Renewable energy

Oregon Wastes Millions on Renewable Energy, New Audit Reveals

An external audit finds rampant mismanagement of the state's now-shuttered Business Energy Tax Credit program.

|

wind farm
National Rural Knowledge Exchange/Flickr

On Thursday the Oregon Secretary of State released a damning external audit of failures by the Oregon Department of Energy (ODOE) to properly administer the state's notorious Business Energy Tax Credit (BETC) program.

The BETC has a long and well-documented history of bankrolling dubious renewable energy projects, including $10 million in subsidies to a solar farm that never sent any electricity to the grid and $12 million to a developer who failed to either meet the program's eligibility requirements or disclose that he sourced his solar panels from prison labor.

These individual scandals have previously been covered by the Oregon media. But this new audit reveals the degree to which the ODOE failed to adopt or enforce even the most basic of compliance measures for the BETC program as well as the frequency at which the program was abused.

According to the audit report, some $347 million of the $1 billion given out by ODOE since 2007 went to projects that were "non-operational," "illogical," or beset by a "direct conflict of interest." All in all, about 25 percent of large projects (those costing over $1 million) that were examined "contained evidence of risk factors that were 'concerning.'" Just 2.7 percent of randomly sampled small projects were deemed "concerning," but even current ODOE Director Michael Kaplan thinks that figure is "overly optimistic."

How did the agency fail so spectacularly to administer a program put under its charge? The audit report suggests that the trouble began in 2007 when the Oregon Legislature nearly unanimously passed a major expansion of the BETC as part of that year's omnibus tax bill (page 17 of the audit).

Then–Gov. Ted Kulongoski, a Democrat, touted it as a means of expanding renewable energy production and stimulating job growth in the downturn economy (page 7). One legislator at the time even speculated that increased economic activity as a result of the tax credit would make the bill revenue positive (page 17), a claim that in retrospect looks laughable given that the program has actually run 3,511 percent above cost projections (page 27).

The 2007 legislation, along with a further expansion in 2008, largely left it the ODOE on its own to craft appropriate anti-fraud and compliance measures. As this recent audit makes clear, the agency was woefully unprepared for the task.

Under intense political pressure to expand the program, and lacking trained staff to oversee its implementation, the ODOE failed to adopt effective "lines of defense," including "a risk management program, internal audits for BETC, proactive fraud detection, or other measures to capably and effectively mitigate risks" (page 6).

The scale of abuse in the program is so severe that Secretary of State Jeanne Atkins (who as recently as August 2015 penned an op-ed stating that an audit of BETC was unnecessary) has forwarded case files on 79 recipients to the Oregon Department of Justice for review.

It's too early to know what the outcome of that investigation will be. Here's hoping the answer is that some measure of accountability will finally be imposed on a program that has cost Oregon taxpayers six years of scandal and hundreds of millions of dollars in wasted funds.

Advertisement

NEXT: Mississippi Police Chief Kills Self Amid Federal Asset Forfeiture Investigation (UPDATED)

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Should rename them the Oregon Department Of Renewables, because they sure seem to stink.

  2. Imagine my surprise.

  3. Odoes! Another green energy bust!

  4. Under intense political pressure to expand the program

    By the way, that’s the nut right there. So many of these programs actually measure their success by how much money they give away. The idea of any oversight merely slows down the process, and thus slows down the “success”.

  5. Climate change is a top priority.

    There can be no waste when combating dangerous carbon emissions.

  6. RE: Oregon Wastes Millions on Renewable Energy, New Audit Reveals
    An external audit finds rampant mismanagement of the state’s now-shuttered Business Energy Tax Credit program.

    It would be a huge mistake to consider Oregon wasted millions on renewable energy.
    One can only speculate the millions of dollars made from the politically connected cronies have made on the little people’s money.
    How any one in their right mind consider this wasted money is beyond the logic of any sane person.

  7. Now where have I seen Oregon’s stunning incompetence and wastage of hundreds of millions of dollars when pushing progressive causes before… Oh, right:

    No state fared worse during the launch of Obamacare’s health insurance exchanges than Oregon. The Beaver State was the first to announce a major delay in opening its online insurance portal, and the technology for the project?a $240 million project heavily funded through federal grants?never worked.

