[House Report 112-652]
[From the U.S. Government Publishing Office]
112th Congress Rept. 112-652
HOUSE OF REPRESENTATIVES
2d Session Part 1
======================================================================
NO MORE SOLYNDRAS ACT
_______
September 10, 2012.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Upton, from the Committee on Energy and Commerce, submitted the
following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 6213]
[Including cost estimate of the Congressional Budget Office]
The Committee on Energy and Commerce, to whom was referred
the bill (H.R. 6213) to limit further taxpayer exposure from
the loan guarantee program established under title XVII of the
Energy Policy Act of 2005, having considered the same, report
favorably thereon with an amendment and recommend that the bill
as amended do pass.
CONTENTS
Page
Amendment........................................................ 1
Purpose and Summary.............................................. 4
Background and Need for Legislation.............................. 5
Hearings......................................................... 9
Committee Consideration.......................................... 10
Committee Votes.................................................. 11
Committee Oversight Findings..................................... 20
Statement of General Performance, Goals, and Objectives.......... 20
New Budget Authority, Entitlement Authority, and Tax Expenditures 20
Earmark.......................................................... 20
Committee Cost Estimate.......................................... 20
Congressional Budget Office Estimate............................. 20
Federal Mandates Statement....................................... 22
Advisory Committee Statement..................................... 22
Applicability to Legislative Branch.............................. 22
Section-by-Section Analysis of Legislation....................... 22
Changes in Existing Law Made by the Bill, as Reported............ 23
Dissenting Views................................................. 25
Exchange of Letters.............................................. 32
Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``No More Solyndras Act''.
SEC. 2. FINDINGS.
The Congress makes the following findings:
(1) President Obama took office amidst a weak economy and
high unemployment, yet he remained committed to advancing an
expansive ``green jobs'' agenda that received substantial
funding with the passage of the American Recovery and
Reinvestment Act of 2009, commonly known as the stimulus
package.
(2) The stimulus package allocated $90 billion to various
green energy programs, and related appropriations provided $47
billion for loan guarantees authorized under title XVII of the
Energy Policy Act of 2005 (42 U.S.C. 16511 et seq.).
(3) Such title XVII authorized the Secretary of Energy to
issue loan guarantees for projects that avoid, reduce, or
sequester air pollutants or greenhouse gases and employ new or
significantly improved technologies compared with commercial
technologies in service at the time the guarantee is issued.
(4) Loan guarantees issued under such title XVII were
required to provide a reasonable prospect of repayment and were
expressly required to be subject to the condition that the
obligation is not subordinate to other financing.
(5) The stimulus package expanded such title XVII by adding
section 1705 to include projects that use commercial technology
for renewable energy systems, electric power transmission
systems, and leading-edge biofuels projects and by
appropriating $6,000,000,000 in funding to pay the credit
subsidy costs for section 1705 loan guarantees for projects
that commence construction no later than September 30, 2011.
(6) The Department of Energy, since the enactment of the
stimulus package, has issued loan guarantees under such title
XVII for 28 projects totaling $15,100,000,000 under the section
1705 program, and, according to the Government Accountability
Office, issued conditional loan guarantees for four projects
totaling $4,400,000,000 under the section 1705 program and four
projects totaling $10,600,000,000 under the section 1703
program.
(7) Three of the first five companies that received section
1705 loan guarantees for their projects, Solyndra, Inc., Beacon
Power Corporation, and Abound Solar, Inc., have declared
bankruptcy.
(8) The bankruptcy of the first section 1705 loan guarantee
recipient, Solyndra, Inc., could result in a loss to taxpayers
of over $530,000,000.
(9) The investigation of the Solyndra loan guarantee by the
Committee on Energy and Commerce has demonstrated that the
review in 2009 of the Solyndra application by the Department of
Energy and the Office of Management and Budget was driven by
politics and ideology and divorced from economic reality where
the Department of Energy ignored concerns about the company's
financial condition and market for its products.
(10) Despite an express provision in such title XVII
prohibiting subordination of the United States taxpayers'
financial interest, the Department of Energy restructured the
Solyndra loan guarantee in February 2011, resulting in the
taxpayers losing priority to Solyndra's investors in the event
of a default.
(11) The Inspector General of the Department of the Treasury
concluded that it was unclear whether the Department of
Energy's consultation requirement with the Secretary of the
Treasury on the Solyndra loan guarantee was met; that the
consultation that did occur was rushed with the Department of
the Treasury expressing that ``the train really has left the
station on this deal''; and that no documentation was retained
as to how the Department of the Treasury's serious concerns
with the loan guarantee were addressed.
(12) The Government Accountability Office concluded that the
Department of Energy Loan Guarantee Program under title XVII
has treated applicants inconsistently; that the Department of
Energy did not follow its own process for reviewing
applications and documenting its analysis and decisions,
increasing the likelihood of taxpayer exposure to financial
risk from a default; and that the Department of Energy's
absence of adequate documentation made it difficult for the
Department to defend its decisions on loan guarantees as sound
and fair.
(13) A memorandum prepared for the President dated October
25, 2010, from Carol Browner, Ron Klain, and Larry Summers,
principal advisors to the President, noted the risk presented
by loan guarantee projects because most of the projects had
little ``skin in the game'' from private investors.
(14) A January 2012 report conducted at the request of the
Chief of Staff to the President concluded that the portfolio of
projects the Department of Energy included in the loan program
were higher risk investments that private capital markets do
not generally invest in.
(15) The Department of Energy's section 1705 program has
expired but the Department of Energy has announced that it will
continue to consider applications for loan guarantees under the
section 1703 program.
(16) The Department of Energy has approximately
$34,000,000,000 in remaining lending authority to issue new
loan guarantees under the section 1703 program.
SEC. 3. SUNSET.
(a) No New Applications.--The Secretary of Energy shall not issue any
new loan guarantee pursuant to title XVII of the Energy Policy Act of
2005 (42 U.S.C. 16511 et seq.) for any application submitted to the
Department of Energy after December 31, 2011.
(b) Pending Applications.--With respect to any application submitted
pursuant to section 1703 or 1705 of the Energy Policy Act of 2005
before December 31, 2011:
(1) No guarantee shall be made until the Secretary of the
Treasury has provided to the Secretary of Energy a written
analysis of the financial terms and conditions of the proposed
loan guarantee, pursuant to section 1702(a) of the Energy
Policy Act of 2005 (42 U.S.C. 16512(a)).
(2) The Secretary of the Treasury shall transmit the written
analysis required under paragraph (1) to the Secretary of
Energy not later than 30 days after receiving the proposal from
the Secretary of Energy.
