September 19, 2013

Oregon lawmakers question triple wind tax credits for Shepherds Flat wind farm in Gorge

THE ASSOCIATED PRESS - September 18, 2013 -

Oregon lawmakers questioned state Department of Energy officials about tax credits for the Shepherds Flat wind farm in the Columbia River Gorge.

Owners divided the farm near Arlington into three entities on paper to qualify for $30 million in subsidies from state taxpayers.

But an investigation this spring by The Oregonian newspaper found that the wind farm is a single unit, eligible for only a single $10 million tax credit. The newspaper found the Energy Department ignored legislators’ intent in signing the final two credits.

The Energy Department offered little new factual information at Tuesday’s joint hearing of the House and Senate Revenue Committees. But Energy Department Director Lisa Schwartz arrived with a memo from the state Department of Justice that offered some legal cover for her decision to sign off on the credits, the newspaper reported (

The state’s business energy tax credit has since been reformed, but lawmakers sought assurances the same thing couldn’t happen again.

Many questions centered on ownership of the wind farm that generates electricity for a California utility. House Revenue Chairman Phil Barnhart, D-Eugene, asked whether the agency tried to look behind the veil of the project’s three separate limited liability corporations to see if the three phases of the wind farm share common ownership.

Schwartz didn’t answer the question.

Shepherds Flat’s three LLCs share a common parent company, Caithness Shepherd’s Flat LLC. Caithness Shepherd’s Flat LLC, in turn, is owned by the project developer, Caithness Energy, its turbine supplier, General Electric, and three investors brought in to harvest the project’s tax benefits – Google, Itochu and Sumitomo of America.

“I don’t know how much more common ownership you could have,” said Rep. Jason Conger, R-Bend, who requested the hearings on Shepherds Flat.

Conger also noted that the three phases were located next to each other, and that a single contractor constructed the entire wind farm. Moreover, the Energy Department analysts originally determined the project had a single interconnection to the grid; and that the three LLCs’ agreement on file with federal regulators outlines how they will share ownership and expenses of shared facilities.

“Most people looking at this with just common sense would say this smells,” Conger said. “I get the feeling it was a foregone conclusion that this should have been approved.”

Schwartz insisted that wasn’t the case. She said ODOE undertook a rigorous analysis of the wind farm. She said the decision conformed to Oregon law and was consistent with findings by other state and federal entities that recognized three separate facilities at Shepherds Flat.

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