Lame-duck Senate Majority Leader Harry Reid soon will lose control of a chamber he has helmed for eight years. As the sun sets on his reign, one question remains: will Reid, D-Nev., go out with bang or a whimper?
The answer to that question could depend on what Congress decides to do about one of Reid’s favorite corporate subsidies: the wind production tax credit.
First, the backstory: Congress enacted the wind tax credit in 1992 as a temporary kick-start for the renewable energy industry, especially wind power. Since its inception, however, the credit has been extended seven times, costing Nevada taxpayers more than $12 million in 2012 alone.
The wind tax credit is one of the most contentious issues on the legislative agenda during the lame-duck session. And for good reason: it is integral to President Barack Obama’s climate change agenda, which will destroy jobs and raise energy prices on Nevada families.
The foundation of the president’s climate plan is the Environmental Protection Agency’s greenhouse gas emissions rule for existing power plants — the president’s attempt to shut down America’s coal industry. A recent analysis finds that residents in 43 states, including Nevada, will face double-digit power bill increases under the rule. For all that pain, the rule would reduce global carbon dioxide emissions by just 1.5 percent by 2050.
One of the central building blocks of the EPA’s power plant rule is increased use of wind and solar for electricity generation. But wind and solar are uncompetitive without massive taxpayer subsidies and mandated renewable portfolio standards. For wind, that takes the form of the production tax credit.
Thus, a vote for the tax credit is a vote for Obama’s climate change agenda.
But there’s another important reason to reject the wind production tax credit: America’s largest and wealthiest corporations exploit the subsidy at taxpayers’ expense.
In recent years, the credit has become one of Wall Street’s favorite tax loopholes. Take billionaire investor Warren Buffett. His company, Berkshire Hathaway, has heavily invested in wind power in recent years, including the purchase of Nevada’s dominant power company, NV Energy. However, Buffett admits he never would have invested in wind if taxpayers weren’t picking up the tab. According to Buffet, the production tax credit is “the only reason to build” wind facilities.
His isn’t the only company to figure out that taxpayers can fund a corporate windfall. GE, one of the largest companies in the country and with deep ties to the Obama administration, is a major wind turbine manufacturer. And T. Boone Pickens, who made his billions in the oil patch, peddled wind energy as part of his “Pickens Plan” before losing $150 million on failed wind projects.
It’s no wonder the production tax credit is a prized subsidy for Wall Street. The credit can be so lucrative that wind producers often turn a profit while paying utilities to take their electricity.
These perverse financial incentives explain why corporate America is flocking to the wind industry, Pickens’ failures notwithstanding. Such abuse has drastically spiked the cost of the production tax credit to taxpayers. In the past seven years, taxpayers have forked over more than $7 billion, including nearly $3 billion alone in 2012, according to government estimates.
Congress should reject any attempt by Reid to revive the wind production tax credit in the lame-duck session. It’s clearly a bad deal for Nevadans, enriching out-of-state billionaires at the expense of working families.
When Reid rides off into the sunset, he should take the wind production tax credit with him.
Thomas Pyle is president of the American Energy Alliance.