Texas-based Microvast selected to bid on contracts to build lithium batteries, but official assures panel no funds have been issued.
By John Haughey
February 3, 2023Updated: February 3, 2023
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.”
Mustangs graze at the Tahoe Reno Industrial
Center, 15 miles east of Sparks, Nev., in September 2014, where Tesla Motors
planned to invest $3.6 billion to produce lithium batteries for electric
vehicles. (Scott Sonner/AP Photo)
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.
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