Interim Committee on Department of Energy Oversight was created by Senate
President Courtney (D-Salem) and House Speaker Tina Kotek (D-Portland)
partially in response to a request by a group of Republican lawmakers who had called
for a criminal investigation into energy tax credits
issued by that agency. Our request was based on information we received from
whistleblowers within both the Oregon Department of Energy (ODOE) and the
Oregon Department of Revenue.
President Peter Courtney (D-Salem) assigned me to serve on the bicameral,
bipartisan oversight committee. We have both been quoted
in the press observing that a full and open
legislative investigation of the purpose and function of the agency was needed.
committee’s work has thus far involved four monthly public hearings at the
capitol. They have consisted of presentations on each of the department’s
various divisions, followed by public comments. To date, the meetings have
resulted in many more questions than answers. With the salient exception of
representatives of the environmental community, public comments regarding the
agency have generally been less than complimentary.
meeting, we heard invited testimony from stakeholders who deal
with ODOE, such as public utilities. Also presented were overviews of the
agency’s budget, the history of Oregon Energy Tax Credit programs and the
nuclear safety division. In
April, we learned about ODOE’s emergency preparedness and
planning and innovation division. The
May meeting was devoted to the Energy Facility Siting
Council (EFSC). This division was
identified early on by agency officials as one of its core competencies.
before, during and after that meeting, committee members received an abundance
of correspondence from residents throughout the state complaining about EFSC.
Most of the public concern was focused on allegations the EFSC administrative processes
are biased, as well as perceptions the Council is prejudiced toward siting
energy facilities regardless of either need or legitimate public concerns.
were a number of further developments related to the Oversight Committee and
its work last week.
Oregonian article by reporter Hillary Borrud disclosed that
ODOE employees were subpoenaed last week as part of an Oregon Department of
Justice (DOJ) investigation into the tax credit program. The agency’s director
declined to answer my questions regarding whether these subpoenas were civil or
criminal in nature and whether they had been issued to former or current ODOE
employees. He said the Oregon DOJ had specifically requested that he not
disclose that information. The individuals subpoenaed are expected to testify
the Secretary of State’s Office has contracted with a private auditing firm to
perform an extensive audit of ODOE’s Business Energy Tax Credit (BETC) program.
I met with a representative of that auditing firm and provided her with
information as part of the process.
Borrud article cites Governor Brown’s office as being reluctant to make
meaningful changes at ODOE. It says her administration feels the agency is
necessary to help combat climate change, although she may be willing to allow
all of the tax credit programs to sunset as scheduled.
kind of rhetoric sounds too familiar. In my opinion, it is exactly the kind of
thinking that lead to ODOE’s current problems. The agency has been directed to
spend enormous amounts of public money to advance social/political motives
rather than low-cost energy solutions. It’s worth noting that former Governor
Kitzhaber’s girlfriend Cylvia Hayes claimed that "I
don't work for the governor, I work for the Earth."
President Courtney is quoted in Borrud’s article as saying it’s premature to
conclude that ODOE should be left completely intact as it is. I strongly agree
with the Senate President on this point.
series of memos from the Department of Administrative Services (DAS) review of
the agency has been made public. They cover ODOE’s Energy
Incentive Program (EIP) tax credit, Small
Energy Loan Program (SELP), Residential
Energy Tax Credit (RETC) and Biomass
Tax Credit programs.
DAS memos state that a “significant amount” of the SELP loan portfolio that was
started 35 years ago consists of loans that were made to local government
entities. It was designed to provide low-interest loan to projects “in a market
where there was little interest” in funding such ventures. It has since
provided 874 loans totaling $611 million.
SELP program is in financial disarray. While meant to be an incentive program
for small projects, it devolved into a government venture capital investment
tool. Several of those major venture capital investments have failed and others
are in or near default.
to these accumulated bad investments of public money, SELP will be unable to
meet its debt service obligations between the years 2020 and 2034. The program will
require at least $15.3 million of general fund money to recapitalize its fund sufficient
to pay for the projected shortfall. Oregon’s State Treasurer has
asked for a moratorium on further SELP loans.
DAS memo further states the SELP program may no longer be needed. Private low-interest
rate financing is now available for these kinds of projects.
Alternative Fuel Vehicle Revolving Fund created through the SELP program has $3
million in available funds. According to the DAS memo, no loans have been made
because its “structure is not attractive to borrowers.”
Energy Incentive Program resulted from the passage of House
Bill 3672 during the 2011 session. It was intended to replace
BETC by reducing and refocusing the program to help address the controversies swirling
surrounding that program.
has three components totaling $51 million per biennium that include: energy
conservation, transportation and renewable energy development. The program has
received a total of 1,436 applications for tax credits. It has issued $94
million in tax credits for public projects and a mere $5.1 million for private
to the DAS memo, many problems exist with the program. Nearly 95 percent of its
current tax credit participants are local governments and non-profits that have
no tax liability. Further, the memo states the holders of tax credits can
transfer the credit for cash equal to its net present value making them
difficult to market. Finally, the memo states ODOE doesn’t know how important
the revenue from the tax credit transfers is to incentivize recipients to
invest in energy conservation projects.
