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85–357 PDF 2013

OVERSIGHT OF THE WIND ENERGY PRODUCTION 

TAX CREDIT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY POLICY, 

HEALTH CARE AND ENTITLEMENTS 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

OCTOBER 2, 2013 

Serial No. 113–62 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://www.house.gov/reform 

(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

DARRELL E. ISSA, California, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

PATRICK T. MCHENRY, North Carolina 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

JAMES LANKFORD, Oklahoma 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

DOC HASTINGS, Washington 

CYNTHIA M. LUMMIS, Wyoming 

ROB WOODALL, Georgia 

THOMAS MASSIE, Kentucky 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

KERRY L. BENTIVOLIO, Michigan 

RON DESANTIS, Florida 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

JOHN F. TIERNEY, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

JACKIE SPEIER, California 

MATTHEW A. CARTWRIGHT, Pennsylvania 

MARK POCAN, Wisconsin 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

DANNY K. DAVIS, Illinois 

PETER WELCH, Vermont 

TONY CARDENAS, California 

STEVEN A. HORSFORD, Nevada 

MICHELLE LUJAN GRISHAM, New Mexico 

LAWRENCE J. BRADY, Staff Director 

JOHN D. CUADERES, Deputy Staff Director 

STEPHEN CASTOR, General Counsel 

LINDA A. GOOD, Chief Clerk 

DAVID RAPALLO, Minority Staff Director 

SUBCOMMITTEE ON ENERGY POLICY, HEALTH CARE AND ENTITLEMENTS

JAMES LANKFORD, Oklahoma, Chairman 

PATRICK T. MCHENRY, North Carolina 

PAUL GOSAR, Arizona 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

BLAKE FARENTHOLD, Texas 

DOC HASTINGS, Washington 

ROB WOODALL, Georgia 

THOMAS MASSIE, Kentucky 

JACKIE SPEIER, California, Ranking 

Minority Member 

ELEANOR HOLMES NORTON, District of 

Columbia 

JIM COOPER, Tennessee 

MATTHEW CARTWRIGHT, Pennsylvania 

TAMMY DUCKWORTH, Illinois 

DANNY K. DAVIS, Illinois 

TONY CARDENAS, California 

STEVEN A. HORSFORD, Nevada 

MICHELLE LUJAN GRISHAM, New Mexico 

(III) 

C O N T E N T S 

Page 

Hearing held on October 2, 2013 ............................................................................ 1 

WITNESSES 

Mr. Curtis G. Wilson, Associate Chief Counsel, Passthroughs and Special 

Industries, Internal Revenue service 

Oral Statement ................................................................................................. 5 

Written Statement ............................................................................................ 8 

Mr. Rob Gramlich, Senior Vice-President for Public Policy, American Wind 

Energy Association 

Oral Statement ................................................................................................. 15 

Written Statement ............................................................................................ 17 

Mr. Dan W. Reicher, Executive Director, Steyer-Taylor Center for Energy 

Policy & Finance, Stanford University 

Oral Statement ................................................................................................. 20 

Written Statement ............................................................................................ 22 

Mr. Robert J. Michaels, Ph.D., Senior Fellow, Institute for Energy Research, 

Professor of Economics, California State University, Fullerton 

Oral Statement ................................................................................................. 30 

Written Statement ............................................................................................ 32 

APPENDIX 

The Hon. Jackie Speier, a Member of Congress from the State of California, 

Opening Statement .............................................................................................. 78 

A Letter from Thomas A. Barthold to the Hon. James Lankford ........................ 82 

(1) 

OVERSIGHT OF THE WIND ENERGY 

PRODUCTION TAX CREDIT 

Wednesday, October 2, 2013 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ENERGY POLICY, HEALTH CARE AND

ENTITLEMENTS, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, D.C. 

The subcommittee met, pursuant to call, at 9:30 a.m., in Room 

2154, Rayburn House Office Building, Hon. James Lankford [chairman of the subcommittee] presiding. 

Present: Representatives Lankford, Farenthold, Jordan, Walberg, 

Speier, Lujan Grisham, Horsford, and Duckworth. 

Staff Present: Molly Boyl, Senior Counsel and Parliamentarian; 

Joseph A. Brazauskas, Counsel; Caitlin Carroll, Deputy Press Secretary; John Cuaderes, Deputy Staff Director; Brian Daner, Counsel; Adam P. Fromm, Director of Member Services and Committee 

Operations; Linda Good, Chief Clerk; Tyler Grimm, Professional 

Staff Member; Ryan M. Hambleton, Professional Staff Member; 

Frederick Hill, Director of Communications and Senior Policy Advisor; Christopher Hixon, Deputy Chief Counsel, Oversight; Mark D. 

Marin, Director of Oversight; Laura Rush, Deputy Chief Clerk; 

Sarah Vance, Assistant Clerk; Jeff Wease, Chief Information Officer; Jaron Bourke, Minority Director of Administration; Beverly 

Britton Fraser, Minority Counsel; Jennifer Hoffman, Minority 

Press Secretary; Elisa LaNier, Minority Deputy Clerk; and Daniel 

Roberts, Minority Staff Assistant/Legislative Correspondent. 

Mr. LANKFORD. The meeting will come to order. I want to begin 

this hearing by stating the Oversight and Government reform mission statements. We exist to secure two fundamental principles: 

First, Americans have the right to know that the money Washington takes from them is well spent. Second, Americans deserve 

an efficient, effective government that works for them. Our duty on 

the Oversight and Government Reform committee is to protect 

these rights. Our solemn responsibility is to hold government accountable to taxpayers because taxpayers do have the right to 

know what they get from their government. 

We work tirelessly in partnership with citizen watchdogs to deliver the facts to the American People and bring genuine reform to 

the Federal bureaucracy. This is the mission of the Oversight and 

Government Reform committee. 

Today’s hearing is really about the oversight of the wind energy 

production tax credit. There is some changes that happened in the 

past year to the way that tax credit is written. So today we’re going 

2 

to talk not only about some of the changes in section 45 of the Internal Revenue Code, but also the issue of long term, where is this 

really going, how we are trying to unfold the PTC. The PTC was 

first enacted 1992, it was not supposed to be permanent, it was a 

subsidy to help a Nation industry to help get on its feet. 

However since then, it has been renewed by Congress eight 

times, most recently, as I just mentioned as part of the fiscal cliff 

deal signed January the 2nd of this year. The deal provided for 1- 

year extension of tax credit, lasting until January of 2014 coming 

up. We are rapidly approaching that date and this hearing is designed to examine this credit. 

First and foremost, it is critical that we ensure our laws have 

clear standards that agencies can enforce. I am glad to see a representative of the Internal Revenue Service is here today, thank 

you, Mr. Wilson, for being here, and will be able to help with this 

conversation to provide some clarity. 

The most recent extension include a significant change for how 

producers qualify for the credit. Previously a wind facility had to 

be placed in service, meaning producing electricity before the deadline. Now one facility only has to begin construction by the deadline to qualify. 

One of the goals of this hearing is to make sure this change to 

the PTC is working properly for the taxpayers and for the Treasury. We need to make sure that the IRS is able to evenly apply the 

law in a manner that reflects Congressional intent. The IRS’s guidance document defining beginning of construction appears to be lenient and vague at some points and we need to provide some clarity. 

Furthermore, there are serious deficiencies in the mechanisms to 

ensure a taxpayer has complied with the tax credits requirements. 

There is a real risk the IRS is not properly positioned to ensure 

that credit is not being improperly claimed at some future date. According to a recent estimate from the Joint Committee on Taxation 

that I requested, another 1-year extension of the PTC will cost $6.2 

billion for just wind alone, and that’s over the next 10 years. A 5- 

year extension for wind would reduce Federal budget receipts by 

18.5 billion over the next 10 years. 

As long ago as the 1980s proponents of wind energy have been 

saying that tax credits only needed temporarily. So we are trying 

to look for what is that temporary date and how does this keep 

working. We keep hearing that we’re almost there or just a little 

bit longer, but the facts state that wind power has been steadily 

increasing over the last ten years. And there is this point of saying 

when does wind power take off on its own? 

In 2003 wind accounted for about .12 quadrillion Btu in power 

consumed. According to the energy information administration, the 

projected total for 2013 will be 1.61 quadrillion Btus rising to almost 1.7 quadrillion for 2014. From 2003 to 2012, wind power consumption increased over a thousand percent. Additionally wind 

power has a share of our domestic electricity generation has risen 

progressively. As of 2012, wind power is at 3.46 percent of our US 

electricity generation. This is up from .29 percent in 2003, representing almost 12-fold increase in wind share of electricity generation in a 10-year period. Additionally wind has increased its 

3 

share of total renewables from about 14 percent in 2003 to over 64 

percent last year. 

In all these metrics, wind energy use on a steady and uninterrupted rise. Today 30 States and the District of Columbia mandate 

a certain percentage of total energy production come from renewable sources, another 7 States, including my home State of Oklahoma have voluntary goals. To date, wind generation accounts for 

90 percent of all new renewable resources developed under the 

State RPS programs. 

It is my hope today that we can provide additionally clarity to 

wind producers, seeking to legally claim a credit that is in the law. 

And we have a healthy dialogue among economists in industry regarding whether the tax credit—continuing to use this tax credit 

is a good steward over taxpayer dollars. As we’re preparing the Nation for a diversified energy profile, it is important that we look at 

all energy sources, how we handle that for the coming days. With 

that I recognize the gentlelady from California, Ms. Speier, for an 

opening statement. 

Ms. SPEIER. Mr. Chairman, thank you. Now I appreciate that 

several of our witnesses have traveled long distances to be here 

today, so moving forward with this hearing can be rationalized. But 

our government is in a shutdown, 800,000 Federal employees are 

furloughed, and Congress has abdicated its fundamental constitutional responsibility to fund the government. So moving forward, I 

think it would be appropriate for this committee and other committees to shut down during this shutdown so that we feel the complete and utter efforts being made to not function in an adequate 

fashion. 

Having said that, we are here today for a hearing on the production tax credit which has helped the wind industry grow to a major 

source of renewable energy here in the United States as the chairman has mentioned. In fact, wind energy has grown from about 1 

percent of the U.S. total energy production before the PTC to now 

4 percent. Today the wind energy industry employs more than 

80,000 American workers, including workers at manufacturing facilities up and down the supply chain, as well as engineers and 

construction workers who build and operate wind farms. And these 

are good paying jobs. 

Wind turbines are now made domestically by approximately 550 

new manufacturing facilities in all regions of the country. These facilities produce more than 70 percent of the content of an average 

wind turbine installed in the U.S. compared to just 25 percent in 

2005. In fact, as a direct result of the PTC, the wind industry was 

the number one source of new generation capacity in the United 

States last year, and we are making these turbines in America. 

Wind energy also means lower prices for consumers, Department 

of Energy data shows that from 2005 to 2010, electricity rates increased by twice as much in the 40 States with at least wind power 

compared to rates in 10 States with the most wind generation. I 

can tell you that clean wind energy and the PTC are important to 

California, and I know that Oklahoma is one of the biggest producers of wind energy as well. 

Only weeks ago, the IRS issued new guidance interpreting the 

latest extension of the PTC. That was passed on January 2nd of 

4 

this year. Not a single energy company has yet claimed the tax 

credit under this 1-year extension, and it will realistically be at 

least 18 months before the IRS will be called upon to apply its 

guidance. This can be a risky proposition for companies that are investing hundreds of millions of dollars in new wind energy projects. 

After all, if they don’t build and get it operating, they don’t get the 

credit. There are no loans or guarantees or upfront benefits. That’s 

why clarity is an essential. We can help make sure we don’t face 

problems down the road when those investing now seek to claim 

the credit. 

