Mr. Chairman, I have an amendment at the desk. My amendment would put a moratorium for fiscal year 2013 on any new loan guarantees under what is now known as the section 1703 loan guarantee program. To offset the loss of administrative…
Mr. Chairman, I have an amendment at the desk.
My amendment would put a moratorium for fiscal year 2013 on any new loan guarantees under what is now known as the section 1703 loan guarantee program. To offset the loss of administrative revenue that would no longer come to the Department of Energy if the amendment passes, the amendment cuts $33 million from administrative costs that will not be necessary if the program is suspended. This program, originated in the Energy Policy Act of 2005, offers a guarantee for the loans that finance an energy project. With that kind of guarantee, the risk for the loaning entity is considered lower, which means they can charge a lower interest rate to the people initiating the energy project. In other words, it saves the project money. But it also puts the taxpayers on the hook if the project defaults.
Section 1703 projects cover nuclear, coal, and even renewable energy. The closer we look at the guarantees, the less they seem like a worthwhile investment for the American taxpayer. Let me give you an example.
Some of the biggest guarantees are for nuclear power. One of the first and biggest loans the Department of Energy is considering is one that is not necessary. That's not my assessment; it's the assessment of Kevin Marsh, the president of South Carolina Electric & Gas Company, which is attempting to build a new nuclear power plant. He said on a call to analysts and investors:
We're confident in our ability to finance this project without a loan guarantee.
This program stands to give him and his project, which could be in the $8 billion to $11 billion range, a preemptive bailout that is not even needed.
Here's another example. A loan guarantee that is most likely to be awarded is for a new nuclear plant called Vogtle. That loan guarantee is for $8.3 billion. For those of you who displayed a great deal of concern about Solyndra's loan guarantee, this one is 15 times the size. With a project that big, it makes sense to look closely at the odds of this project going into default, leaving the taxpayers with the price tag. Well, Vogtle already has $913 million in cost overruns, and their SEC filings indicate more overruns can be expected. That, of course, is not at all unusual for a nuclear power plant
project. Construction cost overruns are the rule, not the exception.
Maybe that's why the CBO had this to say about nuclear loan guarantees:
CBO considers the risk of default on such a loan guarantee to be very high--well above 50 percent.
Or maybe they said that because there is another reason to expect nuclear power plants will continue to struggle financially: that reason is the low cost of natural gas that makes it far more attractive than taking multiple risks by going with nuclear power. Dale Klein, a former chairman of the NRC, cautioned that nuclear plants will not move off the blackboard and into construction, not as long as natural gas remains as cheap and plentiful as it is today.
Nuclear power is not the only recipient of government largess under the section 1703 loan guarantee. Even if you are a nuclear power plant supporter, there are plenty of other boondoggles that are covered by this program that I don't have time to go into. That's why Members of Congress on both sides of the aisle can get behind this amendment, which is supported by a bipartisan coalition of groups, including Taxpayers for Common Sense, Friends of the Earth, National Taxpayers Union, and Physicians for Social Responsibility. It is for those who are concerned about wasteful government spending. This program alone will cost the taxpayers over $500 million--not including any defaults the taxpayers may have to cover. This amendment is for those who have concerns about deficit spending. It's for those with free market concerns about an energy technology that is not financially viable even after tens of billions of dollars in subsidies and decades of opportunities to mature to the point where subsidies are not needed. It is for those who are concerned about the effects of these energy technologies on our drinking water, on clean air, on healthy soil, and on climate change. It is for those who have concerns as ratepayers that they'll get stuck holding the bill when an energy project fails and their electricity rates go up. It is for those who found the Solyndra default to be outrageous.
There's a little something for everyone with this amendment. I urge my colleagues to support it, and I yield back the balance of my time.
My amendment would put a moratorium for fiscal year 2013 on any new loan guarantees under what is known as the Section 1703 loan guarantee program. To offset the loss of administrative revenue that would no longer come to the Department of Energy if the amendment passes, the amendment cuts $33 million from administrative costs that will not be necessary if the program is suspended. This program, originated in the Energy Policy Act of 2005, offers a guarantee for the loans that finance an energy project. With that kind of guarantee, the risk for the loaning entity is considered lower, which means they can charge a lower interest rate to the people initiating the energy project. In other words, it saves the project money. But it also puts taxpayers on the hook if the project defaults.
