Oregon directly investing state funds in clean energy sector

BYLINE: Libby Tucker

Now's the time to buy into the energy sector, investors say, and Oregon is among the first states to wholeheartedly heed the call. Along with California, New York and Pennsylvania, Oregon is one of four states to directly invest state funds in the still-emerging and volatile clean energy sector, which can sometimes swing dramatically in value with the price of oil. "There's a financial commitment from my office to look at long-term (clean energy) investments for the state of Oregon," said Randall Edwards, Oregon state treasurer. The investments will help spur Oregon's economy through development of the state's energy industry as well as help protect natural resources, Edwards said.

Under Edwards' guidance, the Oregon Investment Fund has so far invested $50 million in state pension dollars to alternative energy venture funds, First Reserve XI and Nth Power. The Oregon Investment Council also recently put $300 million to work in an energy investment fund in which 15 percent is dedicated to alternative energy holdings. Edwards has plans to further invest state funds in energy technology and initiatives through partnerships with neighboring states. "My ideal would be that we would co-invest (with Washington state) in a fund for the Northwest that would be a half a billion dollars," Edwards said. "We, Oregon, have already started moving down that path and I think there's an opportunity there to reach across the river. "

Investors show caution But as the price of oil reached its lowest point since February this week, investors remain practical about prematurely pouring money into the sector. Prudent investors have started to pull out of their short term energy investments, said Jason Norris, senior vice president with Ferguson Wellman Capital Management in Portland. "Over the last few years (energy stocks) have been good investments," Norris said. "We've been very positive, but recently we've reduced that exposure. " The main risk investors face in the energy sector is the price of the commodity, which is based on the supply and demand and can fluctuate due to geopolitical events and natural disasters. The state treasurer is betting that oil prices will continue to climb over the long term and that its energy investments will eventually reap large benefits in the state's energy independence. "There are risks," Edwards said. "And I guess I can say I'm talking about making good, calculated risk investments. We do that all the time. " Likewise, Oregon business leaders and environmental organizations have united with the state agencies in support of the state's proposed clean energy policies and investment strategy. "In Oregon you're seeing more and more of a real commitment" to clean energy, said Jeff Bissonnette, organizing director of the Citizens' Utility Board of Oregon. "There's a recognition and a realization that we have been the leader in (clean energy) nationwide and in order to maintain that position we need to ... drive that investment and collectively put our money where our mouth is. " Governor Ted Kulongoski last week announced his four-part legislative agenda for promoting clean energy development in the state in 2007. The agenda charts a 20-year course for the state that includes expanding the residential energy solar tax credit to homebuilders; promoting renewable energy portfolio standards that will require 25 percent of Oregon's energy use come from renewable sources by 2025; increasing the Oregon business energy tax credit from 35 to 50 percent and the eligible cost from $10 million to $20 million per project. The state is also considering creating incentives for biodiesel and ethanol markets, similar to the city of Portland's renewable fuel standard, that would require all fuel consumption in Oregon to have some minimum threshold of biofuels in the fuel supply. Direct energy investments by the state complement the legislative agenda, Edwards said. "In order to be successful we have to have the capitalization and investments to promote this energy segment of the economy," he said, "and also to show the public that there's an opportunity for them to take advantage of this as well. "