Investors in huge California wind farm might end up repaying federal subsidies | McClatchy Washington Bureau

A giant wind farm in California’s southern San Joaquin Valley is blowing gusts through a faraway federal court, with tens of millions of dollars potentially up in the air.

Some of the wind farm’s early investors want more than $200 million in additional subsidies that they say the federal government owes them. Obama administration officials, in turn, argue that the government paid $59 million too much. This week, a judge sharpened the administration’s side of the sword, agreeing that the U.S. can try to retrieve some of the taxpayer dollars paid.

U.S. Court of Federal Claims Judge Thomas C. Wheeler said in a decision Monday that the Treasury Department could counter the claims from investors in the Alta Wind project, the largest wind farm in the United States.

The wind farm investors, Wheeler wrote, “have no guarantee of keeping the amounts that Treasury paid them.” He noted that “a refund always was a possibility given a proper understanding of the issues.” As a result, an upcoming trial will determine who owes money to whom.

Wheeler’s ruling seems an unexpected turn for the Alta Wind Facility, located in the Tehachapi Mountains of Kern County. When some of the Alta Wind investors first started suing in 2013 to get a bigger share of federal money, the possibility that they could be the ones owing $59 million did not appear to be on the table.

Now, unless lawyers settle beforehand, the escalating two-way dispute will be resolved in a trial that is slated to start May 9 and is expected to last three weeks. It will likely be scrutinized by the nation’s big renewable-energy investors, which have included the corporate likes of Google.

“A lot of the parties and major players are probably watching Alta Wind, for any possible spillover effect,” Timothy L. Jacobs, a partner in Hunton & Williams, said Thursday.

Jacobs, who handles similar cases but is not involved in the Alta Wind lawsuit, also noted that the government’s aggressive defense is not a surprise.

“If you go into litigation, you can have a counterclaim filed against you,” Jacobs said. “That has always been understood.”

Attorneys or representatives for the entities involved in the Alta Wind lawsuit could not be reached Wednesday or Thursday.

The Alta Wind complex is composed of hundreds of turbines several thousand feet above sea level. It sells power to Southern California Edison.

Terra-Gen Power developed the various parts of Alta Wind, and then sold them to investors from December 2010 to May 2012. The investors, in turn, leased the facilities back to Terra-Gen as the operator.

The owners of five units, identified as Alta Wind I through V, sought renewable energy grants provided under the American Recovery and Reinvestment Act of 2009.

Under the Democratic-drafted $787 billion stimulus bill, renewable energy developers could receive federal grants equal to 30 percent of the project’s “reasonable and allowable” costs.

From 2009 to 2013, according to a Treasury Department report, at least 9,016 such grants worth at least $18.5 billion were provided. Some, in turn, prompted lawsuits over how the government calculated grant amounts. At least two dozen such suits have been filed in claims court, according to a tally by Hunton & Williams.

“Both wind energy developers and financial investors in good faith undertook massive, multimillion-dollar investments predicated upon the availability of the . . . cash grants,” attorneys for the Alta Wind investors wrote in a brief.

The Alta Wind investors pegged their grant applications to the purchase price from Terra-Gen.

Federal officials, though, instead determined the grants should be pegged to how much it had cost Terra-Gen to develop the project. The Treasury Department subsequently paid out this lesser amount, totaling about $558 million, and investors started suing for the difference.

A subsequent federal appraisal concluded the actual eligible cost basis was even lower than the government first calculated. This prompted a government counterclaim demanding partial repayment, which Wheeler said Monday could proceed despite coming late in the legal proceedings.

“The court’s ultimate resolution of the cost basis issues could be greater than or less than the amount paid by the Treasury,” Wheeler wrote.