Years after promising to revive the coal industry with new carbon capture technologies, the Energy Department has spent less than half of the $1.5 billion it targeted for "clean coal" projects under President Barack Obama's stimulus program.
And much of the money it has spent went to existing carbon capture research instead of new projects intended to create new jobs under the Recovery Act, the department's internal watchdog reported Tuesday.
"We found that the Department had not always effectively managed the Carbon Program and the use of Recovery Act funds," Inspector General Gregory H. Friedman reported in a memo to departing Energy Secretary Steven Chu.
The memo offered the latest sobering look at the administration's clean energy efforts under the stimulus law enacted in 2009. The Energy Department became an early poster child for allegations that Recovery Act money went to clean energy companies with political connections or that later failed, like solar panel maker Solyndra that went bankrupt after receiving more than $500 million in loan guarantees.
Subsequent investigations by Congress and Friedman found no evidence of untoward political influence but did uncover poor management practices that put taxpayers at increased risk with loans and grants to solar, wind and other renewable energy companies.
Clean coal was another major target of the stimulus. The department awarded $1.5 billion under the stimulus to further the development of technologies to capture greenhouse gas emissions from coal-burning power plants and store them under ground. Chu told an audience in West Virginia in 2010 that development carbon capture and sequestration was " an economic opportunity" and key to coal's survival in a global market looking to reduce greenhouse gas emissions.
"The United States is very serious about this," Chu said at the time. "We see this as an opportunity to develop the technology that we can not only use in the United States, but export around the world."
Friedman did not allege specific wrongdoing in the clean coal spending, but did question why less than half of the money has been spent two years after it was awarded. And he urged the department to improve its controls over the $860 million that remains to be spent.
An audit of 15 recipient awards found the department also sidestepped a number of its own rules in awarding and managing the money. Among the problems was that it sent money to existing projects rather than new work favored by the stimulus law.
He acknowledged that the Recovery Act spending represented an unprecedented infusion of money into the department's clean coal research. Yet, Friedman also raised questions about whether the awards would advance efforts to commercialize carbon capture, which is seen as key to reining in coal emissions contributing to global warming.
Friedman stressed that "despite the magnitude of the effort, the issues discussed in our report could, if unresolved, impact the ability of the Carbon Program to meet its objectives and the goals of the Recovery Act." The administration has set a deadline of Sept. 30 for federal agencies to spend their remaining Recovery Act dollars or request waivers.
Friedman's audit found the department's clean coal efforts awarded $575 million to accelerate projects already underway, despite the intent of the department and the stimulus law to target money to new recipients that could create new jobs.
Regarding explanations by department officials for the awards, available documentation yielded evidence that was "either inconsistent with or did not otherwise support their assertions," Friedman said.
Program officials told Friedman that decisions on accelerating existing projects were made by senior department officials, who did not maintain records of their deliberations. "Lacking documented rationale for selecting projects, we were not able to validate the basis for funding the projects ," Friedman said.
The department agreed with three of his recommendations for thorough cost documentation and awardee oversight, and said it had begun taking actions to comply. It did not agree with a fourth, however.
It also said that while the Recovery Act recommended competitive awards, it was not mandatory. When insufficient applications were filed for the funds, it made additional awards to research projects.
In a response letter, Assistant Secretary for Fossil Energy Chuck McConnell said it was Friedman who failed to obtain records of awards outside of competitive processes that were made by officials who had since left the department.
Friedman disputed McConnell, saying the department was unable to produce the records despite numerous attempts.
He also said $16.8 million in costs were approved without proper documentation, including $2.4 million that was questionable or unallowable. Another $1 million in spending was improperly allowed to cover costs before awards were approved, Friedman added.
Finally, the department backed projects in which the companies were known to have risky financial strength. Three projects awarded a total of $90 million had only managed to spend $7 million, he found.