JOHN DAY – The city’s deal with Enviro Board Corp. collapsed last week when the company failed to pay $10,000 in earnest money for land at the industrial park.
However, city officials suggested this week that the deal could be resurrected, saying that the impasse seemed to stem from a misunderstanding about state energy tax credits.
On Thursday, March 28, City Manager Peggy Gray announced that the city had terminated its sales agreement with Enviro Board and its local arm, Oregon Machine Leasing LLC, after a conference call with company principal William Peiffer.
The city and Peiffer signed an agreement Jan. 23 spelling out terms for the project, which was first announced in John Day last fall. Peiffer said Enviro Board wanted the land – 7-plus acres at the Grant County Airport Industrial Park – for a plant that would turn wheat straw into low-cost, environmentally friendly construction panels.
In that agreement, Peiffer agreed to pay the earnest money into escrow by Feb. 4.
The city gave Peiffer two extensions in February, and tasked its city attorney with preparing an addendum to the contract to detail a new payment schedule.
The resulting document set a deadline of March 29 for the company to pay the money into escrow. It also called for a $1,000 payment to the city to cover administrative costs related to the delays.
In last week’s call, Peiffer said he couldn’t sign the addendum because of his concerns about the status of the state’s energy tax credit program.
“With that said, as per the terms of the agreement, our agreement with Oregon Machine Leasing LLC has been terminated,” Gray reported.
Contacted by email last Friday, Peiffer first declined comment, but later wrote that his company had received a March 25 Oregon Department of Energy notice indicating changes would be made to the Business Energy Tax Credit (BETC) program.
“Adverse changes to BETC would create an otherwise unforeseen $3.5 million dollar shortfall in Enviro Board’s finance model,” he said. He said the department had not detailed the changes or the dates for their finalization, and that “Enviro Board’s most responsible position to its shareholders” is to put the project on hold until the impacts can be evaluated.
However, Department of Energy officials told the Eagle this week that Peiffer has not contacted them about any concerns or participated in recent rulemaking discussions.
They also confirmed that the rule changes have been in the works since last fall.
Prompting the state action is the sunset of the BETC program, which the 2011 Legislature replaced with a new set of energy incentives. The Department of Energy said the intent is to clarify how the department will fulfill its obligations to BETC participants as the program ends.
One revision, defining “use” of the tax credits, was approved as a temporary rule last November to help applicants facing a Jan. 1 2013 sunset date make plans for their credit transfers.
Two other rules would set deadlines and expand the transfer process for applicants who have a later sunset date – June 30, 2014 – for project completion and approval, a group that includes Peiffer’s project.
The rules were the subject of a meeting in February; the Energy Department sent an email Jan. 25 to a BETC mail list containing some 2,900 addresses. That message outlined the proposed changes, announced the meeting, and provided a link to more information on the rules.
The next meeting, to take comment and finalize the rules, will be held April 25 in Salem.
Maureen Bock, the department’s energy incentives manager, said the rules are largely intended to formalize what already had become accepted practice, “the way we’ve been doing business.”
She also said she would be surprised if the new rules stopped any projects already in the pipeline. It’s possible that a project might fail to meet its completion deadline, she said, “but it won’t be because of the rulemaking.”
Oregon Machine Leasing gained preliminary approval for a $3.5 million tax credit in July 2011. It originally was certified under its former name, Oregon Plant LLC, which was formed to build its factory in the Willamette Valley community of Lebanon, before the company shifted its sights to John Day.
In June 2012, the Department of Energy extended the company’s project completion deadline to June 30, 2014.
To claim its tax credit, the company must complete its project and then go through a final approval process, which takes about 60 days. If the project is approved, the Department of Energy would issue the tax credit at that time.
City officials, meanwhile, feel Peiffer’s concerns stem from a misunderstanding about the BETC rules. Mayor Ron Lundbom said Gray contacted the Department of Energy for more information, and was assured that the new rules shouldn’t hamper Peiffer’s project.
On Monday, Lundbom, Gray and city attorney Jeremy Green called Peiffer again to pass on that information. They also gave him a chance to resurrect the project.
“If it’s just a BETC misunderstanding, Jeremy told him he should have no problem signing the addendum and paying the earnest money,’” Lundbom said.
He said Peiffer still was inclined to wait for the April 25 BETC hearing before making a commitment, but he agreed to have someone contact the state agency to discuss any impacts on his project.
“We anticipate a call back after that conversation,” Lundbom said. However, he added the agreement won’t be revived unless the city receives a check for the earnest money and city costs.
Lundbom said he was disheartened and angry after the call last week that triggered the contract termination. He recalled a conversation with Peiffer last year at the airport, when he pressed him about his intentions.
“I told him a lot of people are going to be counting on this,” the mayor said. “He assured me he was serious.”
This week, “he assured us he still wants to be in John Day,” Lundbom said.
In an email to the Eagle, Peiffer said “Enviro Board has made no decision to leave John Day, and a new agreement may be entered into once DOE has articulated final definitive changes to BETC.”Read more on bluemountaineagle.com.