WASHINGTON (Reuters) - Iowa Republican Senator Charles Grassley said he is hopeful Congress will renew a tax credit for wind energy but acknowledged that its fate depends on sweeping negotiations over tax and spending issues in coming weeks.
Grassley, instigator of a 22-year-old production tax credit that has driven expansion of wind farms and related manufacturers, made his comments as governors from wind-producing states and companies involved in the industry pushed to keep the subsidy alive.
"As important as I think wind energy is, we've got a big fiscal problem here," Grassley told reporters on Wednesday, explaining the issue is but a small part of talks over the impending "fiscal cliff" between President Barack Obama, House Republican Speaker John Boehner, and others.
Obama campaigned in support of renewing the tax credit. Many Republicans are opposed to supports for the renewable energy sector, including wind.
Supports for all modes of energy production are in play as Congress looks for ways to address the nation's looming debt.
Republican Senator Lamar Alexander from Tennessee said the country can no longer afford the energy credits.
"Given our fiscal crisis, Congress should eliminate special tax breaks for both Big Oil and Big Wind," Alexander wrote in a column in Roll Call.
In August, the Senate Finance Committee agreed to extend the credit for wind projects under construction by the end of 2013, a measure estimated to cost more than $12 billion over 10 years.
Some Republicans support the credit because of the jobs it supports at power plants and factories that make parts.
U.S. wind farms installed a record number of turbines in 2012 but uncertainty about the tax credit has prompted layoffs at manufacturers like Vestas in Colorado, Siemens in Iowa and Gamesa in Pennsylvania.
"We know that this is not going to be something that is going to last forever," said Iowa's Governor Terry Branstad, a Republican who said the industry, which employs about 75,000 people, needs a few years to "transition" away from the support.
A lobbying group for the wind industry has said 37,000 jobs would be lost in the first quarter of 2013 unless the tax credit is extended.
Tax credits for energy and other industries will continue to be in focus as lawmakers look at overhauling the tax code, starting next year. Grassley said the wind credit should not be targeted outside a broader tax reform discussion.
"No single energy tax incentive should be singled out over others before a broad-based tax reform debate takes place," he told reporters.
Oil and gas companies have several tax provisions - such as the well depletion allowance and expensing of intangible drilling costs - that Obama and some Democrats would like to eliminate.
Even some Republicans, including Boehner, have put cutting fossil fuel breaks on the table for possible elimination.
The American Petroleum Institute, the industry's main lobby group, said it will start advertising within days to protect the industry's tax breaks on grounds that cutting them will cost jobs. The group will focus on Alaska, Arkansas, Louisiana, New Mexico, Colorado, North Carolina and Virginia. Each of those states has a Democratic senator up for re-election in 2014.
Additional reporting by Kim Dixon; editing by Andrew Hay