Skip to main content

Cape Wind: Justice Department Urges Swift Lawsuit Resolution Before Tax Breaks Expire

[node:summary]Cape Wind could lose tax advantages that expire at the end of this year if lawsuits aren't resolved soon, U.S. Justice Department says.

Lawyers from the Department of Justice have urged a federal district court to speed up its review of pending lawsuits against a proposed massive wind energy installation in the center of Nantucket Sound so that the project can take advantage of federal tax credits that are set to expire at the end of the year.

Cape Wind, the contested turbine project proposed off the coast of Cape Cod, Massachusetts, has warded off a series of lawsuits during the 12-year pre-construction governmental regulatory phase since it was first announced in 2001. The proposal entails installing 130 wind turbines, each 440 feet in height, covering an area of Nantucket Sound the size of Manhattan, with a 10-story transformer substation holding 40,000 gallons of oil in its center.

But pending lawsuits by the Wampanoag Tribe of Gayhead (Aquinnah), the nonprofit environmental organization Alliance to Protect Nantucket Sound and other opponents could deal the project a final blow, according to the Boston Business Journal.

President Barack Obama’s administration has touted Cape Wind as America’s first offshore wind energy project. In court on April 10, U.S. Department of Justice lawyers said the pending lawsuits need to be resolved before the end of the year so that construction can begin before December 31 in order for the project to take advantage of the federal Production Tax Credit or the Investment Tax Credit, which are set to expire at the end of this year. A few days after the court hearing, the Alliance to Save Nantucket Sound asked the federal government to launch a probe of the Cape Wind proposal that would include a cost-benefit analysis, a study of the project’s potential impacts on tribal rights, an environmental review, and an investigation into whether federal and state approvals have been politically influenced.

The project also must secure more than $2 billion in financing. Cape Wind President Jim Gordon has admitted that the uncertainty caused by the pending lawsuits have created a major obstacle in finding financing for the project, the Boston Business Journal reported. Four lawsuits are pending in Washington district court, filed by the Public Employees for Environmental Responsibility, the Town of Barnstable, the Alliance and the Wampanoag Tribe of Gayhead against the U.S. Department of the Interior, U.S. Fish and Wildlife, the Army Corps of Engineers and the U.S. Coast Guard. A separate lawsuit filed by the Alliance and the Town of Barnstable is pending in the U.S. Court of Appeals to overturn a Federal Aviation Administration decision that was favorable to Cape Wind.

Graphic and information: Courtesy Alliance to Protect Nantucket Sound of Save Our Sound

Groups opposed to Cape Wind in Nantucket Sound predict that far from being cost-effective, the project will actually be three times pricier to obtain electricity from the 130-turbine project as it is from conventional fossil fuels.

Gordon isn’t just worried about the tax credits’ expiration, the Boston Business Journal reported. More delays could also boost construction and borrowing costs, making financing even more difficult to procure. Congress has extended the wind energy tax credits a number of times, including the recent one-year extension that is set to expire on December 31. Dennis Duffy, a vice president at Cape Wind, said the austerity-minded political climate in Washington could halt further extensions. 

“You never know in difficult budget times what’s going to happen,” he told the business journal. “That’s why it’s important to act quickly when we know the tax credit is available.”

Scroll to Continue

Read More

Six days after the Department of Justice lawyers appeared in district court in Washington, Audra Parker, the president and CEO of the Alliance to Save Nantucket Sound, testified before the House Committee on Science, Space and Technology about Cape Wind’s significant potential negative impacts on the region and beyond.

“The project would not only devastate the seascape, the rich history, sacred tribal lands and the very essence of the vibrant tourist industry on the Cape and Islands, but would also pose threats to the environment, put public safety at risk and burden both ratepayers and taxpayers with excessive costs,” she told the committee.

The Alliance to Save Nantucket Sound acts as an umbrella group for dozens of elected officials, towns, tourism and business organizations, environmental groups, fishermen, aviation and boating organizations, residents, and the Mashpee Wampanoag Tribe on Cape Cod and the Wampanoag Tribe of Gayhead on Martha’s Vineyard that oppose the development of Cape Wind in the waters off Cape Cod.

The Wampanoag Tribe of Gayhead filed its lawsuit against various federal agencies in 2011, citing multiple violations of the National Environmental Policy Act, the National Historic Preservation Act, and the Administrative Procedure Act. (Related: Aquinnah Wampanoag Sues Feds Over Cape Wind)

Cape Wind has been working with Barclays to line up debt financing and equity investors, the Boston Business Journal reported. In March, Cape Wind announced it was working with the Bank of Tokyo-Mitsubishi to help arrange the project’s commercial debt. Cape Wind is also seeking a federal loan guarantee to make the project’s debt less risky to financiers.

But opponents question the wisdom of using taxpayer-funded federal loans to support Cape Wind following the failed, publicly funded Solyndra solar energy project, which cost taxpayers $535 million. (Related: Prospects for Tribal Renewable Projects Are Dimming)

Last June, Rep. Cliff Stearns (R-FL), chairman of the House Energy and Commerce Committee’s Subcommittee on Oversight and Investigations and the congressman who led an investigation of Solyndra, called for an investigation of the Cape Wind proposal. He cited e-mails indicating that Federal Aviation Administration officials may have been subject to political pressure from the Obama Administration to approve the project and ignored expert opinions that the turbines’ spinning blades would interfere with radar and endanger aircraft. (Related: Congressman Who Probed Solyndra Calls for Cape Wind Investigation)

In addition to requesting a probe into political influence and other factors, Parker has also asked that no action be taken on loan guarantees or investment tax credits until the review, which would be undertaken by the federal Government Accountability Office, is complete.

“It should also assess if the federal agencies involved in decision making had predetermined the outcome of the review and applied overly lenient standards for review and action based on a policy goal favoring the expedited development of renewable energy,” Parker said. “Approval of this controversial and problematic proposal would be a terrible legacy.”