[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]


 
                 DEPARTMENT OF ENERGY OVERSIGHT: STATUS 
                           OF LOAN PROGRAMS

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

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 30, 2014

                               __________

                           Serial No. 113-150
                           
                           
                           
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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
JOE BARTON, Texas                      Ranking Member
  Chairman Emeritus                  JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               FRANK PALLONE, Jr., New Jersey
JOSEPH R. PITTS, Pennsylvania        BOBBY L. RUSH, Illinois
GREG WALDEN, Oregon                  ANNA G. ESHOO, California
LEE TERRY, Nebraska                  ELIOT L. ENGEL, New York
MIKE ROGERS, Michigan                GENE GREEN, Texas
TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
  Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
PHIL GINGREY, Georgia                JIM MATHESON, Utah
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                JOHN BARROW, Georgia
CATHY McMORRIS RODGERS, Washington   DORIS O. MATSUI, California
GREGG HARPER, Mississippi            DONNA M. CHRISTENSEN, Virgin 
LEONARD LANCE, New Jersey                Islands
BILL CASSIDY, Louisiana              KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky              JOHN P. SARBANES, Maryland
PETE OLSON, Texas                    JERRY McNERNEY, California
DAVID B. McKINLEY, West Virginia     BRUCE L. BRALEY, Iowa
CORY GARDNER, Colorado               PETER WELCH, Vermont
MIKE POMPEO, Kansas                  BEN RAY LUJAN, New Mexico
ADAM KINZINGER, Illinois             PAUL TONKO, New York
H. MORGAN GRIFFITH, Virginia         JOHN A. YARMUTH, Kentucky
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina

              Subcommittee on Oversight and Investigations

                        TIM MURPHY, Pennsylvania
                                 Chairman
MICHAEL C. BURGESS, Texas            DIANA DeGETTE, Colorado
  Vice Chairman                        Ranking Member
MARSHA BLACKBURN, Tennessee          BRUCE L. BRALEY, Iowa
PHIL GINGREY, Georgia                BEN RAY LUJAN, New Mexico
STEVE SCALISE, Louisiana             JANICE D. SCHAKOWSKY, Illinois
GREGG HARPER, Mississippi            G.K. BUTTERFIELD, North Carolina
PETE OLSON, Texas                    KATHY CASTOR, Florida
CORY GARDNER, Colorado               PETER WELCH, Vermont
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
BILL JOHNSON, Ohio                   JOHN A. YARMUTH, Kentucky
BILLY LONG, Missouri                 GENE GREEN, Texas
RENEE L. ELLMERS, North Carolina     HENRY A. WAXMAN, California (ex 
JOE BARTON, Texas                        officio)
FRED UPTON, Michigan (ex officio)
  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Tim Murphy, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     3
Hon. Janice D. Schakowsky, a Representative in Congress from the 
  State of Illinois, opening statement...........................     4
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     5
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     7

                               Witnesses

Peter W. Davidson, Executive Director of the Loan Programs 
  Office, Department of Energy...................................     9
    Prepared statement...........................................    11
    Answers to submitted questions...............................    73
Rickey Hass, Deputy Inspector General for Audits and Inspections, 
  Department of Energy...........................................    17
    Prepared statement...........................................    19
    Answers to submitted questions...............................    95
Frank Rusco, Director, Energy and Science Issues, U.S. Government 
  Accountability Office..........................................    30
    Prepared statement...........................................    32
    Answers to submitted questions...............................    98

                           Submitted Material

Committee memorandum.............................................    68


        DEPARTMENT OF ENERGY OVERSIGHT: STATUS OF LOAN PROGRAMS

                              ----------                              


                          FRIDAY, MAY 30, 2014

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:20 a.m., in 
room 2123, Rayburn House Office Building, Hon. Tim Murphy 
(chairman of the subcommittee) presiding.
    Present: Representatives Murphy, Burgess, Blackburn, 
Gingrey, Scalise, Harper, Griffith, Johnson, Long, DeGette, 
Braley, Schakowsky, Tonko, Green, and Waxman (ex officio).
    Staff Present: Charlotte Baker, Deputy Communications 
Director; Mike Bloomquist, General Counsel; Sean Bonyun, 
Communications Director; Matt Bravo, Professional Staff Member; 
Leighton Brown, Press Assistant; Karen Christian, Chief 
Counsel, Oversight; Carrie-Lee Early, Detailee, Oversight; Brad 
Grantz, Policy Coordinator, O&I Brittany Havens, Legislative 
Clerk; Sam Spector, Counsel, Oversight; Peter Spencer, 
Professional Staff Member, Oversight; Tom Wilbur, Digital Media 
Advisor; Brian Cohen, Minority Staff Director, Oversight & 
Investigations, Senior Policy Advisor; Kiren Gopal, Minority 
Counsel; Hannah Green, Minority Staff Assistant; Elizabeth 
Letter, Minority Press Secretary; and Stephen Salsbury, 
Minority Investigator.

   OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Murphy. Good morning, everyone. This is a hearing of 
the Subcommittee on Oversight and Investigations entitled 
``Department of Energy Oversight: Status of Loan Programs.''
    Today's hearing will examine the status of the Department 
of Energy's loan programs and will focus in particular on the 
Department's efforts to manage a nearly $30 billion portfolio 
of 30 loans and loan guarantees, while the Department at the 
same time launches new initiatives to expand that portfolio 
with additional loans. These new initiatives will tap into 
existing loan authority that at present amounts to another 40 
billion. Add this to the fact that the terms of these loans and 
guarantees are as long as 20 or 30 years, and it is clear that 
DOE will be accountable for managing these programs and 
protecting taxpayer interests for a long time.
    So has DOE implemented the structure, policies, and 
practices to meet its responsibilities? Is it doing so rapidly 
and effectively? Should it do more? And how will the agency 
sustain effective oversight over this program for the long 
term?
    It's been evident since this committee first commenced 
oversight of these programs more that 3 years ago that 
protecting taxpayer interests is no easy task for DOE. Created 
under Title XVII of the Energy Policy Act back in 2005, the 
Department's advanced energy technology loans authorized by 
Congress did not really take off until the stimulus funding of 
2009. The stimulus created a category of loan guarantees that 
were fully subsidized by the taxpayer. In the ensuing years of 
stimulus spending, the DOE's Loan Programs Office focused on 
soliciting, reviewing, and closing a flood of applications 
under what was known as a Section 1705 program. The agency's 
focus with closing loan applications under the stimulus came at 
the expense of establishing a strong back-end program necessary 
to manage the risks of the loan portfolio.
    The result exhibited most prominently by DOE's handling of 
the Solyndra loan guarantee were unnecessary taxpayer losses in 
the hundreds of millions of dollars. Today half the funds and a 
majority of projects in DOE's loan portfolio are comprised of 
these stimulus-funded loan guarantees.
    In some respects DOE is in a different place now than it 
was 3 years ago. The agency has issued only two loan guarantees 
since 2011. It has put more attention to developing portfolio 
management capabilities and implementing other reform measures.
    So today we will take a measure of what DOE has 
accomplished and what more it should do to protect taxpayer 
interests. This oversight is particularly important because as 
the agency transitions focus to portfolio management, it has, 
in the recent months, launched new initiatives to generate more 
loans and loan guarantees. In February, the agency announced a 
new solicitation to tap into $8 billion in loan authority for 
advanced fossil energy projects. It has proposed a second 
solicitation to tap into $4 billion in loan authority for 
renewable energy projects, and it has reminded the automotive 
manufacturing industry that some $16 billion in authority is 
available for loans for advanced vehicle technologies and 
manufacturing.
    The status of these new initiatives remain an open 
question, but it is important to understand whether the agency 
can manage these new solicitations while ensuring appropriate 
stewardship of its existing portfolio; and if these new 
initiatives expand the loan portfolio, can DOE manage it.
    This past month both the Government Accountability Office 
and the DOE inspector general issued reports that evaluated 
certain elements of DOE's management and monitoring of loans. 
While both reports found DOE had made progress strengthening 
oversight, both also identified continuing concerns. For 
example, GAO found that DOE has not fully developed or 
consistently adhered to loan-monitoring policies, and this 
inconsistent adherence means that we cannot be sure the agency 
is completing activities important to protecting taxpayer 
interests.
    The inspector general showed the impact of poor loan 
monitoring in its examination of Abound Solar Manufacturing, 
which defaulted on its DOE loan terms in September 2011 and 
declared bankruptcy in July, 2012. The lessons from the Abound 
case, the IG noted, underscored the need for the Department to 
accelerate loan oversight improvements in light of the amount 
of loans in the portfolio. The IG noted that progress has been 
made, but more needs to be done.
    Frank Rusco of the GAO and Deputy Inspector General Rickey 
Hass will discuss these perspectives today, and most important, 
of course, are DOE's answers to our questions. We have the 
benefit of hearing directly from the head of the loan program, 
Mr. Peter Davidson. So, welcome, Mr. Davidson. I look forward 
to perspectives on the recommendations made by GAO and the IG, 
and your view of the status of the agency's operations and loan 
program goals and challenges. And with that, I now yield 5 
minutes to Ms. Schakowsky for an opening statement.
    [The prepared statement of Mr. Murphy follows:]

                 Prepared statement of Hon. Tim Murphy

    Today's hearing will examine the status of the Department 
of Energy's loan programs. It will focus in particular on the 
Department's efforts to manage nearly a $30 billion portfolio 
of 30 loans and loan guarantees, while the Department at the 
same time launches new initiatives to expand that portfolio 
with additional loans. These new initiatives will tap into 
existing loan authority that, at present, amounts to another 
$40 billion.
    Add to this the fact that the terms of these loans and 
guarantees are as long as 20 or 30 years, and it is clear that 
DOE will be accountable for managing these programs, and 
protecting taxpayer interests, for a long time.
    Has DOE implemented the structure, policies, and practices 
to meet its responsibilities? Is it doing so rapidly and 
effectively? Should it do more? And how will the agency sustain 
effective oversight over this program for the long term?
    It has been evident since this Committee first commenced 
oversight of these loan programs more than 3 years ago that 
protecting taxpayer interests is no easy task for DOE. Created 
under Title 17 of the Energy Policy Act of 2005, the 
Department's advanced energy technology loans authorized by 
Congress did not really take off until the stimulus funding of 
2009. The stimulus created a category of loan guarantees that 
were fully subsidized by the taxpayer.
    In the ensuing go-go years of stimulus spending, DOE's Loan 
Programs Office focused on soliciting, reviewing, and closing a 
flood of applications under what was known as the section 1705 
program. The agency's preoccupation with closing loan 
applications under the stimulus came at the expense of 
establishing a strong back-end program necessary to manage the 
risks of the loan portfolio.
    The result, exhibited most prominently by DOE's handling of 
the Solyndra loan guarantee, were unnecessary taxpayer losses 
in the hundreds of millions of dollars. Today, half of the 
funds and a majority of projects in DOE's loan portfolio are 
comprised of these stimulus-funded loan guarantees.
    In some respects, DOE is in a different place now than it 
was 3 years ago. The agency has issued only two loan guarantees 
since late 2011. It has put more attention to developing 
portfolio management capabilities and implementing other reform 
measures.
    So today, we will take a measure of what DOE has 
accomplished, and what more it should do to protect taxpayer 
interests. This oversight is particularly important because, as 
the agency transitions focus to portfolio management, it has in 
recent months launched new initiatives to generate more loans 
and loan guarantees.
    In February, the agency announced a new solicitation to tap 
into $8 billion dollars in loan authority for advanced fossil 
energy projects. It has proposed a second solicitation to tap 
into $4 billion in loan authority for renewable energy 
projects. And it has reminded the automotive manufacturing 
industry that some $16 billion in authority is available for 
loans for advanced vehicle technologies and manufacturing.
    The status of these new initiatives remain an open 
question, but it is important to understand whether the agency 
can manage these new solicitations while ensuring appropriate 
stewardship of its existing portfolio. And if these new 
initiatives expand the loan portfolio, can DOE manage it?
    This past month, both the Government Accountability Office 
and the DOE Inspector General issued reports that evaluated 
certain elements of DOE's management and monitoring of loans. 
While both reports found DOE had made progress strengthening 
oversight, both also identified continued concerns.
    For example, GAO found that DOE has not fully developed or 
consistently adhered to loan monitoring policies. And this 
inconsistent adherence means that we cannot be sure the agency 
is completing activities important to protecting taxpayer 
interests.
    The Inspector General showed the impact of poor loan 
monitoring in its examination of Abound Solar Manufacturing, 
which defaulted on its DOE loan terms in September 2011 and 
declared bankruptcy in July 2012. The lessons from the Abound 
case, the IG noted, underscored the need for the Department to 
accelerate loan oversight improvements in light of the amount 
of loans in the portfolio. The IG noted that progress has been 
made, but more needs to be done.
    Frank Rusco of the GAO and Deputy Inspector General Rickey 
Hass will discuss these perspectives today.
    Most important, of course, are DOE's answers to our 
questions. We have the benefit of hearing directly from the 
head of the Loan Program Office, Mr. Peter Davidson.
    Welcome Mr. Davidson. I look forward to your perspective on 
the recommendations made by GAO and the IG and your view of the 
status of the agency's operations, and loan program goals and 
challenges.

       OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 
     REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

    Ms. Schakowsky. Thank you, Mr. Chairman. I am sitting in 
this morning for the ranking member Diana DeGette and have the 
privilege of 5 minutes to give you my take on not only the loan 
program, but its goals.
    Thank you, Mr. Chairman, for holding this important hearing 
on the status of the Department of Energy's loan program, and I 
look forward to hearing from our witnesses on this very 
important issue.
    We are at a critical moment in history. 2013 was the 6th 
warmest year on record; 13 of the 14 warmest years have 
occurred since 2000. Earlier this month the National Climate 
Assessment showed that, without major intervention, oceans will 
rise as much as 4 feet, water shortages will increase rapidly, 
and the hottest days could be more than 10 degrees hotter by 
the end of the century. But we are privileged here to have an 
opportunity to fight and win the battle against climate change, 
to leave a legacy to which our children and grandchildren can 
be proud, and I believe this is an opportunity that we must 
take.
    Our approach should be multifaceted. It must include strong 
rules to reduce harmful emissions as well as a commitment to 
promising technologies that will help us achieve that goal. 
Investing in clean energy technologies is not only good for the 
environment, but it's also in our economic self-interest.
    The clean and renewable energy sectors are among the 
fastest-growing areas of the global economy and will generate 
almost $2 trillion in global investment from 2012 to 2018, 
according to PEW. There are three times as many jobs created 
per dollar spent on clean energy versus fossil and nuclear 
fuels. We should be the undisputed leader in clean energy 
technologies and the jobs they support, and, with the right 
Federal support, we will be.
    Today we are going to hear from witnesses about the status 
of loan programs at the Department of Energy. The Government 
Accountability Office and the Department's inspector general 
have recently issued reports assessing DOE's loan management 
and oversight practices. I look forward to hearing about the 
progress DOE has made in strengthening its management policies 
as well as areas for improvement.
    The Loan Programs Office has been successful in financing 
groundbreaking solar, advanced vehicle, and wind projects. 
These and other projects put the credit and confidence of our 
country behind our greatest innovators, allowing them to 
succeed where they otherwise might fail. That backing has paid 
off in a number of ways. Private-sector clean energy projects 
supported by the loan guarantee program have an 87 percent 
success rate, far outpacing the performance of typical venture 
capital firms. Their failure rate is only 2 percent, better 
than that of loan portfolios at typical banks. Add to this the 
fact that many of the recipients of DOE loans have trouble 
finding financing in the private sector, and the program 
success is all the more impressive.
    The programs have also helped ensure that our auto sector 
can make the investments needed to make top-of-the-line, fuel-
efficient cars. Ford used a DOE Advanced Technology Vehicles 
Manufacturing loan to upgrade 13 factories across 6 States, 
including my home State of Illinois. That investment increased 
the fuel efficiency of Ford cars and created or maintained 
33,000 jobs at a time our auto industry was in trouble.
    Tesla Motors, another success story, paid off its entire 
loan last year, 9 years before full payment was due. I wish I 
could afford a Tesla. Each of the 18 large-scale renewable 
energy projects backed by DOE's 1705 program have secured power 
purchase agreements that will ensure the loans are paid back on 
time and in full.
    And finally, the programs have encouraged significant 
private investment in clean energy technologies. The Solar 
Energy Industries Association estimates that DOE loan programs 
have sparked $25 billion in private investment in solar alone. 
We need to continue to support nascent technologies until they 
can attract significant private investment.
    Let me just say that in an environment where so many of my 
colleagues are denying the existence or the importance of 
climate change and global warming, nonetheless there ought to 
be an embrace of programs that create--that stimulate our 
ability to be leaders around the world in energy technology and 
clean energy technology, and I look forward to learning from 
our witnesses how DOE's loan program can be improved and 
strengthened moving forward. And I yield back.
    Mr. Murphy. Thank you for yielding back.
    I now recognize Mr. Burgess for a 5-minute opening 
statement.

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

    Mr. Burgess. Thank you, Mr. Chairman, and thank you for 
holding this hearing because it is an important follow-up to 
work that this subcommittee and subcommittee staff has been 
performing over the past 3 \1/2\ years.
    Certainly the exposition of some of the poor handling of 
the 1703 loan guarantee program has been one of the principal 
efforts of this committee, because, as we now know, the loss of 
hundreds of millions of taxpayer dollars occurred.
    The Department of Energy even went so far as to subordinate 
the United States' interest in being paid back its money and 
allowed private investors to be first in line to receive 
funding, a move that many people believe was done in direct 
conflict with the very plain language of the law that 
authorized the loan guarantee program in the first place.
    Following this committee's work, Herb Allison, the former 
Assistant Secretary of the Treasury, looked into the 
mismanagement of this program by the Department of Energy and 
released a report, and released a set of recommendations into 
how the program could be more efficiently operated and still 
stay within the confines of the authorizing statute.
    In the wake of the disastrous results of the first round of 
loan guarantees, which, you'll recall, ended in bankruptcy 
announcements of companies like Solyndra, Abound Solar, Beacon 
Power, the Department of Energy suspended making any further 
loan guarantee approvals. In June of 2013, Secretary Chu told 
the San Francisco Chronicle, we're going to have more 
bankruptcies. Sometimes it will be like Solyndra where you get 
3 cents on the dollars; others, it will be 80 cents or 
something like that.
    You know, the dismissive tone of the former Secretary 
making a statement about losing such a profound amount of 
American taxpayer money was really upsetting to a lot of us on 
the committee. Following a not-brief-enough 3-year hiatus, it's 
really been since September of 2011 since there have been any 
more loan guarantees, I would question whether any more should 
be made, but the Department of Energy announced this year that 
it would actually breathe new life into the program. Current 
solicitations include loan guarantees for efficiency 
automobiles and solar energy.
    The subcommittee today must look into how the Department of 
Energy intends to operate this program going forward. Does 
Secretary Moniz agree with his predecessor's view that more 
bankruptcies in this program are inevitable? Following the 
Allison report, what changes have been implemented within the 
agency to ensure that such failures are minimized? What is the 
Department's vision for this program going forward?
    The loan guarantee program was really accelerated right 
after the inauguration of President Obama in 2009, was part of 
a massive stimulus bill, and the President said it was 
essential for creating jobs and helping to steer the country 
out of an economic recession. Six years later is this still the 
goal of the program? At that time, in early 2009, credit 
markets were essentially frozen to American companies. Does 
this continue to be the case?
    If those things have changed, what is the government's role 
in any loan guarantee program? If the investment is so 
inherently risky that it cannot attract private capital, why 
should the American taxpayer be the one that's put at risk?
    The loan guarantee programs that the Department of Energy 
will be approving apply to loans issued for 20- and 30-year 
timeframes, two or three decades. Given that, when the fact 
that the Department will need to monitor these loans for 
decades to come, what safeguards are in place within the 
Department to ensure continuity of oversight over the two- to 
three-decade lifetime of the loan?
    Moreover, during our last set of hearings over the failures 
of the Department of Energy to properly oversee the program, it 
became clear that the Department of Energy actively excluded 
the Treasury Department from any meaningful input into the 
decisionmaking of which company should be receiving loan 
guarantees. What has happened to the cooperation between the 
two Departments? Does that lack of cooperation continue to 
exist, or will the Department of Energy be soliciting more 
economic expertise from the Department of Treasury?
    These are some of the many questions that are going to come 
up today, and I hope they are answered in today's hearing. I 
look forward to hearing from our witnesses and welcome them in 
their time in the committee.
    I yield back to the chair.
    Mr. Murphy. The gentleman yields back.
    I now recognize Mr. Waxman for a 5-minute opening 
statement.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you, Mr. Chairman. Thank you for holding 
this hearing. We're here today to discuss DOE's loan programs. 
We should focus on the success of the program and the need for 
clean energy financing as the threat of climate change becomes 
even more dire.
    In 2011 and 2012, and maybe in 2014, this committee was 
almost obsessed with the Solyndra loan that went bad. We 
reviewed over 300,000 pages of documents, issued multiple 
subpoenas, conducted over a dozen interviews, and had 4 
hearings. We found no evidence of the wrongdoing to support the 
wild claims of House Republicans, but we ignored the big 
picture, that the overall loan portfolio was strong, and that 
the loan program was helping to enable new breakthrough 
technologies to hit the market and employ tens of thousands of 
Americans.
    Tesla Motors, the Caithness Shepherds Flat wind farm, the 
Agua Caliente Solar project, these are the exciting success 
stories of the Loan Programs Office, and they are far more 
representative of the program as a whole than the handful of 
programs that have not worked out.
    Ensuring that America generates a much larger share of its 
energy from clean sources should be a top priority for our 
Nation's energy policy. Doing so is critical to allowing 
America to compete for leadership in the global clean energy 
market, to helping reduce America's energy cost by improving 
efficiency, and to combating climate change.
    For the past several years, the Loan Programs Office has 
helped meet these goals. Earlier this year the 
Intergovernmental Panel on Climate Change, the world's 
preeminent authority on climate science, issued a stark warning 
on the consequences of failing to take action to address 
manmade climate change. The report found that climate change is 
already happening and will get much worse if we do not take 
action immediately.
    In order for the planet to avoid the worst consequences of 
climate change, the United States has to be a leader in 
reducing carbon pollution, and yet Republicans in Congress 
continue to feed the myth that there is a scientific debate 
about whether climate change is happening, despite glaciers 
melting, despite more powerful and prolonged hurricane and 
wildfire seasons. The wild fire season in California doesn't 
even end anymore. My Republican colleagues continue to bury 
their head in the sand.
    This committee should be finding solutions to address 
climate change, but House Republicans offer no solutions. They 
reject every policy that would reduce our carbon pollution. 
They say no to a price on carbon. OK. But then they say no to 
cap-and-trade, and then they say no to EPA rules. They even 
reject financial support for climate science in DOE's loan 
program, which was originally established with bipartisan 
support.
    Denying the science and rejecting all potential solutions 
is not a plan. So as we discuss the Loan Programs Office today, 
let's avoid the attempts to make political hay out of Solyndra. 
Instead, we should learn what loan program leaders have learned 
from past problems and what they are doing to ensure the 
program's success as it begins to accelerate the pace of new 
loans.
    These loan programs can help us develop an energy strategy 
for the future that creates jobs, saves money, and positions us 
as a leader in the effort to mitigate the worst impacts of 
climate change. I thank our witnesses for being here with us 
today and to share their expertise on how we can make sure that 
the loan program achieves this vision.
    Thank you, Mr. Chairman, and I yield back my time.
    Mr. Murphy. The gentleman yields back.
    We will now proceed with our witnesses to speak. I wanted 
to add and tell Members, because we are limited on time, we'll 
have a quick gavel at 5 minutes, so please go under your time, 
so we will cut you off there so that all of us can ask 
questions.
    So, Mr. Peter Davidson is the Executive Director of the 
Loan Programs Office at the United States Department of Energy. 
In this role he oversees the program, more than 30 billion 
portfolio of clean energy and advanced vehicle loans and loan 
guarantees, making it the largest project finance organization 
in the U.S. Government.
    Mr. Rickey Hass is the Deputy Inspector General of Audits 
and Inspections at the United States Department of Energy. In 
this role he directs a Federal workforce of professional 
auditors and inspectors, serving at 13 major Department of 
Energy sites across the country.
    And Mr. Frank Rusco is the Director of Natural Resources 
and Environment of the United States Government Accountability 
Office. In this role he leads audits and reviews on a broad 
spectrum of energy, science, and DOE programmatic issues for 
Congress and the committee.
    I will now swear in the witnesses.
    Are you all aware that this committee is holding an 
investigative hearing and, when doing so, has had the practice 
of taking testimony under oath? Do you have any objections to 
taking testimony under oath?
    All of them say no.
    The chair will then advise you that under the rules of the 
House and the rules of the committee, you are entitled to be 
advised by counsel. Do any of you desire to be advised by 
counsel during your testimony today?
    All the witnesses say no.
    So, in that case, if you would please rise, raise your 
right hand, I'll swear you in.
    [Witnesses sworn.]
    Mr. Murphy. Thank you. All of the witnesses have answered 
in the affirmative. You are now under oath and subject to the 
penalties set forth in Title 18, section 1001 of the United 
States Code. You may now each give a 5-minute summary of your 
written statement. Mr. Davidson, we will begin with you.

