Legislature Sticks Taxpayers With $1.45 Million Bill for Hydrogen Fueling Stations

But the maneuver was really just a backdoor deal to get more money for one of House Speaker Bobby Harrell’s favorite economic development programs – without coming out and saying the money was for hydrogen transportation research.

The ConserFund’s goal is to provide loans for “energy-efficiency improvements” to state agencies, public universities, school districts, local governments and private nonprofits. But there’s no way the loans – $840,000 to Columbia and $600,000 to Aiken County – could conserve very much energy in a state with just two hydrogen-powered vehicles.

What’s more, while the original intent of the program was for borrowers to repay loans over several years, the legislature’s actions have turned the ConserFund into little more than a covert grants fund, with taxpayers footing the bill.

Since 2000, the ConserFund has made nearly 40 loans to about two dozen different entities, ranging from Clemson University and Florence County School District 3 to the Budget and Control Board’s Division of General Services.

During that time, about $14.5 million has been loaned out. Loans are typically made for 4 to 10 years, with interest rates usually ranging from 1 percent to 3.9 percent.

Perhaps not surprisingly, it appears politics has played a role in determining where at least some of the ConserFund money has gone.

S.C. Energy Office Director John Clark said he was contacted by Budget and Control Board Executive Director Frank Fusco in 2008 to see if the hydrogen fueling stations would qualify for ConserFund loans. The state Energy Office operates under the Budget and Control Board.

Fusco told Clark that he believed the legislature would be willing to pay the loans off, rather than having the recipients repay the funds, as the program was designed.

Later in 2008, both the city of Columbia and Aiken County submitted applications for funding for hydrogen fueling stations. Approval was granted with terms that called for the money to be repaid with 3 percent interest over 10 years.

Beyond the fact that the legislature has decided to use the ConserFund as a thinly disguised subsidy fund, it’s clear the hydrogen loans don’t even meet the program’s criteria:

  • According to the SC Energy Office’s website, “The Fund is focused on supporting the implementation of energy-efficiency improvements that provide long-term cost reductions.” How a pair of hydrogen fueling stations in a state with just two hydrogen-powered vehicles (and where hydrogen fuel costs considerably more than gas) will provide any cost savings isn’t apparent.
  • “Priority is given to energy conservation projects with fast energy-savings paybacks.” Given the cost of hydrogen and the expense associated with the infrastructure necessary to make hydrogen-powered vehicles even remotely feasible, a “fast” energy-savings payback is utterly impossible. Earlier this year, in fact, the Obama administration hesitated in recommending that federal dollars be spent on hydrogen transportation research because the infrastructure is too costly and would take too long to develop – up to 20 years.
  • “Repayments are generally calculated so that projected energy savings cover loan payments.” Again, there can be no energy savings when there are essentially no hydrogen-powered vehicles in South Carolina.

The free money that found its way into the coffers of Columbia and Aiken County is a repeat of what occurred a year earlier.

In 2007, $1,929,000 in ConserFund money went to the Donaldson Development Commission, which operates the Donaldson Center Industrial Air Park. Jointly owned by the city of Greenville and Greenville County, the Donaldson Center Industrial Air Park was renamed the S.C. Technology and Aviation Center in 2008.

The 8-year state-backed loan was for renovation and refurbishing of hangers, and replacement of oil-fired furnaces with new forced-air suspended gas furnaces.

In the end, South Carolina taxpayers ended up paying for improvements to the facility. In the spring of 2008 the General Assembly appropriated $1.9 million to the Department of Commerce, money Commerce was forced to use to retire the debt on the loan to the Donaldson Development Commission. This despite the fact that while the park itself is owned by the city and the county, it’s home to more than 80 technology and aviation businesses, including Lockheed Martin, 3M Corp. and Michelin.

The legislature gave away nearly $3.4 million in tax dollars in a little more than a year to pay off loans taken out by the city of Greenville and Greenville County for an Upstate business park, and by the city of Columbia and Aiken County for hydrogen fueling stations.

All the while, lawmakers kept up the drumbeat that South Carolina was so short of money that teachers were but a blink of an eye from joining the ranks of the unemployed and criminals were ready to be unleashed on the public for want of funding.

In reality, the General Assembly’s threats were nothing more than a political ploy, an opportunity to dole out perks through a nebulous state-run program, win votes by employing scare tactics and grab more power for themselves. Pretty much business as usual.

Nothing in the foregoing should be construed as an attempt to aid or hinder passage of any legislation. Copyright 2009. South Carolina Policy Council Education Foundation, 1323 Pendleton Street, Columbia, South Carolina 29201.

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