Actual Expenditures, Last Three Budgets, include funding sources: Actual Expenditures: 2011-13: $169,926 2013-15: $272,009 2015-17 (projected): $233,385 Funding Sources: Fees & Energy Supplier Assessment Number of FTEs: FTE: 2013: 0.6 2015: 1.2 2017 (projected): 1.1 ORS Authority ORS 315.141, ORS 315.144, and ORS 469B.403 Legislatively-directed Purpose The state s Biomass Producer or Collector tax credit program was established in 2007. The BPC tax credit was introduced as part of a larger biofuels package with the original program administered by the Oregon Department of Revenue. ODOE began administering the program in 2010. 469.010(2)(a) and (b) 469.010 Policy. The Legislative Assembly finds and declares that: (2) It is the goal of Oregon to promote the efficient use of energy resources and to develop permanently sustainable energy resources. The need exists for comprehensive state leadership in energy production, distribution and utilization. It is, therefore, the policy of Oregon: (a) That development and use of a diverse array of permanently sustainable energy resources be encouraged utilizing to the highest degree possible the private sector of our free enterprise system. (b) That through state government example and other effective communications, energy conservation and elimination of wasteful and uneconomical uses of energy and materials be promoted. This conservation must include, but not be limited to, resource recovery and materials recycling. 526.277 Findings. The Legislative Assembly finds and declares that: (6) The policy of this state is to support efforts to build, and place in service, biomass-fueled energy production facilities that utilize biomass collected from forests or derived from other sources such as agricultural crop residue when: (a) The facilities utilize sustainable supplies of biomass from cost-effective sources; (b) The use of woody biomass for energy maintains or enhances the biological productivity of the land, taking into consideration transportation costs, existing forest conditions, management objectives, vegetation growth rates and the need to sustain water quality and fish and wildlife habitat; and (c) The set of forest values to be sustained, in addition to wood and biomass for energy, is considered. Forest values include forest products, water, wildlife and recreation. 1
1. What is the objective of this program or function? Describe the major activities performed under this program. Explain why these functions are still needed. HB 2210 (2007) established Oregon s Renewable Fuel Standards, provided property tax and energy facility siting requirement exemptions for biofuel production facilities, directed state government use of biofuels, and created tax credits for biomass producers, biomass collectors, and consumers of certain types of biofuels. The policy objectives were to grow the biofuels market in Oregon, leverage private sector investment, incent development of the local bio-feedstock production market, reduce GHG emissions, and diversify Oregon s fuel portfolio. The Biomass Producer or Collector Tax Credit (BPC) program encourages the production, collection and utilization of biomass material in the state of Oregon. The program provides energy, economic, and ecological benefits by diverting biomass material from the waste stream into higher value usage. The state of Oregon offers a tax credit per unit of biomass produced or collected in Oregon and used as biofuel or to produce biofuel in Oregon using rates established in statute. In 2009, the Legislature established a certification program for the BPC tax credits that clarified eligibility requirements. Major activities performed under this program include administrative oversight, intake and analysis of applications, and the issuance of tax credit certificates. These functions are needed for the continued administration of the overall program through the current legislative sunset at the end of tax year 2017. Additionally, some functions of the program will be continued past this sunset; tax credits for Animal Manure/Rendering Offal were extended through the end of tax year 2021 during the 2016 Oregon Legislative session. The current program is characterized as a standards-based program intended to offset the production, collection, and transportation costs associated with biomass feedstock. 2. Describe how the program or function is administered. Include flowcharts, timelines, or other illustrations as necessary to describe agency policies and procedures. Applicants may receive a tax credit for collecting or producing certain types of biomass material in Oregon that is delivered for use as feedstock for bioenergy or biofuel production in Oregon. Applications are submitted to ODOE after the applicant has already harvested, converted, processed and/or delivered the material to the end user. ODOE may review the biomass origination, production or collection activities, or the operating activities of the biofuel producer prior to issuing the tax credit. ODOE reviews applications for compliance with statutes and administrative rules to determine the eligibility of the biomass material and the applicant. If ODOE determines the biomass material and applicant are eligible, ODOE will issue a tax credit certificate for the biomass material claimed in the application. ODOE may issue a partial approval of the tax credit that was requested if it determines that only a portion of the biomass or the process is eligible. ODOE will only issue one tax credit per unit of biomass (this ensures that the same unit of biomass isn t claimed by multiple applicants). The applicant must have title to the biomass material at the time the biomass was delivered to a biofuel producer. Unlike other EIP programs, only entities with tax liability are eligible to apply for the biomass producer collector tax credit; this excludes nonprofits, tribes, and public entities. Project owners may use the tax credit themselves or utilize the pass-through or transfer process administered by ODOE to sell the tax credit. Statute directs ODOE to set, by rule, a minimum discount value at which the tax credit may be transferred, which is currently 90%. The transfer process is administered by the Oregon Department of Revenue; ODOE has no role in the transfer of the tax credit. 2
