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Failed energy projects cross U.S. party lines

By Aamer Madhani

USA TODAY

Published: Friday, Oct. 14 2011 10:54 p.m. MDT

Halley Dickey shows Sen. Orrin Hatch one of Raser's portable geothermal plants at a 2008 press conference.

Tom Smart, Deseret News

Enlarge photo»

WASHINGTON — When green-energy company Raser Technologies broke ground on its geothermal power plant more than three years ago, Sen. Orrin Hatch was there to herald the day as a "turning point" in the country's clean-energy future.

At the ceremony in southern Utah, Raser's chief executive officer thanked Hatch for his steadfast support. Utah's Republican senior senator had previously championed an earlier Raser clean-energy project — the development of an AC induction motor that could be used to power a Hummer that could get 100 miles per gallon. The company's executives would later name the Beaver County facility "the Hatch Plant."

But just a month before the groundbreaking for a plant that was supposed to produce 10 megawatts of zero-emission electricity to be sold to the city of Anaheim, Calif. — and help power Disneyland — Raser was already on shaky ground. The company had $51.2 million in debt and less than $6 million on hand, according to Securities and Exchange Commission records.

It was, as Raser warned investors in its annual report, a company that "may be forced to curtail operations, dispose of assets or seek extended payment terms from our vendors."

Still, Hatch, who has criticized President Barack Obama's support of federal loans to solar panel maker Solyndra, now in bankruptcy court, gushed about the bright future of geothermal energy in the United States and boasted that a new era was being led by one of Utah's own.

"Raser Tech is a company that has consistently pushed the envelope to develop, and bring to market, some of our nation's most advanced concepts in clean energy, and I congratulate this Utah business for being first out of the gate to use the latest technology to convert the earth's natural heat into the world's cleanest energy," Hatch said.

In April, the company that Hatch touted as on the cutting edge filed for Chapter 11 bankruptcy protection — never coming close to producing the 10 megawatts that were projected at the Hatch Plant.

Since Solyndra's collapse, Republican lawmakers have criticized as misguided the Obama administration's attempt to boost the clean-energy industry.

Much of the GOP criticism has centered on the fact that one of Solyndra's top investors was a foundation controlled by a top Democratic fundraiser, and Republican lawmakers have raised questions about why the Department of Energy green-lighted a $535 million loan guarantee despite internal debate about the long-term viability of the California company. Many Republicans — including Hatch — have also questioned whether Solyndra ultimately had a sound business plan that was worthy of U.S. government backing.

But Hatch — who in a Fox News interview last month called the Solyndra collapse a "disgrace" and questioned the administration's decision to "put $535 million into a program that has a poor business plan" — hasn't had much to say about Raser since its collapse. That's although he has met with company officials repeatedly to discuss clean-energy policy since 2004.

Much like Solyndra, Raser Technologies was once one of the darlings of the clean-tech industry, and its collapse was perhaps as dramatic. When the company filed for bankruptcy court protection, it listed $107.8 million in debt and $41.8 million in assets.

In the bankruptcy filings, Raser bore little resemblance to the once-promising clean-energy firm that magazine Fast Company ballyhooed as a hot property in 2009 after it launched the Utah plant.

For years, company officials told investors they would be able to turn the relatively low-temperature geothermal waters under the Hatch Plant into electricity by using small generators. Raser even had plans to develop seven more sites in the United States and said it would be producing more than 600 megawatts within five years.

So far, however, Raser, which was renamed Cyrq Energy as part of its bankruptcy reorganization, is producing about 7 megawatts for its lone client. Cyrq Energy did not respond to requests for comment.

Raser's executives also spun off their electric-vehicle division into a new company, Via Motors. Raser founder Kraig Higginson announced in February that he was leaving Raser to focus on his job as Via's CEO. Former Raser directors and executives Alan Perriton and Richard Clayton also joined the newly formed company.

Higginson, Perriton and Clayton did not respond to requests for comment made through Via.

Criticism and silence

Hatch, who was first elected in 1976, would not comment for this report. However, his spokesman, Matthew Harakal, said there is no inconsistency between his criticism of Solyndra and his reluctance to discuss Raser.

Harakal said Hatch's support for Raser's geothermal project — unlike the Obama administration's backing of Solyndra — never included a push for using taxpayer dollars to build the plant.

Raser was eventually awarded a $33 million Treasury Department grant in 2010 for construction of the plant. The company also unsuccessfully applied for money through at least three different Department of Energy loan guarantee programs, according to an SEC filing.

Hatch was not aware of the company's financial difficulties when he took part in the company's groundbreaking ceremony in May 2008, and he was unaware of its applications for any government subsidies, Harakal said. Hatch also attended a second ceremony in November 2008 to celebrate completion of the power plant.

