Inspector General Report Shows Massive Waste

EPA/CARB Gives Away Millions Without Adequate Supervision/Oversight

A recent Environmental Protection Agency (EPA) Office of Inspector General (OIG) reported on six recipients of funding from the Diesel Emission Reduction Act (DERA) and their failure to perform as specified for those grants, wasting millions of dollars.

Included in the scathing OIG report was two cases involving the California Air Resources Board’s (CARB) failure to properly handle two different cases—one the infamous Cascade Sierra Solutions and the other the Burlington Northern Santa Fe Railroad.

This report, issued on September 15th, outlines the lack of financial management systems, a lack of understanding of what the intended purpose of the grants was and an inability to respond to formal audits spelling out their shortcomings.

This is the second OIG report on the DERA program. The first was done at the end of 2010. The EPA officer in charge of the program was Gina McCarthy, who was then director of EPA office of Air & Radiation and a long time associate of Mary Nichols when she was at the EPA. McCarthy’s responses to the first OIG report was to “study, formulate and implement corrections” and have them done by the end of 2013, an auspicious date.

Millions Lost in California

The EPA and CARB decided to provide seed money ($9 million) to help Cascade Sierra Solutions (CSS) with the idea of establishing a subprime lending institution for economically distressed truckers. The idea was for the effort to eventually become self-funding as a revolving fund and expand nationwide.

CSS actually behaved like a used truck dealer, buying 272 pre-2007 units and reconditioning them, although not equipping them with diesel particulate filters, which was a requirement for the program. CSS did act like a subprime lender—offering unsecured loans, no money down and interest not to exceed sic percent above prime with a maximum term of 10 years. They got grants or revolving loans from CARB. EPA, Prop1B, Oregon EPA, U.S. Department of Energy and one or two other states.

It was an amazing business plan, one that only the “greenies” could feel good about. CSS it was a non-profit both as an organizational structure and as a business. The OIG did report that EPA recovered $1.8 million of money paid to CSS, (the rest went to creditors. The OIG did not recommend any criminal charges, only the often heard, “reforms.”

Way to Run a Railroad

The second give-away from the EPA and CARB combine was to Burlington Northern Santa Fe Railroad, a wholly owned subsidiary of Warren Buffet’s Berkshire Hathaway, Inc. The Inspector General also prepared a Report on this unmanaged and ill-conceived scheme.

The grant to BNSF of $8.87 million was for repowering locomotives to reduce emissions. CARB says it thought the money was to repower older engines for southern California freight yards, thus reducing their emissions. In the end, BNSF got 11 new engines installed and the locomotives are circulating wherever they want, anywhere in the county.

The old engines were rebuilt and can be used anywhere but California. That was not the deal CARB thought they had—they ask truckers and contractors to scrap their old engines and they thought they had the same deal with the railroad. CARB also doesn’t have the legal authority to regulate railroads—that is reserved to the EPA…and they don’t do it. The OIG also noted that CARB had no real idea about the emission reductions because they used estimated fuel numbers and still can’t produce the real numbers. No money was recovered from this deal.

Stimulus Money Mess-ups

The OIG conclusion was that a better understanding of the deals would have prevented the unfortunate results. CARB says it will do a better job of oversight with other people’s money. Since some of the funds for the six questionable programs audited by the OIG, the failure to report the jobs gained or saved, was offense as serious as financial negligence!

CARB in both above cases in response to OIG questions said they were unable to answer the investigators’ questions because the effort would be “time-consuming” and “costly.” In other instances they just failed to respond to the OIG questions. Their overall excuse was that the document was difficult to understand and complex. They claimed a basic lack of comprehension of the grant and requirements.

In the real world, people would be fired and quite possibly sent to prison. So far, neither the Obama Justice Department nor the California Attorney General has shown any interest in prosecuting these cases. Neither has Gina McCarthy, who now runs the EPA, shown any interest in cleaning up the mess.

You can read the complete report at: