Energy Loan Program With No Projects May Get Funds
Energy Loan Program With No Projects May Get Funds
By Daniel Whitten
January 29, 2009 (Bloomberg) — Congress is planning to direct at least $10 billion in economic stimulus funding to an Energy Department loan guarantee program that hasn’t backed any projects since it began in 2005.
The new money is intended to generate $100 billion in loans for renewable energy and transmission projects, according to Senator Byron Dorgan, a North Dakota Democrat. Congress previously approved at least $38.5 billion for clean-energy loan guarantees, and not a single project was funded.
“It will get worse the more you put into it,” said Doug Koplow, president of Earth Track of Cambridge, Massachusetts, which reviews environmental subsidies. “There is still a lot of talk about dumping much more in, and you have to be wary.”
Lawmakers, trying to encourage a shift to clean-energy sources such as wind and solar, have sought to stretch government funds by using loan guarantees instead of grants or direct support for renewable energy projects.
The Senate’s economic stimulus plan includes about $78 billion overall for Energy Department programs or tax breaks for energy projects. The House plan would spend about $10 billion less on such projects.
A July Government Accountability Office report found the Energy Department’s loan guarantee program lacked “adequate management and internal controls.”
Energy officials hadn’t determined the resources needed to carry out the program, set policies for processing applications or monitor the loans, the report found. GAO, the investigative agency for Congress, also said the Energy Department had no clear idea of program costs or how it would identify eligible lenders.
Former Energy Secretary Samuel Bodman told reporters Jan. 14, before he left office, that the loan guarantee program had foundered initially because the staff lacked experience financing large projects. The department hired staff with such expertise before he left, Bodman said. A spokesman for the department said in an e-mailed statement today that Energy Secretary Steven Chu has targeted the program for improvement. “Fixing the program is a top priority for Secretary Chu so that we can get moving with investments that will build a new energy economy, put Americans back to work and address the climate crisis,” said Dan Leistikow, the department spokesman.
Mary Anne Sullivan, an attorney at Hogan & Hartson in Washington who represents clients seeking guarantees, said the department’s improved preparation, combined with the new Obama administration’s commitment to the program, should lead to loan guarantees being given out.
“With motivated administrators of the program, it should go much more quickly,” said Sullivan, who was a general counsel at the Energy Department during former President Bill Clinton’s administration.
Koplow, of Earth Track, said government employees who administer financing programs don’t have any personal or institutional risk in reviewing whether projects will succeed.
Brent Blackwelder, president of the Washington-based environmental group Friends of the Earth, said in a statement yesterday that under the Senate plan, as much as half of the $100 billion in loans might be used for nuclear power plants. He said that would be a waste of the money.
Seventeen companies have submitted applications seeking $122 billion in loan guarantees for nuclear-plant construction, the department said in October. Among the companies are Atlanta- based Southern Co., Duke Energy Corp., in Charlotte, North Carolina, and PPL Corp., based in Allentown, Pennsylvania.
Officials at the Nuclear Energy Institute, the industry’s main lobbying group, have said the guarantees are critical because of the high cost of building reactors and difficulty in getting financing.
The department also has received applications from Tesla Motors Inc., of San Carlos, California, which makes electric cars; and Alico Inc., in La Belle, Florida, and Irvine, California-based BlueFire Ethanol Fuels Inc., both of which are planning cellulosic ethanol plants.
Congress approved the loan-guarantee program as part of energy legislation in 2005. It called for the government to guarantee repayment of loans made to fund energy projects such as nuclear power plants, coal projects and renewable-energy investments.
Of the $38.5 billion already authorized, the department is planning to distribute $18.5 billion in guarantees for nuclear plants; $10 billion for renewable or energy-efficient systems; $8 billion for clean coal; and $2 billion for processing of nuclear fuel.
Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita. Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol. Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program. Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector. On January 20, 2009, Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is renewable, more economical, cleaner, and more efficient than unleaded gasoline. Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.