The gettin’ is increasingly good and the law of unintended consequences alive and well in the Beaver State. An investigation by The Oregonian reveals that the state’s “green-energy” subsidies have spiraled out of control, with millions of dollars going to projects “with questionable environmental benefits” and to ones that would have been pursued without a government handout.
The handouts come from Oregon’s Business Energy Tax Credit program — the state’s fastest growing tax shelter. The credits are so easy to obtain that more than 4,000 applicants have lined up to get them whether they need them or not.
“It’s gotten out of hand,” says Chuck Sheketoff, director of the Oregon Center for Public Policy, which studies the impact of state tax policies on low-income residents. “It’s being scammed. It’s not serving its purpose.”
Even banks and big corporations that have nothing to do with renewable energy are grabbing the tax breaks. Under the state’s generous incentives, groups and companies that qualify for tax credits can turn around and sell them. Most do. Standard Insurance, for example, paid $2.5 million to Flakeboard, an Albany mill that makes composite wood. In exchange, Standard gets to use $3.5 million in tax credits the mill received for building a wood-burning boiler that can generate electricity.
“My concern is, it’s going to be loved to death,” says state Sen. Ginny Burdick, D-Portland, who chairs the Senate Revenue Committee. “Are we getting our money’s worth as taxpayers? Or are we simply doling out money to people who would be doing what they’re doing anyway?”
(Funny you ask, the FTC is wondering the same thing about carbon offsets.)
A case in point is Enterprise Rent-A-Car, the St. Louis-based chain that has shifted large numbers of its rental fleet to hybrids. Enterprise has received more than $100,000 in Oregon tax credits, mostly for new Toyota Priuses, which run on a combination of electricity and gasoline.
Yet the company would have bought the cars even without the tax credit, says Meghan Maguire, an Enterprise spokeswoman.
“We buy hybrids because it’s a reaction to customer demand,” Maguire said. “It’s a nice thing that (the tax credits) are available, but it certainly doesn’t impact our decision to buy hybrids.”
In some cases, however, Oregon energy tax credits have been used as startup money for projects that aren’t proven energy savers. One is Reklaim Technologies, a Bellevue, Wash., company that erected a tire recycling plant in Boardman.
Reklaim got $3.4 million in tax credits from Oregon. The company says the plant will extract usable oil from the tires and sell it as industrial grade fuel.
The problem, says Michael Blumenthal, a national expert on scrap tires, is that the process Reklaim plans to use, called pyrolysis, has never been proved as an economically viable way to recycle tires. It is possible to get oil from the tires, but it is prohibitively expensive, and the markets for the end products often aren’t there, he says.
(Hmmm, millions for a technology that is not viable without taxpayer dollars? Add it to the list: wind power, solar power, ethanol . . . )
Oregon’s energy tax credits began as a small, targeted program aimed at conservation and efficiency. It kicked into high gear after the 2007 legislative session, when Kulongoski pushed for some of the biggest tax breaks offered anywhere in the nation.
Under the 2007 rules, companies could apply for up to 50 percent of the cost of the project, up to a limit of $20 million, as long as they could show the project would save energy or produce renewable energy or fuel alternatives.
The governor saw what he considered to be two golden opportunities. One, green tech companies would move to Oregon to take advantage of the tax savings, bringing jobs with them. And two, the state would make progress on its goal of drawing 25 percent of its energy from renewable sources by 2025.
At the time, state officials projected the changes would add $2 million to a projected $23 million hit on the state’s two-year budget. They were wrong. Less than two years later, the program is costing taxpayers $78 million. And that figure easily could triple again. State records show more than 4,400 applications pending for the credits, for projects worth $716 million.