STATEMENT OF PETER W. DAVIDSON, EXECUTIVE DIRECTOR OF THE LOAN 
  PROGRAMS OFFICE, DEPARTMENT OF ENERGY; RICKEY HASS, DEPUTY 
  INSPECTOR GENERAL FOR AUDITS AND INSPECTIONS, DEPARTMENT OF 
 ENERGY; AND FRANK RUSCO, DIRECTOR, ENERGY AND SCIENCE ISSUES, 
             U.S. GOVERNMENT ACCOUNTABILITY OFFICE

                 STATEMENT OF PETER W. DAVIDSON

    Mr. Davidson. Chairman Upton and Chairman Murphy, Ranking 
Members Waxman and DeGette, members of the subcommittee, thank 
you for the opportunity to appear before you today. My name is 
Peter Davidson. I'm the Executive Director of the Department of 
Energy's Loan Program Office, or LPO, a role I assumed almost 
one year ago.
    LPO issues loans and loan guarantees to accelerate the 
commercial deployment of clean energy projects and advanced 
vehicle manufacturing in the United States. The program was 
designed to fill a critical role in the marketplace, because 
the initial commercial deployment of innovative energy 
technology is often limited by a project developer's ability to 
secure sufficient full-term debt financing to build the 
project.
    Every transaction supported by the loan program is a 
public-private undertaking. While the Department issues loans 
and loan guarantees to provide the necessary debt financing for 
these projects, the project sponsor must provide sufficient 
project-level equity investments of at least 20 percent of the 
total cost of every project, and usually represents more than 
30 percent. DOE will not issue a loan or a loan guarantee until 
substantial private equity support is committed to the project. 
The LPO supports these innovative projects by administering two 
separate programs, the Title XVII and the Advanced Technology 
Vehicle Manufacturing, or ATVM, Program.
    We currently manage a portfolio of more than $30 billion of 
loan guarantees, loans, and conditional commitments, of 31 
projects. As the committee knows, our projects include the 
first new nuclear power plant to be licensed and constructed in 
the United States in more than 30 years, some of the largest 
utility-scale solar facilities in the world, dozens of retooled 
auto manufacturing plants producing some of America's best-
selling vehicles, the world's largest solar thermal energy 
storage systems, and a variety of other groundbreaking 
projects. Overall, these loans and loan guarantees have 
resulted in more than $50 billion in total project investment.
    Under the Title XVII program, the LPO currently has 17 
electricity generation projects in operation that produce 
enough clean energy to power more than 550,000 homes annually, 
and this number is increasing as new projects come online.
    The auto program has supported the production of over 4 
million vehicles and approximately 35,000 direct jobs across 8 
States: Michigan, California, Illinois, Missouri, Ohio, 
Kentucky, New York, and Tennessee.
    So even in the context of the program's statutory mandate 
to take on technology risk, losses to date are approximately 2 
percent of the entire portfolio; 98 percent of the portfolio is 
operating and money good. We believe our performance is strong 
and compares favorably to the private sector.
    Now, the Department of Energy takes its responsibility to 
the American taxpayer very seriously. As a result, the LPO 
underwrites and structures its loan and loan guarantees to 
protect the interests of the taxpayer and maximize prospects 
for full repayment. Before making a loan or a loan guarantee, 
we conduct extensive due diligence on the application with 
rigorous financial, technical, legal, and market analysis by 
our professional staff, which includes qualified engineers, 
financial experts, and outside advisors. And as noted in 
previous GAO reports, some private lenders have observed that 
the LPO's due diligence process is as rigorous, if not more 
rigorous, than the reviews performed in the private sector.
    Despite these efforts we have experienced some losses and 
thus constantly seek to improve every aspect of our operations. 
We have benefited greatly from recommendations for improvement, 
which have come from Congress, from the GAO, from the DOE's 
inspector general, and independent consultants such as former 
Treasury Department official Herb Allison. DOE has adopted many 
of these improvements, including streamlining the application 
process, adding transparency to the approval process, filling 
key positions with experienced professionals, clarifying 
authorities, strengthening internal oversight of the program, 
developing a state-of-the-art workflow management system, 
establishing a robust early warning system, and improving 
reporting to the public. We continuously look for ways to 
improve our underwriting and asset-monitoring activities, to 
incorporate lessons learned, and ensure best practices to 
protect taxpayer interests.
    In conclusion, securing economic leadership in the future 
requires the support of clean energy innovation and deployment 
today. The LPO provides one of the most important tools to 
achieve those goals, and, as our global competitors have 
learned, that is debt financing on reasonable terms, wisely 
targeted, and responsibly deployed.
    The achievements of the LPO, I believe, to date are solid, 
but they are not enough, and we need to do more to compete on 
the global stage, starting with our recently issued advanced 
fossil energy project solicitation, and continuing with other 
remaining authority, we aim to do just that.
    Mr. Chairman, I thank the members of the subcommittee, and 
I look forward to answering your questions.
    Mr. Murphy. Thank you.
    [The prepared statement of Mr. Davidson follows:]
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    Mr. Murphy. Mr. Hass, 5 minutes.

                    STATEMENT OF RICKEY HASS

    Mr. Hass. Mr. Chairman and members of the subcommittee, I 
appreciate the opportunity to testify on the work of the Office 
of Inspector General regarding the Department of Energy's 
loan----
    Mr. Murphy. Could you pull that microphone real close to 
your mouth, please?
    Mr. Hass. Little better?
    Mr. Murphy. That's much better. Thank you.
    Mr. Hass. Because of the significant taxpayer funds 
involved, the Office of Inspector General has, over the years, 
performed a series of reviews of the Loan Programs Office. 
These reviews have identified needed improvements in both the 
origination and monitoring of loans.
    My testimony today will focus on our review of the 
Department's implementation and recommendations that resulted 
from an administration-requested review of the LPO by Mr. 
Herbert Allison in January of 2012. Prior to doing so, however, 
I will discuss our recent report on the failure of the $400 
million Abound loan guarantee to provide a benchmark for 
understanding the Department's progress and actions yet to be 
completed.
    Although the Department had identified and taken steps to 
mitigate risk, and had reduced its financial exposure by 
suspending funding when Abound did not meet its project 
milestones, our audit identified several weaknesses in the 
administration of the loan. Specifically we found that the 
program had not notified the Department's credit review board 
of material change in the credit subsidy used to cover 
potential loan losses. It had not resolved conflicting opinions 
of technical advisors, adequately documented assumptions used 
in its financial modeling, and conducted ongoing formal 
financial and market analyses.
    We concluded that the issues we identified occurred because 
the program had not established comprehensive policies, 
procedures, and guidance for awarding, and monitoring and 
administrating loans. We also pointed out that the weaknesses 
in the financial market and monitoring of Abound occurred when 
the program had limited staff and was just establishing its 
portfolio management division.
    The Department's experience with the Abound loan guarantee 
provides useful lessons learned for program improvements, which 
were generally incorporated in the independent consultant 
recommendations. The purpose of our most recent review was to 
the determine whether the Department adequately addressed the 
independent consultant's twelve recommendations to enhance 
program oversight and management.
    Our review found that the Department had completed actions 
to address four of the twelve recommendations, including 
filling a number of key positions and establishing and 
communicating management goals. While the Department did not 
fully concur with our findings, we consider efforts to address 
the remaining eight recommendations to be ongoing, because 
policies, procedures, and other plans and efforts were not yet 
complete and in place. Examples of remaining actions include 
strengthening internal oversight, clarifying authorities, and 
incorporating lessons learned into policies and procedures.
    We also identified other needed improvements. Specifically 
we noted that the Department had not finalized changes in 
policies and procedures necessary to address Mr. Allison's 
recommendations, and had not developed a formal adjudication 
process for resolving differences of professional opinion. 
Finally, we found that the program had created a potential 
conflict of interest by appointing the Director of Portfolio 
Management as a member of the program's risk committee.
    While the Department's actions show promise and substantial 
progress had been made, we were unable make a determination at 
the time of our report as to whether the efforts will be 
ultimately fully successful, because, as previously noted, a 
number of actions are still ongoing.
    Given the significant amount of funding available for loans 
and loan guarantees and the previously identified weaknesses, 
we'll continue to monitor the loan-related activities as part 
of our normal risk-assessment process. In our view, the loan 
guarantee program warrants special attention by Department 
officials, and as such has been one of our management challenge 
watch list items since 2011.
    Mr. Chairman, this concludes my statement, and I will be 
pleased to answer any questions the subcommittee may have. 
Thank you.
    Mr. Murphy. I thank the gentleman.
    [The prepared statement of Mr. Hass follows:]
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    Mr. Murphy. I now recognize Mr. Rusco for 5 minutes.

