By: Ari Natter
Sept. 13 (BNA - World Climate Change Report) -- WASHINGTON, D.C.—Legislation that Republicans say would end an Energy Department loan guarantee program would allow tens of billions of dollars in pending loan guarantee applications for nuclear and fossil energy projects to continue.
While the No More Solyndras Act (H.R. 6213) would prohibit the Energy Department from making new commitments for loan guarantee applications received after 2011, roughly 50 pending applications received before then can still be considered under the bill. The bill is expected to be on the House floor Sept. 14.
The program has $30.5 billion in loan guarantee authority for nuclear and fossil energy projects; only about $4.5 billion in authority remains for renewable energy projects, according to an analysis by Taxpayers for Common Sense, an opponent of the legislation.
“The practical affect [of the bill] would be to make ineligible a whole list of renewable energy development projects and at the same time allow other projects to go forward that are more capital-intensive and more mature,” Robert P. Cowin, a lobbyist for the Union of Concerned Scientists, an environmental group also opposed to the legislation, said in an interview.
The bill, which was approved by the Energy and Commerce Committee Aug. 1 on a largely party-line vote, is the Republican response to the failure of Solyndra LLC, the California solar panel manufacturer that went bankrupt in 2011 (148 WCCR, 8/1/12).
“Our legislative fix will give taxpayers the peace of mind that such a disaster like Solyndra will never happen again,” Rep. Fred Upton (R-Mich.), chairman of the House Energy and Commerce Committee, said in a statement when the legislation was unveiled in July.
Risky Projects Continue
The company, which had received a $535 million loan guarantee from the Energy Department, has since been held up as an example of the problems inherent in government support for the renewable energy industry.
But committee Democrats and other critics contend the No More Solyndras Act, as written, would allow the financing of risky energy projects to continue.
“We think it would not stop the next Solyndra by any stretch because it leaves so many loan guarantees on the table,” said Autumn Hanna, a senior program director for Taxpayers for Common Sense. “For huge projects that are high risk that we feel have gone through the same flawed process that Solyndra has gone through, we don't think they would be any less likely to default.”
Though the Energy Department has not made the list of roughly 50 active loan guarantee applications believed to be under consideration public, observers of the program say that a $2 billion loan guarantee request by a financially troubled uranium enrichment company is among the loan guarantees that are pending.
The company, United States Enrichment Corp. (USEC), has received a junk-bond credit rating from Moody's Credit Rating Service, and its stock prices have been trading at “less than $1 per share for months,” according to the Competitive Enterprise Institute, the Nonproliferation Policy Education Center, and other groups that sent a July 31 letter to lawmakers criticizing the No More Solyndras Bill.
Pending Applicant Losing Money
Rep. Ed Markey (D-Mass.), one of USEC's leading critics, noted the Bethesda, Md.-based company lost $540 million last year, a figure which tops the amount associated with the Solyndra loss.
Paul Jacobson, a spokesman for USEC, said the company's loan guarantee application is on hold while it participates in a two-year research and development program per an agreement with the Energy Department.
He said the USEC's financial issues were irrelevant and added the company has a long history of profitable operations. The company's losses in 2011 were on paper due to “non-cash losses associated with some deferred income tax credits,” Jacobson said in an interview.
Other projects still eligible for loan guarantees under the legislation include an $8.3 billion conditional commitment for a loan guarantee to a subsidiary of the Southern Co. for the construction of a nuclear reactor in Waynesboro, Ga., a figure that represents nearly 15 times the amount received by Solyndra.
Bill ‘Guarantees' Next Solyndra
“On its face there is something wrong with the legislation,” Cowin, of the Union of Concerned Scientists, said. “A bad loan guarantee should be a bad loan guarantee. Why are all these nuclear and fossil loan guarantee projects that are actually more risky and capital-intensive okay?”
Other pending loan guarantee applications include a nearly $2 billion request for a Wyoming coal-to-liquid fuel project known as Medicine Bow Fuel & Power Project and a $1.7 billion loan guarantee for a subsidiary of Leucadia Corp. for a large-scale coal gasification plant in Rockport, Ind., according to Taxpayers for Common Sense.
“Without strengthening the bill, lawmakers would be signing off on a bill that doesn't stop the next Solyndra—it guarantees it,” Ryan Alexander, the group's president, said. “Lawmakers need to stop the program from putting taxpayers on the hook for billions in loan guarantees instead of passing bait and switch legislation.”
Rep. Ed Whitfield (R-Ky.), the chairman of the House Energy and Commerce Subcommittee on Energy and Power and a supporter of the No More Solyndras Bill, said allowing the program to consider remaining nuclear and fossil fuel loan guarantee applications is “only fair.”
“The first part of it didn't do anything for nuclear or fossil fuels; most of the [loan guarantees awarded through the program] went for renewables,” Whitfield told reporters in the Capitol Sept. 12.
Companies Already in Pipeline
“But the real reason that we are allowing those in the pipeline to remain there is that these companies through the application process, there has been a lot of money spent, there have been issues raised about the legality of just terminating it now after a certain length of time,” Whitfield said. “Since they are already in the pipeline we are just going go on and let them finish it up.”
In a statement, Rep. Cliff Stearns (R-Fla.), who chairs the Energy Oversight and Investigations Subcommittee, also said it would be “tremendously unfair” to pending loan guarantee applicants to terminate the program and said completely shutting it down could “expose the federal government to lawsuits from those companies that have reached the conditional commitment stage.”
An Upton spokesman did not immediately return a request for comment.
To some Republicans who would like to see the entire loan guarantee program stopped, the No More Solyndras Act does not go far enough.
An amendment by Rep. Tom McClintock (R-Calif.) that would have prohibited the Energy Department from issuing any additional loan guarantees was not ruled in order by the House Rules Committee.
“I would suggest a more accurate title, ‘The 50 More Solyndras and Then We'll Stop Wasting Your Money—Really—We Promise Act,’ ” McClintock said in remarks on the House floor Sept. 13.
Vote for Passage an ‘Admission of Mistake.’
While the bill is largely seen as election year posturing—no companion legislation has been introduced in the Democratic-controlled Senate—a vote by the Republican-controlled House would serve as an “admission of mistake in policy,” Andrew Moylan, vice president of the National Taxpayers Union, said.
“I think it would be particularly notable if the Republican House of Representatives were to pass legislation … basically dismantling one of the key features of the 2005 energy bill that the previous Republican majority passed,” Moylan said during a conference call on the legislation with reporters Sept. 12. “I think it would be an admission that this has been a mistake and that it has been a failure of a program and the cost to taxpayers is too great to be continued.”
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