Wyoming lawmakers surprise public with proposal to repeal three-year electricity tax exemptions for wind energy

Despite the topic not being on the agenda, Wyoming lawmakers narrowly voted to propose a bill increasing the tax burden on wind energy producers in the state late Friday afternoon.

After impassioned public comment on the topic, the Legislature’s Joint Committee on Corporations, Elections and Political Subdivisions decided to draft a bill to eliminate a three-year electricity tax moratorium available to new wind energy projects. In a 6-5 vote, lawmakers voted to draft the legislation for review in November.

The change would eliminate the three-year exemption from the $1 per megawatt hour electricity tax now available to new wind facilities.

When the Legislature instituted the tax about a decade ago, it built in a grace period for budding renewable energy facilities by exempting companies from paying a generation tax for the first three years of producing electricity.

At Friday’s committee meeting, proponents of the exemption repeal argued the move could drum up a much-needed alternate revenue stream for the state during a ballooning fiscal crisis.

But the renewed possibility of changes to wind energy regulations has once again sparked panic among the state’s utility companies, independent power producers and other renewable energy supporters. Many say the exemption repeal would hike costs for consumers and severely deter renewable energy investment in the state.

“We are creating uncertainty for the industry,” said Rep. Dan Furphy, R-Laramie. “So I’m going to vote against the (motion to draft a bill). I’m not opposed to looking at it, but I am not ready to draft a bill to again create uncertainty for the industry.”

Murky beginnings

Rumors that a potential wind energy tax bill would be proposed by the Legislature’s Joint Committee on Corporations, Elections and Political Subdivisions first flared up early last week, after Sen. Cale Case, R-Lander, sent an email to a group of his contacts. The email was shared with the Star-Tribune on Friday.

Case, a long-time proponent of increasing taxes on wind developers, encouraged lobbyists to contribute public comment in support of beefing up taxes on wind on Friday. But the committee’s agenda simply listed the topic as “utilities” and provided no additional details.“The bottom line is that this is a great opportunity and we need to testify — even if it is short and simple,” Case’s email stated. “Say things like wind and solar should be taxed; that the three year tax exemption makes not sense what so ever; that these installations have environmental impacts; that the power is exported and more.”

Case was not available for comment on Monday or Tuesday before press time.

Rep. Andi Clifford, D-Fort Washakie, questioned the committee’s process to propose a bill and hold a general public comment opportunity without the specifics of the topic being listed on the agenda. “My concern is transparency to the public, to allow them an opportunity to see legislation,” Clifford noted on Friday to the committee.

“I don’t think we’re honoring that with this motion,” she added.

But Rep. Jim Blackburn, R-Cheyenne, maintained that proposing a bill draft Friday would still allow the public ample time to review and comment on the legislation. Lawmakers plan to review it in an upcoming November committee meeting.

Nonetheless, several members of the public expressed similar alarm at the committee’s opaque strategy for discussions.

After inquiries from fellow committee members on the exact purpose of the meeting, Co-chairman Bill Landen, R-Casper, offered clarification.

“Our goal this entire fall and with this meeting, and the subsequent meeting in November, was to do everything we could to get our arms around all of the issues related to utilities, electric generation, everything on renewables, Rocky Mountain Power’s closure of coal-fired power plants,” Landen said. “It’s a big, big lift and my goal was to simply do everything we could to give ourselves an educational foundation as we go into a pretty important session in January.”

In his mind, that included potentially proposing bills. Co-Chairman Tyler Lindholm, R-Sundance, echoed Landen’s approach.

“A lot of the testimony has been about the rumor that started that (the committee) is going to pass a … generation tax on wind,” Lindholm said. “I’m certainly not going to make that motion. But I’m going to fist pump if somebody does do it.”

“The door is open,” he concluded.

While lawmakers are required to announce the topics to be discussed at meetings at least 24 hours in advance while the Legislature is in session, Bruce Moats, a Cheyenne attorney who specializes in public records law, says there is no such requirement demanded of them during the interim, when most bills are actually drafted.

The case for a tax exemption

Understanding the significance of the generation tax exemption for wind energy requires looking back to 2009, when a legislative task force on wind energy development met during the interim session to issue a set of recommendations on the burgeoning wind energy sector for the Legislature.

After multiple days of discussion, the task force encouraged lawmakers to avoid instituting taxes that would become a disincentive for wind energy development in the blustery Equality State. “The Task Force recommends that any proposed new tax be imposed in a way so as to encourage the diversification of Wyoming’s economy and so as not to force the wind energy industry out of Wyoming,” the final report stated. “Any tax should be designed to encourage the development of employment opportunities for Wyoming’s people and to encourage the development of businesses ancillary to the wind energy industry.”

