Oregon legislators to review Shepherds Flat wind farm tax credits that were approved by state Department of Energy 

I believe the committee should adopt an oversight and investigatory role into exactly this kind of waste of our limited resources,” Conger wrote in a letter addressed to Rep. Phil Barnhart, D-Eugene and House Revenue Committee chair. “If it is true that the state, in one stroke, gave away or simply wasted $20 million, the people of Oregon deserve an explanation and the assurance that we will take steps to change the law so it cannot happen again.”

Barnhart said Friday that he was satisfied that the committee needs to hold hearings to get to the bottom of what happened and whether it was justified. He said he hopes to schedule the hearings during legislative days, which run Sept. 16 through 18.

Both Barnhart and his counterpart in the Senate, Ginny Burdick, D-Portland, maintain that the same situation “can’t happen again,” as the Legislature has put limits on the Business Energy Tax Credit, including an elimination of subsidies for utility-scale wind farms, which it concluded were economical without state support.

Yet the department still has a backlog of credits grandfathered in under the old rules, including solar and other projects that must meet specific criteria to qualify for the state credits. If the due diligence on Shepherds Flat is any indication, it’s not clear that Department site inspectors and analysts are applying the rules in a meaningful way, or protecting taxpayers interests.

Jody Wiser, an advocate with Tax Fairness Oregon, said she sought advice on filing a lawsuit over the Shepherds Flat credits, but was told that average citizens lack legal standing.

“Maybe the revenue committee doesn’t have to go to court,” she said.

Wiser also noted that economic development officials have been pushing to reestablish a big tax credit for manufacturers. From her perspective, the lack of due diligence on Shepherds Flat, and the huge cost to taxpayers for every permanent job, ought to give lawmakers pause on expanding other tax credit programs.

Shepherds Flat, a constellation of wind turbines in Gilliam and Morrow counties that started operating last year, is one of the largest and most heavily subsidized wind farms in the country. Its developers, New York-based Caithness Energy and General Electric, originally received approval from the state to build a single wind farm, but subsequently subdivided the project on paper to apply for three separate tax credits.

State rules provide very specific definitions of what constitutes a single renewable energy facility. Those rules were adopted by the Legislature to stop developers from gaming taxpayers by slicing and dicing their projects to qualify for multiple credits.

The Oregonian’s investigation last spring concluded the three phases of Shepherds Flat are owned, financed, constructed, operated and maintained as a single facility. They share an interconnection to the grid and are located on adjacent parcels of land. As such they meet at least five of the seven state definitions of a single facility. If a project meets any three criteria, its is supposed to be defined as a single facility, eligible for only one tax credit.

Indeed, in two separate analyses, the Energy Department’s own analysts found sufficient evidence to disqualify multiple tax credits, but the department either ignored the findings or failed to connect the dots.

Lisa Schwartz, who took over in January as the fourth director of the troubled Department of Energy in five years, decided this spring to re-review the Shepherds Flat tax credits in light of The Oregonian’s findings. The department said it was enlisting the state Department of Justice to help.

In June, Schwartz said ODOE had reaffirmed its original approval of the tax credits after a detailed review with the Justice Department that “uncovered every stone.” The legal basis of the decision remains a secret, as Schwartz refused to provide any information related to the DOJ review of the credits, citing attorney client privilege.

The department did provide limited and often non responsive information to detailed questions from The Oregonian about its due diligence process. They showed that ODOE ignored clear evidence in its own files and additional records identified by The Oregonian that should have disqualified $20 million of the $30 million in tax credits. It failed to ask for contracts or other documentation to answer fundamental questions that state rules pose about ownership, financing, construction, operation and maintenance. And it made assumptions, relied on statements made by developers before the project was built, and reversed its own analysts’ earlier conclusions.

Burdick, chair of the Senate Finance and Revenue Committee, said it was telling to her that ODOE had never rebutted any of the newspaper’s findings, which provided “compelling evidence that the program was abused.

“Unless someone can show me some additional information,” she said, “it’s pretty clear that taxpayers got bilked.”