  8. “wastes”?

    But that’s the point of these programs.

  9. The 2007 legislation, along with a further expansion in 2008, largely left it the ODOE on its own to craft appropriate anti-fraud and compliance measures. As this recent audit makes clear, the agency was woefully unprepared for the task.

    Again = Feature, not bug.

    Why build in “anti-fraud” or “compliance” if the aim is simply to dole out money? You dont WANT that stuff if it complicates the purpose. Which is why it was left out.

    Its this aspect of coverage of “environmental stuff” which continually drives me nuts = people keep pretending that the intent is honest in the first place. That there’s actually some sincere desire to achieve some “environmental” result. That they really believe that they can cost-effectively reduce emissions via ‘wind farms and solar panels’ and shit.

    They don’t. Or if they did, this is sure as fuck not how they’d be doing it. They know what it is = an opportunity to spend money.

    And pretending that its NOT just that, that there’s some other purpose? Actually grants that there are any “good intentions” here. There aren’t. Its just a fucking scam. Stop pretending its not a scam, and endlessly being “surprised” when it turns out to be a giant boondoggle/public-till-robbing exercise.

  10. All renewable / green energy projects are boondoggles. Of course they lose money and waste energy. It is a remarkably easy shell game to pull off when the average person doesnt have even a rudimentary understanding of the physics or chemistry of it.

    Sink billions of calories into an effort to produce millions of calories that can be efficiently delivered to the end user as thousands of calories. If it goes from natural gas to ethanol to electricity then the average joe who plugs his Prius in has no idea of the massive waste of energy it takes to make that plug hot. He can feel good about himself and pay that carbon tax.

    1. Sink billions of calories into an effort to produce millions of calories that can be efficiently delivered to the end user as thousands of calories. If it goes from natural gas to ethanol to electricity then the average joe who plugs his Prius in has no idea of the massive waste of energy it takes to make that plug hot. He can feel good about himself and pay that carbon tax.

      This is why all Chevy Volts should have a gas engine attached to charge the batteries when you make it almost all the way.

      1. Chevy volts do have gas engines.

  11. You know, Christian, I would take this topic a lot more seriously if you equally criticized anusive and fraudulent tax credits to the oil industry. But you’ll never discuss that at Reason, will you?

    Let’s review Oregon report:

    “It found that there was circumstantial evidence of suspicious behavior in 79 of the 14,494 total BETC projects.”

    79 out of 14,000. And circumstantial. But good on them. They should pursue that small number.

    Where were you on improper tax crests to oil in Louisuana? You were nowhere.

    1. “For the past seven years, as Louisiana has lurched from one fiscal crisis to another, the State of Louisiana has paid the oil and gas industry $2.4 Billion in severance tax exemptions. Despite that massive transfer of public wealth into private hands, the oil and gas industry used its influence inside the Department of Natural Resources and the Jindal administration, to limit?and for three years shut down?audits that would have revealed whether the industry’s severance taxes and royalty payments to the state were accurate.”

      “These facts have been hiding in plain sight, contained in five performance audits of the Department of Natural Resources and the Louisiana Department of Revenue conducted by the Legislative Auditor since 2010.”

      1. Good on Oregon for investigating improprieties in their tax credit program. What do you think of oil shutting down the findings of an audit to their tax credits? Not much I take it.

    2. And Alaska, Christian.

      “Lawmakers were surprised last week to find that Alaska has given as much as $4 billion in tax credits to oil companies since the incentives were first put in place in 2006.”

      “But they were stunned when they learned that state revenue officials can’t say what the money has gone for.”

      http://www.adn.com/politics/ar…..011/02/17/

      1. JA

        I don’t support any of these convoluted tax credit/exemption programs, however….

        Is “tax credit” something different from what I imagine it to be?

        Isn’t a tax credit just some amount that a person or corp reduces their tax burden by?

        And if so, what money is being referred to by:
        “But they were stunned when they learned that state revenue officials can’t say what the money has gone for.”

        1. And I don’t either. I said to Christian I would take his criticism more to heart if he had equal rage for improper tax credits to oil. But he is at Reason, who if nothing else are apologists to oil. His complaint should be to improper tax credits given to energy producers. At least Oregon is investigating theirs. Louisiana got bought off by oil. Crickets at Reason.