In 2010, lawmakers reasoned the generation tax, which would kick in after three years of a facility being online, could help provide a steady stream of revenue to local and state governments after projects complete the initial construction and the stream of revenue from sales and use taxes slows down.

The electricity generation tax, ultimately instituted during the 2010 Legislature’s budget session, came one year after the governing body repealed a sales and use tax exemption for renewable energy facilities. Wind energy developers now shoulder all industrial-rate property taxes too.

This year’s proposed generation tax exemption repeal comes on the heels of a Aug. 25 Joint Revenue Committee meeting, co-chaired by Case, dominated by discussions of a potential electricity generation tax.

Lawmakers have repeatedly raised the possibility of boosting the tax in committee meetings, but none of the attempts have been successful. The revenue committee has formally discussed the possibility of an electricity tax 12 times since May 2016.

The state’s regulatory uncertainty, windy politics and existing wind generation taxes may already be hindering wind development in the state, several developers said.

Sen. Charles Scott, R-Casper, also introduced a motion on Friday at the committee meeting on corporations to draft an additional bill to increase the electricity tax on wind energy by $1 per megawatt hour. But the bill proposal failed in a 4-7 vote.

Tied up over wind

In anticipation of a potential bill to bulk up electricity taxes for renewable energy on Friday, several lobbyists and residents stepped up for public comment to express there opposition or support for the bill at the committee meeting.

Abby Briggerman represents the Wyoming Industrial Energy Consumers, an association of companies consuming over half of Rocky Mountain Power’s power load. (Rocky Mountain Power is the state’s largest utility.) “WIEC is strongly opposed to any generation tax being placed on their electric utility bills,” Briggerman said. “...Their rates are incredibly high as a portion of their operating costs and any tax that increases their electricity rates makes it all the more difficult to do business in Wyoming.”

The independent energy firm, Power Company of Wyoming, would also likely be affected by the three-year tax exemption repeal, according to its communications director, Kara Choquette.

Any increased tax burden on developers makes projects less competitive in the region’s cutthroat energy market. That's because, Power Company of Wyoming is an independent power producer and does not deliver electricity directly to retail customers. Instead, it must compete in the market to sell the electricity it produces to utilities.

“As a result, the challenges we face, and the risks we have and market opportunities we have, are very different (from a rate regulated utility),” Choquette said. “We don’t have a guaranteed market, guaranteed customer or guaranteed rate of return.”

Power Company of Wyoming is in the midst of over decade long push to build the massive 3,000-megawatt Chokecherry and Sierra Madre Wind Energy Project in Wyoming. The Chokecherry and Sierra Madre wind farm will eventually funnel power into a new transmission line, called the TransWest Express Transmission Project. The transmission line will be a 732-mile line capable of delivering power generated from wind farms in Wyoming to new customers in the desert southwest. The transmission line will cut through four states and 14 counties. The project’s northern terminal and about 92 miles of the line will be built in Wyoming.

Choquette, who represents both the wind farm and transmission project, called on lawmakers to keep current tax structures stable.

According to Choquette, the projects undertaken by Power Company of Wyoming and TransWest could draw in $1.1 billion in non-mineral revenue for Wyoming in the form of new property taxes, sales and use taxes and generation taxes during the project’s initial operating lives. Local governments also collect impact assistance funding during the project’s construction phases.

But Wyoming residents wary of the uptick in wind development statewide also provided substantial public comment on Friday, highlighting the consequences such development could have on natural view sheds, wildlife and nearby communities.

“There are jobs that come with wind energy,” Wyoming resident Joe Quiroz said. “The problem is that we often forget about the long view when we’re in an emergency; wind infrastructure construction does create some jobs, but they’re few in the long term. What is long-term about wind power is the footprint it imposes on the landscape.”

Wind energy development in the state has ramped up, with hundreds of turbines popping up in recent years, as developers rush to meet the demand for renewable energy.

In 2000, of the 45.5 million megawatts of electricity generated in the state, 95.8% of electricity came from coal and less than 1% was sourced from wind and solar energy. Nearly two decades later, coal production has chipped in 84.3% to that total amount of electricity generated statewide, and contributions from wind and solar have risen to 10.2%.

Wyoming had 1,816 megawatts of wind capacity installed and 4,341 megawatts under construction as of the second quarter in 2020, according to the American Wind Energy Association.

The draft bill repealing the three-year electricity generation tax exemption will be taken up at the next committee meeting scheduled for November.