The History of the Wind Tax Credit

Federal Production Tax Credit (1992)

  • Wind companies receive a 2.3-cent per kWh subsidy (adjusted annually w/ inflation)
  • In December 2015, the federal production tax credit was extended for another 5 years until December 31, 2019
  • These ten-year credits will payout to December 23,2029
  • No maximum rebate

Oklahoma Zero Emission Tax Credit

  • Enacted in 2001 by the Easley-sponsored GRDA bill, which calculated ongoing costs at $2 million per year through an additional 0.5-cent per kWh subsidy
  • For 2017 generation, the ZETC will cost the state over $170 million

The wind industry has dramatically expanded their take from the State through a cafeteria-like plate of incentives, reaching an expected $700 million in subsidies, exemptions and lost revenues to Oklahoma in 2017. Wind companies currently contract employ 26 lobbyists at the Oklahoma legislature.


The Oklahoma Giveaway = $10+ Billion

A Cafeteria-Like Plate of Incentives Never Before Extended in Oklahoma

Current Oklahoma State Wind Subsidies

There are currently 4 wind tax credits/exemptions:

  1. 10-year zero emission tax credit is 0.5-cent per kWh generated (The 10-year wind tax credit is refundable in cash for 85% of face value) – Ends in 2020/Payout 2030
  1. 5-year ad valorem tax exemption for wind infrastructure buildout which has failed to deliver increased property valuations due to calculated depreciation before the 5-year exemption sunsets – Ends in 2017/Payout 2022
  1. 15-year investment tax credit is based on up to 2% of the cost of the qualified depreciable property – Ends in 2017/Payout to 2032

Investment Tax Credit in Wind Companies’ Back Pocket

Investment tax credit based up to 2% of the cost of qualified depreciable property
May be claimed for 5 years based upon the initial expenditure

May be carried forward for up to 15 years
Expires January 1, 2017
Potential payout to 2032
Oklahoma wind producers are not currently cashing in these investment tax credits, but will likely choose to do so as soon as they are actually required to pay Oklahoma state taxes, making this credit a long-term liability
Estimated to be between $150 - $200 million
  1. Wind facilities qualify for the Manufacturers Sales Tax Exemption

Manufacturer Sales Tax Exemption for Wind

Wind Turbine x
State Sales Tax
$2 million x 4.5% =
$90,000*
2,800 installed turbines
in 2015
2,800 x $90,000 =
$252 million
740 new turbines planned
for 2016
740 x $90,000 =
$67 million
Possible 3,152 new turbines** in 2017 based on FERC interconnect filings
3,152 x $90,000 =
$284 million

Oklahoma’s Subsidized Wind Power is Going to Out-of-State Companies – 37% are Foreign-Owned

  • Oklahoma now ranks 3rd in the nation for electricity generated from wind, only behind Texas and Iowa
  • 63% of Oklahoma’s wind capacity is tied to out-of-state sales contracts
  • 93% of wind companies are out-of-state and foreign-owned
  • Only 7% of wind company ownership is Oklahoma-based
  • Oklahoma companies support eliminating these incentives
  • The term “carpet baggers” is truly applicable to these out-of-state and foreign wind companies. They don’t live here, don’t vote here, and don’t contribute to Oklahoma communities or economy. Oklahomans are being forced to sacrifice the education of Oklahoma’s children for the benefit of out-of-state companies.

The Broken Promises of the Wind Industry to Oklahoma

  • The zero emission tax credit was originally pitched to only cost the state less than $2 million per year – was amended and extended, resulting in a virtual hockey stick ascent to an unsustainable height

    Zero Emission Tax Credit New Jobs Incentive

  • The zero emission tax credit was promised to create new direct and indirect wind jobs, but according to a recent study commissioned by the State of Oklahoma Incentive Evaluation Commission2:
    • To date, the jobs associated with the credit in the last year with data available are less than 1,400
    • Payroll is less than $80 million

Wind Company Ownership in Oklahoma

37% Foreign Owned


Italy, Germany, Spain, South Korea, Portugal

56% Out-of-State Ownership


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Oklahoma Giveaway Is Soaring To New Heights

  • Since 2003, over 6 million kilowatts of capacity has been put online
  • By year-end 2017, that capacity is expected to double*

Subsidized Wind is Displacing Oklahoma’s No. 1 Source of Tax Revenue and No. 1 Natural Resource – Natural Gas

