February 10, 2009
Dear Representative,
Taxpayers for Common Sense Action urges you to oppose the inclusion of an additional $50 billion in budget authority for the Department of Energy (DOE) Loan Guarantee program in the final stimulus bill. This expansion was included in the Senate bill, but was not included in the original House bill. Regardless of your position on the program, this is an egregious giveaway that does not pass the litmus test for stimulus legislation and blatantly jeopardizes billions of taxpayer dollars.
Created in the Energy Policy Act of 2005 to distribute loan guarantees to innovative energy technologies, the Department of Energy Loan Guarantee Program already has more than $42.5 billion in budget authority. Despite this existing authority being on the books since FY07, DOE has yet to distribute a loan guarantee and has come under serious scrutiny by the Government Accountability Office (GAO) and others. The GAO found DOE lacked sufficient resources and internal structure to review and process loan guarantee applications, inadequate staffing and management, and an inability to track the program’s effectiveness. They recommended Congress limit the program until proper safeguards were put in place.
Under the program, the federal government is required to cover up to 100 percent of the loan at up to 80 percent of the cost of the eligible energy projects, which the Department of Energy Inspector General stated will expose taxpayers to significant risk. If these entities default on their loans, taxpayers will be forced to cover the costs. For nuclear reactors which currently have an $18.5 billion cap and are eligible for the $50 Billion expansion in the Senate stimulus the GAO has considers the risk of default to be more than 50 percent. Taxpayers could be on the hook for more than $30 billion in losses if this language succeeds. That would be in addition to the more than $800 billion stimulus bill cost.
We’ve been down this road before. During the late 1970s and early 1980s, DOE haphazardly issued loan guarantees to jumpstart the synthetic fuels industry. It was a fiscal nightmare and taxpayers ended up covering the bill.
With DOE’s poor track record, a clear lack of internal safeguards and structures, and taxpayers already on the hook for $42.5 billion in unused budget authority Congress should not include this expansion in the final bill. We ask you to urge conferees to remove this $50 billion expansion from the final stimulus. To discuss this issue further please contact me or Autumn Hanna at (202) 546-8500.
Sincerely,
Ryan Alexander
President
(Download a PDF version of this letter)
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