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Bozeman Daily Chronicle
by: Jeff Fox
January 3, 2015

Guest Column: A two-week wind energy production tax credit


Two weeks is all the wind energy industry had in 2014 to start construction on new wind projects and qualify for the production tax credit (PTC), a key component to wind energy’s growth over recent years. While there was much joy that Congress included the PTC in its tax package, two weeks is barely enough time to buy holiday gifts for loved ones, let alone enough time for an energy development business to make plans and long-term investment decisions. Yet two weeks was enough time for Montanans to break ground on what promises to be Montana’s largest wind farm located near Bridger, in Carbon County.

When Congress acted to pass the short-term extension of the PTC before heading home for the holidays, the entities building the Mud Springs Wind Ranch took advantage of the remaining two weeks of December to begin construction in order to qualify for the PTC. The PTC awards a business tax credit of 2.3 cents for each kilowatt-hour a wind farm produces in its first 10 years of operation. The PTC will help buy down the cost of power from the Mud Springs project and make the wind farm more attractive for an eventual buyer.

We Montanans are lucky that a gutsy wind developer was in the right place at the right time to begin construction. The Mud Springs project will boost the tax rolls in Carbon County significantly, provide local jobs, and make ongoing lease payments to landowners. Montana’s wind farms already permanently employ over 100 people, and wind farms have supported more than 1,500 construction jobs.

But the on again-off again tax credit for wind energy is a challenge to moving forward on a bigger vision for developing Montana’s vast wind resources. Without steady and stable business policies in place, developers won’t make the long-term business investments in infrastructure needed to bring our wind energy to market. As we enter 2015, the PTC has already expired again, because Congress only “extended” the tax breaks retroactively to the first of the year, meaning only wind farms that began construction in 2014 could qualify. The last time the PTC was allowed to expire in 2013, the wind industry saw a 92 percent drop in new wind projects.

The uncertainty is bad for the industry, but what is particularly disappointing in the expiration of the PTC is that it removes a critical policy that helps level the playing field with other energy sources, including fossil fuels. As Republican Sen. Chuck Grassley rhetorically asked in a recent opinion column, “Why are wind energy tax breaks cronyism but not ones for nuclear and fossil fuels?”

As Sen. Grassley rightly points out: “the 100-year-old oil and gas industry continues to benefit from tax preferences that benefit only that industry,” including “expensing for intangible drilling costs; deduction for tertiary injectants; percentage depletion for oil wells; and special amortization for geological costs.” According to Sen. Grassley, these four tax preferences for oil and gas result in the loss of billions of dollars annually in tax revenue.

Sen. Grassley goes on to detail the special tax treatment and subsidies that exist for other extractive energy industries before stating “I don’t understand the argument that repealing a subsidy for oil or gas or nuclear energy production is a tax increase on energy producers and consumers, while repealing an incentive for alternative or renewable energy is not. It’s not intellectually honest.”

That’s the problem. Other energy industry subsidies and tax credits go on forever, while the wind energy PTC expires regularly or is only extended for a few years at best.

Ideally, comprehensive tax reform should evaluate all energy tax credits and subsides to determine which should be phased out and eliminated, and all energy resources should be required to pay for or mitigate their environmental impacts. If that is unachievable, then Congress should put all energy industries on equal footing and permanently extend tax credits for wind energy to ensure a stable and predictable business climate for wind producers, just like other energy industries.

Jeff L. Fox is the Montana policy manager for Renewable Northwest, a nonprofit regional advocacy group promoting environmentally responsible renewable-energy resources.

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