TITLE: B-308715, Department of Energy--Title XVII Loan Guarantee Program, April 20, 2007
BNUMBER: B-308715
DATE: April 20, 2007
*********************************************************************************
B-308715, Department of Energy--Title XVII Loan Guarantee Program, April 20, 2007
B-308715
April 20, 2007
The Honorable Peter J. Visclosky
Chairman
Subcommittee on Energy and Water Development
Committee on Appropriations
House of Representatives
The Honorable David L. Hobson
Ranking Minority Member
Subcommittee on Energy and Water Development
Committee on Appropriations
House of Representatives
Subject: Department of Energy--Title XVII Loan Guarantee Program
In February 2007, GAO responded to a number of questions you asked
concerning the Department of Energy's (DOE) loan guarantee authority under
title XVII (Incentives for Innovative Technologies) of the Energy Policy
Act of 2005, Pub. L. No. 109-58, 119 Stat. 594, 1117-22 (Aug. 8, 2005)
(EPACT). See GAO, DOE: Key Steps Needed to Help Ensure the Success of the
New Loan Guarantee Program for Innovative Technologies by Better Managing
Its Financial Risk, GAO-07-339R (Washington, D.C.: Feb. 28, 2007). During
that engagement, you asked us to issue a separate legal opinion addressing
the following related questions:
1) Does the loan guarantee authority in EPACT section 1702(b)(2)
constitute authority for DOE to make loan guarantees notwithstanding the
requirements of the Federal Credit Reform Act of 1990[1] (FCRA)? Or does
section 1702(b)(2) constitute new budget authority for FCRA purposes?
2) Was DOE authorized to engage in activities such as issuing and
publishing in the Federal Register program guidelines and a solicitation
announcement inviting pre-application proposals for guaranteed loans in
advance of the enactment of appropriations to make loans under EPACT's
title XVII program?[2]
As explained further below, we conclude as follows:
1) EPACT section 1702(b)(2) confers upon DOE independent authority to
make loan guarantees, notwithstanding the FCRA requirements. Given our
answer to the first part of this question, we did not address the second
part concerning whether, in the alternative, section 1702(b)(2)
constitutes new budget authority for the purposes of FCRA.
2) DOE engaged in preparatory activities to implement the granting of
guaranteed loans under EPACT title XVII during a period when DOE was
affirmatively prohibited from implementing that title by 42 U.S.C.
sect. 7278, a statutory prohibition applicable to DOE guaranteed loan
programs.[3] These activities violated section 7278; the purpose statute,
31 U.S.C. sect. 1301(a); and the Antideficiency Act, 31 U.S.C.
sect. 1341(a).
Consistent with our practice in rendering opinions, we contacted DOE to
establish the factual record and elicit the agency's legal position on the
subject matter of the request.[4] Letter from Susan A. Poling, Managing
Associate General Counsel, GAO, to David R. Hill, General Counsel, DOE,
Jan. 12, 2007. In this instance, we received the views of DOE's General
Counsel. Letter from David R. Hill, General Counsel, DOE, to Susan A.
Poling, Managing Associate General Counsel, GAO, Feb. 9, 2007 (Hill
Letter).
BACKGROUND
Congress enacted title XVII (Incentives for Innovative Technologies) as
part of the Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594,
1117-22 (Aug. 8, 2005) (EPACT), codified at 22 U.S.C. sections
16511-16514. This title directs DOE to make loan guarantees for projects
that employ new or significantly improved technologies to address air
pollution or anthropogenic emissions of greenhouse gases. EPACT,
sect. 1703(a). The title identifies both categories of projects and some
specific projects that are eligible for these loan guarantees. Id.
sections 1703(b), 1703(c). Title XVII provides, among other things, that
no loan guarantee may be made unless "an appropriation for the cost"[5] of
the loan guarantee has been made, or DOE has received from the borrower
and deposited into the Treasury "payment in full for the cost of the
obligation." Id. sect. 1702(b). Title XVII also authorizes DOE to "charge
and collect fees for guarantees in amounts the Secretary determines are
sufficient to cover applicable administrative expenses." Id. sect.
1702(h)(1). Fees collected under this authority must be deposited into the
Treasury, but "remain available until expended, subject to such other
conditions as are contained in annual appropriations Acts." Id.
sect.1702(h)(2). While title XVII authorizes the appropriation of "such
sums as are necessary to provide the cost of guarantees under this title,"
id. sect. 1704, no funds were specifically appropriated for this purpose
at the time of EPACT's enactment.
