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America’s Most Favored Industry
A lame-duck Congress will decide the wind-energy-production tax credit’s future.


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Robert Bryce

In the history of American business, it’s difficult to find an industry that has enjoyed more political favoritism than the wind-energy sector now enjoys.

The wind industry gets subsidies, mandates, and a de facto exemption from prosecution under some of America’s oldest wildlife laws. And the wind-energy lobby is doing all it can to make sure that this favoritism is maintained.

With the lame-duck session of Congress now under way, the American Wind Energy Association and its allies on Capitol Hill have begun a lobbying effort to extend the Production Tax Credit, the 2.2-cent-per-kilowatt-hour subsidy that the wind sector has received for about two decades. A bill that would extend the tax credit is pending in the House of Representatives. It has 119 co-sponsors, including 25 Republicans.

On Wednesday, Senator Chuck Grassley, an Iowa Republican, released a statement supporting the extension of the tax credit, saying, “If we’re going to have a discussion of which industries merit federal support and which don’t, the discussion needs to be intellectually honest.”

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Grassley makes a good point. Let’s look at the facts.

First, there are the subsidies. According to the Energy Information Administration, in 2007, total subsidies for the oil-and-gas sector amounted to about $1.9 billion per year, or about 3 cents per million British thermal units (BTU) of energy produced. Recall that the production tax credit is 2.2 cents per kilowatt-hour, which is $6.44 per million BTU of energy produced. (One kilowatt-hour of electricity contains 3,412 BTU.) Therefore, on a raw, per-unit-of-energy-produced basis, subsidies to the wind sector are more than 200 times as great as those given to the oil-and-gas sector. Put another way, the subsidy for 1 million BTUs of wind energy is nearly two times the market price of the same amount of natural gas: On Wednesday the spot price of natural gas was about $3.40 per million BTUs.

We can also calculate the subsidies using data from the Congressional Budget Office. The CBO estimates that tax preferences for renewable-electricity production in 2011 totaled $1.4 billion. The vast majority of that money went to the wind-energy sector, which produces about 60 times as much electricity as the solar-energy sector. (Note that the $1.4 billion figure does not include any of the $3.25 billion in tax-free grants that were given to the wind-energy sector by the Treasury Department under section 1603 of the American Recovery and Reinvestment Act between 2009 and 2011.)

In 2011, according to the BP Statistical Review, all non-hydro renewable-energy production in the U.S. averaged 909,000 barrels of oil equivalent (BOE) per day. Therefore, according to the CBO and BP data, the tax preferences for wind energy totaled about $1,540 per BOE per day.

How does that compare with oil and gas? The CBO found that tax preferences for the fossil-fuel sector totaled $2.5 billion in 2011. That year, domestic oil-and-gas production totaled 19.736 million BOE per day. (Oil accounted for 7.8 million BOE per day and natural gas accounted for nearly 11.9 million.) These numbers imply that the tax preferences for the oil-and-gas sector cost taxpayers about $127 per BOE per day.

So at $1,540 per BOE per day, the wind sector is getting subsidies that are about twelve times as great as the tax preferences provided to the oil-and-gas sector.

Lobbyists for renewable energy, along with their allies at the Sierra Club and other environmental groups, like to point out that the oil-and-gas sector gets favorable tax treatment. The numbers above show that that’s true. But there are no requirements for consumers to buy gasoline or natural gas. And that takes us to the issue of mandates.

Up until last year, the corn-ethanol industry benefited from both a mandate and a subsidy. Congress ended the corn-ethanol subsidy, but the mandate remains. That mandate requires gasoline retailers to blend an increasing volume of corn ethanol into their fuel. And the ethanol industry continues to get support for the mandate from the Obama administration despite objections from a wide variety of lobby groups over the effect that the corn-ethanol requirement has on food prices.

Meanwhile, the wind industry continues to enjoy both a subsidy and a mandate. (Twenty-nine states and the District of Columbia are subject to mandates for renewable-electricity production, which will likely mean higher-priced electricity for as many as 220 million Americans.) If there are any other industries that have a similar arrangement, I haven’t heard of them.

Finally, the wind sector has an effective exemption from prosecution under two of America’s oldest wildlife-protection laws: the Migratory Bird Treaty Act and the Eagle Protection Act. A violation of either law can result in a fine of $250,000 and/or imprisonment for two years.

According to the U.S. Fish and Wildlife Service, some 440,000 birds per year are being killed by wind turbines, but the Obama administration — like the Bush administration before it — has never prosecuted the wind industry for violating the law.

Last year, the Los Angeles Times reported that some 70 golden eagles per year are being killed by wind turbines located at Altamont Pass in central California. That finding follows a 2008 study funded by the Alameda County Community Development Agency, which estimated that about 2,400 raptors, including burrowing owls, American kestrels, and red-tailed hawks — as well as about 7,500 other birds — are being killed every year by the turbines at Altamont.



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