Pat Stryker’s Abound Solar “will close its doors and file for bankruptcy” next week according to the Department of Energy (DOE) blog. Because the bankruptcy means roughly $70 million in lost taxpayer money, we take no joy in saying that “we told you so.” Back on January 11, 2012, we wrote:
Unfortunately for taxpayers who provided a $400 million loan guarantee for Abound, 2012 may be the year that the sun sets on Pat Stryker’s pet project.
Apparently taxpayers have been venture capitalists invested in Abound Solar since 2007, well before the controversial $400 million taxpayer-guaranteed loan:
In 2007, the Department awarded the company a grant to support a pilot project to demonstrate the viability of its manufacturing process. In December 2010, the Department issued a loan guarantee to support the construction of two commercial scale plants: one in Longmont, Colorado and a second new facility in Tipton, Indiana.
Perhaps Abound should have heeded Ronald Reagan’s warning when he said the nine most terrifying words in the English language are “I’m from the government, and I’m here to help.” John Keyes, founder of the first commercial solar energy corporation, knows this first hand. He explained in an interview that the worst thing to happen to the industry he loves was government involvement which began in the Carter Administration.
Rob Douglas wrote on WatchDog.org that the bureaucratic red tape involved with DOE loans ends up hamstringing businesses like Abound:
For example, the $400 million loan-guarantee agreement between Colorado-based Abound Solar and the DOE reveals that Abound Solar — and, it is safe to assume, all loan-guarantee recipients — had to comply with a staggering range of federal laws and regulations, including, but not limited to:
- The Recovery Act;
- The Davis-Bacon Act; Office of Management and Budget regulations;
- Environmental laws (including those involving “air emissions, discharges to surface water or ground water, noise emissions, solid or liquid waste disposal, the use, generation, storage, transportation or disposal of toxic or Hazardous Substances or wastes, or other environmental health or safety matters”);
- The Investment Company Act;
- The Employee Retirement Income Security Act;
- Buy American regulations;
- Lobbying laws;
- Foreign asset control laws;
- Prohibited person laws;
- Prohibited jurisdiction laws;
- Corrupt practices laws;
- The Anti-Terrorism Order.
Scratch the surface of any one of the above categories and you find requirements like this one, in the OMB compliance section:
“OMB shall have certified in writing (in form and substance satisfactory to DOE) that the DOE Credit Facility Documents and the Project comply with the provisions of the Omnibus Appropriations Act, 2009, P.L. No. 111-8, Division C, Title III, as amended by Section 408 of the Supplemental Appropriations Act, 2009, P.L. No. 111-32.”
Keep in mind that’s just one provision in more than 100 pages of detailed requirements that span the breadth and depth of federal laws and regulations. And in case the loan guarantee agreement by the DOE is not suffocating enough, the following legal, financial and regulatory blanket — as revealed in the Abound Solar documents — is placed atop the specific, enumerated rules and regulations loan-guarantee recipients are required to obey:
“All provisions of this term sheet are subject to the following (the “Program Requirements”): (i) the provisions of Title XVII, all applicable provisions of the Recovery Act, and the Applicable Provisions, (ii) all DOE or Federal Financing Bank (“FFB”) legal and financial requirements, policies, and procedures applicable to the Title XVII program from time to time, and (iii) the Office of Management and Budget’s Initial Implementing Guidance for the Recovery Act, M-09-10 (February 18,2009), Updated Implementing Guidance for the Recovery Act, M-09-15 (April 3, 2009), Updated Implementing Guidance for the Recovery Act, M-09-21 (June 22, 2009) and, in each case, any amendment, supplement or successor thereto (collectively referred to herein, the “OMB Implementing Guidance”).”
The Abound Solar loan-guarantee documents suggest that a newborn company, which lays down with the DOE, runs the risk of being smothered by the federal leviathan before ever bringing a product to market.
Not surprisingly, the DOE doesn’t take any responsibility for smothering the newborn. Instead, it blames China and then claims the answer is MORE taxpayer money. That might explain its cavalier attitude about losing taxpayer money:
While disappointing, this outcome reflects the basic fact that investing in innovative companies – as Congress intended the Department to do when it established the program – carries some risk.
Of course, there really isn’t much “risk” when using someone else’s money.
Complete Colorado‘s Todd Shepherd reported, that Abound’s DOE loan guarantee had the appearance of more than just an investment in an upstart solar company. It looked a little more like political payback in a classic pay-to-play scheme. The billionaire heiress Pat Stryker could have financed the entire project herself, but instead used her political connections to put taxpayers on the hook.
For its part, in an online press release, Abound says it’s “appreciative of the significant investment from private investors and the U.S. Department of Energy.” Abound should be “appreciative” toward taxpayers who footed much of the bill for Styker’s and President Obama’s green fantasy.