Oregon governor signs new limits on Business Energy Tax Credit

A host of reforms aimed at reining in Oregon’s budget-busting subsidies for green energy projects were signed into law Thursday by Gov. Ted Kulongoski — a year after he vetoed a similar bill. The new rules phase out tax incentives for big wind farms, give the state greater authority to reject applications from suspect companies and set caps on the amount the state can spend to attract renewable energy projects and manufacturing plants.
The changes, which come after investigations by The Oregonian revealed widespread abuse of the tax breaks, are expected to save Oregon’s general fund about $140 million over the next three years.
For years, Oregon has offered renewable energy companies tax credits worth up to $10 million for wind farms and other renewable energy projects and $20 million for plants that produce solar energy components. The cost of the program skyrocketed, however, as hundreds of companies took advantage of loose regulations that allowed some to obtain multiple subsidies and others to claim tax credits without saving any energy.
Lawmakers last year passed a bill that put limits on the subsidies and cut the amount the state could give to wind energy developers. Kulongoski vetoed the bill, however, saying it would hurt the state’s efforts to develop a thriving wind power industry.
In the following months, however, the governor worked with lawmakers and state energy officials to craft a compromise bill. Kulongoski said the new bill “strengthens the accountability in the program” but still allows it to be a critical economic development tool.
Among the bill’s provisions:
* Reduces the maximum tax credit for wind energy projects from $10 million to $3.5 million in 2010, $2.5 million in 2011 and $1.5 million in 2012. The credit sunsets after 2012.
*Sets a cap of $300 million every two years for renewable energy projects and $200 million for manufacturing plants. The sunset on manufacturing tax credits was extended through 2014.
* Stops the practice of wind farms dividing into multiple smaller projects to claim numerous tax credits.
* Gives the state Department of Energy greater authority to reject applications, or to suspend, revoke or put conditions on projects that receive approval for the subsidies.
* Sets performance standards for projects that receive the subsidies, and allows “claw back” provisions to reclaim tax credits once they’ve been issued.
* Adds electric vehicle and battery storage manufacturers to the list of those who qualify for the incentives.
Reaction to the changes was mixed. Renewable energy supporters said they are worried that the new rules and limits might discourage development.  During hearings on the bill, wind energy representatives said the cutbacks would make Oregon less competitive with other states that also are seeking green energy companies and the jobs they bring.
But a taxpayer watchdog, who closely monitors the energy tax credits, said she’s not persuaded the new law will do much to rein in the cost to Oregon. While credits for wind might be limited, others aren’t, including subsidies for energy research and development which are showing “explosive growth,” Wiser said.
Furthermore, she said, the subsidies continue to be based on how much a project costs to build, not on how much energy it saves or how many workers it employs. That leads to situations where one firm gets millions in subsidies for the same amount of alternative energy as one that got only a few thousand dollars.
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