Section 1703 projects cover nuclear, coal, and even renewable energy. The closer we look at the guarantees, the less they seem like a worthwhile investment for the American taxpayer. Let me give you an example.
Some of the biggest guarantees are for nuclear power. One of the first and biggest loans the Department of Energy is considering is one that is not necessary. That is not my assessment. That is the assessment of Kevin B. Marsh, the President of South Carolina Electric & Gas Company, which is attempting to build a new nuclear power plant. He said on a call to analysts and investors, ``[W]e are confident in our ability to finance this project without loan guarantee . . .'' This program stands to give him and his project, which could be in the 8 11 billion dollar range, a preemptive bailout that is not even needed.
Here's another example. A loan guarantee that is most likely to be awarded is for a new nuclear power plant called Vogtle. That loan guarantee is for 8.33 billion dollars. For those of you who displayed a great deal of concern about Solyndra's loan guarantee, this one is 15 times as big. With a project that big, it makes sense to look closely at the odds of this project going into default, leaving you and me with the price tag. Well, Vogtle already has $913 million in cost overruns and their SEC filings indicate more overruns can be expected. That, of course, is not at all unusual for a nuclear power plant project. Construction cost overruns are the rule, not the exception.
Maybe that is why the Congressional Budget Office had this to say about nuclear loan guarantees; ``CBO considers the risk of default on such a loan guarantee to be very high--well above 50 percent.'' Or maybe they said that because there is another reason to expect nuclear power plants will continue to struggle financially; that reason is the low cost of natural gas that makes it far more attractive than taking multiple risks by going with nuclear power. Dale Klein, a former chairman of the Nuclear Regulatory Commission, cautioned that nuclear plants will not ``move off the blackboard and into construction . . . . Not as long as natural gas remains as cheap and plentiful as it is today.''
Nuclear power is not the only recipient of government largesse under the section 1703 loan guarantee program. Even if you are a nuclear power supporter, there are plenty of other boondoggles covered by this program that I don't have time to go into.
That is why Members of Congress on both sides of the aisle can get behind this amendment, which is supported by a bipartisan coalition of groups including Taxpayers for Common Sense, Friends of the Earth, National Taxpayers Union, and Physicians for Social Responsibility. It is for those who are concerned about wasteful government spending. This program alone will cost the taxpayers over 500 million dollars--not including any defaults the taxpayers may have to cover. This amendment is for those who have concerns about deficit spending. It is for those with free market concerns about an energy technology that is not financially viable even after tens of billions of dollars of subsidies and decades of opportunities to mature to the point where subsidies are not needed. It is for those who are concerned about the effects of these energy technologies on our drinking water, on clean air, on healthy soil, and on climate change. It is for those who have concerns as ratepayers that they will also get stuck holding the bill when an energy project fails and their electricity rates go up. It is for those who found the Solyndra default to be outrageous.
There is a little something for everyone here. I urge my colleagues to support the Kucinich amendment.
Potential Questions
You are targeting nuclear loan guarantees. This is an anti-nuclear amendment.
The Section 1703 loan guarantees will be awarded to a range of energy projects, including some which I wholeheartedly support like renewable energy. I firmly believe that renewables deserve to have aggressive subsidies to help them compete with the fuels of yesterday that have been so heavily subsidized for decades. But I am looking at the big picture here. This program, on balance, is bad policy.
It is bad for our energy portfolio, bad for taxpayers, bad for clean air and water, and bad fiscal policy. Many of my friends on the other side of the aisle have voiced concerns over government picking winners and losers. This qualifies. They have expressed concern about government spending. This is a half billion program at a minimum, probably many times that. They have expressed concern about deficit spending. This is it. They have expressed concern that the free market should reign. This program does the opposite.
