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The Oswego Harbor Power plant, formerly known as the Oswego Steam Station, is one of three Upstate power plants owned by NRG Energy that participated in the Empire Zones program. The Oswego plant rarely runs. The Huntley and Dunkirk plants in Western New York shut down last year.

(Gary Walts)

In the name of creating jobs, New York state spent more than $190 million to subsidize two old, pollution-spewing coal plants near Buffalo. The money was paid out over 13 years.

Soon afterward, both plants closed, laying off 136 people in 2016.

The Huntley and Dunkirk power plants, both owned by NRG Energy, were among the biggest beneficiaries of New York's notorious Empire Zones program. The program was supposed to attract new businesses to depressed areas and create new jobs.

A third plant owned by NRG, the Oswego Harbor Power plant in Oswego, also collected millions in Empire Zone tax breaks. The Oswego plant has not been closed, but rarely runs.

The power plants are examples of how Empire Zone benefits spread beyond what lawmakers intended. Millions of dollars were claimed by companies that were not new, could not move out of the region, and created few, if any, new jobs.

Empire Zones are likely to cost state taxpayers at least $3 billion by the time the last tax credit is claimed.

NRG officials say they "invested heavily'' to keep the two Western New York plants running - spending roughly $300 million on new pollution controls alone -- during the time Huntley and Dunkirk collected Empire Zone benefits.

But even supporters of Empire Zones cringed at how much money NRG and other power plant owners made off the program. Gov. George Pataki twice proposed scaling back the tax breaks available to power plants, but the state Legislature failed to act.

Huntley and Dunkirk were well past their prime when they started earning Empire Zone tax credits in 2003. They were built in stages during the 1940s and '50s by Niagara Mohawk Power Corp. The utility sold the plants to NRG in 1999 as part of the state's energy industry restructuring.

The two plants qualified for the most lucrative Empire Zone tax breaks, which included 100 percent reimbursement of their property taxes.

Using an accounting gimmick known as "shirt changing," common to early Empire Zone participants, NRG created new companies with no employees to own the power plant land and buildings. By adding at least one employee, they could claim to have increased their work force 100 percent.

During the 13 years Huntley and Dunkirk were in the Empire Zone program, the two coal plants added 12 net new jobs, according to estimates the company filed with state officials.

But in early 2016, after claiming the last of their tax credits in 2015, both Huntley and Dunkirk shut down and laid off their workers. According to formal notices the company filed with the state labor department, 136 people lost their jobs.

NRG officials said they complied with all the requirements of the Empire Zones program.

"It is based on headcount maintained . . . and capital expenditures,'' company spokesman David Gaier wrote in an email. "We invested in the area of $300 million in environmental controls at the Huntley and Dunkirk plants during 2009-2010. We complied with all the requirements for those years (in the Empire Zone program), and we've been audited by the state.''

Prior to upgrading their emission controls, the two plants were among the state's worst polluters.

In 2002, a year before the plants started earning Empire Zone tax breaks, state environmental officials sued to force the two plants to cut emissions.

After three years of litigation, NRG Energy settled in 2005. The company agreed to cut sulfur dioxide emissions by 87 percent over eight years, and to cut nitrogen oxide emissions by 81 percent.

The two plants struggled to compete in the wholesale energy market, despite their Empire Zone benefits.

NRG threatened to close Dunkirk for financial reasons in 2012. Power grid operators said the shutdown would cause electric reliability issues, so state regulators then ordered National Grid's Upstate utility customers to pay $110 million in above-market payments to keep the plant generating. Those subsidies continued through December 2015 while transmission facilities were beefed up to keep the power grid stable without Dunkirk.

In January 2016, Dunkirk stopped operating. Huntley shut down two months later.

Gaier, of NRG Energy, blamed the closures in part on New York's capacity market for electricity, which he said does not provide power plant operators with sufficient incentives to invest "in maintaining current generation, as well as developing new and cleaner generation.''

Huntley is permanently retired. Dunkirk is listed as "mothballed,'' pending a plan to repower the facility using natural gas.

If the gas conversion goes forward, National Grid ratepayers will pay more than $200 million over 10 years to finance the work, under a deal approved in 2014 by state utility regulators. NRG says the project is still in the planning stages.

Critics, including some Upstate business owners, would like to see the Public Service Commission rescind the deal.

Michael Mager, a lawyer who represents a coalition of large commercial and industrial businesses, urged the PSC in March to reverse its decision to make utility customers subsidize the project. He pointed out that Dunkirk is no longer necessary to the regional power network, according to grid overseers at the New York Independent System Operator.

"Customers will be forced to bear an exorbitant and wholly-unnecessary expense to subsidize the refueling of an aged, uneconomic and deactivated coal-fired generating facility,'' Mager wrote.

PSC officials said they have no plans to rescind the deal.

Gaier said Huntley and Dunkirk provided good jobs during the years NRG received Empire Zone benefits.

"NRG's power plants actually did provide many local jobs for years,'' he said.

Two hundred miles away in Oswego, NRG Energy also received Empire Zone benefits at a third power plant, Oswego Harbor Power. Formerly known as Oswego Steam Station, it was also acquired from the former Niagara Mohawk.

The Oswego plant, built between 1938 and 1956, rarely runs. It operates as a backup facility, in case one of the nearby nuclear plants shuts down or during periods of extremely high demand.

NRG received an estimated $28.6 million in tax credits for the Oswego plant from 2002 through 2008, according to reports the company filed with Empire State Development, the economic development agency. During that time, the company reported creating four jobs at the site.

State officials removed the plant from the Empire Zone program in 2009 after an analysis showed the facility earned more in tax credits than it spent on wages, benefits and plant investments.

Contact reporter Tim Knauss anytime | email | Twitter | 315-470-3023

More from the archives:

2006 report on Empire Zones waste and abuse

2006 report on shirt-changers

Post-Standard wins lawsuit, exposes Empire Zones data (2007)