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DEPARTMENT OF ENERGY OVERSIGHT: 

THE DOE LOAN GUARANTEE PROGRAM 

JOINT HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY & 

SUBCOMMITTEE ON OVERSIGHT 

COMMITTEE ON SCIENCE, SPACE, AND 

TECHNOLOGY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

March 3, 2016 

Serial No. 114–64 

Printed for the use of the Committee on Science, Space, and Technology 

( 

Available via the World Wide Web: http://science.house.gov 
(II) 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

HON. LAMAR S. SMITH, Texas, Chair 

FRANK D. LUCAS, Oklahoma 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

DANA ROHRABACHER, California 

RANDY NEUGEBAUER, Texas 

MICHAEL T. MCCAUL, Texas 

MO BROOKS, Alabama 

RANDY HULTGREN, Illinois 

BILL POSEY, Florida 

THOMAS MASSIE, Kentucky 

JIM BRIDENSTINE, Oklahoma 

RANDY K. WEBER, Texas 

JOHN R. MOOLENAAR, Michigan 

STEVE KNIGHT, California 

BRIAN BABIN, Texas 

BRUCE WESTERMAN, Arkansas 

BARBARA COMSTOCK, Virginia 

GARY PALMER, Alabama 

BARRY LOUDERMILK, Georgia 

RALPH LEE ABRAHAM, Louisiana 

DARIN LAHOOD, Illinois 

EDDIE BERNICE JOHNSON, Texas 

ZOE LOFGREN, California 

DANIEL LIPINSKI, Illinois 

DONNA F. EDWARDS, Maryland 

SUZANNE BONAMICI, Oregon 

ERIC SWALWELL, California 

ALAN GRAYSON, Florida 

AMI BERA, California 

ELIZABETH H. ESTY, Connecticut 

MARC A. VEASEY, Texas 

KATHERINE M. CLARK, Massachusetts 

DON S. BEYER, JR., Virginia 

ED PERLMUTTER, Colorado 

PAUL TONKO, New York 

MARK TAKANO, California 

BILL FOSTER, Illinois 

SUBCOMMITTEE ON ENERGY

HON. RANDY K. WEBER, Texas, Chair 

DANA ROHRABACHER, California 

RANDY NEUGEBAUER, Texas 

MO BROOKS, Alabama 

RANDY HULTGREN, Illinois 

THOMAS MASSIE, Kentucky 

STEPHAN KNIGHT, California 

BARBARA COMSTOCK, Virginia 

BARRY LOUDERMILK, Georgia 

LAMAR S. SMITH, Texas 

ALAN GRAYSON, Florida 

ERIC SWALWELL, California 

MARC A. VEASEY, Texas 

DANIEL LIPINSKI, Illinois 

KATHERINE M. CLARK, Massachusetts 

ED PERLMUTTER, Colorado 

EDDIE BERNICE JOHNSON, Texas 

SUBCOMMITTEE ON OVERSIGHT

HON. BARRY LOUDERMILK, Georgia, Chair 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

BILL POSEY, Florida 

THOMAS MASSIE, Kentucky 

DARIN LAHOOD, Illinois 

LAMAR S. SMITH, Texas 

DON BEYER, Virginia 

ALAN GRAYSON, Florida 

ZOE LOFGREN, California 

EDDIE BERNICE JOHNSON, Texas 
(III) 

C O N T E N T S 

March 3, 2016 

Page 

Witness List ............................................................................................................. 2 

Hearing Charter ...................................................................................................... 3 

Opening Statements 

Statement by Representative Randy K. Weber, Chairman, Subcommittee on 

Energy, Committee on Science, Space, and Technology, U.S. House of Representatives ........................................................................................................... 8 

Written Statement ............................................................................................ 11 

Statement by Representative Alan Grayson, Ranking Minority Member, Subcommittee on Oversight, Committee on Science, Space, and Technology, 

U.S. House of Representatives ............................................................................ 13 

Written Statement ............................................................................................ 14 

Statement by Representative Barry Loudermilk, Chairman, Subcommittee 

on Oversight, Committee on Science, Space, and Technology, U.S. House 

of Representatives ................................................................................................ 16 

Written Statement ............................................................................................ 18 

Statement submitted by Representative Donald S. Beyer, Jr., Ranking Minority Member, Subcommittee on Oversight, Committee on Science, Space, 

and Technology, U.S. House of Representatives ............................................... 20 

