State must raise tax on wind power, resist industry lobby

Driving Interstate 80 home to Lander from Cheyenne recently, I crested the commanding rise in Carbon County looking west toward Walcott Junction, just a few miles after beginning the descent from the Elk Mountain plateau.  

From this wonderful spot you can see more than 25 miles toward Sinclair and Rawlins and gaze south up the Saratoga valley and north toward the Shirley Basin.

Over the years making this drive home from legislative sessions, I have witnessed many beautiful sunsets on the western horizon across this 50-plus-mile vista. On this particular evening, I considered what the view will be like south of Sinclair, almost to Saratoga, with 1,000 blinking red lights, each marking the location of a giant turbine in the largest wind farm in the world.

Wind energy has been on my mind a lot lately. Efforts within the Joint Revenue Interim Committee to increase the tax on wind energy production, culminating at a meeting in Buffalo last fall, have been a topic of particular interest this year.

The members of the Revenue Committee have been subjected to the most concentrated lobbying effort against the tax on wind energy I’ve witnessed in my career as a legislator.

The list of people working for the wind interests reads like a “Who’s Who” of Wyoming influence: some of the biggest names and largest Cheyenne law firms, well-known economic experts and former Wyoming state bureaucrats.

The contingent from Carbon County was impressive, too: elected officials and economic development representatives seemed more enamored with the short-term infusion of funds from the mostly out-of-state construction work than the extremely small number of long-term sustainable jobs the project will create.

In contrast, I recently received a startling letter from a California state senator warning me to protect my constituents from being “…’saved’ by California’s energy bureaucrats and radical environmentalists.”

A surprising amount of new information was revealed by the testimony at the September meeting. The “party line” of wind developers has always been that Wyoming’s minute 1/10 cent per kWh wind tax was keeping them out of Wyoming.  But, “out of the woodwork” came a host of folks saying that they had projects “ready to go” under the existing tax structure, only if Wyoming did not raise the tax.

One developer, whose company’s official Cheyenne address is one of the so-called “professional registered agents,” informed the committee his company had a project in the works for the Shirley Basin that would be up to three times the size of the proposed wind farm between Saratoga and Rawlins. It is hard to imagine 3,000 additional wind turbines in the Shirley Basin.

Transmission capacity is the key and it is clear Wyoming is transmission constrained — but only for now. Lack of transmission means low prices to producers of electricity from Wyoming wind. One wind developer testified that wind was worth only 2 cents per kWh now, revealing that his company profits more from the 2.3 cents per kWh federal tax credit than from payments for the electricity it produces.

Responding to questions from the committee, Rocky Mountain Power representatives said the company’s progress in building the Gateway West transmission project will eliminate the transmission bottleneck.

That’s the reason wind developers are pushing hard now. When the transmission constraint is resolved, prices will rebound and the boom will be on.

The Rawlins-Saratoga project, known to the Bureau of Land Management as the Chokecherry & Sierra Madre Wind Energy Project, is different. That boom is happening now, because astonishingly, the developer is solving the transmission problem by building his own transmission line all the way to Nevada.

The new transmission line, plus the 1,000 wind turbines, roads and other facilities, makes this possibly the single largest private infrastructure project in Wyoming since construction of the Union Pacific Railroad.

Because this project will not be transmission-constrained, it will earn higher returns on the investment. The developer, Philip Anschutz, is silent on how much he will make, but a good guess is that the revenue will be nearly 6 cents per kWh. Using a price of 6 cents and other information from the company’s website, one can see that over the next 20 years, the developer of the Rawlins-Saratoga project will receive more than $10.2 billion in revenue while paying less than 8 percent in Wyoming taxes of all types, including property, sales and wind production taxes.

Raising the existing wind production tax to ½ cent per kWh will increase Wyoming’s 20-year tax receipts to only 14 percent of total project revenue — small compensation for the loss of one of Wyoming’s treasured open spaces.

One issue that stands out to me is the permanence of wind projects. Since the real effort of development is mostly wrapped up in the fixed permanent costs of permitting, siting, building roads and transmission lines, wind farms once established will stand for generations.

Of course, turbines, towers and generators will wear out. However, the cost of replacement is small in comparison to the total initial investments; there is no reason for a developer to walk away. Thus wind farms, in a practical sense, will always be here — irreversibly altering the Wyoming landscape.

Wyoming will experience these negative impacts while gaining very little in the way of tax revenues or employment. Further, our own electricity mix already has plentiful wind energy production.

On the other hand, the benefits of the new wind power will accrue to the West Coast, supporting the Coasters’ electrical needs and desires to be environmentally responsible.

It seems like the beneficiaries of this energy source could provide a small compensation for the impact on Wyoming. They can afford it. According to the Bureau of Labor Statistics, Los Angeles area households paid an average of 21.0 cents per kWh in July 2016. This cost is only going up. Given the high prices that Californians pay, a ½ cent tax to compensate the people of Wyoming for a landscape that will be permanently lost for future generations seems minimal.

Do not get me wrong. I am a green guy and I like the idea of a renewable energy future. But we should be realistic about the gigantic operational considerations of more renewables in the electricity mix, especially as solar and wind become increasing proportions.

The experience of Germany may be relevant; the country has ventured so far down the renewable energy path that the operational issues caused by intermittent production have forced a net increase in coal-fired generation to deal with system swings. Costs have gone up too: in some areas of Germany electricity costs have approached 40 cents per kWh.

In the 2017 legislative session, another bill will be introduced to tax wind-generated electricity at the rate of ½ cent per kWh. I hope that citizens will give this proposal their support and the Legislature will take an objective look.

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Wyoming’s political climate has changed from that prevailing at the September Revenue Committee meeting in Buffalo. New leadership and new legislators will be sworn in today. New committee members will serve on the revenue and other standing committees. Wyoming’s economic picture also is more clear.

The Legislature will benefit by hearing from residents who are concerned about the future of Wyoming’s grand vistas. Do not let lawmakers and special interest groups bury Wyoming in wind generation for the West Coast’s electricity without fair compensation for Wyoming’s future generations.

These future citizens are the ones who will see turbines, lights, and transmission lines and wonder about how marvelous our vistas must have been in the early 21st century.

Republican State Sen. Cale Case lives in Lander and has represented Senate District 25 for 18 years. He holds a PhD in economics and works as a utility consultant.

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