## Facts

- W.E. Partners II, LLC owned an open-loop biomass facility located at a poultry-rendering plant in North Carolina.
- The facility burned forest-product waste and agricultural residues in three boilers to create steam that both (a) drove a 495-kW turbine generator and (b) supplied process steam to the rendering plant.
- Under § 1603 of the American Recovery and Reinvestment Act of 2009, Treasury pays cash grants in lieu of certain energy tax credits equal to 30% of the “basis” of qualifying renewable-energy property.
- W.E. Partners applied for a § 1603 grant in 2012, claiming an approximately $9 million cost basis and seeking about $2.7 million.
- Treasury awarded about $940,000, treating the turbine/generator as qualifying property but limiting boiler/steam-system costs to roughly one-third.
- Treasury relied on an engineering analysis indicating the turbine’s electrical output could be achieved with about one-third of the installed boiler heat capacity; it characterized the remaining capacity as serving non-qualifying process-heat needs.
- W.E. Partners sued under 28 U.S.C. § 1491, asserting Treasury’s reduction violated § 1603; the parties filed cross-motions for summary judgment on what portion of the facility’s basis qualified.

## Issues

1. Whether § 1603 permits a cash grant based on the entire cost basis of an open-loop biomass facility that produces both electricity and process steam.
2. Whether Treasury may limit qualifying “energy property” to equipment and capacity “used to produce electricity,” excluding costs attributable to process-heat functions.
3. Whether a proportional, engineering-based allocation of mixed-use equipment costs is permissible under § 1603 and the cross-referenced Internal Revenue Code provisions.

## Decision

- The Court of Federal Claims granted in part and denied in part the parties’ cross-motions for summary judgment.
- The court held § 1603 reimburses an open-loop biomass facility only to the extent the property is used to produce electricity, not for all facility property merely because electricity is produced.
- The court upheld Treasury’s functional distinction between electricity-producing property and property whose primary function is providing process steam.
- The court accepted pro rata allocation as a lawful method where equipment serves both qualifying and non-qualifying functions, and approved using engineering evidence to determine the qualifying share.
- W.E. Partners was entitled to a grant for the turbine/generator and a proportionate share of boiler/steam-system and ancillary equipment reasonably necessary for electricity generation, but not for the entire plant.

## Legal Principles

- Section 1603 grant eligibility and amount depend on whether the property meets the cross-referenced “energy property” definition tied to equipment used to produce electricity.
- In mixed-output facilities (electricity and process heat), qualifying costs may be limited to the portion of integrated equipment and capacity that supports electricity production.
- Equipment capacity primarily installed for non-electricity functions (e.g., industrial process steam) may be excluded from the § 1603 basis even if the system is physically integrated with a turbine.
- Proportional allocation of basis between qualifying and non-qualifying uses is permissible when supported by technical evidence showing what capacity is reasonably necessary to produce the claimed electricity output.
- A facility’s general eligibility for § 1603 does not compel inclusion of all installed equipment in the grant basis; the statutory “used to produce electricity” limitation governs scope.

## Conclusion

The court held that § 1603 grants for open-loop biomass projects extend only to the electricity-producing components and the reasonable portion of shared equipment needed for electricity generation, allowing Treasury to exclude boiler capacity attributable to process-heat use and to allocate costs based on engineering evidence.


W.E. Partners II, LLC v. United States, 119 Fed. Cl. 684 (Fed. Cl. 2015)