Since the enactment of title XVII, DOE has undertaken what it describes as
"preparatory activities reasonably necessary for [DOE] to be in a position
to make guarantees authorized by Title XVII." Hill Letter, at 3. DOE
informed us that these activities included establishing and maintaining a
Web site for the program;[6] developing policies and "guidelines" for the
program and publishing them in the Federal Register;[7] and issuing a
solicitation announcement inviting interested parties to submit
"pre-applications" for title XVII guaranteed loans.[8] See GAO-07-339R,
at 13, 20. In response to its solicitation, DOE received over 100
pre-applications. Id. at 43.
To facilitate work on these and other activities, DOE established the Loan
Guarantee Program Office. Implementation of the Provisions of the Energy
Policy Act of 2005: Hearing before the Senate Committee on Energy and
Natural Resources, 109^th Cong. 50 (2006) (statement by DOE Under
Secretary David K. Garman), available at
www.ne.doe.gov/pdfFiles/garmanTestimony050106.pdf (last visited Apr. 16,
2007). See also GAO-07-339R, at 2. From March through October 2006, DOE
staffed that office with three employees detailed from different DOE
organizations. Id. at 16, 19, 21. Total salaries, benefits, and travel
expenses for the detailed employees amounted to about $309,000 during
fiscal year 2006 and about $38,000 from October 1 through October 31,
2006. Id. at 19. These amounts were paid from fiscal year 2006 and 2007
DOE appropriations for Departmental Administration[9] and Science.[10] Id.
DOE also issued task orders to obtain private contractor support services
for various tasks. Id. These orders cost an additional $121,194 in fiscal
year 2006, and $34,829 in October of fiscal year 2007, which were paid
from DOE's fiscal year 2006 and 2007 appropriations for Energy Supply and
Conservation[11] and Science.[12] Id. As of October 31, 2006, DOE had
spent a total of about $503,000 to prepare for the awarding of title XVII
guaranteed loans. Id. at 16.
On October 31, 2006, DOE terminated the details of the three employees
assigned to the Loan Guarantee Program Office and returned those employees
to their home organizations. GAO-07-339R, at 21. However, DOE continued
to perform preparatory activities. As of January 2007, DOE, using its
fiscal year 2007 appropriation for Departmental Administration,[13]
assigned staff in its Office of General Counsel to perform various title
XVII tasks, including preparing a notice of proposed rulemaking, drafting
and perfecting a charter for a departmental Credit Review Board, drafting
program regulations, and evaluating pre-applications for loan guarantees.
Id. at 2, 21, 43. With the same appropriation, DOE used staff from its
Office of the Chief Financial Officer to maintain the title XVII Web site.
Id. DOE used its fiscal year 2007 Energy Supply and Conservation
appropriation[14] to pay for task order support services, such as
responding to program inquiries. Id. We do not know what amounts DOE spent
on these activities after October 31, 2006.
DISCUSSION
This opinion addresses two questions. We answer them below.
FCRA and Section 1702(b)(2)
First, we address whether the loan guarantee authority in EPACT section
1702(b)(2) constitutes authority for DOE to make loan guarantees
notwithstanding the requirements of FCRA, or whether section 1702(b)(2)
constitutes new budget authority for FCRA purposes. FCRA provides, with
certain exceptions not relevant here, that notwithstanding any other
provision of law, new loan guarantee commitments may be made "only to the
extent that--
"(1) new budget authority to cover their costs is provided in advance in
an appropriations Act;
"(2) a limitation on the use of funds otherwise available for the cost of
a direct loan or loan guarantee program has been provided in advance in an
appropriations Act; or
"(3) authority is otherwise provided in appropriation Acts."
2 U.S.C. sect. 661c(b) (emphasis added). EPACT section 1702(b) says that
no loan guarantees shall be made unless--
"(1) an appropriation for the cost has been made, or
"(2) the Secretary has received from the borrower a payment in full for
the cost of the obligation and deposited the payment into the Treasury."
EPACT, sect. 1702(b) (emphasis added). In February 2007, Congress
appropriated amounts to cover the costs of loan guarantees. Pub. L. No.
110-5, sections 20315, 20320.
At the time of your request, however, DOE did not have an appropriation
for this purpose, raising the question of whether subsection (b)(2)
provides DOE authority independent of FCRA and subsection (b)(1) to make
loan guarantees. We think it does.
