Tax break for wind energy sweeps forward in Nebraska Legislature

Source: By Paul Hammel, Omaha WORLD-HERALD BUREAU • Posted: Thursday, April 25, 2013

LINCOLN — The state would be poised to gain a $300 million wind farm under a bill given resounding initial approval Wednesday.

The measure would provide a sales tax exemption for the purchase of turbines, towers and other wind-farm components — a tax break that nearby states Iowa, Kansas and Oklahoma have parlayed into a wind-energy boom.

Meanwhile, Nebraska has lagged behind, ranking 26th of the 39 states that generate wind energy, despite having the fourth-best wind resources in the country.

Iowa generates more than 13 times as much wind power as Nebraska — 4,536 megawatts to 337. And Nebraska ranks last among its neighboring states.

Proponents of Legislative Bill 104 said the state needs to act now if it wants to develop its abundant wind resources, because a major wind-energy incentive — a federal production tax credit — is scheduled to expire at the end of the year.

“This discussion is extremely important and time-sensitive. It’s as important as any decision being made this year,” said State Sen. Galen Hadley of Kearney.

He said Nebraska just lost a major company, Facebook, to Iowa in part because the tech giant wanted access to wind energy to power a proposed data center. Facebook has a corporate goal of utilizing 25 percent renewable energy.

Sen. Steve Lathrop of Omaha, who made LB 104 his priority bill, said wind farms provide a needed boost for rural areas

Lathrop said a 200-megawatt wind farm planned near Allen in northeast Nebraska would provide lease payments to local landowners of $10,000 to $15,000 per turbine, create 200 construction jobs and 12 to 16 permanent jobs, and pay $700,000 a year in local taxes.

TradeWind Energy will decide soon whether it will build in Nebraska or elsewhere, Lathrop said, so the Legislature cannot wait.

But critics, including Gov. Dave Heineman, have said the measure and another wind bill should wait until next year, after the Legislature completes a major study of state tax breaks.

Sens. Beau McCoy of Omaha and Charlie Janssen of Fremont said that there’s no guarantee that the federal incentives won’t be renewed and that tax breaks for wind farms should be weighed against other tax breaks.

Heineman has said lawmakers should provide tax breaks for retirees, military veterans and other regular Nebraskans before giving a tax exemption to an out-of-state wind company. TradeWind has its headquarters in Lenexa, Kan.

McCoy questioned how the Legislature could afford LB 104, and its $7.8 million estimated cost, along with another wind bill, LB 402, that is designed to help smaller turbine farms. That measure has a $6.7 million estimated cost.

The Legislature has about $41 million to spend on new bills, and spending one-third of that on wind is probably too much, McCoy said.

But Sen. Heath Mello of Omaha, chairman of the budget-writing Appropriations Committee and sponsor of LB 402, said both bills can be passed and funded with some adjustments.

Mello said his bill would amend a current law, the Community Based Energy Development Act, to lower thresholds for local investment, making it easier for projects to qualify for a sales tax break.

Meanwhile, LB 104 simply grants a tax exemption if a project invests enough money.

The bills have caused a some disagreement among wind-energy proponents.

Some groups, like the Nebraska Farmers Union and Center for Rural Affairs, have said they support LB 402 because it would create more economic development in rural areas by requiring purchases from Nebraska to qualify for tax breaks. The Sierra Club supports both bills.

Sen. Ernie Chambers of Omaha criticized LB 104 as being only about investors. But several rural senators said any wind energy development provides an unmatched opportunity to help revitalize small towns.

Frank Costanza, a representative of TradeWind, said the company prefers LB 104 because it would cost less to qualify for a tax exemption. The bill would allow the company to charge the lowest rates possible to its customers.

The company estimates that Nebraska’s lack of a sales tax break adds 10 percent to 15 percent to the production cost of wind power, thus making it uncompetitive with power produced in states that provide such tax advantages.

Derek Sunderman of TradeWinds said that the company expects to gain about $15 million in tax breaks for its proposed wind farm but that it would generate about $40 million in new tax revenue.