September 18, 2013
Oregon

Triple tax credits for wind farm questioned

Written by Anna Staver, Statesman Journal, Sep. 17, 2013, statesmanjournal.com

Oregon’s Department of Energy faced harsh questions Tuesday from lawmakers who appeared divided about whether the agency erred in giving $30 million in tax credits to three wind farms built in Eastern Oregon, allowing an East Coast energy company to cheat the State of Oregon.

The department approved three $10 million Business Energy Tax Credits in 2012 to one New York-based company because, it said, the company had created three smaller “corporations” to run each of its wind farms. Department officials said the BETC rules – long considered a problematic quagmire – allowed each corporation to take its own tax credit.

Lawmakers suggested the company created those three limited-liability corporations on purpose to receive an extra $20 million it didn’t truly qualify for.

The three wind farms are known collectively as Shepherds Flat, owned by New York-based Caithness Energy and General Electric.

ODOE Director Lisa Schwartz maintained throughout the joint hearing of the Legislature’s revenue committees that the projects met the statutory requirements of being separate and distinct. She pointed to the farms’ separate construction, separate managers and separate financing as evidence.

Rep. Jason Conger, R-Bend, wasn’t as convinced. He pointed to inspections by ODOE employees in June and September 2012 that he believes contradicted Schwartz’ testimony about whether the three projects share services and ownership.

At one point, he asked whether he should believe Schwartz or her agency’s inspectors.

“I felt like our questions weren’t being answered in a way that contributed to shedding light on what happened,” Rep. Jason Conger, R-Bend, said. “I really felt like we were being stonewalled.”

Conger said he’d like to see attorneys from the Department of Justice investigate whether the state could recoup $20 million from Caithness.

The beleaguered BETC program was partially a victim of its success. Lawmakers placed no limit on how much money the state would give out for these credits, and the general fund took a significant hit when large projects such as Shepherds Flat started applying.

In 2011, lawmakers overhauled the program and created an auction for credits using a predetermined amount of money. The problem was more than 130 projects – including Shepherds Flat – already were pre-certified for credits.

Berger thought ODOE approved Shepherds Flat for the correct number of credits based on the way the old BETC law was written.

“Maybe it’s not what we meant, but it sure wasn’t in the statute,” Berger said. “There was nothing in the testimony that would indicate to me that we have a case for saying, ‘Oh, you did it wrong.’ ”

Whether the Legislature got it right with the current system is what Rep. Phil Barnhart, D-Eugene, wants to focus on going forward. He asked ODOE to provide additional information about Shepherds Flat, including whether the agency still lacks the authority to say, “No, this is really only one project even if all the specific technical indices have been met for calling it three projects.”

“I do hope we get to the bottom of it in the next few months, and decide whether we need to write some new legislation,” Barnhart said. “We’re trying to figure out whether we are there or not.”