The 25-3 vote to advance the proposal from the first round came after a long debate over whether such a tax break could succeed in creating an incentive or whether Nebraska is too late to become a big player in wind energy.
Nebraska’s wind energy potential has always ranked among the highest in the nation. But its production of energy via wind farms has lagged behind, ranking 18th nationally in 2013. By contrast, neighboring Iowa was No. 1 in wind energy production that year, with about eight times more wind turbines than Nebraska.
State Sen. Jeremy Nordquist of Omaha, who sponsored the tax credit bill, said Nebraska has a “once in a lifetime” opportunity to attract more wind farms because utilities are in the process of closing dozens of coal-fired power plants and will be looking to invest in clean energy projects.
“We need to be in the game,” Nordquist said. “Right now, without a (state) production tax credit, we are not in that game.”
Other senators questioned the need for a tax break. They said the reason Nebraska has lagged in wind energy is that its public power utilities could not qualify for federal production tax credits that, before expiring last year, propelled development in other states.
“On wind, we’re a day late and a dollar short,” said Columbus Sen. Paul Schumacher.
He urged fellow lawmakers to seek out new technologies, such as fusion or thorium reactors, so that Nebraska could take the lead instead of being “behind the curve.”
North Platte Sen. Mike Groene said he would not support such tax breaks unless they benefited all Nebraskans. Groene also joined a couple of other rural senators in complaining that wind farms ruin the landscape.
That brought a quick retort from Ogallala Sen. Ken Schilz, a supporter of the tax credits. He said that if a county didn’t want wind farms ruining someone’s view, county officials could restrict them. But he said wind farms provide much-needed economic development for rural areas.
Other supporters argued that taxes paid by wind farms can be used to reduce property taxes in rural counties. All forms of energy, they added, have received tax incentives.
“If Nebraska had the same potential for oil as we do for wind, we’d be tripping over ourselves to provide incentives for that,” said Omaha Sen. Heath Mello.
Among the projects mentioned that could benefit were a farmer-owned wind farm near Oakland, another wind farm in Cherry County, and solar projects in Gothenburg and Lexington.
Under the amended version of Legislative Bill 423, a wind or renewable energy project would get a 1-cent tax credit for every kilowatt hour of power produced. The tax credit would decline by .1 of a cent every two years and then go away after 10 years. By contrast, the federal tax credit was 2.3 cents per kilowatt hour.
Six states, including Iowa, provide state production tax credits, according to a report last year by the Iowa Department of Revenue.
Under LB 423, Nebraska would provide about $3 million worth of tax credits after two years, according to fiscal estimates. That amount would continue rising to $14 million to $17 million a year after four years.
Omaha Sen. John McCollister, who expressed doubts that the tax break would work, won approval of an additional amendment that would cut off applications after five years and require an annual report on whether the tax break was truly inspiring economic development.
McCollister said that, to limit the expense of the program, he might seek an additional amendment to cap the amount of tax credits given in a particular year.