  • Wind is displacing natural gas gross production tax at the following rates2:
    • $37 million in 2017
    • $95 million by 2020
    • $151 million by 2023
    • $153 million by 2025

Oklahoma’s Giveaway Amplifies the Budget Crisis

Oklahoma currently projects a nearly $900 million budget shortfall in FY 2018

  • An unbudgeted $584 million in wind subsidies and exemptions is projected to be generated in 2016
  • An unbudgeted $616 million expected in 2017
  • This is in addition to the millions in lost natural gas production tax as well as forced unemployment in the natural gas sector
  • Oklahoma does not specify a limit on wind subsidies, which are projected to grow upwards of hundreds of millions of dollars with no cap
  • Unfunded, unlimited, unfounded, unbudgeted, unaccountable, unconscionable – unintended consequences of unregulated, non-taxed subsidy

State Budget Picture

  • FY-16 finished 9.4%, or $541 million, below estimate.
  • Original certification for FY-17 was $1.3 billion below prior year. The gap was filled with budget cuts, some new revenue and some $500 million in one-time funds.
  • Year-to-date GRF collections for FY-17 (through December) are $66 million, or 2.7%, below the estimate.
  • Preliminary certification for FY-18 is almost $900 million below current budget.

This Incoming Legislature Must Take Immediate Action to Fund Oklahoma’s Projected $900 Million Budget Shortfall in FY 2018 By:

  • Eliminating now the 4 current subsidies for the wind industry
    1. Zero emission tax credit
    2. Ad valorem tax exemption
    3. Investment tax credit
    4. Manufacturers sales tax exemption
  • Assessing gross production tax on wind-generated power in parity with oil and gas production for education

Oklahoma’s children, State employees and infrastructure have sacrificed enough.

This must be ended now in its entirety.

Wind Production Must be Taxed

  • Other states tax wind Production:
    • South Dakota: Production tax and nameplate tax
    • Wyoming: Production tax
  • Oklahoma must level the energy playing field production tax should be in parity with all forms of energy produced in Oklahoma

Lack of Regulatory Oversight on the Growing Wind Industry

  • Oklahoma must provide wind industry regulation
  • The wind industry is not required to report or verify production numbers – the state has no practical way to verify the production numbers the subsidies are paid on currently
  • In order to regulate wind generation, a wind turbine metering system is necessary
  • Facilities claiming a credit should be required to provide monthly data related to generated energy and projections related to use of the credit*
*State of Oklahoma Incentive Evaluation Commission, Tax Credit for Zero Emission Facilities Final Report, November 28, 2016

Why Wind Companies Take Advantage of Oklahoma Taxpayers

  • Oklahoma is the only state in the top 10 of wind energy production with a Production Tax Credit (PTC) program still accepting new applicants.
  • Five of the six other states with PTCs for renewable energy have some form of program cap.
  • Oklahoma is now 3rd in the nation in installed wind energy capacity.
Incentive/Credit Texas Iowa Oklahoma California1
Source: State of Oklahoma Incentive Evaluation Commission, Tax Credit for Zero Emission Facilities, November 28, 2016.
Source: Database of State Incentives for Renewables & Efficiency.
1Renewable mandate of 33%.
2363 MW capped.
X = Retracted.
Zero Emission Tax Credit 20 M2
Ad Valorem Tax Exemption
Investment Tax Credit
Manufacturers Sales Tax Exemption
No Cap on Subsidies
Paid on Production vs. Sales
Subject to Regulation

Yes

Yes

No

Yes


Oklahoma’s Giveaway During a Budget Crisis and Solutions

2017 Cost Solution
Cash Subsidies & Credits1 $373 million Remove Subsidies
Exemptions $243 million Remove Exemptions
Lost Gas Tax Revenue $37 million Impose Wind Production Tax
Total Cost $653 million
$51 million
Recommended Gross Production Tax2
  • 7% on existing production capacity
  • 2% per year for the first 36 months, then 7% per year thereafter on new production capacity
2017 Total $704 million
1$172 million zero-emissions credit (of which 85% can be remitted in cash), $63 million ad valorem tax reimbursement, $138 million investment tax credits.
2Assuming $.04 per kWh sales price, assuming flat 2% GPT for first 3yrs, 7% GPT thereafter.
Important Note: Unclaimed ITC prior to 2017 may total ~$500 million

Copyright © 2016 The Windfall Coalition