SD officials want wind energy tax credit extended

SIOUX FALLS, S.D. — Time is short for a tax credit seen as crucial to the wind energy industry.

The Production Tax Credit — which offers a 2.2-cent tax break for every kilowatt-hour of electricity produced from utility-scale turbines — expires Dec. 31, and uncertainty about whether and how it will be extended has sent ripples through the industry.

"The bad news is the wind industry is really going to contract this year — severely," said Ron Rebenitsch, executive director of the South Dakota Wind Energy Association. "We went from a boom to a bust."

Low natural gas prices and a longstanding transmission bottleneck haven't done the industry any favors, either. And the stress is starting to show.

At the Molded Fiber Glass blade plant in Aberdeen, 92 workers were laid off earlier this year as equipment orders slowed. These are just a few of the thousands of jobs lost in recent months in the wind-rich Great Plains, Rebenitsch said.

"Development has pretty much shut down," he said.

Last year, 75 megawatts of new wind power came online in South Dakota. This year: zero.

"Every day, I get another phone call from one of my wind friends looking for a job," said Steve Wegman, Rebenitsch's predecessor and an analyst at the South Dakota Renewable Energy Association. "At the rate we're going, we're truly cannibalizing the industry."

But with the presidential election settled and the congressional balance of power relatively unchanged, there is a renewed push to include an extension of the Production Tax Credit in a larger deal on taxes and spending. But first it must rise above the many other issues to be considered in the lame-duck session.

South Dakota's delegation supports an extension, but they — and lawmakers from other windy states — will have to persuade their colleagues to vote it through at a time when Congress is looking for expenditures to cut.

"This is a difficult time to extend any tax credit that is regarded as a subsidy," said Sen. Tim Johnson, D-S.D.

Extending the Production Tax Credit for one year will cost taxpayers $5 billion, but proponents cite an industry estimate that the credit creates three times that amount in annual private investment.

As part of the tax extenders bill that cleared the Senate Finance Committee in August, Sen. John Thune, R-S.D., voted to extend the credit — with a phase-out provision.

"I am hopeful that a proposal of this nature will be included in a larger fiscal cliff/tax package by the end of the year," Thune said in a statement.

But Johnson said the bill will come up for a vote after negotiations on the so-called fiscal cliff between the White House and House Speaker John Boehner shake out.

"The credit might also be included in a unique bargain the administration and Congress reach on the debt," said Johnson, who favors a multiyear extension.

The House, meanwhile, is working on its version of the tax extender bill. A Production Tax Credit extension easily could be folded into that, said Rep. Kristi Noem, R-S.D., who has co-sponsored legislation to extend the credit for four years.

If allowed to lapse, there is always the chance the tax credit extension could be included in a broader tax reform bill expected to be taken up next year.

"We need comprehensive tax reform, and it makes sense to include this as well," Noem said.

Given the long production cycle — seven to nine years from planning to startup — the industry needs more than one year, Wegman said.

"The one-year extension is a safe bet, but it doesn't do much for the industry," Wegman said. "You're giving a one-time blood transfusion to a patient with two amputated legs. It's a tourniquet. You keep the thing alive, kind of, but it's not viable."