In Texas, Ambivalence Over Wind Tax Credit Extension

Texas has a commanding lead over other states in wind power production, as turbines supply 8 percent of the state grid's power. But the looming expiration of a federal tax credit jeopardizes the boom — and Texas' congressional delegation, for the most part, does not appear to be clamoring loudly to save it.

The "production tax credit," due to expire at the end of this year, offers wind farm owners 2.2 cents for every kilowatt-hour of power they produce for 10 years. It makes wind power substantially cheaper, but is projected to cost the federal government about $1.3 billion this fiscal year. The credit has helped spur substantial development in rural Texas, especially around Sweetwater and, more recently, along the Gulf coast.

But even as the industry's efforts to extend the credit intensify in Washington, analysts say that Texas' Republican-dominated congressional delegation seems largely ambivalent about extending the credit (with some exceptions like U.S. Rep. Mac Thornberry, R-Clarendon, whose vast district includes the windy Panhandle and who has backed a 10-year extension).

Jimmy Glotfelty, vice president for external affairs at Clean Line Energy, a Houston company working to build transmission lines for renewable energy, said that Texas congressional Democrats mostly seem supportive from a green-power perspective, while Texas Republicans are caught between the desire for job growth in the industry and "the fiscal accountability piece of it."

By contrast, some other wind-friendly states have vocal bipartisan backing for the credit's extension. The entire congressional delegation of Iowa, the country’s second-ranked wind state, wrote a letter last week urging House and Senate leaders to extend the credit. U.S. Sen. Chuck Grassley, R-Iowa, has been a key backer of the extension. Seven members of Colorado's congressional delegation, including two Republicans, wrote a similar letter last week.

Gov. Rick Perry, on the campaign trail last fall, called for an end to all federal energy subsidies, which would have included the wind credit, though he has expressed some support for its extension in the past. Perry did not join more than 20 governors, including Republicans Mary Fallin of Oklahoma, Terry Branstad of Iowa and Sam Brownback of Kansas, in writing to President Obama last July to urge extension of the credit. An extension, the governors wrote, is "critical to the health of wind manufacturing in our nation."

The credit was signed into law in 1992 by President George H.W. Bush. Congress has extended it numerous times — sometimes after it actually expired. In years past, Glotfelty said, Texas Republicans have come down on both sides of the wind credit extension issue, which is often included in broader bills.

If the credit expires, or if an extension is delayed until after the election, wind groups warn of a major slowdown in turbine manufacturing and wind farm construction. Right now, plenty of companies are rushing to finish projects before the credit expires (though Russel Smith, executive director of the Texas Renewable Energy Industries Association, notes that in Texas, the multibillion-dollar transmission lines the state plans to use to move wind power from remote areas to big cities will not be fully built until 2013, leaving a tricky one-year gap between the tax credit's extension and the power line completion).

John Graham, president of BP Wind Energy, said his company was having its biggest year ever in 2012, with two major wind farms — totaling more than $1 billion in investment — being built this year in Pennsylvania and Kansas. (BP Wind has four wind farms in Texas, including a new one, near Fort Stockton, that will be dedicated this month.)

However, with the uncertainty of the tax credit, "We [will] have no work to do next year at all," Graham said. Fewer wind farms means hard times for manufacturers, so starting midyear, "you're going to see a lot of layoffs in the manufacturing supply chain," Graham said. So even if the credit gets extended at year's end, it could be hard to revive the industry quickly, wind advocates say.

Opponents of the extension say that it is time wind managed without federal help, especially at a time of tight budgets.

"It is past time that the industrial wind energy industry demonstrates that it is competitive on its own," wrote Robert Weatherford, president of Fredericksburg-based Save Our Scenic Hill Country Environment, in a letter on Monday to U.S. Rep Mike Conway, R-Midland. The incentive, he wrote, encourages wind developers "to improperly pursue projects in relatively low potential wind areas such as the Texas Hill Country where such development does not make sense" from aesthetic and other perspectives.

Wind groups say that costs are coming down but that they need more time, especially when competing against low natural gas prices. Graham said that he could foresee independence from the credit in the coming years. "We don't want to be part of the problem long-term," he said. "In fact, we want to be part of the solution."

Right now, the wind industry is working furiously to attach a one-year extension of the production tax credit to a bill that extends a payroll tax cut that expires at the end of this month. If that effort fails — wind groups will keep pushing for an extension all year. A stand-alone bill, HR 3307, would extend the production tax credit by four years, though 2016. U.S. Rep Lloyd Doggett, D-Austin, is the sole Texas co-sponsor. Graham, of BP Wind Energy, says he's "quite pessimistic" that the credit will be extended.

