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Tax Dollars Blowin' in the Wind

by Rick Attig
The Oregonian, August 29, 2009

Wind turbines. As Oregon's tax subsidies for green energy projects, mainly wind turbines, climb higher and higher, and are now projected to increase by nearly $100 million over last biennium, Gov. Ted Kulongoski's veto of a bill reining in the credits seems ever more a costly mistake.

When the governor vetoed House Bill 2472 three weeks ago, the state estimated that energy tax breaks would total about $144 million over the next two years. Now revenue forecasters are predicting that Oregon will subsidize wind and other renewable energy projects to the tune of $167 million this biennium -- a sum that opens a hole of nearly $50 million in the state's operating budget, thanks to Kulongoski's veto.

The new, higher estimate further demonstrates that the lawmakers who overwhelmingly passed HB2472 were right: Oregon taxpayers are paying an unnecessarily high price to encourage clean renewable energy, especially the wind farms that now have plenty of economic incentive to sprout across Oregon and the Northwest.

This is not a knock on wind energy, or an attack on the core of Oregon's Business Energy Tax Credit, the "Betsy" program that has kick-started renewable energy development in the state and spurred several thousand jobs in wind, solar and other green energy projects. But the program has exploded in size and cost -- from $68 million last biennium to the $167 million now forecast for the current one. Kulongoski is concerned about the runaway costs of the credits, and he's asked the Department of Energy to develop stricter rules for who gets them. The governor also supports a separate bill passed by the Legislature that requires the state to analyze the wind-farm industry and whether it still requires the nation's most generous state tax subsidies. A spokeswoman for the governor said more study is needed to "evaluate whether the industry can stand on its own and thrive."

If you look around the Northwest, that seems obvious. Wind projects now churn out the energy equivalent of two Bonneville dams, and they are projected soon to double to four Bonnevilles. Meanwhile, a strict renewable energy portfolio standard in California guarantees a market for Oregon wind projects, and provides a heavy economic incentive without Oregon taxpayers chipping in $10 million for every project.

Wind is a great Oregon resource, and, yes, it is essential that the state encourage and support its burgeoning green energy sector. The BETC tax credit allows a business to recoup up to half the cost of building a new plant that either generates renewable power or makes equipment for renewable power generation. With credits of $10 million up to $20 million for large-scale manufacturing projects, the BETC subsidies are the nation's most generous.

HB2472 would lower the maximum state payments to large wind projects from $10 million to $3.5 million -- shaving only about $20 million from the rapid growth of the subsidies.

That made sense when the Legislature approved the bill, and it makes even more now that the program is expected to grow by nearly $100 million, even while Oregon taxpayers struggle to fund schools, keep inmates in prison and provide essential services to children and the elderly.

When the Legislature gathers in February for its next session, one of the first orders of business should be to override the governor's veto of HB2472, and reduce the unnecessarily large tax subsidies of some energy projects in Oregon.

Rick Attig
Tax Dollars Blowin' in the Wind
The Oregonian, August 29, 2009

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