Since the November 2021 adoption of the $1.2 trillion Bipartisan Infrastructure Law (BIL), the U.S. Department of Energy (DOE) has allocated $37 billion to companies bidding to participate in 72 research and development programs designed to foster domestic energy independence.
Among 60 new DOE programs launched under BIL, adopted as the Infrastructure Investment and Jobs Act, is a $7 billion initiative to boost the nation’s lithium battery materials processing and component manufacturing capacity.
Right now, China controls about 90 percent of the global market in raw lithium and batteries.
During a two-hour Feb. 2 discussion on the status of BIL programs in the 14 months since enactment, members of the Senate Energy and Natural Resources Committee questioned if the DOE’s vetting process was adequate.
Not only to prevent fraud and reduce waste but to ensure United States-based subsidiaries owned by Chinese companies—and other adversarial nations—are not cashing in on the taxpayer-funded bonanza.
Case in point: Microvast Holdings, a battery manufacturer founded in 2006 in Houston and now based in Stafford, Texas, makes lithium-ion batteries for electric vehicles—mostly buses—and energy storage systems.
The company operates manufacturing facilities in Germany, Texas, and soon, Tennessee, and a research office in Orlando, Florida, but most of its presence is in China, where its corporate headquarters is in Huzhou.
Chinese-Owned Company Gets DOE Nod
In October, the DOE announced Microvast was among 20 companies selected from more than 200 applicants for a $200-million program to manufacture lithium batteries, sparking alarm and criticism from Congressional Republicans, including Sen. John Barrasso (R-Wyo.).
Barrasso, ranking GOP member of the Senate Energy and Natural Resources Committee—a 20-member panel equally split between Republicans and Democrats with 15 from states west of the Mississippi River—seized on the committee’s first full 2023 meeting to quiz DOE deputy secretary David Turk about how the Chinese-owned subsidiary was selected to participate in the program.
“This company’s filings with the Security and Exchange Commission (SEC) reveal very troubling connections to the communist Chinese government,” Barrasso said.
“One filing states, ‘The People’s Republic of China [PRC] exerts substantial influence over the manner in which we must conduct our business activities and may intervene at any time and with no notice.’
“The company goes on to state,” he continued, “‘We may not be able to protect our intellectual property rights in the PRC.’ Now we know the DOE has funneled hundreds of millions of dollars to a company that publicly admits it is at the beck-and-call of the Chinese government.”
Barrasso said he and other Republicans, including Rep. Frank Lucas (R-Okla.), penned December letters to U.S. Energy Secretary Jennifer Granholm questioning the Microvast award without a response.
Committee Chair Sen. Joe Manchin (D-W.V.) also chimed in, noting Microvast received a 2019 grant under the Trump administration for a joint research project with the University of Chicago’s Argonne National Laboratory for a “high-energy density and safe battery system.”
The rush to develop an electric vehicle industry without a fully fleshed-out manufacturing and supply base could prove counter-intuitive, he said.
“I’m concerned with the geopolitical risk that this administration isn’t concerned about right now in trying to push more EVs out before we’re able to supply these EVs without dependence on China” for batteries, Manchin said.
“We’re pushing EVs to the point that we are going to continue to rely on China for these batteries. That is the problem.”
Like Barrasso, he asked Turk to “alleviate some concerns” about the “DOE vetting process for applicants to ensure we are not giving way our best ideas to China and funding them to be able to take advantage of it in their marketplace along with ours.”
Microvast Passed Muster But Got No Money
Microvast was “selected to negotiate an award,” Turk clarified, but “there are no taxpayer funds going to Microvast or to any of the other 20 companies right now” that were selected to be considered for the program.
“They were selected to participate in a negotiation for an award,” he said, explaining the selection is essentially a preliminary first round that “triggers for us an extended due diligence process where we look into” a company’s details “and we also verify the accuracy of the information” they provide.
Turk said the DOE was trying to quickly allocate money to get needed projects off the ground while developing oversight guardrails “to make sure we are doing it right, to make sure we are being smart and [with] eyes wide open.”
He said the competitive bid process has been enhanced by “a realignment to enhance oversight” that includes “an extensive merits review process done by civil servants” with “industry experts to provide guidance” in analyzing companies bidding for federal money.
The DOE is “continuously improving that process to ensure our civil servants have that geostrategic perspective of what we are trying to do here,” Turk said adding there is now “also a robust process where we get intelligence officials” involved in the vetting.
To qualify for federal funding, a company must “be a domestic entity incorporated in the United States, with a majority domestic ownership and control, with a physical place of residence in the United States,” he said.
“The other specific requirement is any person participating in a foreign government-sponsored talent recruitment program [is] prohibited from participating in any federally funded program.”
Turk said under the BIL, the Energy Department can hire an additional 500 staffers. It has thus far hired “400 new staff with contracting expertise” to more quickly and intensively review contracts and bids.
Bonanza Bound to Draw Frauds
Barrasso questioned the DOE’s capacity to ensure foreign interests weren’t dipping into a cascade of federal funding that, even without potential national security implications, is bound to draw scammers like flies to sugar slush.
The infrastructure law allocates $62 billion to the Energy Department “in addition to its annual appropriation of $40 billion. On top of these funds, Democrats gave another $35 billion to the department as part of their ‘Inflation Act,” he said, a “staggering” amount of money over the past two years.
“So the question is not whether the department is going to waste taxpayer dollars but how it is going to reduce that waste,” Barrasso said.
“We are all interested in learning what, if any, new controls or protocols the department has put in place to reduce any of the waste, fraud, and abuse that is likely to come with that kind of money being spent.”
He noted the Energy Department’s Inspector General Teri Donaldson in a letter to the committee last year, “explained that she doesn’t have sufficient resources at the department to monitor the amount of money that is now flying out the department’s doors. She stated she anticipates ‘substantial losses’ due to fraud, waste, and abuse in part because the law expands programs with a history of serious problems.”
Barrasso said BIL allocates $100 million for the Department of Interior’s IG office “but only about half that amount” for the DOE’s IG office.
“This seems reckless given [BIL] appropriated more than twice the amount to the Department of Energy than it did to the Department of the Interior.”
Turk said he has met with Donaldson numerous times in recent months and the DOE is seeking to boost additional funding for its IG office, a request he expects to be granted soon.
Among those companies with “a history of serious problems” identified by Donaldson is Microvast, Barrasso said, holding up the company’s 4-inch thick SEC filings, noting PRC is mentioned 471 times and China 110 times in the documents.
“How did the department let this happen? Did anyone at DOE do their homework? Did anyone at DOE actually read this?” He asked Turk.
“No taxpayer money has gone to this company,” Turk said.
Barrasso, noting that he had received the requested letter from Granholm just that morning, said the secretary assured him, “‘We do a thorough post-selection risk-based due-diligence review’” of selected applicants.
“After selection,” he said. “Makes you wonder why we don’t make those decisions before, as opposed to after, making a decision on something like this.”
“So our goal is to be thorough and diligent through the process before we spend any taxpayer money,” Turk said. The DOE does it “again and again” through the process “and we make sure our intelligence colleagues and those who have been doing this for years are part of the process” with “eyes wide open.”
“I would suggest eyes wide open would have been before making this selection, before making this decision,” Barrasso said.
“Just to clarify,” intervened Sen. Catherine Cortez Masto (D-Nev.), “the money has not been allocated?”
“Correct,” Turk confirmed. “Not for Microvast or any other company” among the 20 selected to bid for the DOE program.
