Here’s the situation: Tens of millions of state tax dollars are going to billion-dollar corporations – but only with approval from other billion-dollar corporations – at the same time Gov. Brown maintains state government is flat broke and needs billions more in new taxes.

Nevertheless, Brown refuses comment on the Energy Commission grant policy for handing out money to build hydrogen fuel cell refueling stations, a program that originated under ex-Gov. Schwarzenegger. Brown’s press secretary pronounced him “unavailable” to discuss the many millions in state grants.

This bizarre scene emerged as the Energy Commission gave tentative approval this spring for $12 million more in grants for two companies – the German-based Linde Group and Pennsylvania-based Air Products and Chemicals Inc. – which over the last two years received more than $15 million in additional, similar grants.

The companies must use the state money to build refueling stations for fuel cell cars due to arrive in showrooms from eight major carmakers by the 2017 model year. They and not the state will own stations built with taxpayer dollars. To be considered for a grant to build such stations or install hydrogen pumps in existing gas stations, all applicants must first get letters of approval from at least one of the eight automakers – Honda, GM, Chrysler, Nissan, Toyota, Hyundai, Daimler Benz and Volkswagen.

Quid Pro Quo?

It’s the first time in memory that applicants for government grants have needed consent from other private companies before they could even be considered.

All but one of the $27 million in handouts given to private companies so far have gone to Linde and Air Products, both members of the California Fuel Cell Partnership, where yearly membership costs at least $87,800. The eight carmakers and the Energy Commission are also partners.

When the grant-giving process came to light, consumer groups and smaller companies also seeking to build hydrogen stations said the pattern of the awards gave the appearance of collusion between the commission and its fuel-cell partners.

Where Is Our Share?

“The process appears totally rigged,” said Jamie Court, president of the Consumer Watchdog consumer advocacy group.

Both the Energy Commission and Ed Heydorn, business development manager for Air Products’ hydrogen energy systems, deny collusion. But both outfits concede they attend Fuel Cell Partnership meetings and have other encounters with automaker executives regularly and converse freely with them. Most of those meetings are not open to companies that cannot afford the Fuel Cell Partnership dues. Does this make the grants a form of cronyism?

The money here comes from vehicle license fees under a 2007 law authored by former Assembly Speaker Fabian Nunez and signed by Schwarzenegger.

Apprised of this scene, Brown remained silent and did nothing to end or change current policy. By failing in his latest budget proposal even to try cutting the grants, Brown also makes subsidies for the international chemical companies Linde and Air Products a higher state priority than maintaining the Healthy Families program which provides health care for indigent children or continuing in-home care for frail seniors, two programs he proposes to end.

Energy Commission Chairman Robert Weisenmiller also declined comment. So the grant-giving practice continues.

The main justification for all this is that hydrogen fuel cell cars will run on “green” energy. But much of the fuel Linde and Air Products will sell is to come from natural gas, not a renewable energy source. Because the state will require at least one-third of its power to come from renewable sources like wind or solar by 2020, Air Products executive Heydorn says one-third of gas to be sold in company stations funded by grants it received in 2010 will sell hydrogen derived from biogas taken from landfills, considered a renewable resource.

Meanwhile, no state money went, for example, to the 15 prime-location stations where the much smaller California-based HyGen Industries proposes hydrogen pumps. Plans are for all those stations to sell hydrogen made from on-site electrolysis of water. So HyGen’s hydrogen would all be renewable. But HyGen could get automaker approval for only one of its sites, even though all are in areas where early hybrid cars sold strongly, the same areas where the new fuel cell cars are expected to do best.

“We can’t do it with just one station,” said HyGen CEO Paul Staples. “It wouldn’t give us the economies of scale we need.”

Which means the Energy Commission policy thwarts both small companies and greener energy, while providing tens of millions to billion-dollar corporations at a time when the state is pinching pennies on almost everything else.

It’s hard to see how this policy can do anything but hurt chances for passage of Brown’s tax increase proposal next November. For once they’ve seen that grants to big corporations approved by other, even bigger corporations continue during the toughest of times, many voters may question the wisdom of letting Brown set priorities for spending more of their tax dollars.

Mr. Elias may be contacted at tdelias@aol.com. His book, “The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It,” is now available in a soft cover fourth edition. For more Elias columns, see www.californiafocus.net