Global Project Finance > Tax Equity Telegraph > Senator Coburn Suggests to Treasury a Cut to Cash Grant Payments
14 Mar '13

Senator Coburn’s (R-OK) letter of March 13 to Treasury Secretary Lew suggests ways to reallocate spending at Treasury to mitigate the effect of sequester on funding for tax enforcement efforts.

The letter notes that it is estimated the sequester will result in a $187 million reduction in Treasury Cash Grants. The senator is not happy with that reduction, and his letter appears to suggest that Treasury should further reduce Cash Grant payments beyond the 8.7 percent mandated by the sequester.

Senator Coburn’s rationale for targeting Cash Grants is that the Cash Grants for wind projects have been paid disproportionately to developers with foreign ownership, and, at one point, more than two-thirds of the turbines that had qualified for Cash Grants were made by foreign manufacturers.

The senator’s letter has a questionable analysis in the following:

First, if the senator is concerned about Cash Grants for wind farms, there will be no more wind farms eligible for the Cash Grant: wind farms had to be “placed in service” in 2012 or before to be Cash Grant eligible.

Second, Senator Coburn’s suggestion does not distinguish between Cash Grants for wind versus other renewable energy technologies; however, his rationale for further Cash Grant cuts due to benefiting foreigners referenced only Cash Grants for wind and ignored other industries like solar. For instance, the senator appears unaware of the blue-collar jobs created for residential solar installers.

Third, the senator is correct to observe that many wind developers are affiliates of European utilities. However, merely because a Cash Grant payment is made to the United States subsidiary of a European utility, it does not mean the Cash Grant created no benefit in the United States.  For instance, the developers with European parents have employees and offices in the United States.

Fourth, Senator Coburn gives no recognition to the fact that Siemens and Vestas are major wind turbine manufacturers and are based in Europe, but they have both added wind operations in the United States during the existence of the Cash Grant program. In February, Siemens announced it is building a wind energy training facility in Orlando that will train 2,400 employees annually and create 50 full-time jobs. Further, Vestas expanded its Oregon North American headquarters in 2010; Vestas had to cut jobs at its Colorado factory, opened in 2008, when turbine orders lagged in 2012 due to uncertainty about the future of the production tax credit, a fact politicians who purport to be concerned about U.S. jobs should keep in mind when considering energy policy.

Fifth, once the wind Cash Grant statistics are updated to reflect the massive 845 MW Shepherds Flat Wind Project that deploys General Electric turbines, the ratio of United States made turbines that qualified for Cash Grants will improve.

Sixth, the senator’s letter goes on to suggest a freeze in iPhone purchases for Treasury personnel and a reduction in travel for conferences; by grouping the Cash Grant program with iPhones and travel appears to suggest that the Cash Grant program is subject to the discretion of the Secretary.  The Cash Grant program is mandated by a statute -Section 1603 of the American Recovery and Reinvestment Tax Act of 2009, as amended.  Therefore, the Senator should be raising his concerns with his colleagues in Congress and not the agency that merely administers it.

In sum, the rationale, scope, means and audience for Senator Coburn’s Cash Grant reduction proposal merits reconsideration.