A wind energy industry lobbyist pushing to extend Idaho’s sales tax rebate for alternative power developers made it clear: If the extension died, Roy Eiguren told lawmakers on April 7, so would hundreds of millions worth of his company’s projects.
“Your client would announce tomorrow that they are canceling those projects?” asked Sen. Joe Stegner, R-Lewiston.
“That would be correct,” answered Eiguren, lobbyist for Exergy Development Group.
The extension failed 18-17 in the final minutes of the 2011 session, but Exergy has retreated from its threat. James Carkulis, the company’s founder, now says he’ll follow through due to existing commitments, even if the rebate’s death wipes out profit margins from more than 100 megawatts of wind power he’s now hoping to install in southern Idaho.
“It will be more than likely unprofitable for Exergy,” said Carkulis, who drives a 1979 Porsche 911, flies in a Swiss-made Pilatus turboprop and sponsors a Boise-based professional cycling team. “That said, we are a company that strongly believes in honoring our contractual obligations.”
Idaho’s rebate, originally passed in 2005, will now expire on June 30 – not just for Carkulis and other wind developers who emerged as a lobbying force over the last three months, but also for other alt energy wildcatters building landfill gas, anaerobic digesters and geothermal power projects.
The brinksmanship Exergy employed to keep it alive is nothing new to the Idaho Legislature, especially when millions are at stake.
Grocery chain Albertsons Inc. did it in 2005, threatening then-Gov. Dirk Kempthorne’s administration it would move elsewhere without lucrative concessions. Lawmakers went along, but Albertsons was sold just months later to an out-of-state competitor.
Stegner, who opposed the extension on grounds that companies should sink or swim in a free market, believes wind companies’ threats to blow out of Idaho may have been hyperbole to scare lawmakers. With wind developers, a majority in the Senate just didn’t blink.
“It’s logical that companies are going to tell us that they are vitally important,” Stegner said. “The responsibility of the Legislature remains one of a certain amount of caution and a certain amount of suspicion when it comes to these types of tax incentives.”
On April 15, Eiguren said his response to Stegner’s question reflected his discussions with Carkulis at the time.
“I obviously would not have said what I said had he not told me that,” Eiguren told The Associated Press. “Since the vote, James has been re-evaluating the projects.”
Other companies are, too.
Scott Montgomery, the Salt Lake City-based developer of Cedar Creek Wind, told lawmakers he’d have to “seriously evaluate” his 133-megawatt project in eastern Idaho without the state break. Armand Eckert, who is developing a 20-megawatt wind farm near Buhl, said small projects like his will be hurt, because they already require more than a decade to recoup their investment.
Still others say the rebate isn’t the make-or-break issue.
On the Idaho-Nevada border, where RES Americas is developing its 400-megawatt China Mountain project, the British company says the gusts that roar through the area, coupled with economical transmission to ship electricity to customers in Nevada, make its project competitive without the rebate.
“While the rebate is a helpful tool, it is not essential for this project,” said Suzanne Leta Liou, an RES manager.
According to a Boise State University study last month, a 160-megawatt wind farm will qualify for $12 million in state tax rebates while generating $77 million in state and local taxes over 25 years. Wind developers argue this tradeoff benefits the public.
But Stan Hawkins, a former eastern Idaho Republican state senator who practically lived in Boise this winter to champion stricter limits on Idaho’s wind industry, argues turbine developers have expanded thanks to state and federal incentives like tax credits, cash grants and favorable depreciation rules.
These help make non-polluting wind projects more competitive with coal- or natural gas-fired electricity, but Hawkins insists the proliferation of tall, white turbines is driving up utility customers’ rates and encroaching on private property rights of neighbors who live in their shadow.
“This is creating a wealth machine for risk-takers that foists the risk on ratepayers and taxpayers,” he told the AP. “Tax avoidance, essentially, that’s what this is all about.”
Companies like Exergy and its partners including General Electric can also sell potentially lucrative renewable energy credits to utilities in places like California and Washington, to help them meet their home states’ renewable mandates. Last week (April 11-15), for example, Seattle City Light bought the credits from a 22-megawatt Idaho wind farm in Elmore County from 2015 to 2029 for $1 million annually.
At that rate, Exergy and GE would reap more than $8.4 million annually from their 183-megawatt development near Hagerman.
Carkulis said the comparison is unrealistic, since no two companies have the same models or receive the same deals. All the incentives combined – the renewable credits, the state and federal tax breaks, and the price developers get for their power – make a project profitable, while losing just one can turn the equation on its head, he said.
“All of that is already built in,” Carkulis said. “It’s a slim margin to begin with.”