Written Statement ............................................................................................ 22 

Witnesses: 

Mr. Mark McCall, Executive Director, Loan Program Office, U.S. Department 

of Energy 

Oral Statement ................................................................................................. 24 

Written Statement ............................................................................................ 27 

Dr. Frank Rusco, Director, Natural Resources and Environment, Government 

Accountability Office 

Oral Statement ................................................................................................. 38 

Written Statement ............................................................................................ 40 

Gregory Kats, President, Capital E 

Oral Statement ................................................................................................. 61 

Written Statement ............................................................................................ 63 

Mr. Nick Loris, Herbert and Joyce Morgan Fellow, Thomas A. Roe Institute 

for Economic Policy Studies, Heritage Foundation 

Oral Statement ................................................................................................. 72 

Written Statement ............................................................................................ 75 

Discussion ................................................................................................................. 100

Appendix I: Answers to Post-Hearing Questions 

Mr. Mark McCall, Executive Director, Loan Program Office, U.S. Department 

of Energy ............................................................................................................... 116 

Dr. Frank Rusco, Director, Natural Resources and Environment, Government 

Accountability Office ............................................................................................ 124 
Page

IV 

Appendix II: Additional Material for the Record 

Statement submitted by Representative Eddie Bernice Johnson, Ranking 

Member, Committee on Science, Space, and Technology, U.S. House of 

Representatives .................................................................................................... 130 

Report submitted by Representative Barry Loudermilk, Chairman, Subcommittee on Oversight, Committee on Science, Space, and Technology, 

U.S. House of Representatives ............................................................................ 132 

Slide submitted by Representative Barry Loudermilk, Chairman, Subcommittee on Oversight, Committee on Science, Space, and Technology, 

U.S. House of Representatives ............................................................................ 168 
(1) 

DEPARTMENT OF ENERGY OVERSIGHT: 

THE DOE LOAN GUARANTEE PROGRAM 

THURSDAY, MARCH 3, 2016 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ENERGY AND

SUBCOMMITTEE ON OVERSIGHT

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY, 

Washington, D.C. 

The Subcommittees met, pursuant to call, at 9:37 a.m., in Room 

2318 of the Rayburn House Office Building, Hon. Randy Weber 

[Chairman of the Subcommittee on Energy] presiding. 
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Chairman WEBER. The Subcommittees on Energy and Oversight 

will come to order. Without objection, the Chair is authorized to declare recesses of the Subcommittee at any time. 

Today’s hearing is entitled ‘‘Department of Energy Oversight: 

The DOE Loan Guarantee Program.’’ I recognize myself for five 

minutes for an opening statement. 

Good morning, and we’re glad you all showed up, so thank you 

for being here. Today, we will hear from the Department and a 

number of expert witnesses on the Department of Energy’s loan 

program, and will examine the market impact and the risk associated with federal loan guarantees for energy innovation. 

The DOE Loan Guarantee Program was established in 2005, and 

was designed to use loan guarantees to advance commercial application for innovative clean energy technology. Through the Section 

1703 program, the Department ‘‘guarantees’’ a private loan given 

to an energy company. To guarantee a loan, DOE tells private investors that if the company defaults, then the taxpayers, that’s us, 

will foot the bill. Instead of the private sector taking on risk to 

fund scale-up of new technology, the government steps in, risking 

federal dollars on the hopes for success of energy projects. DOE 

also provides direct loans to large automobile companies through 

the Advanced Technology Vehicle Manufacturing (or ATVM) program. 

As a part of the stimulus in 2009, Congress temporarily ex- panded the Loan Guarantee Program, and gave DOE another $2.4 

billion, with a B, to subsidize the costs of loan guarantees. In these 

subsidized loans, known as Section 1705 loans, companies not only 

received government backing for their loan but additional taxpayer 

dollars to pay the ‘‘credit subsidy cost’’ of the loan, or the estimated 

cost to the federal government over the lifetime of the loan. With 

political pressure to issue loans before the temporary subsidy program expired, DOE rushed loan applications, issuing some $16 billion in loans to just 26 projects. 

But both the DOE Inspector General and GAO found that DOE 

did not have the necessary expertise or the metrics to effectively 

evaluate these loans. What’s worse, it seems the loan guarantees 

for President Obama’s political allies were often fast-tracked, with 

little consideration for project merit or benefits to the taxpayer. 