(3) Before making a guarantee under such title XVII, the
Secretary of Energy shall take into consideration the written
analysis made by the Secretary of the Treasury under paragraph
(1).
(4) If the Secretary of Energy makes a guarantee that is not
consistent with the written analysis provided by the Secretary
of the Treasury under paragraph (1), not later than 30 days
after making such guarantee the Secretary of Energy shall
transmit to the Committee on Energy and Commerce of the House
of Representatives and the Committee on Energy and Natural
Resources of the Senate a written explanation of any material
inconsistencies.
(c) Transparency.--
(1) Reports to congress.--Not later than 60 days after making
a guarantee as provided in subsection (b), the Secretary of
Energy shall transmit to the Committee on Energy and Commerce
of the House of Representatives and the Committee on Energy and
Natural Resources of the Senate a report that includes
information regarding--
(A) the review and decisionmaking process utilized by
the Secretary in making the guarantee;
(B) the terms of the guarantee;
(C) the recipient; and
(D) the technology and project for which the loan
guarantee will be used.
(2) Protecting confidential business information.--A report
under paragraph (1) shall provide all relevant information, but
the Secretary shall take all necessary steps to protect
confidential business information with respect to the recipient
of the loan guarantee and the technology used.
SEC. 4. RESTRUCTURING OF LOAN GUARANTEES.
With respect to any restructuring of the terms of a loan guarantee
issued pursuant to title XVII of the Energy Policy Act of 2005, the
Secretary of Energy shall consult with the Secretary of the Treasury
regarding any restructuring of the terms and conditions of the loan
guarantee, including any deviations from the financial terms of the
loan guarantee.
SEC. 5. RESTATING THE PROHIBITION ON SUBORDINATION.
Section 1702(d)(3) of the Energy Policy Act of 2005 (42 U.S.C.
16512(d)(3)) is amended by striking ``is not subordinate'' and
inserting ``, including any reorganization, restructuring, or
termination thereof, shall not at any time be subordinate''.
SEC. 6. ADMINISTRATIVE ACTIONS AND CIVIL PENALTIES.
(a) In General.--Any Federal official who is responsible for the
issuance of a loan guarantee under title XVII of the Energy Policy Act
of 2005 in a manner that violates the requirements of such title or of
this Act shall be--
(1) subject to appropriate administrative discipline
including, when circumstances warrant, suspension from duty
without pay or removal from office; and
(2) personally liable for a civil penalty in an amount of at
least $10,000 but not more than $50,000 for each violation.
(b) Definition.--For purposes of this section, the term ``Federal
official'' means--
(1) an individual serving in a position in level I, II, III,
IV, or V of the Executive Schedule, as provided in subchapter
II of chapter 53 of title 5, United States Code; and
(2) an individual serving in a Senior Executive Service
position, as provided in subchapter II of chapter 31 of title
5, United States Code.
SEC. 7. GAO STUDY OF FEDERAL SUBSIDIES IN ENERGY MARKETS.
(a) In General.--The Comptroller General shall conduct a study of the
Federal subsidies in energy markets provided from fiscal year 2003
through fiscal year 2012.
(b) Focus.--The study required under subsection (a) shall have
particular focus on Federal subsidies in energy markets provided in
support of--
(1) electricity production, transmission, and consumption;
(2) transportation fuels and infrastructure;
(3) energy-related research and development; and
(4) facilities that manufacture energy-related components.
(c) Report.--Not later than 1 year after the date of enactment of
this Act, the Comptroller General shall submit to the Committee on
Energy and Commerce of the House of Representatives and the Committee
on Energy and Natural Resources of the Senate a report that describes
the results of the study conducted under subsection (a), including an
identification and quantification of--
(1) costs to the United States Treasury;
(2) impacts on United States energy security;
(3) impacts on electricity prices, including any potential
negative pricing impact on wholesale electricity markets;
(4) impacts on transportation fuel prices;
(5) impacts on private energy-related industries not
benefitting from Federal subsidies in energy markets;
(6) any Federal subsidies in energy markets that are provided
to foreign persons or corporations; and
(7) subsidies and direct financial interest any of the 15
foreign countries with the largest gross domestic product are
providing to support energy markets in their respective
countries.
(d) Definition.--For purposes of this section, the term ``Federal
subsidies'' means Federal grants, direct loans, loan guarantees, and
tax credits, and other programmatic activities targeted at energy
markets and related sectors, relating to specific energy technologies.
Purpose and Summary
H.R. 6213, the ``No More Solyndras Act,'' was introduced by
Representative Fred Upton (together with Reps. Stearns, Pitts,
Terry, Stivers, Latham, Scott, Gingrey, Ellmers, Lance, Rogers,
Whitfield, Burgess, Sullivan, Blackburn, Pompeo, Myrick,
Harper, Flake and Olson) on July 26, 2012. The legislation
limits further taxpayer exposure from the Department of Energy
(DOE) loan guarantee program established under Title 17 of the
Energy Policy Act of 2005. Key provisions of the bill:
Prohibits DOE from issuing any Title 17 loan
guarantees for applications submitted after December 31, 2011.
Provides that Title 17 applications submitted
prior to December 31, 2011, remain eligible to receive a DOE
loan guarantee if certain conditions are satisfied.
Requires written consultation from the Department
of the Treasury evaluating the financial terms and conditions
prior to initial issuance of a Title 17 loan guarantee.
Provides for greater transparency by requiring
that for any new guarantee issued pursuant to Title 17, DOE
must, within 60 days of issuance, report to Congress on: (i)
the review and decision-making process utilized by DOE in
issuing the guarantee; (ii) the terms of the guarantee; (iii)
the recipient; and (iv) the technology and project.
Reaffirms that any loan guarantee obligation made
pursuant to Title 17, including any reorganization,
restructuring, or termination thereof, shall not, at any time,
be subordinate to other financing and requires Department of
Treasury consultation with respect to any restructuring.
Subjects senior-level Federal officials and
appointees to administrative actions and civil penalties for
violations of any requirements of Title 17 of the Energy Policy
Act of 2005 or the ``No More Solyndras Act.''
Requires the Government Accountability Office to
complete a study of the Federal subsidies in energy markets
from FY 2003 through FY 2012.
Background and Need for Legislation
There is no dispute that the Nation would benefit from an
all-of-the-above energy policy that includes alternative as
well as conventional energy sources. Nor is there much doubt
that the energy mix will change over time to take advantage of
new technological breakthroughs. But there is a right way and a
wrong way to diversify the Nation's energy supply, and heavy-
handed government attempts to pick winners and losers have a
long and unsuccessful history. Nonetheless, this was the
approach taken by the Obama Administration in the 2009 stimulus
package, which allocated $90 billion dollars for the so-called
green energy economy. The results of the stimulus spending are
largely in, and they are no better than Washington's past
efforts to spur energy innovation and jobs by favoring specific
companies and technologies. Particularly disappointing is the
Administration's record on the loan guarantee program
established under Title 17 of the Energy Policy Act of 2005.
