Rewritten SB 888 eliminates refundability of tax credits for wind energy generation
OKLAHOMA CITY — Wind may soon get more expensive in Oklahoma.
With the bare minimum 51 votes needed, the Oklahoma House of Representatives passed and sent to the Senate on Wednesday legislation revoking what is arguably the most valuable feature of a tax credit that helped lure some of the world’s largest wind energy operators to the state.
Stripped of original language that would have eliminated a small ethanol subsidy, Senate Bill 888 was rearmed as a guided missile aimed at the state’s last major wind energy incentive.
SB 888 eliminates the refundability of tax credits for renewable energy generation. The state stopped issuing new credits several years ago, and the state is already scheduled to phase out the program altogether by 2027.
Zeroing out the refundability feature could save the state as much as $750 million from 2020, when SB 888 takes effect, until 2027, Coody said.
Those mounting a petition challenge to House Bill 1010xx, the historic revenue bill signed into law earlier this session, have signaled they intend to use the refundable tax credits as a reason to repeal the measure.
But, opponents said, SB 888’s provisions are likely to cause even some existing wind farms to cease operation and will almost certainly trigger legal action because of economic development contracts signed by the state.
Refundable tax credits became a popular economic development tool a decade ago or more because they are nearly the same as cash in instances in which the value of the credits far exceeds tax liability.
In such cases, the balance is refunded to the holder of the credits. That surplus is often figured into the financial calculations of the targeted project — in this case, wind farms.
The refund value of the zero-emission credits was lowered to 85 percent a few years ago, and SB 888 would eliminate it altogether.
The wind industry has lobbied for a $1 per megawatt tax on generation instead of eliminating the tax credits’ refundability, and thought it had an agreement on just that late last week.
Industry representatives say losing the tax credits will cause several projects to default on their loans and effectively drive wind generation out of the state.
Coody said his vote several weeks ago against lifting a tax incentive for oil and gas was justified by the jobs and economic activity generated by that industry. He and others said the wind industry has produced little in the way of economic benefit for the state, and Rep. Mark McBride, R-Moore, called the industry “thugs.”
Representatives with wind farms in their districts hotly contested the claim that the industry contributes little to the state’s economy, and noted it has been a factor in attracting new development such as the Google facility at Pryor.
Rep. Meloyde Blancett, D-Tulsa, a former economic development officer for the state, said revoking the terms of the tax credits would likely scare away potential investors in the state.
“We entered into business agreement,” she said. “If we default on that agreement, we most certainly will be facing lawsuits, and not just for the amount of the credits, but seeking damages.
“Who will want to come to this ‘pro business location’ when all we do a few years later is yank the rug out from under them?” Blancett said.