By Rob Douglas | Special to Colorado Watchdog
Federal investigators and lawmakers are looking into more than $16 billion in taxpayer-backed loan guarantees and grants the Obama administration’s Department of Energy gave to politically connected renewable energy firms.
Their inquiries raise serious questions about the relationships between President Barack Obama, his political campaigns and appointees, members of his National Finance Committee, Obama campaign donation bundlers, political appointees and politically connected attorneys working inside and outside of the DOE, and the companies that received loan guarantees and grants.
Separate from these issues, the DOE loan-guarantee scandal reveals something else. The investigations have exposed a federal bureaucratic culture that so pervades the DOE that it actually increases the odds of failure for any company involved in the loan program.
When it comes to federal grants, business is often better without it.
Documents obtained by the Independence Institute through the federal Freedom of Information Act reveal grant restrictions that are time and resource drains, reducing an organization’s nimbleness in the face of global competitors not similarly hamstrung.
For example, the $400 million loan-guarantee agreement between Colorado-based Abound Solar and the DOE reveals that Abound Solar — and, it is safe to assume, all loan-guarantee recipients — had to comply with a staggering range of federal laws and regulations, including, but not limited to:
- The Recovery Act;
- The Davis-Bacon Act; Office of Management and Budget regulations;
- Environmental laws (including those involving “air emissions, discharges to surface water or ground water, noise emissions, solid or liquid waste disposal, the use, generation, storage, transportation or disposal of toxic or Hazardous Substances or wastes, or other environmental health or safety matters”);
- The Investment Company Act;
- The Employee Retirement Income Security Act;
- Buy American regulations;
- Lobbying laws;
- Foreign asset control laws;
- Prohibited person laws;
- Prohibited jurisdiction laws;
- Corrupt practices laws;
- The Anti-Terrorism Order.
Scratch the surface of any one of the above categories and you find requirements like this one, in the OMB compliance section:
“OMB shall have certified in writing (in form and substance satisfactory to DOE) that the DOE Credit Facility Documents and the Project comply with the provisions of the Omnibus Appropriations Act, 2009, P.L. No. 111-8, Division C, Title III, as amended by Section 408 of the Supplemental Appropriations Act, 2009, P.L. No. 111-32.”
Keep in mind that’s just one provision in more than 100 pages of detailed requirements that span the breadth and depth of federal laws and regulations. And in case the loan guarantee agreement by the DOE is not suffocating enough, the following legal, financial and regulatory blanket — as revealed in the Abound Solar documents — is placed atop the specific, enumerated rules and regulations loan-guarantee recipients are required to obey:
All provisions of this term sheet are subject to the following (the “Program Requirements”): (i) the provisions of Title XVII, all applicable provisions of the Recovery Act, and the Applicable Provisions, (ii) all DOE or Federal Financing Bank (“FFB”) legal and financial requirements, policies, and procedures applicable to the Title XVII program from time to time, and (iii) the Office of Management and Budget’s Initial Implementing Guidance for the Recovery Act, M-09-10 (February 18,2009), Updated Implementing Guidance for the Recovery Act, M-09-15 (April 3, 2009), Updated Implementing Guidance for the Recovery Act, M-09-21 (June 22, 2009) and, in each case, any amendment, supplement or successor thereto (collectively referred to herein, the “OMB Implementing Guidance”).
The Abound Solar loan-guarantee documents suggest that a newborn company, which lays down with the DOE, runs the risk of being smothered by the federal leviathan before ever bringing a product to market.
Given the almost incalculable number of laws and regulations that companies seeking DOE loan guarantees must comply with, can renewable energy companies in the program operate in a quick, efficient, and cost-effective manner in order to increase the likelihood of success in a rapidly advancing global energy marketplace?
Based on the dismal results (Beacon Power, Solyndra, Raser Technologies, ECOtality), most Americans realize the answer is no.
Consider in February of this year, Bright Automotive wrote a letter to U.S. Secretary of Energy Stephen Chu. The letter is a scathing indictment of government whim, capriciousness and an ocean of red tape saying each new DOE communication asked for “more onerous terms than the last,” adding, “We asked our team members on countless occasions to work literally around the clock whenever yet another new DOE requirement came down the pike…” And that’s an example of a company that didn’t sign on the dotted line. How much worse is the marriage when it’s legally binding?
It’s clear we should leave the DOE out of the quest for energy solutions. It’s time to return to privately financed companies that can respond effectively to free-market conditions.