The language of section 1702(b) makes clear that Congress contemplated two
possible paths for making loan guarantees under title XVII. DOE,
consistent with FCRA (2 U.S.C. sect. 661c(b)), could issue loan guarantees
pursuant to appropriations for that purpose (EPACT, sect. 1702(b)(1)); or
DOE could issue loan guarantees if it receives payments by borrowers of
the "full cost of the obligation" (EPACT, sect. 1702(b)(2)). To read
section 1702(b) as subjecting title XVII loan guarantees to the
requirements of FCRA would read subsection (b)(2) out of the law, and we
cannot do that; we have to give meaning to all of the enacted language.
E.g., 70 Comp. Gen. 351, 354 (1991); 29 Comp. Gen. 124, 126 (1949). See
also 2A Sutherland, Statutory Construction, sect. 46:06 at 193-94 (6^th
ed. 2000). Section 1702(b)(2) is clearly inconsistent with FCRA, and it is
a later enacted, more specific law. It is well established that a later
enacted, specific statute will typically supersede a conflicting
previously enacted, general statute to the extent of the inconsistency.
E.g., Smith v. Robinson, 468 U.S. 992, 1024 (1984); B-255979, Oct. 30,
1995. For these reasons, we conclude that EPACT section 1702(b)(2) allows
DOE to issue loan guarantees if the borrowers pay the "full cost of the
obligation." The alternative path clearly represents authority to make
loan guarantees independent of and notwithstanding the earlier, more
general FCRA requirements.
Given our answer to the first part of this question, we need not address
the second part which asks whether, in the alternative, section 1702(b)(2)
constitutes new budget authority for the purposes of FCRA. Suffice it to
say that section 1702(b)(2) provides DOE authority to make loan guarantees
independent of FCRA.
DOE's Title XVII Activities and Statutory Restrictions
The second question to be addressed is whether DOE was authorized to
engage in activities such as issuing and publishing in the Federal
Register program guidelines and a solicitation announcement inviting
pre-application proposals for guaranteed loans in advance of the enactment
of appropriations to make loans under EPACT's title XVII program. By law,
"[n]one of the funds made available to the Department of Energy under . .
. Energy and Water Development Appropriations Acts shall be used to
implement or finance authorized . . . loan guarantee programs unless
specific provision is made for such programs in an appropriation Act." 42
U.S.C. sect. 7278 (emphasis added). The crux of this question is the
meaning of the phrase, "implement or finance," as used in section 7278. In
the absence of indications to the contrary, Congress is deemed to use
words in their common, ordinary sense. E.g., Mallard v. United States
District Court for Southern District of Iowa, 490 U.S. 296, 300-01 (1989).
"One measure of the common, ordinary meaning of words is a standard
dictionary." B-303495, Jan. 4, 2005. The Merriam-Webster Dictionary
defines the verb "implement" to mean, "carry out, accomplish; especially:
to give practical effect to and ensure of actual fulfillment by concrete
measures." Merriam-Webster's Collegiate Dictionary 624 (11^th ed. 2004)
(emphasis in original).
We think DOE's preparatory activities fall squarely within this definition
of "implement." In support of the title XVII loan guarantee program, DOE
established and maintained a Web site, developed and published policies
and "guidelines," issued a solicitation announcement inviting
pre-applications, staffed and operated a program office, prepared a notice
of proposed rulemaking, drafted and perfected a charter for the Credit
Review Board, drafted regulations, reviewed pre-applications for
completeness, and procured task order support services. DOE spent more
than $503,000 on these preparatory activities. These activities
constituted concrete measures designed to give practical effect to and
ensure the actual fulfillment of the title XVII loan guarantee program
(i.e., awarding of loan guarantees) once appropriations were made
available for that purpose. DOE acknowledged undertaking these actions in
preparation for making loan guarantees. Hill Letter, at 3 (quoted above).
To fund these activities, DOE used appropriations provided by Energy and
Water Development Appropriation Acts for fiscal years 2006 and 2007.
DOE defends these activities by noting that none of them actually
obligated the federal government to guarantee any loans. Hill Letter, at
3. DOE told us that it "understands the [section 7278] constraint to apply
to `implement[ing]' . . . those authorized loan guarantees by making them,
. . . [not] conducting preparatory activities reasonably necessary for the
Department to be in a position to make guarantees." Id. Preparatory
activities, DOE reasons, are not barred by this provision because they do
not "obligate the federal fisc to third parties pursuant to Title XVII."
Id. DOE has confused implementation with financing. Merriam-Webster
defines the verb "finance" to mean, "provide funds . . . for."
Merriam-Webster's Collegiate Dictionary, at 469. See also Black's Law
Dictionary 662 (8^th ed. 2004) ("finance, vb. To raise or provide funds").
Thus, financing something is commonly understood to mean taking actions
which provide funds for that something. This, DOE did not do. Section
7272, however, prohibits not just "financing" loan guarantees, but also
"implementing" loan guarantee programs.
