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Oklahoma governor signs bill to sunset tax credits for wind industry

Cathleen Rychner / Red Dirt Report
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OKLAHOMA CITY – On Monday Gov. Mary Fallin signed into law a bill that would sunset tax credits for the state’s wind industry on July 1, 2017.

House Bill 2298, authored by Speaker Charles McCall (R-Atoka), and Senate President Pro Tempore Mike Schulz (R-Altus) passed the Senate 40-3 last Monday. The bill requires that zero-emission facilities must be in operation by July 1 to qualify for the credit, instead of the original Jan. 1, 2021.

The measure, which seeks to address part of the $868 million budget shortfall in the state, is one of many approaches to recoup revenue for the state.

“The wind industry for Oklahoma is an essential piece of my ‘All of the Above’ energy strategy,” Fallin said in a statement. “With the support of the zero emissions tax credit, our state has become a national leader in wind energy. Currently, Oklahoma ranks third in the nation in total installed wind capacity, with nearly 7,000MW in the ground. This accounts for more than 25 percent of the state’s electricity generation mix and is an important contributor to Oklahoma having the lowest cost of electricity in the nation.”

Fallin said the zero-emissions tax credit was key to the growth of wind energy in Oklahoma, that she was grateful to the industry for their “ambitious successes, as well as their willingness to work with the state to address our challenging budgetary circumstances.”

However, the savings to the state will be a long time coming in that the first tax year that the change will be fully in effect is 2027.

Oklahoma’s wind industry

Jeffrey Clark, president of the Wind Coalition, said the wind energy industry offered to work with Oklahoma leaders in phasing out incentives for wind energy development, saying that the industry recognizes the need for incentives to be adjusted.

“These incentives have been tremendously beneficial to Oklahoma by attracting billions in private investment to rural areas, lowering electricity prices for Oklahoma consumers, creating new jobs and providing essential tax revenue to rural public school districts,” Clark said following the Senate’s passing of the bill. “The incentives have served their purpose well and have helped Oklahoma bring much-needed diversification to its economy.

Clark said he hoped other industries will recognize the state’s challenging fiscal situation and follow suit.

“If it chooses to do so, Oklahoma can be a leader in the energy development that will drive our nation’s economy in the decades ahead,” he said.

“That includes natural gas, wind energy, solar power and energy storage. While the path ahead for Oklahoma remains unclear, we look forward to working with state leaders to help them develop a plan to keep Oklahoma competitive for future investment.”

A law enacted in 2015 requires Oklahoma’s economic incentives to be independently evaluated once every four years. According to the Oklahoma Incentive Evaluation Commission, this year was the scheduled second round of such evaluations, which included a dozen incentives with an estimated annual financial cost of about $228 million with $45,793,720 coming from the Tax Credit for Electricity Generated by Zero-Emission Facilities.

Other incentives included the Quality Jobs program, the Quality Events Program, the Oklahoma Venture Investment program and Capital Access Program, the Capital Gain Deduction and the incentives for coal production and the Ethanol Fuel Retailer Tax Credit.

In 2015, Oklahoma ranked third nationwide for total wind energy generation, providing enough electricity to power the equivalent of 1.3 million American homes, according to the organization. In addition, the wind energy industry supported 7,000 to 8,000 jobs and $9.6 billion in capital investment.

A recent study from Oklahoma State University found that wind companies paid nearly $134 million in ad valorem taxes to the state since 2004, and a Department of Energy Wind Vision Scenario projects that Oklahoma could produce enough wind energy by 2030 to power the equivalent of 1.9 million average American homes.

In 2010, Oklahoma set a renewable energy target for 15 percent of total installed generation capacity for operating electric utilities to be renewable sources by 2015. Wind energy has historically been the renewable resource chosen to meet renewable energy targets in America, according to the American Wind Energy Association.

“The zero-emissions tax credit did what it was supposed to do—help the wind industry get off the ground in Oklahoma,” said Schulz after the Senate vote.

“Our state ranks third in the nation in terms of wind power and will likely remain among the leaders in wind power for the foreseeable future. The state is facing extraordinary budget challenges, and we can no longer afford the zero-emissions tax credit. This measure provides certainty to the wind industry and stability in the long-term for the state budget.” 

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