Oregon's Renewable Energy Tax Credit Program Undergoes Revisions

Oregon's legislature has adopted modifications to the Business Energy Tax Credit (BETC) program. HB 3680 will place new financial limits on the BETC program, and give more discretion to the Director of the Oregon Department of Energy (“ODOE”) to reject BETC applications and to reduce the amount of BETCs delivered to projects.

Some of the key modifications, as summarized by my collegues in the Lane Powell Portland office, include:

• New Program-Wide Caps – The bill establishes separate caps on “the total amount of potential tax credits” for renewable energy facilities and renewable energy equipment manufacturing facilities. For renewable energy facilities, the caps are $300 million for the biennium ending June 30, 2011, and $150 million for the year beginning July 1, 2011, and ending June 30, 2012. For manufacturing facilities, the caps are $200 million for the biennium ending June 30, 2011, $200 million for the biennium ending June 30, 2013, and $50 million for the six month period starting July 1, 2013, and ending December 31, 2013. These program-wide caps apply to all facilities receiving preliminary certificates after June 2009. For other types of facilities, such as energy efficiency and recycling facilities, no program-wide cap has been imposed.



• Reduced Credits for Larger Wind Facilities – The credit for a wind facility with over 10 megawatts of installed capacity is limited to 5 percent of the cost of the facility, effective for all facilities receiving preliminary certificates after 2009. The maximum eligible cost for such a facility is further capped at $7 million if the preliminary certificate is issued in 2010, $5 million if the preliminary certificate is issued in 2011, and $3 million if the preliminary certificate is issued in 2012. Any wind facility that received a preliminary certificate in 2009 or earlier is not affected by these changes.


• Delayed Use of Tax Credit for Larger Renewable Energy Facilities – In the case of a renewable energy facility that has over $10 million in certified costs and receives final certification after January 1, 2010, the five-year credit period begins with the tax year after the tax year in which the application for final certification is filed. This delay does not affect other facilities such as energy efficiency or manufacturing facilities.


• New Dates for Termination of BETC Program – For facilities other than manufacturing facilities, final certification must be received before July 1, 2012. For manufacturing facilities, preliminary certification must be received before January 1, 2014.



• Credit Allowed for Facilities Manufacturing Electric Vehicles and Renewable Energy Storage Devices – The bill adds electric vehicles, electric vehicle component parts (not including batteries), and renewable energy storage devices to the types of property that may be manufactured by an eligible “renewable energy resource equipment manufacturing facility.” The bill limits the total eligible cost for an electric vehicle manufacturing facility to $2.5 million. Electric vehicle batteries may be included by rule in the definition of renewable energy storage devices.



• 10 Percent Overrun Provision Eliminated – The bill provides that the Department of Energy may not certify an amount of eligible cost for a facility that is more than the amount approved in the preliminary certificate.


• Greater Discretion Given to ODOE in Administering the BETC Program – The bill codifies many of the program-tightening proposals contained in the temporary rules issued by ODOE in November 2009 and in ODOE’s recommendations provided to the Governor in December. For example, ODOE is directed to establish a “tiered priority system” for evaluating preliminary applications for renewable energy facilities, taking into account factors such as relative cost, investment payback period, job creation, strength of business plan, satisfaction of environmental standards established by ODOE, and amount of energy generation. The bill also provides greater discretion to ODOE to allocate BETCs among manufacturing facilities when the program is oversubscribed. For a facility that receives preliminary certification, the bill empowers ODOE to deny or revoke final certification if the applicant cannot demonstrate that the facility will remain in operation for at least five years, or if the facility ceases to operate.



• Reduced Return for Investors in Pass-Through Program – While not part of HB 3680, another significant change to the BETC program has resulted from temporary rules issued by ODOE in November 2009. In those temporary rules, ODOE increased the pass-through rate that must be paid to an owner of a facility eligible for a 50 percent BETC from 33.5 percent to 42.7 percent. From an investment perspective, the change in formula means the annualized rate of return for the pass-through partner will be reduced significantly. While the new rates are intended to provide more capital to project owners and less return on investment to pass-through partners, there is great concern that the lower rates of return will make it difficult for project developers to monetize BETCs.

Passage of HB 3680, which the governor said he will sign, is a big deal for Oregon and renewable energy. The local newspaper campaigned long and loud to eliminate BETC entirely and with a significant shortfall in state revenues the arguments against BETC had some traction. But BETC also had some strong support as a way to keep Oregon in the forefront of renewable energy and provide long-term benefits.

Vancouver B.C. Green Olympics

Nashville TN lawyer and blogger Lena Babaeva Coridini has a post today about the Vancouver 2010 Winter Olympics getting a gold medal for sustainability. Aside from the convention center's green roof, a number of the things she mentions that Vancouver has done right are not things you would notice because they deal with things like using recycled wood and LEED certification.