Mr. Chairman, call me paranoid, but I also have to note that on 

the same day this hearing was announced, Americans for Prosperity, FreedomWorks and more than 20 other conservative groups 

launched a campaign to end the PTC. The majority’s witness is also 

known as an opponent of the PTC and wind energy altogether. I 

hope that we are really conducting oversight of the implementation 

of the law and not using this hearing simply to launch another attack on a clean energy program that has worked well for many 

years. 

There is little doubt that the elimination of the PTC or the risk 

of its determination lapse will damage the industry and put a 

break on its renewable growth. The wind energy has gone through 

a boom and bust cycle whatever Congress has allowed the benefit 

to expire or get close to expiration. Last year, even though the PTC 

lapsed for just 1 day, hundreds of workers who manufactured wind 

turbines were laid off and construction and manufacturing projects 

were cancelled in anticipation of the lapse. Workers in Grand 

Forks, North Dakota and Little Rock, Arkansas lost their jobs at 

turbine manufacturers when the PTC’s future was in question. 

Some object to the wind energy industry receiving any Federal 

support. But let’s get real, the fossil fuel industry has received tax 

subsidies since the early 1900s. And other government incentives 

that far exceed everything we are doing for renewable energy. Big 

oil still gets Federal subsidies even though justified biggest oil companies, BP, Chevron, ConocoPhillips, ExxonMobil and Shell made 

a combined $118 billion in profits in 2012. Of course, those profits 

were down from their record high of $137 billion in 2011. 

I want to bring your attention to this chart which illustrates the 

huge differences in subsidies for fossil fuels as opposed to wind energy over time. Oil and gas have received over $4.8 billion each 

year in government subsidies over 90 years. Wind energy, by contrast, has received a small fraction of that, an average of about 

$370 million per year for the last 19. 

So if anyone has fiscal concerns about Federal support for energy 

producers, I think this chart shows clearly that there is much more 

reason to be concerned about support for fossil fuel industry than 

renewable energy sources. If we want to get rid of the PTC, well, 

let’s get rid of all the subsidies for all of the various forms of energy. We need to give as much support to clean renewable energy 

sources as we have provided and continue to provide for fossil fuel 

industry. 

The committee and the Federal Government shouldn’t be in the 

business of picking winners and losers in the energy marketplace. 

We certainly shouldn’t be using our hearing to promote the interVerDate Aug 31 2005 09:33 Nov 26, 2013 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 C:\DOCS\85357.TXT APRIL
5 

ests of fossil fuels by creating problems for renewable energy, especially when the PTC and other renewable programs help ensure 

that our Nation maintain a diverse energy portfolio. 

Mr. Chairman, I thank the members for participating in this 

hearing. I thank, in particular, the witnesses who are here and 

hopefully we will have a thoughtful examination of ways to encourage greater use of renewable energy sources as we tackle the growing problems of climate change and energy independence. I yield 

back. 

Mr. LANKFORD. Thank you. And just to remove any paranoia—— 

Ms. SPEIER. Yes, I need that. 

Mr. LANKFORD. —this is actually the first that I’ve heard that 

they released that that day, so there was no connection on that. So 

I will be interested in being able to see that, that way you can be 

totally free of any paranoia. 

Ms. SPEIER. Good to know. 

Mr. LANKFORD. That’s great. Members will have seven days to 

submit opening statements for the record. We now recognize our 

first and only panel today and look forward to the conversation. 

Mr. Curtis Wilson, associate chief counsel for Passthroughs and 

Special Industries in the Internal Revenue Service. Thanks for 

being here. As well, Mr. Robert Gramlich is the senior vice president for Public Policy, the American Wind Energy Association. 

Thanks. Mr. Dan Reicher is the executive director for the SteyerTaylor Center for Energy Policy & Finance at Stanford University. 

Thanks for the flight. And Mr. Robert Michaels is a senior fellow 

at the Institute for Energy Research and Professor of Economics, 

California State University in Fullerton. Hopefully you all rode on 

the same plane together coming from California. So I appreciate 

your coming on this. 

Pursuant to committee rules all witnesses are sworn in before 

they testify. Gentlemen if you please stand add raise your righthand. 

Do you solemnly swear or affirm the testimony you are about to 

give will be the truth, the whole truth and nothing but the truth, 

so help you God? 

Thank you. You may be seated. Let the record reflect the witnesses have answered in the affirmative. 

In order to allow time for a discussion I would ask you to limit 

your testimony to 5 minutes, there is a countdown clock in front 

of you that will help with that. If you go a little bit over we will 

have mercy, if you go a little bit under it’s bonus points. And then 

we’ll have a conversation and dialog from there. So recognizing the 

panel, Mr. Wilson, we’d ask you to be able to go first on this and 

look forward to receiving your testimony. 

WITNESS STATEMENTS 

STATEMENT OF CURTIS G. WILSON 

Mr. WILSON. Thank you, Chairman Lankford Ranking Member 

Speier and members of the subcommittee. My name Curt Wilson, 

and I appreciate the opportunity to appear before you today to discuss renewable energy credits under the Internal Revenue Code. 

Before I begin, I will provide to you a little background about my 

6 

office and its role in connection with renewable energy credits. As 

you said, I’m the associate chief counsel of the Passthroughs and 

Special Industries division of the IRS Office of Chief Counsel. My 

division has between 70 and 80 lawyers, plus six support staff. Our 

responsibilities include providing advice to the Commissioner of the 

Internal Revenue Service and his staff, providing litigation support 

to our colleagues in our field offices and at the Department of Justice tax division, working with taxpayers on private letter ruling 

requests and drafting guidance to taxpayers in the Internal Revenue Service that is published in the Federal Register and the Internal Revenue bulletin. 

When drafting published guidance, we work very closely with the 

Office of Tax Policy at the Department of Treasury. My office has 

subject matter responsibility for a wide range of issues. One of 

those issues is the credit for production of electricity from renewable energy sources under section 45 of the Code. That section generally permits taxpayers to earn a credit each year based on the 

amount of energy that they produce over a 10-year period from 

qualified resources at a qualified facility. 

Alternatively, taxpayers may elect an investment tax credit 

based on a percentage of their eligible basis and qualifying property in lieu of claiming the production tax credit. Qualified resources include wind, geothermal, closed loop biomass, open loop 

biomass, municipal solid waste and a few others. In addition to the 

production tax credit and investment tax credit section 1603 of the 

American Recovery and Reinvestment Act of 2009 allowed taxpayers a third option of requesting a cash payment in lieu of either 

the production credit or the investment tax credit. 

To qualify for that cash payment in lieu of the credits, a taxpayer 

had to place a qualifying facility in service in 2009, ’10 or ’11, or 

alternatively, the taxpayer could place a facility into service after 

2011, but only if the taxpayer began construction during 2009 

through 2011 and then placed the facility in service before a termination date, and that termination date varied depending on the 

type facility. 

In contrast to the section 1603 program, to claim the production 

tax credit or the investment tax credit, taxpayers initially had to 

place a facility in service by the end of 2012 in the case of wind 

facilities, and by the end of 2013 for other eligible technologies. 

The American Taxpayer Relief Act of 2012 extended eligibility for 

the credit for wind to the end of 2013, and also changed the qualification requirement for wind as well as other eligible technologies 

from a requirement that the taxpayer placed on facility and service 

to a requirement that the taxpayer begin construction. 

The statutory language of the ATRA amendment didn’t define 

beginning of construction standard. The 1603 program, which addressed similar energy related facilities, had used a similar phrase 

however. So when we began to consider publishing guidance for 

taxpayers, we look to how that standard was administered in the 

section 1603 program. Guidance regarding the section 1603 program had been previously issued in question-and-answer format. It 

generally provided that physical work of a significant nature constituted beginning of construction. 

7 

The determination of whether that task was met in any case was 

based on all the relevant facts and circumstances, and the Q and 

As provided examples. In addition, the section 1603 program provided a safe harbor that basically said you would be treated as if 

you had begun construction if you had spent at least 5 percent of 

the ultimate cost of the property. 

The section 1603 guidance, in turn, used the description of beginning of construction that was very similar to regulatory language 

pertaining to bonus depreciation under section 16 168(k). So when 

we issued our first published guidance in notice 2013–29, we 

turned to that prior precedent in the 1603 program. For the most 

part, we followed that prior precedent providing both the physical 

work of a significant nature, and a 5 percent safe harbor, but we 

also noted that there would be strict scrutiny like there was in 

1603 program if taxpayers didn’t begin construction and then maintain a continuous construction program. 

It’s important to note that whether the taxpayers apply under 

the safe harbor of the 5 percent, or a second safe harbor that we 

provided in 2013–60 following questions from the industry about 

beginning of construction that taxpayers can still meet that standard if they do perform physical work of a significant nature. 

I hope I’ve provided sufficient background on this credit and I am 

happy to take questions. 

Mr. LANKFORD. Thank you. 

[Prepared statement of Mr. Wilson follows:] 

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Mr. LANKFORD. Mr. Gramlich. 

STATEMENT OF ROB GRAMLICH 

Mr. GRAMLICH. Thank you. Good morning, Chairman Lankford, 

Ranking Member Speier, subcommittee members. I appreciate the 

opportunity to speak to you this morning about the success of the 

PTC and its value to American taxpayers. I also appreciate the interest in clear standards and making sure the policy works effectively. The short answer is we now believe we have clear standards 

and we believe it will work very effectively. 

The PTC is a production-based tax credit provided to a variety 

of different renewable electricity sources, including small hydro, 

geothermal and biomass to name a few, and it’s also available for 

new nuclear energy facilities. Congress designed the PTC as a performance-based incentive such as the credit can be taken only if 

and when actual electricity is produced. It does not provide to finance development or construction. It is also broad-based and competitive such that every company that develops an eligible project 

can claim the credit on their tax return. There is not an application 

process and government employees do not pick or choose winners 

or losers. 

On January 1st, 2013, as part the American Tax Payer Relief Act 

of 2012, just as the PTC expired, Congress extended and modified 

the structure of how projects qualify for the PTC. This was done 

in recognition of the uncertainty created by the exploration and the 

recognition of project development delays such as permitting delays 

or weather-related construction delays that can occur and create 

uncertainty as to when a project will be placed in service. 

Under the modification projects that commence construction before January 1st, 2014 qualify for the credit. However consistent 

with prior law, a wind operator cannot actually claim the PTC 

until it produces and sells electricity. The IRS, as you have just 

heard, has issued much needed and much more clear guidance on 

the statutory change in a manner consistent with congressional intent and start construction precedence. Under the guidance construction commences when physical work of a significant nature 

starts. This start of construction framework has ample precedent 

and several other sections of the Tax Code, including sections for 

bonus depreciation for self-constructed property, expensing for 

qualified property use and refining liquid fuels and with respect to 

the recovery period for natural gas distribution lines. 

Over the years, the PTC has been a tremendous success. With 

the credit in place, the U.S. wind industry was the number one 

source of new generation capacity last year, wind turbines are now 

generally made domestically by approximately 550 manufacturing 

facilities in all regions of the country. Wind projects in the U.S. 

have brought economic growth to rural communities, roughly $400 

million in annual property taxes or similar payments to communities, and lease payments to farmers and ranchers of around 

$120,000 per turbine over its life time. 

This tax credit estimated by the Joint Committee on Taxation to 

cost less than $2 billion per year drives over $20 billion in private 

investment annually and brings electricity to the equivalent of 15 

16 

million American homes. Without the PTC, these economic benefits 

and this private investment in the United States would not have 

occurred. Wind energy is also saving money for consumers across 

the country. 