EIP is set to sunset on January 1, 2018. In my opinion, early termination of
this program will be in the best interest of the entire public, other than
those who broker and receive the tax credits.
Energy Tax Credits have been in operation since 1978. They have resulted in the
issuance of 570,000 tax credits worth $172 million. However, the DAS memo
observes quantifying the program’s benefits in any given year is “problematic,”
because no data is available regarding the actual cost savings realized as a
result of its utilization.
DAS memo repeatedly states the purpose of RETCs is for “transforming markets.”
I would submit it was never government’s business to get involved in the
so-called transformation, or social engineering, of any market. RETC is
scheduled to sunset on December 31, 2017.
Biomass Tax Credit Program (BTC) has issued $29.8 million in tax credits since
2010. One of its provisions pertaining to animal manure and rendering offal was
significantly amended and had its sunset extended to January 1, 2022 by the
passage of Senate
Bill 1507 during the 2016 session. All other forms of BTCs are
due to sunset January 1, 2018.
to DAS, there are similar issues with this program. It’s “difficult to
ascertain the impact of the program on pollution reduction and rural economies,”
the memo states.
ODOE director discussed each of the tax credit programs within the scope of the
agency’s energy development services programs during the oversight committee’s Monday,
June 27 meeting. Committee members asked numerous questions that largely
Borrud attended the hearing and produced this
excellent article regarding what took place. The article’s headline
accurately sums up the committee’s deliberations.
director defended the agency’s tax credit programs as being critical for
economic development. However, DAS was unable to quantify, or even identify,
measurable public benefits produced by spending these enormous sums of public
money. Moreover, I really question how the economy is developed by loaning
money from one part of the public sector to another part of the public sector.
there are competing visions about what should be done with ODOE. The agency was
formed in response to the energy crisis our nation was facing in the 1970s. The
decades since then have proven many of the early assumptions regarding energy
to be completely false.
domestic energy boom of the past few years is in stark contrast to the “peak
oil” scare and artificial shortages in supply that were caused by the political
elite’s response to geopolitical events in the 70s. An impending shortage of
energy supply is no longer at issue. Today’s debate is focused on the political
elite’s concern regarding the utilization of our energy abundance.
for example, ODOE’s nuclear safety division.
power has been banned in Oregon for decades. The state’s sole commercial
nuclear plant was the Trojan
facility, located southeast of Rainier. That plant was closed
by its owner, PGE, after 16 years. A 1980
ballot measure was passed by voters banning the construction of further
week, members of the oversight committee toured the Hanford Nuclear Facility
near Richland, Washington. My chief of staff attended the tour on my behalf.
was used to produce the plutonium that ultimately created the nuclear bombs
that ended World War II by forcing Japan to surrender. That 586 square mile
site is now the largest and most expensive environmental cleanup project in the
world. It includes 2000 distinct waste sites, with 177 underground tanks
holding over 56 million gallons of waste. Sixty three of those tanks have
leaked over one million gallons of radioactive contaminants into the soil.
annual budget is nearly $2 billion. Just over 30 percent of the economy of
Washington’s Tri-Cities area is tied to the Hanford cleanup project. It employs
around 400 federal employees supervising as many as 8500 contractors.
cleanup effort is through a Tri-Party Agreement involving the federal Department
of Energy, Environmental Protection Agency and Washington State. Oregon and its
agencies, such as ODOE and the Department of Environmental Quality, are not a
party to it.
federal Department of Energy has a Richland Field Office at the Hanford site
that is under the agency’s Office of River Protection. Despite the lack of any
nuclear facilities anywhere in Oregon, the abundance of government agencies,
personnel and contractors working at the Hanford site located in Washington
State, and the large contingent of Washington State employees assigned to the
effort, ODOE unaccountably continues to maintain a nuclear safety division.
more meetings of the oversight committee are currently scheduled. The DOJ
investigation is ongoing. The Secretary of State’s commissioned BETC audits
should be completed in August.
next oversight committee hearing will be July 18, when we are slated to discuss
the department director’s office and central services division. We are
scheduled to complete our review during the August 29 hearing. Further
meetings could be scheduled around the September Legislative Days.
political majority leadership will then decide whether to reform this truly
troubled agency, or allow the status quo to prevail.
Please remember--if we do not stand up for rural Oregon, no one will.
Senate District 28
Email: Sen.DougWhitsett@state.or.us I Phone: 503-986-1728
Address: 900 Court St NE, S-311, Salem, OR 97301