A Lawsuit

A Lawsuit

September 15, 2010

A lawsuit will test whether power projects that are awarded federal tax credits become subject to the National Environmental Policy Act.

Such projects could have to get time-consuming environmental impact statements. The case could also affect renewable energy projects that receive Treasury cash grants.

However, the environmental group that filed the suit lost another round in late July.

The suit was filed after the IRS awarded $1 billion in investment tax credits in November 2006 to developers of nine projects that planned to use gasification and other advanced technologies to generate electricity or produce other forms of energy for industrial use from coal. Section 48A of the US tax code authorizes a 20% investment tax credit for building new integrated-gasification combined-cycle power plants and a 15% investment credit for using other advanced technologies to burn coal. However, the credits were limited at the time to $1.6 billion. Developers had to apply to the US Department of Energy and the Internal Revenue Service for an allocation.

Appalachian Voices is arguing in the suit that the decision to award tax credits is a “federal action” requiring recipients to comply with the National Environmental Policy Act.

The Department of Energy and IRS disagree.

The environmental group originally asked a federal district court in Washington for a preliminary injunction to deny the recipients use of the tax credits until the case could be heard. The court declined in 2008, saying that the group had not shown any “particularized connection to the sites” that were distant from the Appalachian region. The group re-filed its argument focusing on the one project that is nearby, an upgrade that Duke Energy plans to its Cliffside power plant in North Carolina. The utility was awarded $125 million in tax credits.

The court declined again in late July to issue a preliminary injunction. It said the Duke project will not be completed until 2012. Courts do not issue preliminary injunctions unless there is a risk of irreparable harm to one of the litigants before the merits of the case can be heard. The court said there is plenty of time to decide the case before the project is completed.

The case is Appalachian Voices v. Chu.

Keith Martin