An Albany company’s plan to retrofit a former coal plant into a biomass energy facility to power Fort Drum is in jeopardy after a tax incentive for the project was voted down last week.

The LeRay Town Council rejected a five-year payment-in-lieu-of-taxes agreement with ReEnergy in a 3-2 decision at its meeting Thursday, and now the parties involved are scrambling to see if they can still strike a deal.

Board members who rejected the tax break cited the sales tax revenue the town would lose — about $31,000 a year — because the plant’s current $10 million assessed property value would be removed from the tax roll for the five years under the plan.

ReEnergy proposes to invest $34 million to launch the now-defunct plant that it purchased in December. But if it can’t negotiate the tax break for the project with LeRay after another try, it will need to muster the finances to still move forward.

The town’s approval was the last the company needed for the PILOT, which was unanimously approved by the Jefferson County Board of Legislators on June 5 and the Carthage Central School District on June 11.

ReEnergy would have received 50 percent off of an average property-value assessment of $30 million during the term of the agreement.

After LeRay’s rejection, talks among the parties involved started Friday morning. But the company’s strategy remains uncertain.

“There’s a big question right now on whether this project does go forward, and our concern is the loss of the opportunity to provide energy to Fort Drum,” said David J. Zembiec, Deputy CEO for the Jefferson County Industrial Development Agency, which helped negotiate the deal on the energy company’s behalf. “We were a bit surprised” with the town’s decision, he said, “because our impression was the town would put (the sales tax issue) aside for the time being” and discuss it later.

But according to one opponent of deal, ReEnergy doesn’t need the PILOT to move forward.

“I think it’s a good project but don’t think it deserves a tax break,” Councilman William R. Jesmore said Thursday night after voting against it.

Parties might attempt to negotiate the same deal with LeRay again, Mr. Zembiec said, trying to ensure that Town Council members fully understand the project. In LeRay, some officials have strongly voiced their support of the project in spite of the board’s decision.

Although LeRay wouldn’t receive sales tax over the five years of the PILOT, Mr. Zembiec pointed out the town would soon recoup that amount when the plant is back on the tax roll.

With the plant removed from the tax roll, LeRay would lose about $150,000 over the five-year term. But when the ReEnergy plant would be back on the tax roll in 2019, the town would receive about $90,000 a year in additional sales tax revenue.

With the biomass plant back on the tax roll for three years, the town would collect $270,000 in 2021. If the project doesn’t materialize and the plant never goes off the tax roll, the town will have collected $240,000 by 2021.

“It would take only three years on the tax rolls to surpass what the plant would now make in eight years,” Mr. Zembiec said. “I think board members got caught up on what they’re losing per year and didn’t do the math to see the future net gain for the town and school district, which will both see growing revenue.”

Town board members who voted down the PILOT were skeptical that ReEnergy needed the tax-break to move forward with the project. The company is now seeking a contract with the U.S. Army to build the plant, and it’s also expected to be awarded a 10-year renewable-energy contract with North Country Regional Development Council this year.

The project’s benefits for Fort Drum and the region have been often touted by its supporters. It would create 33 jobs at the plant and about 150 jobs for the region’s logging industry, investing about $11 million a year for local foresters to supply biomass materials to the plant. It would also meet the goal set by the U.S. Department of Defense to make operations more energy-efficient, providing 60 megawatts of generation capacity that will supply the entire 28-megawatt post and customers on the grid with power.

In light of the project’s potential benefits, CEO Donald Alexander of the JCIDA said he was shocked by the LeRay board’s rejection.

“It’s a very good project for the community in so many ways, and I frankly can’t see a downside,” he said. “Frankly, maybe we haven’t done as good of a job communicating the benefits, and I’ll try to bring the parties together to see if there’s something we can do to make this amenable to all.”

Steven T. Harter, administrative clerk to the town supervisor, likewise said he hopes a consensus is reached.

“I’ve got calls from all of the different parties involved, and this is certainly open to further discussion,” he said Friday.

ReEnergy CEO Larry D. Richardson said in a written statement Friday that the company is disappointed.

“We were very disappointed with the decision,” wrote Mr. Richardson. “We will be in conversation with the town of LeRay and the IDA over the next few weeks to see what options exist.”

No one yet knows whether the project will get scrapped by the company if it doesn’t get a tax-break.

“I guess we’ll know when we see the company’s decision,” Mr. Zembiec said. “It’s a significant up-front investment.”

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