Today, the Washington State Department of Commerce released its assessment of the Energy Freedom Program, created in 2006 to “promote public research and development in bioenergy.” As part of the program the state loaned just over $10 million to four companies, in partnership with public entities, to generate biofuels and renewable energy. One company just began operations in July, but the other three have been operating for a few years now and are a useful guide to the failure of political efforts to create a “green” economy.

Of the three remaining projects, all three are struggling or failed, putting at risk the $4.4 million still owed taxpayers by these companies. Here is the rundown:

  • Inland Empire Oilseeds. Late last year, Inland Empire Oilseeds declared bankruptcy for the second time in three years. They still owe the state more than $3 million on their loans. Although the Department of Commerce says it “anticipates contracting with a new management entity in the near future,” IEO entered Chapter 7 bankruptcy in anticipation of liquidation, not reorganization.
  • Natural Selection Farms. Owing more than $400,000 on its loan for its oilseed crushing facility, they did not make a payment on their loan in 2012 and will not in 2013. The Department of Commerce notes that these payments will be deferred until June 1, 2018.
  • DeRuyter and Sons Farms. The family operation received nearly $2 million to build an anaerobic digester which would use methane to create renewable energy. The project, however, is now losing money and is under reorganization. As the Capital Press reported recently, the project “ceased being profitable at the end of 2012 as the return…dropped from 6.5 cents per kilowatt-hour to 3.5 cents, below the break-even of 6 cents.” The project still owes more than $700,000 to the state.

The remaining project, Pacific Coast Canola, is operating at 50 percent of its capacity and still owes the state $1.3 million on its loan. The company reports it expects “it to take time to fully develop the PCC business as part of the normal transition into a commercial producer.”

Two lessons stand out.

First, these loans are another example of the failure of political programs to create “green” jobs or promote a “green” economy. The money lost on these failed loans came from families and businesses that were creating jobs and sent to failed efforts. With $4.4 million, the state could have supported projects (based on the California cap-and-trade price), cutting 338,461 metric tons of CO2, or nearly 1,500 rail cars of coal or remove the CO2 from 70,512 cars for a year.

Second, as we noted recently in comparing the collapse of Boeing’s Supersonic Transport in the 1960s to current government green energy programs, government is again trying to lure businesses into unsustainable practices with the promise of cheap money. When those business strategies ultimately fail, as they have here, the businesses and taxpayers pay the price. Politicians and those at state agencies who promoted these projects pay no price. Until politicians pay a price for wasting money and resources, they will continue to promote projects that harm the economy and the environment.

This fall, Washington lawmakers will be receiving a report from the Climate Legislative Executive Workgroup outlining possible strategies to cut carbon emissions. We hope they will learn the lesson from the state’s failed “Energy Freedom Account,” and follow an approach that is guided more by effective, market-based approaches and less on the politically driven, failed policies like this one.


[Re-posted from the Washington Policy Center blog; image used under Creative Commons license with attribution, credit: Hjelle]