Gov. Ted Kulongoski bowed to mounting criticism Wednesday and said he’s ready to pare Oregon’s tax subsidies for green energy projects — especially wind power — after vetoing a similar plan earlier this year.
The governor offered his support for a proposal to phase out the incentives given to wind energy projects, worth up to $11 million each. The proposal is part of a set of changes recommended by state energy and economic development officials for the Business Energy Tax Credit, considered the most lucrative incentive of its kind in the nation.
“The recommendations represent immediate actions the Legislature can take in February to strengthen the program and ensure it is delivering the greatest return for taxpayers,” Kulongoski said.
Lawmakers will convene a short session in February to tackle a number of budget issues, and the energy tax credit is a priority.
The proposed changes come amid increasing criticism about the rapidly escalating cost of the subsidies. Investigative reports by The Oregonian showed that state officials intentionally downplayed the cost of the tax credits before the Legislature voted to substantially increase them in 2007. In addition, millions of state tax dollars went to projects that went bankrupt or never produced energy savings.
Kulongoski, who has pushed for bigger subsidies as part of an effort to boost jobs along with cleaner energy in Oregon, believes wind companies can stand on their own, said his spokeswoman, Anna Richter Taylor.
“What he’s determined is, this industry has matured and doesn’t need as large of a subsidy,” she said.
Last month, Kulongoski asked the state energy department director, Mark Long, and the business development department director, Tim McCabe, for a review of the incentives and a list of recommended changes.
Chief among the recommendations is to separate wind energy from other areas covered by the tax incentives. The proposal would cap the amount of incentives offered to wind companies, reduce the amount of the subsidy most projects would get and phase out the incentives over five years.
The report concludes that the tax credits remain a critical component of Oregon’s efforts to expand its green energy industry but that more controls are needed. The directors also recommended voiding tax credits if a company doesn’t perform and reducing the subsidies if other public money is used in the project.
State Sen. Ginny Burdick, D-Portland, who championed the vetoed bill that cut tax subsidies to wind farms, called Kulongoski’s change of heart “a very, very good start.”
Burdick’s bill would have saved the state about $10 million a year. She hasn’t seen an estimate on how much money the state would save if the new changes are adopted.
“The bottom line is we have a recognition that this a is a program that needs immediate attention to bring it under control,” Burdick said.
Under rules set in place in 2007, renewable energy companies can receive tax credits worth up to 50 percent of the cost of a project, whether it is a wind farm or a solar energy plant. The maximum credit for wind farms is $10 million; for solar projects it’s $20 million.
Alan Tresidder, a lobbyist who represents Iberdola, one of the biggest players in Oregon’s fast-growing wind energy industry, said the changes could slow development of new projects.
“You take a lot of things into account when you’re deciding to construct a wind farm,” Tresidder said. Oregon tax incentives “have made a difference in several cases.”
Rachel Shimshak, director of Renewable Northwest Project, which advocates for alternative energy, said some of the changes could hurt smaller projects that depend on the incentives to survive. But “tightening up the program and its accountability is a good thing,” she said.
Harry Esteve, The Oregonian – http://www.oregonlive.com/politics/index.ssf/2009/12/kulongoski_changes_course_supp.html