Companies that received Section 1705 loans had no skin in the 

game and weren’t carefully considered. And we’re all familiar with 

the results. With high-profile defaults like the $535 million loan 

guarantee provided to Solyndra in 2011, $68 million lost when 

Abound Solar filed for bankruptcy in 2012, and $139 million lost 

from a direct loan to Fisker Automotive, the Department has lost 

over $800 million on bad loans. 

According to GAO estimates, the total cost for the current loan 

portfolio is $2.2 billion with a B, plus another $312 million in program administrative costs. These costs will increase if another loan 

defaults or if the Department issues more loan guarantees to 

projects with any financial risk. 

And unlike a private lender, there is no benefit to the taxpayer 

if the guaranteed loan is paid in full. Regular Americans take on 

the liability of the full loan; they do not see a return even if the 

project is successful and the loan is paid back. American tax dollars 
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subsidize loans for large companies with billions in available capital like Ford, Goldman Sachs, Google, GE, and Berkshire Hathaway. DOE loans and loan guarantees have been overwhelmingly 

awarded to subsidiaries of large companies or companies with highprofile private investors who jump, quite frankly, at the chance for 

government security. But if something goes wrong, these big companies aren’t stuck with the bill. The America people are stuck 

with the bill. 

While supporters of the Loan Guarantee Program often cite the 

low percentage of default loans, those numbers don’t tell the whole 

story. First, the DOE loan program is a prime example of the government trying to do something that the private sector actually 

does better. GAO has consistently criticized DOE for lacking the 

appropriate expertise, both technical and financial, to evaluate and 

monitor those loans. Private sector investment firms have this expertise, and they make investment decisions based on profit, not on 

political favors. It’s no surprise that mistakes are made when rushing loans without proper scrutiny is the main priority. And political 

pressure to issue loan guarantees will only increase as this Obama 

Administration comes to a close. 

Second, loan guarantees are only one piece of the billions of taxpayer dollars President Obama has spent on his clean energy agenda. A quick look at the loan portfolio reveals companies that benefited from countless subsidies, from tax credits and cash grants 

from other government programs, not to mention federal and state 

mandates that push utilities to enter into power purchase agreements for higher-cost energy from renewable power. 

In the case of SolarReserve’s Crescent Dunes project in Nevada, a concentrating solar power project that received a $737 million 

loan guarantee, Nevadans will pay 66 percent more per kilowatt 

hour for electricity produced by that plant. So the loan program 

risks American tax dollars, and then the tradeoff is it rewards 

Americans, Nevadans in this case, with more expensive utility bills 

when the project is finally complete. 

Finally, federal meddling in the energy market crowds out investment for innovative technologies that don’t receive loan guarantees. 

By subsidizing loans to favored technologies, DOE has driven private investors to choose projects based strictly on loan security, not 

necessarily market success or innovation. Why would a private investor take a risk on an innovative technology when they can invest in a project backed by the government? The federal government should get out of the way, focus our limited resources on research and development, and let the market drive investment for 

energy innovation. 

I do want to thank Mr. McCall and all of our witnesses for testifying to the Committee today, and we look forward to a review of 

the DOE’s loan portfolio. 

As some of our witnesses will point out today, the DOE loan programs are just one more way the Obama Administration is picking 

winners and losers in the energy market. We can’t afford to risk 

American tax dollars or increase costs for the American people to 

play favorites. The fact is, when those loans fail, like Solyndra,the 

American taxpayers are the losers. 
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[The prepared statement of Chairman Weber follows:] 
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Chairman WEBER. So at this time I’ll recognize the Ranking 

Member for his statement. 

Mr. GRAYSON. Thank you, Mr. Chairman. 

I welcome our witnesses to today’s hearing on the Department of 

Energy’s Loan Programs Office. I strongly support the efforts of the 

Loan Programs Office to commercialize and deploy innovative new 

clean energy technologies. 

The Loan Programs Office manages a large and diverse portfolio 

comprising more than $30 billion in loans, loan guarantees, and 

commitments covering more than 30 major projects across the entire United States. These projects include launching utility-scale 

solar power plants and accelerating the resurgence of the U.S. auto 

manufacturing industry. Overall, these loans and loan guarantees 

have resulted in more than $50 billion in total project investments 

in energy in the United States. 

The Loan Programs Office has maintained strong financial performance even though its mission carries some degree of risk inevitably since it includes financing innovative clean energy projects. 

