Energy Department auditors are so concerned about the viability of a government-backed clean coal project, they’ve issued a report before their audit has been completed, warning the Obama administration they could be wasting hundreds of millions of tax dollars.
The DOE’s inspector general issued a report on the Texas Clean Energy Project, a government-backed effort to commercialize carbon capture and storage (CCS) technology. The IG warned Obama administration officials the project is on shaky ground and could lose taxpayers a whopping $450 million.
“Although we have not yet completed our audit, we are issuing this Special Report to communicate our immediate concern about the Project to allow the Department sufficient time to take actions to protect taxpayer funds,” the IG warned in a recent report on the viability of The Texas Clean Energy Project (TCEP).
“Although construction of the plant was originally planned for completion in June 2014, the Project remains in the project definition phase,” the IG warned. “Additionally, we found that the Department had taken actions that increased its financial risk in the Project.”
DOE signed a $1.7 billion cooperative agreement with Summit Texas Clean Energy LLC in 2010 to finance the CCS coal plant in Texas, which was estimated at the time to only cost $1.9 billion. Now, the project’s costs have doubled to $3.9 billion and delays cost taxpayers even more money.
“As of February 2016, the Department had invested about $116 million in the Project without assurances that it would succeed,” the IG noted.
“Over the course of the Project, the Department has taken actions that increased its financial risk without assurances that the Project would succeed,” the IG’s audit warned. “In particular, the Department provided multiple extensions to the period of performance for the project definition phase, extending it by more than 5 years.”
“Furthermore, the Department accelerated the use of Recovery Act funds and reduced Summit’s Project cost-share requirement to help it with liquidity needs, both of which put more taxpayer funds at risk if the Project does not move forward,” according to the audit. “The Department additionally shifted about $90 million in Federal funds earmarked for detailed engineering activities in phase 2 to the project definition phase.”
DOE is under political pressure to help make the technology commercially viable since it’s now being mandated for new coal plants by the Environmental Protection Agency.
But CCS just hasn’t taken off like government planners had hoped. TCEP is no exception, according to the DOE IG’s report. Now, agency auditors are worried the project may not even be viable anymore because it hasn’t gotten the financing it needs to even begin construction.
At the end of 2013, the Texas utility CPS Energy pulled out of a 25-year agreement to buy power from TCEP. The project, run by Summit Power Group, is one of four coal projects in development using CCS that the EPA cited to justify its commercial viability.
TCEP was supposed to be completed and operational by June 2014, but it’s still in the “definition phase” and has already cost taxpayers $116 million. If it had been on schedule, EPA would have had at least one real-world example of CCS in action by the time they finalized the so-called Clean Power Plan.
“Due to Summit’s inability to obtain the required commercial debt and equity project financing and the adverse effect of changing energy markets on the demand for coal-based power plants, we are concerned about the viability of the Project and the Department’s continued involvement,” the IG’s office wrote.
“In the absence of commercial debt and equity financing, Summit will be unable to contribute its share of costs and move forward with the Project,” reads the IG’s report.
CPS told The Daily Caller News Foundation in 2013 that competition from cheap, abundant natural gas and continued project delays contributed to their decision to break their power purchase agreement with TCEP.
“CPS Energy extended Summit’s deadlines for milestones three times, understanding that power plant construction does not always follow a precise timeline,” the utility said.
TCEP’s problems play into the hands of 30 states and state agencies suing EPA that its de facto CCs mandate for new coal plants is unworkable and violates federal law. Pro-coal advocates pointed out that EPA’s own regulatory analysis didn’t cite any commercial-scale power plants using CCS that are currently in operation.
Instead, EPA cited three U.S. plants under construction or in the planning phase, all of which are being funded with taxpayer dollars. The EPA also cited one Canadian government-backed CCS plant that recently went online.
Republican lawmakers have pointed out that using taxpayer-funded projects as proof that a technology has been commercially proven violates the Energy Policy Act of 2005. Now, lawmakers critical of EPA can point to this audit as ammo against the agency’s global warming plan.
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