Nevada governor urges tax-exempt bonds for power lines

Workmen are shown making repairs to a power pole with a high-voltage transmission line in background in Burbank, California November 12, 2008.

SAN FRANCISCO (Reuters) - Nevada Gov. Jim Gibbons is urging President Barack Obama to back federal tax code changes as part of an economic stimulus package to allow the state to help finance power lines, part of its plan to boost alternative energy, an aide said on Thursday.

Nevada's Republican governor in a letter to the president requested changes to Internal Revenue Service codes that would allow the state to establish a not-for-profit corporation that would issue tax-exempt private activity bonds to finance the construction of $3 billion in transmission lines across the state.

Nevada could issue bonds for the projects or build them through public-private partnerships. But first the state needs U.S. tax code changes to increase its bonding capacity without affecting other state projects, said Gibbons' spokesman, Daniel Burns.

"There are private companies that want to build transmission lines and we want to have public-private partnerships to build transmission lines, and in order to do that we need some tax code changes," Burns said.

"This is really, really looking into the future. But if we don't start now some other state is going to get ahead of us," Burns said.

In neighboring Utah, Gov. Jon Huntsman Jr. last month called on lawmakers to pass legislation this year that promotes renewable energy technology development.

"We must have the land, transmission and regulatory framework to make it a reality," Huntsman said in his state of the state speech.

A key hurdle to the deployment of renewable power like solar and wind is construction of high-voltage transmission lines.

In the current financial climate, private financing for infrastructure projects like transmission lines is difficult. Gibbons sees a proposed nonprofit group, called Nevada Energy Assistance Corp, as a way to facilitate power line construction.

Most renewable power sources are in remote areas far from cities that need the electricity, particularly in vast regions of the West, which has rich potential for developing solar, wind and geothermal power.

Also, wind and solar generate power intermittently, meaning it is more difficult to sync this electricity with conventional power on transmission lines.

Gibbons has estimated that building transmission infrastructure across Nevada would cost $3 billion.

California Gov. Arnold Schwarzenegger and Wyoming Gov. Dave Freudenthal have also urged Obama to give the Western United States' transmission needs greater attention.

In a recent letter to the president, the two governors pointed to the long review and permitting process at federal land agencies as an obstacle to building transmission infrastructure that would speed the development of alternative energy resources across the region.

Gibbons in his letter to Obama also cited bureaucratic delays.

"To move to our renewable-powered future, we need to overcome the challenges caused by long permitting processes, inadequate transmission infrastructure and limited incentive," Gibbons said.