Cascade Kelly Holdings, LLC v. Or. Dep't of Energy

• Decision Date: 16 December 2015
• Docket Number: 10C15088, 10C15089,A152224 (Control), A152225.
• Citation: 365 P.3d 603,275 Or.App. 500
• Parties: CASCADE KELLY HOLDINGS, LLC, Petitioner–Respondent, v. OREGON DEPARTMENT OF ENERGY; and Michael Kaplan, in his official capacity as Acting Director of Oregon Department of Energy, Respondents–Appellants.
• Court: Oregon Court of Appeals

275 Or.App. 500

365 P.3d 603

CASCADE KELLY HOLDINGS, LLC, Petitioner–Respondent,

v.OREGON DEPARTMENT OF ENERGY; and Michael Kaplan, in his official capacity as Acting Director of Oregon Department of Energy, Respondents–Appellants.

10C15088, 10C15089

A152224 (Control), A152225.

Court of Appeals of Oregon.

Argued and Submitted April 17, 2015.

Decided Dec. 16, 2015.

Stephanie L. Striffler, Assistant Attorney General, argued the cause for appellants. With her on the briefs were Mary H. Williams, Deputy Attorney General, Anna M. Joyce, Solicitor General, and Carson L. Whitehead, Assistant Attorney General.

Crystal S. Chase, Portland, argued the cause for respondent. With her on the brief were Per A. Ramfjord and Stoel Rives LLP.

Before ORTEGA, Presiding Judge, and DeVORE, Judge, and GARRETT, Judge.

DeVORE, J.

In these consolidated cases, petitioner Cascade Kelly Holdings filed an action in the Circuit Court of Marion County under ORS 183.490 of the Administrative Procedures Act (APA) and an alternate claim for declaratory relief under ORS 28.010, seeking to compel the Oregon Department of Energy to certify that petitioner is entitled to claim or to sell business energy tax credits pursuant to former ORS 469.215 (2009), for petitioner's ethanol production and transfer facilities.¹ On cross-motions for summary judgment, the circuit court rejected the department's contention that the court lacked authority to grant the requested relief, and granted relief under ORS 183.490, ruling that the department had unreasonably failed to process and accept petitioner's application for final certification of energy tax credits, as required by ORS 469.215. The court ordered the department to issue final certification for more than $8 million in energy tax credits and awarded petitioner attorney fees of $347,157.69 under ORS 183.497 or ORS 182.090. The court dismissed petitioner's alternate claim for a declaratory judgment as moot.

The department appeals, raising several assignments of error. The department has also given notice of probable mootness under ORAP 8.45, as a result of the "sunset" of the business energy tax credit program. As explained below, we conclude that the program's end now precludes the remedy awarded by the trial court and therefore makes the underlying controversy nonjusticiable, and we therefore do not address the merits of the circuit court's ruling. But, because the department also challenges the award of attorney fees, the appeal itself is not moot. We therefore write to address the department's assignment of error regarding attorney fees, and we reverse the award.

At the outset, we provide the statutory and factual context for this dispute. Oregon's business energy tax credit, first enacted by the Legislative Assembly in 1979, was based on a public policy "to encourage the conservation of electricity, petroleum and natural gas by providing tax relief for Oregon facilities that conserve energy resources or meet energy requirements through the use of renewable resources." ORS 469.190. At the relevant time, a business that was engaged in the manufacture or distribution of alternate fuels such as ethanol could apply for certification for energy tax credits, to be determined as a percentage of the certified cost of construction of its facilities. ORS 315.354(3) ; ORS 469.205 ; ORS 469.215. Upon receipt of a final certification for energy tax credits from the department, the tax credits could be applied against the taxpayer's Oregon income tax obligation over a period of years. ORS 315.354. The tax credits could be claimed by the facility's owner or could be sold to a "pass-through partner" in exchange for their present value. ORS 469.205(1)(c)(A) ; ORS 469.206 ; OAR 330–090–0110(45) (defining "pass-through partner" as "[a]n individual, C corporation or S corporation that purchases a tax credit certificate in return for a cash payment equivalent to the net present value of the [business energy tax credit]").

