Sen. Mike Mazzei and Rep. Earl Sears filed legislation Thursday for the 2015 session to reform existing state subsidies for all new Oklahoma industrial wind facilities. The legislation, which would take effect January 1, 2016, would establish sensible laws to regulate industrial wind companies and oversee future development in Oklahoma.
"Tax credits are designed to help us create a competitive environment that results in job growth and economic development,” said Mazzei, R-Tulsa, chairman of the Senate Finance Committee. “In order for us to be good stewards of our limited state resources, it is critical to reassess those subsidies to determine if the benefit justifies the cost. Providing handouts to wind developers for simply operating in Oklahoma is not a sensible approach and should be troubling to our citizens.”
“I support tax incentives, however the tax credits for wind power are overly generous and must be modified for all new wind power development projects in the state,” said Sears, R-Bartlesville, House Appropriations and Budget Chair. “The cost of these wind subsidies is mounting at an alarming rate, and if we do not address the policies now, Oklahoma will suffer the consequences.”
The proposed legislation will address the following problems:
Gradually reduce the amount of Zero Emissions Tax credits for new industrial wind facilities from a half-cent per kilowatt hour for energy produced in the first year to one-tenth of a cent by the fifth year, and require approval by the legislature to reauthorize in 2020. (SB 501)
Establish a $6 million statewide cap for the Zero Emissions Tax credit. (SB 501)
Eliminate the ability of industrial wind facilities to use the investment/new jobs tax credit, preventing the possibility of double dipping by those who use the zero-emission tax credit. (SB 502)
Adjust the state's ad valorem (property tax) policy to remove a special exemption for wind manufacturing that releases the industry from the jobs creation requirement every other industry must meet. (SB 498)
Both Mazzei and Sears acknowledged anticipated significant revenue reductions for the coming fiscal year, while also facing serious needs for additional resources in core government services. Currently, wind developers qualify for three major subsidies: Zero Emissions Tax Credits, Investment Tax Credits and Ad Valorem Tax Exemptions.
According to the Oklahoma Tax Commission (OTC), the state's Ad Valorem reimbursement cost was more than $41 million in 2002. By 2013, the amount increased to more than $64 million, with approximately half resulting from Ad Valorem exemptions for wind farms.
"To protect entities that depend upon local property tax collections, Oklahoma law requires the state to reimburse counties for the Ad Valorem exemption. Those payments have increased at an alarming rate, and it’s becoming increasingly difficult to meet that obligation without compromising funding for other critical services," Mazzei said.