THE HISTORY OF THE TITLE 17 LOAN GUARANTEE PROGRAM
Section 1703 of the Energy Policy Act of 2005 authorized
the Department of Energy (DOE) to issue loan guarantees to
projects investing in either innovative clean technologies or
commercial-scale renewable energy that meet the following two
criteria; (1) the projects ``avoid, reduce, or sequester air
pollutants'' and (2) ``employ new or significantly improved
technologies as compared to commercial technologies in service
in the United States at the time the guarantee is issued.'' The
Act listed ten different types of project categories that were
eligible for funding, including renewable energy systems,
advanced fossil energy technology, hydrogen fuel cell
technology, advanced nuclear facilities, and efficient
electrical generation and transmission. The goal of the program
is to assist companies with promising projects meeting these
criteria that are unable to attract sufficient private
investment--hence the need for a Federal loan guarantee.
However, the Bush Administration did not approve any loan
guarantees under the program. This was due partly to the fact
that the DOE office implementing the program was slow in being
set up, and that program funding only became available in 2007.
But even after the Bush DOE had the program up and running, it
ran into difficulties finding applicants whose energy projects
are meritorious, but unable to secure private financing absent
loan guarantees. At a July 12, 2012, legislative hearing before
the Energy and Power Subcommittee, Dr. David Kreutzer, Research
Fellow in Energy Economics and Climate Change with the Heritage
Foundation, testified about this inherent contradiction in the
loan guarantee program. He stated that ``a program that seeks
to fund projects that are both market viable and unable to get
private financing will have to settle for projects that meet
just one or neither of those criteria. That is, the projects
are likely to fail, or they could have gotten private
financing.''
In retrospect, the Bush Administration's reluctance to
approve any loan guarantees was fully justified. Nonetheless,
the incoming Obama Administration treated the lack of approvals
not as an indication of a flawed program but as a Bush DOE
failing that needed to be corrected. The Obama DOE immediately
accelerated the pace by which applications were processed. In
addition, the American Recovery and Reinvestment Act of 2009
(the stimulus package) created a new section 1705 to include
for loan guarantees projects that use commercial technology for
renewable energy systems, electric power transmission systems,
and leading-edge biofuels projects. Further, the law
appropriated $6 billion dollars in funding to pay the credit
subsidy costs for projects that commence no later than
September 30, 2011--further reducing the amount of private
investment (i.e. ``skin in the game'') at risk on these
projects. Shortly after passage of the stimulus package,
subsequent related appropriations provided $47 billion for
Title 17 loan guarantees.
Within two years, more than $15 billion dollars in loan
guarantees were approved for 28 projects, mostly related to
solar and wind energy.
THE CASE OF SOLYNDRA
None of the 28 projects can definitively be called a
success at this time, but the single biggest failure thus far
is Solyndra, the California-based solar panel maker that
received a $527 million dollar loan guarantee in 2009, but went
bankrupt nonetheless. Prior to Solyndra's bankruptcy--indeed
right up to it--the company was the centerpiece of the Obama
Administration's loan guarantee program, if not the entire
stimulus package. In numerous public announcements, the
Administration hailed the company as an important component of
America's energy future and a source of green jobs. During a
May 2010 visit to the company, the President explained that
``the true engine of economic growth will always be companies
like Solyndra,'' and that ``in a few months, Solyndra expects
to hire a thousand workers to manufacture solar panels and sell
them across America and around the world.''
In reality, by the time of the President's visit to
Solyndra, an independent audit had questioned the ability of
the company to continue as a going concern. A few weeks after,
Solyndra had to cancel its initial public offering. A year
later--and only six months after a restructuring of the loan
guarantee that subordinated the government's interest to
Solyndra's private investors and thus put taxpayers at risk for
more of the losses--the company went bankrupt and laid off the
rest of its 1,900 employees.
After an extensive 18 month investigation undertaken by the
Oversight and Investigations Subcommittee, the Committee issued
a Majority Staff Report, The Solyndra Failure, which documents
serious problems throughout the Obama Administration's handling
of the Solyndra loan guarantee.\1\ This report notes that
Solyndra was one of the loan guarantee applications that the
Bush Administration had expressed reservations about, but
nonetheless it was the first one approved under the Obama
Administration. In fact, the Bush DOE presciently raised doubts
about Solyndra's financial condition and whether its solar
panel designs gave the company any real advantage over
competing products, but these concerns were quickly swept aside
by the incoming Obama team.\2\ The report also provides
evidence that safeguards built into the loan guarantee program
were sidestepped, including required reviews of applications by
the Office of Management and Budget (OMB) and the Department of
the Treasury.\3\ In several instances, corners were apparently
cut at the urging of the White House for the purpose of
completing loan guarantee approvals ahead of planned public
announcements. For example, one internal email from an OMB
official to a policy advisor to Vice President Biden stated
that ``[w]e have ended up in the situation of having to do
rushed approvals on a couple of occasions (and we are worried
about Solyndra at the end of the week). We would prefer to have
sufficient time to do our due diligence reviews and have the
approval set the date for the announcement rather than the
other way around.''\4\
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\1\Committee on Energy and Commerce, Majority Staff Report, The
Solyndra Failure, August 2, 2012, at http://energycommerce.house.gov/
Media/file/PDFs/Solyndra/solyndrareport.pdf; See also U.S. Government
Accountability Office, GAO-10-627, Department of Energy: Further
Actions Needed to Improve DOE's Ability To Evaluate and Implement The
Loan Guarantee Program, July 2012, at http://www.gao.gov/new.items/
d10627.pdf.
\2\Id. at 10-15.
\3\Id. at 23-47.
\4\Id. at 44.
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The report also documents many potential improprieties,
such as the influence exerted by George Kaiser, Solyndra's
largest investor.\5\
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\5\Id. at 144-145.
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Further, internal documents reveal that after Solyndra's
precarious position became evident to the Administration, it
considered additional costly steps to try to bail out the
company rather than attempt to limit any further taxpayer
liability.\6\ A second loan guarantee was proposed, as was
large-scale government purchases of Solyndra's solar panels.
Though neither was eventually pursued, DOE did agree to a
restructuring of the loan that subordinated the taxpayers'
interest to that of private investors, skirting statutory
language that precluded subordination.\7\ Solyndra nonetheless
went bankrupt in September of 2011, and the restructuring
served only to raise the cost to the public.
