Oregon Taxpayers Left Holding Bag After State’s Failed ‘Investments’

Published May 19, 2011

Oregon lawmakers provided Blue Heron Paper Company in Oregon City with $13.75 million in loans and tax credits, but the intended long-term investment lasted a mere seven years.

The company shut down in April.

Todd Wynn, vice president of the Portland-based Cascade Policy Institute, has been following the Blue Heron case for several years. He said it’s a prime example of what happens when government gets involved in private businesses.

“You have politicians giving incentives to preferred industries,” Wynn said. “Some bureaucrat decides this [Blue Heron] is the future. They shouldn’t be making investments in private companies — private investors should do that.”

‘Green’ Industry Promise
In 2005, owners of the paper mill, which produced newsprint and recycled paper products, wanted to expand its recycling operations and reduce its energy consumption. State officials saw it as an opportunity to promote a green industry and preserve jobs, and they stepped in to provide funding backed by taxpayers and electricity consumers.

Glenn Montgomery, sustainable business liaison at the Oregon Department of Economic and Community Development, said at the time, “Assisting companies like Blue Heron Paper to be more sustainable will ensure Oregon’s long-term economic prosperity.”
“This project will promote economic development, save energy and save jobs,” said Michael Grainey, director of the Oregon Department of Energy, in 2005.

Of the nearly $14 million the state spent, the Department of Energy provided $3.85 million in business energy tax credits and $5.4 million came from Energy Trust, which is funded by Oregon electricity ratepayers.

‘Green’ Industry Failure
The state’s investments were not enough to keep the plant afloat and in December 2009 the company filed for bankruptcy protection. This spring, Blue Heron closed with little warning, leaving its 175 employees scrambling to find other jobs. Plant officials cited the rising cost of paper scrap, driven higher by foreign competition, as the reason for the plant closing.

Wynn says the Blue Heron failure is one of many examples of the Oregon government rushing to make a green energy investment without doing proper research. Another example of a failed investment he cites is the state’s 2008 loan of $20 million to Cascade Grain Products, LLC, an ethanol producer. Seven months later the ethanol plant was shuttered and the company owners filed for bankruptcy.

Wynn said lawmakers have been silent on the state’s failed investment in Blue Heron, and the minimal media coverage has focused on the job losses, not the cost to taxpayers.

“The government must learn from past mistakes and not cherry-pick which businesses get tax incentives. Taxes should be lowered across the board and for everyone, individuals and businesses,” he said.

Nick Baker ([email protected]) writes from Washington, DC.