Last month, Senatory Michael Bennet, a Colorado Democrat, lambasted his colleagues for not extending the production tax credit, the 2.2 cent-per-kilowatt-hour subsidy for wind energy that expires at the end of this year. Bennet said that without the subsidy, the wind industry, which he called “an economic driver that is critical to jobs” will “take a devastating hit.”[i]
Let’s set aside Bennet’s – and the wind-energy lobby’s – self-serving argument about jobs for the moment and acknowledge one unassailable fact: no other part of the energy industry receives as much preferential treatment as the wind-energy business.
Indeed, perhaps no other sector in all of American business gets such preferential treatment. The wind industry not only has the production tax credit, it also has mandates covering about two thirds of the US population, and a de facto grant of immunity from federal prosecution under some of America’s oldest wildlife laws. It’s that last issue that chaps my hide the most, but I’ll come back to it in a moment.
First, let’s talk subsidies. On a per-unit-of-energy produced basis, the PTC provides a subsidy to the wind industry that is at least 12 times as great as that provided to the oil and gas sector and 6.5 times as great as that provided to the nuclear industry.
Here’s the math: In 2011, according to BP, all non-hydro renewable energy production in the US averaged 909,000 barrels of oil equivalent per day. (BP uses a multiplier of about three to put renewables on par with fossil-fuel generation.) According to the Congressional Budget Office, tax preferences for renewable-electricity production totaled $1.4 billion in 2011. The vast majority of that money went to the wind-energy sector which, in 2011, produced more than 60 times as much electricity as the solar-energy sector.[ii] (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.)
Therefore, using the BP and CBO data, we find that the tax preferences for wind energy total $1,540 per barrel of oil equivalent per day. At $1,540 per barrel of oil equivalent per day, the wind sector is getting subsidies that are about 12 times as great as the amount of tax preferences provided to the oil and gas sector. Here are the numbers: In 2011, domestic oil and gas production totaled 19.736 million barrels of oil equivalent per day. (Oil accounted for 7.84 million barrels per day and natural gas accounted for nearly 11.9 million barrels of oil equivalent per day.) Last year, according to the CBO, the tax preferences extended to the fossil-fuel sector totaled $2.5 billion.[iii] Therefore, a bit of simple math shows that the tax preferences for the oil and gas sector cost taxpayers about $127 per barrel of oil equivalent per day.
How do wind subsidies compare to those provided to nuclear? Although opponents of nuclear energy often contend that the sector gets lavish subsidies, it’s clear from the BP and CBO data that the wind energy sector gets far more in the way of tax preferences than the nuclear sector.
In 2011, the US obtained nearly 3.8 million barrels of oil equivalent per day from nuclear reactors.[iv] (Note that BP treats nuclear in the same way as it treats renewables by nearly tripling the amount of energy delivered so as to put the source on par with fossil-fuel generation.) According to the CBO, the nuclear sector was subsidized to the tune of $900 million in 2011, which works out to about $238 per barrel of oil equivalent per day. At that level, the wind energy sector is getting about 6.5 times as much subsidies as the nuclear sector.
In addition to the subsidies, 29 states and the District of Columbia are subject to mandates for renewable electricity production, which is affecting the cost of electricity for about 220 million Americans. While those mandates may be politically popular, it’s also clear that they are imposing real costs on consumers. As Suedeen Kelly, a former member of the Federal Energy Regulatory Commission, has put it, the mandates for renewable energy are, in fact, a “back-end way to put a price on carbon.”[v]
Advocates of renewable energy often claim that traditional energy producers get favorable tax treatment. And while that may be true, there are no requirements at the federal level or the state level for consumers to use coal, oil, or natural gas. There is no reason why the wind energy sector should be entitled to both direct subsidies and the indirect subsidies that come in the form of mandates.
As for jobs, a simple bit of math shows just how expensive wind-related jobs are for consumers.
In August, the Senate Finance Committee approved a plan to extend the PTC for one year.[vi] At about the same time the committee approved the proposal, the Joint Committee on Taxation, the non-partisan congressional entity established in 1926 that assists legislators on tax-related matters, released their estimate of the cost of the extension. The committee put the cost of extending the subsidy at $12.18 billion from 2013 to 2022.[vii]Therefore, if you use the wind-industry’s subsidy of $12.18 billion and divide it by the 37,000 jobs that AWEA claims are at risk, you get $329,000 per job.
A wind-energy supporter might claim that the $329,000 figure is too high — that it should be spread out over a decade, just as the costs calculated by the tax committee are. If we take that approach, then each wind-energy job costs $32,900 per year. But even with that more conservative methodology, wind-energy employment is still expensive. In fact, these numbers may be too low.
