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.