The facilities in this case are known as "Port Westward" and were designed and constructed for the production and loading of ethanol at the Port of St. Helens in Clatskanie, Oregon. The facilities were built between 2006 and 2008 by Cascade Grain Products, LLC. Before it began construction of the facilities, Cascade Grain filed an application with the department and was approved for a "preliminary certificate" for energy tax credits for both facilities. See ORS 469.205 (describing application process for preliminary certification for the energy tax credit). When, in June 2008, the facilities were largely complete and operational, Cascade Grain applied for final certification pursuant to ORS 469.215. Pursuant to the department's administrative rule, OAR 330–090–0130(9)(c), when an applicant desires to sell its tax credits to a pass-through partner, the department does not issue final certification of the tax credits to the facility owner. Rather, the department issues "certified amount letters" authorizing the facility owner to pass through its tax credits. The department issues the tax credits to the pass-through partner after the pass-through partner has paid for the credits and the department has given final approval to the transfer of the credits. Because Cascade Grain intended to sell its tax credits to pass-through partners, Cascade Grain's application was entitled an "Application for Final Certification for Pass–Through Projects." The department issued certified amount letters to Cascade Grain, certifying eligible project costs for the pass-through program of $22,000,000 (with a tax credit value of $11,000,000) for the ethanol production facility and $10,166,668 (with a tax credit value of $5,083,334) for the ethanol distribution facility.² The certified amount letters allowed Cascade Grain to transfer eligible tax credits to pass-through partners in exchange for cash payments of 33.5 percent of the eligible final certified costs, or $7.37 million.

Cascade Grain transferred some of its eligible tax credits for the ethanol production facility to three pass-through partners and, when the transfers were approved, the department issued final tax credit certificates to the pass-through partners. No final certificates were issued for the remaining, potential credits, because no pass-through partners had been identified and no cash payments had been made to Cascade Grain for the remaining $3,250,000 in eligible certified costs on the production facility or the entire eligible certified cost of $5,083,334 on the distribution facility.

In January 2009, Cascade Grain ceased operations and filed for bankruptcy. Cascade Grain's parent company, JH Kelly, acquired the facilities at a bankruptcy auction and transferred them to petitioner on December 23, 2009. At that time, the facilities were in "cold maintenance mode." Because the facilities were damaged from not having been operated for over a year, petitioner could not begin operations until it had hired employees, made repairs, obtained permits, and fulfilled obligations to multiple stakeholders.

After petitioner acquired the facilities on December 23, 2009, petitioner submitted applications for final pass-through certification on December 31, 2009. ORS 469.215(2)(b)(A) (providing that "any person" may apply for final certification "after acquisition of the proposed facility"). Under ORS 469.215(4), "[t]he director [of the department] shall act on an application for certification before the 60th day after the filing of the application[.]"³ Under ORS 469.215(5), if the director rejects an application for final certification,

"the director shall send to the applicant written notice of the action, together with a statement of the findings and reasons therefor, by certified mail, before the 60th day after the filing of the application."

The subsection concludes that the "[f]ailure of the director to act constitutes rejection of the application." ORS 469.215(5).

The department's administrative rules included similar provisions. Under OAR 330–090–0133(1)(a), "[w]ithin 60 days after a completed final certification application is filed," the Director of the department "will either approve or deny the final application."⁴ Similar to ORS 469.215(5), OAR 330–090–0133(2)(a) provides that,

"[i]f the Director does not approve the application, the Director will provide written notice of the action, including a statement of the findings and reasons for the denial by regular and certified mail."

And also similar to ORS 469.215(5), OAR 330–090–0133(2)(c) states that if the Director "does not issue a final certification within 60 days after an application is filed, the application is denied pursuant to

ORS 469.215(4)."⁵

The department took no action on petitioner's applications for final certification. Thus, on March 2, 2010, the 61st day after the filing of the applications, the applications were deemed rejected by operation of ORS 469.215(5).⁶

Within 60 days of the date that its applications were rejected by operation of ORS 469.215(5), petitioner filed this action under ORS 183.490, seeking to "compel [the] agency to act where it has unlawfully refused to act [.]"⁷ Petitioner complained that, under ORS 469.215(2)(b)(B) and ORS 315.354(5), it was entitled as a matter of law to final certification for the remaining tax credits that had not been used by Cascade Grain. Petitioner characterized the department's failure to process its applications as a "refusal to act by not processing the Subject Application in accordance with applicable statutes, regulations, and/or [department] procedure." Petitioner alleged a number of ways in which petitioner asserted that the department had failed to act.⁸ Petitioner asked the court to compel the department to issue final certified amount letters for the remaining final eligible project costs for its production and transfer facilities. As one alternative, petitioner asked the court to order the department to process its applications in accordance with the...