By the beginning of August, it was clear the Maine Department of Environmental Protection was going to deny First Wind’s permit application to build the Bowers Mountain wind project, a 16-turbine farm in Carroll Plantation and Kossuth Township in eastern Penobscot County.

But that didn’t stop the company from signing a long-term deal to provide electricity generated at the yet-to-be-built farm to Rhode Island residents and businesses. The company was confident enough that it would succeed in the state’s appeals process that it put up nearly $1.5 million, which it could lose if it’s not able to build the project.

The DEP’s staff on July 24 recommended that DEP Commissioner Patricia Aho deny First Wind’s application because of concerns over the impact the wind turbines would have on views from the area’s lakes. The official applicant is Champlain Wind LLC, a subsidiary of Boston-based First Wind, which operates four wind farms in Maine.

Nine days later, on Aug. 2, First Wind signed a 15-year deal with National Grid, a utility that supplies electricity to customers in Rhode Island and surrounding states, to have the Bowers Mountain project up and running by March 2017, and sending electricity to businesses and residents in Rhode Island at a cost of 7.8 cents per kilowatt hour. That price is competitive with other energy generation sources, though still more expensive than electricity coming from the region’s natural gas-fired power plants.

On Aug. 5, Aho followed her staff’s suggestion and denied First Wind’s application for a permit to build the Bowers Mountain project because it would have “an unreasonable adverse effect on the scenic character and existing uses related to scenic character” in the area, which includes eight lakes deemed Scenic Resources of State or National Significance within eight miles of the project site.

First Wind has appealed the decision to the Board of Environmental Protection, which is a seven-member citizen board that is part of the DEP but has independent authority when it comes to things like deciding appeals of the commissioner’s licensing actions. That appeal is underway.

It is not uncommon for wind developers such as First Wind to sign such deals, known as power-purchase agreements, before the projects have been permitted or built. The long-term arrangements provide stability for the developer and reduce the cost of financing the project, according to Matt Kearns, First Wind’s vice president of development in the Northeast.

However, why would National Grid sign a long-term deal with a developer whose project it was clear was going to be denied a crucial permit and throwing the project’s entire existence into question?

Requests to speak to the National Grid staff who negotiated the deal with First Wind were denied. However, Deborah Drew, a National Grid spokeswoman, sent the Bangor Daily News the following statement:

“We believe this is a positive project and a good deal for Rhode Island customers. The development process is a lengthy one and most projects at the time of bid and award or contract execution do not yet have permits in hand. The fact that Champlain Wind has received a denial simply means they are in a better position than many developers to address permit issues sooner rather than later.”

So, rather than being a liability, Drew believes the DEP’s initial denial is a benefit.

The appeal process is underway, and Kearns expects a hearing to be scheduled in the next two months or at the beginning of 2014.

First Wind argues that its project complies with existing law, and that the DEP denied its project based on higher standards not outlined in statute.

“It basically looks to us as [if] a new standard has been created that does not currently exist in the law. That’s particularly troubling,” Kearns said. “We’re not asking to get a permit every time, but in this case we met the standard, and the DEP’s own expert said we met the standard, so it’s a little bit hard for us to understand. It sends a distressing signal to the business community, to any business looking at investing in the state, if we can’t expect balls and strikes to be called fairly.”

Kearns is confident the appeal will be successful.

If it’s not successful, First Wind could face penalties stemming from its deal with National Grid. While the deal is complicated with various opportunities for First Wind to extend milestone deadlines toward completion of the project, the bottom line is that if First Wind does not get its DEP permit and does not complete the wind farm by March 2017, it would forfeit nearly $1.5 million it put up in security, Kearns said.

The appeal process did work for another developer, Passadumkeag Wind Park LLC. In November 2012, Aho rejected the company’s initial application for a permit to build a 14-turbine wind farm on Passadumkeag Mountain in Penobscot County, but the BEP reversed her decision in March 2013 and allowed the project to move forward.

Whit Richardson is Business Editor at the Bangor Daily News. He blogs about Maine business, entrepreneurs and the economy.