[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
              OMB'S ROLE IN THE DOE LOAN GUARANTEE PROCESS 

=======================================================================

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 24, 2011

                               __________

                           Serial No. 112-68



      Printed for the use of the Committee on Energy and Commerce

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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

JOE BARTON, Texas                    HENRY A. WAXMAN, California
  Chairman Emeritus                    Ranking Member
CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        EDOLPHUS TOWNS, New York
MARY BONO MACK, California           FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina   GENE GREEN, Texas
  Vice Chair                         DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma              LOIS CAPPS, California
TIM MURPHY, Pennsylvania             MICHAEL F. DOYLE, Pennsylvania
MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California         JAY INSLEE, Washington
CHARLES F. BASS, New Hampshire       TAMMY BALDWIN, Wisconsin
PHIL GINGREY, Georgia                MIKE ROSS, Arkansas
STEVE SCALISE, Louisiana             JIM MATHESON, Utah
ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington   JOHN BARROW, Georgia
GREGG HARPER, Mississippi            DORIS O. MATSUI, California
LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin 
BILL CASSIDY, Louisiana              Islands
BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia

                                 _____

              Subcommittee on Oversight and Investigations

                         CLIFF STEARNS, Florida
                                 Chairman
LEE TERRY, Nebraska                  DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma                Ranking Member
TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
MICHAEL C. BURGESS, Texas            MIKE ROSS, Arkansas
MARSHA BLACKBURN, Tennessee          KATHY CASTOR, Florida
SUE WILKINS MYRICK, North Carolina   EDWARD J. MARKEY, Massachusetts
BRIAN P. BILBRAY, California         GENE GREEN, Texas
PHIL GINGREY, Georgia                DONNA M. CHRISTENSEN, Virgin 
STEVE SCALISE, Louisiana                 Islands
CORY GARDNER, Colorado               JOHN D. DINGELL, Michigan
H. MORGAN GRIFFITH, Virginia         HENRY A. WAXMAN, California (ex 
JOE BARTON, Texas                        officio)
FRED UPTON, Michigan (ex officio)

                                  (ii)































                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Cliff Stearns, a Representative in Congress from the State 
  of Florida, opening statement..................................     1
    Prepared statement...........................................     4
Hon. Diana DeGette, a Representative in Congress from the State 
  of Colorado, opening statement.................................     8
    Prepared statement...........................................     9
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................    18
    Prepared statement...........................................    20
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................    21
    Prepared statement...........................................    22

                           Submitted Material

Letter from William R. Richardson Jr., Deputy General Counsel, 
  Office of Management and Budget, to Mr. Stearns, dated June 22, 
  2011, submitted by Ms. DeGette.................................    11
Letter from Jeffrey D. Zients, Deputy Director for Management, 
  Office of Management and Budget, to Mr. Stearns, dated June 23, 
  2011, submitted by Ms. DeGette.................................    14
Email from Karen Christian to Allie Neil, dated June 17, 2011, 
  submitted by Mr. Stearns.......................................    16
Majority Supplemental Memorandum, dated June 13, 2011, submitted 
  by Mr. Stearns.................................................    25
Subcommittee exhibit binder......................................    31


              OMB'S ROLE IN THE DOE LOAN GUARANTEE PROCESS

                              ----------                              


                         FRIDAY, JUNE 24, 2011

                  House of Representatives,
       Subcommittee on Oversight and Investigation,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:55 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Cliff 
Stearns (chairman of the subcommittee) presiding.
    Members present: Representatives Stearns, Burgess, 
Blackburn, Griffith, and DeGette.
    Staff present: Carl Anderson, Counsel, Oversight; Jim 
Barnette, General Counsel; Sean Bonyun, Deputy Communications 
Director; Karen Christian, Counsel, Oversight; Kirby Howard, 
Legislative Clerk; Carly McWilliams, Legislative Clerk; Andrew 
Powaleny, Press Assistant; Alan Slobodin, Deputy Chief Counsel, 
Oversight; Kristin Amerling, Democratic Chief Counsel and 
Oversight Staff Director; Phil Barnett, Democratic Staff 
Director; Tiffany Benjamin, Democratic Investigative Counsel; 
Karen Lightfoot, Democratic Communications Director and Senior 
Policy Advisor; Ali Neubauer, Democratic Investigator; and Anne 
Tindall, Democratic Counsel.
    Mr. Stearns. Good morning, everybody. The Subcommittee on 
Oversight and Investigations will convene. Our witness, 
obviously, did not show, so what we intend to do is do opening 
statements, myself and the ranking member and the ranking 
chairman, as well as members on this side, and then we will 
recess after that, after we put documents into the record by 
unanimous consent.
    So I will start with my opening statement.

 OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    We convene this hearing of the Subcommittee on Oversight 
and Investigation to investigate OMB's role in the Department 
of Energy's loan guarantee process. The Energy Policy Act of 
2005 gave the Department of Energy the authority to award loan 
guarantees to companies investing in innovative, clean 
technologies, or renewable energy projects. Through the 
stimulus, Congress appropriated nearly $2.5 billion to pay the 
credit subsidy costs for the companies receiving these loan 
guarantees. With that funding, the DOE Loan Guarantee Program 
took off. So far, DOE has announced loan guarantees for 20 
projects totaling over $11 billion in financing.
    Solyndra, a California company, was the first recipient of 
a DOE loan guarantee. However, since receiving the guarantee, 
Solyndra has suffered a number of financial setbacks. 
Solyndra's own auditors noted the company's ``recurring 
losses'' and ``negative cash flows.'' The company canceled a 
planned Initial Public Offering in 2010, and was forced to lay 
off employees in November 2010.
    DOE announced just last March that it had notified--excuse 
me--modified the loan guarantee to extend the repayment period, 
and Solyndra's investors injected additional funding into the 
company.
    Due to the number of problems Solyndra experienced, this 
subcommittee began an investigation of the DOE Loan Guarantee 
Program and the Solyndra guarantee, in particular. Examining 
the Loan Program was an obvious choice for this subcommittee. 
This committee is the authorizing committee for DOE and the 
Loan Guarantee Program. The Loan Programs Office had received 
over $2 billion in funding from the stimulus, and the committee 
had yet to conduct any oversight of the program. So, on 
February 17, 2011, this committee opened an investigation with 
a letter to DOE requesting a briefing and documents. As our 
investigation unfolded, we learned that OMB played an important 
role in the DOE loan guarantee process. We also became aware of 
a White House memorandum sent to President Obama in October 
2010, where White House staff discussed certain ``risks'' 
presented by the loan guarantee program and specifically 
discussed OMB's role in reviewing these loans. DOE staff were 
not able to shed much light on these issues or on OMB's 
processes for reviewing the Solyndra guarantee, so this 
committee sent OMB Director Jack Lew a letter on March 14, 
2011, requesting a briefing and certain specific documents.
    Over three months later, this committee still does not have 
all the information or the full picture of OMB's review 
processes with respect to Solyndra. At almost every step, OMB 
has sought to delay or frustrate this committee's efforts to 
move this investigation forward. We did get a briefing, but OMB 
staff were able to offer few specifics about OMB's review of 
Solyndra's deal. We thought the documents would provide those 
details, but OMB has produced only those records that DOE gave 
to OMB in the course of the Solyndra review. These documents 
reveal nothing about what OMB did with DOE's information, and 
OMB so far has failed to produce any of its own reports, any 
memorandum, or analyses to demonstrate how it even considered 
or weighed the risks presented by the Solyndra deal.
    Committee staff then pressed OMB for production of the 
requested communications records, hoping these documents would 
provide the story of OMB's role over the course of the Solyndra 
review. OMB refused to produce these documents, stating (1) in 
OMB's opinion, the committee did not need to see these 
documents, (2) that they had concerns about the confidentiality 
of staff discussions should these documents be made public. 
Committee staff attempted to accommodate this second concern by 
offering to review these documents in camera, meaning that 
committee staff would look over these documents but not take 
possession of them unless that review revealed a further need 
for the committee to take possession of the documents.
    In order to move the investigation forward, I called 
today's witness, Deputy Director Jeffrey Zients, 3 weeks ago to 
see if we could reach an agreement about production of these 
communications. During our conversation, I asked OMB to make 
available to committee staff all emails exchanged on Solyndra, 
both internally among OMB staff and with the Department of 
Energy, for an in camera review. He stated he needed to consult 
with OMB's counsel. One day later, OMB staff called back to 
schedule the agreed-upon in camera review. But, in what I view 
as a telling example of OMB's overall approach to this 
investigation, they did not live up to their end of the 
bargain. Instead of producing all communications relating to 
Solyndra, as we had discussed, OMB took it upon itself to 
select just eight emails that were exchanged between DOE and 
OMB in late August 2009, just 1 week before the Solyndra loan 
closed. According to OMB staff, they made their own 
determination that it was not necessary for this committee to 
see any more emails, including OMB's own internal emails. In 
their opinion, these eight emails were all the committee needed 
to see.
    OMB's position demonstrates a fundamental misunderstanding 
of the Constitutional roles of Congress and the Executive 
Branch. It is not OMB's job to direct this investigation and 
decide what Congress can and cannot see. This committee has 
jurisdiction over the Department of Energy program. OMB plays a 
role in approving the credit subsidy costs for over $11 billion 
in loan guarantees. Congress appropriated over $2 billion in 
taxpayer money to pay these costs. Congress and the taxpayers 
have a right to know if OMB is doing a good job of weighing the 
risks that are associated with these investments and with these 
deals. We know that OMB's role extended beyond the 1-week 
period in late August 2009. I had hoped that the Deputy 
Director would have viewed this hearing as I do: OMB's last 
chance to finally, and fully, answer the committee's questions 
about OMB's role in reviewing the Solyndra guarantee and simply 
turn over the requested documents that we have sought.
    However, they once again have chosen to delay and frustrate 
this committee's efforts to resolve this matter. I believe the 
time has come for the committee to fulfill its oversight 
obligations and responsibility and pursue this information 
together and with the ranking member and the Democrats to move 
this investigation forward. And ultimately if we can agree, or 
not agree, we might move to possibly a subpoena.
    [The prepared statement of Mr. Stearns follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Stearns. And with that, I recognize the ranking member 
for her opening statement.

 OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Ms. DeGette. Thank you, Mr. Chairman. I think that this 
hearing, ``OMB's Role in the DOE Loan Guarantee Process,'' is a 
potentially very constructive hearing, and that this committee 
could play a real oversight role going forward. The 
subcommittee could do a thoughtful review of the material we 
have obtained. They could follow the facts where they lead. And 
obtaining testimony from OMB officials is a legitimate means of 
advancing this effort.
    Having said that, I think it is hard to see how an empty-
chair hearing would accomplish anything, and I think it is a 
profound waste of everybody's time. Instead of truly examining 
OMB's role in the DOE Loan Guarantee Program, we are spending 
time on a hearing that will obtain absolutely no new facts for 
the record. And this proceeding follows on the heels of public 
statements by the chairman this spring, suggesting that the 
Loan Guarantee Program involved political favoritism, an 
allegation that is completely unsupported by the documents 
provided by DOE and OMB, and by interviews the committee has 
conducted with relevant parties.
    And by the way, given those statements, it is easy to see 
why the DOE would be a little bit leery about just unlimited 
document productions.
    Now, the hearing date today was announced before the 
Majority even contacted their witness to ascertain his 
availability. In fact, he received his formal invitation to 
this hearing just 3-\1/2\ days ago. Mr. Zients, as I understand 
it, is perfectly willing to testify, but rather than reschedule 
the hearing for one of the dozens of days he is available, the 
Majority has called members here to just address their concern 
to an empty chair.
    Now, he says--Mr. Zients says he is willing to come before 
the committee. He couldn't come today, but he is willing to 
come in the future. Now, I will also say, the Minority is very 
willing to work with the Majority to make sure that appropriate 
documents are produced by the witnesses. OMB has a duty to 
provide appropriate documents. If they are not providing 
appropriate documents, then that needs to happen. We have 
agreed, Mr. Chairman, upon a process by which over the next 
recess, the next 10 days or so, our staffs will work together 
and will work with the OMB to identify and produce the 
appropriate documents. If that does not happen, then we will 
sit down and talk about further steps, because this is an 
appropriate oversight role, and we do look forward to working 
with you. But frankly, I think sitting here this morning is a 
big waste of time.
    And I yield back.
    [The prepared statement of Ms. DeGette follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Stearns. I thank the gentlelady.
    Ms. DeGette. Mr. Chairman, I also have two letters I would 
like to enter for the record. The letter from--are they both 
from Mr. Zients? One is from Bill Richardson, the deputy 
general counsel, dated June 22, to you, and the other is from 
Mr. Zients, dated yesterday. Both these letters express their 
willingness to come, and also their willingness to work with 
the committee on the documents that would be produced. I ask 
unanimous consent to enter those into the record.
    Mr. Stearns. Unanimous consent is so ordered, and we had 
also an email here by unanimous consent as shown to your staff. 
We would like to put that as part of the record.
    By unanimous consent, that is part of the record.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Stearns. And I would just point out to the gentlelady 
that we did invite the deputy director 7 days ago, plenty of 
time in advance, according to the rules.
    And with that, I recognize for 5 minutes the gentlelady 
from Tennessee, Ms. Blackburn.