In December 2010, Susan Combs, the Texas state comptroller, reported that each wind-related job in Texas, costs the state’s taxpayers $1.6 million.[viii]
Or consider the most egregious case of wind-energy corporate welfare: the Shepherds Flat wind project in Oregon, which is getting a $490 million cash grant from the federal government. The project, backed by General Electric, Google, and other companies, will create just 35 permanent jobs.[ix] If we use that figure as our basis, then each job at Shepherds Flat will cost taxpayers some $14 million. To be clear, during the construction phase of the project, some 400 jobs were created. But even if we count all of those 400 jobs as permanent, and add the 35 jobs previously cited, taxpayers are still spending about $1.1 million per wind-related job.
While all of those factors are substantial, the most outrageous example of preferential treatment involves two of America’s oldest wildlife-protection laws: the Migratory Bird Treaty Act and the Eagle Protection Act.
Last year, the Los Angeles Times reported that about 70 golden eagles per year are being killed by wind turbines located at Altamont Pass in central California.[x] 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 wind turbines at Altamont.[xi]
In all, according to the U.S. Fish and Wildlife Service, some 440,000 birds per year are being killed by wind turbines.[xii] And nearly all of those birds are protected by federal law.
But the Obama administration – like the Bush administration before it – has never prosecuted the wind industry for violating those laws despite myriad examples of widespread, unpermitted bird kills by turbines. A violation of either law can result in a fine of $250,000 and/or imprisonment for two years.[xiii]
By exempting the wind industry from prosecution under the Migratory Bird Treaty Act and/or the Eagle Protection Act, the federal government is providing another indirect subsidy to the sector. Other energy companies have been required to pay hefty fines and perform mitigation work to reduce the risk that their facilities pose to birds. For instance, in 2009, ExxonMobil pled guilty in federal court to charges that it killed 85 birds – all of which were protected under the Migratory Bird Treaty Act. The company agreed to pay $600,000 in fines and fees for the bird kills, which occurred after the animals came in contact with hydrocarbons in uncovered tanks and waste water facilities on company properties located in five western states.[xiv]
And yet, despite numerous cases of bird deaths at wind-energy projects, the industry has not been prosecuted a single time by federal authorities.
There is a pernicious double standard at work here. Over the past two decades or so, the Interior Department has brought hundreds of cases against the oil and gas industry and the electricity generation sector for violations of the Migratory Bird Treaty Act and/or the Eagle Protection Act.[xv] Meanwhile, that same agency has given the wind industry a de facto exemption from prosecution.
About 25 years ago I wrote extensively about the prosecutions being brought against the oil and gas industry under the Migratory Bird Treaty Act because birds were dying in open – and often, unlicensed – oil pits. The industry was involved in some bad practices and they deserved to be fined for violating federal law. But here’s where the perniciousness of the double standard becomes obvious: In the late 1980s, federal authorities estimated that about 500,000 birds were being killed every year by open oil pits. Using that number, they aggressively prosecuted violators in the oil patch.
Today, the agency estimates that nearly the same number of birds are being killed by wind turbines – recall they estimate the wind-energy sector is killing about 440,000 birds per year – and yet federal authorities are ignoring the problem, presumably because wind energy is “green.”
Nevertheless, at the very same time that the wind industry wields a get-out-of-jail-free card for violating the Migratory Bird Treaty Act and Eagle Protection Act, federal prosecutors continue bringing cases against the oil industry under those very same laws. In 2011, the U.S. Fish and Wildlife Service filed criminal indictments against three drillers who were operating in North Dakota’s Bakken field. One of those companies, Continental Resources, was indicted for killing a single bird, a Say’s phoebe. Brigham Oil & Gas was charged with killing two mallards and Newfield Production was indicted for the deaths of two mallards, one northern pintail, and one red-necked duck. (In January, a federal judge in North Dakota dismissed the charges against the companies, ruling that the case against the companies was too vague.)[xvi]
Environmental groups are beginning to understand the threat to wildlife posed by wind-energy projects and they are taking legal action. The Center for Biological Diversity, Sierra Club, and Defenders of Wildlife have filed a lawsuit against officials in Kern County, California, in an effort to block the construction of two proposed wind projects — North Sky River and Jawbone — due to concerns about their impact on local bird populations.[xvii]The groups oppose the projects because of their proximity to the deadly Pine Tree facility, which the Fish and Wildlife Service believes is killing 1,595 birds, or about 12 birds per megawatt of installed capacity, per year.[xviii] At least six golden eagles have been killed by turbines at the Pine Tree wind project.[xix]
And the problem may soon get worse, far worse. Last week, the American Bird Conservancy, which has been leading the fight for stricter siting standards for wind projects, issued a press release which lambasted the Interior Department for its approval of the Chokecherry and Sierra Madre wind project in Wyoming. The group’s lead coordinator on wind issues, Kelly Fuller said the newly approved project is “on track to become the single most deadly wind farm for eagles in the country.”[xx] The ABC points out that the Bureau of Land Management estimated that 46 to 64 golden eagles per year would likely be killed each year by the project. Some estimates put the likely death toll at more than 200 eagles per year. But even at the lower level, the ABC says that eagle populations will almost surely be depressed due to the wind project.
