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Phasing Out Wind Farm Tax Credit Divides Oregon Groups

Phasing Out Wind Farm Tax Credit Divides Oregon Groups

Ted Sickinger | The Oregonian via YellowBrix

December 14, 2009

Proposed changes to rein in state tax incentives for renewable energy projects would do little in the short run to reduce subsidies going to the large, utility scale wind farms that are capturing the lion’s share of the incentives.

The 13 proposed large-scale wind farms that have submitted applications for Oregon’s Business Energy Tax Credit would be eligible for up to $118 million in subsidies under an alternative tax credit regime proposed earlier this month by state energy and economic development officials, according to a state report.

That’s just a 9 percent reduction from the $130 million in subsidies the 13 projects are eligible for under current rules. And it is far more generous than the 65 percent reduction that would have taken place under a bill to reform the tax credits passed by the Legislature earlier this year but vetoed by Gov. Ted Kulongoski.

Even so, a trade group for the renewables industry has warned the governor and key legislators that any attempt to apply changes retroactively and reduce incentives for projects that have already applied for the credits would invite lawsuits.

The BETC program has become increasingly controversial as the costs have ballooned and lawmakers look for ways to balance a strained state budget. Investigations by The Oregonian have found that state officials intentionally downplayed the cost of the tax credits before the Legislature voted to substantially increase them in 2007; that millions of tax dollars went to projects that went bankrupt or never produced energy savings; that many of the projects being subsidized would eventually be built with or without the subsidies; and that much of Oregon’s subsidized wind power is being sold to customers out of state.

Kulongoski vetoed the Legislature’s reform bill because he said it would undermine the growth of Oregon’s green economy at a time when the state — and rural counties in particular — are desperate for new jobs and tax revenues.

But last month he asked state energy and economic development departments to evaluate the BETC program and make recommendations for potential changes that could inform debate when the Legislature convenes in February.

The departments’ report, delivered in early December, reached an obvious mathematical conclusion: Oregon’s tax credits are becoming a smaller percentage of wind farm costs as the size of those projects grows. The report also included a 36-page list of the subsidy programs offered by Oregon and five other western states.

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