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Mrs. Blackburn. Thank you, Mr. Chairman. I know that the 
bell has rung for votes, and we will soon be heading in that 
direction, but I think that as we sit here this morning, even 
though we will not have our hearing as we had wanted to have, 
that we have to remember the words of Reagan, ``trust, but 
verify.'' And that is what we are going to do over and over 
again as we look at what--the steps that the bureaucracy is 
taking. Our constituents are hurting, we have unemployment at 
9.1 percent. Underemployment is getting pretty close to the 20 
percent range. Small businesses with fewer than 20 employees 
face an average regulatory cost of over $10,000 per employee, 
due to all of the new federal regulations that have been 
hitting them. It seems as if there is no end in sight on those. 
And if that is not enough, CBO has stated that our Nation's 
debt will overtake our economy by the end of the decade.
    This is not a rosy outlook. Now, more than ever, this 
committee and OMB have a responsibility. It is a responsibility 
to the taxpayers to ensure that every dollar that leaves 
Washington, especially through loan guarantees backed by 
American taxpayers, are being put through the highest levels of 
oversight and accountability.
    As we examine OMB's role in the Loan Guarantee Process 
today, one loan in particular that we all were looking forward 
to discussing is the $535 million loan guarantee to Solyndra in 
September '09 to build a solar panel manufacturing facility. I 
thought it was interesting 6 months after the loan guarantee 
was approved, Solyndra's auditor, PricewaterhouseCoopers, 
stated that the company had suffered recurring losses from 
operations, negative cash flow since inception, and has a net 
stockholder's deficit that, among other concerns, raised 
substantial doubt about its ability to continue as a going 
concern.
    My questions would be, did OMB and DOE share any of these 
same concerns just 6 months prior to this report? We don't 
fully know the answer yet, and we are not going to get it 
today. Also, what exactly was OMB's role throughout the loan 
guarantee process to Solyndra? And we don't have the answer to 
that, either. We don't know, because OMB has yet to produce the 
notes, analyses, memoranda, documents that its staff has 
created in response to a Solyndra review.
    I hope that OMB will change their position and be willing 
to work with us on this issue. Our constituents want some 
answers. We need to have answers to these questions. You know, 
Mr. Chairman, much of it is due to the fact we are hearing 
today that the President now is wanting to do a half-billion-
dollar technology fund to do similar things. Congress shouldn't 
be--the President and the administration shouldn't be choosing 
winners and losers, and we need to be diligent in our 
oversight.
    I yield to the gentleman from Texas.
    [The prepared statement of Mrs. Blackburn follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Stearns. Ms. Blackburn yields to the gentleman from 
Texas.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. I thank the gentlelady for yielding.
    So we are here today in the Oversight and Investigations 
Subcommittee to get information on how funds from the so-called 
stimulus package from 2009 have been used. This investigation--
this type of investigation is historically what this 
subcommittee has done best, but we find ourselves thwarted by 
an administration that, once again, is being non-compliant with 
the will of the Congress.
    Now, shovel-ready is a concept that was thrown around a lot 
in 2009, but just over the last few weeks, the President 
himself admitted that he wasn't quite sure the definition of 
shovel-ready, or maybe he was unsure of the definition of 
shovel-ready when the bill was passed. But in any event, what 
started as a $787 billion bill turned into $862 billion, and 
the fact of the matter is, we have got very little to show for 
it.
    In the course of conducting our constitutionally mandated 
role of oversight, this committee has repeatedly attempted to 
work with Office of Management and Budget to review the 
documents pertinent to this investigation. Time and again, this 
White House has thwarted any sort of sunlight being shown on 
how the federal taxpayer money is being spent and how 
determinations were made to that end. This is important work, 
and this committee must accomplish this. The administration 
must recognize that the Legislative Branch is indeed a coequal 
branch of government, and the will of the Legislative Branch 
must not be thwarted as it has been repeatedly by this 
administration on numerous fronts.
    I hope the chairman will take this lack of response by the 
administration very seriously, and be fully prepared to 
exercise all of the authority that this subcommittee has in 
order to compel this witness to come and testify before our 
subcommittee.
    Mr. Chairman, I will yield back the balance of my time.
    [The prepared statement of Mr. Burgess follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mrs. Blackburn. Yield back.
    Mr. Stearns. I thank the gentleman. I would also ask 
unanimous consent to enter the following documents into the 
record: the Majority staff's supplemental memorandum regarding 
the efforts it has taken to obtain documents from OMB, and 2, 
the document binder for the hearing.
    Without objection, so ordered.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Stearns. It is very unfortunate that our witness failed 
to show, but we have made every effort to do so. The 
subcommittee is adjourned.
    [Whereupon, at 10:12 a.m., the subcommittee was adjourned.]

                                 
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