Last week, the Legislative Budget and Audit Committee (LBA)Â quietly approved $100 million inÂ taxpayer money to be used for a collection ofÂ renewable energy projects funded throughÂ the Alaska Energy Authority (AEA).
Shockingly, lawmakersÂ approved the money just hours afterÂ the Division of Legislative AuditÂ released a report that raised serious questions about AEA'sÂ due diligence in determining the economic viability of these speculative projects.
The reportÂ foundÂ 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 reportÂ and voted to give the money to AEA, even though the report was shorthand forÂ "AEA is cookingÂ the numbers on four outÂ five projects we reviewed."
Last year the legislature passed HB 152 which created a $100 million renewable energy fund to be usedÂ 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 passedÂ oil was at $110 per barrel, many of these projects made economic senseÂ with high oil and the stateÂ swimming in cash. Today, oil sits at $36 per barrel alongside a $1.6Â billion budget deficitÂ and someÂ feel these alternative energy projects cannot be sustained.
On October 7, 2008, whenÂ Governor PalinÂ was managing the state from her Blackberry, the LB&A Committee held a hearing with the governor's energy czar, Steve Haagenson,Â to get a report on his management of AEA's renewable grant selection process.
The AEA, under the leadership ofÂ Haagenson,Â has the responsibility to oversee the grant program. His agency has proposedÂ 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 questionedÂ Haagenson and staff aboutÂ 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 displacementÂ cost of $110 per barrel. When asked why heÂ was using such an unrealistic price per barrel, HaagensonÂ claimed he got the number from projections issued inÂ a report byÂ 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 ofÂ $110 per barrel,Â they replied in aÂ letterÂ that theÂ price wasÂ established by AEA's Haagenson.
When confrontedÂ with ISER's response by Rep. Hawker;Â Haagenson admitted heÂ was responsible for the inflated price.
At a February 4 meeting,Â the LBA tasked the audit division to "evaluate and recommend alternative energy projects for funding" under the terms ofÂ 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, andÂ foundÂ four out of five had raised red flags.
In their report issued Feb. 17,Â the divisionÂ identified "a variety of areasÂ on which AEA did not follow its established methodology or was not as comprehensive or complete as otherÂ (state and federal)Â 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 projectÂ even though they just released a statewide energy plan which they concluded that "solar holds little promiseÂ 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 deniedÂ 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 ofÂ five projects revealed thatÂ four of themÂ raised serious questions about the agency's diligence in accuratelyÂ evaluating theirÂ economic viability.
Apparently it doesn't matter thatÂ lawmakers, AEA and the governor haveÂ noÂ 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 whenÂ theÂ 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 moneyÂ at energy projects that they know haven't been adequately studied.
AÂ majority of the LB&AÂ committeeÂ voted to spend the $100 millionÂ 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 withÂ soaring energy costs. (There wereÂ two no votes; Rep. Doogan and Rep. Stoltz)
Lawmakers and the governor are agreeingÂ to spend this money so they canÂ say they areÂ 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 accusedÂ 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.Â 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 aÂ press release on Feb. 16.
Let's see; the auditorsÂ raised red flags onÂ four out of five randomly selected alternative energy projectsÂ onÂ concerns about their economic sustainability.
The auditorÂ faults the current process and suggests a more "aggressive grant management process," but yetÂ lawmakers respond by immediately approving $100 millionÂ 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.