Mike Simpson isn't ready to give up on the Department of Energy loan guarantee program.
The Idaho Republican, who is drawing up a DOE funding bill to be introduced this spring, readily acknowledges that the program has experienced some problems in the past. But he says loan guarantees do more good than harm overall.
"Obviously, we need to do a better job of looking at who the loan guarantees are going to. But overall, it's been an important program," Simpson told E&E Daily in a brief interview yesterday, explaining that he was confident DOE has learned from its past stumbles. "We've talked to them about it, and I think they've learned from some of these. ... [E]xotic loans might not be in the best interest of the country and the taxpayer."
That stance puts him squarely at odds with Rep. Paul Ryan's (R-Wis.) proposal to completely eliminate the program just as DOE ramps up its plans to distribute the tens of billions of dollars in loan authority it has left over from the 2005 energy law. Ryan's budget proposal released earlier this week leaned on one of the most widely criticized examples of a failed recipient and a vague warning from an internal administration review to justify its call to rescind the existing authority that was presented without much context.
"I think that goes too far," Simpson, who chairs the Appropriations Subcommittee on Energy and Water Development and Related Agencies, said of the Ryan proposal.
Simpson's defense of the program, even as he defends his right flank from a well-funded primary challenger, indicates the extent to which the politics of loan guarantees have changed in recent years. The conservative Club for Growth, no fan of the loan guarantee program, already is running ads calling Simpson "too liberal" ahead of the May 20 primary.
It used to be that all a Republican lawmaker had to do to score some quick political points was to mention a company like solar manufacturer Solyndra or carmaker Fisker, two of the handful of companies that went bankrupt after receiving DOE loan guarantees. But one hears far less about them these days compared to a few years ago.
In the early years of the Obama administration, the highest-profile loan guarantee beneficiaries tended to be renewable energy or electric vehicle companies based in traditionally Democratic coastal states. The most recent winner was the Georgia-based Southern Co. for a pair of new nuclear reactors, and DOE is in the process of evaluating applications for fossil fuel projects eligible for another $8 billion in available funds.
Yesterday, Energy Secretary Ernest Moniz announced a reboot of the dormant Advanced Technology Vehicle Manufacturing (ATVM) loan guarantee program, which has more than $16 billion in remaining authority.
The fossil and upcoming renewable solicitations are being made pursuant to the 1703 program, which was established in the 2005 energy law. The ATVM program was created by the 2007 energy law. A separate 1705 loan guarantee program was created in the 2009 economic stimulus law and was the source of the most controversial loan guarantees. Its authority expired in 2011.
House Oversight Chairman Darrell Issa (R-Calif.) was quick to release a statement panning the ATVM move, but the rest of the caucus was largely silent, according to a search of official press releases and tweets in the congressional database Legistorm.
Moniz faced no questions about the loan guarantee program when he testified before Simpson's subcommittee yesterday. The secretary is scheduled to appear this morning in front of the Energy and Commerce Committee's Energy and Power subpanel; full committee Chairman Fred Upton (R-Mich.) predicted loan guarantees would come up then.
Not enough risk?
Still, there are ample signs that the department has convinced at least some key lawmakers not to judge the entire program by a few high-profile examples.
"We've been taking the position quite consistently -- and we're happy to discuss it anyplace, anytime -- that the program as a portfolio has done extremely well," Moniz said of the program, emphasizing that 10 percent of the funds Congress set aside to cover losses from the program have been spent.
"So you know maybe I'm worried that the arguments will change that we're not taking enough risk," Moniz added.
Ryan's budget blueprint cites Fisker as an example of a loan guarantee gone wrong. He also argues that the administration is downplaying the risk of its portfolio because of inadequate accounting methods. To support that point, the budget quotes a single line that appears twice in the independent review of the loan guarantee program commissioned by the administration in the wake of Solyndra.
"The White House's independent report noted that these DOE loans may increase taxpayers' financial liability," Ryan's budget says. "It stated, 'If the eventual actual loss exceeds the Credit Subsidy Cost, that incremental loss is absorbed by the taxpayers.'"
The quoted line comes from a discussion of the inherent concerns with the methodologies DOE uses in evaluating the riskiness of its portfolio. Among the other shortcomings noted by Herb Allison, whom the White House selected to lead the independent review, was the fact that the methodologies "assume that DOE is a passive bystander unable to act to reduce or mitigate risk" in its portfolio.
"To the contrary, DOE has robust tools for protecting itself against taking on elective risk," the Allison report notes.
That line was not included in Ryan's budget. Even judging based on available credit subsidy, there are indications that DOE's portfolio is in good shape. A Ryan spokesman did not respond to a request for comment yesterday evening.
Moniz may have been joking about the portfolio being too risk-averse, but DOE's top loan officer made a similar point as recently as last week.
Briefing the Secretary of Energy Advisory Board, a group of outside experts, Loan Program Office Executive Director Peter Davidson pointed to a discrepancy between the credit subsidy DOE charges recipients under the 1705 loan guarantee program, which was established in the 2005 energy law and is the source of the current fossil solicitation and upcoming renewable energy solicitation.
Loan guarantee recipients were charged an average 13 percent subsidy, and the additional fees were "consistently higher" than actual losses, which were closer to 3 percent. But Davidson noted that those two numbers should be closer together.
"That 13 percent is supposed to be a proxy for losses, so there's a disconnect," Davidson said. "Maybe we're just better at making loans than the average person, or maybe we're not taking enough risk."
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