Obama administration gives billions in stimulus money without environmental safeguards

By Kristen Lombardiand John Solomon
Center for Public Integrity
Sunday, November 28, 2010; 9:41 PM

In the name of job creation and clean energy, the Obama administration has doled out about $2 billion in stimulus money to some of the nation's biggest polluters while granting them exemptions from a basic form of environmental oversight, a Center for Public Integrity investigation has found.

The administration has awarded more than 179,000 "categorical exclusions" to stimulus projects funded by federal agencies, freeing the projects from review under the National Environmental Policy Act, or NEPA. Officials said they did not consider companies' pollution records in deciding whether to grant the waivers. They said that creating jobs quickly was an important part of the stimulus plan, and that past environmental violations should not disqualify a company from pursuing federal contracts for unrelated projects.

The projects include:

- An electrical-grid upgrade project in Kansas led by Westar Energy, the state's largest coal-burning utility, which settled a major air pollution case by paying half a billion dollars in penalties and remediation costs. The Energy Department granted the NEPA waiver to Westar's project, funded by a $19 million stimulus grant that was approved on the same day the settlement became official. Westar considers its "smart grid" project to be "our basic,standard, above-ground upgrade," said Brad Loveless, the company's environmental director. "From everybody's perspective, there really wasn't the potential for smart grid to have environmental problems."

- A wind farm project in Texas, as well as an electrical-grid upgrade project in five additional states, undertaken by Duke Energy. The department granted the NEPA waiver to both Duke projects, funded by a combined $226 million in stimulus grants, even as the energy corporation continues its decade-long defense against two of the largest air pollution cases involving coal utilities in the nation's history. "We're basically adding communication infrastructure on top of what is already there so it is not disturbing the environment," Duke's Paige Layne said.

- A project to create clean-burning biofuel from seaweed led by chemical giant DuPont, which received $8.9 million in stimulus funds in February. That amount nearly equals the environmental fine DuPont paid in 2005 for hiding the dangers of its toxic chemical known as C8 from federal regulators for two decades. In a statement, DuPont stressed that it "has not applied for an environmental exclusion" for its project, but rather is "following the necessary process set forth by the Department of Energy." It concludes, "Each project that we work on includes, by our own policy, a comprehensive and individualized product stewardship program."

In all, about three dozen of the country's biggest polluters with past environmental problems won NEPA exemptions for the stimulus grants totaling $2 billion from the Energy Department - about 6 percent of the department's total money awarded so far.

Passed by Congress in 1969, NEPA provides one of the few proactive protections in an environmental enforcement system that typically relies on penalties after the fact. The law requires companies to study possible threats to the landscape, wildlife or human health before proceeding with a major federally funded project. Industry groups and their allies on Capitol Hill have long complained that the process can delay projects by months and even years, costing millions of dollars.

Career employees who granted NEPA exemptions said that their screening process does not consider a company's environmental record as they lack the ability to easily access such information. Even so, they said that the NEPA process focuses on specific projects, and that a company's environmental record isn't pertinent to its stimulus work on unrelated projects.

Environmentalists and people who have suffered from the companies' past pollution disagree and say the exemptions should not have been granted.

"It's outrageous to give these companies these big breaks when they haven't earned a bit of trust from the communities around them," said Joe Kiger, a Parkersburg, W.Va., schoolteacher who lived in a neighborhood affected by drinking-water pollution traced to DuPont. "I'm all for the stimulus, and I'm all for job creation, but not at the expense of the environment and human health."

Administration officials say the exemptions were essential to accelerate more than $30 billion in stimulus-funded clean-energy projects through the Energy Department, which already have created 35,000 jobs. In the long run, they add, the exempted activities will boost energy efficiency and curb pollution.

"What we are doing is providing federal funding to increase energy efficiency and increase the use of clean energy," said Scott Blake Harris, the Energy Department's general counsel. "I think that sends a good message to the entire American public, whether or not there are companies that have decided to do environmentally good things after doing environmentally bad things."

This approach to stimulus projects has left the Obama administration at odds with some of its supporters in the green movement. Environmental advocates said the goals of creating a clean energy economy and more jobs do not outweigh the risks of funding repeat violators of anti-pollution laws and forgoing supervision.

"Why bring somebody who was a known bad actor and give them government money and a categorical exclusion for their project?" asked David Pettit, a senior attorney at the Natural Resources Defense Council.

Ethanol producer Didion Milling received $5.6 million in stimulus money for an energy-efficiency project just weeks after a federal court ruled that the company had repeatedly violated the federal Clean Water Act, according to documents obtained by the Wisconsin Center for Investigative Journalism, which collaborated with the Center for Public Integrity. Didion landed the NEPA exemption in March for expanding its plant in ways that "conserve energy," the documents say.

Dale Drachenberg, the company's vice president of operations, said the project will enable the company to use 25 percent less power for every gallon of ethanol it produces. "Since the day we started construction on our ethanol-production facility," he said, "we've made innovation and conservation top priorities."

Didion is installing new equipment at its ethanol plant, "things that are easy to do and should not have a negative impact," said Mark Lusk, the NEPA compliance officer who granted the exemption at the Energy Department. He did not see any red flags in Didion's case, he said, and did not look into any past compliance problems.

The department has carved out regulatory exceptions for entire programs of stimulus money. One NEPA officer cleared all stimulus-funded projects to upgrade electrical grids. The Smart Grid Investment Grant Program involves many of the nation's biggest polluting utilities, including Westar and Duke. Companies say their projects simply are installing new equipment such as smart meters and high-speed sensors on existing distribution systems.

"As a government, I feel we always have to give somebody a break," said Fred Pozzuto, another NEPA officer at the Energy Department. "We have to always be forgiving and look at this on a project-by-project basis."

The idea of granting NEPA exemptions for stimulus recipients was first raised in Congress when the law was being crafted in early 2009. Sen. John Barrasso (R-Wyo.) offered an amendment exempting projects whose NEPA reviews would take longer than 270 days. Two dozen industry groups sent senators a letter backing the proposal while environmental advocates mounted a robust protest.

"Special interests will assert we cannot afford the NEPA process in a time of national urgency," 31 environmental groups argued in a Jan. 13, 2009, letter to House Speaker Nancy Pelosi (D-Calif.), Senate Majority Leader Harry M. Reid (D-Nev.) and Sen. Barbara Boxer (D-Calif.). "The truth is we cannot afford that kind of leap-before-you-look rashness."

The green groups prevailed. Lawmakers declined to insert a broad exemption into the stimulus legislation. Instead, senators passed an amendment, negotiated by Boxer and Barrasso, mandating "expeditious" NEPA reviews. To give a categorical exclusion, officials must conclude that a project won't "individually or cumulatively have a significant effect on the human environment."

At a meeting of the nation's governors in February, Energy Secretary Steven Chu said his department would issue categorical exclusions for some of the stimulus activities aimed at advancing clean energy. The goal, he said, was to "get the money out and spent as quickly as possible."

"It's about putting our citizens back to work," Chu said.

In filings with Congress, the administration has reported handing out exclusions to 96 percent of stimulus projects funded by $293 billion so far. The Energy Department, for its part, has granted NEPA exemptions to 99 percent of all stimulus projects it has funded so far - 8,012 actions costing $33 billion.

The White House Council on Environmental Quality, which oversees compliance with NEPA, told the Center for Public Integrity it did not keep historical records on the percentage of federal projects that get NEPA exemptions and could not say how the NEPA exclusions for stimulus projects compared with past years.

Kate Golden of the Wisconsin Center for Investigative Journalism contributed to this report.

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