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Arizona solar farms could be taxed for out-of-state business

By Howard Fischer
Capitol Media Services

PHOENIX -- It's not quite like taxing Arizona's abundant sun.
But Arizona lawmakers took the first steps Thursday to treating sunlight here the same way that Alaskans treat oil: tax the power generated if it's going out of state -- and divide up the revenues among residents.
SB 1066, approved on a 3-2 party line vote by the Senate Committee on Natural Resources, Energy and Water, would require counties to establish a 12.5% royalty on every dollar received by companies that operate solar farms for commercial sale of electricity. And then those dollars would be divided up among residents.
The levy would not affect homeowners with rooftop solar. Nor would it impose new charges on the production from solar panels set up on site for commercial or industrial use.
And Sen. Sonny Borrelli, R-Lake Havasu City, said utilities that own their own solar generation also would be exempt.
Instead, the legislation is aimed at companies that set up shop on private or state-owned lands for the purpose of selling the electricity produced to out-of-state utilities.
"If you're going to come to Arizona and exploit the land and take advantage of our sun, and the citizens don't benefit from that at all, that's not fair,'' he told committee members.
He said it's no different than Alaska where the state distributes a check every year from the earnings from oil. This past year that figure was $1,312.
Borrelli said he had no figures on how much revenue could be generated, saying that will depend on how much electricity is produced.
But Sen. Priya Sundareshan said there's a big difference between taxing companies for taking advantage of the state's sunshine and those who come into a state and actually remove something.
"Mining and oil and gas, these are all extractive industries that will result in some level of disturbance to the land, that is fundamentally pollution, impacts to the water quality,'' the Tucson Democrat said. "There's a lot more that goes into the extraction of oil and gas and other mining industries than, let's say, passively sitting and letting the sun fall onto a solar panel.''
And there's something else.
"More than one state can play this game,'' warned Stan Barnes. He lobbies for the Interwest Energy Alliance which represents major companies involved in wind, solar and energy storage.
Barnes told lawmakers that if Arizona decides to start taxing solar energy that is sold to utilities in other states, those costs that would be passed along to their customers. Then those states might decide to do the same when energy from their states winds up here.
And one of the places where Arizona utilities get renewable energy is from wind farms in New Mexico.
"And so if other states did what Sen. Borrelli is proposing ... our rates go up,'' Barnes said.
"It's a bad game to play,'' he continued. "It's a trade war starting, anti-business kind of thing that Arizona would lose.''
Sundareshan said it also could run afoul of federal laws regulating interstate commerce.
Borrelli's legislation is not occurring in a vacuum.
The Mohave County Board of Supervisors voted in October to impose a 240-day moratorium on approving zoning changes for all types of energy projects. Among the concerns was the use of water in the area where supplies already are under threat.
Solar generation, by itself, does not use water. But water is needed to keep the solar collectors and the mirrors and photovoltaic panels. The supervisors said the moratorium will give them more time to study the issues.
Borrelli said his legislation is just like the efforts the state is making to preclude outsiders -- including Middle Eastern countries -- from using groundwater to grow alfalfa and the state getting no real benefit.
"They're exploiting our water,'' he said.
"No different,'' Borrelli said. "We should be able to benefit from that.''
Barnes said it's not like solar companies are freeloading.
"What they are doing now in Arizona is investing billions of dollars, with millions of dollars being kicked off in tax payments and thousands of jobs,'' he said, all without pollution and "no water use.''
The debate, however, goes beyond water use. Sen. Sine Kerr, R-Buckeye, said there are other issues that she sees in her district.
"It's heartbreaking, heart wrenching, to see what is happening to our beautiful, pristine open lands out there, the destruction not only to lands,'' she said. "There's no way those lands can ever be put back to their original state.''
And Kerr said wildlife also is harmed.
"We know those solar panels, when they're reflecting in the summertime, a bird has no chance if it gets near those,'' she said.
The Audubon Society says there is a particular problem with "power tower'' technology, where mirrors concentrate solar energy to heat a solution that then is used to boil water that drives turbines. The society says birds are attracting to the light beam and the mirrors and are killed by the intense heat.
Other groups say birds are attracted to the flat panels because some bird species may mistake them for water and attempt to dive in.
Kerr said that the extensive farms also can disrupt habitat and migration patterns for deer and other animals.
"It's very sad what's going on in my neck of the woods,'' she said.
Sen. Brian Fernandez, D-Yuma, said he is "super sympathetic.''
"We've had our problems with these large-scale solar farms coming into these state lands that we've just known as pristine areas,'' he said.
That includes a bid by Eolus North America to put a proposed solar farm on seven parcels covering more than 4,000 acres state land in the area of Tacna and Dateland. Concerns were expressed by those who use the area for outdoor recreation.
But that project died when the Arizona Land Department withdrew its request for county supervisors to issue the required special use permit after the Planning and Zoning Commission recommended against approval.
Fernandez said that is fighting them "the right way'' when they don't make sense in an area. But he voted against the measure, questioning whether making these companies pay some additional taxes is the way to go.
Rep. T.J. Shope, R-Coolidge, did agree to support Borrelli's bill, at least for now. Shope said, though, he has concerns because it would affect what property owners can do with their private lands.
The measure now needs to be considered by the full Senate.
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