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\6\Id. at 48-106.
\7\Id. at 70-106.
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OTHER LOAN GUARANTEE FAILURES
Solyndra cannot be dismissed as the sole failure in an
otherwise successful program to expand America's energy
sources. Two others, Abound Solar and Beacon Power, have also
gone bankrupt. Thus, three of the first five loan guarantee
recipients have already failed, despite the large infusions of
cash. Dr. Kreutzer categorizes these projects as those that
``were not market viable, as demonstrated by subsequent
economic performance. . . .'' Other defaults and bankruptcies
may follow once the loan guarantee money runs out.
Many loan guarantee recipients are avoiding bankruptcy not
because their clean energy projects are paying off, but because
their ownership interests include multi-billion dollar
companies. Among those benefitting directly or through
subsidiaries are Google, General Electric, Exelon, Goldman
Sachs, Brookfield Asset Management, Sempra Energy, NextEra
Energy Resources, Prologis, Abengoa, and others. Putting aside
the question why such well-financed entities qualified for
taxpayer-backed low-interest loans in the first place, it is
difficult to describe any of their energy projects as Title 17
successes since they clearly could have been funded without
government assistance.
In fairness, many of these loan guarantee projects are
still underway, and in most cases it is premature to
conclusively call them failures. Indeed, twelve companies were
approved for loan guarantees as recently as September of 2011,
which was the last month of eligibility under section 1705. It
is worth noting that several were approved after Solyndra's
announced bankruptcy that month, which should have put the
Administration on notice that there were serious problems with
its program.
Nonetheless, the outlook for outstanding loan guarantee
projects is not particularly good, and there is little
indication that any are likely to achieve significant
technological breakthroughs or appreciably contribute to the
Nation's energy supply. In contrast, a genuinely transformative
energy success story has emerged over the time that the Title
17 program has been in existence--the innovations in drilling
technologies that have led to substantial increases in domestic
natural gas and oil production--but this occurred without loan
guarantees or other Federal subsidies.
Part of the failure may be due to loan guarantees being
awarded for reasons other than merit. Indeed, The Solyndra
Failure documents potential improprieties in the
Administration's choice of Solyndra and in its handling of the
company's loan guarantee application. But the bigger issue is
whether elected officials and bureaucrats should assume the
role of venture capitalists, and whether they are capable of
making the best choices even if acting in good faith. As Dr.
Kreutzer noted, ``loan guarantees are based on the false
premise that the Department of Energy can systematically
discover commercially viable investment projects that private
investors have overlooked.''
The Federal government has played a constructive role in
energy policy in the conduct of basic energy research, and it
is here that DOE and the national energy laboratories have a
decades-long record of significant contributions. However, the
loan guarantee program represents a departure from this core
competency. The experience with loan guarantees argues against
a Federal role in financing specific companies at the
commercialization stage.
THE TRUE COST OF THE LOAN GUARANTEE PROGRAM
The cost of the loan guarantee failures goes well beyond
the tax dollars needed to repay the loans in default. The real
cost is the damage to the goal of energy innovation. By
choosing certain energy companies for special treatment, the
loan guarantee program hinders other companies, including ones
that may be pursuing more promising and innovative ideas.
Indeed, the history of such programs is that they discourage
private investment in energy projects bypassed by the
government.\8\ The former head of a loan guarantee recipient
admitted that ``the existence of an 800-pound gorilla putting
massive capital behind select start-ups is sucking the air away
from the rest of the venture capital ecosystem.''\9\ Dr.
Kreutzer warned that ``loan guarantees can misallocate capital
and reduce overall output.''
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\8\Statement of Monte Canfield, Jr., Director, Office of Special
Programs, General Accounting Office, before Committee on Banking,
Housing and Urban Affairs, United States Senate, April 12-14, 1976, p.
134, at http://fraser.stlouisfed.org/docs/historical/congressional/
197605sen--energyindact1975.pdf p. 134.
\9\Wall Street Journal, Venture Capitol: New VC Force, by Neil
King, Jr., at http://online.wsj.com/article/SB126074549073889853.html.
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This is also why the loan guarantee program has failed as a
job creator. Clearly, the bankrupt companies no longer support
any jobs, and the solvent ones do so at great cost--$12.8
million per permanent job.\10\ But when one considers the
potential job losses as resulting from capital being siphoned
away from the rest of the economy, the program may well be a
net job destroyer.\11\
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\10\DOE Loan Guarantee Program Office, ``Our Projects,'' available
at: https://lpo.energy.gov/?page--id=45.
\11\See Committee on Energy and Commerce, Majority Staff Report,
Not Very Green, Not Many Jobs: An Assessment of the Obama
Administration's Green Jobs Agenda,'' June 2012, at http://
energycommerce.house.gov/Media/file/PDFs/062212GreenJobsReport.pdf.
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Thus, the damage done by Title 17 loan guarantees is two-
fold--the Federal government invariably wastes money picking
losers like Solyndra, and the program makes it harder for
potential winners to emerge. The end result is
counterproductive to achieving the nation's energy goals.
SUPPORTERS OF THE LEGISLATION
Supporters of the legislation include American Commitment,
American Conservative Union, American Energy Alliance,
Americans for Prosperity, Americans for Tax Reform, Cost of
Government Center, Citizens Against Government Waste, Heritage
Action, and Let Freedom Ring.
Hearings
On July 12, 2012, the Subcommittee on Energy and Power and
the Subcommittee on Oversight and Investigations held a joint
legislative hearing on a discussion draft of the ``No More
Solyndras Act'' and received testimony from:
Mr. David G. Frantz, Acting Executive
Director, Loan Guarantee Program Office, U.S.
Department of Energy;
Dr. David W. Kreutzer. Research Fellow in
Energy Economics and Climate Change, Heritage
Foundation;
Ms. Diana Furchtgott-Roth, Senior Fellow,
Manhattan Institute for Policy Research; and
Mr. Kenneth Berlin, General Counsel & Senior
Vice President for Policy and Programming, Coalition
for Green Capital.
Committee Consideration
Representatives Upton and Stearns released a discussion
draft of the ``No More Solyndras Act'' on July 9, 2012. On July
12, 2012, the Subcommittee on Energy and Power and the
Subcommittee on Oversight and Investigations held a joint
legislative hearing on the discussion draft. A revised
discussion draft was released on July 16, 2012.
On July 25, 2012, the Subcommittee on Energy and Power
favorably reported the discussion draft, as amended, to the
full Committee by roll call vote of 14 ayes and 9 nays. During
the markup, 6 amendments were offered of which 1 was adopted.
