Wyoming legislators advance bill ending wind tax exemption

Wyoming lawmakers moved forward on Wednesday with a bill to remove a tax exemption for wind developers in the state. 

The bill, which was passed with a 7-6 majority in the Corporations, Elections and Political Subdivisions Committee, would end a three-year tax exemption for new wind projects built in Wyoming, which critics say would be detrimental to one of the state's key industries. Wind facility owners must pay a USD 1.00 per MWh tax following the three-year grace period, and removal could have an impact on utility Rocky Mountain Power's current RFP. The bill is also particularly crucial for future wind projects, as new facilities also face the end of the national production tax credit. 

"Wind development is a capital-intensive industry, and the vast majority of that capital is spent at the beginning of a project’s lifespan," said Nate Blouin, policy manager for Interwest Energy Alliance, during a public comment session. 

Proponents of the bill believe it could generate additional revenue at a time when the state is suffering a deficit following the COVID-19 epidemic, seeing as Wyoming is a wind-producing state. But critics of the bill say in the end it could deter additional in-state projects and development, ultimately providing less revenue for the state. 

"This might look like a step forward as far as revenue enhancement, but it really is taking potentially two steps backward," said Wyoming Business Alliance President Cindy DeLancey. "What I mean by that is if the exemption were to go away, sure, it would be the imposition of a new tax on an emerging industry that would generate some production tax revenue, but we also could stand to lose the other revenue streams at the same time. The net sum of zero is zero." 

Ryan Fitzpatrick, a developer with NextEra Energy Resources, said that while he didn't think the exemption removal would kill projects, it would have a severe impact on the ability of Wyoming projects to be competitive as most RFPs are heavily determined by cost and won in small margins. NextEra projects in Wyoming, according to Fitzpatrick, represented USD 1bn worth of investment in the state in 2020, with USD 170m in tax revenue over the life of projects. 

He noted that in his personal experience, NextEra lost a Wyoming project to an out-of-state one by USD 0.40 cents. 

"I’m not here to say that any increase on wind taxes in Wyoming is severely going to kill projects or drive everything out of state, but I know it's going to hurt the competitiveness of Wyoming projects," said Fitzpatrick. "That’s what it comes down to." 

The bill, if passed, would also have a potential impact on IOU PacifiCorp's 2020 All-Source RFP, which called for 1,920 MW of wind energy to come online by 2024. An early report on results indicate the majority of new wind project bids were located in Wyoming. Vice President of Government Affairs at PacifiCorp subsidiary Rocky Mountain Power confirmed in the meeting that if the exemption was lifted, RMP would have to pay the additional tax, which would affect the costs of project bids. 

"I don’t like the idea of increasing taxes on the wind industry like that in general, but I don’t know if that would be a project-killer necessarily," Fitzpatrick said. "But price is the determining factor in power purchase agreements when other states are competing for these investment dollars, tax revenues and the other benefits that come from it." 

With Wednesday's approval, the bill will come up for consideration again during Wyoming's legislative session in 2021. For Blouin, the decision will be an important one in determining the future of in-state development. 

"In an industry where bids are won and lost on margins of just a couple of cents per MWh of energy production, Wyoming is sending a signal that project developers should look elsewhere," Blouin said.