2021: The Year of the Ohio Air Quality Development Authority?

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Dickinson Wright

If you’ve been involved with an energy project in Ohio any time in the last several decades, you may well already be familiar with the Ohio Air Quality Development Authority (OAQDA), which marks its 50th anniversary this year.[1] But for two important reasons, the OAQDA may become a lot more prominent over the next year.

The OAQDA was established in 1971 under Ohio Revised Code (R.C.) Chapter 3706 to help the state meet the requirements of the recently enacted federal Clean Air Act. The core mission of the agency was to act as a conduit issuer of bonds for “air quality facilities” that reduce or prevent air pollution. Under R.C. 3706.041,[2] the qualifying facilities are then exempted from state and local sales and use tax on tangible personal property as well as real property tax for the life of the bond. OAQDA currently administers this financing and tax abatement mechanism under its “Clean Air Improvement Program” (CAIP). It also offers grants for small businesses to help cover eligible costs for air quality projects through its Clean Air Resource Center.

OAQDA has used its conduit bond financing authority successfully over the years to support millions of dollars of investments in Ohio. But 2021 may be its biggest year yet, for two main reasons:

  • Utility-scale renewables: OAQDA has historically financed small-scale renewables projects, generally located at a business’ premises. However, 2020 marked the first time that OAQDA accepted an application to issue bonds for a “utility-scale” renewables project, generating megawatts of clean electricity for the wholesale market rather than for on-site use at a single property.[3] This new option has gained the attention of utility-scale renewables developers since the wholesale electricity market regulator for Ohio, PJM, recently recognized that OAQDA tax abatements would not likely trigger restrictions on a project’s participation in the wholesale capacity market under its Minimum Offer Price Rule (MOPR).[4] By contrast, PJM has indicated that it will apply the MOPR’s restrictions to clean energy projects receiving a tax abatement available through Ohio’s separate Payment in Lieu of Taxes mechanism. Although proposed changes to the MOPR policy may make this distinction less important over the long term, for the moment the OAQDA CAIP represents a potential avenue for avoiding this regulatory restriction on wholesale market participation.
  • Electric vehicle charging: The broad statutory definition of “air quality facility” gives OAQDA significant flexibility to support new technologies entering the marketplace that can produce air quality improvements. That expressly includes electric vehicle (EV) chargers and related infrastructure, which may qualify as “[a]ny property, device, or equipment related to the recharging or refueling of vehicles that promotes the reduction of emissions of air contaminants into the ambient air through the use of an alternative fuel . . . or the use of a renewable energy resource” under R.C. 3706.01(G)(11).[5] With the price point of EVs coming down and the momentum for EV adoption increasing as a way to reduce greenhouse gas emissions, deployment of EV charging equipment is starting to pick up speed in Ohio. OAQDA’s program may offer a route to accelerate that progress even further, especially if an applicant is eligible for the agency’s small business grants.[6]

OAQDA has been a somewhat quiet workhorse supporting clean air investments in Ohio for several decades. But as energy technologies and markets evolve, the financing and tax benefits offered through the Clean Air Improvement Program may become useful to an even broader range of projects.

[1] https://ohioairquality.ohio.gov

[2] https://codes.ohio.gov/ohio-revised-code/section-3706.041

[3]https://ohioairquality.ohio.gov/Portals/0/OAQDA%20Approves%20%24150%20Million%20To%20Support%20Solar%20and%20Clean%20Air%20Projects%20_1.pdf

[4] https://www.pjm.com/-/media/markets-ops/rpm/rpm-auction-info/non-binding-mopr-subsidy-opinions.ashx. Although this is not a formal, binding determination, it is the result of a binding decision from the Federal Energy Regulatory Commission in Docket No. EL21-35-000 that held a similar Virginia program did not qualify as a “state subsidy” triggering the MOPR.

[5] https://codes.ohio.gov/ohio-revised-code/section-3706.01

[6] https://ohioairquality.ohio.gov/Our-Services/Small-Business-Assistance

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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