          1. While I support neither, a subsidy is different from a tax credit.

            The unaccountable subsidies described in the Oregon article are the worst, probably worse than the government trying to run a solar wind farm itself.
            Literally pouring money down the drain.

            1. They are all tax credits that I linked, just like Oregon.

              1. From the Oregon article above:

                “The BETC has a long and well-documented history of bankrolling dubious renewable energy projects, including $10 million in subsidies to a solar farm that never sent any electricity to the grid and $12 million to a developer who failed to either meet the program’s eligibility requirements”

                The word used is ‘subsidy’,

                1. BETC
                  Business Energy TAX CREDIT.

                  1. And Obamacare is technically the Affordable Care Act.

                    But that isn’t what it does.

                    It’s just a name.

            2. And all tax credits are subsidies, whether given to oil or renewables.

              1. “And all tax credits are subsidies”

                No. Words have meanings. Get a dictionary. I agree with your rant in general, but you don’t need to purposely confuse. It just re-affirms your ongoing reputation here.

                1. Tax credits are subsidies. Sorry.

                  1. No tax credits are not subsidies.

                    Tax credits simply means that the business availing itself of the credit is keeping more of it’s own money than it otherwise would have done absent the credit.

                    The money WAS it’s own money to begin with.

                    The ONLY way to determine whether any individual, business or other entity is being subsidized by the federal government is compare the total federal taxes that he, she or it paid to the federal government on an absolute dollar basis to the absolute dollar value of explicit, direct federal government services calculated on a user fee basis that have been provided to that person business or entity in exchange for those tax dollars. If the former number exceeds the latter, there is no subsidy at all – tax credits or no tax credits.

                2. By the way Tom, whatever my reputation is here, trust me, it’s a badge of honor.

                  1. Liar
                    Asshole
                    Scumbag

                    You graduate with “honors”

                    I’ll take up a collection to send you a diploma. And a badge.

                    1. I take those labels from the sourced to which they come. And the source isn’t impressive. Therefore, it’s an honor. Have a great evening!

                    2. *the source from which they come.

                    3. In 2009 Louisiana collected $1.6 Billion from oil and gas leases. The tax incentives are a minuscule fraction of that. The tax rate is currently 21.9% in LA.

                      So the oil/gas industry is MORE than paying its way, unlike renewables.

                      “Royalties, severance taxes and lease payments provided about $1.6 billion, or 15 percent of all state tax collections last fiscal year. That makes oil and gas the third-biggest revenue source after sales and income taxes, Albrecht said.”

                      http://www.nola.com/business/i…..isian.html

                      Jackass, Stick to something you know…whatever that might be.

                    4. Big Twerp checks in with his latest statist theory. Let me get this straight…for you, no malfeasance from government or businesses as long as the money is coming in from them elsewhere. Wow. Listen to you.

                      By the way, idiot, do you think businesses in renewable industry don’t pay taxes, fees, and fines?
                      Check out the link below on Wyoming.

                      Congrats on giving renewables in Oregon an excuse…if they paid some money somewhere else, don’t complain.

                      But I would expect nothing else from a corporate apologist and statist like you. Well done!

                    5. Renewables are net suckers at the govt teat.

                      Tax credits are bad, but minuscule for o/g companies. Happy to see them go. And get rid of renewables subsidies. Level playing field.

              2. A subsidy strongly implies money given directly to a company. A tax credit strongly implies an easing of the amount of money taken by the government under threat of force. The only basis on which one could say these are the same is if one assumes that all money belongs to the government in the first place, an assumption that has a long and miserable history.

                Where the line gets blurry is that the terms are being used by politicians, and thus probably don’t actually mean what they seem to.

    3. And Texas, where oil companies are taking advantage of tax credits meant for natural gas by simply reclassifying their wells as gas and not oil.

      “Reclassification ? the legal term for it ? doesn’t happen with the wave of a magic wand. Regulators at the Texas Railroad Commission have to sign off on it. By shifting oil wells to gas wells, producers can often claim a generous state tax credit targeting “high cost” natural gas.”