Having just come back from a day at the Olympics, and comparing with many previous visits to Vancouver, the emphasis on public transit and minimizing the number of cars in downtown Vancouver is probably one of the biggest and most obvious "green" differences. We paid $2.00 to park our (hybrid) car at a park and ride garage well away from downtown and next to Hwy. 99 (the main north-south road into Vancouver). An all day pass on the brand new 19 km long Canada Line light rail train, took us from the Bridgeport Park & Ride to stops in downtown, including the waterfront, a block from the convention center and Olympic cauldron.

This has a huge impact on reducing the carbon footprint of the Olympics since 36% of British Columbia's CO2e emissions come from transportation (thanks to plentiful hydro power reducing the region's reliance on coal-fired power generation). Kudos to Vancouver for literally walking the walk and taking the train when it comes to real sustainability. And thanks also for the big t.v. screens set up in Yaletown where we could watch USA-Canada men's hockey live with a few thousand of our closest Canadian friends!

Weather v. Climate Change

Diane O'Neil has a good post on the Electric Utility Consultants, Inc. (EUCI) blog that's an open letter to the media to stop using the major east coast snow storms and the lack of snow for the Winter Olympics as evidence that proves or disproves global climate change. She says:

Taking a single moment in time and trying to extrapolate it out to have any significance whatsoever on such a complex issue is irresponsible and disingenuous. As anyone who has ever taken a statistics class can explain, using a sample size of one to make conclusions about an overall situation is patently incorrect. The snow in the east, or the lack of it in the west, is merely an anecdote.

I would add politicians to Diane's open letter since all too often the media simply parrots what some elected official (or uninformed celebrity like Donald Trump) says without question or challenge. This is a complex and serious issue that merits more than soundbites.

A Rising Tide Raises More Than Boats

The Washington Department of Ecology has released photographs depicting what a rising sea level might mean for waterfront properties in the future. The photos taken in early and mid-January 2010 during extreme high tides are a preview of what's to come even with a medium sea level rise of six inches by 2050. Seattle P-I.com also published photographs of some of the high tides at Bainbridge Island. A six inch rise in sea level would mean these extreme high tides might occur as many as 10 times a year instead of one or two times now. In addition, the higher sea level and higher extreme high tides would also make properties more susceptible to storm damage, such as what happened to some Camano Island property owners when strong winds accompanied the January high tides.

The next series of extreme high tides in Washington are February 1 through 3, and Ecology is requesting more photographs.

Another Conflict Brews Over Renewable Energy Versus Endangered Species

The desert tortoise is this week's poster critter as the California Energy Commission holds evidentiary hearings on the proposed Bright Source Energy Ivanpah Solar Power Complex, which will occupy 6.2 square miles of public land near I-15 and the California-Nevada border. At issue is the desert tortoise, 25 of whom live in Ivanpah Valley. Project backers have set aside three times as much land in the valley as the project will displace for a new home to the tortoises, but environmentalists say the tortoises may not be able to survive such a move.

The Energy Commission hearings will attempt to balance protection of an endangered species with the state mandate to increase dramatically California's renewable energy. As was seen, however, in the recent Maryland court decision effectively stopping a West Virginia wind project due to an endangered bat, this won't be easy. Its difficult to say how this one will turn out, particularly in light of the Maryland bat case, but it definitely will not be the last project to face this dilemma.

Is it Possible to Avoid Wind Turbine Litigation?

One of the top renewable energy legal decisions in 2009 has to be the injunction issued on December 8 by U.S. District Judge Roger Titus in Animal Welfare Institute v. Beech Ridge Energy LLC. The ruling halted the construction of a 122-turbine wind project in West Virginia due to the failure to study adequately the impacts of the turbines on the endangered Indiana bat. The case highlights the importance of heeding the formal advisories of agencies, such as the U.S. Fish and Wildlife Service (USFWS), in the pre-construction evaluation of a project's impacts on local fauna.

Beech Ridge Project

The project obtained its siting certificate in 2006 with the West Virginia Public Service Commission concluding that the evidence before it did not support a conclusion that Indiana bats lived near the project. Following a trial in October 2009, the U.S. District Court in Maryland concluded otherwise and criticized the project's consultant for disregarding the repeated formal advisories of USFWS to conduct multi-year studies using a variety of tools (radar, thermal imaging, acoustical studies, mist-netting and other appropriate sampling techniques) during spring and fall to determine the presence and risks to endangered Indiana bats. The consultants primarily relied on surveys using mist-nets (small-screen fine-mesh nets) conducted during two summer seasons, and only incidental, and apparently unintended, collection of acoustical data.

This did not sit well with the judge, who said that the mist nets, which did not capture any Indiana bats, at best could only establish that the bats were not present in large numbers during the summer, but did not establish absence of the bats at other times of the year.

