In administrating its stimulus-fed loan and grants programs, the Department of Energy has been accused of incompetence, carelessness, recklessness, and cronyism. Now it can add inconsistency to those distinguishing characteristics.
Last week Bright Automotive, an electric vehicle start-up company that General Motors helped two years ago with an investment of at least $5 million from its venture capital arm, gave up hope on winning a $450 million loan from DOE’s Advanced Technology Vehicle Manufacturing program. As the company announced the withdrawal of its loan application and that it would end operations, CEO Reuben Munger and COO Mike Donoughe sent (and released to the media) a letter to DOE Secretary Steven Chu that sharply criticized the loan programs processes and outlined their frustrations.
“Bright has not been explicitly rejected by the DOE,” the Bright executives wrote, “rather, we have been forced to say ‘uncle….’”
“Last week we received the fourth ‘near final’ Conditional Commitment Letter since September 2010. Each new letter arrived with more onerous terms than the last. The first three were workable for us, but the last was so outlandish that most rational and objective persons would likely conclude that your team was negotiating in bad faith. We hope that as their Secretary, this was not at your urging.”
The shutdown is the latest in what is becoming a long line of green energy government “investment” failures in Indiana. In January EV battery maker Ener1, which had received $118.5 million in grants from DOE and $7.15 million in incentives from the Hoosier State, filed for bankruptcy. The EV company upon which it depended to buy its product, Norway-based Think Global (beneficiary of $3.1 million in state incentives), has repeatedly run out of money over the years and most recently went bankrupt in June. Abound Solar, which was to receive $11.85 million in state tax credits to launch a plant in Tipton, slashed payroll at its Colorado headquarters last week and activity in Indiana may never get off the ground. And then there are the disastrous cost overruns and cronyism surrounding Duke Energy’s Edwardsport coal gasification power plant, which featured an unproven technology to (needlessly) capture carbon dioxide emissions and store them underground, that also benefited from nearly $600 million in government subsidies.
Republican Gov. Mitch Daniels said in January 2010 he planned to make Indiana “the electric vehicle state.” And many conservatives hoped he would be the small-government alternative to President Obama?
Meanwhile Bright Automotive’s Munger and Donoughe bemoaned how DOE gave them the runaround on its loan application.
“In good faith we entered the ATVM process,” the executives told Chu, “approved under President Bush with bi-partisan Congressional approval, in December of 2008.
“At that time, our application was deemed ‘substantially complete.’ As of today, we have been in the ‘due diligence’ process for more than 1175 days. That is a record for which no one can be proud.”
Apparently someone at DOE told Bright in August 2010 that its loan would be approved “within weeks” if it formed a strategic partnership with GM, received private financing commitments, and reached other milestones. But according to Munger and Donoughe, “we waited and waited; staying in this process for as long as we could after repeated, yet unmet promises by government bureaucrats. We continued to play by the rules, even as you and your team were changing those rules constantly – seemingly on a whim.”
In response, DOE spokesman Damien LaVera said, “Over the last three years, the department has worked with the company to try to negotiate a deal that supported their business while protecting the taxpayers. In the end, we were not able to come to an agreement on terms that would protect the taxpayers.”
Too bad DOE’s concern for taxpayers fell short with loans or grants to Solyndra, Beacon Power, Fisker Automotive (which recently had its DOE loan suspended), A123 Systems, Smith Electric Vehicles, First Solar, Iberdrola Renewables, Vestas, Ener1, and Abound Solar, among many others. All these unproven companies have received billions in taxpayer dollars through federal government green initiatives, but have experienced either bankruptcies, layoffs, or have bailed out previous failing projects.
Now even these projects with legacy corporations are cutting jobs, after GM’s announcement (extremely) late last week that it will sideline 1,300 employees who were working on the Chevy Volt because of poor demand for the vehicle. As my NLPC colleague Mark Modica wrote today, “taxpayers have been bilked out of billions of dollars to produce a car that does practically nothing for the environment or foreign oil dependence.” Watch for a similar storyline in the not-too-distant future about the Nissan Leaf, which received a $1.45 billion loan guarantee from DOE to retrofit a plant in Smyrna, Tenn. to produce the EV.
Undeterred supporters of “clean” technology and DOE’s subsidies programs will blame the failure of the Bright Automotive loan on political pressure from Congress after Solyndra’s bankruptcy. But that occurred in September, long after Bright had been in DOE’s queue for consideration and had been apparently been getting jerked around by bureaucrats. Munger is probably especially peeved after he gave $67,100 to the Democratic Senatorial Campaign Committee and Democratic Congressional Campaign Committee, which produced nothing for his company in return (unlike others’ whose political giving seemed to help along DOE grants and loans).
It proves two things (again): that government should never be in the business of choosing which companies upon which it bestows money that it takes from taxpayers, and businesses should never depend on government to provide for it funding it should instead earn from voluntary participants in the free market. Otherwise you are at the mercy of political whims and fickle or incompetent bureaucrats.
Paul Chesser is an associate fellow for the National Legal and Policy Center.