Statement of The Honorable Randy Neugebauer, a Representative in Congress from the State of Texas

Testimony Before the Subcommittee on Select Revenue Measures
of the House Committee on Ways and Means

September 23, 2004

Thank you Mr. Chairman.  I am here today to discuss a matter of significant importance to my district in West Texas—wind energy. 

In the 1960s, Bob Dylan wrote the popular tune, "You don't need a weatherman to know which way the wind blows." Today the wind represents much more than weather; it means economic growth and renewable energy.

Texas, particularly West Texas, has vast areas of land with high wind power potential.  Previous generations in this area relied on windmills to pump water.  Today, high-tech wind turbines as tall as the Statue of Liberty are producing megawatts of electricity, enough power to supply thousands of homes.

As the oldest source of renewable energy, wind power supplies affordable, inexhaustible energy to the economy.  It also provides jobs and other sources of income.  Wind powers the economy without causing pollution, generating hazardous wastes, or depleting natural resources.  Best of all, wind energy depends on a free fuel source—the wind—and so it is relatively immune to inflation.

The wind industry contributes directly to the economies of 46 states, with power plants and manufacturing facilities that produce wind turbines, blades, electronic components, gearboxes, generators, and a wide range of other equipment.

The Renewable Energy Policy Project (REPP) estimates that every megawatt of installed wind capacity creates about 4.8 job-years of employment, both direct (manufacturing, construction, operations) and indirect (advertising, office support, etc.).  This means that a 50 megawatt wind farm creates 240 job-years of employment.

Wind farms can also revitalize the economy of rural communities, providing steady income through lease or royalty payments to farmers and other landowners, as well as property and school taxes to local governments.  Although leasing arrangements vary widely, a reasonable estimate for income to a landowner from a single utility-scale turbine is about $3,000 a year. 

For a 250-acre farm, with income from wind at about $55 an acre, the annual income from a wind lease could be $14,000, with no more than 2 or 3 acres removed from production.  Such a sum can significantly increase the net income from farming. Farmers can grow crops or raise cattle next to the towers.  Wind farms may extend over a large geographical area, but their actual "footprint" covers only a very small portion of the land, making wind development an ideal way for farmers to earn additional income.  In West Texas farmers and ranchers are welcoming wind, as lease payments from this new clean energy source replace declining payments from oil wells on their property that have been depleted.

Local governments are also welcoming wind.  The county commissioners in Howard County in my district have proposed issuance of industrial revenue bonds to an energy company interested in building another wind farm in the county.  County officials estimate that a new wind farm would bring in more than $700,000 to the county and other taxing jurisdictions, such as local schools.

Additional local income is generated from payments to construction contractors and suppliers during installation, and from payments to turbine maintenance personnel on a long-term basis. 

Investing in wind energy also makes us less dependant on foreign sources of energy.  The American Wind Energy Association estimates that U.S. wind plants are already helping to reduce the national natural gas shortage by 10-15%.  By encouraging new domestic energy exploration and investing in new energy infrastructure, we can improve our domestic energy security.

All of this sounds great, but how much does wind energy cost?  The actual production of energy comes at a relatively low price.  State-of-the-art wind power plants can generate electricity for less than 5 cents per kilowatt-hour in many parts of the U.S.  Over the last 20 years, the cost of electricity from utility-scale wind systems has dropped by more than 80 percent.  However, the investment required to establish a wind production farm runs in the millions of dollars.  A 160-turbine wind farm built in West Texas in 2003 cost more than $80 million.

The wind energy production credit is a key component in financing new wind energy projects.  Without a consistent government tax policy that creates a consistent business environment, investment slows and projects on the drawing board are put on hold.  Wind energy producers need tax policy consistency in order to develop accurate long-term business models, acquire land and finance expensive construction. 

As you all know, the productions tax credit expired at the end of 2003, costing thousands of jobs and millions of dollars of wind power investments in states across the country, including Texas.  I appreciate the work of this subcommittee to advance the credit in the energy bill, the American Jobs Creations Act, and, most recently, the proposal to include it in the conference report extending other expiring tax provisions.

This credit is so crucial to this young, growing industry.  Wind energy projects require a lead time of six to nine months.  Expiration of the credit has stopped wind projects, and restarting projects will take time.  This slow-down has affected not only wind energy producers, but their suppliers, construction workers and local governments

For example, Taylor County Texas estimates that it has lost $500,000 in annual tax revenue this year due to postponement of construction of up to 200 new wind turbines, and area school districts had anticipated up to $1 million in taxes from the projects.  To make up for the lost revenue, the county has raised tax rates.

Lone Star Transportation of Ft. Worth is losing $1.5 million in revenue per month to the production tax credit delay.  Last year the company earned $20 million—a full 20 percent of company revenues—by trucking wind turbine towers, blades and generating units to development site.

Over the last two years, the wind industry has installed over 2,500 megawatts of new electric capacity spurring more than $2.5 billion in economic activity.  However, the expiration of the credit has resulted in the loss of over 2000 jobs already and 1,500 megawatts of new wind energy production and nearly $2 billion in economic activity on hold.

As work continues on legislation to provide relief to American businesses, I believe that the wind energy production tax credit is a critical incentive that will further fuel economic growth and job creation in West Texas, and in the United States.