Could some Oklahoma wind farms go down in flames because of the legislature?
Lawsuits from the wind industry and school districts. The bankruptcy of wind farms. School bond projects in jeopardy. Higher electricity costs.The banking industry losing money it loaned for wind farms. A black eye for Oklahoma’s ability to recruit industries to the state.
They are what Wind Coalition executive Mark Yates is predicting if the Oklahoma legislature passes some of the bills that last week won committee approval and are on their way to the State House and Senate.
“It’s really devastating to the point of–you hate to tell people this—but if these measures were to pass, companies will have no other option but to file a lawsuit against the state of Oklahoma,”said Yates in an extensive interview with OK Energy Today.
The measures he referred to included House Bill 3069 which passed out of the House Rules Committee last week on a vote of 8-3. Authored by Rep. Dennis Casey, a former educator and rancher from Morrison, his “Oklahoma Wind Energy Policy Review Act of 2018” would create a $10 million cap on the zero emissions tax credit received by any wind generation company.
Senate Bill 1035, authored Senate Pro Tem President Mike Schulz of Altus, would create a $5 million cap on the zero emissions tax credits beginning in 2019. It passed out of the Senate Appropriations Committee last week on a 27-4 vote.
House Bill 2011 by Bartlesville Rep. Earl Sears would lower the refund for unused tax credits from 85% to 42.5%.
“All of them would really jeopardize the economics of several existing projects,”said Yates. “Obviously, the lower the cap the more punitive it is. And our companies have run some of the numbers on the economics and you could definitely see with a couple of years, some of these projects going under.”
Yates said the legislators don’t understand that the tax credits were built into the business models when the wind industry companies won state approval to build wind farms in Oklahoma.
“These projects are not profitable for the first 12 years of existence,” he explained. The Wind Coalition leader said for the state to go back and change the rules “of the game so dramatically after these projects are already up and spinning, the investment is there and now to go back in and change is devastating.”
He compared it to a homeowner getting a 5% rate on a 30-year home mortgage and after 4 years, the bank changes the interest rate to 12%.
“That’s why I say this isn’t really a wind issue. It’s a business issue. You don’t recruit companies to come here and invest billions of dollars and turn around and say ‘hey, we’re gonna go back on our promise and change it.’ Really, the legislature hasn’t thought out the process of how you go claim those tax credits.”
That’s when Yates, in the interview, raised the possibility of the state being sued by the wind industry or one of the wind farm operators.
“If these measures were to pass, companies will have no other option but to file a lawsuit against the state of Oklahoma,” said Yates “If you go bankrupt or they unload a project because of the economics of it, you also have the potential of school districts that bonded these projects—who’s going to foot that bill? So now you have even the potential that school districts could turn around and sue the state of Oklahoma for these projects going under.”
As the Wind Coalition pointed out in a recent news conference at the State Capitol, school districts in several of the more than two dozen counties with wind farms used additional tax revenue to finance improvements with school bond projects.
Which particular wind projects could fail? Yates said it could include those wind farms that came on line and qualified for the zero emissions tax credit as of July 1, 2017.
“If you look back at projects that came on line in the past 3 or 4 years, those all qualified for the zero emissions tax credit. And they’ve all been built into the financing,” he told OK Energy Today. “They would be unable to make their payments and basically it would put them under water. No doubt about that.”
Yates also pointed to some of the wind farms making long-term power agreements with major corporations including T-Mobile and Anheuser-Busch. Those corporations reached deals on agreed-upon purchase prices.
“For these companies that have already sold power, they can’t go back and change purchase agreements with anyone. So now they’re forced to eat what is placed on them as a burden. They’re not able to pass it on either. Unlike a utility, they’re not gonna be able to pass that cost along. They’re gonna have to eat it.”
Yates predicted the cost of electricity could also go up for consumers in Oklahoma as a result if the legislative measures are made law.
“At the end of the day, it’s very simple. You recruited investment in the state of Oklahoma. You actively went to conferences and trade shows to recruit companies to spend and invest in Oklahoma. You said ‘we will give you this for this amount of years.’ And now they’re completely changing those rules It’s just a horrible story quite frankly.”
He also raised the question, if the legislature does it to the wind industry, what will it do to other industries and other companies.
“It’s also about the financial institutions that have been a part of these negotiations. The banking institutions have been involved in this as much as anybody. You have to think about people who finance wind projects are also people that finance projects in all forms of industry,” he said.
“We have nowhere else to go on this. A promise is a promise and to do anything now and change—it’s just devastating to the state of Oklahoma.”
Who were the legislators who forced the 3 measures?
House Bill 2011 and House Bill 3069 each won approval on 8-3 votes in the House Rules Committee. Representatives Josh Cockroft, Jon Echols, Elise Hall, Leslie Osborn, Zack Taylor, Terry O’Donnell, Weldon Watson and Tammy West voted for both.
Three Representatives opposed the two measures including David Perryman, Steve Kouplen and Melodye Blancett.
In the Senate Appropriations Committee, SB 1035 won approval from Senators Bergstrom, Bice, Daniels, Dossett, Dugger, Floyd, Holt, Ikley-Freeman, Jech, Leewright, McCortney, Paxton, Pemberton, Pugh, Rader, Rosino, Scott, Sharp, Simpson,Smalley, Sparks, Standridge, Stanislawski, Yen, Fields, David and Treat.
Four Senators opposed the measure. They were Griffin, Murdock, Pederson and Thompson.