3. Provide a summary of key performance measures and other outcomes that convey the effectiveness and efficiency of this function or program. ODOE has issued more than $29 million in tax credits for the production, collection, and utilization of biomass materials. ODOE has provided tax credits for over 1.4 million tons of woody biomass; over 2.7 million tons of animal manure; over 16.8 million gallons of used cooking oil/waste grease; and over 56,000 tons of vegetative biomass, redirecting those materials from the waste stream for energy creation. These totals do not include credits issued by the Oregon Department of Revenue prior to ODOE administering the program in 2010. ODOE has issued the following tax credits for biomass material: 2010 - $5,770,671 2011 - $6,403,523 2012 - $2,968,803 2013 - $4,792,083 2014 - $5,529,917 2015 - $5,123,216 2014 Biomass Tax Credits by Type Woody Biomass, $1,142,177 Other, $39,781 Used Oil/FOG, $280,583 Animal Manure, 4,067,376 3
Biomass One, LP, $104,080 2014 Tax Credit Recipients Smaller recipients, $786,571 Ankeridge Dairy, $125,402 Quicksilver Contracting Co., $126,167 TMF Biofuels, LLC, $2,533,738 RES-AG, $264,890 T2, Inc., $768,817 Farm Power, $820,253 Biomass, Tax Credits (As of 6/14/16) $5,000,000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- 2010 2011 2012 2013 2014 2015 Animal Manure Used Oil/FOG Woody Biomass Yard Debris Other 4
In 2012, the incentive rate for woody biomass went from green ton to bone dry ton, effectively reducing the tax credit by 50%. The increase in 2013 was the result of a large anaerobic digester coming online in early 2013. In 2015, roughly 30 entities utilized this program. Entities may have more than one location for which they can submit applications; individual locations may submit multiple applications in a year. Applications are denied if ODOE determines during the application review that the applicant, biomass material, process for collecting, producing, or transporting biomass, or the facility that received the biomass material is deemed ineligible per the applicable Oregon Administrative Rules and Oregon Revised Statutes. In general, applications are processed within two to three weeks of the received date. 4. Describe any important history regarding this program, including how the services or functions have changed from the original intent. Describe problems or lawsuits that have been encountered in this program. A tax credit program for biomass production or collection was originally implemented in 2007 and administered by the Oregon Department of Revenue. There was no certification process in place while the program was with Revenue. In 2009, the Oregon Legislature passed HB 2078 transferred the administrative responsibility for biomass producer collector tax credit from the Oregon Department of Revenue to ODOE and established a certification process to receive the tax credit. HB 2078 allowed ODOE to define additional program criteria and determine additional characteristics for biomass, which helped bolster ODOE s certification authority. In subsequent years, a number of legislative changes were made to the program. In 2009, HB 2078 established a certification program for these tax credits through the Department of Energy and clarified eligibility; it also changed the basis for the tax credit rate for woody biomass, effectively reducing it by 50%. Yard debris and food waste were no longer eligible. In 2012, HB 4079 codified in statute that only one tax credit could be provided for each unit of biomass material; and in 2013, canola collected or produced in the Willamette Valley was no longer eligible. Passed in 2016, SB 1507 extended the tax credit sunset for animal manure and rendering offal through the end of tax year 2021. All other eligible feedstocks except animal manure and rendering offal will sunset after tax year 2017. SB 1507 also reduced the tax credit rate for animal manure and rendering offal from $5.00 to $3.5 per wet ton beginning January 1, 2016. In addition, the bill added claw-back provision authority for the BPC program, back to Jan. 1 2007 when the program started. The program has had five lawsuits regarding eligibility of biomass material. Subsequent rulemakings have strengthened the administrative rule language to better clarify what biomass material is eligible and the conditions of eligibility. Litigations with the following companies have been resolved or are still pending: Lane Forest Products, Quicksilver Contracting, Warrenton Fiber, Greenway, and Seneca. 5. Describe who or what this program or function affects. This program serves participants from all corners of the state of Oregon. Many of the applicants in the dairy and agriculture sectors are located in Tillamook and Morrow Counties. Woody biomass material is removed from private and federal forest land across the state, from Clatsop to Malheur County. Used cooking oils and waste grease are mainly collected from densely populated municipal areas. 5
6. If the program or function works with local, regional, other state agencies, or federal agencies, include a brief description of these entities and their relationship to the ODOE program or function. Please identify the roles assigned to each agency. ODOE staff does not work directly with any other agencies regarding the general implementation of this program; however, staff may sometimes reach out to other state agencies for expertise. These include the Oregon Department of Forestry, Oregon Department of Revenue, and Oregon Department of Agriculture. ODOE may also work with federal agencies, such as the USDA or the US Forest Service. ODOE can also serve as a source of information for outside agencies. The US Forest Service has contracted with ODOE to examine ODOE s database of program participants to examine the availability of woody biomass material and the costs associated with transporting this material as part of a study of the feasibility for using woody biomass as an alternative resource for coal burning facilities.. 7. Explain if, and why, each of the key functions is most appropriately placed within ODOE, and how duplication with other related agencies is avoided. ODOE has experience certifying and managing tax credit programs and has bioenergy related expertise in various agency divisions. ODOE specifically focuses on the conversion of biomass as a renewable resource into energy, whereas other agencies indirectly focus on biomass material as a component of forest health or business development. 6