Giant Oregon Wind Farm’s Tax Breaks Under Scrutiny

Renewable energy is fighting a long, uphill battle to catch up with the subsidies that fossil fuels and nuclear have historically gotten, but a new report in the Oregonian newspaper suggests a signature wind project has benefited from public largess in ways that meet “neither the spirit nor the specific requirements of Oregon law.”

The wind farm is the giagantic, 338-turbine Caithness Shepherds Flat, referred to far and wide – by us, by The New York Times, by the U.S. Department of Energy (which helped build it with a big loan guarantee), heck, even by Caithness Energy itself – as a 845-megawatt wind farm. Singular. As in, one of ‘em.

shepherds flat wind farm

Earlier this month, U.S. Deputy Energy Secretary Daniel Poneman visited the wind farm, about 140 miles east of Portland (image via DOE)

But when it came to filing papers with the state of Oregon, Caithness Energy broke Shepherds Flat into three wind farms. We’d actually noticed this when we reported on the project’s ribbon-cutting ceremony last September, pointing out that according to the Oregon Department of Energy, the facility officially consisted of Shepherds Flat North (265 MW), Shepherds Flat South (290 MW) and Shepherds Flat Central (290 MW).

What we hadn’t realized – but what the Oregonian has now brought to light – is the reason Shepherds Flat is officially three wind farms: This allowed the developer to triple its tax credit from the state of Oregon, giving it $30 million instead of the $10 million it would have received as a single entity.

The Oregonian makes it pretty clear that under Oregon law, Shepherds Flat is one wind farm, built on adjacent land; having one customer for the power; having the same general manager; and – perhaps most tellingly – having a common interconnection to the grid.

The only thing that makes this three wind farms, the Oregonian reports, is all the paperwork Caithness did to give it that appearance: splitting it into three businesses, selling the power to Southern California Edison in three contracts and likewise doing three interconnection agreements with the Bonneville Power Authority.

In a response to the Oregonian article, Caithness didn’t really address the specifics, simply saying “all requirements of the Oregon Business Energy Tax Credit program were fully met.”

But the state of Oregon, prompted by the newspaper report, said it will review the determination that Shepherds Flat deserved three tax credits.

What’s remarkable about this latest twist in the Shepherds Flat story is that the project was already the subject of scrutiny for the generous subsidies it received, to a large degree a product of the 2009 stimulus. As we’ve reported, even within the Obama administration there was concern expressed on this count: An October 2010 memo to President Obama by three senior White House advisors detailed how developers were able to pile several different subsidy programs into a mountain of benefits that left them with “little skin in the game.”

The memo noted that Shepherds Flat’s developers received a $500 million federal grant, state tax credits totaling $18 million (or so it appeared at the time), accelerated depreciation on federal and state taxes worth $200 million, and a premium for its power from the state worth $220 million. On top of that, a $1.3 billion partial loan guarantee provided $300 million in benefits to the developers, bringing the total subsidy for the $1.9 billion project to nearly $1.24 billion.

That said, the wind farm is bringing clean power to hundreds of thousands of homes; it did support hundreds of construction jobs (and now a few dozen permanent jobs); and the counties where it is located will receive millions in property taxes over the next 20 years, while private landowners are also benefiting from lease payments. For all those reasons, the Republican member of Congress from the area, Greg Walden, was at the ribbon-cutting last September, where he lauded Shepherds Flat as “part of an ‘all of the above’ energy strategy that this country so desperately needs.”

Sports columnist, newspaper desk guy, website managing editor, wine-industry PR specialist, freelance writer—Pete Danko’s career in media has covered a lot of terrain. The constant along the way has been a fierce dedication to knowing the story and getting it right. Danko's work has appeared in Wired, The New York Times, San Francisco Chronicle and elsewhere.

    • Joe Murtaugh

      How many soldiers were lost in this deception?

    • bluethumb

      Someone robbing the tax payers again.