One recent report from May of this year found that doubling the 

use of wind energy in the Mid Atlantic and Great Lake States 

would save consumers close to $7 billion per year. Even in the 

southeast utilities have entered into power purchase agreements 

with wind energy owners, because wind energy proved to be the 

least expensive option for their customers. Furthermore wind energy offers the stability of long-term fixed energy price which is offered by very few other energy sources. This protects consumers 

from fluctuations in fuel prices much like a fixed rate mortgage 

protects home owners from interest rate spikes. The cost of wind 

energy has dropped by 43 percent in the last 4 years, a great indication of a policy that’s working. But the PTC is still needed to prevent us from relying too heavily on any single fuel source. 

For decades, Federal policies, especially within the Tax Code, has 

fostered a diverse mix of fuels in the interest of our economic and 

national security. So while the PTC may be a more recent addition 

to the Tax Code, it is one of many incentives that have been available over the years for many, in fact, all electricity sources. 

In conclusion, the PTC is a wise investment. Allowing it to expire 

as is scheduled to occur at the end of this year will move us away 

from further diversification of our energy portfolio, take away opportunities for consumers to save money, dampen domestic manufacturing and innovation, and cause companies to hold off on investing in communities across America. Again, thank you for the 

opportunity to be here today, I look forward to answering your 

questions. 

Mr. LANKFORD. Thank you. 

[Prepared statement of Mr. Gramlich follows:] 

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Mr. LANKFORD. Mr. Reicher. 

STATEMENT OF DAN W. REICHER 

Mr. REICHER. Chairman Lankford, Ranking Member Speier, 

members of the subcommittee, my name is Dan Reicher, and I’m 

pleased to share my perspective on the wind energy production tax 

credit. The PTC has been a highly effective policy tool in the financing of tens of thousands of megawatts of U.S. Wind projects. 

I support the extension of the PTC for a multiyear period, with a 

gradual phase-down as Congress simultaneously transitions the industry to the same financing mechanisms that have provided low 

cost capital to hundreds of billions of dollars worth of oil, gas, coal 

and transmission infrastructure for decades. I refer to Master Limited Partnerships, MLPs, and Real Estate Investment Trusts, or 

REITs. 

MLPs and REITs combine the fundraising advantages of a classic 

corporation, that is the sale of publicly traded stock with the tax 

benefits of a partnership. That is, a single layer of taxation. These 

two financing mechanisms were authorized by Congress decades 

ago and importantly, do not require periodic reauthorization unlike 

renewable energy tax credits. Since Apache Petroleum launched 

the first MLP in 1981, MLPs have reached a total market capitalization over $440 billion. 

REITs have a total market cap of over 670 billion, with IRS rulings opening up REIT investment and electricity transmission, gas 

pipelines and other traditional energy-related projects. The use of 

MLPs and REITs would give renewable energy projects access to 

far greater pools of capital than in the tax equity markets, and as 

a result, lower the cost of project capital significantly and with it, 

renewable electricity prices. And with publicly traded shares, MLP 

and REITs would allow millions of Americans to invest in our Nation’s renewable energy future just like they can today in fossil energy and transmission infrastructure. 

A bipartisan bill, the MLP Parity Act, would extend MLPs to renewable energy, energy efficiency, carbon capture and storage, cogeneration and other technologies. The bill is cosponsored by Representatives Poe, Republican of Texas, Gibson Republican of New 

York, Gardner, Republican of Colorado, Welch, Democrat of 

Vermont, and Mike Thompson, Democrat of California. Senators 

Coons, Moran, Murkowski and Stabenow back a bipartisan and 

identical companion bill in the Senate. 

On the REIT front the IRS, on its own, could issue a broad revenue ruling that would extend REITs to renewable energy. The IRS 

has already issued private letter rulings extending REIT status to, 

among other things, electricity transmission lines, gas pipelines, 

cell towers and billboards. In December 2012, 35 Members of Congress Republicans and Democrats, wrote President Obama urging 

him to support the extension of REITs and MLPs to renewable energy. I understand that the administration is considering these approaches. A smart transition to the financing of U.S. wind projects 

would involve a 3-pronged approach: Number 1, a multiyear extension of the PTC with a gradual phase down; number 2, the nearterm congressional adoption of the MLP Parity Act; number 3, an 

21 

IRS revenue ruling that expands REITs to include renewables. 

This smart transition would allow the wind industry for the next 

several years to continue to build projects using a well established 

financing approach that PTC, while the industry also works with 

the existing MLP and REIT finance community to transition to 

these long-standing lower cost financing mechanisms. In this way, 

wind companies could land in a place that much of the rest of the 

energy industry has long enjoyed, low cost, government authorized 

financing mechanisms, not requiring periodic Congressional extensions. This would be a big step forward for an industry that is generating more and more good paying U.S. jobs as it also generates 

more and more low carbon electricity. 

I want to emphasize that my support for MLPs and REITs 

should, in no way, signal that I endorse an immediate phaseout of 

the PTC or any weakening of the current investment tax credit for 

solar. We need significant time for a thoughtful phase-down of the 

PTC, and we need significant time for an effective ramp up of MLP 

and REIT financing. Above all the industry needs policy certainty 

and continuity to avoid the serious consequence of past boom and 

bust cycles. I’d be pleased to take questions. Thank you. 

[Prepared statement of Mr. Reicher follows:] 

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Mr. LANKFORD. Dr. Michaels. 

STATEMENT OF ROBERT J. MICHAELS 

Mr. MICHAELS. Thank you, Chairman Lankford, Ranking Member Speier and members of the committee for the opportunity to 

testify today on the loss of taxpayer dollars in the form of wind production tax credit. To start with, go back to the creation, the PTC 

began as an obscure part of the Energy Policy Act of 1992, a tiny 

subsidy to an infant industry that might need support to grow. Not 

until 1990s was it even mentioned in DOE’s annual energy outlook 

where it was expected to produce very little by 2020. It surprised 

us, it grew to a highly competitive international industry, wind turbines accounted for the largest block of new power generation in 

2012. Throughout this the PTC sunsetted, was renewed and so on. 

Today, wind lobbyists are again asking for full continuation permanent subsidy. Looked at objectively, wind power is a poor choice 

for continued subsidy through the PTC. It is in no way an infant 

industry, generator manufacturers compete around the world and 

could fund their own research. Even if advances are on the horizon, 

a subsidy like the PTC should not be offered because it pays turbine owners to operate rather than to invent. Even without the 

PTC the wind is exceptional because it still does have a long-term 

market in the form of State renewable portfolio standard requirements which are expected to lead to approximately a large amount 

over the next 20 years under these programs. 

Wind is hardly without its drawbacks, we hear that a wind turbine could light 20,000 homes per year. Because wind blows intermittently, most of the residents will be living in the dark most of 

the time. An electric grid only works if supply equals demand every 

second which requires the Nation’s power plants to compensate for 

winds randomness and act as reserves. Over 85 percent of these 

plants obtain their energy from coal, natural gas and nuclear 

power. Adding one of those plants to the system increases reliability because it is controllable. Adding a wind generation does the 

opposite because it requires additional reserves to compensate for 

wind’s unpredictability. For system planning purposes, the ERCOT, 

the Texas grid operator, counts a megawatt of wind generation capacity as equal to 8.7 percent of a reliable fossil fuel megawatt. 

Wind entails other costs. Over the past 5 years, approximately $22 billion have been spent on transmission dedicated to reaching 

wind facilities which would not otherwise have to have been built. 

The fact that wind turbines do not burn fuel or emit no pollutants 

or carbon does not make them green. The reasoning conveniently 

neglects the reality of the substantial volume of fossil fuel generation must operate and pollute solely as backup for the intermittent 

wind power that most utilities have no choice but to accept. Going 

back a step, wind turbines are made of materials whose production 

entails emissions, and the material requirements per megawatt of 

wind capacity are substantially greater than for gas or coal capacity. 

Finally, some advocates see wind is worthy of public support because of its alleged ability to create jobs. There is nothing discernibly unique about wind as an industry. Construction jobs are short 

lived and mostly in conventional building trades, most construction 

31 

employment is small and post construction employment, is small in 

volume and skewed toward low skills. 

Claims that the wind production tax credit increases employment 

are without foundation. There are computer programs that purport 

to show job creation as wind workers incomes are re-spent. When 

households and businesses pay premium prices for wind power 

those funds are unavailable for them to spend elsewhere. Every 

visible new job in the wind industry comes with a less visible lost 

job elsewhere in the economy. It concerns me that the National Renewable Energy Laboratory now offers computer models for use by 

wind advocates, that calculate created jobs, and never consider the 

lost jobs due to overpriced power. Wind power has grown from a 

novelty boutique energy source into a mainstream industry that 

employs numerous high-paid lobbyists at the Federal and State 

level. 

The PTC has remained, and even expanded despite the lack of 

any rationale for keeping it. At the wind industry’s present size, 

other seeming advantages have also vanished to be replaced by 

higher costs, generally funded by consumers rather than wind investors. Winds environmental implications are not all benign, advocates of the PTC cannot substantiate claims of job creation. The 

PTC’s rationale has vanished, it’s usefulness to taxpayers has expired and so should the PTC. Thank you. 

[Prepared statement of Mr. Michaels follows:] 

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Mr. LANKFORD. Thank you. I am very grateful for all four of you 

to be here. Listening to opening statements could not have been 

more different, and I’m looking forward to the dialogue on that, 

and I really do appreciate that and that’s the way it should be to 

be able to go through the dialog as we try to pursue some of this. 

Mr. Wilson, I mentioned to you before and giving you the heads 

up on it. Mr. Gramlich had mentioned much greater clarity is 

there, the 5 percent phaseout, or the 5 percent safe harbor is obviously a clear safe harbor based on what the final price is. My concerns are the way the rule is written as it comes out right now and 

based on beginning construction, it gives the impression almost 

that IRS has to be there to be able to inspect the roads, to be able 

to inspect the purposes and the intents, when really this is going 

to be filed later on it. 

To make it more clear, there is a section, I mentioned to you before, if the road is done for construction, it counts as under construction. But if that same road was built for employee use or for 

visitors to come on, it doesn’t count. So is it the intent of the IRS 

to say make this as non nebulous as you can, make sure that 

you’ve spent at least 5 percent to get safe harbor because everything else is going to be a guess. 

Mr. WILSON. That was certainly not my intent to make it nebulous. We—as I mentioned earlier, we did pattern our guidance off 

the prior guidance and—— 

Mr. LANKFORD. Sure. 

Mr. WILSON. —section 1603 program and section 168(k). We do 

have a history with that and it has not generated a lot of questions 

on those points. Just to clarify, the service doesn’t typically— 

wouldn’t typically go and determine whether or not someone had 

began construction at the time that they were doing it. They might 

get picked up on audit at a later stage, and then the taxpayer 

would demonstrate that they had actually begun construction 

through the normal business records process. 

Mr. LANKFORD. Correct, and that was my point. When I read 

through the regulations and they are invigorating reading, which 

is great, by the way, try to be a clear as you can, when I read 

through the regulations on it, it almost gives the assumption that 

someone is going to have to look at it before it begins to make that 

judgment call if they doesn’t reach this 5 percent safe harbor. 

So my question to you is, is it the assumption that industry will 

make sure they hit that 5 percent, and if they don’t hit that 5 percent safe harbor it’s going to be quite a significant paperwork process to be able to prove they were under construction by that date. 

Mr. WILSON. I—the—there is no assumption that people will try 

to make the—to use the safe harbor, the 5 percent safe harbor 

more than the other safe harbor which I mentioned and noticed in 

2013–60, which is a place in service by the end of 2015. That is 

an alternative that they can use. They can make the 5 percent safe 

harbor, they can make the place in service safe harbor, or they can 

do the physical construction. 

Mr. LANKFORD. But physical construction, if they are going to put 

up, let’s say, 100 towers and they put in the footings for two of 

them, that is under construction, so they might have only spent 3 

percent of the actual total end cost. So the question is, that now 

54 

it becomes were they under construction enough, were two footings 

with the steel and the concrete down, I know they are not going 

to pour that way by the way, they are going to have to do multiples, but putting in a road, and putting in two footings for 100 

different units, does that count long term? For all 100 eventually? 

