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Wyoming state officials are considering an increase to the taxes levied on wind generation. As the only state that taxes wind generation output, wind advocates are concerned that any tax increases will crush Wyoming’s burgeoning wind industry. This year, there are several wind farms being planned in Wyoming, including two massive projects in Carbon County: the Power Co. of Wyoming’s 3 GW Chokecherry and Sierra Madre (CCSM) Wind Energy Project and Viridis Eolia Corp.’s 840 MW Little Medicine Bow wind farm.

In May, Wyoming’s Joint Revenue Interim Committee met to discuss its increases to the wind electric generation tax. The revenue committee will meet two more times this year. If it is recommended to the 2017 legislature, a bill will be drafted. Both the House and the Senate would need to approve the bill before it would go to the governor for signature in spring 2017.

As it is, Wyoming is the only state that taxes wind generation output – which probably has something to do with the fact that no wind farms have been built in the state since 2010. And any increases to taxes will likely halt incremental wind development in its tracks.

If increases are approved, wind energy advocates are concerned about the negative impacts any tax hikes would have on Wyoming wind development, explains Loyd Drain, independent energy consultant and former executive director of the Wyoming Infrastructure Authority.

“If such additional tax is imposed, it will have a continued chilling effect on wind development in the state at a time when the need for economic diversity in the state is at an all-time high,” he says.

In a letter to the committee, Sarah Propst, executive director at the Interwest Energy Alliance, a regional partner of the American Wind Energy Association, writes, “We are sympathetic with the difficulty Wyoming faces in meeting critical budget needs, but raising the wind tax could create a continued chilling effect on wind development in the state. Wyoming is blessed with excellent wind resources. However, the western electricity market features robust competition among states for new generation resources. In considering an increase in the wind tax, it appears that Wyoming is comparing the taxation of wind generation to fossil fuels rather than comparing the state’s wind tax regime to the renewable energy tax regimes of other competing western states.”

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“The results have not been promising: No new wind facilities have come online in Wyoming since the wind tax was instated due to a set of factors including the tax, transmission constraints and other challenges.”

Drain says that Wyoming had a sales/use tax exemption on wind equipment that was scheduled to expire in 2012. In 2010, that exemption was allowed to expire, which resulted in a 4% state sales tax. That’s in addition to wind equipment taxes levied by several Wyoming counties. According to Drain, that means that wind development in 21 of the 23 counties will incur a 5% to 6% sales tax.

For example, Drain estimates that a 500 MW wind farm would have to pay about $40 million up front in sales tax.

“Without a doubt, wind development stalled when the sales tax was imposed in 2010 and in 2011 – when a generation tax of $1 tax on every megawatt-hour of wind-generated electricity became effective,” says Drain.

“There is tremendous monetary risk involved in wind and transmission development – it’s expensive and takes years of investment, with no assurance of success. There’s been hundreds of millions invested in Wyoming on wind and transmission projects, some of which will never be developed – it’s a risky endeavor.”

Propst shares Drain’s concerns. “We are concerned about discussions related to raising the state’s wind generation tax,” Propst says. “If a tax makes Wyoming wind less competitive than projects in other states, the state will lose out on the jobs, capital investments, property taxes and lease payments to farmers and ranchers that accompany wind development.”

“Overall, the state of Wyoming’s current leadership has been very supportive of our proposed CCSM Project,” notes Bill Miller, president and CEO of Power Co. of Wyoming. He is also president and CEO of TransWest Express (TWE) LLC, which is developing the TWE transmission project. “However, it would be beneficial for continued business investment in Wyoming if the Wyoming legislature aligned the state’s wind farm tax structure more with the structure found in other western states. We understand that Wyoming is unique in assessing property taxes, sales/use taxes and wind electricity generation taxes on wind energy projects.”

 

Other challenges

In addition to its burdensome taxes, Wyoming has been plagued with a lack of transmission lines, which are needed to take the power out of the state. A less-populous state, Wyoming does not have in-state demand for all of the power it is capable of supplying. To date, approximately two-thirds of all electricity generated in Wyoming is used in other states. As such, there’s great demand to build transmission lines to carry the power to other states. These transmission lines are the following:

TransWest Express. A proposed regional electric transmission system, TWE would add more than 3 GW of transmission capacity to the western U.S. electric grid. The 600 kV high-voltage, direct-current transmission line is designed to deliver about 20,000 GWh per year of renewable energy to multiple utilities in California, Nevada and Arizona that seek cost-effective supplies of renewable power. Seven years in the making, the project received its final environmental impact statement (EIS) in May. The project’s next hurdle is obtaining its record of decision (ROD), which would grant the TWE a right of way across federal land. According to the U.S. Bureau of Land Management (BLM), the ROD could happen as soon as this month.

Gateway West. A dual transmission initiative between Rocky Mountain Power and Idaho Power, the line aims to bring more than 1,000 miles of new high-voltage transmission lines in Wyoming and Idaho. (For more on this transmission line, see “Meet Wyomings Quiet Giant”.)

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Gateway South. Another project involving PacifiCorp, Gateway South extends approximately 400 miles from the planned Aeolus substation in southeastern Wyoming into the Clover substation, near Mona, Utah. Gateway South received its final EIS in May. The company is awaiting its ROD in the fall.

The other challenge plaguing state wind development is simply out of the hands of state officials. That’s because much of the land available for development is under the auspices of federal agencies, such as the BLM.

Requirements under the National Environmental Policy Act (NEPA) are controlled by the BLM, and there is little that states can actually do about the pace, Drain notes.

“Everyone at a state and local level urges the BLM to move through their NEPA compliance more quickly to approve projects that involve some federal land, but ultimately, the BLM moves at their own speed,” he says. “The BLM has no deadlines under which they need to complete their environmental reviews, and that hinders and delays renewable energy development in states with BLM-managed land, like in Wyoming. We need some kind of NEPA reform at a national level.”

 

California beckons

Clearly, Wyoming’s energy industry finds itself at a crossroads. Putting challenges aside, however, the state stands to benefit from California’s 50% by 2030 renewable portfolio standard (RPS), which was passed into law last year.

“We see the primary market for our Wyoming wind energy as California, Arizona and Nevada,” explains TWE’s Miller, noting that states with a high population and a strong demand for cost-effective renewable energy, such as California, will aid in the development of Wyoming-based wind farms.

Drain agrees. “If California wants to add more renewables to their grid to achieve the 50% RPS and cut emissions while saving their ratepayers money, Wyoming wind is the ideal candidate to address California’s renewables reliability concerns due to Wyoming wind’s world-class strength and right timing,” Drain says. “When the sun goes down in California and solar output declines, south-central Wyoming wind is ramping up and ready to help fill in the gap.”

And further hope lies within the California Independent System Operator’s (CAISO) proposed merger with PacifiCorp, which would form a regional energy market – in other words, a super market.

According to CAISO, a regional energy market would better use resources, particularly renewables, to reduce greenhouse-gas emissions and costs. Further, a merger would enable CAISO’s sophisticated market and grid optimization systems to pick the lowest-cost energy to serve demand and give preference to renewable resources across a wide geographic region.

“We are very supportive of the California ISO’s proposed expansion,” Miller says. “We believe it will be good for grid operators and good for customers from a cost perspective, a reliability perspective and a renewable energy perspective. A regional energy market for the West, like those that already operate nationwide, is an idea whose time has come.”

Spotlight: Wyoming

In Wyoming, The Tax Man Cometh For More

By Mark Del Franco

A looming issue continues to gain traction at the worst time possible.

 

 

 

 

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