The Loan Programs Office record actually compares favorably with 

private financing of conventional energy projects in the United 

States. 

Congress identified an area where the lending market wasn’t 

meeting our national needs, and we directed the Department of Energy to take on this task. By statute, this meant that the Department was allowed to take on some risk. As with any financial portfolio, gains may come with some losses, but the basis of modern 

lending is the acceptance of some level of risk to provide our economy with greater access to capital to grow. 

Despite this risk, the Loan Programs Office has had an overall 

success rate of over 90 percent. Losses to date represent only 2.27 

percent of the Department’s $34 billion loan and loan guarantee 

portfolio and less than ten percent of the $10 billion in loan loss 

reserves that Congress set aside to cover expected losses in these 

programs. In fact, interest rate payments to the federal government received to date for these loans now total more than $500 

million more than the estimated losses to the portfolio. 

This program was not a partisan issue when the Department of 

Energy was first directed to carry out these activities in the Energy 

Policy Act of 2005 and then expanded twice more in 2007 and 2009. 

The statutory authority for the two active programs, the Loan Programs Office, were crafted in bipartisan legislation and signed into 

law by a Republican President. 

I applaud the Department for its efforts to apply lessons learned 

from its few unsuccessful investments, and I look forward to learning how the loan program has evolved to better protect the taxpayers’ interests. I also look forward to hearing the GAO’s recommendations and Mr. McCall’s plans on how the program can 

continue to improve and meet our goal of a great America. 

I look forward to hearing each of your testimonies today, and I 

yield back. 

[The prepared statement of Mr. Grayson follows:] 
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Chairman WEBER. Thank you, Mr. Grayson. 

I now recognize the Chairman of the Subcommittee on Oversight, 

Mr. Loudermilk, for his opening statement. 

Mr. LOUDERMILK. Well, thank you, Mr. Chairman. And I’d like 

to thank all of our witnesses for being here today. 

Today’s hearing is an examination of the Administration’s effort 

to use taxpayer dollars to fund a massive green energy experiment. 

The 2009 stimulus directed billions of dollars toward green energy 

initiatives like the Department’s Loan Guarantee Program. President Obama said we will ‘‘harness the sun, the winds, and the soil’’ 

to fuel our cars and to run our factories. The President is referring 

to the billions of dollars spent propping up the solar industry, not 

just in loans and loan guarantees, but through subsidies, grants, 

tax credits, and federal and state renewable energy mandates. 

The resulting renewable power dotted across our nation is 

threatening the reliability of our electrical grid. To make matters 

worse, mandates like the renewable fuel standard will release more 

emissions across their lifecycles than conventional fuels do while 

increasing the cost of fuel at the pump. 

Several years ago—or several years into this experiment, it became clear these efforts have wasted vast sums of taxpayer dollars, 

and yet in August 2015 the President announced that the Department of Energy Loan Program Office would make an additional one 

billion dollars in loan guarantees available for commercial-scale 

distributed energy projects. This committee welcomes and embraces new business and technologies with open arms, but it’s important that these technologies be brought to commercial scale by 

market forces, not political whims. 

In the President’s second inauguration speech, he stated ‘‘The 

path towards sustainable energy sources will be long and sometimes difficult.’’ President Obama was referring to the five Department of Energy Loan Program Office projects that failed to the 

tune of $800 million taxpayer dollars lost. The same Loan Program 

Office failed to properly monitor the risks and financial measures 

of Solyndra, which defaulted on a $500 million loan guarantee. 

The Loan Program Office has faced strong criticism from Congress in the past. This Committee, the Energy and Commerce Committee, and the Oversight and Government Reform Committee held 

many hearings outlining concerns with the program. In one hearing, the former Loan Program Office Director, Jonathan Silver, 

faced harsh criticism from Congressman Jim Jordan for using a 

personal email account to conduct official business and intentionally circumventing the Federal Records Act. Director Silver also 

used his personal email account to lobby White House officials on 

approving loan guarantee projects based on their political impact, 

not on their financial merits. Additionally, it was commonplace 

among staff in the Loan Program Office to use personal email to 

avoid recordkeeping requirements. This is just one of the concerns 

the Oversight and Government Reform Committee highlighted in 

its report on the program, which I would like to enter into the 

record. 

Chairman WEBER. Without objection. 

