Falmouth Turbine II Officials Ignore Federal Loan Regulations

In the 2013 Barnstable Superior Court civil action number BACV2013-00281

The court considered the affidavit of Town Manager Julian Suso which details the terms of the various financing agreements the Town undertook to construct the turbines and the opinions of related state and federal agencies.

The Massachusetts courts concluded in 2013 that there is a strong risk that a complete turbine shut down could trigger at least two irreparable failures of the long-term financing used by the Town to construct the turbines (i.e. default on the terms of an approximately five million dollar loan/grant from the Massachusetts Water Pollution Abatement Trust aka today known as the Massachusetts Clean Water Trust.

To build Falmouth Wind II the town borrowed 5 million dollars signing a project regulatory agreement with the Massachusetts Clean Water Trust brokered by the Massachusetts Department of Environmental Protection using funds from the 2009 American Recovery and Reinvestment Act.

Falmouth Wind II must remain an energy-efficient project or the 5 million loan must be paid back with interest to the State Revolving Fund.

The courts shut down the turbine in 2017 -Falmouth Select Board and Town Meeting approved 2.5 million to remove the turbines in November 2019

The loan is due 3.5 million plus interest

Letter
MASSACHUSETTS WATER POLLUTION ABATEMENT TRUST
April 2, 2013
Julian M. Suso, Town Manager
Town Hall 59 Town Hall Square
Falmouth, MA 02540

Dear Mr. Suso,

This letter follows up on the telephone call by Commissioner Kenneth Kimmell, of the Department of Environmental Protection ("DEP" , to Julian Suso, the Town Manager of Falmouth, Massachusetts (the "Town") on Friday, March 29, 2013 concerning the Wind Turbine project at the Town's wastewater treatment facility ("Wind II") that was funded with money provided through the American Recovery and Reinvestment Act of 2009 ("ARRA").

As the Commissioner indicated in that call, DEP and the Water Pollution Abatement Trust (the "T1ust") cannot unconditionally approve the Project Completion Certificate submitted by the Town to DEP on March 14, 2013, for Wind 11 if it has reason to believe that Wind 11 may cease operations.

Outside legal counsel has advised that Wind II is subject to specific provisions of ARRA and applicable federal regulations and guidelines ("Federal Law") in addition to the terms and conditions of the Project Regulatory Agreement ("PRA") and the Loan Agreement associated with the funding of Wind 11.

Under Federal Law and the(Massachusetts Department of Environmental Protection) PRA and Loan Agreement, the Town must maintain Wind II as an "energy efficiency" project, as described in EPA guidelines dated March 2, 2009, in order to benefit from the financial subsidy provided by the Trust under ARRA and the Trust's Clean Water State Revolving Fund program.

Under federal regulations governing the Trust's ARRA grant at 40 CRF Part 31.30(d)(l), if the Town chooses to change the scope or objectives for Wind H in any significant manner, the Town will have to request the Trust's prior written approval. If the change is such that Wind II continues to be used in a manner that is consistent with an "energy efficiency" project, the Trust will be able to approve such a change. But if the change would result in Wind II being used in a manner that is not consistent with an "energy efficiency" project (for example either ceasing operations or curtailing them to the extent that Wind 11 operates for only a very limited period of time each day), the Trust will not be able to approve the request and the Town will not be allowed to utilize the ARRA funds with principal forgiveness.

Federal regulations at 40 CFR 31.30(f)(3) states that a grantee, such as the Trust, "will not approve any budget or project revision which is inconsistent with the purpose or terms and conditions of the Federal grant to the grantee." Thus, the Trust's disapproval of such a change is compelled by Federal Law.

Because of the foregoing requirements of Federal Law and actions taken by the Falmouth Board of Selectmen and warrant articles that will be considered by the April 8, 2013 Falmouth Town Meeting, the Trust is requiring that the Town provide it with "further assurances," pursuant to section 20 of the Loan Agreement, as follows:

First, DEP will conduct its normal completion audit in response to the Town's submission of its Project Completion Certificate to DEP;

Second, the Trust will require that the Town enter into an agreement to operate Wind II at a level that permits it to continue to qualify as an "energy efficiency" project in accordance with DEP requirements for the duration of the Loan;

Third, upon the signing of the agreement, the Trust will conditionally forgive principal repayment by waiving the payment of principal and interest under the Note and amending Schedule C to the Loan Agreement accordingly, to be in effect so long as there is no default under the agreement;

Fourth, the agreement will include on—going reporting requirements and auditing procedures with respect to the project to ensure that Wind 11 continues to operate as an energy efficiency project for the duration of the loan; and

Fifth, in the event that the project ceases to function as an energy efficient project, the Trust will amend Schedule C to reinstate the Town's obligation to pay principal and interest on the Loan and take such other actions as it deems necessary or appropriate to ensure compliance with Federal Law, the PRA, and the Loan Agreement.

If you have any questions regarding the foregoing, please call me at (617)367-9333 x816.
Very truly yours,

Susan E. Perez Executive Director MWPAT and
Kenneth Kimmell, Commissioner MassDEP

http://www.falmouthmass.us/DocumentCenter/View/132/Letter-From-Town-Manager-Regarding-Wind-II-Loan-PDF?bidId=