On July 26, 2012, H.R. 6213, the ``No More Solyndras Act''
was introduced by Representative Upton (together with Reps.
Stearns, Pitts, Terry, Stivers, Latham, Scott, Gingrey,
Ellmers, Lance, Rogers, Whitfield, Burgess, Sullivan,
Blackburn, Pompeo, Myrick, Harper, Flake and Olson).
On July 31, 2012, and August 1, 2012, the Committee on
Energy and Commerce met in open markup session. During the
markup, 12 amendments were offered of which 4 were adopted. On
August 1, 2012, the Committee ordered H.R. 6213 favorably
reported to the House, as amended, by roll call vote of 29 ayes
and 19 nays.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. The
following are the recorded votes taken on amendments offered to
the measure, including the names of those Members voting for
and against. A motion by Mr. Upton to order H.R. 6213, reported
to the House, as amended, was agreed to by a record vote of 29
ayes and 19 nays.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee made findings that are
reflected in this report.
Statement of General Performance, Goals, and Objectives
H.R. 6213, the ``No More Solyndras Act,'' limits further
taxpayer exposure from the loan guarantee program established
under Title 17 of the Energy Policy Act of 2005.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee finds that H.R.
6213, the ``No More Solyndras Act,'' would result in no new or
increased budget authority, entitlement authority, or tax
expenditures or revenues.
Earmarks
In compliance with clause 9(e), 9(f), and 9(g) of rule XXI
of the Rules of the House of Representatives, the Committee
finds that H.R. 6213, the ``No More Solyndras Act,'' contains
no earmarks, limited tax benefits, or limited tariff benefits.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
September 4, 2012.
Hon. Fred Upton,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 6213, the No More
Solyndras Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Kathleen
Gramp.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 6213--No More Solyndras Act
CBO estimates that implementing H.R. 6213 would cost about
$1 million over the 2013-2017 period, assuming appropriation of
the necessary amounts. Pay-as-you-go procedures would apply to
this legislation because it would affect direct spending and
revenues. CBO estimates, however, that those impacts would be
insignificant over the 2013-2022 period.
H.R. 6213 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would not affect the budgets of state, local, or tribal
governments.
H.R. 6213 would revise the terms and conditions governing
the Department of Energy's (DOE's) loan guarantee program for
advanced energy technologies, which was established under title
17 of the Energy Policy Act of 2005. It would restrict
eligibility for future guarantees to projects that submitted
applications before December 31, 2011, require the Secretary of
the Treasury to review those guarantees, and direct DOE to
consult with the Treasury regarding any changes in the terms
and conditions of a loan guarantee. The bill also would impose
certain administrative sanctions and civil penalties on federal
officials who violate the requirements of the title 17 program
and would direct the Government Accountability Office (GAO) to
prepare a comprehensive report on federal energy subsidies.
Based on the cost of similar activities, CBO estimates that
preparing the GAO study on federal energy subsidies required by
H.R. 6213 would cost about $1 million, assuming appropriation
of the necessary amounts. CBO estimates that other provisions
in the bill would have no significant impact on spending
subject to appropriation. Although limiting eligibility for new
loan guarantees could affect the need for future
appropriations, CBO has no basis for projecting a change in
DOE's program costs under this bill because the title 17
program received no funding or obligational authority in fiscal
year 2012 and could use its existing obligational authority for
projects that applied for loan guarantees prior to December 31,
2011.
Similarly, CBO estimates that implementing H.R. 6213 would
have a negligible impact on spending by the Department of the
Treasury because the new procedural requirements in this
legislation would apply to a small number of projects and
involve assessments similar to those done under current law.
Most of the Treasury's expenditures would be subject to annual
appropriations, but any costs incurred by the Federal Financing
Bank (FFB) would affect direct spending because the FFB's
operations are funded by fees that can be spent without further
appropriation.\1\ CBO estimates, however, that any such effects
on direct spending would be minimal over the 2013-2022 period.
---------------------------------------------------------------------------
\1\The FFB is a government corporation under the supervision of the
Secretary of the Treasury that is responsible for various federal
financial activities, including purchasing obligations fully guaranteed
by other agencies such as DOE.
---------------------------------------------------------------------------
Finally, H.R. 6213 would make certain federal employees
personally liable for civil penalties ranging from $10,000 to
$50,000 for each violation of any of the requirements of the
laws governing the title 17 program. CBO estimates that the
amounts collected from such civil penalties, which are recorded
in the budget as revenues, would not be significant over the
2013-2022 period.
The CBO staff contact for this estimate is Kathleen Gramp.
The estimate was approved by Theresa Gullo, Deputy Assistant
Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Section-by-Section Analysis of Legislation
Section 1: Short title
Section 1 provides the short title of ``No More Solyndras
Act.''
Section 2: Findings
Section 2 sets forth findings regarding the Department of
Energy (DOE) Loan Guarantee Program under Title 17 of the
Energy Policy Act of 2005, and highlights key findings of the
Energy and Commerce Committee's investigation into the loan
guarantee issued to Solyndra Corporation.
Section 3: Sunset
Section 3(a) prohibits DOE from issuing any loan guarantees
pursuant to Title 17 of the Energy Policy Act of 2005 for
applications submitted after December 31, 2011.
Section 3(b) provides that, with respect to any application
submitted pursuant to Title 17 of the Energy Policy Act of 2005
prior to December 31, 2011:
No guarantee shall be issued until the Secretary
of the Treasury (Treasury) has provided DOE a written analysis
of the financial terms and conditions of the proposed loan
guarantee.
Treasury shall submit its written analysis to DOE
not later than 30 days after receiving the proposal from DOE.
Before DOE makes a guarantee under Title 17, it
shall take into consideration the written analysis made by
Treasury.
If DOE makes a loan guarantee that is not
consistent with the written analysis provided by Treasury, DOE
must, within 30 days of issuance, provide a written report to
Congress explaining any material inconsistencies.
Section 3(c) provides that for any new guarantee issued,
DOE must, within 60 days of issuance, report to Congress on:
(i) the review and decision-making process utilized by DOE in
issuing the guarantee; (ii) the terms of the guarantee; (iii)
the recipient; and (iv) the technology and project.
Section 4: Restructuring of loan guarantees
Section 4 provides that, with respect to any restructuring
of the terms of a loan guarantee issued pursuant to Title 17 of
the Energy Policy Act of 2005, DOE shall consult with Treasury
regarding any restructuring of the terms and conditions of the
loan guarantee, including any deviations from the financial
terms of the loan guarantee.
