Taxes from wind energy benefit Wyoming’s economy at the state and county level

“Wind energy is an extremely important topics for the state of Wyoming and the revenue picture of Wyoming,” says Wyoming Department of Revenue Director Dan Noble.

In 1982, Wyoming built two wind turbines in Medicine Bow, including a four megawatt unit and a 2.5 megawatt turbine.

“At that time, the four megawatt turbine was probably the most powerful in the world, and it remained so for 20 years, but there was an issue.” 

When the main bearing in one turbine failed after 18 months, it was sold for scrap iron. The second turbine survived until 1986, when it was repaired, and then a windstorm took it out in 1994, according to Noble. 

“It’s important that we were involved in wind energy early on, and I think some of the things that were discovered then play an important role in how wind has developed today,” Noble adds.

Tax

An early revenue stream for the state of Wyoming as it relates to wind energy came from taxes.

“An exemption to the tax on retail sales of tangible personal property passed in 2003, and it exempted equipment used in the generation of electricity for renewable resources,” Noble says, explaining wind and solar were both exempted from sales tax. “Solar was a main driver, but one of the main reasons the bill passed was because the wind industry made an effort to support the bill to provide economic incentives to put up wind turbines in Wyoming.”

In 2010, another bill passed in the Wyoming Legislature that created a tax on electricity generated from wind resources. The bill was set up to exempt facilities from paying the tax for the first three years of production. 

“The tax was paid beginning in year four after production started at one dollar per megawatt hour of electricity produced,” Noble commented. “The tax was shared between state and local governments and was distributed between the two entities.” 

Of that tax, 40 percent goes to the general fund, and 60 percent is retained in the county where the tax is collected. 

Property taxes

Additionally, taxes are collected on wind generation facilities at the county level. 

“Wind generation facilities are considered industrial property and are taxed at 11.5 percent,” Noble says. “A very large portion of that tax goes to funding education in the state.”

In the last five years, wind generation has resulted in between $1.2 million and $1.4 million of property taxes. For both property and generation taxes, the Wyoming Department of Revenue has reported between $3.7 million and $4.4 million annually in revenue. 

“Fluctuation is caused when wind generators have to be taken offline for maintenance, when wind varies and in the amount of electricity actually produced,” Noble explains. “A lot of factors can create fluctuation in this tax.”

Implications

Noble notes wind energy taxes have been the subject of many conversations over time, and discussions have looked at the use of wind energy, as well as its economic impact. 

“There were concerns about wind energy, because it was felt to be in direct competition with coal,” Noble explains. “A study was funded by the legislature to look at the tax policy for the industry.”

A model was created to look at the structure of the wind energy industry, and almost immediately after the project was released, discussions began about a generation tax. 

“The one dollar generation tax was considered a placeholder for many,” Noble says. “This is going to be a conversation that continues, and we don’t know where it will end up.”

Future

With Wyoming’s tight budgets over the last few years, new conversations about taxes on wind energy have emerged, but no plan has stuck thus far. 

“There are an awful lot of wind generation projects being contemplated in Wyoming right now,” Noble adds, referencing projects proposed by Rocky Mountain Power and other groups. “Just the Chokecherry and Sierra Madre project alone is 1,000 turbines that could generate $232 million in sales tax. The generation tax would be roughly $10.5 million each year. 

“This project could triple what we’ve currently been taking in,” he says.

Noble further notes discussions about taxes have to also consider the costs associated with wind generation projects, as well as other factors, and he says the addition of new taxes could dis-incentivize wind developers from new projects in Wyoming. 

“I think it’s safe to say wind is here to stay,” Noble comments. “Does tax policy have an impact on wind? I think it does, and I think it’s also safe to say taxes will continue to play a role on conversations about wind energy going forward.”

Noble spoke during a wind energy forum held in Laramie in November 2017. 

Saige Albert is managing editor of the Wyoming Livestock Roundup. Send comments on this article to saige@wylr.net.