[The information appears in Appendix II] 
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Mr. LOUDERMILK. It is abundantly clear that billions of taxpayer 

dollars were put at undue risk though the Loan Program Office, 

which often lacked the expertise to even evaluate loan applications. 

The DOE Inspector General described the Loan Program Office as 

‘‘attaching a garden hose to a fire hydrant.’’ Had it not been for 

Congress drawing attention to the problems with the Loan Program Office, the losses could have been far greater. 

Mr. McCall is here today to explain the improvements of the 

Loan Guarantee Program and to ensure that this type of conduct 

does not take place under his watch. I want to be clear, Mr. 

McCall, that this committee holds you accountable for the billions 

of taxpayer dollars at your discretion, as will the American people. 

I look forward to hearing how Mr. McCall plans to learn from the 

mistakes of his predecessor and prevent these problems from happening again. 

I also look forward to hearing from Dr. Rusco from the Government Accountability Office on the recommendations GAO has made 

for the Loan Program Office, particularly the outstanding recommendations that have not been implemented by the loan program. I also welcome Mr. Loris from the Heritage Foundation, who 

has testified on this matter a number of times before Congress. 

And thank you, Mr. Chairman. I yield back. 

[The prepared statement of Mr. Loudermilk follows:] 
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Chairman WEBER. Thank you, Mr. Loudermilk. 

And I’ll—before I recognize the gentleman from Virginia, they’re 

going to be calling votes pretty quick here, and what we thought 

we would do for the benefit of the Committee is we will probably 

just kind of go in shifts. Chairman Loudermilk and myself will take 

turns here, and we’ll probably keep this thing rolling, which means 

you all might be a little safer. There’ll be less of us here to ask 

those hard questions. 

I now recognize Mr. Beyer for his opening statement. 

Mr. BEYER. Thank you, Mr. Chairman. And thank you for the 

logistical plan. 

Thank you, Chairman Weber and Chairman Loudermilk, for 

holding this hearing today on the DOE loan program. 

Fundamentally, I believe the federal government has a crucial 

role to play in fostering scientific innovation in the development of 

advanced technologies. Throughout the past century, the U.S. Government has banked—backed and bankrolled a host of technical 

discoveries from global positioning satellites, semiconductors, nuclear power, and a vast array of medical and healthcare-related devices. Economist Mariana Mazzucato points out that one dozen of 

the key technologies that make the iPhone possible, from microprocessors to touch screens to lithium-ion batteries, were developed 

with the investment and support of federal agencies from the National Science Foundation to the Department of Defense to the Department of Energy. 

I believe the DOE Loan Program helps to advance the commercialization of new and emerging clean energy technologies. It encourages private investment in these key areas that would have 

been absent without federal support. Just like in the private sector, 

however, not every venture proves viable; not every investment is 

an automatic success. But not every failure is reason to dismember 

a program or withdraw from federal support of innovation that has 

been the established norm in this country for well over a century. 

Some of my friends in the Majority have acknowledge this fact, 

but investments the federal government has chosen to make in key 

technologies have helped spawn new industries, including the information revolution, and solidified America’s place as the global hub 

of scientific innovation, revolutionary discoveries, and advanced 

technological development. I believe our government should also 

strive to be a leader in developing clean energy technologies as 

well, and the DOE Loan Program helps us do just that. 

However, ensuring that federal dollars in these enterprises are 

well invested, thoughtfully managed, and efficiently distributed is 

proper and appropriate. And I look forward to hearing from Mr. 

McCall today about how the DOE Loan Program is doing just that 

and from our other witnesses, including Frank Rusco from GAO, 

about how the program can improve to be better in the future. 

The Majority has expressed particularly interest in three projects 

related to a company named Abengoa that received funding from 

the DOE Loan Program. Their particular interest in these loans is 

understandable because Abengoa, based in Spain, has recently 

begun insolvency proceedings. Fortunately, the $132 million loan 

for an Abengoa-related bioenergy project backed by a DOE loan 

guarantee has been repaid in full, repaid in full. And the other two 
21 

projects named Solana and Mojave are currently operating and repaying principal and interest on these DOE loans as scheduled. 

I look forward to Mr. McCall explaining how federal dollars have 

been protected by the structure of these loans, and I hope you can 

clear up some of the misinformation in the media about the specific 

Abengoa projects supported by the DOE Loan Program. 

