Ampersand Chowchilla Biomass, LLC v. United States

Ampersand Chowchilla Biomass, LLC v. United States

Opinion

HUGHES, Circuit Judge.

This is a tax case. Ampersand Chowchilla Biomass, LLC and Merced Power, LLC appeal a decision of the Court of Federal Claims denying their request for additional payments of Section 1603 grants under the American Recovery and Reinvestment Act of 2009. Because we agree with the Court of Federal Claims that the relevant power facilities did not meet the requirements of the statute, we affirm.

In 2007, California Biomass Fund I, LLC (CalBio) acquired two defunct facilities and began restoring them and upgrading them to biomass facilities, expecting the facilities to be operational in 2008.

Before CalBio acquired the facilities, Pacific Gas & Electric Company had entered into power-purchase agreements with the facilities' previous [*2]  owner. PG&E had agreed to purchase electricity when (1) the facilities achieved commercial operations and passed initial capacity tests, (2) PG&E received performance-assurance payments, and (3) the facilities received approval from the California Public Utilities Commission. CalBio assumed these power-purchase agreements, and CalBio and PG&E later amended the agreements to loosen their requirements. CalBio and PG&E also entered into interconnection agreements that required the facilities to pass pre-parallel testing, which ensures that the facilities can operate at the same frequency and in the same phase as the transmission grid so that the facilities do not damage the grid.

While renovating in 2007, CalBio secured Authority to Construct permits for the facilities. These permits allowed construction on the facilities and allowed the facilities to generate and sell electricity. The Authority to Construct permits could be converted into Permits to Operate after the facilities met certain conditions, like emissions tests. Biomass facilities, though, often have some difficulty passing environmental tests. So instead of shutting down biomass facilities at the first sign of noncompliance—which [*3]  could lead to agricultural waste being burned in open fields, causing more environmental pollution—the San Joaquin Valley Air Pollution Control District has a Notice of Violation process in which the District fines and oversees noncompliant facilities until they are brought back into compliance.

The Chowchilla and Merced facilities had their "initial fires" in April and July 2008, respectively. CalBio labeled the facilities "in operation" as of May 15, 2008 and August 23, 2008. And the facilities passed pre-parallel testing under the PG&E interconnection agreements on June 17, 2008 and August 24, 2008.

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