The ABC has submitted a petition to the U.S. Fish and Wildlife Service which asks the agency to create regulations that would better protect migratory birds.[xxi] Some 91 groups have signed onto the petition including entities like the Cornell Laboratory of Ornithology, Endangered Species Coalition, and numerous chapters of the Audubon Society.[xxii]
Despite the pressure from the environmental groups, the Interior Department has indicated it may issue permits to the wind industry that will guarantee certain wind projects are exempted from the MBTA and EPA for a period of up to 30 years. The Obama administration has delayed taking any final action on the permits until after the November 6 election, but it appears that several environmental groups will file lawsuits if the Interior Department issues permits that allow wind projects to kill birds with impunity over a three-decade period.
As long as the PTC remains in place, federal taxpayers will be, in effect, subsidizing the killing of federal wildlife. And that may be the worst form of subsidy of all.
Robert Bryce is a senior fellow at the Manhattan Institute. This article is a shortened version of a recent report he did for the think tank. The full report is available here.
[ii] EIA data, http://www.eia.gov/totalenergy/data/monthly/pdf/sec7_5.pdf
[iii] Congressional Budget office data, http://www.cbo.gov/sites/default/files/cbofiles/attachments/03-06-FuelsandEnergy_Brief.pdf
[iv] BP Statistical Review of World Energy 2011.
[v] Speech by Suedeen Kelly at Tufts University energy conference, Boston, April 16, 2011. Quotation transcribed by the author.
[vi] Richard Rubin, “U.S. Senate Finance Committee Passes PTC Extension Plan,” Bloomberg, August 2, 2012, Renewable Energy World, http://www.renewableenergyworld.com/rea/news/article/2012/08/u-s-senate-finance-committee-passes-tax-break-extension-plan
[vii] Joint Committee on Taxation data, https://www.jct.gov/publications.html?func=startdown&id=1174
[viii] Laylan Copelin, “Combs report says Texas overpays in tax breaks to wind farms based on job creation,”Dallas Morning News, December 20, 2010, http://www.dallasnews.com/news/state/headlines/20101220-comb-report-says-texas-overpays-in-tax-breaks-to-wind-farms-based-on-job-creation.ece
[ix] Hibah Yousuf, “GE to supply world’s largest wind farm,” CNN.com, December 20, 2009,http://money.cnn.com/2009/12/10/news/companies/GE_wind_farm/index.htm?cnn=yes, Renewable Fuels Association data, http://ethanolrfa.org/page/-/images/RFA Letter to Obama TH%2BPOL15.pdf?nocdn=1
[x] Louis Sahagun, “Wind power turbines in Altamont Pass threaten protected birds,” Los Angeles Times, June 6, 2011, http://articles.latimes.com/2011/jun/06/local/la-me-adv-wind-eagles-20110606
[xi] Alameda County Community Development Agency, “Altamont Pass Wind Resource Area Bird Fatality Study,” June 2008, http://www.altamontsrc.org/alt_doc/m30_apwra_monitoring_report_exec_sum.pdf
[xii] Albert M. Manville II, “Towers, Turbines, Power Lines, And Buildings—Steps Being Taken By The U.S. Fish And Wildlife Service To Avoid Or Minimize Take Of Migratory Birds At These Structures,” Proceedings of the Fourth International Partners in Flight Conference: Tundra to Tropics 262–272, undated (approximately 2009),http://www.partnersinflight.org/pubs/mcallenproc/articles/pif09_anthropogenic%20impacts/manville_pif09.pdf, 268
[xiii] U.S. Fish and Wildlife Service data, undated, http://www.fws.gov/midwest/eagle/protect/laws.html
[xiv] Amy Littlefield, “ExxonMobil pleads guilty to killing protected birds,” Los Angeles Times, August 14, 2009. Available: http://www.latimes.com/news/nationworld/nation/la-na-exxon-birds14-2009aug14,0,626783.story
[xvi] Christopher Helman, “Judge Throws Out Criminal Case Against Oil Companies for Killing Birds at Drilling Sites,” Forbes, January 18, 2012, http://www.forbes.com/sites/christopherhelman/2012/01/18/judge-throws-out-criminal-case-against-oil-companies-for-killing-birds-at-drilling-sites/
[xvii] Louis Sahagun, “U.S. probes golden eagles’ deaths at DWP wind farm,” Los Angeles Times, February 16, 2012, http://articles.latimes.com/2012/feb/16/local/la-me-eagles-20120216
[xviii] Center for Biological Diversity press release, http://www.biologicaldiversity.org/news/press_releases/2011/wind-energy-project-10-20-2011.html
[xix] Louis Sahagun, “U.S. probes golden eagles’ deaths at DWP wind farm,” Los Angeles Times, February 16, 2012, http://articles.latimes.com/2012/feb/16/local/la-me-eagles-20120216
[xxi] American Bird Conservancy data, http://www.abcbirds.org/abcprograms/policy/collisions/pdf/wind_rulemaking_petition.pdf
[xxii] American Bird Conservancy data, http://www.abcbirds.org/abcprograms/policy/collisions/pdf/petition_endorsements.pdf