This is an anti-renewable amendment,
This is a 32 billion dollar loan guarantee program, of which only between 1.2 billion and 4 billion dollars is dedicated to renewables. The rest goes to unsustainable energy. Still, I don't take the renewable money lightly. I am a major supporter of the solar industry. In fact, I think the rapid and full throated deployment of solar energy should be one of our top priorities in Congress. But I am looking at the big picture here. This program, on balance, is bad policy.
It is bad for our energy portfolio, bad for taxpayers, bad for clean air and water, and bad fiscal policy. Many of my friends on the other side of the aisle have voiced concerns over government picking winners and losers. This qualifies. They have expressed concern about government spending. This is a half billion program at a minimum, probably many times that. They have expressed concern about deficit spending. This is it. They have expressed concern that the free market should reign. This program does the opposite.
This is a limitation amendment so you will not save a half billion dollars.
We will not save the half billion all in one year. But if we hit the pause button on this program to consider it a little more carefully, we won't spend any of that money this year.
Nuclear is viable/a good investment/financially sustainable.
In reaction to Southern Company's investment in new nuclear reactors in 2010, Moody's downgraded its rating of Southern Company's.
The Economist magazine declared in its March 10th issue that nuclear power is ``the dream that failed'': the plants are too costly and uncompetitive with alternatives.
How will this amendment work?
The CBO determined that budget authority would be increased by this amendment because administrative revenue from the loan guarantee recipients to the Department of Energy would be foregone. CBO estimated that
amount to be $33 million. My amendment offsets that cost to the federal government buy cutting administrative expenses dedicated to running the program this amendment would suspend.
What kind of energy is covered in the loan guarantees?
$18.5 billion for nuclear power plants.
$4 billion for uranium enrichment plants.
$8 billion for non-nuclear technologies; probably coal.
$2 billion for unspecified projects.
$1.183--$3.0 billion for renewable energy and energy efficiency.
Taxpayers for Commonsense, Action,
June 5, 2012.
Dear Representative: Together we urge you support the
amendment offered by Reps. Kucinich (D OH) and McClintock (R
CA) amendment to stop the Department of Energy (DOE) Loan
Guarantee Program from issuing any new loan guarantees in FY
2013. Created in Title 17 of the 2005 Energy Policy Act, the
DOE Loan Guarantee Program has received increased scrutiny
with the recent default of a loan guarantee to the solar
start-up company, Solyndra. Taxpayers stand to lose $500
million on the failed solar project and billions more could
be lost if the program continues in its current form.
The Government Accountability Office (GAO), the DOE
Inspector General, and many others have been critical of the
existing loan guarantee effort. Recently the GAO found that
DOE could not even provide comprehensive information on the
current loan guarantee applicants and commitments, and a
recent review commissioned by the White House found the
program was not proactively protecting the taxpayer or
providing for a reasonable prospect of repayment.
A recent audit of the Loan Guarantee Program by the Office
of the Inspector General found that the program, ``could not
always readily demonstrate . . . how it resolved or mitigated
relevant risks prior to granting loan guarantees.'' This
creates serious concern for taxpayers that the financial
terms of the loans are not being judiciously decided.
Furthermore, loan guarantees provided under Title 17
guarantee 100% of a loan for up to 80% of the project cost--
leaving taxpayers to shoulder far too much of the project
risk. Adding insult to injury, the little protection
taxpayers did have in the event of project default was
undermined in 2009 when DOE weakened the original statute.
With hundreds of billions in bailouts already on the
shoulders of US taxpayers, the country cannot afford to
continue a program that could easily become a black hole for
tens of billions in new defaults. We urge you to support the
Kucinich-McClintock amendment to stop new loan guarantees
from the troubled DOE Loan Guarantee Program!
Sincerely,
Taxpayers for Common Sense Action,
National Taxpayers Union,
Americans for Prosperity,
Friends of the Earth,
Nonproliferation Policy Education Center,
Competitive Enterprise Institute,
Freedom Action,
Physicians for Social Responsibility.
Mr. Chairman, I demand a recorded vote.