Perry Energy Department Loans Could Favor Fossil Fuels

Turn to the nation's most objective and informative daily environmental news resource to learn how the United States and key players around the world are responding to the environmental...

By Rebecca Kern

Tesla. Ford. Nissan. They are all recipients of loans totaling $8 billion from the Energy Department to help develop electric and fuel-efficient vehicles.

While the loans to the three automakers will continue, other new clean energy technology loans from the Energy Department would likely be in limbo under the leadership of Rick Perry, who has a record of supporting fossil fuel technologies, energy policy experts said.

“I would expect Perry to put more emphasis on programs that would come out of the [DOE] Office of Fossil Energy,” Robert Edwards, a partner at Kilpatrick Townsend & Stockton who focuses on energy projects and a former deputy general counsel for energy policy at the Energy Department, told Bloomberg BNA Dec. 14.

Perry, who was named this week by President-elect Donald Trump to be his pick for energy secretary, has long-standing ties to the oil and gas industries in Texas.

Trump also tapped Rex Tillerson, the ExxonMobil Corp. chief executive officer, for secretary of state, and Scott Pruitt, the Oklahoma attorney general with oil and gas ties, to head the Environmental Protection Agency. Trump has indicated he wants to revive the coal industry and repeal President Barack Obama’s hallmark climate change regulations.

Clean Coal, Carbon Capture

However, Edwards notes that while the Obama administration focused on electric vehicles and renewable technologies, it also provided loans toward clean coal and carbon capture and sequestration projects which were designed to allow fossil fuel generation with fewer greenhouse gas emissions. So continuing work in this area would still be beneficial to the environment, he said.

Since its creation in 2005, the Energy Department’s Loan Program Office has provided $30 billion in loans, loan guarantees and commitments covering more than 30 projects in the U.S. focused on innovative clean energy projects and advanced technology vehicle manufacturing facilities.

The current DOE Loan Program Office still has more than $24 billion remaining to fund clean energy projects, according to the program’s website.

Future of Loan Program

Edwards said he is hopeful that Perry and his staff would first do an analysis of all existing loan guarantees, before deciding how it would reprioritize funding. However, he did note that any loans that have conditional commitments and signed contracts with the Energy Department will continue to be funded.

Also, the Energy Department’s loan program isn’t subject to annual appropriations, so the money remains in the fund until it’s all used up, Stephen Munro, a policy analyst with Bloomberg New Energy Finance, said.

“So the question is really not about funding when the new administration comes in, it’s about interest,” Munro told Bloomberg BNA Dec. 14. “Will the incoming Trump administration be interested in continuing to leverage this program? We don’t believe that there will be anything like the level of enthusiasm for it that that we’ve seen in the Obama era.”

Strong Job Argument Cited

However, Edwards is more optimistic that there’s a strong job argument to keep funding the loan programs.

“My hope is that when Perry takes a careful review of the programs at the Department of Energy, including the loan programs, he will find that many of these programs have supported creation of thousands and tens of thousands of high-paying jobs,” Edwards said.

“Based on a business analysis alone, I hope that [Perry] would consider that a number of the programs supporting clean technologies are well worth continuing,” he added.

Section 1703 Rulemaking

The department finalized a rule Dec. 14 that clarifies Section 1703 of the loan program, created through the Energy Policy Act of 2005, which offers loans to non-commercialized, innovative clean energy technologies that work to avoid, reduce or sequester air pollutants or greenhouse gas emissions.

“The rulemaking was primarily designed to clarify some ambiguities that developers felt were present in the loan guarantee program,” Munro said. “DOE addressed some ambiguities in the upfront costs that guarantee recipients would have to pay as they close deals.”

However, the Section 1703 loan program hasn’t had much success to date. There have only been a few applicants for the funding, and the highest profile recipient was a loan guarantee in 2010 to Southern Co.'s Vogtle nuclear plants in Georgia, which are still under construction, Munro said. So, he said the department is trying to make changes to the program in the rulemaking to make it more attractive to developers.

He said the updated rulemaking is the Energy Department’s “last and best attempt to make the program usable, and our position is that they have until Jan. 20 to get some takers.”

To contact the reporter on this story: Rebecca Kern in Washington at rKern@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

Try Environment & Energy Report