What kind of project pays a couple of politically connected people hundreds of thousands of dollars for producing next to nothing? An Obama stimulus project, of course.
More than four years after President Barack Obama signed the $787 billion stimulus package into law, troubling details continue to emerge. Earlier this month, for example, the nonprofit news site WyoFile reported that a $10 million stimulus project in Wyoming has been suspended and referred to the U.S. Attorney’s office for an investigation into possible fraud.
Between 2009 and 2010, the federal government awarded two stimulus grants totaling more than $9.9 million to Colorado-based North American Power Group (NAPG). The funding was designated for a “characterization” study to determine whether a river basin near the Two Elk Energy Park in northeast Wyoming had potential as an underground site for carbon storage. However, as WyoFile has extensively documented, the project appears, at best, to have been a questionable use of taxpayer dollars. The project created zero jobs, according to Recovery.gov, and many of the study’s primary components, including the drilling of a deep “characterization well,” were never completed — or even formally initiated. Records show nearly $3 million in dubious invoices from North American Land & Livestock, a company managed by NAPG CEO Michael Ruffatto.
Federal records also reveal that at least $1.1 million in stimulus funding went toward paying the salaries and benefits of two NAPG employees: Ruffatto and Wyoming representative Brad Enzi, the son of U.S. Senator Mike Enzi (R., Wyo.). Ruffatto was reportedly compensated with taxpayer funds at a rate exceeding $500,000 a year, while Enzi earned nearly $130,000 for his work on the project between September 2009 and July 2011, at a rate of about $80 per hour. Ruffatto received more than $73,000 in salary and benefits in October 2010 alone, after he reported working 76 hours per week on the project, in addition to his other responsibilities as NAPG chief executive. Enzi earned as much as $17,363 in one month. Enzi told WyoFile he was unaware of the accounting details of his work on the project, and he denied receiving any special treatment owing to his father, a stimulus opponent.
In contrast, a similar stimulus-funded characterization study conducted by the University of Wyoming has made considerable progress and avoided exorbitant salary and benefit costs. The highest-paid worker on the project was a research scientist who earned $110,000 in salary and benefits.
Ruffatto, a millionaire philanthropist and socialite with homes in Colorado and California, has not contributed extensively to federal politicians, but his donations have been mostly to Democrats. He gave $4,800 to the successful campaign of Senator Michael Bennet (D., Colo.) in 2010 and contributed $2,300 to Hillary Clinton’s presidential bid in 2007. Ruffatto also donated to Senator Jon Kyl (R., Ariz.) in 2005.
The Department of Energy (DOE) ultimately suspended the NAPG project in January 2012, and the project is currently under review by the U.S. Attorney’s office in Pittsburgh. The attorney in charge of the case, Paul Skirtich, specializes in fraud and public-asset recovery.
The central focus of the Two Elk project — carbon-capture technology — was an important aspect of President Obama’s green-energy agenda. The stimulus package provided nearly $1.5 billion in funding for the DOE’s Industrial Carbon Capture and Storage Program, and in 2010 the president established an interagency task force to promote the “rapid commercial development and deployment of clean coal technologies, particularly carbon capture and storage.”
A March 2013 audit by the DOE’s inspector general (IG) found that the department had “not always effectively managed” the carbon-capture program and appears to cite the Two Elk project as an example. The IG report notes that the DOE reimbursed one grant recipient (working on a project that was suspended in January 2012) about $3.7 million, or nearly 75 percent of the total award, “even though documentation submitted to the Department lacked evidence that the costs claimed corresponded to the items in the approved project budget.”
The audit reviewed 15 out of 46 stimulus-funded “cooperative agreements” such as the Two Elk project, which had received a combined $1.1 billion in taxpayer funding. The reported identified up to $18.3 million in “questionable reimbursement claims.” Three particular recipients were awarded a combined $90 million despite “significant financial and/or technical issues” identified during DOE’s merit-review process, the report found, including $48 million in funding given to a recipient “whose financial condition precluded it from obtaining a satisfactory merit review.” And the DOE had failed to review millions of dollars’ worth of contracting arrangements to ensure they did not involve conflicts of interest; the audit identified more than $1.4 million in transactions between one grant recipient and an affiliated company that had representatives on the board of directors at the recipient’s firm.
These figures pale in comparison with some of the more high-profile stimulus failures such as Solyndra, the California solar-panel firm that went bankrupt after receiving more than half a billion dollars in taxpayer-guaranteed loans. But the numbers add up, and all in all they do not inspire confidence in the government’s ability to spend taxpayer dollars wisely. Agency inspectors’ general audits routinely shed light on this sort of fiscal mismanagement.
Perhaps the only upside is that the federal government is even inefficient when it comes to wasting money. The DOE IG’s report found that as of February 2013, four years after the stimulus was signed, and more than two years after the funding for the carbon program was fully obligated, less than 42 percent ($623 million) had actually been spent.
— Andrew Stiles is a political reporter for National Review Online.