Culminating the Energy and Commerce Committee’s extensive investigation into the Obama administration’s failed loan guarantee program, full committee Chairman Fred Upton (R-MI) and Oversight and Investigations Subcommittee Chairman Cliff Stearns (R-FL) are offering the “No More Solyndras Act” to ensure taxpayers are never again stuck paying hundreds of millions of dollars because of the Obama administration’s or any future president’s risky bets.
The legislation draws on lessons learned from the committee’s investigation into the Department of Energy’s $535 million loan guarantee to Solyndra, the California solar panel manufacturer that ultimately went bankrupt last summer leaving taxpayers on the hook for half a billion dollars.
Eliminating the Title XVII DOE Loan Guarantee Program
President Obama’s stimulus skewed the Energy Department’s loan guarantee program to support the Obama administration’s favored technologies and shifted the financial risks of these technologies from the program’s participants to U.S. taxpayers. Even after Solyndra went bankrupt, raising questions about the soundness of the program and its role in his green jobs agenda, the president dismissed the program’s failure. In his State of the Union address, President Obama shrugged off the concern by noting that “some companies fail.” His prophecy was confirmed with the subsequent bankruptcies of loan guarantee recipients Beacon Power and Abound Solar.
The “No More Solyndras Act” will effectively phase out DOE’s flawed loan guarantee program under Title XVII of the Energy Policy Act of 2005 by prohibiting DOE from issuing any loan guarantees under Title XVII for applications submitted after December 31, 2011.
Providing Taxpayers Strong New Protections for any Pending Participants
While the legislation will ultimately terminate the loan guarantee program entirely, some applications are already pending in the queue and some projects have received conditional commitments but have not yet been issued a loan guarantee. To account for these existing program participants and the resources that have already been committed, the bill allows only these applicants and projects to remain eligible to pursue a loan guarantee.
Obama administration officials rushed Solyndra’s loan out the door despite repeated warnings of failure from within the administration. To ensure taxpayers are never again left vulnerable to executive branch negligence, the bill provides added protections to any new guarantee issued for an existing application:
- No guarantee shall be made until the Secretary of Treasury has made a written recommendation to DOE on the merits of the guarantee.
- If DOE makes a guarantee that does not conform to a Treasury recommendation, DOE must provide a detailed explanation to Congress.
Greater Loan Guarantee Transparency
The committee’s investigation uncovered a series of questionable dealings leading up to Solyndra’s loan issuance. Warning signs questioning the project’s viability and the company’s financial condition remained hidden from the public and only came to light well after millions of taxpayer dollars had been paid out to Solyndra.
To provide greater transparency in the future, the legislation requires DOE to provide a report to Congress detailing the following information for any new guarantees issued to an existing applicant: (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.
Protecting Taxpayers in the Restructuring of Any Loan Guarantees
When Solyndra’s warnings came to fruition and the company ran out of cash in the autumn of 2010, the Obama administration doubled down on their bad bet, restructuring Solyndra’s loan in early 2011 and putting wealthy investors at the front of the line ahead of taxpayers.
While the plain letter of the law prohibits subordination, or putting any interests before those of the U.S. taxpayer, DOE formulated a convoluted legal justification in order to move forward with the restructuring anyway. DOE also failed to take advantage of Treasury's financial expertise, which could have helped prevent further losses. DOE elected not to involve Treasury in the restructuring in any meaningful way, and when Treasury interjected, DOE rejected Treasury’s recommendation that it seek the opinion of the Justice Department. The “No More Solyndras Act” will prohibit DOE from restructuring the terms of any guarantee unless they first consult with Treasury. Just as with current law, the Act also prohibits the subordination of U.S. taxpayer dollars to any other investors.