                    STATEMENT OF FRANK RUSCO

    Mr. Rusco. Thank you. Chairman Murphy, Ranking Member 
DeGette, Ms. Schakowsky, and members of the subcommittee, I am 
pleased to speak to you today about DOE's loan programs.
    Since 2009, DOE has made a total of 38 loans under 3 
programs. These loans amount to about $30 billion, and DOE has 
about $45 billion in remaining loan authority. Five of the 
thirty-eight loans have defaulted, and another four were either 
deobligated or withdrew prior to disbursement of the loans. DOE 
is in the process of unraveling the defaulted loans and 
calculating the losses to the Federal Government.
    The Section 1703 Loan Guarantee Program was authorized by 
Congress in 2005 and was designed to encourage investment in 
commercial use of new or innovative energy technologies. This 
program issued its first two loans in February 2014 to support 
two nuclear reactors under construction in Georgia. The total 
amount of these two loans was about $6.2 billion, and DOE has 
about $29 billion in remaining 1703 loan authority.
    For 1703 loans, the loan recipients are generally required 
to pay for the expected costs of the loans at the time the 
loans are made. These expected costs are referred to as credit 
subsidy costs. The Advanced Technology Vehicles Manufacturing 
Loan Program was authorized by Congress in 2007 and is designed 
to encourage the automotive industry to invest in vehicle 
technologies resulting in greater fuel efficiency of vehicles 
and components. DOE made five loans under the ATVM Program 
between September 2009 and March 2011 for a total of $8.4 
billion and has $16.6 billion in remaining loan authority. For 
ATVM loans, the Federal Government pays the credit subsidy 
costs. For the five loans made to date under this program, 
these credit subsidy costs were $3.3 billion.
    In 2009, as part of the Recovery Act, Congress created the 
Section 1705 Loan Guarantee Program to support commercial 
energy projects that use renewable energy, electric-power 
transmission systems, or leading-edge biofuels. Congress also 
appropriated funds to pay the credit subsidy costs for 1705 
loans. Thirty-one loans were made under 1705 between September 
2009 and September 2011, when loan authority expired. The total 
value of the loans made were $15.7 billion, and the credit 
subsidy costs for the loans were $1.9 billion.
    GAO has evaluated DOE's loan programs on an annual basis 
since 2007 and has found that, over time, DOE has set up the 
infrastructure to solicit and evaluate loan applications, to 
estimate credit subsidy costs, and to issue or guarantee loans. 
DOE is also building its capacity to manage the risk of its 
existing loan portfolio. In our reports we have made many 
recommendations intended to improve the functioning of the 
programs, and DOE has generally been responsive in implementing 
these recommendations.
    There is, however, some question about whether there will 
be sufficient demand for all remaining loan authority under the 
1703 and ATVM programs. For 1703, the fact that borrowers must 
generally pay for the credit subsidy costs at the time the 
loans are made may prove to be a deterrent. The 1703 program 
has offered numerous solicitations over the past 8 years and 
evaluated many dozens of applications, but until February of 
this year, it had been unable to make a single loan. It is also 
important to note that for the two loans it did make, the 
borrowers did not pay any credit subsidy cost because DOE 
estimated these costs to be zero.
    We are not questioning DOE's cost estimates for these 
loans, but we note that under the 1705 program, when the 
government was paying these costs, the average credit subsidies 
were about 12.5 percent of the loan value. If similar credit 
subsidy costs are assessed under the 1703 program in the 
future, it is unclear that borrowers would find these loans to 
be economically attractive.
    Further, the ATVM program has not made a loan since March 
2011, despite having loan authorization and appropriated funds 
to pay the credit subsidy costs. In a recent report, we found 
that as of March 2014, the program had only one active loan 
application, and this loan was for about $200 million, a small 
fraction of total remaining loan authority. GAO, therefore, 
suggested that unless DOE can demonstrate adequate demand for 
ATVM loan authority, Congress may wish to consider rescinding 
all or part of the remaining $4.2 billion in credit subsidy 
appropriations.
    Thank you. This completes my oral remarks. I will be happy 
to answer any questions you may have.
    Mr. Murphy. I thank the gentleman.
    [The prepared statement of Mr. Rusco follows:]
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    Mr. Murphy. I am now going to recognize myself for 5 
minutes.
    Mr. Davidson, how long have you been running the DOE's Loan 
Programs Office, did you say?
    Mr. Davidson. Mr. Chairman, I began there in May of last 
year, so one year.
    Mr. Murphy. And as the head of the Loan Programs Office, 
you report directly to the Secretary; am I correct on that?
    Mr. Davidson. Correct.
    Mr. Murphy. So, have you had meetings with Secretary Moniz 
to discuss the LPO?
    Mr. Davidson. Yes.
    Mr. Murphy. And what is the Secretary's vision for how the 
remaining $40 billion in loan authority should be used?
    Mr. Davidson. Thank you for that question. The Secretary's 
point of view is that we move ahead and do what we believe the 
statute provides for, which is within our area, which is now 
the 1703.
    Our 1705 funding, which is the stimulus act, that loan 
program is over, so now we have the 1703, which is the self-pay 
authority.
    Mr. Murphy. Pull that mic a little bit closer because I 
want to make sure we hear.
    Let me ask about specifics. So has he directed you in 
anything such as fossil fuel, carbon capture sequestration, 
nuclear power plants?
    Mr. Davidson. We don't discuss specific transactions. What 
we talk about is the ability to put out solicitations. As was 
remarked, we have not put out a solicitation in a number of 
years. We put out the first new solicitation under 1703 in a 
number of years, which is the advanced fossil fuel 
solicitation.
    Mr. Murphy. But I assume, as head of the LPO, you receive 
periodic status reports, loan applications, and the existing 
portfolio; is that correct?
    Mr. Davidson. Excuse me?
    Mr. Murphy. I'm assuming that you receive reports on the 
loan applications and the existing portfolio?
    Mr. Davidson. Correct.
    Mr. Murphy. OK. Do you regularly brief the Secretary on the 
current status of all the aspects of the program?
    Mr. Davidson. The Secretary and I meet on a quarterly 
basis.
    Mr. Murphy. Two years ago this committee asked the DOE to 
submit a list of projects that applied for loan guarantees. Can 
you tell me how many of the active loan guarantee applications 
are still in the queue?
    Mr. Davidson. We have been providing that to certain areas 
of Congress. I'm not sure it did this committee, but we're 
happy to do that.
    Mr. Murphy. Do you have any idea how many are still in the 
queue, by any chance?
    Mr. Davidson. Our total applicants?
    Mr. Murphy. Yes.
    Mr. Davidson. We have a number of applicants still in the 
queue. As we shut down, as the 1705 program ended, all those 
that were still in the queue were allowed to proceed if they 
had been active. So of that, we have a number of active 
applications. We don't disclose the exact number, but there are 
a handful of active applications. On the renewable side, there 
are a handful of active applications from earlier fossil 
solicitations we did in 2008.
    Mr. Murphy. Can you describe the nature of those fossil 
solicitations in general?
    Mr. Davidson. Well, Mr. Chairman, if I can go back, I'll go 
back. As I know many of you on the committee are aware, we did 
a solicitation in 2008 which was really about a coal 
gasification. It was a very specific solicitation. At that time 
a number of applications came in, I think 10 or so at the time. 
Some of those have remained active. And are still in the queue, 
and are still being pursued, and are in due diligence. Many of 
those projects, the sponsors withdrew the projects primarily 
because of what's happened with natural gas. And the decrease 
in the cost of natural gas has made those projects not 
economically viable, so the developers have withdrawn.
    Mr. Murphy. Mr. Rusco, let me ask you, GAO has reviewed the 
loan program extensively, as you pointed out. What do you see 
as the largest risk in the program as it is currently run both 
in terms of the loan origination and the long term?
    Mr. Rusco. In terms of the front-end process of the loan 
origination, I would say DOE does not have a perfect record of 
choosing viable projects to support. Most of their experience 
is in the 1705 program, where the Federal Government paid the 
credit subsidy cost, but in that program, DOE made loans to 
four solar manufacturers, and of those four loans, two have 
defaulted, and one was deobligated prior to loan disbursement. 
In large part, these problems stem from growing competition 
from lower-cost producers of solar panels in China and 
elsewhere, but----
    Mr. Murphy. Can I interrupt you on that point, because I 
know that one of the problems we had with Solyndra when there 
was competition from China, unfortunately, is that the issue 
was--when you talk about viability, are you referring to 
viability of where the company is financially viable, if the 
nature of the project itself is going to be viable as new 
technologies develop, or both?
    Mr. Rusco. Well, I think that the energy sector is changing 
rapidly, constantly, and keeping abreast of that and making 
sure that you are supporting projects that will remain viable 
is a very difficult proposition.
    Mr. Murphy. Particularly when you are doing a 20- or 30-
year loan.
    Mr. Rusco. Yes, that is a concern, and--so on the back end, 
we remain concerned that DOE has not fully set up and staffed 
its portfolio risk management procedures and policies. DOE must 
remain vigilant to ensure it's well informed and prepared to 
respond to any emerging risks to its existing loans, and that 
could include risks associated with lower-priced natural gas, 
as was mentioned, or any other changes in the markets.
    Mr. Murphy. Thank you. I recognize I am out of time. I'll 
now recognize--you ready? We'll recognize Mr. Green first for 5 
minutes, if you're ready, Mr. Green, from Texas.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Davidson, just off the top of my head, why are the 
number of applications privileged, that you can't share with a 
congressional committee?
    Mr. Davidson. I believe it's our DOE policy. We state the 
number of applicants who have--the specific number of 
applicants we try not to release because there are potential 
competitive issues involved. We try and really safeguard the 
privacy information of those people that apply, trade secrets, 
those types of issues, and the feeling is if people know how 
many applied for a certain type of solicitation, it could 
determine if there are competitors applying or things of that 
nature.
    Mr. Green. I understand that, and obviously I want business 
records and proprietary information, but it seems like a public 
loan would be--at least the information for the number--I'm not 
talking about the names even, but that would be helpful, of 
someone who's applied, but that's separate from my line of 
questions. I just didn't know they were--even the number of 
applications, I never had somebody say we can't tell you how 
many we have. It just bothers me as a Member of Congress.
    In the most recent solicitations released by your office 
for advanced fossil energy projects, an eligible project could 
apply as an advanced resource development project. These 
projects include projects that employ new or significantly 
improved technologies to economically develop and recover and 
produce traditional fossil energy resources with reduced 
greenhouse gas emissions. Just for clarification, an eligible 
project could involve either hydraulic fracking as a technology 
or natural gas as a traditional resource; is that correct?
    Mr. Davidson. Correct.
    Mr. Green. Because coming from Texas, I also know we have 
some issues that we need to do. If we want to continue the 
successful development of natural gas, we need to use 
technology, whether it's private sector or public sector, to be 
able to safely get that product out of the ground and as clean 
as we can do. Is the Department of Energy open to something 
like that as a grant project?
    Mr. Davidson. Yes. Thank you, Congressman, for that 
question.
    First of all, on the prior point, let me just say we're 
happy to work with your staff to try and get you the 
information on the number of applicants, so we'll follow up 
with you on that.
    I'm glad you brought up the advanced fossil. We are very 
pleased to be having issued that in December with the support, 
obviously, of the Secretary, and it is the first time in recent 
years that we'll be able to move on loans that are not just in 
the renewable side and the auto side.
    We think there's a great opportunity within the fossil fuel 
area. That's all the way from extraction through the generation 
side, through the end use in the area of energy efficiency and 
combined heat and power. We believe developers and project 
sponsors will have many uses for the fossil fuel.
