W.E. Partners II, LLC v. United States

Beginning in 2010, W.E. Partners II, LLC (WEP II) (plaintiff) constructed and operated an open-loop biomass facility at a chicken-rendering plant in North Carolina. The facility had three boilers that burned forest-product waste and agricultural residue to produce steam. All of the steam was routed through a 495-kilowatt turbine to produce electricity. The turbine also released lower-pressure steam used in the plant to process the chicken. Of the useful energy produced by WEP II’s facility, 2.2 percent was electrical energy, and 97.8 percent was thermal energy. Under the American Recovery and Reinvestment Act of 2009 (the recovery act), an investor in a qualifying renewable-energy facility could apply to the federal government (defendant) for reimbursement of a percentage of the cost basis of the facility instead of receiving a tax credit for the investment. A qualified facility for reimbursement purposes was a facility using open-loop biomass to produce electricity as long as construction on the facility began before 2014. Qualified property within a qualified facility was further defined to include the components necessary for producing electricity from open-loop biomass, including boilers and turbines. In 2012, WEP II applied for reimbursement under the recovery act. WEP II claimed a cost basis of roughly $9 million in the facility and sought 30-percent reimbursement, or $2.7 million. However, the Treasury Department approved reimbursement of roughly $940,000, which represented only the turbine cost and one-third of all other costs, including boiler costs. WEP II sued the government in the Court of Federal Claims, asserting that the government had violated the recovery act by failing to reimburse the full 30 percent of the facility’s cost basis. The government asserted that not all of the property in WEP II’s facility was qualifying property under the recovery act because the National Renewable Energy Laboratory (NREL) had calculated that WEP II’s facility could generate the same amount of electricity with one-third of the heat produced by the facility’s three-boiler system. The parties cross-moved for summary judgment.