CORRECTION: The below story incorrectly stated that Barbara McCall, one of the plaintiffs in the suit, is a candidate for Cape May County surrogate. Beverly McCall is a surrogate candidate and is not a party to the suit.
COURT HOUSE – The State of New Jersey, Ocean Wind LLC, and Ørsted North America Inc. were named as defendants in a legal action challenging tax credit subsidies that the state granted to Ocean Wind LLC as part of its offshore wind initiative.
The litigation was brought, July 27, by two not-for-profit groups, Protect Our Coast NJ and Defend Brigantine Beach Inc., along with three Ocean City electricity customers.
The complaint argues that Ørsted received New Jersey Board of Public Utilities (NJBPU) approval for its Ocean Wind I project only after representing that it would return the tax credits to ratepayers “so as to limit the impact of Ocean Wind I on the ratepayer,” adding the bill granting the tax credits to Ørsted “protects Ørsted from such prior commitments.”
The complaint further argues that the state action benefitting Ørsted’s Ocean Wind I project is unconstitutional given that it represents “special” legislation intended to benefit a single entity. The complaint maintains that the state constitution bars such actions that benefit only one party.
While the state Legislature was acting on the bill allowing Ørsted to retain the federal tax credits, there was also a warning issued by the New Jersey Rate Council (NJRC), a state office representing the interest of utility customers. In a letter, the NJRC said, “There should be no doubt that this bill will increase the amount the developer earns on this project and will result in higher OREC prices being paid by ratepayers.”
OREC is the Offshore Wind Renewable Energy Certificate, which, when not offset by the federal tax credits, will add to the rates state electricity customers will pay.
Almost immediately following the granting of tax credits to Ørsted, another New Jersey wind farm developer began asking for similar treatment. Atlantic Shores is now representing that its project and the jobs it would create are “at risk” if it does not receive government assistance. Gov. Phil Murphy said he is “open-minded” with respect to the Atlantic Shores request.
The legislation granting the tax credits to Ørsted justifies the action by referencing a laundry list of factors. These factors, it claims, altered the financial context that existed when Ørsted first represented to the NJBPU in 2019 that it would return the tax credits to ratepayers. The bill speaks of the disruptions caused by the Covid pandemic, the historic levels of inflation in 2021 and 2022, and even the Russian invasion of Ukraine.
Opponents of the tax credit “giveaway” argue that Ørsted agreed to take on the business risks associated with the project when it sought the NJBPU award and the company should not expect a bailout now.
Part of what is happening is a competition among states for onshore manufacturing facilities, like the facility at the Port of Paulsboro. A report from the Sweeney Center at Rowan University argued that New Jersey was losing ground to nearby states in the race to become the manufacturing center for offshore wind development. A Sweeney Center press release stated that New Jersey was in danger of “being left behind in the competition for offshore wind jobs and economic growth.”
In a press release, Protect Our Coast NJ called the action by the state “poor public policy at its best.” The organization suggested that the state has put its $47 billion tourist economy at risk “without any benefit to the environment.” The group cites the likelihood that the offshore wind initiative will “damage our environment” and “hurt sea life,” while “increasing ratepayers’ cost for electricity.”
The two nonprofits bringing this action against the state and Ørsted are already in court challenging the state Department of Environmental Protection’s ruling that the wind farm construction is consistent with the state’s coastal zone regulations. In that litigation, they are joined by a third nonprofit, Save LBI.
Contact the author, Vince Conti, at vconti@cmcherald.com.
