It has been a busy day in Chairman Darrell Issa’s House Oversight and Government Reform Committee. This morning, the committee released a report titled The Department of Energy’s Disastrous Management of Loan Guarantee Programs. The report is a devastating indictment of the Obama administration’s “green” energy cronyism. It documents the extraordinary series of shaky (and sometimes shady) loans that DOE has made, often to administration allies.
You really should read the report in full; it describes how the Obama administration failed to follow its own rules, failed to diversify its investment portfolio, ignored clear signs of impending insolvency on the part of borrowers, and sometimes fraudulently characterized technologies in order to justify loans. This is the beginning of a section titled “Systemic Risks from ‘Crony Capitalism’ and Wasteful Spending:”
There is evidence a number of loan guarantee recipients have engaged in clearly profligate spending. Such wasteful spending threatens the financial viability of the recipient companies, creating risks to both the DOE’s loan commitment portfolio and taxpayer dollars. It is particularly troubling that this waste often takes the form of large cash bonuses to company executives – such payments feed the perception that taxpayer funds are being used to line the pockets of green energy executives.
Beacon Power Corp, the second recipient of a § 1705 loan guarantee, paid three executives more than a quarter million dollars in bonuses in March 2010.58 Eighteen months later, Beacon declared bankruptcy, leaving taxpayers to repay the loan. Adding insult to this injury, these bonuses were explicitly linked to the executives securing the DOE loan guarantee. Similarly, bankruptcy records show Solyndra doled out executive payments just months prior to its late August collapse and early September bankruptcy.59 In Solyndra’s case, former executives have stated that DOE explicitly allowed federal funds to be used to pay out executive bonuses.
Wasteful spending is not limited to executive compensation alone. BrightSource Energy, recipient of a $1.6 billion loan guarantee to build a solar generation facility, has spent more than $56 million on a desert tortoise relocation program.62 Furthermore, BrightSource will build 50 miles of intricate fencing, at a cost of up to $50,000 per mile, designed to prevent relocated tortoises from climbing or burrowing back into the solar generation facility.63 BrightSource has indicated that the exploding cost of tortoise relocation program threatens to derail the entire $1.6 billion project – leaving taxpayers on the hook for the enormous sums on money spent on construction thus far.
Nancy Ann DeParle, the current Deputy Chief of Staff for Policy in the White House, had a financial stake in the success of Granite Reliable, which received $168.9 million loan from DOE. Prior to joining the White House, DeParle was a Managing Director of multi-billion dollar private equity firm CCMP and she both had a financial interest in and sat on the Board of Directors for Noble Environmental Power, LLC.178 Noble owned Granite Reliable, a wind energy project.179 Prior to her departure, her position on Noble’s board of Directors positioned her to understand the most confidential and material aspects of Noble Environmental and its subsidiary Granite Reliable. DeParle misrepresented her relationship with Noble Energy, claiming on disclosure forms that her interest had been divested, when in fact it had merely been transferred to her 10 year old son.180
Energy Secretary Steven Chu testified before Issa’s committee this morning and was grilled by some of the Republican members. Here, Ann Marie Buerkle of New York blasts the administration’s false claim that the U.S. has only 2% of the world’s oil reserves and therefore can’t begin to meet its energy needs by domestic production:
In this clip, Trey Gowdy of South Carolina asks Chu about his wish, expressed in 2008 just before he was named Secretary of Energy, that the government should “boost” gasoline prices to European levels. A visibly uncomfortable Chu explains that this was his opinion as a private citizen, but that since he became Secretary of Energy he has not pursued policies designed to increase prices:
I don’t believe him for a moment, but one wonders, in any event, why anyone would appoint a Secretary of Energy whose expressed desire is that energy costs rise, thereby impoverishing the American people. One might as well appoint as Secretary of Defense a man who is known for advocating unilateral disarmament. I suppose we should count ourselves lucky Obama didn’t do that.
All in all, it was an eventful morning in the Oversight and Government Reform Committee.