I’d also point out that these three Abengoa-related loan guaran- tees combine total almost $2.8 billion, while the DOE provided 

guarantees to nearly three times as much, $8.3 billion, for construction of the new Vogtle nuclear plant in Georgia, which I very 

much support. 

And I would remind the majority that the U.S. Government has provided more than $470 billion—$2.8 billion—$470 billion in subsidies to the oil and gas industry over the past 100 years, and they 

continue to receive these today. 

Let me just emphasize, a loan guarantee is paid back to the taxpayers, very low but a subsidy is never paid back. And the Chair 

talks about picking winners and losers. We’ve been picking winners 

and losers for over a century. 

Last, I’d also like to express a particularly warm welcome to Mr. 

Gregory Kats. Mr. Kats is uniquely placed to provide a broad view 

of the DOE Loan Program and the critical need for this sort of federal investment. Hopefully, you can put—place the failures and the 

successes in the proper context. You’re a former DOE official, now 

a venture capitalist and has been on the board of directors of two 

companies which have applied for DOE loans. So I look forward to 

your description of the rigors of the DOE Loan Program from your 

perspective and in the private arena investing in clean energy technologies and companies that have helped move our country forward. 

So thank you, Mr. Chairman. I yield back. 

[The prepared statement of Mr. Beyer follows:] 
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Chairman WEBER. I thank the gentleman. 

Misinformation in the media? Gosh. According to the media, you 

would never say anything like that. 

Well, it’s a pleasure to be here today. Let me introduce our witnesses. 

Our first witness today is Mr. Mark McCall, Executive Director 

of the Loan Programs Office at the Department Of Energy. Prior 

to joining the DOE, Mr. McCall spent 17 years as Managing Director and CFO for Lime Rock Partners. You were a venture capitalist 

kind of like Mr. Kats is. Did you all swap places? And Mr. McCall 

received his bachelor’s degree from Georgetown and his law degree 

from Yale. 

Our next witness is Dr. Frank Rusco—is that right? 

[Nonverbal response.] 

Chairman WEBER. Okay. Director of Natural Resources and Environment at the Government Accountability Office. Dr. Rusco 

leads work on a broad spectrum of energy issues, including federal 

oil and gas management, DOE’s energy and R&D programs, the 

Nuclear Regulatory Commission oversight, and government-wide 

energy programs. What do you do in your spare time? Dr. Rusco 

received his master’s and Ph.D. in economics from the University 

of Washington in Seattle. 

Our third witness today is Mr. Gregory Kats, President of Capital E. Mr. Kats previously served for five years as Director of Financing for Energy Efficiency and Renewable Energy at the DOE. 

Mr. Kats received his bachelor’s degree from UNC, his MBA from 

Stanford, and his MPA from Princeton. 

Our final witness is Mr. Nicolas Loris, Herbert and Joyce Morgan Fellow for the Heritage Foundation. Before being named Morgan Fellow, Mr. Loris was a Policy Analyst specializing in energy 

and environmental issues. Mr. Loris received his master’s in economics from George Mason University and his bachelor’s degree in 

economics, finance, and political science from Albright College. 

Welcome, gentlemen. 

Mr. McCall, you’re recognized for five minutes. 

TESTIMONY OF MR. MARK MCCALL, 

EXECUTIVE DIRECTOR, 

LOAN PROGRAM OFFICE, 

U.S. DEPARTMENT OF ENERGY 

Mr. MCCALL. Chairman Smith, Subcommittee Chairmen Weber 

and Loudermilk, Ranking Members Johnson, Grayson, and Beyer, 

and members of the subcommittees, thank you for the opportunity 

to appear before you today. My name is Mark McCall, and I am 

the Executive Director of the Loan Programs Office at the Department of Energy. 

Before joining LPO last July, I spent the prior 17 years at a private equity firm focused on investing in the oil and gas sector. I 

served as the Chief Financial Officer for the firm and for the first 

12 of those 17 years as its general counsel as well. 

My investment background in the energy sector has informed my 

view of the challenges and opportunities for the United States to 

be at the cutting-edge of commercialization of new energy tech-
25 

nologies. I feel privileged to be leading LPO, and I appreciate the 

opportunity to bring my private sector experience to public service. 

LPO issues loans and loan guarantees to accelerate the commercial deployment of clean energy projects and advanced vehicle manufacturing projects in the United States. LPO’s authority to support these projects comes under two separate programs: the Title 

XVII loan program and the Advanced Technology Vehicles Manufacturing, or ATVM, loan program. 

