CoBank, by far the largest institution in the national Farm Credit System (FCS) with nearly $155 billion in total assets, was given a special function by Congress: among routine lending to farmers, ranchers, and producers, lend to utility cooperatives so that farmers can access standard services that all Americans should enjoy.
CoBank is no stranger to abusing this special function.
Last month, WattBridge Energy, LLC, based in Houston, announced its financial closing on a peak-power installation, the “Brotman project,” which “will deliver reliable power during peak-demand times, including severe heat waves and winter weather.” CoBank is listed as a “key partner” providing financing.
No one should have any issue with providing a reliable source of power to guard against outages due to inclement weather. But why exactly is CoBank funding this venture?
This project is based in Brazoria County, Texas, just south of Houston. Brazoria County is almost 80 percent urban. Now, not all agriculture takes place in rural areas, but most does. And even though energy can be generated in urban areas for use in rural areas, that doesn’t at all seem to be the main purpose of this project. Nowhere is there any mention of farmers, ranchers, or producers.
It’s not even clear whether WattBridge is a cooperative! That unfortunately does not stop CoBank from lending to it. WattBridge may not be a cooperative, but it could be a “similar entity,” that is, one that “while not eligible for a loan…is functionally similar to an entity eligible for a loan… in that it derives a majority of its income from the conduct of activities functionally similar to those conducted by the entity.” Because WattBridge produces energy, and a small, rural energy cooperative also produces energy, CoBank is authorized to extend it a loan.
Most people can see how this could be abused. This sort of lending is one that CoBank indulges in frequently, lending to a global packaging products company, a publicly-traded building materials manufacturer, Verizon, a battery company, and a solar panel company slated to power Facebook.
Few people should have any issue with trying to strengthen the electrical grid. But this project, based in an urban location and with seemingly little relation to agriculture, should give policymakers pause. Why is CoBank serving as a key financial partner in this? Is this in line with the intent of Congress when it first passed the Farm Credit Act?
The Farm Credit Administration (FCA) needs to take a hard look at CoBank’s record of similar entity loans to see whether credit could be found elsewhere, and whether they truly serve agriculture. If the FCA won’t take on this task, Congress should.