Against the wind?: Tax policy may be hurting Wyoming industry

2010-10-17T00:05:00Z Against the wind?: Tax policy may be hurting Wyoming industryDUSTIN BLEIZEFFER Casper Star-Tribune The Billings Gazette
October 17, 2010 12:05 am  • 

CASPER — Construction is complete on two new wind farms in Wyoming: Duke Energy’s 200-megawatt Top of the World wind farm in Converse County, and Rocky Mountain Power’s 111-megawatt Dunlap I wind farm in Carbon County.

The wind farms are among the largest in Wyoming’s recent wind energy construction boom. Of Wyoming’s approximate 1,285 megawatts of installed wind energy capacity, about 78 percent was added in the past five years.

Turning point

But the completion of Top of the World and Dunlap I could mark a turning point for Wyoming’s fledgling wind energy industry. Both Duke Energy and Rocky Mountain Power say they have no further plans to plant wind turbines in Wyoming.

Wasatch Wind and Shell Wind Energy are expected to submit permit applications for separate wind farms within the next few months. But industry officials expect a lull in construction that could last many years.

Electrical transmission constraints and the lack of a national energy policy make planning uncertain. Also a factor, according to a wind industry advocacy group, is Wyoming’s still-evolving tax and regulatory structure for wind energy.

“I do think there’s going to be a little slowdown, and I think some of it has to do with these policies. And part of that is taxation,” said Cheryl Riley, executive director of the Wyoming Power Producers Coalition.

Wyoming’s sales tax exemption for commercial wind energy equipment is set to expire in 2011. Then in 2012, a new wind energy generation tax of $1 per megawatt hour begins. Those are in addition to existing property taxes.

Wyoming lawmakers are considering increasing the generation tax significantly — to $5 or $7 per megawatt hour. In addition, lawmakers may strip merchant, or nonregulated, wind energy companies of eminent domain authority for “connector” lines that move power from wind farms to main, interstate transmission lines.

David Picard lobbies on behalf of the Wyoming Power Producers Coalition, which is made up of about 13 companies. Duke Energy is not part of the coalition.

Picard said the tone of the current policy discussion on wind energy in Wyoming seems to be anti-wind. That could be detrimental to the hundreds of Wyoming landowners who have signed leases with wind energy companies and hope the industry can help them avoid losing or subdividing their property.

“Companies have said (to Wyoming policymakers), ‘We are sitting on hundreds of millions of dollars that we want to invest in Wyoming, and because of uncertainty we will end up investing in other states,’” Picard said. “Unlike coal, they are not forced to come to Wyoming.”

Taxation row

At the request of a state legislative task force, the Wyoming Power Producers Coalition compared Wyoming’s tax structure for wind energy to other Rocky Mountain states. The study suggested that the current tax structure for wind energy in Wyoming far exceeds taxation in Montana, Colorado, Utah, Idaho, South Dakota and New Mexico.

The same legislative subcommittee hired a consulting company, E3, to produce another state-by-state comparison, this time measuring the overall cost of wind energy generation and cost to deliver the power. Several scenarios were produced with the E3 model, including delaying some taxes on the front end while increasing the generation tax.

Joint Revenue Interim Committee co-chairman Sen. John Schiffer, R-Kaycee, said those results suggest that Wyoming remains the most competitive among states likely to export wind power to the Southwest — even under scenarios involving raising the generation tax.

He said the main factor is Wyoming’s superior wind resource.

“This shed a whole different light on tax policy,” Schiffer said. “Because of the quality and quantity of Wyoming wind, we are extremely competitive.”

The Wyoming Power Producers Coalition disputes the results of the E3 model. Picard said the group questions data used in the model, specifically the “net capacity factor” calculating the quality of wind. He said the input seems to represent the low-end estimate of wind quality in New Mexico and the high-end estimate in Wyoming, for example.

“The E3 model is a great model, except it is completely flawed because of the input,” Picard said.

Schiffer said no evidence has been presented to the subcommittee to support the accusation. Picard notes that Wyoming’s higher-quality wind will also generate more revenue through the generation tax.

“At the same time Wyoming is taking off the sales tax exemption, removing incentives to this development in this state, the other states that are clamoring for jobs are finding unique ways of (attracting) this development,” Picard said.

Market challenge

There are other reasons for a potential decline in wind energy development in Wyoming.

The economic downturn has triggered an in-state preference when it comes to developing wind and other forms of renewable energy. That doesn’t bode well for ambitions to tap world class wind energy resources in Wyoming, an energy-exporting state.

Under pressure to create jobs, the California Public Utilities Commission proposed a measure this year that would restrict the amount of out-of-state renewable energy that California utilities could buy to meet the state’s renewable energy goals.

The action has stalled plans for TransCanada’s Zephyr Power Transmission Line Project — a 3,000-megawatt capacity line from the Medicine Bow area in Wyoming to Idaho, Nevada and California.

Credit-worthy wind developers have committed to filling up the entire capacity of the line. However, the wind energy to fill the line doesn’t necessarily have to come from Wyoming. It could come from Wyoming, Colorado, New Mexico or a combination of all three.

But without a clear policy in California and the southwest, the market remains uncertain and the Zephyr line remains on hold, according to TransCanada officials.

Past sins

Picard said Wyoming has fantastic wind resources, and fantastic burdens getting wind energy to market. The interstate transmission challenge doesn’t stem from Wyoming, but many other policies in the state do erode Wyoming’s largesse of Class 5, 6 and 7 wind resources.

Gov. Dave Freudenthal’s sage grouse “core areas” plan took large areas of potential wind development off the table. Lawmakers are considering stripping eminent domain authority from merchant developers wanting to build “connector” lines that tie wind farms to the electrical grid.

And some Wyoming lawmakers want taxes on the industry as high as possible without running the industry out of the state.

“We’re the revenue committee. We raise revenue. That’s what we do,” Schiffer said.

Picard said the companies he represents are happy to pay their way through a fair tax structure. But taxing at the maximum level possible seems antagonistic toward the industry.

“The notion of looking at an industry and saying, ‘How much tax can we, as a state, impose on you before you go away?’ is not a Wyoming value that I grew up with,” Picard said.

Schiffer makes no apologies on behalf of lawmakers wanting to get as much revenue as possible from wind energy, and providing the best possible protections for landowners who suffer impacts from transmission lines and revenue for communities that must provide essential services.

“Wind farms will impact tourism, wildlife, viewsheds and private landowners,” Schiffer said.

Asked whether Wyoming lawmakers sought such protections and benefits for communities and landowners during other energy booms such as the coalbed methane gas play in the Powder River Basin, Schiffer said they did not.

“They got hung out to dry. Those landowners got screwed,” Schiffer said. “Just because we didn’t do a thorough job with coal-bed methane doesn’t mean we shouldn’t try to do it better with wind development.”

Contact Dustin Bleizeffer at dustin.bleizeffer@trib.com or 307-577-6069.

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