Rough & Ready’s Phillippi defends state BETC program
From our weekly issue dated December 02, 2009
The co-generation facility at Rough & Ready Lumber Co. (Illinois Valley News file photo )
Oregon’s Business Energy Tax Credit (BETC) program has come under increased scrutiny due to “unanticipated” cost overruns, but some maintain that it has proven successful in efforts to encourage renewable energy projects.
Supporters of BETC include Link Phillippi, president of Rough & Ready Lumber Co., of Cave Junction.
A recent investigation by The Oregonian newspaper revealed that state officials deliberately underestimated the cost of the BETC program when presenting it to legislators. Some of the costs included tax breaks and subsidies given to companies that later went out of business.
But Phillippi said that the BETC program was instrumental in helping his business build its multimillion dollar co-generation plant. The facility produces renewable power while drying lumber using forest biomass and wood waste.
“Originally, the payback analysis on the plant was probably too long to make the investment,” Phillippi said. “But with BETC, that lowered the payback to a reasonable timeframe.”
Introduction of the BETC program coincided with Rough & Ready’s need to increase its boiler size to produce more steam and dry more lumber. Phillippi found out about the tax incentives, federal grants and other programs aimed at encouraging investments in renewable energy.
“There were a lot of incentives to help the plant get constructed, and we took advantage of them,” Phillippi said. “Without BETC, we wouldn’t have been able to build our plant. It was critical to have it in place in order for small businesses like ours to make that investment.”
Rough & Ready opened its co-generation plant in February 2008. And even though the lumber market has been soft during the past couple of years due to the housing crisis, Phillippi said that the plant is running well.
He noted the main upsides of the plant include renewable energy production and enhanced forest health through the removal of woody debris. It also has prompted visits from such notables as U.S. Rep. Greg Walden (R-Hood River).
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“The plant has gotten quite a lot of recognition throughout the state,” Phillippi said. “It was a tremendous benefit to Rough & Ready.”
Despite all the positive aspects, it hasn’t been all smooth sailing for the company. Rough & Ready currently is in litigation against PacifiCorp due to cost and time overruns.
Phillippi said that it was expected that the plant would be linked into PacifiCorp’s grid on Nov. 15, 2007, but the three-month delay cost Rough & Ready considerable sums of revenue.
“The cost overruns and schedule overruns created a significant dollar amount that hurt our business,” he said. “Our out-of-pocket costs for the project cost us over and above what we budgeted and where we thought we’d be.”
However, he said that if he had to do it again, he still would opt to build the plant and utilize programs such as BETC to help finance it.
“The litigation with PacifiCorp has nothing to do with BETC paybacks or anything,” said Phillippi. “We have no regrets for building the plant. It’s been a good thing for us. It’s a good thing for the valley.
“There are tremendous benefits from building it that I think most people can agree on,” he concluded.
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