Shepherds Flat Wind Farm: The seamy side of green energy

Shepherds Flat Wind Farm: The seamy side of green energy

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U.S. Department of Energy/Caithness Energy: Shepherds Flat Wind Farm near Arlington, Oregon.

SALEM, Ore., February 25, 2014 — The path to President Obama’s green energy utopia is littered with government waste, mismanagement and shady corporate public-sector business practices.

Nowhere is that spelled out more clearly than in a 2010 Larry Summers White House memo about double dipping into the 2009 Stimulus (Recovery Act) money trough.

The White House memo specifically identifies one double-dip green energy project and its sponsor. The project is the $1.9 billion Shepherds Flat Wind Farm built near Arlington, Oregon. The double-dip sponsor is Caithness Energy, LLC, out of Long Island, New York.

The president had full knowledge of shady corporate dealings involving Shepherds Flat before the fact, yet less than two months later he approved full project funding anyway. It was built and went into service on September 22, 2012. Government paid for 65 percent of the project.

Caithness Energy’s shady business practices didn’t stop with the federal government. It also tripled-dipped the state of Oregon for tax breaks it didn’t deserve. That case is still being investigated by the Oregon State Legislature.

For it’s efforts, Caithness is full owner and operator of Shepherds Flat — at only an 11 percent stake. It has a sweet fixed-rate 30-year power purchase agreement with Southern California Edison that guarantees it a return on equity of 30 percent.

Rarely has one company taken greater advantage of federal and state public policy, and taxpayer investments than has Caithness Energy, LLC.

Shepherds Flat Wind Farm


DOE fact sheet on Shepherds Flat Wind Farm
DOE fact sheet on Shepherds Flat Wind Farm

Shepherds Flat was the largest wind farm in the world when it went into service in 2012. Wagon ruts left by 1840s Oregon trail settlers can still be found where it is built.

By wind power standards, everything about it is big:

  • Covers 30 square miles spread out over two counties.
  • Cost $1.9 billion.
  • Received $1.3 billion in DOE loan guarantees.
  • Has 845 megawatts of electric generating capacity.
  • Advertised it saves one million tons of CO2 emissions annually.
  • Has 338 windmills
  • Each 2.5MW GE windmill is 360 feet tall with 60 foot long blades
  • Created 400 construction and 35 permanent jobs.

Even though Shepherds Flat is in northeastern Oregon, 100 percent of its electricity goes to Southern California Edison of Los Angeles.

Its electricity is delivered south through the federal Bonneville Power Administration grid. That helps Southern California Edison meet a state mandate requiring that all new electricity deployed by utilities in California are 33 percent renewable energy by 2020.

2010 White House Memo

The DOE’s fact sheet doesn’t tell the whole Shepherds Flat story.

Ted Sickinger, investigative reporter for The Oregonian newspaper in Portland, uncovered two damning White House memos. One described “A big meeting at the White House on Friday with Treasury and OMB” about Shepherds Flat. The other summarizes green energy double-dipping practices involving Shepherds Flat to be shared by Energy Secretary Stephen Chu in a meeting with the President.

The appendix of the Larry Summers White House memo, titled “Shepherds Flat Loan Guarantee,” identifies $1.2 billion in outright double-dip gorged giveaways:

  • $500 million: Federal 1603 grant
  • $300 million: Value of $1.3 billion loan guarantee
  • $220 million: Premium paid for power from state renewable electricity standard
  • $200 million: Accelerated depreciation on federal and state taxes
  • $18 million: State tax credits

Saying that Caithness has little “skin in the game,” the memo asserts the government paid more than 65 percent of the cost of the wind farm while Caithness put up just 10 percent.

Further, it says due to favorable market conditions the project probably would have gone forward anyway without the loan guarantee.

It even casts doubt on the project’s carbon reduction benefits. It estimates a savings of 18 million tons of CO2 emissions through 2033. It then says that CO2 savings would have to be valued at $130/ton to equal the cost of the subsidies. That is six times more than the primary estimate allowed in government evaluation rules at the time.

In March, 2013 a U.S. Government Accounting Office report on wind energy subsidies exposed 82 overlapping federal wind related initiatives spread out among five different federal government departments — DOE, Interior, Agriculture, Commerce and the Treasury — and across nine agencies. GAO concluded “fragmentation” resulted in duplicate funding.

The $30 million Tax Credit Scam

Apparently a $1.3 billion dollar loan guarantee, $1.2 billion in freebies and a guaranteed 30 percent profit for the next 30 years wasn’t good enough for Caithness. It had to get greedy and stiff the state of Oregon for $20 million more in tax credits than it doesn’t qualify for. $20 million is one percent of the total cost of the project.

Here is how it was done. Caithness set up three subsidiaries that, on paper, split Shepherds Flat up into three different wind farms. By doing so, it applied for and got $10 million in Oregon tax credits for each farm, $30 million in all.

The problem is, Oregon requires a project to be “separate and distinct” to qualify for the tax credit. A project is considered to be a single facility if it meets any three of these criteria:

  1. Projects are located on adjacent parcels of land.
  2. The projects have been recognized or licensed as a single entity by federal, state, county or local authorities.
  3. Construction performed under one contract, or interdependent contracts using shared resources.
  4. Projects share expenses, personnel, equipment or capital investments.
  5. Equipment was purchased through the same person(s).
  6. Facility connect to the grid through a single connection.
  7. Other factors like construction, operation, maintenance or output demonstrating it is singular.

The Oregonian’s Ted Sickinger extensively researched each item and found six of seven criteria met the qualifying standard defining Shepherds Flat as a single wind farm. His analysis is detailed in an article titled “Oregon Energy Department blows past facts in review of subsidies for Shepherds Flat wind farm.”

If Sickinger is right, Shepherds Flat qualifies for one $10 million tax credit instead of $30 million.

The Oregon State Legislature is investigating, but has not yet ruled.


Only in the United States can a New York firm build the world’s largest wind farm in Oregon to sell all its electricity to Los Angeles at a 30 percent per year guaranteed profit so a southern California utility can meet its California state mandated renewable energy requirement.

It would be considered inspired capitalism except for one thing: Most of it was paid for by taxpayers. It enabled a private company to gain total ownership, then to reap profits from ill-got gains obtained from incompetent governments going all the way up to the White House.

Yet that is exactly what happened at Shepherds Flat outside sleepy Arlington, Oregon.

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