Bills to Purge Energy Credits Stall in Oklahoma Legislature

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By Paul Stinson

March 29 — Four bills before the Oklahoma Legislature seeking the elimination of wind energy tax credits in addition to a set percentage of natural gas use in the state’s energy mix will go no further this year, following failures to meet their respective legislative deadlines.

“Amazingly, all the bills died at the March 10 deadline. We are still in shock,” Oklahoma Sierra Club Director Johnson Bridgwater told Bloomberg BNA March 25.

Although all four bills successfully emerged from their respective energy and finance committees after receiving a first and second reading, they failed to achieve a third read in their chamber of origin that would have made the proposed measures eligible for passage during the state's legislative period that ends May 27.

Touted by the state as a means of shoring up finances, Bridgwater said in a March 2 statement that the impact of passage would be to “kill the wind energy in the state and stop renewable energy in its tracks.”

Measures Sought to Disallow Wind Credits

One of three measures seeking to impact the zero-emission energy tax credit, H.B. 2818, sponsored by Rep. Lee Denney (R), Speaker Pro Tempore, would have amended the credit for electricity generated by zero-emission facilities by disallowing the credit for assets first placed into operation on or after Jan. 1, 2017.

That credit is $0.005 for each kilowatt-hour of electricity generated and sold by a qualifying zero-emission facility.

S.B. 883, authored by Sen. Mike Mazzei (R), chair of the Senate Finance Committee, would have changed the basis of the zero-emission energy tax credit from electricity generated to electricity sold, according to the bill. The measure would have also had the effect of reducing the credit 25 percent beginning in July 2016.

S.B. 1443, sponsored by Sen. Rob Standridge (R), would have disallowed a zero-emissions electricity credit, specifically related to wind generation occurring after Jan. 1, 2018, unless the Legislature reauthorizes the credit following evaluation by the state's tax incentive evaluation body.

Developed with an eye toward improving state finances, state officials in February convened the inaugural meeting of the Incentive Evaluation Commission—a body tasked with evaluating business tax incentives as Oklahoma comes to grips with a $1.3 billion budget gap attributed to falling revenue and lower energy prices.

Effort to Curb Wind Follows 2014 Tax Break for Oil/Gas

Available for tax years beginning in January 2003, Bridgwater said the zero-emissions electricity tax credit has played a central role in Oklahoma's ascent to fourth in the nation in wind energy production, while also creating economic development and jobs.

“Trying to kill a tax credit of $27 million annually that leads to billions of dollars of economic development in our state seems amazingly short-sighted,” he said.

“And for comparison—the oil and gas tax break passed in 2014 cost the State of Oklahoma $600 million last year in lost revenue—so tell me where the real need for tax reform is,” Bridgwater said.

In May 2014, Oklahoma Gov. Mary Fallin (R) signed a bill setting the state’s oil and natural gas gross production tax at 2 percent for the first 36 months of production—instead of the 7 percent rate that would have applied in the absence of the legislation.

Measure Sought 75 Percent Natural Gas Usage in State

A measure related to oil and gas from the current legislative session, S.B. 1413, sponsored by Sen. Jason Smalley (R), sought to establish a natural gas energy standard of 75 percent by the year 2020 “to capitalize on the state's abundant natural gas resources,” according to the legislation.

Had that bill come to fruition, Sierra's Bridgwater said the measure would have left the state to achieve its renewable energy goal in the absence of a tax credit support while “institutionalizing” the use of natural gas.

That bill “would literally force Oklahoma businesses to use natural gas” to meet three quarters of all energy needs, a development that would have had the effect of putting a ceiling on Oklahoma's green energy economy, according to Bridgwater.

Wind energy already accounts for about 18 percent of the state's energy mix, Sierra's top Oklahoma official added, with geothermal and other renewable sources contributing an additional 2 percent. Imposing what he called a “75 percent natural gas use act” would have left an additional 5 percent to expand renewable energy, leaving “no room” for solar energy.

While expressing relief, Bridgwater warned that the future of the state's wind production is still far from secure. “This is still an on-going issue and will be back next year worse than ever.”

To contact the reporter on this story: Paul Stinson in Austin, Tex., at pstinson@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com

For More Information

H.B. 2818 is at http://src.bna.com/dEj.

S. B. 883 is at http://src.bna.com/dEi.

S.B. 1443 is at http://src.bna.com/dEk.

S.B. 1413 is at http://src.bna.com/dEl.