February 13, 2015 Read More →

How to Tell Truth from Fiction in an Energy Development Proposal (Part 2)

Yesterday, I laid out some questions that skeptical residents, community leaders, and local officials can ask when presented with an energy development project that sounds too good to be true.

Today: a few tips on how to do the research to answer those questions.

It’s worth repeating here that you should never assume that a government agency or lender that has been asked to provide money to a project has already done this research. It may come as a surprise, too, that the environmental-protection agencies (like the EPA, or your local health department) that grant permits for projects, usually require absolutely no financial background check or information.

Here are seven ways to get to the bottom of what’s going on behind a proposed energy development.

  • File public records requests at every agency that may have information on the project. Find out which local, state, and federal agencies are handling the project’s applications for permits or financial assistance. Be relentless and thorough—and follow up. Although the law generally requires agencies to respond within a reasonable period of time, agencies don’t always comply, and sometimes have to be pressed to do so. Be sure to contact not only environmental- or health-permit agencies but the economic development departments and financing agencies that may be being asked to give the projects loans or outright grants. The information found on these applications is golden.
  • Visit the company’s website and get a list of its past projects. If these companies are publicly traded, get their filings from the Securities and Exchange Commission. Each company’s annual filing, called a 10-K, will tell you whether the company is involved in any lawsuits with vendors, neighbors, or enforcement agencies. (To find a company’s 10-K, go to the SEC’s EDGAR database.) You can get a lot of other information online by yourself, too, but it can be well worth a visit to the business department of your public library. The librarians there are skilled in how to do such research and are there to help you.
  • Get copies from the courts of any lawsuits involving a particular company. If a company is being sued or has been sued by vendors for lack of payment for other projects, or if it is tangled in other contract disputes, you can learn a lot about its financial resources from the back-and-forth involved in a court case.
  • Pick up the phone. This, believe it or not, can be the most important research tool of all. You can call the project developer and politely ask them to answer any questions you have. If the company claims they have built a similar facility in another town, call that town and find out if it’s true. If it says it has lined up grants from a government agency, call that agency and find out if it’s true. If it claims it has developed a specialized fuel that some other industry is guaranteed to buy, call experts in that industry and find out if it’s true.
  • Attend public hearings, collect copies of any presentations or hand-outs and make sure your voice is heard. If government officials in charge of a public hearing don’t permit questions from the public, talk with friendly members of the city council or other governing body beforehand and brainstorm some questions they can ask.
  • Talk to local journalists. Reporters are always looking for a story, and energy development issues are always good fodder. Many journalists have spent years honing their research skills and building relationships with sources who can give them access to information that you might not have. They are also your best allies for public records requests.
  • Find a financial analyst or business person to help you out. Having some experience in finance or business can go a long way toward seeing through a smoke-and-mirrors proposal. You can get such help by contacting the business department of your local college or university. You can reach out to a friend who works in the financial industry. You can connect with a non-profit research organization to help you understand a company’s documents.

While these seven tactics can be effective, nothing is more persuasive than self-confidence and in your realization that you have the ability and the right to ask questions—and to get both those questions, and the answers, into the public record.

A project with sound finances, a market for its customers, and a solid public benefit can withstand any scrutiny from citizens and regulators.

As for the fly-by-night developers that will no doubt come through town from time to time, remember these words from a seasoned observer at the Army Corps of Engineers: “Never trust announcements. Never trust ground-breakings. Only trust ribbon-cuttings.”

Sandy Buchanan is IEEFA’s executive director.

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