Energy tax credits pay off for buyers and sellers

EO Media Group ZeaChem completed construction on their 250,000 gallon per year Demonstration Biorefinery at the Port of Morrow in Boardman in 2015. The company received $10 million in renewable energy credits from the state, and sold them to investors for $6.7 million.

SALEM — Oregon has given hundreds of millions of dollars worth of tax credits to help developers kick-start investment in renewable energy and efficiency projects around the state. The credits were meant to either offset the taxes of the energy project owners, or to be sold to provide them with project capital.

Even when those projects have not proven viable, the tax credits have been sound investments for wealthy taxpayers who have bought them from developers for a fraction of their face value.

The sale of the credits were governed by rules that set out minimum prices that would limit the discounts buyers received.

But around 2011, the Oregon Department of Energy scaled back its oversight of the tax credit sales. The department quietly stopped enforcing pricing and other rules, which allowed private brokers to strike deals in which the prices were never verified by the state.

From 2006 to 2014, investors bought green energy and efficiency tax credits worth $703.6 million for $494.2 million, according to the EO Media Group/Pamplin Media Group Capital Bureau’s analysis of nonrefundable energy tax credits. That’s a gain of $209.4 million, or 29.8 percent.

The ZeaChem biorefinery in Boardman is an example of a project that has not yet lived up to its promise, but has provided a healthy return for investors who bought the tax credits given the project by the state.

ZeaChem told the state in 2009 that the plant would employ 20 people, and the Oregon Employment Department estimated that could fuel the creation of an additional 154 jobs in Oregon, said state employment economist Nick Beleiciks.

In late 2013, ZeaChem had a problem.

The state had certified a $10 million credit for ZeaChem’s cellulosic ethanol demonstration plant in Boardman, which was built to produce up to 250,000 gallons of cellulosic ethanol per year from wood waste and other materials. But the company laid off employees in 2013 due to a cash shortage and has since operated with a staff of approximately 15 employees who continue to run tests.

Joe Regnery, ZeaChem’s chief commercial officer, said in an interview Monday the plant was always supposed to be a testing facility, despite a 2012 U.S. Department of Energy document that stated “the biorefinery will convert 10 bone-dry tons per day of cellulosic feedstock into ethanol.”

“The demonstration plant does not generate income,” Regnery said. “It’s not a production asset ... Selling (the tax credit) was a better financial outcome than using it against taxes because we were not paying taxes in the state at the time.”

The sale of those credits was facilitated by the Energy Department and followed rules that allowed for a discount of up to 33.5 percent.

ZeaChem split up the $10 million Oregon business energy tax credit and sold pieces of various sized to a handful of investors — Portland industrialist and developer Jay Zidell, Union Pacific railroad and Lee and Becky Holzman — for $6.7 million.

Zidell, whose family plans to develop its former Portland shipyard property on the south waterfront, purchased $500,000 worth of the ZeaChem tax credit for $335,000, according to state data. In all, Zidell has bought nearly $2 million in renewable energy credits for $1.4 million.

The credits have also attracted much larger investors. U.S. Bank has spent $30.7 million to purchase tax credits that will allow the bank to cut its Oregon tax bill by approximately $44.7 million. Walmart paid $30.2 million for credits that will reduce its state taxes by $43.1 million.

Other major investors who are using the non-refundable BETC to save millions on their Oregon taxes include Costco, Comcast, Trader Joe’s, Lews Schwab and a long list of other corporations and wealthy individuals.

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