    As you know, there are four requirements for any 1703 loan 
to be----
    Mr. Green. I only have 5 minutes, and let me first--under 
the ATVM Program, Secretary Moniz has stated DOE would 
specifically reach out to component manufacturers. Has the DOE 
reached out to similar technology companies in the hydraulic 
fracking sector?
    Mr. Davidson. We just don't have the ability to do that the 
way our solicitation is structured. What we do is we put out a 
solicitation, which we have now done, and then we have to wait 
for companies to apply to us. We are not allowed to engage 
specifically with companies. We can't go out and pick one 
company or another. We just have to say, the Department of 
Energy is open for business, here are the requirements, so 
please apply for the program. But we very much encourage 
companies involved in the front end, the extractive side of the 
industry, to apply to the program.
    Mr. Green. Mr. Chairman, this wasn't part of the loan 
program in the 2005 act, but we did do an amendment to the 2005 
act for directional drilling. We had a Texas company who did 
its best they could with the technology, and the 2005 act 
authorized, but the DOE lab in Wyoming--because of former 
Congressman Barbara Cubin--and they did the research so we can. 
And part of our success in natural gas is not only 
hydrofracking, but also the directional drilling, and 
Department of Energy, I think, helped that company in the 
industry to be able to extend that reach from 35,000 feet to 
more, but--and that's one of the successes, I think, of what 
happened in the 2005 Energy Act. It wasn't a loan program, but 
it actually helped us with the success we have today.
    So I know I'm almost out of time, Mr. Chairman. I 
appreciate you and our ranking member having this hearing 
today.
    Mr. Murphy. The gentleman yields back.
    I now recognize the vice chairman of the full committee, 
Mrs. Blackburn of Tennessee for 5 minutes.
    Mrs. Blackburn. Thank you, Mr. Chairman, and I'm going to 
try not to take that full 5, but I want to welcome our 
witnesses. We do thank you for being here. As you know, we have 
a history, as Dr. Burgess said, of being very concerned and 
very interested in this program and the process that takes 
place at the LPO.
    Mr. Davidson, I have to tell you, I found your background 
fascinating, and Blackstrap Communications, and the fact that 
you were in the communications world and now you moved over to 
the energy world, and how you took that name as a tribute to 
your grandfather and with his selling molasses, I thought that 
was really quite fascinating. And maybe we should have you come 
back when we're talking telecommunications and broadcasting.
    A couple of questions for you. On clarification, if I can, 
on just how many loans and loan guarantees you all have closed 
on and how many you are actively monitoring, what is your 
total?
    Mr. Davidson. Thank you, Congresswoman. Thank you first for 
those nice comments to begin.
    The total number of loans we have that we're actively--that 
in our portfolio, we've lent money to, are 33.
    Mrs. Blackburn. So you do have a total of 33 that are out 
there, and you're actively monitoring those. And the amount of 
those loans, is it about $28 billion?
    Mr. Davidson. It's a little closer to $30 billion now.
    Mrs. Blackburn. OK. So it's closer to $30 billion.
    And how much of your total loan funds have been disbursed?
    Mr. Davidson. Well----
    Mrs. Blackburn. By percentage.
    Mr. Davidson. Well, the short answer is we have 
approximately 26 billion in the 1703 authorization still 
available and 16 billion in the ATVM available.
    Mrs. Blackburn. OK.
    Mr. Davidson. So, a little over $40 billion still 
remaining.
    Mrs. Blackburn. OK. All righty. And let me ask you this. 
What I'd like to know, since we've had so many questions about 
due diligence and how the program goes about its due diligence, 
describe for me how the LPO actually monitors that portfolio.
    Mr. Davidson. Thank you, Congresswoman, for that. First let 
me say, as you mentioned, I had been in the private sector for 
a number of years. I was in the banking business for a while, 
and I've been now in government for the last 5 years, State 
government and now here, and I just would like to reassure you, 
from what I've seen in the private sector and what I've seen at 
the LPO in my one year there, I think our processes, the way we 
go through our due diligence, the way we involve both our staff 
and outside consultants when we need them, outside engineers 
and outside financial advisors, is really first rate, and it's 
really very thorough and----
    Mrs. Blackburn. I've only got 5 minutes. What I'm looking 
for is specifics.
    Mr. Davidson. OK.
    Mrs. Blackburn. What are some of your benchmarks? What are 
some of the components that you're looking for as you do this 
due diligence? And if you cannot answer that question right 
now, what we want to see is to see that in writing.
    And, Mr. Rusco, in your report, you noted that while DOE 
had implemented some reforms, they have not done written 
policies and procedures for those loan-monitoring activities; 
is that correct?
    Mr. Rusco. That's correct. There are several areas where we 
want to see additional improvements. DOE did not consistently 
adhere to its policies for monitoring and reporting on credit 
risk, for example, on ongoing loans. They should be reviewing 
that credit risk periodically and writing reports.
    Mrs. Blackburn. So, they're still conducting their 
business, and too much of a subjective format; would that be 
correct?
    Mr. Rusco. I think that what they were doing is they have 
not yet put into place specific policies and guidance that they 
are following consistently, and they really need to do that to 
ensure that----
    Mrs. Blackburn. Sometimes we say that's kind of making it 
up as you go along.
    OK. Mr. Chairman, I'm going to yield back.
    Mr. Murphy. The gentlewoman yields back.
    I Now recognize the ranking member Ms. DeGette for 5 
minutes.
    Ms. DeGette. Thank you, Mr. Chairman, and thank you for 
having this hearing. It's been several years, and I think a 
review of these programs is really overdue, and I appreciate 
it.
    I also want to thank Mr. Green for filling in for me while 
I was at a preexisting commitment this morning.
    I have some questions about how the loan guarantee program 
is working, since this is the first hearing we've had since 
Solyndra, and I want to start with you, Mr. Davidson. By what 
metrics does the Loan Programs Office assess whether the clean 
energy loan portfolio is performing well, and what do those 
metrics show?
    Mr. Davidson. Thank you for the question. Primarily two 
ways we look at it. One is on the financial performance, how 
we're doing that way. I think, as I mentioned in my statement, 
of the 30 billion portfolio outstanding, 98 percent of that 
portfolio is performing and paying back. We have had losses of 
2 percent that----
    Ms. DeGette. Wait. What's the amount of those losses?
    Mr. Davidson. The losses are approximately 700 million over 
the five projects that have been described.
    Ms. DeGette. OK.
    Mr. Davidson. Of the 30 billion portfolio. So we look at 
the financial performance as one metric, and the others we 
really look at the intention was are we bringing new forms of 
energy technology to market that would not be possible without 
this program?
    Ms. DeGette. And what's your view on that?
    Mr. Davidson. We think we have been very successful in a 
number of ways. If you look at the utility-scale solar 
industry, that did not exist. Before the Loan Programs Office 
made the first five loans to utility-scale solar, the 
government made the first five loans. We stopped making those 
loans in the 1705 program, and in 2011, since that time, 10 new 
utility-scale solar facilities have been built without a dime 
of government money. That's a success.
    Ms. DeGette. OK. I'm sorry.
    Mr. Davidson. So, we look at the nuclear facility. No 
nuclear facility had been built in this country in 30 years. 
Now the first one is being built. We think that's directly 
related to this program.
    And then, finally, a lot of what's happened in the auto 
sector with Ford retooling 13 facilities, the $5.9 billion loan 
from the ATVM Program went to Ford for that. Nissan was able to 
bring the batteries, which they had been producing in Japan. We 
brought those and now built a factory in Smyrna, Tennessee, 
where we're making those battery packs.
    Ms. DeGette. Thanks. OK.
    So now, when Congress passed the loan guarantee program, 
they did that in order to help encourage funding of programs 
that the private sector would find too risky to fund on its 
own; is that correct?
    Mr. Davidson. That is correct.
    Ms. DeGette. And so, therefore, are the amount of losses 
that you had described as seeing in line of what was expected 
by Congress when they passed that section XVII program into 
law?
    Mr. Davidson. Thank you, Congresswoman, for that question.
    Ms. DeGette. Well----
    Mr. Davidson. A member or----
    Ms. DeGette. Do you think that was in line with what 
Congress expected when they passed that into law?
    Mr. Davidson. I think what Congress, when they passed, 
there was kind of the credit subsidy number that was mentioned 
for ATVM, that number was 7.5 billion, and for the 1705 program 
was approximately 2 \1/2\ billion. So essentially Congress said 
losses essentially could be high as $10 billion for our 
program. As I mentioned, losses to date are 700 million----
    Ms. DeGette. So, actually it's less----
    Mr. Davidson [continuing]. So more than 90 percent of what 
was allocated remains.
    Ms. DeGette. It's less than what was expected from 
Congress.
    Mr. Davidson. Far less than what was----
    Ms. DeGette. And how has the DOE program performed compared 
to what we'd expect from a private-sector portfolio?
    Mr. Davidson. It's a little hard to make that direct 
connection because by law and the way Congress set up our 
program, we are funding technology risk which normally 
commercial lenders would not make.
    Ms. DeGette. Right.
    Mr. Davidson. So you would expect our portfolio to fare 
worse. The fact that we have a 98 percent success rating, I 
think, is a testament to the due diligence process we do and 
the loan monitoring that we continue.
    Ms. DeGette. OK. But nonetheless, you have incurred losses, 
and so I'm wondering has DOE made changes and improvements in 
response to those lessons learned?
    Mr. Davidson. Thank you for that question.
    We certainly have learned--and I really would like to thank 
the great work that the GAO and the IG have done. We agree 
fully with the recommendations that they have made, 
particularly on the Allison report. What we have done is our 
policies and procedures, as we go through our due diligence, 
and as we go through our portfolio monitoring, are very robust, 
and I believe that's why we have such a high success rate with 
our loans.
    What we have not done, and what we are in the process of 
doing, is fully documenting our active policies and procedures. 
So we agree fully. We need to document what we are doing, but 
we are in the process of putting the documents together.
    Ms. DeGette. But the GAO report, you agree with the GAO 
report, you need to work on documenting?
    Mr. Davidson. Exactly. And we were working very closely 
with those recommendations----
    Ms. DeGette. And when do you expect to have those 
recommendations?
    Mr. Davidson. We are working on them now. We expect to have 
them within the next few months.
    Ms. DeGette. Thank you very much.
    Mr. Murphy. Thank you. The gentlelady yields back.
    I now recognize Dr. Burgess for 5 minutes.
    Mr. Burgess. Thank you, Mr. Chairman. So, again, thanks to 
our witnesses for being here.
    Mr. Davidson, one of the factors we identified as causing 
problems during the Solyndra investigation was that deadlines 
seemed to be dictated by outside forces, perhaps something in 
the stimulus bill or a political deadline, rather than when the 
loan guarantee was actually ready to close. So the question is 
what deadlines will govern the review of applications that are 
being submitted in response to the new loan program 
solicitations or under the existing ATVM Program?
    Mr. Davidson. Thank you, Congressman, for the question. On 
the timeframe of when we get back to applicants?
    Mr. Burgess. Yes, sir.
    Mr. Davidson. OK. Slightly different by our programs. For 
the 1703 advanced fossil solicitation, which is now our only 
active solicitation on the 1703 side, we have part 1 and a part 
2 application. Part 1, applicants apply to a part 1, and there 
we see if they meet the four required criteria, which is a new 
technology or significantly enhanced commercial technology; 
does it reduce sequestered greenhouse gasses; is the facility 
located in the United States or its territories; and do they 
have the ability to pay it back, reasonable prospect of 
repayment. When applicants submit, our team conducts that part 
1 review.
    We have only just issued that solicitation. Our first part 
1 application date was in February. We had a number of 
applicants for that part 1, and I can say now, without trying 
to get into too much detail, because we just don't do that, 
that those part 1s have now been fully vetted, and many of them 
are moving into the part 2. And that has now taken us 
