Our Northwest Energy
11:10 am
Wed April 21, 2010

Push For Multiple Business Energy Tax Credits Continues

SALEM, Ore. – In February, Oregon lawmakers voted to reign in a renewable energy tax credit program. The incentives had turned out to be far more generous than anyone intended. One of the new rules in place curbs the ability of companies to receive multiple tax credits by simply breaking up a larger project into several smaller ones. But that hasn't stopped at least one major player in the renewable energy industry from making the case for multiple versions of Oregon's Business Energy Tax Credit.

Drive through Oregon these days and you're bound to see windmills popping up like daisies. Oregon's abundant wind powers scores of turbines in the rural eastern part of the state. But look out wind, because…

Not so fast.

David Brown: “Solar power, while the prices have come down quite a bit in the last three years, it's still not competitive with traditional power or even frankly with larger scale wind projects.”

Unless, says David Brown of Portland-based Obsidian Renewables, the solar projects get a helping hand. In this case, the helping hand Brown sought was the Business Energy Tax Credit. It's often referred to by its acronym, BETC, pronounced “Betsy.” Obsidian submitted five separate applications for large solar energy projects in sunshine-drenched south-central Oregon. Some of the sites would have more than 20,000 solar panels.

The Oregon Department of Energy last year gave a preliminary green-light to giving Obsidian five BETC credits worth a total of $50 million. If you were to set five separate tax credits to music, it would sound like“Here comes the sun” played 5 times over top of each other.

As opposed to just one tax credit, worth $10 million.

But last fall, the tax credit program came under increased scrutiny and regulators wrote up new rules. Part of the aim was to limit the ability of companies to get multiple credits for what could sometimes be considered the same project. Here's Mark Long, the interim director of the Oregon Department of Energy.

Mark Long: “Additional standards, accountability and authority measures were necessary so the agency could prioritize and approve projects that met strong energy efficiency, renewable conservation standards.”

The Legislature put its own stamp of approval on many of the new rules during the February special session. But Obsidian continued making its case for five separate credits. That's according to documents I obtained through a public records request.

The company kept asking even after lawmakers passed the BETC bill. In a letter to the Department of Energy in March, Obsidian's David Brown detailed his reasons for why the solar projects should qualify for multiple credits. The agency didn't bite. One analyst wrote in an email to colleagues, “It appears that Obsidian is not reading the rules, but making a loose interpretation of what they think they can make an argument for.” The Department's Mark Long says Obsidian's applications failed to meet the standards to qualify as multiple projects.

Mark Long: “It's a process that looks at roughly 10 factors and a series of rules to determine whether it's a single project or a multiple project. And I'm sure that the staff has analyzed this according to those factors and has responded back to this applicant that it's the department's position that this is a single project.”

Indeed, the Department sent a letter to Obsidian late last month telling the company its applications would be combined into a single project for a tax credit of $10 million, instead of the $50 million Obsidian sought. Obsidian's David Brown says he disagrees with the agency's conclusions. He says some of the proposed solar installations are over a hundred miles apart from each other and shouldn't be considered a single project.

David Brown: “At least right now it looks like their proposal is that you can only do one project in the entire state, that the line is the exterior boundary of the state of Oregon. But that is clearly not the correct interpretation of the law in my view.”

The Department of Energy did not cite the geographic proximity—or lack thereof—of the various Obsidian locations in its letter to the company. Division Administrator Bob Repine cited other factors, including the fact that each location would have common financing and shared expenses of capital investments. Obsidian's continued requests to qualify for multiple Business Energy Tax Credits is an example of trying to game the system, says one state government watchdog. Jon Bartholomew is with the Oregon State Public Interest Research Group.

Jon Bartholomew: “The new rules that were put forth by the Department of Energy were to crack down on exactly this kind of thing. What you see is where there's money involved, people will do whatever they can to try to take advantage of that money.”

David Brown of Obsidian says he hasn't decided yet whether he'll appeal the Department's ruling. He says he may wait until after the agency finalizes the rule changes that have been discussed over the past few months. Those regulations are expected to take effect in the coming weeks.