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Shirley Basin Turbines

Wind turbines operate in Shirley Basin on Feb. 24. Recent studies show the cost of wind generated power is now competitive with natural gas.

State lawmakers and the developer of the largest onshore wind farm in America are increasingly at odds these days. The subject of their strife: a proposal to raise Wyoming’s wind-generation tax.

Power Company of Wyoming officials say the measure puts in limbo their plans to build 1,000 turbines in Carbon County. The 3,000 megawatt project — enough to power nearly 1 million homes — will be left at a disadvantage relative to renewable producers in other states, they argue. Wyoming is already the only state in the country with a wind-generation tax.

The Denver-based company had planned to begin construction on a haul road this year. Now, it is uncertain if that work will begin.

“It’s just difficult to plan,” said Kara Choquette, a Power Company of Wyoming spokeswoman. “We’re still working on our plans to begin construction. Whether we can begin construction, that is the question.”

Wyoming lawmakers are calling such statements a bluff. The Cowboy State’s bountiful breeze means developers will continue to flock to its vast expanses of wind-blown prairie, regardless of the tax, they say. What’s more, they argue, Congress extended the $23-per-megawatt-hour tax credit for wind producers last year. They contend Power Company of Wyoming can spare some of those proceeds.

“This isn’t my first rodeo on this type of thing. People come in and say, ‘If we don’t get this tax exemption, we’re going to have to close down,’” said State Rep. Mike Madden, a Buffalo Republican who chairs the Revenue Committee. “How do you prove that?”

The debate is especially fraught because it comes at a time when Wyoming is reeling from an extended downturn in the coal, oil and natural gas sectors.

The number of people seeking unemployment in the state has risen by 40 percent in the past year. State coffers are $130 million short of revenue projections for the current fiscal year and Gov. Matt Mead has said state government may need to cut $300 million over the next two years.

News of a potential tax hike on wind generation was greeted with fierce opposition by local officials in Carbon County.

The Chokecherry Sierra Madre Energy Project, now nine years in the making, is expected to create 945 construction jobs at its peak and almost 115 full-time positions once the turbines go into operation. A neighboring substation is expected to require another 1,000 jobs during construction.

“I think the Legislature is getting greedy and trying to kill the goose laying the golden egg,” said John Espy, a county commissioner. “If they do this, and it shuts down Chokecherry Sierra Madre, I think a couple legislators should think about retiring.”

His colleague, Commissioner Leo Chapman, said it was foolish for the state to try and saddle wind producers with the responsibility of making up lost revenue from the fossil fuel industry.

“It doesn’t replace oil, gas and coal, but it sure as hell helps,” Chapman said.

Wyoming legislators backing the proposal said they were not seeking to stifle wind development. Instead, they said they are striving to ensure wind producers shoulder the same tax burden as their counterparts in the fossil fuel industry.

A study by the state Legislative Service Office found wind producers pay $1 per megawatt hour in taxes. That figure includes the state’s 40-cent-per-megawatt-hour wind-generation tax. Coal paid between $1.77 and $2.69 per megawatt hour, depending on its quality. Natural gas paid $3.49 per megawatt hour, the study found.

State Sen. Ogden Driskill, a Devils Tower Republican, said lawmakers were attempting to even the playing field for fossil fuels.

“I really don’t believe in the federal subsidy,” he said. “I feel it has had a detrimental effect on our very competitively priced energy in Wyoming.”

Wind power can provide benefits to the climate and consumers, said Republican State Sen. Cale Case of Lander. But it in a state where tourism provides a significant source of revenue, the spectacle of wind mills dotting Wyoming’s open vistas comes at a cost. Developers should pay to compensate for that loss, he said, arguing the change is permanent. 

“My son, my grandchildren will never see the Wyoming I saw,” Case said.

Much of the current debate stems from comments made by Power Company of Wyoming CEO Bill Miller in 2014. Congress was debating whether to extend the wind production tax credit at the time.

The credit would be beneficial to Chokecherry Sierra Madre, but was not necessary to make the project economically viable, Miller told the Star-Tribune that year.

Lawmakers have used that statement to bolster their position. Since the credit has now been passed, Power Company of Wyoming should effectively be able to share some of the proceeds with the state, they say.

“What’s apparent is there’s a production tax credit that totally overwhelms whatever tax we’ve got,” said Madden, the Revenue Committee chair.

But company officials argue it’s not that simple. The tax credit will be phased out over the next five years, falling 20 percent in 2017, 40 percent in 2018 and 60 percent in 2019.

Meanwhile, Congress also passed an investment tax credit for solar projects. It provides a 30 percent credit on the price of installing a solar array through 2022, after which it declines to 10 percent.

They also argue the state’s tax study was flawed. Wind pays $3.91 per megawatt hour when also accounting sales and ad valorem taxes, as well as royalties to the federal government, a company analysis found.

“I have said in the past, we can compete with any resource generating electricity without the production tax credit,” Miller said in a recent interview. “That’s only under the premise that we’re on a level playing field, with, for example, the solar industry.”

The company, an Anschutz Corp. subsidiary, still faces substantial hurdles. It has yet to sign an agreement to sell its power to a utility. And it is waiting for a series of approvals from the U.S. Bureau of Land Management, which will allow construction to proceed.

Wyoming’s tax debate now joins its to-do list. Legislators asked Revenue Committee staff to draft two bills for consideration later this year. One will look at raising the generation tax. The other will contemplate asking companies to turn over a portion of the production tax credit to the state.

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Follow energy reporter Benjamin Storrow on Twitter @bstorrow.

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