National Wind Watch: Wind Energy News » Near miss on Oregon clean-fuel folly

Taxpayers should be dismayed by the Shepherds Flat wind farm mess, which The Oregonian’s Ted Sickinger dissected on Sunday and Monday. They also should be relieved. By the narrowest of margins, the Oregon Senate this year stalled another complex clean-energy program that many Oregonians would regret in several years, long after it had gained too much momentum (and subsidized too many businesses) to stop easily. Oregon probably will have to endure the Shepherds Flat fleecing, but they may be spared the full implementation of the state’s low-carbon fuel standard.

The clean fuel program is certainly well-intentioned, as is the program at the center of the Shepherds Flat controversy. But good intentions don’t guarantee good results. With the state’s blessing, owners of the Shepherds Flat project supersized – perhaps inappropriately – a tax subsidy provided by a notorious program designed to spur investment in green energy projects. Initially proposed as a single wind farm, which would have been eligible for a $10 million Business Energy Tax Credit, Shepherds Flat was broken up into three projects. The result: $30 million in business energy tax credits. Bonus!

State rules governing “separate and distinct” facilities are supposed to protect the public from double- or triple-dipping in this fashion. However, the rules are only as strict as those who apply and enforce them, and the state’s efforts to protect taxpayers in this case were, at best, perfunctory, as Sickinger discovered. In fact, former Oregon Department of Energy Director Lynn Frank, who helped write the “separate and distinct” rules, concluded that “any reasonable person looking at the project would have denied the application.”

Taxpayers should take two important lessons from the BETC program and from its use by Shepherds Flat’s developers. First, such ambitious initiatives, no matter how well-intentioned, frequently don’t work as intended. Second, mistakes, once made, can be extremely difficult to correct even if public officials are motivated to do so. When such motivation is lacking, as appears to be the case with Shepherds Flat, forget about it. Kiss your money goodbye.

The clean fuels program is nothing if not ambitious. It would be objectionable even if it worked as intended, but that’s about as likely as the development of a cold fusion roadster within the next decade. Created by lawmakers in 2009, the low-carbon fuel standard is supposed to reduce the “carbon intensity” of motor fuels by 10 percent within a like number of years. Carbon intensity is a measure of the global warming gases released during a given fuel’s life cycle, which includes not only its use in a car or truck, but also its production, transportation, storage and so on.

If that sounds like a complicated task, it is. The first part of the program, now in effect, imposes tracking and reporting requirements on fuel manufacturers and importers. This is a bureaucratic headache for affected businesses, but the real fun will start with the second part of the program, which requires carbon reduction. Fortunately, the Department of Environmental Quality has put it on hold until the Legislature waives the 2015 sunset date wisely included in the law. It doesn’t make a lot of sense to get the whole program up and running only to shut it down months later.

The state Senate declined to remove the sunset date this year, thanks in part to Sen. Betsy Johnson, D-Scappoose, who irritated green groups by voting with Republicans. If she hadn’t, Oregonians might now be bracing themselves for a credit-swapping arrangement that eventually would force users of “bad” fuels (gasoline and conventional diesel) to subsidize users of “good” fuels (electricity, biodiesel and so on) at the pump.

The law requires the state to protect consumers from program-related price hikes, yet it stands to reason that conventional fuels would become more expensive as a result of this scheme. Reconciling the law with reality is a near impossibility, of course, and administrative rules developed (and temporarily shelved) by the state are conveniently sprinkled with conditions that would allow officials to whistle and do nothing while prices rose.

To be fair, the rules also would allow officials to act in the interest of consumers and suspend the program if they were so motivated. We have two words for those who believe that’s likely: Shepherds Flat.

The decision of lawmakers not to lift the program’s sunset date is an encouraging sign, but Oregonians’ wallets won’t be safe until the clock runs out in late 2015. Expect supporters to make another push during next year’s short session and again during the 2015 regular session.