Investing in Foreign Countries

House Committee finds Obama stimulus cash flowing to foreign companies

Wind farm / AP
• January 18, 2013 5:57 pm


The House Energy and Commerce Committee released a report Thursday that shows much of the money in a Department of Energy renewable-energy grant program has gone to foreign companies and has failed to produce many jobs.

"American Taxpayer Investment, Foreign Corporation Benefit" examined the grants the Department of Energy has awarded through its "Section 1603" green-energy grant program.

"Nearly one-quarter of this federal grant funding went to the U.S. operations of a handful of large European and Asian renewable energy corporations," the report said.

The report also noted the lack of job growth: "The Section 1603 grant program has not been a dependable agent of long-term job creation."

The federal government has used tax credits to encourage green energy development since the 1970s. However, the financial collapse in 2008 reduced corporate profits.

These companies saw their tax liabilities to which they could apply a tax credit either shrink or vanish altogether as a result, said William Yeatman, an energy policy expert at the Competitive Enterprise Institute. This destroyed any incentive companies had to pursue green energy production

The federal government, in an effort to recreate the incentive, transformed the tax credit into a cash grant in which companies, especially wind-power developers, would receive 30 percent of the capital cost in a grant, Yeatman said. The government made this change in Section 1603 of the 2009 American Recovery Act, better known as the stimulus bill.

"The stimulus’s purpose was to create jobs," said Yeatman. Each job created by the grant program cost $1.2 million, according to the report.

"That cost-per-jobs figure is eye-popping," Yeatman said.

Iberdrola Renewables, the American wing of a Spanish renewable energy company, received $1.77 billion spread over 24 grants, over 10 percent of the total grants awarded.

One such section 1603 grant received by Iberdola was a $72.6 million disbursement for the Barton Chapel Wind Farm in Texas, a project that came under scrutiny in a New York Times article. The Times revealed that the Iberdrola project and others like it were already well underway when Congress passed the stimulus and awarded the grants.

"In some cases, it is unclear whether the program actually stimulated development in the renewable energy sector or simply subsidized projects that the private sector would have come around to on its own," the congressional report said.

"The program shouldn’t have existed in the first place," said Nicolas Loris, an economist at the Heritage Foundation.

He said the government does not come out ahead whether the subsidized companies succeed or fail. If the companies fail, he said, they should not have received help they could not get in the private sector, and the government is simply padding their profits if they succeed.

"This is corporate welfare," Loris said, adding that these kinds of decisions are "better left to the private sector."

Yeatman accused some companies of "double dipping," noting that many companies receiving the grants were also receiving loan guarantees from the government.

Iberdrola defended the 1603 program, arguing it has helped local economies and created jobs.

"Foreign direct investment has always been a valuable source of U.S. economic growth, and the $6 billion in U.S. investments by Portland-based Iberdrola Renewables since 2009 is a direct result of the 1603 program," Iberdrola spokesman Paul Copleman wrote in an email to the Free Beacon.

He said the grant program has helped buoy both construction and maintenance jobs at the physical sites and jobs along the supply chain.

"In an era when so many American communities have suffered from the migration of capital and jobs to other countries, we would think Congress would consider a program that brings investment into the U.S. to be a success story," he wrote. He cited the Blue Creek project as an example of investment in a local economy.

The Department of Energy did not return a request for comment.