The acoustic data, which apparently a field technician collected on his own, did not get evaluated until trial and arguably indicated that some Indiana bats might be present. The court relied heavily on this disputed acoustic data to confirm "to a virtual certainty" the presence of Indiana bats and to conclude it is "a virtual certainty that Indiana bats would be harmed, wounded or killed" by the wind project in violation of the Endangered Species Act.

The court reluctantly issued an injunction halting the Beech Ridge project and chided the developer for "disregard[ing] not only repeated advice from the [US]FWS but also fail[ing] to take advantage of a specific mechanism, the [incidental take permit] process, established by federal law to allow their project to proceed in harmony with the goal of avoidance of harm to endangered species."

Had the Beech Ridge project followed the USFWS suggestions and combined acoustic data with the mist net surveys the developer might have been in a position to make a case for an incidental take permit under the Endangered Species Act and to have better evidence to oppose a court challenge. The cautionary tale in all this is that the injunction effectively halted the project, which at the time had poured foundations for the initial 67 turbines, taken delivery on turbines and strung transmission lines.

Wind Turbine Guidelines Advisory Committee

In the meantime, the USFWS Wind Turbine Guidelines Advisory Committee (Advisory Committee)is preparing a set of recommended measures to reduce or minimize impacts to wildlife and their habitats related to land-based wind energy facilities. The American Wind Energy Association (AWEA) lists completion of the Advisory Committee work among its wind power trends for 2010, and the Beech Ridge decision suggests that such draft guidelines, if followed, might be helpful to avoid the harsh results of the case.

The sixth draft issued by a workgroup of the Advisory Committee in late October 2009 proposes a five-tiered approach to wildlife assessment and siting decisions that includes pre-construction evaluation of avian and bat impacts.

The draft guidelines specifically recommend against using mist-netting to assess the presence of bats and birds, in part because it is not feasible at the heights of the rotor-swept zone, and captures below that zone may not adequately reflect risk of fatality. If mist-netting is used, the draft guidelines recommend using it in combination with acoustic monitoring.

Litigation Likely

The Beech Ridge court's critique of the methodologies used in that case lends some credence to the Advisory Committee's draft recommendations. Even, however, as that process works toward final guidelines for approval by Interior Secretary Ken Salazar, they may not prove to be a hallmark event in wind power development for 2010 because of the strong likelihood of a court challenge.

Indeed, the attorney who represented the plaintiffs in the Beech Ridge case wrote a letter earlier in 2009 asking Secretary Salazar to disband the Advisory Committee because its draft recommendations "contain little but vague bromides and generic pronouncements" and "read more as an unabashed endorsement of wind power than a rigorous effort to address the harmful — and ever growing — effects of poorly sited and constructed wind power projects on wildlife." While that letter was written well before the current draft guidelines, it indicates that the final recommendations could well face litigation.

In the absence of implimentation of the guidelines, the Beech Ridge case provides a strong signal that it does not pay to ignore or minimize an agency's formal advisories in the pre-construction evaluation of a project.

Adventures in Houston

Houston may be home to urban sprawl that would make L.A. blush, but amid the giant office towers (even in residential neighborhoods thanks to minimal zoning) you can find a real true diner. Although Avalon Diner happens to be located in a Houston strip mall, its the real deal. Last Friday, my colleague and I were driving down Westheimer Road looking for a place to have lunch before we flew back to Seattle. In the River Oaks area we happened on Avalon Diner and decided to check it out. The diner, which opened in 1938 across from its present location, is not one of those kitschy, after-the-fact recreations. Except for the styrofoam cups that the ice tea comes in you'd think you were back in the Fifties.

We sat at the counter and had the pleasure to meet Velma, whose apron said she had been working at Avalon since 1975. After 34 years on her feet, it's no wonder Velma sat down next to me to take our order, but she apparently is one of the newbies. Her co-workers Cassie and Sarah have worked at the Avalon since 1966 and 1968! The photo at the top is the trio, with Velma in the middle, and the year they started proudly embroidered on their aprons.

I was so intrigued that I wrote down their names and years they started, which Velma noticed and asked what I was doing. I think she might have been worried I was some inspector or something, but I told her I was going to write a blog about Avalon and she graciously agreed to let me take her picture with her co-workers.

We ordered the meatloaf with red sauce, mashed potatoes and warm corn bread muffins. It was fast and it was great. What a wonderful find in a time where "history" seems seems mean what happened ten years ago. Thank you to Velma, Cassie and Sarah for making Avalon a true gem and thanks for your dedication.

Now on an even lighter side, here's a photo I took at the Galleria before we found the Avalon. I couldn't resist the juxtaposition. In fairness, the school buses actually were parked at the Dillards (not pictured, but also nearby), but their proximity to Zone d'Erotica was irresistable and perhaps a lesson in situational awareness. So long Houston!