Saved by Delay: Appeals court says BETC’s demise means state need not pour $8.33 million more into failed ethanol plant

             On Wednesday, a three-member panel of Oregon Court of Appeals judges announced that it was overturning two judgments against the Oregon Department of Energy that the late Marion County Judge Alvin P. Norblad issued . The appeals court reversed the trial court’s decisions that the Energy Department must issue $8.33 million in business energy tax credits (BETC) to the successor-owner of a bankrupt ethanol facility in Clatskanie, Oregon, that failed in 2009 and also pay that company’s attorney fees amounting to almost $350,000.
             Before going bankrupt, Cascade Grain managed to sell millions of its tax credits on the Port Westward plant against the $33 million project price tab. Oregon taxpayers were saved from handing over an additional $8.33 million in tax credits for the facility because, in 2012, the Legislature put an end to the BETC program and required that tax credit applications that had not been finalized an issued expired on July 1, 2014. The court decided that the tax credit question was moot and that it did not have to decide whether Judge Norblad’s judgments against Energy were correct, because the abolition of the BETC meant that Energy could not, after that date, issue the final tax credit certificates. Since Energy could no longer issue the credits no matter how the court decided the case, the court declined to wade into the arguments on the merits.
            That decision then led the appeals court to reverse the attorney fee award against Energy, which was for just under $350,000, even before the costs of the appeal were included. Thus, the court gave Energy, which has been the subject of intense criticism that is still building, a Christmas present worth millions. However, OregonPEN estimates the chances of an appeal as 99 to 100%. If the Supreme Court chooses to hear the appeal, though, the Energy Department itself may have been abolished like the BETC that caused Oregon so much budgetary distress.
            About the ethanol plant, its builder, JH Kelly, parent company of the failed “Cascade Grain” operation, described it one of the 10 largest ethanol plants in the United States.

JH Kelly constructed this dry mill ethanol plant, the largest on the West Coast and one of the ten largest in the US. The plant has a capacity of 108 million gallons per year (gpy) of undenatured ethanol with a design basis of operating 24 hours per day for 350 days per year.
JH Kelly self-performed the following activities:

  • Site preparation – 7,000 LF roadway with truck scales; 24,000 LF rail spur with rail scales and unit train grain unloading system sized for ten storage days; and stone columns for soil stabilization
  • Concrete – 17,000 cubic yards of concrete
  • Structural steel erection – 1,350 tons of structural steel and miscellaneous iron
  • Structures – 2,500 sf administration building, 2,400 sf maintenance building, 30,000 sf process building, DDGS loadout enclosure, DDGS dryer (complete drying system including a thermal oxidizer/ heat recovery steam generator), DD&E structure, fermentation equipment building and control room
  • Tanks, vessels and equipment – complete rail unloading and grain handling system, four carbon steel tanks, 20 stainless steel tanks, nine major process vessels including distillation beer column and ethanol dehydration, molecular sieves
  • Piping installation – 82,000 LF of pipe, over 175 miscellaneous pumps, heat exchanger, compressors, and blowers.