On July 9th, Husch Blackwell Partner (and TREIA board member) Chris Reeder hosted TREIA’s fourth webinar of 2019, featuring a review of the related activities of the 86th Texas legislature.
The conversation featured Jeff Clark, President of the Advanced Power Alliance, and Mark Vane, Principal with Husch Blackwell Strategies.
The two panelists emphasized the fact that the committee chairs were fairly well balanced and reflected both the state’s political and geographic diversity. They characterized the legislative session as relatively efficient and productive, with a total of 7,541 bills were filed, and 1,429 passed, a significant improvement on the 2017 session. There were also fewer surprise vetoes from Governor Abbott’s office, as there was clear communication ahead of time as to what legislation it would accept.
The panelists commented that it was a very active energy session, with an unprecedented amount of opposition to renewable energy development, funded primarily by coal companies from outside the state using nonprofit organizations to present their viewpoints. While that was dismaying, Clark also noted that there was a corresponding and “unprecedented response” from the collective voices supporting the renewable industry, including corporate purchasers, groups focused on clean air and water issues, and “soccer moms” who care about clean air for their children.
The context over tax abatements
The single most important renewable enegy issues were related to the extensions of the Chapter 312 property tax and 313 school district tax abatement programs, both of which were slated to expire in September.
The panelists emphasized that these are a voluntary abatement programs that are not exclusive to renewables, which are intended to attract investments that would not otherwise occur in a state with some of the highest such tax burdens in the country. Each of these provisions allow local authorities to adjust the value of investments in order to reduce taxes and attract investment to communities, whether they be wind turbines, solar projects or local manufacturing facilities.
The opposition sought to extend the overall programs but specifically targeted the removal of renewable energy as qualifying investments. Ultimately, the programs were extended for all types of investments until 2021 with some additional requirements for disclosure and public notice.
Another legislative issue arose concerning the decommissioning of wind projects, with a proposed law creating an onerous set of provisions for end-of-life decommissioning. A less burdensome compromise was eventually reached stipulating that new wind contract must include a set-aside of financial sureties necessary to fulfill decommissioning obligations at the end of a project’s useful life.
A proposed study focused on renewables
The opposition also filed a bill proposing that ERCOT undertake a study of the impact of the federal production tax credit (PTC) for wind energy, and the overall effect of the PTC on wholesale electricity markets. It further stipulated that ERCOT would have to issue recommendations for rules that counteract the impact of PTC.
Clark commented that the renewables community should expect to see more bills like this in future legislative sessions. The most effective response, he noted, and one that his group and other allies proposed, is to evaluate the entire landscape of all energy incentives. To that end, the group launched a website “studythemall.com,” to make it abundantly clear that in fact over 90% of state and federal incentives have benefited energy actors outside the renewables space. Clark warned that opponents will likely be back with another permutation of this strategy for the next session in 2021, and the renewables community should prepare accordingly.
The time to prepare for 2021 is now
The panelist both asserted that in today’s legislative world, although the next session doesn’t start until 2021, there’s no real down time. The jockeying for 2021 takes place almost immediately after this year’s session is over. Among key issues, redistricting is set to take place soon, an event whose outcome will define the legislature for the next decade.
As far as renewable energy goes, they noted, we can expect to see the opposition groups gearing up, questioning the reliability of wind and solar, and targeting subsidies. The clear take-away message is to start engaging now. In fact, the campaign to renew 312 and 313 has already begun. The other topic that will increasingly be raised by the opposition focuses on the military and issues relating to siting of projects potentially affecting military training, particularly the air force. Some opponents claim that tall wind towers compromise military training routes and Clark noted that –“the opposition wants to make 40% of state off-limits to wind development.” They are also now focusing on the glare of solar panels.
The panelists also commented that the renewables development community is likely to see more local opposition to siting of new facilities. With the CREZ lines filling up, and other long-distance transmission limitations cropping up, developers are necessarily moving closer to population centers.
The key to future success, they commented, is to showcase the economic value to the state and to electricity customers who save millions on their electric bills as a result of cost-effective renewables. To that end, Clark’s group has been meeting with manufacturing groups, oil and gas companies, and other potential stakeholders, working to assemble a broad and powerful coalition of supporters. Texas, he noted, is blessed with many energy resources, including fossil and wind. “We can support them all. It doesn’t have to be a choice.”