Today the Senate Energy and Natural Resources Committee held a hearing on the Department of Energy Loan Guarantee Program. The program, created in Title XVII of the 2005 Energy Bill, has recently received significant attention because of a failed attempt to add in the stimulus an additional $50 billion to the program’s budget authority. The additional authority, proposed by Senators Dorgan (D-ND) and Bennett (R-UT), was included in the original Senate passed bill, but at today’s hearing, Senator Bennett expressed much displeasure that it had not survived the conference negotiations. TCS vigorously opposed this expansion , noting the considerable risk adding $50 billion to a risky and ill-conceived program would place on federal taxpayers. Under the program, taxpayers can already be forced to back $42.5 billion in loans.

The hearing covered a range of issues that primarily centered on ways to fast-track loan guarantees. Several senators expressed their dismay that DOE has yet to issue a loan guarantee despite the availability of $4 billion in guarantee authority since FY07 and $38.5 billion in FY08. But taxpayers should be glad to see this fundamentally flawed program stalled. In fact, under Title XVII taxpayers stand to lose billions in defaulted loans and miscalculated costs and fees. Last summer, the GAO issued a report concluding congress should limit the program. They highlighted problems with the program’s staffing, structure, and oversight mechanisms.

However, rather than focusing on how to reform the program in a way to that provides more taxpayer protection, witnesses and several committee members voiced support for policies that would actually remove the program’s already weak safeguards. As described by one witness, these reforms included: eliminating upfront fees, regulatory barriers and program deadlines. Support for moving the program off-budget and out of the Appropriations process completely was also voiced repeatedly—another egregious proposition for taxpayers.

Providing an easy path for industry to receive the backing of the federal Treasury and therefore the American taxpayer should not be the goal of Congress or the Department of Energy Loan Guarantee program. Protecting taxpayer assets should first and foremost be the goal of our legislators. We encourage the committee to hear other voices before expediting a process that could leave taxpayers losing hundreds of billions of dollars.

*Chairman Bingaman (D-UT), Ranking Member Murkowski (R-AK), and Senators Bennett (R-UT), Stabenow (D-MI), Shaheen (D- NH) and Sen. Udall (D-CO) were in attendance for all or part of the hearing. The webcast and testimony of the witnesses is available on the committee website.