Energy Department watchdog notes woes with managing stimulus dollars

The Energy Department’s internal watchdog has mixed reviews of the department’s distribution and use of economic stimulus dollars, even as the White House touts the massive spending bill in the run-up to midterms.

President Obama’s planned tour Monday of ZBB Energy Corp.’s facilities in Menomonee Falls, Wis., is the latest in a series of stops this election season to highlight what the administration calls the effectiveness of federal clean energy stimulus investments.

{mosads}But recent reports by DOE’s Inspector General (IG) have cited problems with the department’s distribution of the stimulus dollars and recipients’ use of them.

The IG reported Wednesday that DOE has given out about $2.7 billion of $3.2 billion in energy and conservation block grants provided in last year’s stimulus. But grant recipients had used only 8.4 percent of the total after more than a year.

Spending delays were “prevalent and widespread throughout the Program,” particularly by those receiving the largest grants of more than $2 million each, the report found.

DOE officials have pointed out that “spending rates have significantly increased since March 2010,” according to the IG report, which also noted that recipient spending “was not a leading indicator” of the program’s overall performance.

But the IG still concluded that rapid spending of the funds “was hampered by numerous administrative and regulatory challenges associated with implementing a new program” at the federal, state and local levels.

An Aug. 4 IG report indicated “a number of issues” needing to be addressed before the remaining $3.4 billion of $32.7 billion in contracts and grants for science, energy and environmental programs can be doled out.

As of July 9, the department had obligated 90 percent of that $32.7 billion. But less than half intended for a couple of major projects had been spent, and none of the programs covered under the stimulus plan had all funding obligated.

“We are particularly concerned that delays in the award process for two major Fossil Energy projects could result in the expiration of funds before all awards are made,” the report stated.

The day after the IG delivered its report to senior DOE officials, the department announced $1 billion in stimulus money was being awarded to the revised version of the long-planned and troubled “FutureGen” project, a prototype coal-fired power plant that would trap and store almost all of its carbon dioxide emissions.

But Mattoon, Ill., the town that was to house the FutureGen project, subsequently rejected the project revisions after seeing its role change and shrink.

DOE spokeswoman Stephanie Mueller said the department has “now made selections for all of our program areas and are highly confident we will meet the September 30 deadline of obligating Recovery Act funds.” She adds that the energy efficiency and conservation block grant program “has seen significant growth this summer,” with more than 4,000 projects now under way.

“And as project deployment continues to accelerate, the rate of payments to local communities has also increased, including a doubling of total payments between the first and second quarter of 2010,” Mueller said.

Early challenges with the block grant program — such as environmental reviews and technical staff support — “have now largely been addressed and grantees are moving forward with their projects,” she said.

Separately, while the administration overall has doled out the majority of its stimulus funds — including a $14.7 million tax credit to ZBB Energy Corp. — it still faces backlash from the renewable energy industry over the diversion of more than half of loan guarantees set aside for the industry in the stimulus.

Lawmakers — with the backing of the White House — have diverted for other priorities $3.5 billion of the $6 billion in DOE loan guarantees authorized in the stimulus.

Democratic congressional leaders and the Energy Department are promising to replenish the loan guarantees so projects in the pipeline aren’t affected.

“The Department recognizes the urgent need to avoid devastating teacher layoffs and to avert cuts in medical and social services for our most vulnerable citizens,” an Energy Department spokeswoman said in a statement. “At the same time, we recognize the need for continued investments in clean energy. In the short term, we have the resources to support a broad portfolio of clean energy technologies — even as we work with Congress and the White House to secure additional funding to invest in a clean energy economy.”

Renewable energy groups are still somewhat skeptical given that it has been a year already since an initial $2 billion was diverted.

“They said, ‘OK, guys, don’t worry we will replenish it. We have plenty of time to get the funding back in there,’” said Monique Hanis, spokeswoman for the Solar Energy Industries Association. “I think that’s why we have been very vocal this time. Now there is definite concern.”

The $6 billion in lending authority would actually affect the development of 10 times that — roughly $60 billion — worth of projects, renewable energy industry groups argue.