Bloomberg News

Audit Faults Stimulus-Backed $1.5 Billion U.S. Clean-Coal Effort

March 26, 2013

Audit Faults Stimulus-Backed $1.5 Billion U.S. Clean-Coal Effort

Electricity cables travel along a track as steam is vented through exhaust stacks at a coal fueled power plant in Underwood, North Dakota. Photographer: Daniel Acker/Bloomberg

Poor management has hampered a U.S. program to develop technology to capture carbon-dioxide emissions, the Energy Department inspector general said in a report that raises new questions about a clean-energy initiative backed by the 2009 economic stimulus.

In total, the Energy Department received $1.5 billion in the American Recovery and Reinvestment Act to invest in technology that responds to climate-change risks. Carbon dioxide is a greenhouse gas that most scientists think is making the planet hotter.

Energy officials hadn’t “adequately documented the approval and rationale” in awarding $575 million to 15 recipients, the watchdog found. Three projects won $90 million even though a review process identified significant financial and technical issues with the companies that won the aid, according to the report.

“The issues we identified occurred, in part, because program officials had not always provided effective monitoring and oversight of recipient activities,” the inspector general found.

In response, the Energy Department said it would improve program oversight.

“Project monitoring procedures will be reviewed to ensure sound guidance exists for conducting consistent, thorough reviews of documentation supporting invoiced costs,” Chuck McConnell, assistant secretary for fossil energy, wrote in response to the report.

Clean Energy

The stimulus provided a record $90 billion for clean-energy programs, about $35 billion of which went to the Energy Department to distribute.

The money paid for a $535 million loan guarantee in 2009 to Solyndra LLC, a solar-panel maker that went bankrupt two years later. Republicans have criticized management of the program and what they say are the administration’s efforts to pick winners and losers among energy companies.

As of February, the department has spent about $623 million, or less than 42 percent, of the money for the cleaner- coal program, according to the report. That leaves about $860 million left to be spent.

The watchdog report covered $1.1 billion directed to 15 projects.

Energy Department officials faced a Sept. 30, 2010, deadline to distribute the stimulus money, which was designed to kick-start an economy in a deep recession following the financial crisis of 2008.

‘Unprecedented’ Investment

The program “represented an investment in the development of clean-coal technologies that was unprecedented in terms of cost and scope,” according to the report.

The report found that the department reimbursed recipients about $18.3 million in questionable expenses. The department said in response that it was seeking to reclaim the money.

The agency spent $90 million on three projects the review suggested faced technical challenges or were unable to raise the required amount of private capital to win the government money. The projects have experienced delays, the inspector general said. The department had only distributed about $7 million of the funds.

The department sometimes changed the terms of the awards, in one instance reducing the amount the recipient was to put up to $11.6 million from $92.6 million. That $25 million project was supposed to create 272 jobs. As of July 2012, only 68 had been created, according to the report.

While federal officials were supposed to award contracts through competitive bidding, the report found that $575 million went to accelerate existing projects without always documenting its rationale for doing so.

The Energy Department told the watchdog that it didn’t receive the number of bids it had anticipated, so it decided to direct some money to existing programs in order to use the stimulus money by the deadline.

To contact the reporter on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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