Section 5: Restating the prohibition on subordination
Section 1702(d)(3) of the Energy Policy Act of 2005
provides that ``the obligation shall be subject to the
condition that the obligation is not subordinate to other
financing.'' It is the position of the Committee that this
language unambiguously establishes that subordination of the
loan guarantee obligation to other financing is prohibited at
any time. Section 5 amends section 1702(d)(3) to reaffirm that
the loan guarantee obligation, including any reorganization,
restructuring, or termination thereof, shall not at any time be
subordinate to other financing.
Section 6: Administrative actions and civil penalties
Section 6 subjects Federal officials serving in a position
in level I, II, III, IV, or V of the Executive Schedule or
serving in a Senior Executive Service position to
administrative actions and civil penalties for violations of
any requirements of Title 17 of the Energy Policy Act of 2005
or the ``No More Solyndras Act.''
Section 7: GAO study of Federal subsidies in energy markets
Section 7(a) requires the Government Accountability Office
(GAO) to complete a study of the Federal subsidies in energy
markets from FY 2003 through FY 2012. The term ``federal
subsidies'' is defined as ``Federal grants, direct loans, loan
guarantees, and tax credits, and other programmatic activities
targeted at energy markets and related sectors, relating to
specific energy technologies.''
Section 7(b) requires the study to have a particular focus
on federal subsidies in energy markets provided in support of
electricity production, transmission, and consumption;
transportation fuels and infrastructure; energy-related
research and development; and facilities that manufacture
energy-related components.
Section 7(c) requires that GAO submit to Congress within a
year of enactment of the ``No More Solyndras Act'' a report
that describes the results of the study, including an
identification and quantification of: costs to the United
States Treasury; impacts on United States energy security;
impacts on electricity prices, including any potential negative
pricing impact on wholesale electricity markets; impacts on
transportation fuel prices; impacts on private energy-related
industries not benefitting from federal subsidies in energy
markets; any Federal subsidies in energy markets that are
provided to foreign persons or corporations; and subsidies and
direct financial interest any of the 15 foreign countries with
the largest gross domestic product are providing to support
energy markets in their respective countries.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of the
House of Representatives, changes in existing law made by the
bill, as reported, are shown as follows (new matter is printed
in italic and existing law in which no change is proposed is
shown in roman):
ENERGY POLICY ACT OF 2005
* * * * * * *
TITLE XVII--INCENTIVES FOR INNOVATIVE TECHNOLOGIES
* * * * * * *
SEC. 1702. TERMS AND CONDITIONS.
(a) * * *
* * * * * * *
(d) Repayment.--
(1) * * *
* * * * * * *
(3) Subordination.--The obligation shall be subject to
the condition that the obligation [is not subordinate],
including any reorganization, restructuring, or
termination thereof, shall not at any time be
subordinate to other financing.
* * * * * * *
DISSENTING VIEWS
I. Purpose of Legislation
The bill's supporters have claimed that this legislation
will terminate the Department of Energy's (DOE) Title XVII loan
guarantee program. On July 19, 2012, Chairman Whitfield,
referring to the relevant sections of Title XVII, said: ``We
are totally committed to ending this 1703, 1705 program.''
Similarly, at the August 1, 2012, full committee markup of the
bill, Chairman Whitfield stated: ``I just philosophically think
we need to stop this program. We have an opportunity to do it
with this bill.'' At the same full committee markup, Chairman
Stearns stated: ``We need to get the government out of the
venture capitalist business, and we can start by getting rid of
Title XVII.'' He claimed that the bill ``will phase out DOE's
flawed loan guarantee program under Title XVII of the Energy
Policy Act of 2005.''
This description of the bill's purpose and effect is
misleading and inaccurate. The bill does not terminate, end, or
phase out the loan guarantee program. Under this bill, DOE can
use its existing authority to issue $34 billion in new loan
guarantees. DOE can issue those loan guarantees tomorrow, next
year, or twenty years from now. The bill establishes no end
date for the program. As explained in more detail below, the
bill would prohibit DOE from considering any applications for
loan guarantees submitted after December 31, 2011.
At the July 12, 2012, legislative hearing, David Frantz,
the Acting Executive Director of DOE's Loan Programs Office,
explained that the bill does not terminate the loan guarantee
program. At the July 25, 2012, Energy and Power Subcommittee
markup of the bill, Committee counsel confirmed that the bill
does not terminate the program and that, under the bill, DOE
could use its existing authority to issue $34 billion in
additional loan guarantees at any time in the future. Chairman
Whitfield conceded this point during the August 1, 2012, full
committee markup, stating:
So while it is appealing to end the project right now,
let us just end the program right now, not consider any
of these pending applications, I think the better view
is, let us let the Department of Energy go through the
remainder of these applications that are already
pending and let them make that decision. But there is
only $34 billion left.
A vote on an amendment offered by Rep. Markey during the
full committee markup demonstrated that the purpose of the
legislation is not to terminate the loan guarantee program.
Rep. Markey's amendment would have expressly prohibited DOE
from issuing any new Title XVII loan guarantees without
exception, effectively terminating the program. The amendment
was overwhelmingly defeated on a bipartisan basis by a vote of
3 to 39. Twenty-five Republican members of the Committee,
including Chairmen Upton, Stearns, and Whitfield, voted against
the amendment.
II. Bill Summary: H.R. 6213, No More Solyndras Act
A. INACCURATE AND MISLEADING FINDINGS
Section 2 of the bill includes several misleading and
inaccurate statements. For example, finding number 9 states
that the Committee's investigation into Solyndra ``has
demonstrated that the review in 2009 of the Solyndra
application by the Department of Energy and the Office of
Management and Budget was driven by politics and ideology and
divorced from economic reality where the Department of Energy
ignored concerns about the company's financial condition and
market for its products.'' This statement is not supported by
the evidence before the Committee.
The Department of Energy awarded the loan guarantee to
Solyndra in 2009 after more than two years of thorough due
diligence carried out by reputable independent third party
experts and career professionals working at DOE through the
Bush and Obama Administrations. The findings suggest that no
one but short-sighted officials at the Department of Energy
thought Solyndra had a chance of succeeding, but this is
revisionist history. While, in hindsight, failed investments
may look obvious, in 2009 there were many astute investors and
market observers who thought that Solyndra was a smart
investment. The company had raised nearly $1 billion from
sophisticated private investors, including Argonaut Ventures,
Madrone Capital, Redpoint Ventures, and Rockport Capital
Partners. Moreover, in 2010 after Solyndra was awarded the loan
guarantee, the Massachusetts Institute of Technology's
Technology Review, ranked Solyndra as one of the ``50 Most
Innovative Companies in the World'' and the Wall Street Journal
ranked Solyndra number one on its list of ``The Next Big Thing:
Top 10 Venture Backed Clean Technology Companies.''\1\ The
career officials at DOE stress tested Solyndra's financial
projections by estimating the impact of a 40% drop in solar
prices. Solyndra passed this stress test, but went bankrupt
when solar prices dropped a staggering 70% in a two year
period--largely because of intense Chinese competition.