"Showcasing how Utah has a dynamic economy with a tremendous workforce is precisely why Sen. Hatch attended that groundbreaking and meets with Utah business owners across the state," Harakal said. "For Sen. Hatch to talk about a technology that led to the opening of that facility is pretty standard as well."

Hatch is not the only politician who has met with Raser. Former governor Jon Huntsman, now a candidate for the Republican presidential nomination, signed two clean-energy bills into law at the plant in 2009. Former Republican California governor Arnold Schwarzenegger drove a hybrid Raser Hummer near the state capitol in Sacramento in 2009. Montana Gov. Brian Schweitzer, a Democrat, has also met with Raser executives.

The Treasury Department grant was used to pay some of the company's debts, according to a Raser filing with the SEC. But it wasn't enough to keep the company's head above water. It filed for Chapter 11 bankruptcy protection two months after receiving the federal money.

Raser's finances were not a factor in determining its eligibility for the Treasury grant, department spokeswoman Sandra Salstrom said. The program award clean-tech firms grants for building renewable energy facilities.

"It was a blind application process," Salstrom said. "If a project meets the qualifying criteria, then it receives funding."

Longtime backer

While Harakal downplayed Hatch's familiarity with the Raser project, company records and published reports show Hatch has long supported the company's geothermal and automotive projects.

In 2009, Hatch recalled to reporters a serendipitous meeting with Raser executives in 2004 who shared with him their vision of a plug-in vehicle that could get 100 miles per gallon.

Hatch said that the Raser officials — who asked him to back tax incentives for hybrid vehicles — were unaware that he had already been championing legislation for alternative-energy-fueled vehicles for several years. Harakal declined to name which Raser representatives Hatch spoke with in that first meeting.

In January 2005, Hatch wrote on behalf of the company to Edward Wall, the director of the Department of Energy's FreedomCar, a program focused on improving the energy efficiency of cars and trucks. At the time, Hatch had authored a package of tax incentives for alternative-fuel vehicles that was included in 2005 energy bill.

"I have had the goal of lowering the market barriers to the mass production of the best available automotive technologies," Hatch wrote in the letter to Wall obtained by USA Today. "I believe Raser's technology breakthrough will play an important role in achieving this goal."

Three months after Hatch wrote the letter, Raser's vice president of marketing, David West, joined Hatch in Washington for a news conference to endorse clean- energy legislation Hatch was sponsoring.

At another news conference after the power plant's groundbreaking in 2008, Hatch noted that Raser was "supportive" of legislation he co-sponsored with then-Sen. Barack Obama, D-Ill., and Sen. Maria Cantwell, D-Wash., that offered tax incentives for consumers and manufacturers of plug-in electric and plug-in hybrid vehicles.

A year later, in May 2009, Hatch test drove a Raser prototype of a hybrid Hummer on Capitol Hill and called on Obama to ditch a plan to sell the Hummer line to China as part of General Motors' restructuring. That deal collapsed and GM ceased producing the Hummer last year.

Despite these ties, Harakal downplayed Hatch's familiarity with Raser's geothermal project that bears his name. Instead, Harakal said, Hatch's interest in the plant was no different than his support of any innovative Utah business: "Sen. Hatch touts Utah's economy, workforce and the technologies it produces when he can."

The plant and problems

Court documents and SEC filings paint a portrait of a company and power plant that never seemed to have sure footing. For example, the "latest technology" that Hatch touted at the plant groundbreaking — low-wattage power generators manufactured by Pratt & Whitney subsidiary UTC Power — had never been used on such a large-scale project.

Last month, Raser sued UTC Power in federal court, saying UTC duped Raser when it sold Raser 50 of its PureCycle generation units to power the plant. The units were connected like a computer network to generate electricity.

UTC, Raser claims, misrepresented the units' abilities to produce 11 megawatts of electricity. The plant has produced an average of 5 to 7 megawatts of power for its one customer — the city of Anaheim — since it began operating in the fall of 2008, according to Steve Sciortino, assistant manager for Anaheim's utilities department.

Pratt & Whitney spokesman Matthew Bates said the generation units aren't to blame.

The PureCycle units, he said, performed at or above capacity and that Raser touted its relationship with Pratt &Whitney to potential investors long after all the generators were installed in February 2009.

"We are grateful for our strong partnership with PWPS and appreciate their commitment to helping us develop these geothermal power plants," former Raser CEO Brent Cook said in an April 2009 news release. "They … stand behind their modular units, which continue to perform at higher levels than expected."

Raser erred, Bates said, by building its plant on a geothermal field that didn't produce enough heat to create enough hot water for electricity. During the two years after the installation of the generators, Raser kept drilling well fields around the Hatch Plant to increase output but never found enough to allow it to generate the electricity it needed to keep up with its mounting debt, the company's SEC filings show.

"Had they found what they thought they were going to find in the ground, we wouldn't be at this point," Bates said. "It would have been a success story — a revolutionary project."

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