Trick and Treat: Energy loans under review, as Hallowe’en looms
The Obama Administration got tricked, and handed out some bad energy loan candy.
Turns out that the Washington press corps, and House Republicans, were asleep on the job, too. Until the money ran out, that is.
We’re not sure if there’s been any more perfect timing for an Obama Administration announcement, than the news that it will start up an investigation of the DOE loan guarantee program just as Hallowe’en weekend got underway.
Hallowe’en, is of course, the time of disguise, the celebration of the macabre, and the ghostly return of the dead to haunt you.
Not a bad description, overall, for the Solyndra loan. But there was substantial evidence that the loan guarantee process was fundamentally broken, over two years ago.
“Today,” announced White House chief of staff Bill Daley, “we are directing that an independent analysis be conducted of the current state of the Department of Energy loan portfolio, focusing on future loan monitoring and management,” “While we continue to take steps to make sure the United States remains competitive in the 21st century energy economy, we must also ensure that we are strong stewards of taxpayer dollars.”
Today. As in the end of October 2011. But, let’s rewind the tape two years.
The signs in 2009On Friday, Politico reported that Rep. Cliff Stearns (R-Fla.), chairman of the House Energy and Commerce oversight subcommittee, said, “In August 2009, the staff on the Department of Energy indicated that Solyndra would go prophetically bankrupt in September 2011.”
Well, it is high Washington fashion this fall, even more popular than the latest from Lagerfeld, Chanel or Dior, to trash the Solyndra loan. It looks like “Obamacare meets Watergate Junior”, to a lot of Republicans on the Hill.
The fact that the US government doubled-down, by allegedly subordinating the loan to investments by a pair of hedge funds, during a Solyndra financial reorganization, is going to cost Energy Secretary a headache when he heads to a November 17th hearing on Capitol Hioll, and possibly more.
But House Republicans and the general media missed a lot of signals themselves, that something was awry in clean energy financing and funding, way back in 2009.
In 2009, we reported:
“$32.9 billion in total funding announced, including grants and loan guarantees. Impressive! But just $17.44 billion for the private sector, the street – nearly half of that in loan guarantees rather than outright funding. The rest of it went to government (although, some went in state block grants that may, in turn, have some portion that finds its way to the street; and some of that went to the utility sector, in which there are private companies). Seems to me that government announcing a grant to government is double-counting. Call me stupid – isn’t that just an allocation?”
Why did so much energy funding get funneled to electric and clean vehicles, not energy?We warned that an awfully high percentage of the funding was being shifted into specific industries, for reasons we could not fathom:
“Electric and “clean” vehicle technology received $2.9 billion — that’s $500 million more than the entire support for the solar, biofuels, wind, hydro, and geothermal investments which are supposed to provide the renewable molecules and electrons to power said vehicles.”
Why did coal receive more clean energy treats than biomass and biofuels?We noted that, somehow, the coal industry had received more funding than biofuels and biomass put together – this, in a clean energy financing round:
“Of the $32 billion, $792 million has gone directly to biofuels or biomass — 2.4 percent. That’s 29 percent less than went to coal – which I thought was the energy we were supposed to be transitioning away from, rather than investing in.”
How did researchers in DOE labs end up costing the taxpayer $500,000 per year, each?In fall 2009, we noted that a program “to support at least 50 early career researchers for five years at US academic institutions and DOE national laboratories,” received more than nuclear energy R&D, so far this year, or hydroelectric power development, or fuel cell research.”
That program received $85 million for salaries and the expenses of the organizations that do the hiring. In all, it was $1,700,000 per researcher, or $340,000 per person per year. Interestingly, the university positions were for “summer salary and expenses” only. Only some of these positions — for DOE National Labs — were full time. Full-timers received $500,000 in funding, per person per year.
At the time, we pointed out that, according to salary.com, the average salary for an assistant professor in the United States is $62,654. Leaving $438,346 for DOE national lab “expenses”. Per person. Per year. That’s a lot of beakers.
And, we pointed out that it wasn’t exactly like a honeymoon for more exotic, fashionable projects like solar. Even as Solyndra was getting the come-on, a lot of projects were getting the shut out.
How macabre did energy financing get, and when did it get that way?In 2009, Mike Carpenter, managing director of Energy Recovery Group in Oregon advised us, “My USDA Oregon rep sent me the contact information of 30 banks, all apparently designated USDA 90% guaranty, $10M – 3 of thirty responded. One of the three followed up – we had a deal – all I have to do is: Show 30% cash, 27 different documents, private and personal, and the killer, a separate, exclusive method or vehicle to pay for the project, not related to the project. As a solar project, I need to show a 5-year payoff. I called the other 27 banks just to check – the FDIC answered twice, we aren’t lending any money, we don’t have anyone smart enough to analyze a solar deal, on and on.”
We decline to fall in with the general expressions of “shock and horror” on Capitol Hill that Solyndra failed. Even if it is Hallowe’en, and “trick or treat” is in the air. Or, is that “trick, and you’ll get a treat too”?
For us, there was enough evidence on the table in 2009 that any self-respecting auditor might have issued a “substantial doubt, going concern” notice on the Administration’s financing programs way back in 2009. That the broader media didn’t pick up on what was broadly distributed in trade media two years ago, tells you just about what you need to know about the state of the Washington press corps.
When the treats run out, it’s time to soap the windowsThe fact that Congress didn’t pick up on any of this, until the loan guarantee program was just about over, the funding wells were dry, and there was no more lipstick left for pigs, tells you just about what you need to know about Washington itself.
Now and through November, the Washington press corps and the House of Representatives will shine its jack-o’-lanterns on the macabre world of the DOE and the Obama Administration’s energy financing goals and achievements. They may well find a landscape of activity that reminds one more of out-takes from Thriller than a well-run financing program. There’s bound to be dirty laundry mixed in with some genuinely good loans, and well-meaning goals.
But the afore-mentioned watchdogs might do well to drop the we-are-the-champions costumery this year, and tramp the streets of Washington wearing hair shirts — or at least the latest sleepwear, to reflect what they have been up to most of the past two years.
The Bottom Line: No Great Pumpkin, and rocks againTreats for a lot of companies and individuals.
For the long-suffering public, saddled with bad loans, and still not end in sight to the dependence on foreign loans – as it is each year in It’s the Great Pumpkin, Charlie Brown: no great pumpkin in sight, and rocks in the Hallowe’en sack, all over again.
To all of the above, we offer the traditional Hallowe’en (and theater) greeting: Boo!
Jim Lane is editor and publisher of Biofuels Digest.
|Tweet||Add to Flipboard Magazine.|