In the past, this Office has agreed in a number of cases that when
Congress assigns new duties to an agency, the agency, under certain
circumstances, may use an existing appropriation to defray the expenses of
carrying out the new duties. E.g., B-290011, Mar. 25, 2002; 46 Comp. Gen.
604 (1967); B-211306, June 6, 1983. However, that is not the case here.
Section 7278 specifically prohibits the use of any funds made available to
DOE by an Energy and Water Development Appropriations Act to implement or
finance a loan guarantee program unless specific provision has been made
for that program in an appropriations act. In other words, as a result of
section 7278, no DOE appropriations under any Energy and Water Development
Appropriations Act are legally available to fund any guaranteed loan
program before the requisite appropriations act provisions are made. 42
U.S.C. sect. 7278. Cf., e.g., B-211306, June 6, 1983 (BLM could use an
existing appropriation to pay expenses of a new program because the law
"did not prohibit" use of the existing appropriation for those expenses).
DOE's use of appropriations enacted by Energy and Water Development
Appropriations Acts for other purposes to support the title XVII loan
guarantee program violated the prohibitions of section 7278.
In addition, DOE's actions violated two fundamental appropriations laws:
the so-called purpose statute and the Antideficiency Act. Under the
purpose statute (31 U.S.C. sect. 1301(a)), appropriations "shall be
applied only to the objects for which the appropriations were made." See
B-302973, Oct. 6, 2004. Where Congress has specifically prohibited a use
of appropriated funds for a particular purpose, any obligation of funds
for that purpose is in excess of the amount available for that purpose.
E.g., B-300192, Nov. 13, 2002; 60 Comp. Gen. 440 (1981). DOE expended
fiscal year 2006 Energy and Water Development Appropriations Act funds to
implement title XVII despite the fact that, under section 7278, no funds
were available for this purpose. This violated the purpose statute. The
Antideficiency Act (31 U.S.C. sect. 1341(a)) prohibits making or
authorizing an expenditure or obligation that exceeds or is in advance of
available budget authority. E.g., B-303495, Jan 4, 2005. In fiscal year
2006, DOE expended fiscal year 2006 Energy and Water Development
Appropriations Act funds to implement title XVII even though it had no
funds available for this purpose, and did so again using fiscal year 2007
funds. Since DOE had no funds available to implement the title XVII prior
to the 2007 Continuing Resolution, those uses of fiscal year 2006 and 2007
appropriations violated the Antideficiency Act. Cf., e.g., B-300192, Nov.
13, 2002; B-302710, May 19, 2004.
CONCLUSIONS
This opinion addresses two questions. First, we conclude that EPACT
section 1702(b)(2) confers upon DOE independent authority to make loan
guarantees, notwithstanding the FCRA requirements. In view of this
conclusion, we did not address the second part of your question concerning
whether, in the alternative, section 1702(b)(2) constitutes new budget
authority for the purposes of FCRA.
Second, we conclude that DOE engaged in activities to implement a loan
guarantee program under EPACT title XVII during a period when DOE was
affirmatively prohibited from implementing that title by 42 U.S.C.
sect. 7278. These activities violated section 7278; the purpose statute,
31 U.S.C. sect. 1301(a); and the Antideficiency Act, 31 U.S.C.
sect. 1341(a). DOE must report the violations of the Antideficiency Act to
the Congress and the President, and submit a copy of that report to the
Comptroller General under 31 U.S.C. sect. 1351, as amended.[15] B-304335,
Mar. 8, 2005.
If you have any questions regarding this matter, please contact Susan A.
Poling, Managing Associate General Counsel, at 202-512-2667, or Thomas H.
Armstrong, Assistant General Counsel, at 202-512-8257.
Gary L. Kepplinger
General Counsel
DIGESTS
1. Section 1702(b)(2) of the Energy Policy Act of 2005, Pub. L.
No. 109-58, 119 Stat. 594, 1117-18 (Aug. 8, 2005), confers upon the
Department of Energy independent authority to make loan guarantees,
notwithstanding the requirements imposed by the Federal Credit Reform Act
of 1990 (FCRA), Pub. L. No. 101-508, title XIII, subtitle B, sect. 13201,
104 Stat 1388, 1388-610 (Nov. 5, 1990), codified at 2 U.S.C. sect. 661c.
2. The Department of Energy violated 42 U.S.C. sect. 7278 by expending
appropriated funds to implement a new loan guarantee program authorized by
title XVII of the Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat.
