Off-Shore Wind Power Companies Collecting More In Federal Subsidies Than They Pay In Federal Royalties

The Obama administration spends a lot of its time sandbagging and attacking fossil-fuel energy development while spending a lot of tax dollars promoting so-called “green” energy. This is little better, from a moral standpoint, than picking and choosing which groups or individuals will get audited by the IRS based on their political ideology, but I digress.

The Obama administration has been blocking leases for off-shore drilling even as they subsidize off-shore wind projects. So a couple of Senators decided to do the math on the benefits, to the US Treasury, of off-shore drilling vs. off-shore wind.

What they found is that while off-shore drilling is a net positive, off-shore wind actually gobbles up more in federal subsidies than they pay in federal royalties:

Seven months after asking former Interior Secretary Ken Salazar for data on the economics of offshore wind production, Sens. David Vitter (R-La.) and Lamar Alexander (R-Tenn.) finally got a response from the department that they say just undermines the administration’s focus on offshore wind power.

The senators noted that that the Interior Department won’t allow offshore oil and gas leasing in the Atlantic Outer Continental Shelf and requested data on the economics of the wind lease sale to compare with “the value of a similar lease for oil and gas on equivalent acreage.”

“The Federal Government derives significant revenue from royalties for offshore oil and gas production. The current rate companies must pay is between 12.5% and 18.75%,” Vitter and Alexander wrote in the November 2012 letter. “…What is the effective royalty rate Interior has contracted with NRG Bluewater Wind Delaware LLC for this lease for the energy it produces? What is the anticipated revenue to be raised from this development over the next 10 years?”

In a six-page response, Interior said a minimum bid for oil and gas offshore lease sales is $100 per acre for deepwater leases, compared to $1 or $2 per acre for the upcoming wind lease sale. There’s also strong indication that the royalty rate is a fraction of the tax credit, meaning federal subsidies more than cover what these projects are expected to pay in royalties, Vitter’s office said.

“The administration has a habit of picking energy industry winners and losers, but their ‘winners’ – in this case – actually cost taxpayers money and are not sustainable without government subsidies,” Vitter said. “I appreciate the Interior Department’s response – albeit six months late – but their response tells us that the government assistance the wind industry receives in leasing and special tax credits, exceeds the money they can generate for the Treasury in offshore production. I’ll reiterate that alternative energy has potential for our ‘all of the above’ energy future, but the administration needs to quit ignoring the economic benefits of traditional energy.”

The problem with the government trying to pick winners is that the sort of companies or industries that need government assistance are almost always losers.