---------------------------------------------------------------------------
\1\The 50 Most Innovative Companies in 2010, MIT Technology Review
(Feb. 23, 2010) and Wall Street Journal Ranks the Next Big Thing: The
Top 10 Venture Backed Clean Technology Companies, Wall Street Journal
(Mar. 4, 2010).
---------------------------------------------------------------------------
There is no evidence before the Committee that the decision
to award the loan was ``driven by politics and ideology.''
Instead, the voluminous record before the Committee, including
over 300,000 pages of documents and more than 60 hours of
interviews with the key officials who reviewed the loan
guarantee reveals that all decisions on the loan were made on
the merits after thorough and independent review, and that
political considerations did not affect the key decisions on
the loan guarantee.
The Committee interviewed 14 individuals involved in the
Solyndra loan guarantee, including White House officials, OMB
officials, Energy Department officials, and private investors.
The Committee also heard testimony from six additional
officials involved in the guarantee, including the Secretary of
Energy. Many of these individuals were career officials; one
was a Bush Administration appointee. Every individual was asked
whether political contributions played a role in the decisions
on Solyndra. They unanimously said there was no political
influence in these decisions. At the July 12, 2012, legislative
hearing, David Frantz, a career civil servant who was the first
employee and director of the loan guarantee program in 2007
under the Bush Administration, testified: ``To the very best of
my knowledge, through the whole history of the program from its
inception to today, it has not been driven by any political
considerations whatsoever.''
The Committee report compounds the problems with this
misleading finding by stating that there were ``potential
improprieties'' in the Solyndra loan process ``such as the
influence exerted by George Kaiser, Solyndra's largest
investor,'' that ``corners were apparently cut at the urging of
the White House'' during the Obama Administration's review of
the Solyndra loan guarantee, and that upon taking office the
Obama Administration ``quickly swept aside'' the Bush
Administration's concerns about Solyndra's viability and
awarded the loan guarantee. These claims are inaccurate and
ignore key exculpatory evidence received by the Committee.
The Committee report's unfounded claims about ``potential
improprieties'' related to George Kaiser ignore the fact that
the key White House officials who were supposedly involved told
Committee staff that they were unaware of Mr. Kaiser's
contributions to the President until they became public through
the Committee's investigation. These same White House officials
also told Committee staff that they did not seek to ``cut
corners'' in the review of the Solyndra loan guarantee nor did
they have any involvement in the substance of the decisions
about the loan guarantee. The career staff at DOE and OMB
confirmed that they felt no White House pressure related to
their decisions on the loan guarantee, that their decisions
were made purely on the merits, and that no corners were cut.
Finally, career officials and a Bush Administration political
appointee who worked on the Solyndra loan at DOE in both the
Bush and Obama Administrations told Committee staff that
advancing the first loan guarantee was a key priority of both
Administrations and that Solyndra's application was not
improperly accelerated at the start of the Obama
Administration.
Finding number 10 states that ``despite an express
provision . . . prohibiting subordination of the United States
taxpayers' financial interest, the Department of Energy
restructured the Solyndra loan guarantee.'' The Committee's
investigation revealed that when Solyndra faced severe
financial strain, it required new capital from investors in
late 2010 and early 2011. DOE looked carefully at the text of
the Title 17 loan guarantee statute and concluded that although
subordination was not allowed during the origination process
for the loan guarantee, it was permitted in the event that a
loan needed to be restructured. The most senior lawyers at DOE,
the Loan Program's outside counsel, and the top legal counsel
at OMB all agreed with this decision. When the Democratic staff
of the Committee sought an outside opinion from the former
general counsel at DOE, she concurred with DOE's analysis.
Furthermore, the independent consultant Herb Alison, who
reviewed the DOE loan program, stated that DOE ``should have
some flexibility to subordinate because that may be the best
way . . . to recover some money for taxpayers. Because by
subordinating, it may make it possible to attract additional
funding . . . which can help that project succeed.''\2\
---------------------------------------------------------------------------
\2\Senate Committee on Energy and Natural Resources, Testimony of
Herb Allison, Independent Consultant, Hearing on the Allison Report on
DOE Loan Guarantee Program, 112th Cong. (Mar. 13, 2012).
---------------------------------------------------------------------------
Finding number 12 states that a Government Accountability
Office (GAO) report found that the DOE loan guarantee program
``has treated applicants inconsistently.'' The record before
the Committee has provided no evidence of political favoritism
in the loan guarantee program, and the GAO report provides no
evidence that any ``inconsistent treatment'' impacted the
decision to grant a loan guarantee or was in any way connected
to political considerations.\3\ DOE responded to the GAO report
by stating, in part, that ``within each solicitation the rules
have been applied consistently and no applicants have been
disadvantaged.''\4\
---------------------------------------------------------------------------
\3\Government Accountability Office, Further Actions Are Needed to
Improve DOE's Ability to Evaluate and Implement the Loan Guarantee
Program (July 2010) (GAO-10-627).
\4\Id. at 26.
---------------------------------------------------------------------------
The findings give the misleading impression that the DOE
loan programs have been a failure. But this is not true. The
projects already financed by the program are expected to
support nearly 60,000 jobs and save nearly 300 million gallons
of gasoline per year. The program has supported six power
generation projects that are already complete and nine projects
that are sending power to the electricity grid. The program is
funding one of the world's largest wind farms, the world's
largest concentrated solar generation project, the world's
largest photovoltaic solar power plant, and the nation's first
two all-electric vehicle manufacturing facilities. The program
has allowed private investors to come off the sidelines to
invest tens of billions of dollars and create thousands of
jobs.
After the Solyndra bankruptcy, the White House retained
Herb Allison to conduct an independent review of the loan
guarantee program. Mr. Allison previously served as the
Assistant Secretary of the Treasury for Financial Stability,
President and CEO of Fannie Mae after it was placed into
conservatorship, Chairman, President and CEO of TIAA-CREF, and
National Finance Committee Chair for Senator John McCain's
presidential campaign. His report, which was conducted free
from any Department or White House influence, examined the
overall loan guarantee portfolio.
