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Maine Lawmakers Say Embattled Biomass Generator Shouldn’t Have Qualified For Taxpayer Subsidy

Jay Field
/
Maine Public
A wood chipper at a Maine biomass plant

Lawmakers scrutinizing a biomass generator’s track record of unpaid bills are now questioning whether the firm even qualified for a slice of a $13.4 million taxpayer bailout that benefited the firm two years ago.

Specifically, the lawmakers say the state’s utility regulator was wrong to award a subsidy contract to Stored Solar LLC, a company supported by Gov. Paul LePage. The company is currently under scrutiny for late or missing payments to loggers and contractors – the intended beneficiaries of the 2016 bailout bill.

Stored Solar purchased two plants in Jonesboro and West Enfield shortly before the Maine Public Utilities Commission (PUC) awarded them a subsidy contract in December of 2016. Neither plant was operating at the time of Stored Solar’s application, and both were shuttered in April and March of that year by the previous owner, Covanta Holding Corp.

According to the 2016 bailout bill, energy plants must be “operating at least at a 50 percent capacity for 60 days prior” to even bid for the subsidy.

The PUC addressed the must-run provision in its decision, but its rationale for awarding the contract is now being challenged by lawmakers following an examination by Maine Public.

Some lawmakers said they were not aware that Stored Solar wasn’t operating its two plants during its contract bid, or of the PUC’s justification for considering the company.

Democratic Sen. Mark Dion, the former co-chairman of the Energy and Utilities Committee, said the must-run provision was added to the bill as a viability and accountability test for plant operators.

“The biomass plant had to be operational, in every intent of the word, for a period of time, in this case 60 days, before they'd even be eligible to apply,” Dion said. “So if monies were awarded to a plant to reopen, that's inconsistent with the language and the intent of that language.”

Rep. Norm Higgins, a former-Republican member of the energy committee who is now an independent, was more emphatic. He was among the group of lawmakers who insisted that the provision was inserted in the 2016 bailout law.

“The PUC failed to apply both the intent and the language of the law,” he said in an email. “I urge the Attorney General to take legal action to hold the PUC accountable for its decision to ignore the law and the will of the legislature.”

Members of the PUC declined to be interviewed. However, Harry Lanphear, administrative director for the agency, said commissioners clearly laid out their justification for awarding the contract. He also noted that its decision was not appealed.

Protections For A Controversial Bill

The state lawmakers who drafted the biomass bailout two years ago knew the proposal was controversial. They also knew the situation was desperate. Hundreds of loggers and truckers who depend on biomass plants to purchase sawdust and wastewood flooded the State House to plead for help. The state’s six biomass plants were on the verge of collapse, unable to compete with much lower electricity prices from gas- and oil-fired plants.

“I’m not pleading for me,” said Steve Hanington, a biomass supplier who choked back tears during a 2016 press event. “I’m pleading for the 46 people who work for me.”

Lawmakers wanted to help, but they were also wary of diverting millions of taxpayer dollars to biomass operators – some owned by private equity firms worth billions of dollars – that might take the subsidy and run.

“From my perception there was some distrust by the committee that certain companies could benefit and wouldn't be investors in the state for the long run,” said Dana Doran, director of the Professional Logging Contractors of Maine, a trade group representing loggers and truckers.

Lawmakers and lobbyists interviewed for this story said there was a particular concern about the two Covanta plants now owned by Stored Solar.

Rep. Higgins, who represents the Dover-Foxcroft region, was worried that he could not gain assurances from Covanta officials that the bailout would prompt them to refire their plants.

“Jobs will be lost because those plants don’t open,” he said from the House floor the day the bill was ratified. “And yet, still today, with this pending legislation, we have no commitment from Covanta that they will bid into this program and access these funds.”

Higgins also brought up the must-run requirement, a provision he described as incentive for operators to keep accepting biomass fuel while proving their viability to qualify for a taxpayer subsidy.

Sen. Dawn Hill, a Democrat from Cape Neddick, said the bailout wasn’t intended for unproven startups.

“First of all, we wanted a company that was fairly stable and just being impacted by the market,” Hill said. “We weren't looking to take a company and rebuild it from the ground up ... we had to have some way of knowing this company was worthy of placing an application and being considered.”

But the PUC did not read the provision the same way. In its order, it largely echoed arguments made by Stored Solar – that the bailout bill was designed to save Maine’s six plants, not just a few of them, regardless of whether they were operational.

