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Texas Outages Fuel Western Lawmakers’ Push for Taxes on Wind

Feb. 19, 2021, 11:23 PM

Montana and Wyoming legislators who are considering higher taxes on the wind industry say frozen turbines in Texas are proof that coal and natural gas are more reliable energy sources.

Lawmakers are proposing the tax increases in part to offset declines in minerals revenues brought about by low prices and diminished production of coal, fracked oil, and natural gas. They also want the increases—sought prior to the Texas storms—because some of them view the turbines as unsightly.

“Hey Texas, Wyoming could help your rolling blackouts if we weren’t busy closing down coal mines and laying off workers,” Wyoming state Rep. Chip Neiman (R) said in a Facebook post Feb. 16. “This is just a taste of what is to come if we don’t utilize our clean, efficient, available Coal. Wind and solar is not stable energy...obviously.”

Lawmakers in the two states seeking to place a priority on coal and gas over wind are betting that the freezing conditions that led to power outages throughout Texas will strengthen their hands as they push higher taxes forward.

Removing Exemption

A bill (H.B. 28) in the Wyoming Legislature, which resumes its 2021 session March 1, would remove the three-year exemption from the current $1 per megawatt/hour production tax for new wind energy projects.

A second measure (H.B. 108) would repeal the exemption and double the tax to $2 per megawatt/hour, raising $11.5 million for the state’s general fund and $3.1 million for counties.

In Montana, a draft bill (LC 0806) that would create a new $1-per-megawatt hour tax has yet to be introduced. A Montana legislative committee tabled a bill that would have increased property taxes on wind facilities Jan. 29.

Montana U.S. Sen. Steve Daines (R) said in a tweet Feb. 16 the Texas situation is “a perfect example of the need for reliable energy sources like natural gas & coal. These blackouts would be devastating to MT.”

The storms did bring blackouts to Montana, caused by a strain on the power grid it shares with other states, state Rep. Matt Rosendale (R) said in a statement. The power outages demonstrate “the dangerous consequences of transitioning away from fossil fuel-based power sources,” he said.

Faulty Blame

Proponents of wind and solar say such arguments misstate what happened in Texas and wrongly fault renewables for failures in natural gas, coal and nuclear energy systems.

Proposals to raise taxes on renewables ignore the economic realities of fossil-fuel-based energy, and display a stubborn refusal to embrace a diverse mix of energy that will benefit the environment as well as state revenues, they say.

“It’s unfortunate that sometimes this is spun into a political debate,” said Chris Brown, executive director of Powering Up Wyoming, a grassroots organization that advocates for renewable energy as part of an “all-of-the-above” energy strategy. “The perception that more taxes on renewable energy is going to equate to more revenue for the state of Wyoming is a short-sighted view.”

In Wyoming, the chief sponsor of the proposal to double the tax, Rep. Tim Hallinan (R), said it’s likely his bill will get support from lawmakers who don’t want more wind turbines in the state.

“People don’t like to have these structures in their neighborhood,” he said. If the state gets more wind farms, “the amount of people who are upset about it is going to increase,” he said.

Hallinan said boosting Wyoming’s tax will compensate the state for problems caused by wind. An extra dollar tax won’t deter companies from locating facilities in Wyoming, which, according to World Population Review, is the windiest state in the lower 48.

“California is getting all this energy for their state and they’re kind of treating us like a company town,” he added. “They ought to have a little skin in the game to help pay for these things.”

The Wyoming Taxpayers Association opposes the doubling of the production tax and is neutral on the exemption repeal, said Ashley Harpstreith, executive director of the association.

Gunnar Malm, chair of the Laramie County Commission, said it would be unwise and unfair to raise taxes, “given the profitability of wind and how close the margins are on these projects.”

While Minnesota and North Dakota tax wind energy production, Wyoming is the only state that imposes production, property, and sales and use taxes on the industry, he said.

Tough Competition

High levies can make it difficult for a state to compete when it comes to attracting wind projects, said Tom Darin, senior director of Western state affairs for American Clean Power in Jackson, Wyo.

“There’s a temptation to raise the tax rate, but if it’s too high and companies have to build those costs into their bids in a regional solicitation, for a utility in Oregon or California thinking about its ratepayers, there’s a very good chance they will select a lower cost project in another state.”

“Do you want the project in Montana, or do you want to risk it going someplace else?” he added.

As coal production and prices decline, Wyoming and other western states have watched the minerals revenues dwindle, officials said. Wyoming gets 60% of its state budget from mineral-related revenues, said Mike Madden, a former GOP state legislator. A few years ago, it was near 70%, he said.

“Mineral revenue is going down way faster than we thought because of the way coal is disappearing,” Madden said.

Coal and natural gas pay between $3 to $4 a megawatt hour of electricity generated, when all revenue streams are considered, causing some to argue that wind has gotten special treatment, he said.

To contact the reporter on this story: Tripp Baltz in Denver at abaltz@bloomberglaw.com
To contact the editor on this story: John Hughes in Washington at jhughes@bloombergindustry.com

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