Wind energy tax credit splits Obama, Romney

Source: Written by Jennifer Jacobs, Des Moines Register • Posted: Tuesday, July 31, 2012

WIND ENERGY:- Availon mechanical support engineer Brian Lapcewich , right, and Steve Thompson, North America general manager for Availon, stand atop a GE wind turbine for MidAmerican Energy Wednesday near Blairsburg, Iowa.

WIND ENERGY:- Availon mechanical support engineer Brian Lapcewich , right, and Steve Thompson, North America general manager for Availon, stand atop a GE wind turbine for MidAmerican Energy Wednesday near Blairsburg, Iowa. / Rodney White/The Register

The lines are now drawn on a political hot button in Iowa: a lucrative tax break for wind energy.

Mitt Romney is against it, President Barack Obama favors it — opposing stances that could have political and economic implications in Iowa, which has more wind energy jobs than any other state in the nation.

The wind production tax credit is big deal because it bolsters the market for more turbines and towers.

Advocates for the tax break say jobs would be at risk if it disappears. Critics of the tax break, which will cost the federal government $1.6 billion this year, say it’s time for energy producers to make it on their own without government subsidies.

Romney aides spelled out the GOP presidential candidate’s position in a statement Monday, drawing criticism from at least one Republican elected official in Iowa.

Shawn McCoy, a spokesman for Romney’s Iowa campaign, told The Des Moines Register, “He will allow the wind credit to expire, end the stimulus boondoggles, and create a level playing field on which all sources of energy can compete on their merits.

“Wind energy will thrive wherever it is economically competitive, and wherever private sector competitors with far more experience than the president believe the investment will produce results.”

Obama strategists have been trying to elevate wind energy to one of the focal points of the presidential election in Iowa. Wind is popular with Iowans, so Democrats see opposition to the tax credit as a serious weak spot for Romney and a way for Obama to pry away crucial votes in a tight election.

Top GOP leaders in Iowa — including Republican Gov. Terry Branstad and the entire congressional delegation — champion the tax break as a vital economic development tool.

Monday evening, U.S. Rep. Tom Latham said the position Team Romney laid out “shows a lack of full understanding of how important the wind energy tax credit is for Iowa and our nation. It’s the wrong decision.” Latham called for Romney to re-evaluate.

A spokeswoman for U.S. Sen. Chuck Grassley said Monday he considers the tax credit he authored to be a tremendous success, but he has been talking with wind backers “about options that include a multi-year phase-out along with tax reform.”

Potential job loss? ‘We just don’t know’

Just how many layoffs could Iowa see if the tax credit expires at the end of 2012? Hard to predict, industry representatives said.

“I wish I could give you hard numbers, but the truth of the matter is we just don’t know,” said Harold Prior, director of the Iowa Wind Energy Association.

Some wind component manufacturers have bulked up on contracts outside the United States, so they would likely avoid significant layoffs, he said.

The wind tax credit goes to those who build and operate wind farms, not the manufacturers of wind equipment — but it would be the manufacturers who feel the pinch.

Iowa has five major manufacturers: Acciona in West Branch, Clipper in Cedar Rapids, Siemens in Fort Madison and TPI and Trinity in Newton. Together they employ around 2,300 people. Counting suppliers and other wind-related smaller businesses, the job count is 6,000 to 7,000, industry representatives said.

The uncertainty of the wind tax credit’s fate has already caused orders for turbine production for next year to drop steeply. When Congress delayed extension of the tax break twice in the past, wind projects faltered and workers were laid off. Clipper laid off 90 people in 2009 when projected orders for turbines fell from 450 to about 200.

However, existing wind farms in Iowa won’t generate any less energy if the tax credit dies. The existing 3,000 turbines wouldn’t be affected, so Iowa’s rank as second in the nation in wind-generating capacity likely wouldn’t change.

Nor would it hurt the company that has gained the most advantage from the tax break in Iowa — MidAmerican Energy, a subsidiary of Warren Buffett’s Berkshire Hathaway. In preparation for the possible disappearance of the tax break, MidAmerican and other wind farm owners timed their projects so that they would be finished by the end of the year and eligible for the money.

MidAmerican doesn’t plan at this time to add more wind generation capacity beyond 2012, company spokeswoman Tina Potthoff said. Loss of the tax break wouldn’t impact MidAmerican’s work force, she said.

Missed opportunity foreseen for growth

But it would undoubtedly put a damper on future economic development in Iowa, Prior said. If more wind farms are built here, it would mean more capital investment, an increase in the property tax base, more people hired to operate and maintain the turbines, and more money paid to Iowans in land lease payments, he said.

Without the tax credit, there’s no guarantee that $6 billion or $7 billion in additional wind farms planned for northwest Iowa will be built, Prior said.

In an Obama campaign conference call with reporters Monday, former Iowa Gov. Chet Culver, a Democrat, said the Obama administration has created thousands of American jobs because of its support of renewable energy.

“That progress is now in jeopardy,” Culver said. “If Mitt Romney has his way, jobs will be lost. That’s not a guess, that’s a fact. And we cannot let that happen. We cannot walk away from these jobs.”

McCoy, the Romney campaign spokesman, said Obama’s promise to create 5 million green energy jobs is “a particularly depressing punchline.” He noted that according to the American Wind Energy Association, the wind industry has lost 10,000 jobs since 2009, when Obama took office. And he repeated the criticism that the United States is subsidizing foreign manufacturers of wind turbines

“The president spent $90 billion in taxpayer stimulus dollars, some of which went to his donors and political allies or was sent to create jobs overseas instead of here in America,” McCoy said.

The job losses are due to the uncertainty of the future of the wind production tax credit, said Erin Seidler, spokeswoman for Obama’s Iowa campaign. In response to the criticism about stimulus money, Obama aides said that while wind manufacturers Acciona and Siemens are both foreign companies, they have created close to 1,000 jobs in West Branch and Fort Madison.

Will the wind issue make a difference on Election Day? The disappearance of the ethanol tax credit may have set the stage for the wind credit’s demise. In the face of Congress’ general anti-subsidy attitude, ethanol producers didn’t fight the loss of their 45-cents-per-gallon blenders tax credit, and it went away at the end of 2011.

The wind production tax credit costs the federal government less than the combined tax subsidies for oil, coal and natural gas by a 4 to 1 margin, wind advocates said. They expect the industry to need at least another five years of support.

Asked what sort of phase-out schedule Obama prefers, Seidler answered: “The administration is willing to work with Congress on the right time frame,” but its first priority is to get the tax break extended.