The President’s FY2022 budget requests authority to award an additional $1.5 billion in loan guarantees under Title XVII of the Energy Policy Act of 2005. If granted, the Department of Energy’s (DOE’s) Title 17 Loan Guarantee Program’s total authority would increase from $22.4 billion to $23.9 billion.

In the FY 2022 request, DOE also claims it will abide by Executive Order 14008 and withdraw direct support for fossil energy projects (see here for more detail). But it will be hard to square that with the solicitation for $8.5 billion in guarantees for Advanced Fossil Energy Projects that remains open.

TCS has long criticized the Title XVII Loan Guarantee Program, which guarantees loans to support early commercialization of advanced technologies like renewables, nuclear, and advanced fossil fuels. When the program awards a loan guarantee, it basically says that the federal government will pay back loans to lenders if the borrowers can’t. The program has been used to provide debt financing for large-scale, capital-intensive, and highly risky projects, often without enough safeguard for federal taxpayers. For example, the program has guaranteed up to $12 billion for the Vogtle Reactors 3 & 4, a nuclear plant that is more than 5 years behind schedule and $14 billion over budget.

As with all federal credit programs, Title XVII requires the loan guarantee’s subsidy cost to be paid either through appropriations or by the borrower. The subsidy cost is an estimate of the long-term cost of guaranteeing a loan and includes costs of covering interest subsidies, loan defaults, and delinquencies. But the LPO has a history of under-estimating the subsidy cost it makes projects pay. Although the Vogtle Project had a high risk, the LPO put the credit subsidy cost for the loan guarantees at $0, a blatant disregard of the risks federal taxpayers are shouldering. Instead of making recipients pay for the subsidy cost of the $1.5 billion in requested new loan guarantees, DOE is requesting $150 million from Congress to cover the costs. It would mean taxpayers are not being compensated for the risks we bear when LPO makes a guarantee.

The Trump administration proposed to terminate the program in their FY18 budget request, but promptly issued an additional loan of $3.7 billion to the Vogtle Project on the last day of FY17 to allow the loan guarantee to escape the axe. The Trump administration ultimately called for eliminating the program four times, but the Title XVII program refuses to die on the chopping block and could now come back to haunt taxpayers.