      “Meant to spur more drilling, the policy can shave several percentage points off the state’s 7.5 percent severance tax on natural gas production. The tax credit is good for 10 years, or until the credits total half the cost to drill and complete a well.”

      “But a surge in oil-to-gas reclassifications may put taxpayers on the hook for hundreds of millions of dollars in incentives for oil wells drilled during boom times, including reimbursement for taxes paid years ago.”

      1. Wells often produce both.

        Solution is to subsidize neither.

      2. You are indeed a moron, jackass. The o/g industry pays a lot in taxes and royalties. A few tiny tax rebates to stimulate more growth are wrong, but insignificant.

        The grants to renewables are pure gifts, taken from taxpayers. Renewables are a net loss for the state.

        “AUSTIN ? According to just-released data from the Texas Oil & Gas Association (TXOGA), the Texas oil and natural gas industry paid $13.8 billion in state and local taxes and state royalties in fiscal year 2015, the second highest such collection from the oil and natural gas industry in Texas history.”

        http://tinyurl.com/jslu2hm

        1. See my answer to you above. Your idiotic blather doesn’t deserve another response.

          1. Run away chickenshit, yo momma’s calling.

    4. The distinction is quite simple, arithmeticly. Taxation leaves the community with at best the same value it had before the money was taken, and generally with less value, since the transaction was unmotivated on one side. Subsidies and grants and such involve the expenditure of this stolen money on things no one would actually buy, which is always a loss of value, since neither side of the transaction is motivated and the fact that subsidies have to be given out demonstrates that the product has less value than what it’s fetching from subsidies. In the case of the subsidy, value is lost first in the original act of taxation, where one side was unmotivated, and, doubly so, second in the proximal act, where neither side is motivated. In addition there is certainly varying degrees of loss that occur as the funds are moved through bureaucracy between those two points. In the case of a tax credit, loss of value at the first step is minimised and there is no further loss. So, there’s a huge fucking difference. Try to grow a brain.

      Not to dismiss the political harm that is caused by variable taxation. Any condition where individuals are treated differently by the state promotes anuse.

  12. the ODOE failed to adopt effective “lines of defense,” including “a risk management program, internal audits for BETC, proactive fraud detection, or other measures to capably and effectively mitigate risks”

    The only thing that would have worked would have been denying every damn one of these crony capitalist projects.

    And no bureaucrat would defy the legislature that way.

    1. You must have hated the crony capitalist workings in Louisiana to the oil and gas industry.

      1. Yes. Unlikely you’ll find a defense of oil and gas subsidies at this forum.

        1. Come on Tom. Bailey apologizes for subpoenas on behalf of oil companies, and Root…the resident expert on a things eminent domain…never once mentions the industry most using ED for private company gain. If you can find one piece here critical of oil, let me know. I will read it.

          1. Are you referring to the multiple-AG’s’ global warming subpoenas?
            ED?

            That’s a double changing of the subject.

            I referred to government subsidies in my short comment above as that seemed to be a major feature in the Oregon story.

            I don’t know if Reason has been critical of the ED regarding the Oil Industry. If not, shame.

            1. They haven’t. Crickets.

      2. Looks like you combined a tu quoque fallacy with a strawman fallacy, with a side fallacy of “not taking is giving”.

        Don’t support crony capitalism for anything — or anyone else here. But, lowering the tax bill for an industry is less theft, which theft you apparently support.

        1. Missed you saying that yes, crony capitalism for oil is bad. You’ll get there.

  13. See? Just a few spoiler votes going to Nader’s econazis sufficed to beat the looters, thereby forcing them to incorporate nationalsocialism for environmental purity to the hilt. This is how small parties (whose teeth are not in a glass by the bed) change the laws with almost no votes.

  14. Any greenie dumb enough to think government giveaways will produce renewable energy doesn’t have the common sense to balance a checkbook much less oversee a multi-billion dollar operation.
    Left coast libtards with a pile of taxpayer dollars and a bubblehead frothing with good intentions is a loud and clear dogwhistle to every third rate con artist within earshot.

  15. Renewable energy CAN be sustainable, if strict legal controls are placed on. Also, solar and wind energy may still only represent a small fraction of energy consumption, but it’s growing fast!

Please to post comments

Comments are closed.