Last week, the Legislative Budget and Audit Committee (LBA) quietly approved $100 million in taxpayer money to be used for a collection of renewable energy projects funded through the Alaska Energy Authority (AEA).
Shockingly, lawmakers approved the money just hours after the Division of Legislative Audit released a report that raised serious questions about AEA's due diligence in determining the economic viability of these speculative projects.
The report found that four out the five randomly selected energy projects they reviewed showed "there is a higher than necessary risk that the projects will not be successful."
However, lawmakers ignored the report and voted to give the money to AEA, even though the report was shorthand for "AEA is cooking the numbers on four out five projects we reviewed."
Last year the legislature passed HB 152 which created a $100 million renewable energy fund to be used for energy projects such as wind, small hydro, biomass and small geothermal. With record high oil prices last year, rural lawmakers and the governor wanted to try and do anything to help.
When the legislation was passed oil was at $110 per barrel, many of these projects made economic sense with high oil and the state swimming in cash. Today, oil sits at $36 per barrel alongside a $1.6 billion budget deficit and some feel these alternative energy projects cannot be sustained.
On October 7, 2008, when Governor Palin was managing the state from her Blackberry, the LB&A Committee held a hearing with the governor's energy czar, Steve Haagenson, to get a report on his management of AEA's renewable grant selection process.
The AEA, under the leadership of Haagenson, has the responsibility to oversee the grant program. His agency has proposed funding roughly 77 alternative energy projects around Alaska. Lawmakers have raised questions about the number and scope of projects, fearing that too little money is being spread to too many projects.
Rep. Mike Hawker and others questioned Haagenson and staff about the grant recipients. Haaganson was consistently caught flat footed with little or no knowledge about the same recipients that he was proposing to grant millions in taxpayer funds to for energy projects his agency supposedly vetted.
Haagenson testified that each alternative energy project was based on the displacement cost of $110 per barrel. When asked why he was using such an unrealistic price per barrel, Haagenson claimed he got the number from projections issued in a report by the University of Alaska's Institute for Social and Economic Research (ISER).
When Rep. Hawker asked ISER how they arrived at an inflated oil price prediction of $110 per barrel, they replied in a letter that the price was established by AEA's Haagenson.
When confronted with ISER's response by Rep. Hawker; Haagenson admitted he was responsible for the inflated price.
At a February 4 meeting, the LBA tasked the audit division to "evaluate and recommend alternative energy projects for funding" under the terms of legislation passed last year to provide state assistance for renewable energy projects.
Instead of reviewing all of the seventy seven projects, Rep. Hawker (R-Anchorage) requested the Division of Audit review a selected group of projects. The division chose five randomly selected projects out of the dozens proposed, and found four out of five had raised red flags.
In their report issued Feb. 17, the division identified "a variety of areas on which AEA did not follow its established methodology or was not as comprehensive or complete as other (state and federal) agencies are when evaluating alternative energy projects."
For the proposed Ambler Solar PV Construction, the division found that the AEA did not even request a business plan for the applicant, AVEC, because they had worked with the group before.
But more alarming was the fact that AEA supported the solar project even though they just released a statewide energy plan which they concluded that "solar holds little promise to reduce Alaska's dependence on fossil energy."
Another project, the Kongiganak Wind Farm, had an outside analysis done by Northern Economics according to AEA. However, when the audit division contacted Northern Economics, they denied ever reviewing the project. Later, AEA told the auditors that the project was not given an external economic review due to "oversight and timing."
The remaining projects, the Wrangell Hydro and Delta Junction Wood Chip proposals;Â auditors found that AEA had padded the projects viability score based on inflated benefit/cost equations.
The auditor's report concluded that "there is a higher than necessary risk that the projects will not be successful."
But none of this apparently matters.
Apparently it doesn't matter that a random selection of five projects revealed that four of them raised serious questions about the agency's diligence in accurately evaluating their economic viability.
Apparently it doesn't matter that lawmakers, AEA and the governor have no idea if any these projects make economic sense or will actually work because they haven't been properly vetted.
Apparently it doesn't matter that this will be $100 million spread around the state to win political friends and appease voters but offering no promise of sustainability. Just the promise of another opportunity to learn yet again, what happens when the state's pocket book is faster than its brain.
What apparently matters is smash mouth politics, where public policy makers agree to throw $100 million of taxpayer money at energy projects that they know haven't been adequately studied.
A majority of the LB&A committee voted to spend the $100 million because they didn't want to piss off the Co-Chair of the Senate Finance who just happened to be a rural lawmaker under pressure from his district to help with soaring energy costs. (There were two no votes; Rep. Doogan and Rep. Stoltz)
Lawmakers and the governor are agreeing to spend this money so they can say they are doing something; when in reality, what they're doing is putting the cart before the horse to the tune of $100 million. They're tossing $100 million into these projects hoping something works.
Ironically, just last week, Governor Palin accused President Obama's stimulus plan of doing the same thing.
"In the end the majority allowed the spending to balloon and encompass support for programs that don't respond to the problem at hand. It's not fair to Alaskans to create expectations about programs that wouldn't be sustainable, so we'll need to look at the federal funding on a case-by-case basis," Palin said in a press release on Feb. 16.
Let's see; the auditors raised red flags on four out of five randomly selected alternative energy projects on concerns about their economic sustainability.
The auditor faults the current process and suggests a more "aggressive grant management process," but yet lawmakers respond by immediately approving $100 million without any strings attached or performance demands.
What was the governor's quip circa 2007?
"There needs to be an adult in the house."
Yeah, that's it......an adult in the house.