Mr. Allison found that the Department's loan guarantee
program is fulfilling Congress' intent to fund ``innovative
alternative energy projects employing technologies that [have]
not reached commercial maturity and involved more risk than is
typical for project and corporate debt financing.''\5\ In fact,
Mr. Allison found that the overall loan portfolio is
significantly less risky than both the Department and Congress
expected. The report estimated potential losses in the
portfolio and found them to be $2 billion less than the
Department had previously estimated and $7 billion less than
the reserve amount that Congress set aside to cover losses.\6\
According to Mr. Allison, some losses in the portfolio were
anticipated, but overall the portfolio is performing well.
---------------------------------------------------------------------------
\5\The Independent Consultant, Report of the Independent
Consultant's Review with Respect to the Department of Energy Loan and
Loan Guarantee Portfolio (Jan. 31, 2012) (available online at
www.whitehouse.gov/sites/default/files/docs/report--on--doe--loan--
and--guarantee--portfolio.pdf) at 17.
\6\Id. at 32.
---------------------------------------------------------------------------
B. PICKING WINNERS AND LOSERS
Section 3 provides that DOE shall not issue any new loan
guarantees for any applications submitted after December 31,
2011. DOE is permitted to issue new loan guarantees with
existing or future loan guarantee authority but only for
applications submitted by that date. According to DOE,
approximately 50 applications were submitted by December 31,
2011, and were not withdrawn, rejected, or awarded a final loan
guarantee. Under the bill, only this arbitrary pool of
applications would be eligible for new loan guarantees. Even
though the purpose of the loan guarantee program is to foster
innovative technologies, DOE would be prohibited from issuing
new solicitations or considering new applications for
innovative nuclear, fossil, or renewable energy technologies.
As a result, tens of billions of dollars of new loan guarantees
can be issued in the years to come, but those guarantees may
not be used to support the most innovative and promising
technologies. As David Frantz, the Acting Executive Director of
DOE's Loan Programs Office, explained at the July 12, 2012,
legislative hearing: ``going forward, the Department would
increasingly be unable to guarantee loans with the newest and
most innovative technologies, particularly in the area of
nuclear and renewable projects.''
For example, DOE currently has $10.2 billion in uncommitted
loan guarantee authority for nuclear generation projects. Under
the bill, this loan guarantee authority and any additional
future loan guarantee authority for nuclear projects could only
be used to award guarantees to the nuclear project applications
submitted prior to December 31, 2011. If a new applicant has a
ground-breaking small modular reactor or next generation
nuclear technology, DOE would be prohibited from providing
support for such a project.
At the July 25, 2012, Energy and Power Subcommittee markup
of the bill, supporters of the bill claimed that the bill was
drafted to allow DOE to issue $34 billion more in loan
guarantees to grandfathered applicants who submitted
applications prior to December 31, 2011, because DOE might
incur liability if it did not issue loan guarantees to
applicants with conditional commitments or even applicants that
had merely begun due diligence. There is no support for this
claim. The text of the loan guarantee program regulations,
solicitations, and term sheets makes it clear that DOE can
decide not to issue a loan guarantee for any reason at any
time.\7\ There is no contractual obligation to issue a final
loan guarantee.
---------------------------------------------------------------------------
\2\See, e.g., 10 C.F.R. 609.2 (stating: ``the Secretary may
terminate a Conditional Commitment for any reason at any time prior to
the execution of the Loan Guarantee Agreement'').
---------------------------------------------------------------------------
C. PERSONAL CIVIL LIABILITY FOR FEDERAL EMPLOYEES
Section 6 was added by a subcommittee amendment offered by
Rep. Burgess and modified by a full committee amendment offered
by Rep. Burgess. It provides that ``any federal official who is
responsible for the issuance of a loan guarantee'' under the
program in a manner that violates the requirements of Title
XVII or this bill shall be (1) subject to appropriate
administrative discipline and (2) personally liable for a civil
penalty of at least $10,000 and up to $50,000 for each
violation. During the full committee markup, Rep. Burgess
described the provision as giving ``real teeth toward ensuring
that the egregious activities which occurred during the lead-up
to the subordination of taxpayer dollars will never occur
again.''
This broad provision subjects federal employees to punitive
personal civil liability penalties. The provision defines the
term ``federal official'' as an individual serving in an
Executive Schedule or Senior Executive Service position,
including career civil servants. However, the provision does
not define or provide any limits on the term ``who is
responsible for the issuance of a loan guarantee.'' It is
unclear whether ``any federal official who is responsible for
the issuance of a loan guarantee'' includes the Secretary of
Energy, the members of the Credit Review Board, the members of
the Credit Committee, the Executive Director of the Loan
Programs Office, or officials at the Office of Management and
Budget. The inclusion of career Senior Executive Service
employees in the definition of ``federal official'' suggests
that a large number of individuals could be subject to civil
liability penalties under this provision.
The uncertainty about which federal employees are
potentially subject to this new civil liability is exacerbated
by the breadth of the civil liability itself. The language of
the provision does not limit liability to individuals who
knowingly or intentionally violate a requirement of Title XVII.
Under this provision, any federal official who unintentionally
violates a requirement of Title XVII or who relies in good
faith on legal advice from DOE attorneys when making a decision
that is later determined to violate a requirement of Title XVII
would face personal liability for substantial civil penalties.
Moreover, the language of the provision does not appear to
apply to the restructuring of a loan guarantee, which was the
stated purpose of the provision's author. On its face, the
provision applies to federal officials responsible for the
issuance of a loan guarantee in a manner that violates the
requirements of Title XVII, not federal officials responsible
for the restructuring of a previously-issued loan guarantee.
D. SKEWED GAO STUDY
Section 7 was added by a full committee amendment offered
by Rep. Pompeo. It requires a GAO study of federal subsidies in
energy markets provided in fiscal years 2003 through 2012. The
term ``federal subsidies'' is defined to include grants, direct
loans, loan guarantees, and tax credits.
This definition of ``federal subsidies'' would skew the GAO
analysis by excluding consideration of significant subsidies
that oil companies have received for decades. Under this
provision, the study would exclude analysis of key tax policies
that benefit the oil industry, such as certain tax deductions,
accelerated depreciation, and master limited partnerships. Such
an analysis would provide an incomplete and inaccurate picture
of U.S. energy subsidies.
A second-degree amendment offered by Rep. Waxman during the
full committee markup would have expanded the definition of
``federal subsidies'' to include these longstanding ``tax
policies'' but was defeated. The second-degree amendment also
would have ensured that the study examined the economic
importance of U.S. leadership in clean energy technology
development and manufacturing.
For the reasons stated above, we dissent from the views
contained in the Committee's report.
Henry A. Waxman.
Bobby L. Rush.
Diana DeGette.