Mr. WILSON. That depends, if the all 100 are operated as a 

unit—— 

Mr. LANKFORD. Right. 

Mr. WILSON. —it is a facts-and-circumstances determination, but 

you can treat multiple units as one project for purposes of beginning a construction. If you begin work on—— 

Mr. LANKFORD. If they do continuous construction, let’s say they 

put in two footings, and it ends up being 3 percent of the total cost 

of the final cost of projects, but then they do a little bit of construction each year for the next 10 years, and they don’t really put it 

into use, start actually generating producing power for 11 years 

from now, would that 10-year time clock begin for the PTC at the 

point that they put the first tower in as far as actually producing 

electricity, when does that 10-year clock begin for the PTC for 

them? 

Mr. WILSON. That, again, I will have to say it, it will depend. If 

there—one of the things that the guidance provides is that we will 

look carefully with strict scrutiny at a taxpayer who begins construction but then doesn’t maintain a program. 

Mr. LANKFORD. Some level of continuous—I am assuming they 

are going to have some kind of level of continuous construction. 

Could they take 10, 11 years—I know that they would have a difficult time getting capital for that, I get that. Could they take 10 

or 11 years to do a project and then start the 10-year clock running? Could an investor know I’m going to trickle this project along 

while I’m working on other things just to keep something moving 

and then get the PTC at some future date? 

We have the responsibility on this dais to also do budgeting. 

When we put a tax credit out there in the past it has been very 

clear, we know when it guess online and we know we have 10 

years from there. With this one, some of the difficulty we have in 

budgeting on this is, we don’t know when it’s going to go online. 

We don’t know how many projects are going to take, and how long 

it continues construction, and when we talked about phase-out and 

such, that a typical project may take 3 or 4 years to do in construction, not including all the very lengthy permitting processes. The 

challenge is this is somewhat of a phase-out already because of the 

length of time and it is unknown. So could they theoretically hold 

this indefinitely? 

Mr. WILSON. They could, if they still met the beginning of construction and continuous program of construction, then there is not 

an end date for that. 

Mr. LANKFORD. Okay. Well, that’s something we’ll work on, that 

is our responsibility. I am going to continue to move on so we keep 

the conversation moving. Ms. Speier. 

Ms. SPEIER. Thank you, Mr. Chairman. Mr. Gramlich, give me 

an idea of the kind of high-paying jobs the industry generates. 

Mr. GRAMLICH. Sure there certainly are a lot of construction jobs; 

manufacturing jobs would be the other general area as you noted 

55 

and I noted as well; the 550 manufacturing facilities in the country 

now producing wind energy. 

Ms. SPEIER. Give me an average salary. 

Mr. GRAMLICH. Oh, boy, I’m not sure I know. Manufacturing jobs 

are notoriously well paying, and it is one of the very few sectors 

that is actually growing, and significantly growing, manufacturing 

jobs in this country. 

Ms. SPEIER. So maybe on behalf of the committee, you could you 

submit to us some numbers so that we’ll have the benefit of that 

as we evaluate the PTC in the future. 

Mr. GRAMLICH. Sure. 

Ms. SPEIER. Dr. Michaels suggested that these aren’t permanent 

jobs. Would you like to comment on the robustness of the jobs that 

are created within this industry? 

Mr. GRAMLICH. Well, he said there as nothing discernibly different about this industry, I mean, these are great jobs, many industries have great jobs, our industry happens to have a lot of 

manufacturing jobs. As long as the industry keeps growing, those 

facilities, those 550 facilities will keep churning out wind turbines 

over the years. It’s very similar to the auto manufacturing sector 

in terms of the skills and the types of jobs, and of course, those 

auto manufacturing facilities, as long as there is a market they 

keep turning out automobiles year in and year out. That what we 

expect and hope for. 

Ms. SPEIER. Mr. Reicher. 

Mr. REICHER. Let me say quickly, I worked for a wind company 

for several years after I left Washington. This is a longstanding 

wind company, it is in the business of R&D, manufacturing assembly, installation maintenance, this is in a small New England town, 

it has been a real important industry in that community. They 

have installed turbines for the military around the world for native 

Alaskan villages all over this country and all over the world, it is 

a very specialized type of turbine, and these have been great jobs 

for people who I don’t think would otherwise have the access to 

those kinds of jobs. 

Ms. SPEIER. My other question was to what extent are we exporting these turbines? 

Mr. GRAMLICH. There is a little of a bit growing export market. 

One of the reasons we produced so much here is that these happen 

to be very large, heavy pieces of equipment. So we actually have 

a unique strategic advantage for this sector in manufacturing these 

turbines here in this country compared to a lot of other industries 

where policymakers may be looking to, you know, where can we 

grow manufacturing jobs? This is actually because of the unique 

physical attributes of wind turbines, this is actually a great opportunity where we really can’t expect to manufacture the turbines 

here that we end up deploying here. 

Ms. SPEIER. All right. So when we do, as we often do, is not act 

until the last minute, do this lurching forward as we have this year 

in extending it for 1 year, the implications are profound. Can any 

of you talk about the impacts to jobs lost when we don’t give any 

clarity and consistency in what we are offering in terms of tax 

credits? 

56 

Mr. GRAMLICH. I can, sure. I mean, last year, we expected, with 

the impending expiration of the tax credit last year, we commissioned a study that found 37,000 jobs, or roughly half the jobs in 

the industry would have been lost. We did, in fact, lose many of 

those jobs in the latter half of the year as the exploration approached. Some of which we lost to manufacturing and may never 

get back. 

Now the industry has rebounded with the extension of the tax 

credit and the change to the start construction framework as opposed to solely using placement service qualification—— 

Ms. SPEIER. Mr. Gramlich, I’m going to ask one more question, 

so if you could just wrap up. 

Mr. GRAMLICH. Sure. That has alleviated some of the time pressure so it is a more workable policy than it used to be. 

Ms. SPEIER. So Mr. Reicher suggested, Mr. Wilson, that you 

could administratively extend REITs and MLPs to apply to wind 

energy companies. Are you contemplating that, is that on the agenda within the administration? 

Mr. WILSON. That’s a question that the Office of Tax Policy at 

the Department of Treasury has responsibility for doing. My office 

works with them, but they are the ones who would make the policy 

call on that. 

Ms. SPEIER. So have you made any recommendations to them? 

Mr. WILSON. Unfortunately that’s outside the REIT or outside 

my area of responsibility. 

Ms. SPEIER. My time has expired. But Dr. Michaels, you basically 

said that we don’t need this tax credit. And if that is, in fact, your 

position, then do we need a credit for oil, and gas, and coal that 

have been around for generations, are not new industries, and I realize my time has expired so maybe you can include that in some 

response. 

Mr. LANKFORD. No, the witness can answer the question. 

Ms. SPEIER. Thank you. 

Mr. MICHAELS. Thank you. This hearing is about wind, I am not 

an expert on subsidies to those other industries. I think they 

should all be evaluated. But again, if we’re simply looking at wind, 

I think it’s particularly worthy of note in light of the PTC, in light 

of the general energy situation. All those others, I agree with you, 

are imminently worth studying. I didn’t come prepared to do that, 

would be happy to do it otherwise. 

Mr. LANKFORD. Mr. Walberg. 

Mr. WALBERG. Thank you, Mr. Chairman, and thanks to the 

panel for being here. Interesting, interesting subject to deal with. 

Mr. Wilson, according to David Burton, a tax law specialist with 

Akin, Gump, he stated, ‘‘Savvy project developers could theoretically bank tax credits well into the future.’’ If a developer plans 

well and banks through 2013, PTC-eligible component parts it may 

be able to continue to construct PTC eligible wind farms indefinitely. His concern—Mr. Burton’s concern appears to be fair. Why 

is there no hard deadline in your guidance? 

Mr. WILSON. We didn’t place a hard deadline because the statute 

doesn’t place a hard deadline. It allows the credit if you begin construction before the end of the—of appropriate—before the end of 

57 

2014 or ’13, and so we didn’t think we had authority to place a 

hard deadline. 

Mr. WALBERG. So in other words there was a lot of flexibility 

that credits could still be claimed years down the road. 

Mr. WILSON. That’s true. Unlike the section 1603 program which 

had termination dates, the extension that was part of the ATRA 

did not have an end date to it. 

Mr. WALBERG. Mr. Gramlich, many States like Michigan have renewable energy suggestions or requirements already in place and 

working, doesn’t this suggest that when energy can function on its 

own without further Federal subsidies like PTC? 

Mr. GRAMLICH. Well, the State renewable portfolio standards are 

very effective policies. The thing is we met and exceeded most of 

them by now, so for the foreseeable next few years, they have no 

real market impact. In a few States where more than 5,000 

megawatts, I think that would be maybe double what the actual requirement would be. 

Mr. WALBERG. It would seem like it would be in the States’ best 

interest then if they are seeing that type of impact to increase, but 

we’re not seeing that, are we? 

Mr. Michaels, along that line of questioning, you note in your testimony that the widespread use of RPSs negate the need for the 

wind PTC, could you elaborate further on that? 

Mr. MICHAELS. The RPS requirements in States are projected to 

require somewhere around 100,000 megawatts of renewable generation, most of them are going to be wind over about the next 15 

years. That means one thing, even if wind is uneconomic, it says 

that these people, utilities in these States will have to buy it. It 

will support the industry in a very real sense, it supports demand 

without complexities and the incentives that come with protection 

tax credit. 

Mr. WALBERG. Mr. Gramlich, response to that? 

Mr. GRAMLICH. Dr. Michaels, I believe in his testimony, said 70 

gigawatts of additional wind would be needed, and then a minute 

ago in his oral testimony said some large number, and then just 

now, I think he said 100 gigawatts. The truth is it is actually 28, 

so far less than half of his lowest claim. 

Mr. WALBERG. Dr. Michaels, response to that? 

Mr. MICHAELS. I have never heard the 28 gigawatts. I think we 

can simply resolve this by looking at the references. 

Mr. WALBERG. Dr. Michaels, you note that the PTC is probably 

a poor tool to bring forth innovations, explain that a little further. 

That’s a fairly strong statement. 

Mr. MICHAELS. I would challenge someone to tell me any innovations in the industry that have directly been brought about as a result of operations under the PTC. My argument is if you really 

wanted to reward innovation, reward innovation, don’t reward operation. The link between operation and innovation is likely to be 

far weaker than the link between a dedicated research effort in innovation, that’s all I’m saying. 

Mr. WALBERG. Mr. Gramlich, your association suggests that Congress should extend the wind PTC. How long? 

Mr. GRAMLICH. We submitted testimony and spoke with the 

House Ways and Means Committee this spring. They are looking 

58 

at tax reform. They are—as we understand, they are looking at all 

energy resources as has been discussed here, we’re not quite sure 

or we haven’t seen any bills obviously on that. Senate Finance 

Committee is looking at some alternative structures, so we are engaged in that. 

Mr. WALBERG. But what would you suggest at this moment? 

Mr. GRAMLICH. We offered some ideas that would, in fact, probably more than any other industry has offered in terms of how long 

would be needed to sustain a minimally viable industry, which we 

believe everybody wants at least that much so that we can keep the 

cost reductions going, which are, in fact, caused by the production 

tax credit. The reduction of over 40 percent in our cost in 4 years 

is very, very much tied to the PTC. 

Mr. WALBERG. I’ve run out of time here. How many years? 

Mr. GRAMLICH. The letter that we put out in December which 

was in the record in the House Ways and Means is available to see, 

we said 6 years under certain assumptions would create the minimally viable industry, but the stability that would be required to 

get to those—— 

Mr. WALBERG. Thank you, Mr. Chairman. 