approximately 2 or 3 months for that part 1.
    Mr. Burgess. You understand the committee's concern. When 
reviewing the data around the Solyndra application, it did seem 
that there were--you look through the e-mails back and forth, 
and it did seem that there were political deadlines that 
really--or political pressures that were actually impacting 
upon the timeline, and you are comfortable at this point that 
that is not occurring now?
    Mr. Davidson. Thank you for that question. I'm very 
confident that is not occurring now. And I'm currently--as one 
of the missions I had when I came in, as I mentioned, I had a 
real business background, and I think it's very important that 
you be responsive to applicants. And I think that was an issue 
we had before. We now are trying to move very quickly to be 
responsive to all those in our pipeline and all future 
applicants. We are very focused on quickly turning around part 
1s, letting applicants know if they will move into part 2 or 
will they be out of the process.
    Mr. Burgess. There's a semiannual report to Congress from 
April 1, 2012, from the Office of Inspector General from the 
Department of the Treasury. In that report, on the Department 
of Treasury's inspector general's consultation on the Solyndra 
loan guarantee, Department of Treasury pledged to work with 
Department of Energy to define the circumstances that 
constitute a deviation from the material financial terms and 
conditions of the loan guarantee and Treasury's consultative 
role.
    So has the Department of Energy reached a full 
understanding with Treasury so that these definitions are now 
established, and a plan for cooperation and respective roles 
formulated and made public?
    Mr. Davidson. Congressman, I have to say I'm not familiar 
with that issue, so if it's OK with you, I'll research and get 
back to you on that.
    Mr. Burgess. So do you and Treasury talk?
    Mr. Davidson. We have a very robust interagency process. 
Prior to our loans, we meet with OMB to discuss our deals, and 
Treasury is invited to that meeting.
    Mr. Burgess. With all due respect, the information that 
this committee and the committee staff uncovered during the 
Solyndra investigation, it really didn't seem that there was a 
robust relationship between Department of Treasury and 
Department of Energy, and really that's what led to some of the 
concerns that are outlined in this report.
    I'm quoting here: ``We found that Treasury did perform a 
consultation on the terms and conditions of the Solyndra loan 
guarantee. However, whether that consultation met the intent of 
applicable law and regulation is not clear because Treasury's 
consultative role was not sufficiently defined.''
    Have we moved past that point?
    Mr. Davidson. Congressman, I can't speak to the time before 
I was here which that report indicates, but I'm very pleased 
now with the relationship we have on an interagency basis with 
both Treasury and the Office of Management and Budget. We meet 
with them regularly. They are aware of our portfolio.
    Mr. Burgess. I would like for you for the record to go back 
and do this analysis and report, enter in writing for the 
committee as to how going forward we can maintain that 
expectation, that the consultation between Energy and Treasury 
will, in fact, occur the way it was designed to occur.
    Mr. Davidson. OK. We'll look into that.
    Mr. Burgess. Thank you.
    Mr. Murphy. Thank you.
    The gentleman's time is expired. Now recognize Mr. Waxman 
for 5 minutes.
    Mr. Waxman. Thank you, Mr. Chairman.
    The loan guarantee program is important for a number of 
reasons. It's creating jobs, it is moving us closer to a 
renewable energy economy, and it represents a great opportunity 
to develop technologies to address the clear risks of climate 
change.
    Over the past century we have dramatically increased the 
amount of carbon we are emitting into our atmosphere. The 
scientific community has hammered home the point through report 
after report, warning of what will happen if we do not act to 
reverse this trend.
    We are witnessing in our very own communities the impacts 
of higher sea levels and more frequent instances of flooding, 
drought, and intense storms. The projects that these loans are 
supporting, solar and wind farms, nuclear plants, grade 
integration, these are the energy sources of the future, and 
they are the most effective way to deal with the issue of 
climate change because they address the root of the problem, 
which are, of course, carbon emissions.
    Mr. Davidson, how does the loan guarantee program fit into 
the President's climate action plan?
    Mr. Davidson. Thank you for that question, Mr. Chairman. We 
are a key part of the climate action plan. The President 
announced the issuance of our $8 billion advanced fossil 
solicitation as part of the climate plan announcement, and we 
are seen as a key component of the way to both help fund energy 
innovation, to work with the private sector, and to help reduce 
carbon emissions.
    Mr. Waxman. Can you give us an idea of the potentially 
transformational reductions in carbon emissions that these 
programs will be capable of, and what are we achieving in the 
projects that are already online?
    Mr. Davidson. Thank you for that question. The projects 
online have produced a great deal in our solar and wind 
facilities. One of the things I particularly like to remark 
upon is with the new nuclear facility, that is avoiding 10 
million tons a year of carbon. So there may be controversy 
about nuclear power, but it is one of the key areas is 
extremely effective in reducing greenhouse gas emissions.
    The other aspect I think we'd like to talk about, as you 
mentioned, is the jobs impact in the solar facilities, the 
utility-scale solar facilities, that we were involved in 
financing. Those created directly 7,000 jobs in the 
construction and operation of those facilities. And with the 5 
concentrated solar facilities that we built, we've been able to 
track job creation in 39 separate States across the Union that 
have participated directly into the supply chain there.
    So it's not only the funding of these projects, but it's 
the ripple effect for the supply chain, and that is 7,000 for 
the 10 we've funded. Since we've stopped funding, now that 
utility-scale solar is a completely bankable industry, more 
than 10 utility-scale solar facilities have been built, and we 
think the employment there is equally as large. And as you 
know, solar now employs over 140,000 people in this country, up 
from virtually nothing a decade or two ago.
    Mr. Waxman. So these are programs that are now self-
sufficient with private investment, but if we didn't have a 
loan guarantee program, would the private sector have moved 
forward without this effort on behalf of the government?
    Mr. Davidson. Thank you, Congressman. You never know what 
could have happened, but the reason Congress established this 
program was to provide debt financing to those projects which 
were meretricious, but could not attract financing from a 
private-sector bank. And that is why we became involved in 
photovoltaic solar, that's why we became involved with the 
nuclear industry, and that's why we're hoping to find things in 
the advanced fossil area can do. There are many things; carbon 
capture and sequestration we feel is a very interesting area, 
and we're looking forward towards applications in those ways.
    Mr. Waxman. Press reports indicate that the EPA will soon 
announce new standards for carbon emissions from coal-fired 
power plants. Will the breakthroughs you are helping to fund 
help meet these goals?
    Mr. Davidson. Congressman, as you know, we don't know what 
those regs will be until they're issued, but to the extent part 
of it is how do we make coal facilities cleaner, our program is 
specifically set up for that, for coal operators who would like 
to install carbon capture and sequestration; our debt financing 
is available for that, or some of the newer technologies, 
chemical looping and things of that nature. That is what and 
one of the reasons the President announced in the climate 
action plan this $8 billion advanced fossil solicitation.
    Mr. Waxman. Well, Mr. Chairman, I think the DOE Loan 
Programs Office can continue to support break-through 
technologies that address the threat of climate change, and I 
fully support their efforts.
    I yield back my time.
    Mr. Murphy. Gentleman yields back. Now go to Mr. Griffith 
of Virginia for 5 minutes.
    Mr. Griffith. Thank you, Mr. Chairman.
    Let me say upfront, I am very pleased to hear you mention 
chemical looping, because obviously if that works, and the 
plans are going forward on that, we don't have any capture; we 
do have sequestration issues, but it eliminates the real need 
for capture because it comes out with just CO2. So I 
am very pleased to hear that that's on the agenda, support good 
loans being made. I know there's some risk involved.
    What I'm really concerned with is to make sure that we are 
following the laws as it was set up. This is the first time 
that we've been back, as Ms. DeGette pointed out, since we had 
a lot of hearings on the Solyndra issue, and I'm curious, 
because at that time, the last time we had a meeting, the 
inspector general's office indicated that investigations were 
still ongoing.
    Mr. Hass, can you advise us, are the investigations still 
ongoing into what happened with Solyndra, and are we expecting 
any--or do you know if there's any possible criminal conduct 
that may have taken place during this time period?
    Mr. Hass. I can say that investigations are still ongoing, 
sir.
    Mr. Griffith. They are still ongoing?
    Mr. Hass. Yes, sir.
    Mr. Griffith. All right. And I was a little vexed by 
comments made earlier by Mr. Waxman indicating that the 
hearings had shown that there was no wrongdoing. Whether or not 
there were ever any criminal charges that come out of this, I 
think there clearly was wrongdoing, and I hope that in the 
future we'll make sure that the law is actually followed. And I 
feel compelled to go through a litany of these and ask, have we 
learned our lessons? Are we still going down this path?
    In regard to Solyndra, on December 13, 2010, DOE sends a 
letter to Solyndra advising Solyndra that they are in default. 
Section 1702(g)(4)(A) indicates, quote, ``If the borrower 
defaults on an obligation, the Secretary shall notify the 
Attorney General of the default.'' That is so that under 1702 
(2)(g)(4)(B) the Attorney General can be involved in making--or 
taking action to make sure that the American taxpayer is 
protected. In the Solyndra situation that was not done.
    If there are defaults, Mr. Davidson, are you all notifying 
the Attorney General so that the Attorney General's Office can 
at least be a part of the team in trying to protect the 
American taxpayers when we try to collect on a loan that may 
default?
    Mr. Davidson. If there is a default pursuant to the law, 
and we have to get DOJ involved, we do.
    Mr. Griffith. OK. Because that did not happen in the 
Solyndra situation, and they went on to do a subordination. 
Furthermore, in regard to subordination, section 1702(d)(3) 
specifically says, quote, ``The obligation shall be subject''--
talking about the loan--``The obligation shall be subject to 
the condition that the obligation is not subordinate to other 
financing.''
    It goes on in another section to say, ``Superiority of 
Rights,'' in 1702(g)(2)(B), ``The rights of the Secretary, with 
respect to any property acquired pursuant to a guarantee or 
related agreements, shall be superior to the rights of any 
other person with respect to the property.'' However, the DOE 
at the time decided that subordination restriction in section 
1702(d)(3), referring to Susan Richardson's memo, the 
subordination restrictions, section 1702(d)(3), is a condition 
precedent to the issuance of a loan guarantee and not a 
continuing obligation restricting restructuring options.
    Now, I believe it was wrongdoing to come up with that 
opinion, and, as we know, there was a memo that said, well, 
this is your best option, but there was never contact with the 
Department of Justice on making a decision to subordinate. Even 
though someone at Treasury e-mailed back and said, we don't 
think you can do this, I believe it was wrongdoing not to 
consult with the Department of Justice. I believe it was wrong 
under the law to do a subordination in that case, and the 
subordination--forget the riskiness of the loan of Solyndra, 
the subordination cost the American taxpayers $170 million, and 
I believe that was wrongdoing.
    Do you believe that those lessons have been learned, or do 
you all think that you still have an option of subordinating a 
loan, notwithstanding the clear language of the statute?
    Mr. Davidson.
    Mr. Davidson. Thank you for the question, Congressman.
    Now, I realize this issue of subordination is a very 
important issue. It's important to you. It's very important to 
us in the Department. I can say we have absolutely no plans to 
subordinate any loans in our portfolio.
    Mr. Griffith. Well, I hope that you not only have no plans, 
but I hope that even in a dire circumstance, that if you need 
authority, you come back to Congress because it clearly is not 
granted in the Code section.
    I'm excited about some of the things that are happening in 
the energy world. We have had a great resurgence in American 
