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Gov. Mike Beebe Slams Congress as Nordex Stops Production

5 min read

Production at Nordex USA in Jonesboro might have continued if Congress had put more power into a federal tax credit for wind companies, Gov. Mike Beebe told Arkansas Business on Friday.

“I’m so fed up with Congress,” Beebe said. “Arkansas went out of its way to bring these companies in.”

Beebe, interviewed after an event at the Mosaic Templars Cultural Center in Little Rock, was reacting to Nordex’s announcment early Friday that it would end production at its Jonesboro facility by the fall, leaving 40 people out of work. The plant employs 50.

In its announcement, Nordex’s CEO cited “unpredictable extensions of the Production Tax Credit (PTC), and the resulting low utilization rate of our US assembly plant.” 

The tax credit let companies producing renewable energy pay an income tax rate that was 2.2 cents lower per kilowatt-hour. After months of waffling last year, Congress in January renewed the credit for a single year.

Beebe said companies can’t be expected to invest in the state when their tax rate is only guaranteed for a year, a tenet that he said he’s been “preaching for a long time.”

The American Wind Energy Association echoed Beebe’s feeling that Congress needs to pump up the incentive.

“Wind power has been good for Arkansas consumers and businesses, and wind power could do a lot more for the state if we had predictable national policies to create a stable business environment,” Rob Gramlich, AWEA’s senior vice president for public policy, said in a statement. “That starts by keeping the federal production tax credit in place to allow wind energy to scale up as rapidly as it can. Nordex said uncertainty is one of the main reasons for their business decision to cease building wind turbine nacelles in Jonesboro.
“Arkansas has positioned itself to take advantage of the wind industry’s growth in the region, which is providing low-cost electricity in Arkansas and exporting energy east. And consumers are saving, because wind power holds down the overall cost of electricity on fixed-price contracts. But predictable policies to create a stable business environment are critical, especially if we want to maintain this new U.S. manufacturing sector and tens of thousands of good-paying jobs. That will take action by Congress.”
Despite supporting a temporary extension of the tax credit, U.S. Rep. Tim Griffin, R-Ark., said he “just couldn’t vote” for the fiscal cliff legislative package that contained it. On Friday, he took issue with Beebe’s comments.

“Nordex’s decision to close its plant is disappointing and my heart goes out to those affected, but blaming Congress, while convenient, is also misguided: The House is working on bipartisan tax reform to produce a simpler, fairer pro-growth tax code so we can stop jobs from moving overseas,” Griffin said in a statement to Arkansas Business.

“Also, the wind industry’s tax credit that has been in place since 1992 – more than 20 years – was extended in January, and the industry supports phasing it out. Ultimately, Nordex’s decision underscores the pain American workers are feeling as a result of failed policies.”

U.S. Rep. Rick Crawford, R-Ark., who represents Jonesboro in the 1st District, supports a long-term extension of the production tax credit. But he added that the national debt is at the heart of the issue.

“The Nordex announcement is another wake-up call for Congress to take action instead of dawdling. Our nation is in a huge financial mess due to decades of borrow-and-spend policies implemented by both political parties, which make it extremely difficult to provide certainty for most sectors of our economy including energy, agriculture, health care, and small businesses,” Crawford said.

“The $17 trillion debt, which is growing by roughly $600 billion annually, is now larger than our entire economy and, left unaddressed, will result in much higher taxes for industry, farmers, small businesses and certainly middle-class families and we’ll see even greater job losses as a result. This is why it is vital that Congress address the debt crisis.”

U.S. Sen. John Boozman, R-Ark., was in favor of the text credit extension, but advocated for a temporary one. He voted for the fiscal cliff package that contained the extension.

On Friday, Boozman said businesses like those in the wind industry are “sensitive” to “uncertainty” in Washington.

“Tax credits such as the wind tax credit cannot go on forever, but there must be a longer term extension in place so that companies like Nordex and Mitsubishi can grow and put Arkansans to work,” Boozman said. “I support the credit, have voted for the extensions, and would like to see the wind tax credit authorized for a longer time period to provide certainty to business owners. However, until we tackle major tax reform in Washington, this problem will exist.”

Boozman was referring to Mitsubishi Heavy Industries Ltd.’s decision last year to suspend construction of a planned, $100 million wind turbine manufacturing plant in Fort Smith that was to have employed 400 people.

Frustration at Home

On Friday, the Arkansas Economic Development Commission also expressed frustration over last year’s tax credit debate. Spokesman Joe Holmes said LM Wind Power, which built its $150 million North American headquarters in Little Rock in 2007, had also been uneasy about the future of the tax credit.

“They have struggled with a lot of the same issues,” Holmes said. “Of course ,the main one is the uncertainty of the production tax credit which drives the wind industry. … It’s made it very difficult.”

Falling oil prices didn’t help either, Holmes said. But he thinks there is still hope for the wind industry in Arkansas.

“LM is a great company and we talk to them very often,” he said. “We have a great desire to see these companies succeed, even if it takes longer than what we originally wished.”

Still, if the tax credit remains uncertain, the industry may not survive.

“That’s up to Washington,” Holmes said. “That’s up to Congress. That has been a tremendous issue for the wind industry. If Congress were to pass a multi-year credit, I don’t now what would happen, but I think it would be positive. That doesn’t seem to be the climate right now.”

Beebe said it this way: “Congress is going to have to get off its duff.”

Playing Politics

Arkansas Business reported in August about the uncertainty surrounding the extension of the credit and what it meant to Arkansas wind energy firms, including the first big player lured to Arkansas, LM Wind Power. The Danish company makes fiberglass wind turbine blades at its $150 million North American headquarters at the Port of Little Rock.

Last year, LM laid off more than 200 of its Little Rock workers, or about half its state workforce. At the time, LM attributed the layoffs to a decrease in demand for its products as Congress failed to renew the tax credit, which would have expired Dec. 31.

U.S. Sen. Mark Pryor, D-Ark., told Arkansas Business last year that layoffs in the industry were directly tied to a failure of Congress to extend the credit. 

“The layoffs there have been more about the failure to extend the tax credit than anything else,” he said. “I think if we can get that re-established, we can get a lot of those jobs to come back.”

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