WestRock Virginia Corporation owns and operates a paper mill in Covington, Virginia.  In 2011, WestRock built an open-loop biomass facility, and the construction included retrofitting one of its pre-existing boilers to provide steam to a steam turbine generator to create electricity. WestRock also used the biomass facility to create steam, a portion of which is used in its paper mill. On February 17, 2009 President Obama signed into law the American Recovery and Reinvestment Act, which created “a temporary program that offered a cash payment in lieu of a tax credit to certain qualified investments in clean energy property.”

WestRock sought but the Treasury Department refused to reimburse WestRock for certain costs incurred to place into service its open-loop biomass facility under Section 1603 of the American Recovery Act. WestRock sued in the U.S. Court of Federal Claims, seeking $39 million in additional grant funds.

The parties cross-moved for partial summary judgment on liability. The Court first concluded that only electricity production, but not steam production, was a qualifying activity under Section 1603. The Court construed Section 1603 to require WestRock to allocate its cost basis between electricity production and steam production. On this issue the Court concluded that WestRock had not met its burden to put forward a reasonable allocation of cost basis for its open-loop biomass facility.  The Court therefore denied WestRock’s motion for partial summary judgment, and granted the Government’s motion.

Because the parties had also completed extensive fact and expert discovery, and several rounds of briefing and supplemental briefing on WestRock’s cost allocation methodology, the Court stated that no additional discovery or trial would produce evidence regarding a reasonable allocation of WestRock’s eligible cost basis.  Therefore, the Court also dismissed WestRock’s Complaint.

Read Judge Griggsby’s Opinion here.