energy. Hopefully we can find even more ways to do that, and if 
this loan guarantee program can move that forward, that's 
great. I just want to make sure that we're following the law, 
and that we are not--after having made a risky investment, and 
people can argue about whether that was wise or not, that when 
we find that somebody is in trouble, that we follow the law and 
we try to protect the American taxpayer at that point in time.
    Mr. Chairman, I appreciate it very much, I appreciate the 
witnesses being here, and I yield back.
    Mr. Murphy. Gentleman yields back, and now we recognize the 
gentleman from Iowa Mr. Braley for 5 minutes, if he's ready.
    Mr. Braley. Thank you, Mr. Chairman.
    I'm delighted to have the opportunity to be here with the 
distinguished panel we have in front of us today, and one of 
the things that I would like to hear a little bit more about is 
the response to the IG report. One of the things that we'd like 
to hear a little bit more about in detail is a little bit about 
the summary of the findings and recommendations from that 
report that you think have an impact on the work of the 
committee going forward.
    Mr. Davidson. Thank you, Congressman.
    The IG report and the GAO report raise some very good 
points. We are in full agreement on them about ways we can make 
our policies and procedures even better. As I mentioned, we 
feel that we have taken a number of steps, partly as a result 
of the reports.
    Some of those I'd like to go into that we've taken, moved 
ahead on, are we've created the Risk Management Division, which 
was a key part of the reports, and we've hired a senior credit 
officer. We've also significantly staffed up that operation. We 
have tasked the Risk Management Division to prepare separate 
reports on each one of our credits. We have already been doing 
that as part of our portfolio management team, but now we have 
a separate set of eyes on every one of our credits coming out 
of our Risk Management Division. That began last year. They did 
half our portfolio. Now every year they will be analyzing all 
of our loans.
    We have updated and strengthened the charters for our two 
internal oversights boards, the Project Review Committee and 
our Risk and Portfolio Management Committee. These are now 
staffed by DOE personnel, but the majority of people on that 
are non-LPO members. It's a separate set of eyes on all of our 
transactions and actively looking at our portfolio on a 
biweekly basis. And finally, we've developed a very robust 
internal electronic system to control our process and 
procedures and track things.
    So these are all part of the recommendations, but they're 
also just part of our continuing interest in improving, because 
we're very, very focused on making sure we are really 
safeguarding taxpayer money. We take that extremely seriously.
    Mr. Braley. When people use words like ``internal 
electronic systems,'' it leaves a lot of us with questions 
about, what the hell does that really mean? So can you break 
that down as it relates to the changes in this risk management 
system in terms of what you're going to be doing differently 
that would lead to different outcomes than what we had before?
    Mr. Davidson. Yes. Thank you, Congressman, and I don't mean 
to be vague in what that was.
    Mr. Braley. No, no. I'm one of those people who's just 
innately curious.
    Mr. Davidson. Yes. Thank you.
    We've really just been automating our internal systems. We 
had a generation one. We are now on generation three, and we 
are planning to roll out generation four. This just allows 
people from throughout the organization to talk on the same 
platform about the same credit, so people on our origination 
team with our risk management team and portfolio management are 
fully impacting together on the same schedule.
    Mr. Braley. And is that new system fully functional at this 
point?
    Mr. Davidson. Version three is fully functional, and we're 
rolling out the next version within the next few months.
    Mr. Braley. And one of the things you also identified in 
your description was that separate reports on each one of your 
credits were going to be generated as part of this new system. 
Can you explain that in a little more detail?
    Mr. Davidson. Yes. That's not so much part of that system. 
That's part of the creation of our Risk Management Division and 
being able to fully staff up, or more fully staff up, that Risk 
Management Division. This has always been a goal that's been 
one of the recommendations. We do extensive portfolio analysis. 
We have 55 people in our Portfolio Management Division, because 
when we make a loan, we hold those loans, and we will be 
monitoring those loans for the next 25 years. That's one of the 
reasons we're taking the time to make sure when we document our 
policies and procedures, we do them absolutely correctly, 
because these really have to stay in place to manage what we do 
for the next 25 years. So we take that responsibility very 
seriously.
    I lost my train of thought there.
    Mr. Braley. Well, let me just move on to a different 
question, then. When I talk to lenders and I talk to borrowers, 
one of the things they're always concerned about is the 
inordinate amount of paperwork associated with the processing 
of any loan these days, and sometimes the requirements don't 
make sense at face to the people who are being asked to provide 
information.
    After the S&L crisis, I sold a house, bought a cheaper 
house, and was required to fill out an affidavit explaining why 
I was buying a house cheaper than the one I just sold. It 
didn't make a lot of intuitive sense to someone whose parents 
grew up in the Depression.
    So as we're looking at how you're providing oversight and 
underwriting guidance, are you looking at ways to make sure 
that the oversight and the underwriting criteria make sense for 
the type of risk that's being underwritten?
    Mr. Davidson. Thank you, Congressman, for that question.
    We take that very seriously. That is the whole reason we do 
such extensive due diligence. I think the GAO has mentioned 
that our due diligence is as extensive, if not more extensive, 
than what happens in the private sector.
    Mr. Braley. Thank you. I'll yield back.
    Mr. Murphy. Gentleman's time has expired.
    Recognize Mr. Johnson for 5 minutes.
    Mr. Johnson. Thank you, Mr. Chairman, and I'd like to thank 
our panel for joining us today, as well. Thank you, gentlemen, 
for being here.
    Mr. Davidson, at the time of the stimulus, the credit 
markets for energy projects were in rough shape. Your project 
finance people pay close attention to credit market conditions; 
is that correct?
    Mr. Davidson. Correct.
    Mr. Johnson. So what is the current condition of credit 
markets?
    Mr. Davidson. I'm not an economist, so take that, what I 
say, with that caution in mind. But just reading the paper, 
credit markets have gotten better than they were certainly in 
2009 and early into 2010.
    Mr. Johnson. But, obviously, if your Department is paying 
close attention to those, your team knows that that improvement 
has occurred.
    Has the availability of private financing for clean-tech 
projects improved since 2009?
    Mr. Davidson. That's a very interesting question, 
Congressman. Thanks for asking it.
    In certain segments it has improved, but, for instance, as 
I've mentioned a few times, we made the first loans to the 
utility-scale solar industry. At that time, developers--and 
some of these were very big-named developers putting hundreds 
of millions of dollars into projects--they could not arrange 
commercial bank financing. We made those loans, and then we 
stopped making those loans.
    Mr. Johnson. But I'm not talking about what you did during 
the stimulus. We understand that. I'm talking about since 2009 
through today, have those credit markets for clean-tech 
projects improved?
    Mr. Davidson. For some segments of the clean-tech market, 
they have. For others, it is still difficult.
    Mr. Johnson. OK. So how does that credit market improvement 
change the role of the DOE loan programs and the type of 
projects that it supports?
    Mr. Davidson. Yes. Well, thank you, Congressman. I know you 
are concerned, as we are very concerned, that we make the loans 
to the right type of companies that need it, and they're not 
just coming to us for lower-cost financing. We take the issue 
of making sure that the projects we fund are ones that would 
find it very difficult, if not impossible, to raise financing 
from a commercial source.
    The first alternative is always for a project to go to a 
commercial lender. If the project sponsor finds that is not 
possible, they come to us. We do not go out to anybody. We put 
out a solicitation, and we can only deal with applicants if 
they respond to a solicitation.
    Mr. Johnson. Well, therein lies part of the concern that I 
have and that many of my colleagues, many of my constituents 
have. If a project goes out to the private sector markets, and 
they cannot find funding--I'm a patent holder, and I have 
struggled with trying to raise money for tech projects myself. 
And so if they go to the private markets and they can't get the 
money, what kind of additional due diligence does your 
Department do to determine that taxpayer funding should be 
spent on something that the credit markets say might not be a 
worthy project?
    Mr. Davidson. Thank you. That is an excellent question. 
It's one we spend a great deal of time thinking about.
    Maybe to give some comfort is we will not look at a project 
unless it's brought to us by a sponsor that is committing at 
least 20 percent by law, but in reality it's always closer to 
30 percent of real equity dollars in the project.
    Mr. Johnson. Yes.
    Mr. Davidson. So someone has to come to us with a project 
that 20 percent at least is already equity funded, and all the 
other parts of the project have to be in place.
    Mr. Johnson. OK.
    Mr. Davidson. For instance, we do a great deal of 
electricity-generation projects. There has to be an off-take 
agreement in place. There has to be equity in place. There has 
to be regulatory approval in place.
    Mr. Johnson. Mr. Rusco, how would you respond to those 
questions? Has the private markets and credit markets improved, 
and do you believe that should change the way the DOE loan 
programs should work?
    Mr. Rusco. Yes. The financial markets have largely 
recovered from their collapse in the run-up to the recession. I 
do think that that should be an important consideration.
    I think that there is an inherent problem with the way that 
the 1703 program is set up in that innovative projects that 
come there are required to pay their credit subsidy costs. The 
less viable they are in the market, the higher the risk is; 
therefore, the higher the credit subsidy costs are. And I'm 
concerned that may be a deterrent to the program actually being 
effective in meeting its goals.
    Mr. Johnson. OK. I have one more question and just a short 
time. Do you have any loan programs that you're anticipating 
granting loans for this year? If so, when do you anticipate 
granting your next loan program?
    Mr. Davidson. Well, the current active solicitation is an 
advanced fossil. We issued that in December. The first 
application gate or window for that was in February, a few 
months ago. We received a number of applicants. We are moving 
those through our system. We have a part 1 and a part 2. 
Sometimes the part 2 system, because it involves very thorough 
due diligence, can take anywhere from 6 months to--in the case 
of the Vogtle transaction, that took over 5 years.
    Mr. Johnson. So----
    Mr. Murphy. Gentleman's time has expired.
    Mr. Johnson. OK. I yield back, Mr. Chairman.
    Mr. Murphy. I now recognize Mr. Tonko for 5 minutes.
    Mr. Tonko. Thank you, Mr. Chair.
    I think that it's important that we set the record straight 
of the committee's investigation of the Solyndra loan. I was 
not part of the Energy and Commerce Committee at the time of 
the investigation, but there has been exhaustive review of the 
committee report and the record. And we reviewed over 300,000 
pages of documents, issued multiple subpoenas, conducted over a 
dozen interviews and had four hearings.
    The evidence clearly demonstrated that loan guarantee 
decisions were made on merits. The committee found no evidence 
that loan guarantee decisions were influenced by political 
contributions or political considerations. There was a robust 
debate within the administration about the Solyndra loan, and 
decisions were made that ultimately turned out to be the wrong 
ones. But, Mr. Chair, the committee's investigation found no 
evidence of wrongdoing by administration officials with regard 
to the Solyndra loan.
    With that being said, DOE's support of the American auto 
industry through the Advanced Technology Vehicles Manufacturing 
Loan Program has resulted in a number of significant success 
stories. Director Davidson, as you mentioned in your testimony, 
DOE's support of Tesla helped to create thousands of jobs in 
California, and the company repaid the entire remaining balance 
on its loan 9 years earlier than required. Other auto 
manufactures like Ford have modernized factories and produced 
new, advanced engines with DOE's support.
    I'd like to learn more today about the ATVM program and the 
innovative new technologies that it is helping to produce. So, 