594, 1117-22 (Aug. 8, 2005). Section 7278 prohibits the Department from
using funds made available to it under any Energy and Water Development
Appropriations Act to "implement or finance" any loan guarantee program
unless specific provision is made for the program in an appropriations
act. At the time, there was no such provision for title XVII and the
Department used funds appropriated to it for other purposes by two Energy
and Water Development Appropriations Acts. These activities also violated
the purpose statute, 31 U.S.C. sect. 1301(a), and the Antideficiency Act,
31 U.S.C. sect. 1341(a).
------------------------
[1] Pub. L. No. 101-508, title XIII, subtitle B, sect. 13201, 104 Stat
1388, 1388-610 (Nov. 5, 1990), codified at 2 U.S.C. sect. 661c.
[2] You also asked whether EPACT section 1702(h), which authorizes DOE to
collect fees for administrative expenses, appropriates those fees for use
in the title XVII program. In the course of this opinion, we learned that
DOE believes section 1702(h) does not appropriate those fees, and that DOE
has not yet assessed any fees under it. Letter from David R. Hill, General
Counsel, DOE, to Susan A. Poling, Managing Associate General Counsel, GAO,
Feb. 9, 2007, at 2; DOE, Loan Guarantees for Projects that Employ
Innovative Technologies; Guidelines for Proposals Submitted in Response to
the First Solicitation, 71 Fed. Reg. 46,451, 46,452-53 (Aug. 14, 2006).
Moreover, the Revised Continuing Appropriations Resolution, 2007,
explicitly appropriated for DOE's use (as offsetting collections) any fees
that DOE does collect under section 1702(h) during fiscal year 2007. Pub.
L. No. 110-5, title II, ch. 3, sect. 20320(a), 121 Stat. 8, 21 (Feb. 15,
2007). For these reasons, there is no longer a need to address this
question.
[3] In pertinent part, section 7278 states: "None of the funds made
available to the Department of Energy under . . . Energy and Water
Development Appropriations Acts shall be used to implement or finance
authorized . . . loan guarantee programs unless specific provision is made
for such programs in an appropriation Act." This provision was originally
enacted as section 301 of the Energy and Water Development Appropriations
Act, 1993, Pub. L. No. 102-377, title III, 106 Stat. 1315, 1338 (Oct. 2,
1992).
[4] GAO, Procedures and Practices for Legal Decisions and Opinions,
GAO-06-1064SP (Washington, D.C.: Sept. 2006), available at
www.gao.gov/congress.html (last visited Apr. 16, 2007).
[5] Section 1702(b) requires an appropriation for the "cost," which
section 1701(2) defines as "the cost of a loan guarantee." EPACT, sections
1701(2), 1702(b).
[6] See DOE, Loan Guarantee Program, available at
www.lgprogram.energy.gov/index. html (last visited Apr. 16, 2007).
[7] DOE, Loan Guarantees for Projects That Employ Innovative Technologies;
Guidelines for Proposals Submitted in Response to the First Solicitation,
71 Fed. Reg. 46,451 (Aug. 14, 2006).
[8] DOE, Solicitation No. DE-PS01-06LG00001, Federal Loan Guarantees for
Projects that Employ Innovative Technologies in Support of the Advanced
Energy Initiative, (Aug. 8, 2006), available at
www.lgprogram.energy.gov/Solicitationfinal.pdf (last visited Apr. 16,
2007).
[9] Energy and Water Development Appropriations Act, 2006, Pub. L. No.
109-103, title III, 119 Stat. 2247, 2273-74 (Nov. 19, 2005) ("For salaries
and expenses of the Department of Energy necessary for departmental
administration"); Pub. L. No. 110-5, sections 101(a)(2), 20315.
[10] Pub. L. No. 109-103, title III ("For Department of Energy expenses
. . . necessary for science activities"); Pub. L. No. 110-5, sections
101(a)(2), 20313.
[11] Pub. L. No. 109-103, title III ("For Department of Energy expenses
. . . necessary for energy supply and energy conservation activities");
Pub. L. No. 110-5, sections 101(a)(2), 20314.
[12] See note 10, supra.
[13] See note 9, supra.
[14] See note 11, supra.
[15] Office of Management and Budget Circular No. A-11 provides guidance
on the information to include in Antideficiency Act reports. Agencies must
report violations found by GAO, even if they disagree with the finding.
OMB advises agencies, "If the agency does not agree that a violation has
occurred, the report to the President, Congress, and the Comptroller
General will explain the agency's position." OMB Cir. No. A-11,
Preparation, Submission, and Execution of the Budget, sect. 145.8
(June 2006).