National Wind Watch: Wind Energy News » State officials should quickly account for $30 million in Shepherd’s Flat tax credits

With all the cheering from so many who helped to make Shepherd’s Flat wind farm a reality, you’d think Oregon had finally gotten its green-energy house in order. But the largest wind production facility in Oregon and among the largest in the world is mired in a tax-credit mess that will take weeks, likely months, to disentangle.

On the line is $30 million in tax breaks granted by the state to the developer. The credits might in some measure have been approved in error. Try telling that to lawmakers in Salem who are busy duct-taping a tight budget together. It’s a disgrace.

You can’t blame Oregon for trying.

Shepherd’s Flat sprawls across agriculture-intensive Gilliam and Morrow counties, where work can be hard to come by, spiking the horizon with 338 massive turbines. About 400 jobs are associated with building the facility, which will provide more than 40 permanent positions and, in churning out 846 megawatts of electricity, spare the atmosphere of more than 1 million tons of pollutants annually. Significantly, the project is projected to generate more than $100 million in property taxes over the next 15 years.

But Oregon might have blown it in the trying.

The Oregonian’s Ted Sickinger questioned whether the wind farm qualified for multiple Business Energy Tax Credits under toughened rules designed to prevent a practice known as “slicing and dicing” – or subdividing one large facility into sub-units and then winning tax credits for each. Caithness Energy LLC in 2008 won a state permit to build Shepherd’s Flat as a single facility but came back later and won approval for the same layout as three, multiplying eligibility for a $10 million tax credit three times. Caithness, all of whose wind power goes to a California utility, finally won the $30 million in Oregon tax credits.

It looks legal. But it is the Department of Energy’s job to decipher reality as well as to parse regulatory fine print. In some instances, department specialists must decide when a facility is really one installation as opposed to several. As Sickinger’s recent report states, they may have flubbed it with Shepherd’s Flat, whose three sub-units are situated contiguously and were found in separate reviews to share the same general manager and same connection to the power grid.

Lynn Frank, a former Department of Energy director who helped author the rules defining a single facility, wrote in a memo quoted by Sickinger: “The underlying concept is: If it looks like a duck, walks like a duck and quacks like a duck, it is a duck.”

Duckhood will now be reviewed, as well, by the Oregon Department of Justice, an Energy Department spokesman told The Oregonian on Thursday. That’s a good thing. It signals a concern that things could get messy because the stakes are so high.

Lawmakers and state officials have in recent years applied great energy to reining in abuses under the BETC program and to tightening the rules. While Oregon should continue the push to develop renewable energy, it can’t afford to get it wrong and at huge public expense.

Separately, in 2010, when Shepherd’s Flat won a more than $1 billion loan guarantee from the U.S. Department of Energy, Oregon Sen. Jeff Merkley expressed a widely held sentiment in saying: “This is a great holiday gift for Eastern Oregon … This financing … will help put people back to work and continue Oregon’s reputation as a clean energy leader.”

Make that fair-play energy leader.