On November 18, 2009, the Wyoming interim Joint Revenue Committee (the "Committee") considered two bills, each of which proposed to tax wind generated electricity. Neither bill passed the committee on tie votes of 6-6 (4-4 House members and 2-2 senate members). One of the bills sponsored by Sen John Schiffer, R-Kaycee, chairman of the Committee (legisweb.state.wy.us/interimCommittee/2009/10LSO-0126w4.pdf) proposed a tax of $.0010 upon each kilowatt hour for electricity produced and sold in the State of Wyoming. An exemption was provided for electricity produced for the personal consumption of the producer. A power producer using coal or other fuels would break even on the generation tax through a credit equal to the severance tax portion of their electricity production costs. The proposed tax works out to be an approximately 5 percent tax on generation. The second bill considered by the Committee was sponsored by Rep. David Miller, R-Riverton, (legisweb.state.wy.us/interimCommittee/2009/10LSO-0062w2.pdf). Rep. Miller’s bill was similar to Sen. Schiffer’s bill, but would only provide the credit to traditional power producers if they agree to use 90 percent of the credit on electricity generation or transmission projects and put the other 10 percent into the state’s low income energy assistance program. Proponents of the proposed tax cited a number of factors in favor of the bill including the fact that wind projects should contribute to state and local governments equally with other energy industries. For example, Wyoming imposes a severance tax on natural resources, which includes (approximately) a 6 percent tax for oil and gas and a 7 percent tax for coal. Opponents of the tax bills, including the group of wind energy developers represented by the Wyoming Power Producers Coalition, argued, among other things, that (i) wind energy projects already pay property taxes and provide other financial benefits to the local communities and (ii) the taxation issue should be studied carefully so as not to discourage wind energy development in Wyoming.
The taxation issues was studied at great length by the Wyoming Wind Energy Task Force (the "Task Force"), which issued its Final Report and Recommendations on November 1, 2009 (legisweb.state.wy.us/). The Task Force report indicated that the "industry leaders strongly encouraged a taxation policy which is based on an accurate and comprehensive understanding of the costs and burdens faced by the industry, as well as the direct and indirect benefits that will be realized by Wyoming from wind energy development." The Task Force went on to recommend the following with respect to taxation:
- that the Joint Revenue Committee comprehensively study the issues surrounding taxation of the wind energy industry;
- any proposed new tax be imposed in a way so as to encourage the diversification of Wyoming’s economy and so as not to force the wind energy industry out of Wyoming;
- any tax should be designed to encourage the development of employment opportunities for Wyoming’s people and to encourage the development of businesses ancillary to the wind energy industry;
- that the Legislature conduct a careful examination of all burdens placed on wind energy producers and weigh those burdens against any benefits the producers realize by harnessing Wyoming’s high quality resources; and
- any tax burden proposed be calculated to maintain some competitive advantage for Wyoming’s wind energy producers as they deliver electricity to distance markets where a demand for their product exists.
On a final note, although the proposed tax bills did not pass out of Committee, individual legislators can still attempt to gain introduction votes for such legislation during the February 2010 legislative session. However, since the 2010 legislative session is a budget session, introduction of such bills would require a two-thirds vote, which appears unlikely given the current economy. It is important to point out that the taxation debate in Wyoming (and perhaps other states) is a signal to wind energy developers that they may want to revisit or consider the "change of law" risk under a long term power purchase agreement and whether the levy of a generation tax could be passed on to the purchaser under those contracts.