Gusc Energy, Inc. v. United States, 129 Fed. Cl. 118

GUSC Energy owns and operates an open-loop biomass cogeneration plant at Griffiss Business and Technology Park that produces steam for district heating and electricity via a back-pressure steam turbine.
GUSC sought a Section 1603 ARRA cash grant (30% of cost basis) claiming $18,230,094 in qualified property costs; Treasury awarded $316,609 after allocating only 6.6% to electricity and applying a sequestration reduction.
The Government counterclaimed for full recapture, alleging the plant had permanently ceased electricity production after extended idling beginning May 2014.
At trial, Plaintiff presented no activity-based allocation; Government expert (Markell) proposed an "efficiency" activity-based allocation (15.24% electricity-equivalent); Plaintiff’s expert argued all claimed costs qualified.
The Court applied the three-step W.E. Partners framework: (1) facility qualifies; (2) claimed costs are for qualified property; (3) costs must be allocated between qualifying (electricity) and non-qualifying (steam heat) activities.
Court awarded damages based on Markell’s 15.24% efficiency allocation (eligible basis $2,778,266 → 30% = $833,480 minus 7.2% sequestration = $773,469), awarding GUSC the difference from Treasury’s payment: $456,860; Government’s recapture claim dismissed (no permanent cessation).

Issue	Plaintiff's Argument	Defendant's Argument	Held
Proper basis for Section 1603 grant allocation between electricity (qualifying) and steam heat (non-qualifying)	All costs of qualified property are includable because the plant’s property is integral to electricity generation (no activity-based allocation needed)	Allocation required; Treasury’s 6.6% allocation was correct	Court rejected Plaintiff’s property-only approach; adopted an activity-based allocation and used Gov’t expert Markell’s efficiency method (15.24%) to compute eligible basis
Whether extended idling constitutes "permanent cessation" warranting recapture of the grant	Idling was temporary; GUSC maintained plant and intended potential restart; no permanent cessation	Extended idling without a restart timeline indicates permanent cessation and supports recapture	Court held no evidence of affirmative intent to permanently cease; maintenance and occasional operation showed no permanent cessation; recapture claim dismissed

W.E. Partners II, LLC v. United States, 119 Fed. Cl. 684 (2015) (sets three-step inquiry for Section 1603 awards and requires reasonable allocation between qualifying electricity generation and non-qualifying uses)