Mr. LANKFORD. Thank you. Ms. Duckworth. 

Ms. DUCKWORTH. Thank you, Mr. Chairman. You know I think 

if we are serious about reducing our reliance on foreign oil, reducing harmful greenhouse emissions and ensuring that Americans 

have access to reliable and affordable energy, we must make serious investments in a diverse energy sector, not just wind, not just 

oil, and not just gas, but a diverse sector. And I think wind energy 

is playing an important role in meeting these goals. 

In my district, wind energy has been an amazingly successful 

story American manufacturing. I’m proud to say that the State of 

Illinois is leading the way in both wind turbine manufacturing and 

capacity. Illinois now has the wind power in place to power 1.1 million homes, and we host over 2,000 wind turbines in 36 manufacturing facilities for wind turbine components with many of those in 

my district, including Winergy and Bly Industries. Bly Industries 

is a great example of the type of innovation and investment in 

American manufacturing that the wind industry is a great story of. 

Bly Industry manufactured rotating swash plates for helicopters. 

And with the cuts in defense spending, they were reducing production, they quickly, agilely adjusted their production line, and now 

have more orders than they can fill in the wind industry, and now 

have doubled their workforce. 

Good manufacturing jobs, good jobs that have benefits and a lot 

of people put back to work. So I am somewhat interested in knowing—looking at this aspect of it, we’ve got 6,000 wind related jobs 

in Illinois, a thousand of them in manufacturing. Although Dr. Michaels has said wind energy is a dying industry, I’m not sure how 

that jibes with the fact China, India, Brazil, Germany and Romania, all countries with very different economies and governments, 

are all supporting wind projects and resulting in employment. I’m 

going to ask both Dr. Michaels and Mr. Gramlich to answer this 

question, how competitive, Mr. Gramlich, is the global wind industry? 

59 

Mr. GRAMLICH. It is very competitive. As you say a number of 

countries are investing a great deal in wind energy; China for example, and a number of European countries. So it’s been very difficult but the Nation, U.S. has done a great job in bringing again 

70 percent of the domestic production here to this country, and we 

have great resources, tools, training capabilities in this particular 

manufacturing sector that we’ve been able to keep up with that, 

even with our limited policy stability that we’ve had here. 

Ms. DUCKWORTH. I know that in my own district, I have at least 

one manufacturer who makes gear boxes for windmills, exports 

them globally to places like China, one of their biggest customers. 

Dr. Michaels, you said this was a dying industry. Can you talk 

a little bit about the global situation for wind? 

Mr. MICHAELS. I do not know where the word ‘‘dying’’ came from. 

To my recollection, I have never stated that and it has it is clearly 

not a dying industry. 

Ms. DUCKWORTH. I have this quote from you, it says it would be 

dying were it not for the fact that the industry gets all sorts of subsidies and tax breaks. It gets far heavier subsidies than any other 

energy sources. You’re talking about nothing but incredibly expensive technologies that produce low quality power. You didn’t say 

that? 

Mr. MICHAELS. I said that it might well be dead, and dead may 

have been an extreme. It might me be a much, much small presence, I think is a more accurate thing to say. If, in fact, your story 

is correct, and it may be, then wind can stand on its own, and it 

should stand on its own without the PTC. It is a competitive industry, the type we like to always encourage in America, and there’s 

a lot of people who don’t like government intervention in these 

types of markets, precisely because it interferes with their dynamism. So dying may have been not the best word to choose. 

Ms. DUCKWORTH. Mr. Reicher, can you address the topic of the 

global wind industry? 

Mr. REICHER. Representative Duckworth, it’s a very competitive 

global industry that lots of countries want to own. The Chinese 

have taken big, big steps forward to build a very significant wind 

industry, they are beginning to put up turbines in this country, 

they have been long competitors in Germany and in Denmark. It 

is a big race and it is a big global market. 

The international energy agency said we are going to spend $38 

trillion between now and 2035 in building energy infrastructure of 

all types, $38 trillion. That is a huge market. An increasing chunk 

of that market will be renewable energy. The Chinese and other 

nations want to own a big chunk of that market, I think if we could 

put our policy, technology and finance tools in place in the right 

way, we could own a big chunk of that market as well. A market 

for technologies, many of which were developed and invented and 

deployed first in the United States. 

Ms. DUCKWORTH. Thank you, thank you, Mr. Chairman. 

Mr. LANKFORD. Mr. Farenthold. 

Mr. FARENTHOLD. Thank you very much, Mr. Chairman. And I 

will start with Mr. Gramlich. I’m concerned that the wind energy 

subsidies that we’re spending, and the growth of wind energy is actually costing us more than we know. Are you familiar with conVerDate Aug 31 2005 09:33 Nov 26, 2013 Jkt 000000 PO 00000 Frm 00063 Fmt 6633 Sfmt 6633 C:\DOCS\85357.TXT APRIL
60 

cerns that the military that have been raised with respect to interference of wind turbines with radar use for air traffic control and 

military training and any of the costs associated with that? 

Mr. GRAMLICH. Every project does need to review a number of 

things, including wildlife impacts, local community impacts, but 

certainly if you are anywhere near a military installation, there 

has been a lot of work and a lot of interaction with the Department 

of Defense on how radar and training routes can be preserved, intact, and consistent with both development and military objectives. 

Mr. FARENTHOLD. I’m going to go now to Dr. Michaels. The Public Utility Commission of Texas chair Donna Nelson has stated that 

Federal incentives for renewable energy have distorted the competitive wholesale market in Texas. Wind has been supported by 

Federal production tax credit that provides $22 per megawatt hour 

of energy generated by wind resources. With these substantial Federal incentives, some wind producers have actually bid negative 

prices into the market and can still make a process, we’ve seen a 

number of days where the negative clearing price in the west zone 

of ERCOT, which is the Texas energy market, where most of the 

wind farms are installed. These market distortions are creating a 

problem in Texas in that because wind is unreliable and it makes 

it difficult for other generators to recover their cost and discourages 

investment in new generation. Do you believe that her statement 

is accurate? 

Mr. MICHAELS. Um, Chairman Nelson and I worked in proceedings before the Public Utility Commission of Texas. We have 

our differences but on this one, I’m generally in agreement with 

her. It is a much deeper problem because it is going to become 

greater as wind grows as a presence. What happens is that congestion on the transmission lines, people have to bid for it, limited capacity, and because of the PTC, essentially you can bid a negative 

price, and after you get the PTC back, you’re still making an income greater than zero from that. Why is that a distortion? Very 

simply, it’s at variance with the realities of resource scarcity. It is 

a variance of what we would see in competitive markets, and there 

doesn’t seem to be anything we can do about it when obtaining the 

efficiency of the grid. It’s going to be a much bigger problem because it is not just in Texas, there are at least three other regional 

transmission operators who are starting to face increasing volumes 

of this in the same way that Texas is and nobody really knows how 

to resolve it. 

Mr. FARENTHOLD. Thank you, Mr. Reicher, you indicate in your 

written testimony that a multiyear extension in the PTC, Protection Tax Credit, is necessary to avoid a bust in the wind energy industry. As former DOE Chief of Staff, you are certainly familiar 

with the Energy Information Administration’s annual energy outlook, are you not? 

Mr. REICHER. I am. 

Mr. FARENTHOLD. Could you turn your microphone on, please? 

You answered in the affirmative. 

Mr. REICHER. I don’t know this year’s specific outlook, but I am 

generally familiar with the—— 

Mr. FARENTHOLD. You agree that it is one of the definitive resources with respect to energy and economic forecasts. 

61 

Mr. REICHER. It’s a useful one. 

Mr. FARENTHOLD. And so AEO’s reference case which assumes 

that the PTC will not be reauthorized by December 13th of— I’m 

sorry, December 31st of 2013, projects strong growth for the wind 

energy development in the United States. In fact, it says, the increase in wind power generation from 2011 to 2040, had 134 billion 

kilowatt hours, or 2.6 percent per year. It represents the largest 

absolute increase in renewable energy generation. It also indicates 

that wind will add more than 42 gigawatts of capacity by 2040, and 

total wind capacity will exceed hydropower by 2040. How can you 

characterize that projection with no PTC extension as a bust? 

Mr. REICHER. I don’t know the details of that projection. Let me 

just say, what I do know is the history of the development of this 

industry, and that is when the PTC is in place, we see growth in 

this industry. When we lose it as a result of unreliable Federal policy, we see a drop-off. 

Mr. FARENTHOLD. And let me just follow up on Mr. Walberg’s 

question to you. He asked how long do you think it needs to be extended. Do you have a time frame? 

Mr. REICHER. I have said in my testimony, we need to put it in 

place for a multiyear period with a phase-down. I was very clear 

there ought to be a phase-down. 

Mr. FARENTHOLD. And multi—— 

Mr. REICHER. Just if I could finish, and that ought to be linked, 

and I don’t know if you were here to hear my statement, this absolutely needs to be linked to opening up master limited partnerships 

and real estate investment trusts to renewable energy. Both of 

those financing mechanisms put in place by this Congress have 

been available to conventional energy sources and they ought to 

be—— 

Mr. FARENTHOLD. And those won’t— and those alone won’t do it. 

You’ve still got to basically give them money. 

Mr. REICHER. Be careful. I said a multiyear extension with a 

phase-down. With a smart ramp up of those, I am very clear that 

if we give some years to the PTC, phase it down, and then ramp 

up these other two financing mechanisms that have been so vital 

to the development of oil and gas infrastructure, to the tune of 

roughly $500 billion, that’s a smart transition, and that’s what we 

ought to be doing. And let me just finish. We have bipartisan support in this House for that bill and we ought to—we ought to get 

on with it. 

Mr. FARENTHOLD. All right, well, I’m out of time. Thank you very 

much for your testimony. 

Mr. LANKFORD. Ms. Lujan Grisham. 

Ms. LUJAN GRISHAM. Thank you, Mr. Chairman, and I appreciate 

the panel being here today. New Mexico ranks 12th in the Nation 

for the production of wind energy and it’s currently producing energy for about 280,000 homes. And it is also providing great economic promise in our State which currently has negative job 

growth and is experiencing one of the toughest economic situations 

in the country. 

I am—and you have heard this, I think, several times this morning, but we have one of the national labs also, two national labs 

in New Mexico, and they are both very clear that in the interest 

62 

of national security, having a diverse energy portfolio is critical; not 

just necessary, critical, must happen, and making sure that there 

is a clear strategy to assure that that is developing and growing 

in a meaningful way is also on their critical list for national security issues. But recognizing that most—that some of the testimony 

today, and some of the questions that really focused on the credit 

and whether or not that’s a useful investment, I want to focus on 

for a minute, Dr.—Mr. Michaels. 

Now, you state in your written testimony, that Federal data and 

forecasts show that all in all, the cost of wind turbines have and 

will be higher than that of gas-fired plants. And you referred to the 

cost estimates released by the U.S. Energy Information Administration in Exhibit 1. Now, Exhibit 1 compares the cost of different 

types of energy production, and it shows that wind power is one of 

the least expensive methods of producing electricity compared to all 

other types of conventional and non-conventional forms of power 

generation. 

Now, considering that my own State, its potential, has the potential and is capable of needing more than 73 times the State’s current electricity needs, I’m very encouraged. The Intergovernmental 

Panel on Climate Change, which is a worldwide committee tasked 

with examining climate change, recently found that it is extremely 

likely that human influence has been the dominant cause of observed global warming and the panel warns that extreme weather 

will continue unless we act aggressively to reduce the pace of 

greenhouse gas emissions. 

In New Mexico, we are on the forefront of climate change. Earlier 

this year the Federal drought monitor listed New Mexico’s drought 

as the worst in the country. Nearly the entire State was classified 

as experiencing extreme or exceptional drought, and currently we 

are under a state of emergency due to extreme flooding. 

