colleagues and I feel the government shouldn’t be in the business of giving corporate welfare.
“This deal was made 20 years ago; it was a bad deal then, and it’s worse now,” Cleveland said. “The wind companies are not only getting a check from Oklahoma, they’re also getting federal money, and the way I see it, Uncle Sam is your uncle, not your sugar daddy. It’s a heck of a deal for them.”
Cleveland says wind energy lobbyists and legislators from western Oklahoma blocked the bill to end the tax credits.
“Wind energy companies probably have more lobbyists at the capitol than any other special interest, and they were able to kill the repeal,” said Cleveland. “Legislators from western Oklahoma, where the wind turbines are located, all voted against the measure, so we’ve got to work harder next year to end these subsidies.”
Jonathan Small, president of the Oklahoma Council of Public Affairs, says the wind industry has an extraordinary number of lobbyists in the state.
“Wind companies employ more than 40 lobbyists, and they’ve been phenomenally successful,” said Small. “There have been very few issues with this many lobbyists dedicated to fighting against sensible reform.
“Based on projections, by the time wind companies cease receiving their tax credits, they likely will have received as much as a billion dollars,” Small said.
Kenneth Artz ([email protected]) writes from Dallas, Texas.
State Rep. Bobby Cleveland (R-Slaughterville): https://www.okhouse.gov/Members/District.aspx?District=20; https://www.okhouse.gov/Members/Contact.aspx?District=20