Director Davidson, what is the purpose of the ATVM program?
    Mr. Davidson. Thank you very much, Congressman.
    ATVM, the purpose of the program is to assist manufacturing 
for OEMs and suppliers in this country to help achieve the 
efficiency targets, to help boost fuel efficiency. The goal is 
increasing fuel efficiency for lightweight vehicles, and we do 
that by providing support for the manufacturing facilities for 
car makers and component makers.
    Mr. Tonko. So we're creating a better product and more in 
keeping with the consumer's demand?
    Mr. Davidson. It's a resource to help build the 
manufacturing capability in the United States. So for Ford, we 
retooled 13 facilities; Nissan, we brought in production, which 
had been happening in Japan, we brought it to Tennessee; and 
Tesla retrofitted a whole factory. That's why we think there 
will be real interest in the program going forward, more on the 
side of the suppliers, component suppliers and component 
manufacturers. We have been hearing a great deal from them 
about interest in the program since Secretary Moniz made an 
announcement at a supplier convention last month that the 
program was open for business.
    Mr. Tonko. Well, in my district, and I'm certain in 
districts across America, congressional districts across 
America, the number one issue is jobs. How many jobs have you 
quantified to have been helped by the ATVM program? How many 
have we helped to create?
    Mr. Davidson. The number we use, and a lot of these numbers 
come from Ford, which is the number one recipient of the money 
there, is 35,000 jobs have been created or been sustained as a 
result of that.
    Mr. Tonko. And how many--is there a cluster of States that 
might have seen the majority of those jobs?
    Mr. Davidson. The majority of it has been in California, 
certainly for Tesla; and then the Ford was really up in the 
Midwest in upstate New York, Michigan, Ohio, around there.
    Mr. Tonko. Yes.
    What recent steps has the Department taken to revitalize 
and improve the ATVM program?
    Mr. Davidson. Yes. Well, as I mentioned, the Secretary made 
an announcement that the program is back up and open for 
business, so there is $16 billion remaining, really for helping 
companies come in. What we have been hearing is because the 
auto industry is doing well now, there are a number of 
suppliers, component suppliers, overseas suppliers, that are 
looking to possibly build facilities elsewhere; it might be in 
the United States, it might be in Mexico or Canada. And as they 
look at moving to the United States, we think this could be a 
real resource to help them make the decision to locate and 
bring those jobs and investment to the United States.
    Mr. Tonko. And the whole move to retrofit and move into 
advance manufacturing, which is the current MO, I believe, by 
many, how has the ATVM program helped to support American 
manufacturing?
    Mr. Davidson. The whole purpose is how can we retrofit 
facilities, build facilities, and do the software and 
engineering integration. That is financeable by this program, 
the engineering, to really help aid in manufacturing.
    Mr. Tonko. And the GAO has raised concerns about whether 
there is demand for ATVM loans. And in April, as you indicated, 
Secretary Moniz announced improvements to the ATVM program. Can 
you build upon, you know, give us more information on some of 
those improvements?
    Mr. Davidson. Yes. Thank you for that.
    As the chairman mentioned, not many loans have been made. 
I'm pleased to say there is one active loan in the portfolio 
now, so we're working on that one very diligently. And since 
the Secretary has made his announcement, and since we've been 
actively talking with the supplier sector and the OEMs, we are 
finding there is real interest.
    There was a certain amount of confusion before about 
whether suppliers could apply, the type of things that would be 
required. We've been able to clarify that for them, and we are 
out speaking and communicating. We've had a number of meetings, 
and we are cautiously optimistic that there will be interest, 
and we will be seeing if loan applications come in within the 
next few months.
    Mr. Murphy. We're out of time.
    Mr. Tonko. Well, I would think that as we push in 
innovation economy, the new technologies, groundbreaking new 
technologies, are essential. So I thank you for what the 
program is doing, and I yield back.
    Thank you, Mr. Chair.
    Mr. Murphy. Thank you, Mr. Tonko.
    I now recognize Mr. Harper for 5 minutes.
    Mr. Harper. Thank you, Mr. Chairman, and thank each of you 
for being here.
    And, Mr. Davidson, I'd like to start with you. And what I 
would ask, I probably would ask Mr. Rusco to follow up with, on 
your thoughts on this question. You know, as we look at the 
program, try to figure out where it's going, I believe there's, 
what, $16 billion left in the program, is that correct, 
roughly?
    Mr. Davidson. Congressman, there's $16 billion on the auto 
side, the ATVM program.
    Mr. Harper. Sixteen billion.
    Mr. Davidson. In the energy program, 1703, there's $28 
billion remaining.
    Mr. Harper. OK. Great.
    If you look at the existing ATVM program that you just 
talked about, you know, you see established automobile 
manufacturers such as Ford and Nissan, and you see companies 
that are or were startups comparatively, Tesla, Fisker and the 
Vehicle Production Group. So it almost appears to be two 
different types of projects. So can you elaborate what criteria 
you used to determine eligibility for the ATVM program?
    Mr. Davidson. Thank you, Congressman, for that question, 
and I'm happy to respond and talk more about ATVM.
    It's not my criteria, first of all; it's the criteria that 
Congress provided for what we can do. And that is, it is to 
assist in funding a manufacturing facility, either the new 
build, or a rehabilitation, or a reequipping of a facility, 
that is either making the car, light vehicle-- making the car 
or making the component that will be a part of an advanced 
vehicle.
    An advanced vehicle is defined as a light vehicle that is 
25 percent more fuel efficient than the comparable car was in 
2005. So if you can contribute to that fuel efficiency, you are 
then a designated component or a designated auto supplier, and 
if you're building a facility or reequipping a facility, we can 
finance you.
    Mr. Harper. All right. You know, just from recent 
statements from the Secretary, it appears that maybe the 
program goals are changing. Can you elaborate? Are the goals 
changing? Are they----
    Mr. Davidson. Thank you for that question.
    The goals aren't changing. It's really a communication to 
the industry, because this is really a program to assist 
industry. And the communication to the industry was that 
suppliers, component suppliers, are very welcomed and 
encouraged to apply.
    Mr. Harper. Right.
    Mr. Davidson. The suppliers were in very tough shape 4 or 5 
years ago, as the whole auto industry was. Now, as we're doing 
very well in auto assembly for the OEMs, there seems to be real 
demand from the supplier base. And as I mentioned, many of the 
suppliers are thinking of relocating to the United States. We'd 
like to help them to make that decision to relocate here.
    Mr. Harper. Thank you, Mr. Davidson.
    Mr. Rusco, your comments on what I've just asked Mr. 
Davidson as far as the ATVM loans are concerned.
    Mr. Rusco. Well, I think there is some concern about 
whether there is a demand out there, and part of the concern 
comes from our conversations with the applicants, former 
applicants of the original solicitations. Many of the 
applicants that we spoke with said that there were 
requirements, and the length of time it takes to get through 
this process are just not worth it, and they were not 
interested in pursuing those.
    So, I don't know what's going to happen in the future, and 
I know that DOE is trying to rejuvenate this program, but so 
far there has not been a lot of actual interest. There's only 
one active application.
    Mr. Harper. OK. Mr. Rusco, GAO has recommended that unless 
DOE demonstrates demand for new ATVM loans, Congress should 
consider ending the program. Is that correct?
    Mr. Rusco. Yes. We think that unless there is a demand that 
can be demonstrated for these loans, that Congress may wish to 
rescind some or all of the remaining credit subsidy money and 
use it elsewhere.
    Mr. Harper. Mr. Davidson, are there any additional active 
ATVM loan applications, since the one for $200 million reported 
by GAO in March of this year?
    Mr. Davidson. Congressman, that is the only active one in 
the portfolio. I'd like to mention, the Secretary made the 
major announcement at the supplier event. That was just a 
little over a month ago.
    Mr. Harper. OK.
    Mr. Davidson. Since that time we've been--I'm the person 
having meetings, having a number of very interesting meetings 
with people that I believe will be applicants in the relatively 
near term.
    Mr. Harper. But no active at this point since that time.
    And so we've only got just a few seconds, but how do you do 
your outreach to automobile manufacturing companies? How are 
you contacting them to determine if they're eligible, or have 
interest, or create interest?
    Mr. Davidson. Excellent question, Congressman. And because 
the program has been fairly quiet for the last few years, that 
is an issue we are working with, and it's all the ways we try 
and do communication. We're trying to staff up to hire the 
right people, going to industry events, and we're doing things 
like the Secretary, communicating very publicly that we're open 
for applications.
    Mr. Harper. When you said you had some that were interested 
that you're looking at, if you're talking about, let's say, you 
go talk to 10 different potential companies, how many of those 
express interest? How many would you say on average might 
flatly refuse or reject that?
    Mr. Davidson. Well, if they're talking to me, they're 
already interested.
    Mr. Harper. Yes, but you have some that are not interested; 
you have some that are. Fair?
    Mr. Davidson. Correct.
    Mr. Harper. I yield back.
    Mr. Murphy. The gentleman yields back.
    I recognize Ms. DeGette for a follow-up question.
    Ms. DeGette. Thank you very much.
    Mr. Chairman, I know Mr. Tonko talked about those Solyndra 
hearings that we had in 2011 and 2012, and he wasn't on the 
committee, but I was, and, in fact, I was the ranking member of 
the committee. We had 300,000 pages of documents, subpoenas, 
interviews, four hearings that went on and on, and we never did 
find evidence of wrongdoing. It was clear that the loan 
guarantee decisions were made on the merits, but as Mr. 
Davidson said today, the reason we have loan guarantees is 
because we want to encourage this type of investment, and it 
is, by nature, risky.
    And I just also want to thank the witnesses for coming 
today. And I want to comment that I was pleased to see, number 
one, that DOE is recognizing--they're under the losses that 
Congress had predicted and anticipated when we passed the loan 
guarantee program back under the Bush administration, but also 
that they're implementing the recommendations of the GAO.
    I look forward to hearing how that implementation goes, 
because I think that's important. And I yield back.
    Mr. Murphy. Thank you.
    Another follow-up question. Mr. Hass, you've been quiet. We 
haven't been asking you a lot, but I want to ask you this: 
You've had an opportunity to learn extensively the testimonies 
from Mr. Davidson and Mr. Rusco here, but also with the GAO 
report and analysis of what had taken place, are you satisfied 
that the changes you've recommended, that GAO has recommended 
have been put into place at the Department of Energy for this 
loan program?
    Mr. Hass. Well, sir, I will say that we have seen a lot of 
progress over the years from our evaluations, and a lot of 
things are still ongoing. We can't say that they are 100 
percent successful, but it looks like there's a lot of 
movement.
    Now, in response to our last reports we recently issued, 
the Department will be providing a matrix that will set out an 
exact timetable on when they expect to have all of the 
recommendations resolved, and we should be getting that soon as 
part of our normal process.
    Mr. Murphy. And then will you continue to follow up with 
them, so you'll present the matrix, and you'll continue to 
monitor that to see that those plans are being put into place?
    Mr. Hass. Yes, sir, especially with the long nature of the 
loans, as you've mentioned, and the large value. They're an 
important part of our risk assessment we do every year. We have 
plans in place to conduct some additional work this year and in 
the coming year.
    Mr. Murphy. I thank you, and I thank the panel. And I ask 
unanimous consent that the Members' written opening statements 
be introduced into the record, and, without objection, the 
documents will be entered into the record.
    And in conclusion, again, Ithank all the witnesses, all the 
Members that have participated in today's hearing. I remind 
Members they have 10 business days to submit questions for the 
record, and I ask that the witnesses all agree to respond 
promptly to the questions.
    With that, this hearing is adjourned.
    [Whereupon, at 10:58 a.m., the subcommittee was adjourned.]
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