I have lived in New Mexico all my life and I have never seen 

anything like this, destroying roads, farms, and homes. Now, what 

I’m getting at here, is that the cost of electricity is not the only cost 

that should be considered. There are environmental and health 

costs associated with power plant pollution from destroyed and 

damaged property due to droughts, fires, floods, rising oceans, to 

health care costs due to heart attacks, premature deaths and many 

types of respiratory illnesses. 

In Exhibit 1, Mr. Michaels, does your written testimony include 

these environmental and public health costs associated with the 

different types of energy production? 

Mr. MICHAELS. I’m using—pardon me, I’m using the figures from 

the Energy Information Administration and no, those figures do 

not include all of those costs. And again, they also don’t include 

costs of overpriced power, and how people may suffer under that 

for various reasons. And the most important thing they don’t do for 

wind is they are assuming that a megawatt of wind power comes 

out with the same reliability as a megawatt of fossil fuel power. 

You have to add to that wind expense the fact that you need 

backup; that you have to do a lot more than just look at the cost 

of that unit. The gas fired units—— 

Ms. LUJAN GRISHAM. Well, Mr. Michaels, or Dr. Michaels, I appreciate that. I have got Mister in here and I see clearly it is a docVerDate Aug 31 2005 09:33 Nov 26, 2013 Jkt 000000 PO 00000 Frm 00066 Fmt 6633 Sfmt 6633 C:\DOCS\85357.TXT APRIL
63 

tor. So I apologize for getting your title wrong. But in any event, 

it is clear then that this comparison in your exhibit is not complete. 

Mr. MICHAELS. I think it is impossible to make a complete comparison. I’m trying to do the best I can with data that I think I 

can live with. Yet—— 

Ms. LUJAN GRISHAM. Without a complete cost comparison, is it 

fair to say that in making recommendations about using all of our 

tools and investing, particularly in something that affects national 

security, that maybe we ought to have an effective, complete, comprehensive cost comparison that would include all of those things, 

including the things that you have identified? 

Mr. MICHAELS. Personally, if I—— 

Ms. LUJAN GRISHAM. Apples to apples, for all of these energy 

sources. 

Mr. MICHAELS. Please pardon me. 

Ms. LUJAN GRISHAM. Oh, sure. 

Mr. MICHAELS. Personally, I would really very much like to see 

that. I think that costs would come out and I think we would learn 

a tremendous amount, and I think both of us would probably learn 

quite a bit on both sides of this issue. Are, in fact, we overstating 

or understating, say, the health issues and the climate issues, or 

are we overstating or understating the costs of backing up reliable 

wind power? These are open issues, and I certainly favor doing 

more research into that. 

Ms. LUJAN GRISHAM. Dr. Michaels, I’m out of time and I appreciate the chair’s allowance of that, but as policymakers, I agree we 

should definitely be doing things in a much more comprehensive, 

factual manner to make these decisions and recommendation. 

Thank you, Mr. Chairman. 

Mr. LANKFORD. I now recognize Mr. Jordan. 

Mr. JORDAN. I give my time to the chairman. Thank you. 

Mr. LANKFORD. Thank you. Ms. Lujan Grisham, I completely 

agree the difficulty of this, as this committee has dealt with before 

is trying to evaluate the social cost of carbon and all these things 

because that number is difficult to get your hands around. We have 

seen the administration change it by 50 percent in just 3 years, 

saying their models have changed. So there is this great challenge 

of this very subjective, how do you get your hands around that. We 

have an economists here that live and breathe on subjective data, 

and giving their advice in the middle of all of that, and I understand that, but that dynamic is incredibly difficult for us to do. It 

is part of our conversation today as we both figure out how do we 

provide greater certainty for the industry that is currently living 

under this law? And then also, where are we going on this long 

term? We do need to have a broader energy portfolio but we have 

a lot of issues to deal with this as well. 

Mr. Reicher, you have mentioned a couple of times about the 

MLPs. I would like to go into greater depth with you on that, because this conversation about, as you said before, a significant 

trailing off of the PTC to give it a significant amount of time to be 

able to become where Mr. Gramlich—6 years or more whatever it 

may be. It was interesting. I have been in Congress a relatively 

short period of time, about 3 years. But in my first months here, 

because my energy—my State is a significant producer of wind. We 

64 

are jokingly called the Saudi Arabia of wind in Oklahoma because 

we have so much wind generation and we are an exporter of wind 

out of our State, which is a good thing economically for us and 

functionally for us. But the grand challenge of it is is how do we 

do this? I had folks that caught me in my office from my industry 

in the first months that I was here and said, we just need 4 more 

years of the PCT, and I think we can trail this off if we get a good 

sunset on it. This is not a comment from Mr. Gramlich, but to hear 

you say we just need 6 more years, made me think about that conversation I had 3 years ago with someone that said, we just need 

4 more years. 

This is one of those very difficult things to get our arms around. 

We have got to find a way to be able to figure out how do we provide some certainty in Federal policy? Let’s talk in greater depth 

of what you are trying to do with this MLP proposal. How does 

that fit in? How does that work economically? How does that bring 

more capital into the industry? 

Mr. REICHER. Well, let’s take it back home, in fact, to Oklahoma 

where your oil and gas industry, the infrastructure that backs up 

a lot of that oil and gas industry has been financed largely using 

master limited partnerships. 

Mr. LANKFORD. Yes, it has. 

Mr. REICHER. And they have been vital to this from the early 

1980s. They do, in fact, lower the cost of capital for infrastructure. 

They are certain in terms of their policy base, you don’t need to reauthorize them. And they have been a—have had a dramatic impact on the building of energy infrastructure. My point is, let’s 

open up those mechanisms to the rest of the energy industry. I’m 

not just talking renewable energy. I’m talking carbon capture and 

storage. So that if we need to pull carbon out of coal plants and 

you have to build infrastructure, finance that with MLPs. I’m talking energy efficiency. I’m talking cogeneration. 

The bill sitting here in this House and over in the Senate is very 

broad technologically. So put that in place. The IRS can, in fact, 

issue a revenue ruling to do something very similar. 

Ranking Member Speier, they can make the change to REITs. 

Congress has to make the change to MLPs. Meanwhile, link that, 

don’t, don’t cut off—don’t cut off the PTC at the end of this year. 

Give it some running room. 

Mr. LANKFORD. Well, just to push back somewhat, what is your 

guess at this point of how long the PTC has right now, as it currently stands under construction? If someone is under construction, 

and they begin to hit the 5 percent safe harbor threshold, for instance, how many years is this trailing right now? Because it’s— 

well, it is ending ‘‘this year.’’ It is really not ending this year. They 

have got 3 or 4 years. How many companies, how many years is 

this really going to be a trailing off of what we currently have? 

Mr. REICHER. Mr. Chairman, I was in the wind energy development business, and you know, these are projects that generally 

take in the larger ones in 2 to 4 years, something like that. I 

wouldn’t lose a lot of sleep over the fact that there could be a 

project that goes a little bit longer. I think the IRS has done exactly what it should do, which is you, the Congress, didn’t give 

them a specific date. They have written some good guidance as 

65 

they have to in many of these cases, and they have said, here is 

what under construction means. I don’t think there is going to be 

major abuses of this. I think it is going to take a few years to get 

out of this. So let that happen. Meanwhile, extend the PTC for a 

reasonable period of time, and then pull these other two long-term 

financing mechanisms in, that means the MLP and the REIT. 

Mr. LANKFORD. Mr. Gramlich, Dr. Michaels has mentioned a couple of times on it, and I have talked to several folks in the industry 

as well, this issue of where you have a wind farm, you also have 

got to be connected at some point in that grid to nuclear, coal, gas, 

something, because even in Oklahoma, the wind does stop blowing 

on days. I have been to a wind farm and stood next to it and seen 

every tower still. So that what is the connection there between 

other fuel sources that are consistent that you can turn on and off, 

and the wind which only God turns on and off? 

Mr. GRAMLICH. Chairman Lankford, there are three States getting more than 20 percent of their electricity from wind right now. 

They are—— 

Mr. LANKFORD. Of their actual production, or their production capacity? 

Mr. GRAMLICH. Their production, their megawatt hours over the 

course of a year from wind energy. Iowa is one of them. These are 

perfectly reliable systems. You could have those utilities in here 

talk about how their lights stay on. So—— 

Mr. LANKFORD. But because they are partnering with another 

fuel source, and I’m running out of time. 

Mr. GRAMLICH. Exactly how it worked for fossil and nuclear facilities, because every single generation facility can go off at any 

moment. It is nothing—— 

Mr. LANKFORD. While we have a diversified fuel structure, that’s 

why, quite frankly, I believe it is good to have coal and natural gas, 

and nuclear, and wind, have all of these out there because you 

wanted a diversified source on it. But that is true, they are going 

to always be partnered with. They can’t be just be a standalone 

consistent power source. 

Mr. GRAMLICH. Exactly. That is why I did not advocate for a 100 

percent wind energy grid. 

Mr. LANKFORD. Okay, thank you. Mr. Horsford. 

Mr. HORSFORD. Thank you. Good morning, Mr. Chairman. I 

thank you to our panel for being here. Those who oppose wind energy argue that production tax credits should be permanently 

eliminated as an incentive for wind project development because 

the wind industry is no longer in its: ‘‘infancy,’’ and therefore no 

longer needs such support. The argument goes further that all electricity generators should be subject to smart-based competition, 

and but only wind projects should compete on their own economic 

and environmental merits without the support of Federal financial 

incentives. 

Mr. Gramlich, your expertise lies in the wind industry, and I 

have met with your organization in the past. I’m from Nevada. My 

district is 52,000 square miles. I have both rural, and urban. One 

portion of my district in the northeast in White Pine County has 

a major wind farm. There is another one in the Northwest portion 

of the district that’s in Representative Amodei’s district, but wind 

66 

is a very important part of the economic diversification opportunities in rural America. So you are an expert in wind industry, so 

I want to ask you to respond to this graphic. Do you agree with 

the data depicted on the chart displayed regarding energy subsidies? 

Mr. GRAMLICH. I do. I think that’s a very accurate and informative chart. I think it’s very important to look at the number of 

years over which different energy technologies have received incentives, because it effectively gives them a long head start in the 

market. 

Mr. HORSFORD. Is there any way that you can characterize the 

oil and gas industry as being in its infancy given that it has been 

receiving Federal subsidies now for more than 90 years? 

Mr. GRAMLICH. Well, I don’t have ways to characterize it other 

than to say that incentives do exist for all conventional, as well as 

newer clean technologies. 

Mr. HORSFORD. But after 90 years, they are not infants. 

Mr. GRAMLICH. I do think the time frame absolutely matters. 

Yeah, the relative short period over which clean energy sources 

have received incentives is very relevant to determine how long 

they are needed. I mean, one answer to the question of—from Representative Walberg would be, well, I don’t believe the incentives 

for wind will be needed as long as conventional sources have received them. I don’t know, you know, it of course matters a great 

deal, what your assumption is on what other technologies receive 

in order to say how much we need and we don’t know that yet. 

Mr. HORSFORD. Okay, well, let’s stay with this for just a moment 

though. The production tax credit has been around since 1992, 

that’s correct? 

Mr. GRAMLICH. Correct. 

Mr. HORSFORD. But a significant increase in wind energy capacity didn’t actually occur until about 8 years ago in 2005, is that 

also correct? 

Mr. GRAMLICH. I know that well because that’s when I joined 

AWEA, that’s correct, yes. 

Mr. HORSFORD. So would you say that wind energy tax credits 

are still in its infancy? 

Mr. GRAMLICH. Yes, I think they have made a great impact, but 

they have certainly not reached their—completed their task. 

Mr. HORSFORD. Okay, so let’s take a look at the amount of the 

subsidies on this chart. According to this chart, the oil and gas industry receives about $4.8 billion in Federal subsidies on average 

every year, and which have developed into giant industries as a result. 

