The following editorial piece appeared in the Casper Star-Tribune, October 14, 2009 |

Wyoming has a big challenge ahead: how to fairly tax the wind energy industry so a steady stream of revenue goes to the counties that host wind projects. It’s clearly a more complicated task than it was to determine the mineral severance tax system for oil, natural gas and coal.

Fortunately, there’s no need to rush the process. It’s in the state’s best interest to carefully examine all of the alternatives and their potential impacts, rather than hurry just to get something on the books.

The state’s Wind Energy Task Force met in Casper on Monday to consider draft taxation legislation. The Wyoming Constitution prohibits singling out a particular industry for exclusive taxation, so creating a tax specifically on wind energy would be unacceptable. To make it constitutional, the draft bill would impose a tax on the generation of all electrical generation, but provide tax credits or exemptions to all other forms of generation but wind.

It remains to be seen if such a law would pass muster with the courts. But the reason for the exemptions, as offered by Sen. John Schiffer, R-Kaycee, chairman of the Senate Revenue Committee, is sound. He noted that Wyoming’s oil, natural gas and coal extraction industries are big consumers of electricity.

“We need to keep those industries of the state as competitive as possible,” Schiffer said. “That’s why that exemption is in there.”

A spokesman for Rocky Mountain Power, the state’s largest regulated utility, which is also developing wind farms, said the company would support exemptions for traditional power generation. But he added that implementing the tax could be tricky — Rocky Mountain, for example, aggregates the cost of its fuel expenses over its six-state operating region. No other state in its region now taxes electrical generation.

A key to whatever tax system is developed, whether it’s a property tax, a tax on electrical generation or another method, will be whether it stifles or encourages wind power development. Cheryl Riley, executive director of an industry trade association, the Wyoming Power Producers Coalition, said Wyoming’s sales taxes and property taxes are relatively high, already making Wyoming one of the most expensive places to generate wind energy.

Riley was also disappointed when state lawmakers tried to cut short a sales tax exemption for equipment purchased for commercial-scale renewable energy projects in Wyoming. Schiffer said the tax credit will likely be effective through its original Dec. 31, 2011, sunset date.

But it was encouraging to hear Riley say that the best tax structure for wind energy would be for Wyoming to provide incentives that lower the cost of building wind energy facilities, such as sales tax credits. Then, the state could apply some type of generation or property tax that generates a steady stream of revenue to counties over the long term.

Such a combination that helps build the industry while also providing tax revenues to the state should be palatable to lawmakers. We’re not talking about a huge amount of revenue — Schiffer estimated less than $50 million annually, even under a full build-out of current wind energy proposals in the state — but with money scarce, it will definitely be needed to help counties deal with the impacts of large wind farms.