“Although not applicable under a plain-meaning interpretation of the statute, legislative history provides further support for the position that the Act was drafted with the intent to include the Stored Solar Facilities,” the PUC’s Administrative Director Harry Lanphear wrote in an email. “Arguments from Legislators concerning the Act made repeated mention of the goal to support the six standalone biomass plants, two of which are the Stored Solar Facilities. In addition, the Legislators were also clearly aware that the Stored Solar Facilities were in the process of discontinuing operations.”

The PUC also said the two shuttered plants qualified for a planned or forced outage exemption from the must-run requirement.

Dion disagreed. He said a forced outage describes a shutdown due to a natural disaster or an inability to produce the energy required – not a plant closed because of financial insolvency.

“That's not an outage. That's a shutdown,” Dion said. “And I don't think there's any confusion from any of us about what those terms mean.”

Unpaid Loggers And Contractors

Stored Solar ran into trouble shortly after winning the subsidy contract from the PUC.

Operations at the two plants last year were well below the company’s projections, which it submitted in its application to the PUC.

Additionally, reports surfaced of unpaid loggers and taxes at its Jonesboro facility.

The Bangor Daily News reported last year that the company at one point owed the town of Jonesboro $90,000 in property tax payments and faced liens on its equipment.

Meanwhile, Doran, with the loggers trade group, estimates that the company owed between $1.5 million and $200,000 to contractors at various times last year.

The unpaid loggers irked lawmakers, who targeted Stored Solar in a highly unusual bill introduced this session. As originally drafted, the proposal effectively terminates Stored Solar’s subsidy contract before it’s reviewed by the PUC. It also called for an investigation by the Office of Attorney General.

Lawmakers on the energy committee are still reviewing the bill, but during the Feb. 8 public hearing, the must-run requirement was raised by Dan Riley, who lobbied on behalf of Covanta in 2016.

“Since you heard today that the plants weren't operating at the time of this competitive solicitation, how did they qualify [under the must-run provision]?” Riley said. “To this day, I can’t figure out how [the provision] qualified those two plants.”

It’s unclear if anyone on the energy committee took up Riley’s suggestion.

Supported by LePage

Gov. LePage has repeatedly criticized the 2016 biomass bailout as a mistake. Last year he falsely claimed that he didn’t sign the bill.

But while the governor has attempted to distance himself from the bailout, he and his administration continue relationships with its beneficiaries – Stored Solar.

The company is co-owned by Fahim Samaha, who lives in France with his wife Kimberly Samaha, the CEO of Synthesis Venture Fund Partners. Fahim Samaha also owns Capergy, which has a mixed track record in biomass projects. The Bangor Daily News reported last year that Capergy invested in Cate Street Capital, the same firm that scuttled its wood pellet manufacturing venture at Great Northern Paper in East Millinocket despite receiving over $40 million in tax breaks and subsidies.

Cate Street’s flameout prompted an investigation by the Portland Press Herald, which revealed how a complex financing scheme enriched investors while the venture sputtered.

Kimberly Samaha also leads Born Global, an affiliate of Stored Solar that is registered as a nonprofit.

Despite Stored Solar’s problem paying loggers, Born Global touted dramatic plans for the two biomass plants to investors during Advanced Bioeconomy Leadership Conference on Next Generation Technologies in events in San Francisco and Washington, D.C. last year.

According to a presentation, the firm’s 30-year plan for West Enfield includes using power plant waste water to grow shrimp – an initiative that won a $500,000 loan from the Maine Rural Development Authority with performance conditions.

It’s also seeking a $5 million taxpayer backed loan to upgrade equipment at the West Enfield facility.

Meanwhile, questions remain about the PUC’s justification for awarding Stored Solar the biomass subsidy contract. The three-member commission is made up entirely of the governor’s appointees. At times, the PUC has been accused of doing the governor’s bidding by interest groups unhappy with its decisions.

A spokesperson for LePage said the must-run provision was never discussed during 2016 meetings between Stored Solar representatives and the governor and staff.

When asked if anyone from the administration discussed it with members of the PUC, the spokeswoman responded, “Not to our knowledge.”

As for Stored Solar, Born Global, and their plans to redevelop the biomass properties, the spokesperson said, “The concept Stored Solar is pursuing is very promising and if ultimately successful could play a role in helping reinvent Maine’s forest economy. The administration is actively pursuing many potential industries that can boost our forest economy, as the recent announcements indicate.”

The company did not respond to a request for comment.

Nevertheless, the PUC is now undertaking a review of the Stored Solar contract to determine how much of the bailout it will receive. The review could be completed this spring.

Journalist Steve Mistler is Maine Public’s chief politics and government correspondent. He is based at the State House.