Mr. Reicher, would it be a fair competition if the oil and gas industry was permitted to keep receiving $4.8 billion worth of Federal subsidy while the wind industry receive nothing? 

Mr. REICHER. Representative Horsford, we have subsidies across 

the board for the energy industry ranging from oil and gas, to nuclear, to renewables, to energy efficiency, and they have all served 

important roles in different ways across research development, 

demonstration, and deployment. So we really do have to take a 

hard look at all of this, and put it all on a level playing field and 

it is not on a level playing field today. 

67 

You cite nuclear power. Nuclear provides 20 percent of U.S. electricity, zero carbon, very important in our—in our energy mix 

today. And it has received some important subsidies over time from 

R&D dollars, to Federal liability insurance, to tax credits for new 

reactors. It’s become an important mix and Congress has backed 

these subsidies over decades and decades. And we are doing similar 

things in the oil and gas area and we ought to continue to push 

the renewable area as well. 

Mr. HORSFORD. Okay. 

Mr. REICHER. Now, the option to get rid of all of them. I don’t 

see that happening. If we are not going to get rid of all of them, 

let’s build a level playing field. 

Mr. HORSFORD. Thank you. My time is expired, Mr. Chairman. 

I would just say that we need to be careful. It seems that the 

distractors of the wind industry are asking the government to pick 

winners and losers by only removing Federal subsidies for one particular sector of the energy capacity, which is wind energy, but 

leaving all of the other subsidies intact, and I would not support 

that approach. Thank you. 

Mr. LANKFORD. Thank you. We are going to start a second round 

of questioning here in just—people on the dais wants to be able to 

participate in that. 

Mr. Gramlich, when a wind farm does construction they have 

business expensing as well, just normal business expensing for the 

actually tower itself. Are they able to write off the products they 

produce and such as their normal tax treatment for a wind farm? 

Is there anything else in addition to the PTC? 

Mr. GRAMLICH. I’m not—we could certainly give you an answer 

to that and follow-up on that. I’m not exactly sure how the other 

tax provisions work. 

Mr. LANKFORD. Right. They operate as a business and function 

as a business and have normal business expensing through products, through purchasing the towers to whatever it may be. It is 

considered a business expense. They are able to write off that business expense. Does anyone disagree with that? Mr. Wilson, I know 

I’m outside of your lane there on that but—— 

Mr. WILSON. I’m not aware of any others. We can check and get 

back to you. But I don’t think—I’m not aware of anything that is 

not available to any other business. 

Mr. LANKFORD. Correct. Every other business would be treated 

the same and be consistent on that. Part of the—part of the conversation on this, and I mention Mr. Horsford and his comment on 

that, the challenge of it is, is when you take oil and gas and say, 

okay, I’m going to take all of their IDCs and all of their normal 

business expensing and I’m going to call that a subsidy. But for 

wind, I’m not going to call their version of the IDCs their products, 

that’s not a subsidy. That is just normal business expensing. But 

for oil and gas, that’s different. They shouldn’t have any way to do 

business writeoffs, and normal business expense. 

I know, this hearing was not about trying to compete different 

types of fuels. I think everyone has been clear on this dais. We 

want every type of fuel. But if we are going to be consistent in comparing apples and oranges, we probably should compare apples and 

apples and oranges and oranges in this to be able to compare as 

68 

far as how tax treatment is done, whether this normal business expensing, if we are going to do that, let’s put it all in there. And 

let’s actually compare not based on size, because it is my guess— 

I don’t have the exact number in front of me—I think the oil and 

gas industry is slightly larger than the wind industry. So when you 

talk about the dollars that are involved in actual investment, it is 

a different amount of dollars that are involved in investment as 

well. 

I need to ask about renewable fuel standards. Obviously, many 

states, my State, Oklahoma, is one of the largest wind producers 

in the country. We don’t have a mandatory renewable fuel standard. It is a voluntary process. In our State it has thrived in that, 

as far as wind energy. The question becomes of trying to guess this, 

and this is for the two economists that are here as well as anyone 

else that wants to jump in on it. 

How do we begin to compare and say what’s the effect of the 

PTC, versus what is the effect of the renewable, of all of the renewable requirements that are on every single State? So every State 

has this blend of fuels that’s now—that’s putting this in place and 

we see this thriving wind energy there because the State’s mandating some sort of renewables in the portfolio. So how do we balance the two? How do we begin to guess what’s due to the renewable requirement portfolio? What’s due to the PTC? Dr. Michaels, 

do you want to do that? And then Mr. Reicher, you can jump in 

as well. Is there a way to be able to guess and to separate those 

two out on greatest impact? 

Mr. MICHAELS. It sounds like something that I would spend several months trying to think of how to redo the research. Quite 

frankly—— 

Mr. LANKFORD. That’s the benefit of being an economist. 

Mr. MICHAELS. And other economist jokes. No, that is really a 

problem. I don’t know how I would approach it at this point. 

Mr. LANKFORD. Okay. 

Mr. MICHAELS. I’m sure there probably are people who are looking at it though. 

Mr. LANKFORD. Mr. Reicher, do you have a guess on that as well? 

Mr. REICHER. Mr. Chairman, it’s push and pull. There have been 

vital complementary mechanisms over the last couple of decades. 

And as a former developer, I would look out into the market and 

say, you know, where is a good place to build a project? Is there 

some pull going on as a result of State policy? Is there some push 

going on as a result of the availability of tax credit? You sit down, 

you look at the deal, and you see if the numbers work and you decide whether to build it. You take either one of those out, and these 

would not be—— 

Mr. LANKFORD. Sure. 

Mr. REICHER. —as attractive a project. 

Mr. LANKFORD. No, I definitely agree. Both of these have driven 

production. In the earlier stages, even in my State, if you wanted 

to declare your home as a home that’s running on wind power, your 

electricity bill is higher and you would pay a premium for that. But 

it’s individuals that were very concerned about those issues and 

wanted to pay a part of that because the cost was higher initially. 

69 

Now, I don’t know how our cost is catching up and where things 

are going on that, but there is no question that there’s some individuals who want to do that. That’s why the master limited partnerships is a very interesting, capital thing for people that want to 

invest in that, could actively invest in that, provide greater capital, 

but there is also that process as well. Let me briefly go into this 

as well, and we may have time to be able to come back on it also. 

And that is on is environmental issues. 

The effects of the environmental requirements and requests, the 

permitting process. The wind farm that is in Oklahoma is currently 

going through the process with Fish and Wildlife on a taking permit for the number of eagles that will be killed in the future days 

by the wind farm. Other solar projects have large problems with 

a random lizard that is in that area and so they are having difficulty in moving it’s solar project. 

All of these things are real dynamics of actually moving forward 

in the permitting process. What effect do we have right now on 

some of the environmental regulations and the permitting and actually moving wind power ahead? Mr. Gramlich, you want to jump 

into that? 

Mr. GRAMLICH. Sure, I would mainly just offer that our goal in 

that area is the same as it is in tax policy. We are looking for clarity, like every other industry. We want to know what the rules of 

the road are, and with this change in the statutory provision for 

the tax credit, we sought for and received clarity from the IRS. We 

are seeking the same from Interior and the Fish and Wildlife Service. And you know, hopefully we will get more. We don’t have full 

clarity, but you know, the good news is, wildlife impacts are being 

managed. Wind is, even though it tends to get far more attention 

than anything else that impacts wildlife, I think it is .0003 percent, 

of bird—human-induced bird deaths are caused by wind, where 

every bird death is regrettable and we are working hard to mitigate those. 

Mr. LANKFORD. Yeah, it just makes for a great photograph is 

really what it does on that. And we have just as many issues in 

Western Oklahoma, saying we can’t put up a wind tower because 

of the habitat of the lesser prairie chicken in Western Oklahoma. 

And to say, it is not a matter of the taking of an eagle, it is a matter of the habitat of a lesser prairie chicken that someone has said 

prairie chickens are afraid of wind towers, and so we don’t want 

to put more wind towers in this area because we fear that when 

we get a lesser prairie chicken on a couch and begin to do counseling with them, they are nervous about those towers. And so we 

have a whole different set of issues. Obviously, that is a different 

hearing for a different day. Mr. Horsford. 

Mr. HORSFORD. Thank you, Mr. Chairman. I actually enjoy coming to this committee because it’s actually the one time when we 

get have a little bit of substantive debate. And I really do appreciate your leadership as chair that allows us to have more of these 

discussions. And I didn’t want to interrupt you or ask you to yield 

prior when you were clarifying the issue around the subsidies, and 

all I have to say about the subsidies is, you know, oil and gas has 

a whole lot of exemptions and loopholes that have been built into 

those subsidies over the 90 years. And I agree that if we are going 

70 

to look at things apple-to-apple comparison, then it should lay out 

some of the unique exemptions that that industry has enjoyed, and 

whether or not it’s proper for them to continue to enjoy them at 

the expense of having a new burgeoning portion of renewables to 

have an appropriate incentive to participate. And I think that is a 

fundamental policy question that we need to have, so I agree with 

you. 

Mr. LANKFORD. Would the gentleman yield for a colloquy? 

Mr. HORSFORD. Sure. 

Mr. LANKFORD. And I’ll extend your time. I think we can do 

unanimous consent fairly easily to extend your time. 

Mr. HORSFORD. Sure. 

Mr. LANKFORD. The issue that I have is, most of those tax treatments for oil, gas, other traditional fuels that have been around for 

a while, most of them really are normal business expensing; just 

their business expenses look different. Obviously it is very expensive to be able to put up a tower, do a drilling operation for a moment and being able to pull that out. But that’s the normal operation. They are able to write that off. 

So while some folks will say that’s a loophole, or a special subsidy, that’s their normal business. That’s what they do as a business, and it only applies if they keep doing it. If they ever stop, 

then that goes away. And some of the challenge of this is for wind 

at this moment, they have more business expensing which they 

should, by the way, have normal business expensing. They also 

have a PTC that is driving that. They also have renewable portfolios that are driving that. 

It’s an industry that has grown rapidly. It is rapidly catching up 

with hydro, which no one would have guessed decades ago that it 

would catch up with hydro. And the challenge is, how do we do this 

in the future for any industry that’s functioning? And I totally 

agree, everything should be looked at, but we also need to be able 

to keep it in context; what it really is. Like a—for instance, going 

to one of the loopholes you talked about, G&G for oil and gas. 

That’s just geology. That’s a normal part of their business expensing. If you are doing geologic research, you are going to have to 

spend that if you are actually going to poke a hole in the ground 

and do the research. So it is just research, normal business expensing. 

But we will work through this process in the days ahead. We will 

have, hopefully, a tax reform proposal come to the House, and we 

will have this in a very aggressive format at that point on a lot of 

issues simultaneous. 

Mr. HORSFORD. Reclaiming my time, Mr. Chairman, I appreciate 

those points. I will just note that the oil and gas industry is much 

more profitable than any of these other sectors, and the question 

will remain, and the policy choice, is, should those special exemptions, tax loopholes and other subsidies continue to apply for some 

90 years for what is a very profitable industry? 

And I have no, you know, say what you will, it is a private business. They can make money. But wind energy and other renewables are much more entrepreneurial. They are more of the small 

business that’s partnering to develop an energy project with, oftentimes, a utility. That’s what happened in my home State of NeVerDate Aug 31 2005 09:33 Nov 26, 2013 Jkt 000000 PO 00000 Frm 00074 Fmt 6633 Sfmt 6633 C:\DOCS\85357.TXT APRIL
71 

vada. It’s a small wind energy project that has a purchase power 

agreement with a major utility. And their margin of profit is nil, 

if there’s a profit at all, because they are trying to demonstrate 

that this approach will work. 

