Posted on July 4, 2023
New Jersey is poised to enact a controversial law that supporters say will help save the state’s footing in the fledgling wind industry, especially amid the fight against climate change, while opponents decry it as a corporate bailout for a foreign company that will lead to higher energy rates.
The Democratic-controlled state Legislature voted along party lines Friday afternoon to narrowly pass a Democratic-sponsored bill that would allow Ørsted, the Danish energy developer constructing New Jersey’s first offshore wind farm, to keep federal tax credits that would otherwise go to ratepayers.
Gov. Phil Murphy, a Democrat who has championed the wind farm as key to his administration’s energy and environmental policy, is expected to sign the measure (A5651), though it’s unclear when.
The legislation was the subject of intense behind-the-scenes negotiations and alterations this week and lawmakers ultimately approved it in dramatic fashion at the Statehouse in Trenton on a busy day before their summer break.
The drama Friday included concern over whether Democrats would corral enough votes as the bill’s main sponsor rushed to get back on a delayed plane flight from Idaho.
Murphy’s administration, which aims to have New Jersey run on 100% clean energy by 2035, tapped Ørsted to develop wind turbines 15 miles off the coast of Atlantic City to power 500,000 homes in a project called Ocean Wind 1.
But officials say the company has faced mounting costs caused by inflation and the lingering economic effects of the COVID-19 pandemic, including supply chain issues. This tax break bill aims to help rescue it.
Murphy’s administration and top Democratic lawmakers are concerned that if the farm fails, it would seriously wound New Jersey’s chances at being a leader in the wind energy industry, sending jobs to other states rushing to develop similar projects.
State Assemblyman Lou Greenwald, D-Camden, a main sponsor, said the goal is not only to “protect the air we breathe but also to strengthen the economy.” He denied it was a “corporate gift.”
Greenwald noted other states have passed similar tax breaks.
“If we fail to act today, our new industry will be at a competitive disadvantage,” he said before Friday’s votes.
“We have to look at the reality of how to get this project finished. Offshore wind is a once-in-a-generation environmental and economical opportunity for our state. We can’t afford to move away from this opportunity.”
Republicans and other critics, however, note the tax credits — made available under the federal Inflation Reduction Act of 2022 to help support offshore wind development in the wake of the pandemic — were supposed to ultimately be returned to ratepayers to help offset the cost of wind farm construction.
This is on top of separate debates over whether wind turbines could blight the Jersey Shore and pre-construction on them is killing marine life despite state and federal officials insisting there is no evidence to support such claims.
Even a state agency sounded alarms about the cost of the tax credit plan. The state’s Ratepayer Advocate wrote in a letter to lawmakers Tuesday that “while we support offshore wind,” there are “significant concerns” about the measure’s “impact on ratepayers, especially the costs and no protections for ratepayers, and the lack of accountability by the beneficiary of this bill.”
Brian Lipman, director of the state’s Division of Rate Counsel, said “there should be no doubt that this bill will increase the amount the developer earns on this project and will result in higher … prices being paid by ratepayers.”
It’s unclear how much the tax credits are worth in total, though some have cited millions or billions. Ørsted estimates the value of the credit would be 20 cents per month, or $2.40 per year per ratepayer, though the company did not estimate its total anticipated benefit.
Assemblywoman Vicki Flynn, R-Monmouth, said the plan is “not in the interest of the New Jersey taxpayer,” noting the Rate Counsel “took the extraordinary step” of warning lawmakers.
“I want green energy to be an option for New Jersey. I want us to be a leader,” Flynn said. “But I don’t want that on the backs of New Jersey taxpayers for people who do not live here and do not pay taxes here.”
She also argued there’s “no guarantee these jobs go to New Jerseyans.”
Madeline Urbish, Ørsted’s head of governmental affairs and policy in New Jersey, argued the plan would ultimately not hurt taxpayers.
“Ørsted will increase its investments in New Jersey if the bill is enacted,” said Urbish, a former policy adviser in Murphy’s administration. “These federal incentives present an opportunity for New Jersey to further secure in-state economic investments and hundreds of jobs at no additional cost to ratepayers.”
Amid the pushback, sponsors worked with Murphy’s administration this week to amend the legislation so Ørsted would be required to post a $200 million guarantee with the state and submit a report on the financial viability, possible environmental impacts, and likelihood of finishing the project on time.
“To that end, Gov. Murphy looks forward to signing a bill that will help realize the state’s first offshore wind project and critical supply chain facilities — as well as their associated clean energy and economic benefits,” spokesman Bailey Lawrence said.
Still, Assemblyman Brian Rumpf, R-Ocean, called the plan “corporate welfare and malfeasance to our commercial fishing industry and our tourism industry.”
Assemblyman Gerry Scharfenberger, R-Monmouth, warned it‘s “irreversible and consequential.”
Ultimately, the state Assembly voted 44-31 and the state Senate 21-14 to approve the bill.
The Senate briefly was stuck at 20 votes — one short of the total needed to pass — and had to delay the vote. Sen. Bob Smith, D-Middlesex, a top sponsor, was returning from an energy conference in Idaho and had yet to land.
In the end, Smith’s vote wasn’t needed. Democratic leaders secured support from Sen. Shirley Turner, D-Mercer.
Turner told New Jersey Monitor she was hesitant about the legislation at first because of concerns about how many women and minorities could get jobs with the project, how the plan would affect ratepayers, and how a foreign company would benefit.
“I wanted to make sure that it was really going to benefit the state of New Jersey,” Turner told the website. “And you’ve got to come down on the side where you think somewhere the truth is.”
David Pringle, an environmentalist with Clean Water Action, thanked lawmakers, calling offshore wind “New Jersey’s single best contribution to tackling the climate crisis.”
Atlantic Shores, the other wind developer in New Jersey, noted that only Ørsted would receive federal tax credits under this plan and called for a broader proposal.
“Today’s bill passage reaffirms the state’s commitment to offshore wind,” company spokeswoman Meghan Bianco said in a statement. “Yet, to establish a durable, thriving, full-scale offshore wind industry in New Jersey, we need an industry-wide solution.”