The Texas Tribune asked some congressional representatives what they thought about the credit's extension. (The League of Conservation Voters has also sent questionnaires to some Texas congressmen on the issue but has not heard back.) Mostly, the congressmen didn’t directly address the issue of the credit, but here's what they (or their spokespeople) said:

U.S. Sen. Kay Bailey Hutchison, R-Texas:

“This tax credit is one of many that is expiring at the end of this year. While I hope Congress spends this year addressing broad-based tax reform that would lower rates, encourage investment, and spur job creation, the potential expiration of this tax credit serves as a reminder that we need a comprehensive energy policy — which includes the development of domestic oil and gas resources, updated critical infrastructure, and conservation — to complement the development of wind and other renewable energy resources.” [Sent via an email from her spokesman, Tom Flanagin]

U.S. Sen. John Cornyn, R-Texas:

“It’s no secret, as the President’s own bipartisan fiscal commission documented in excruciating detail, our current tax code is a never-ending maze full of twists and turns that can only confuse and befuddle even the experts. It’s in dire need of reform and nothing should be off the table.” [This is from Cornyn's opening statement at a Dec. 14, 2011, Senate finance subcommittee hearing on alternative energy tax incentives; his spokesman, Drew Brandewie, pointed to this when asked about Cornyn's position on the tax credit extension.]  

U.S. Rep. Lloyd Doggett, D-Austin:

“As a long time supporter of incentives for renewable energy, I favor immediate PTC renewal to keep the windmills vigorously churning and the power of the sun working to create more Texas jobs. The extension is the best way to keep us #1 in wind power capacity.” [Sent via an email from his spokeswoman, Sarah Dohl]

U.S. Rep. Mac Thornberry, R-Clarendon:

“I prefer a simpler, flat tax code, but in the meantime, encouraging more domestic energy production of all kinds seems to be a worthy national and economic security goal. I believe that there are instances in which a limited and reasonable federal tax credit can help get a fledgling industry off the ground. This is part of the reason that my bill, H.R. 1023, the “No More Excuses Energy Act,” would extend the PTC for wind for 10 years. At the same time, I also believe these credits should not continue forever, and we should continually reevaluate their need and their cost.”

[On the payroll tax credit extension] 

 “The Social Security Trust Fund is already in financial trouble, and extending the payroll tax cut is going to make it worse.  However, as was the case with the version that I supported in December, my support for any payroll tax extension will depend on what is in the final legislation.” [Sent via email from his spokeswoman, Alison Lynn.] 

U.S. Rep. Sheila Jackson Lee, D-Houston:

[Comments below are from Lee's spokesman, Michael McQuerry]:

"She definitely supports it even if it hasn't affected her district. She supports Texas in its efforts to keep its position as top producer of wind energy. She believes that it not only is beneficial to the environment but the economy because of jobs and energy it produces. Hopefully one day we can get more wind turbines to help Houston directly."

U.S. Rep. Ruben Hinojosa, D-Edinburg:

“I fully support energy producing projects including wind energy. Texas is a clear leader in wind energy production and I would like to see this expand across the state. I believe innovative energy production is important for our future and I will continue to be fully supportive of expanding the tax credit for wind energy to help our state.” [Sent via email from her spokeswoman, Patricia Guillermo.]

Gov. Rick Perry:

[Comments below are from an email from Lucy Nashed, Perry's spokeswoman]:

"Here in Texas, we’ve implemented an all-of-the-above strategy to address our state’s energy challenges. The comments you referred to address reforms to our nation’s energy sector coupled with an overhaul of the current tax system. The governor believes the federal government shouldn’t be in the business of picking winners and losers, and that the states are best suited to determine their own energy policies. ... Gov. Perry would like to see industry specific credits and subsidies phased out, and lower taxes on domestic energy sources to promote an all of the above energy strategy."

Repeated efforts to get comments from U.S. Rep. Francisco “Quico” Canseco, R-San Antonio; U.S. Rep. Kevin Brady, R-Conroe; and U.S. Rep. Randy Neugebauer, R-Lubbock, via their spokesmen, were unsuccessful.

Maria Rivera contributed reporting for this story.

Editor's note: This story has been corrected to say that HR 3307 would extend the production [not payroll] tax credit by four years.

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