So I just hope that as we proceed, and I’m glad to hear that we 

may ultimately have a comprehensive tax reform package, because 

we need to look at these industries who have historically gotten 

special exemptions, tax breaks, and other subsidies, who have tremendous profits to the detriment of entrepreneurs, small businesses, and those who should be getting Federal subsidy in order 

to grow our economy. 

Thank you, Mr. Chairman. 

Mr. LANKFORD. Absolutely. And while we are having this dialogue, and I do appreciate the dialogue going back and forth on it, 

I’m glad to see every type of energy is extremely entrepreneurial. 

Wind is much more efficient now in its generation than it was 20 

years ago in the actual production of electricity and what they are 

actually putting into the line. So we are more entrepreneurial. But 

what is happening right now with oil and gas in the revolution that 

has occurred in fracking is because of an entrepreneurial risk as 

well. 

So those were small businesses that have also taken an enormous risk. The cost of a well now that we have this, as a Nation, 

a wash in natural gas. But that also, each drilling platform has 

gone from a little over $1.5 million to about $6 million just to go 

try to get down to that hole and be able to do it. 

So there is lots of entrepreneurial risk in that. That’s a great 

part of being an American, quite frankly, is that every one of these 

industries has a tremendous amount of entrepreneurial risk, and 

when they take the risk, it pays off for them. 

Mr. Wilson, I’m going to ask you one quick question. The IRS 

provides the private letter rulings in response for guidance. Is 

there a plan to do private letter rulings for wind developers just 

to make sure that they are going to meet the under construction, 

or they have begun construction test? Is that dialogue already occurring with industry to give them some sort of stability and confidence? 

Mr. WILSON. We haven’t received any request for private letter 

rulings yet. 

Mr. LANKFORD. Would you anticipate those would come in the 

next 3 months as we get closer and closer to this deadline? 

Mr. WILSON. I’m not really anticipating that. I think, for the 

most part, the wind industry is pretty satisfied with the placed in 

service safe harbor. I think, for the most part, they think they are 

going to be able to make that comfortably. So I’m not anticipating 

private letter rulings. 

Mr. LANKFORD. Okay, so what—your assumption is at this point 

that the majority of everyone is going to make the above 5 percent 

safe harbor target for final cost of construction, and they are not 

going to have to worry about some of the earlier rulings if they are 

less than 5 percent. 

Mr. WILSON. Right. 

Mr. LANKFORD. Obviously, you can’t say with certainly at this 

point—— 

72 

Mr. WILSON. Right. 

Mr. LANKFORD. —but that’s your assumption at this point. 

Mr. WILSON. Either the 5 percent safe harbor or the alternative 

safe harbor for placed in service—— 

Mr. LANKFORD. Correct. 

Mr. WILSON. —before the end of 2015. 

Mr. LANKFORD. Correct. Mr. Gramlich, do you assume the same 

thing on that? 

Mr. GRAMLICH. I can’t speak to whether private letter rulings 

will come, but the guidance that they did provide is, I know, our 

investors are ready to go now. That guidance, as I said before, was 

much, much needed, both the one in the spring as well as the one 

just issued. So I think there is going to be a lot of business happening based on that. And may I say one more thing about the 

Treasury rules? 

Mr. LANKFORD. Certainly. 

Mr. GRAMLICH. I’m a little concerned with an impression that 

may have been left by some questions and some answers earlier 

about the open-ended nature of the IRS rules. You should be assured that under either approach, safe harbor, or physical work, 

significant investment to the tune of tens of millions of dollars for 

a particular wind project will be needed and committed to, and 

payments begun by the end of this year in order to qualify. 

So—and that risk, as we have just discussed on the entrepreneurial, that is on the developer. That is not on the taxpayer, or 

on anybody else. So the companies are, you know, doing what they 

can right now to sign their power purchase agreements with utilities. They need and off-taker, they need a customer, they need to 

know where that sale is going because they don’t want to hold that 

risk with no customers. So it is not open-ended. It is not indefinite. 

That risk will be held by them, and we expect a very limited universe of projects to qualify for that. Partly the, you know, the 

power markets are somewhat soft for all new electricity, so it is not 

going to be a huge set of projects that do qualify, regardless, and 

also, keep in mind that PTC applies to other technologies than 

wind. So when Treasury and IRS are looking at these timelines, 

they have to account for the construction timelines of not just one 

technology, but multiple. 

Mr. LANKFORD. Right. Mr. Reicher, you look like you are leaning 

onto your button there. Do you have a comment? 

Mr. REICHER. Thank you, Mr. Chairman. I would just say that 

it’s this kind of a situation, the complexity of this, that gives investors pause; that other countries look at the U.S. and they say, this 

is a strange way to support a very important industry. And I think 

it is unfortunate, and I think it’s the reason why a multiyear extension with clarity would be so helpful. This is not the way to build 

an industry. It sends such poor signals to investors, so let’s do that, 

and those other two pieces. 

Mr. LANKFORD. Let me ask you a question with that. Is it better, 

let’s say we can get into a tax treatment to do a multiyear extension with a clear phase-out so that everyone knows, it’s here 100 

percent this year, 100 percent year this year; it phases out, 50 percent, 50 percent, and the trailing off occurs that everyone talks 

about, is that better than what we have now, and to set a clear 

73 

definite, and I agree with your statements, by the way, with the 

Master Limited Partnerships, blending with that, to provide that 

kind of clarity than what we have now? 

Mr. REICHER. Absolutely, and I think that’s consistent with what 

the American Wind Energy Association has said in its statement 

at the end of 2012. 

Mr. LANKFORD. Right. 

Mr. REICHER. Pick a significant amount of time, a reasonable 

amount of time, phase it down, and put these other things into 

place. 

Mr. LANKFORD. Correct. But my own—my own question, we have 

two things here. My own request to joint tax evaluates we do this 

another 5 years, it’s another $18 billion in costs. So we have to look 

at cost issues to say, what does that really look like, and the discouragement that I would have on this side of the dais is, if you 

set a, let’s say a 6-year time period and say there is going to be 

a phase-out, what is not there so that 2 years from now when the 

phase-out actually begins and it starts trickling off, our offices 

aren’t flooded with saying we just need 6 more years to go through 

that. Setting that definite time period and making sure it’s clear. 

Let’s get a balanced look at this to make sure we have the infrastructure in place to provide this, but we also know the industry 

is going to continue to fly on its own. Any thoughts on that? 

Mr. REICHER. Yeah, number one, you are correct. You know, in 

theory, you can’t bind a subsequent Congress. 

Mr. LANKFORD. Right. 

Mr. REICHER. Decisions can change. Having said that, if you 

blend these other financing mechanisms in, I would sit here today 

and bet that you will see the sort of logical transition that I’m talking about, and there will be less and less of a reason to seek another 6 years. 

I actually think that this multiyear phase-down and pull these 

other mechanisms in, I think we will be at a point in 5 or 6 years 

where people will say, boy, we have done a really smart transition 

of this industry to a way that grown-up industries like oil and gas 

infrastructure and transmission infrastructure now use to get built. 

Mr. LANKFORD. Right. Mr. Michaels—Dr. Michaels, one quick 

comment, and then I’m going to recognize the ranking member. 

You had mentioned something about jobs and about job growth. 

These are manufacturing jobs. I know you didn’t mean this, but I 

want to be able to just clarify one thing. And I’m not evaluating 

your heart on this one. You said they are low skilled, they are manufacturing, they are not good jobs. I want to give you an opportunity to clarify that because I can assure you, there are lots of 

folks in manufacturing jobs in my district that are great people, 

and that are great jobs on that. 

Mr. MICHAELS. No, that definitely—— 

Mr. LANKFORD. Can you get your microphone there? 

Mr. MICHAELS. That definitely does need a clarification. Manufacturing jobs come in all sorts of skills, so do construction jobs, 

and the only thing I was saying, was if you look at the typical educational attainment, training attainment of people who are in these 

jobs, people who work at the wind installations after they go into 

operation, I have seen these in things like environmental impact 

74 

statements for wind operations where they have to inventory the 

workforce, and I think generally speaking, the people in the construction and in the wind are pretty standard, good people, but 

pretty standard, and the people operating are simply relatively less 

qualified people. 

Mr. LANKFORD. Yeah, the grand challenge of this is, is that the 

new push to have a definition of what’s a green job and what’s not 

a green job. And that’s where this gets drawn in, to suddenly say 

it’s a green job and so it’s on a higher level and you actually meet 

that person and they are doing manufacturing and other things, 

like a lot of other jobs. I went to a green job training location that 

was a Federal grant that went into my district from several years 

ago and they were doing green job training, and at the end of it 

I met the director I met some of the folks, I went through the program, and I asked the director privately, how many people in this 

program that have gone through for a couple of years, will work in 

a green job? And her answer was, the skills are transferrable. I 

said, that means zero, doesn’t it? And her response was, the skills 

are transferrable. 

There are jobs that are out there that are great jobs and I have 

no opposition to this at all to be able to have great manufacturing 

jobs, and jobs operating and that kind of such in wind power, but 

create this sense that the only way American economy is going to 

move forward, is if we create more green jobs, I think begs the 

question of—we need to create more jobs, period, to have a growing 

economy. With that, I recognize the Ranking Member Speier. 

Ms. SPEIER. Mr. Chairman, thank you. On that note, in a country 

that has been reeling from extraordinary unemployment numbers 

for 5 years now, I think Americans would applaud the creation of 

any job, green or otherwise, and I am, I guess, bullish on the wind 

industry, in part, because we are making it in America. And the 

more we can bring manufacturing back, the more we can be 

insourcing, the more we can be restoring the manufacturing base 

that has really served us so well for so long, is to our advantage. 

Now, having said all that, this has been a really good discussion, 

Mr. Chairman, and the robustness of it and the thoughtfulness of 

it is really the kind of dialogue that should take place in this committee more often. So I want to thank you for that. Now, I do think 

what it has underscored for me is that we should not look at any 

one of these credits in isolation; that if we are going to look at 

these credits, we look at them in toto, we look at them to make 

sure that we are not picking winners and losers, something that I 

have said and that others have said this morning. We have got to 

be fair. And I am one of those that really wants to embrace that 

kind of a review, and since that is under the jurisdiction of this 

subcommittee, I hope that you will consider having a hearing 

where we can look at all of these tax credits, and evaluate them 

completely. 

Let me just ask one last question. And that is to you, Mr. Wilson. 

Has the GAO identified any abuses of the PTC in your recollection? 

Mr. WILSON. I’m not aware of any, no. 

Ms. SPEIER. Do any of you know of any kinds of abuses that have 

taken place? So this is not a situation where people have somehow 

75 

tooled the system, or used it to feather their beds in a manner that 

wasn’t consistent with generating energy, correct? 

Mr. WILSON. Not that I’m aware of, no. 

Ms. SPEIER. All right, so with that, Mr. Chairman, I thank you 

for bringing this hearing to our attention, and for opening up some 

other avenues of review. 

Mr. LANKFORD. Thank you. 

Ms. SPEIER. And thank you, all of the witnesses. 

Mr. LANKFORD. Thank you. And I ask unanimous consent. I have 

mentioned a couple of times a letter that I wrote to the Joint Committee on Taxation asking for some information documentation, 

and I ask unanimous consent to place this in the record. No objection. 

Mr. LANKFORD. Gentlemen, thank you for being here and letting 

us pepper you with questions. We will do some follow-up in the 

days ahead. I’m grateful for the clarification that’s happening, and 

look forward to us finding some solutions to be able to solve this 

long term. We do need a plan so this is not a perpetual, never-ending proposal of how we handle energy production. We need a plan 

and structure that we know is going to work and help us. So gentlemen, thank you very much for your time. With that, we are adjourned. 

[Whereupon, at 11:16 a.m., the subcommittee was adjourned.] 

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