The Title XVII program fills a gap in the marketplace for 

projects that cannot access private debt financing. Deploying innovative technologies at commercial scale for the first time is often 

a capital-intensive, long-term process that entails both technology 

and scale-up risks. Because of these risks, commercial lenders are 

often unwilling to finance these projects until they have a proven 

history of performance at commercial scale. 

Title XVII portfolio technologies currently in operation and under 

construction range from utility-scale PV and concentrating solar 

thermal to nuclear energy, including plant Vogtle in Georgia, the 

first new nuclear plant in the United States in 30 years. LPO currently has over 15 projects in operation that generate enough clean 

energy to power more than 1 million average American homes. 

The ATVM program fulfills a critical role in the marketplace by 

providing debt financing to help automakers meet fuel economy 

standards. ATVM has played and continues to play an important 

role in recovery of the American auto industry. ATVM remains 

available to both auto manufacturers and vehicle component manufacturers. 

Collectively, Title XVII and ATVM projects have supported tens 

of thousands of jobs, and every LPO transaction requires private 

investment. Equity investment from private sources must cover at 

least 20 percent of the total project costs, and borrowers frequently 

invest more. In fact, borrowers have committed over $18 billion in 

financing to their LPO-financed projects, meaning they have significant skin in the game. 

Our portfolio has now been significantly de-risked as many of 

LPO’s projects have completed construction and begun operating in 

recent years and borrowers have begun repayment of their loans. 

As of January 2016, $5.7 billion in principal and nearly $1.4 billion 

in interest on LPO loans and loan guarantees has been repaid. Because of LPO’s prudent due diligence, losses for the $32 billion 

portfolio represent just above two percent of total commitments, a 

rate I believe would be highly competitive in the private sector for 

a portfolio of this nature. 

With all of these positive results, the portfolio is clearly performing well. This good performance is no accident. Before making 

a loan or loan guarantee, LPO conducts extensive due diligence, including rigorous financial, technical, legal, environmental, and 

market analysis by DOE’s professional staff and outside advisors. 

Transactions are structured to identify and mitigate risk. 

After closing, LPO continues to use powerful monitoring tools, including strong covenants and strict milestones to control the risk 

that it assumes. LPO requires borrowers to meet clear benchmarks 

before disbursing funds and staggers disbursements to ensure borrowers are meeting their obligations. 
26 

LPO has benefited from recommendations for improvement from 

Congress, from GAO, DOE’s Inspector General, and from independent consultants such as Herb Allison. LPO has taken his recommendations seriously and implemented changes to address 

them. LPO is always seeking to improve its underwriting and monitoring and to incorporate lessons learned and ensure best practices 

to protect taxpayer interests. 

In closing, energy innovation is widely recognized as a key driver 

for the American and global economy. The United States needs to 

lead on innovation so that we develop the intellectual capital, we 

build the enduring companies, and we create good-paying jobs for 

our workers. LPO has demonstrated that we know how to prudently finance these game-changing projects, get them built and operating, and protect taxpayers at the same time. 

Thank you for allowing me to address the Committee, and I look 

forward to your questions. 

[The prepared statement of Mr. McCall follows:] 
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Chairman WEBER. Thank you, Mr. McCall. 

Dr. Rusco, you’re now recognized for five minutes. 

TESTIMONY OF DR. FRANK RUSCO, DIRECTOR, 

NATURAL RESOURCES AND ENVIRONMENT, 

GOVERNMENT ACCOUNTABILITY OFFICE 

Dr. RUSCO. Thank you. Chairmen Smith, Weber, and 

Loudermilk, Ranking Members Johnson, Grayson, and Beyer, and 

members of the subcommittees, I am pleased to be here today to 

discuss GAO’s oversight of the DOE’s Loan Programs Office and 

specifically focusing on its Loan Guarantee Program, or LGP. 

The LGP was authorized by Congress in 2007 to encourage investment in innovative energy technologies by guaranteeing loans 

for qualifying energy projects. The original authorization required 

that recipients of such loans were to pay for the cost of these loans 

up front. These upfront costs are referred to as credit subsidy costs 

and are estimated to cover the expected losses in the event of default, as well as other costs associated with financing and servicing 

the loans. 

Since 2007, GAO has performed oversight of the loan programs, 

which has resulted in 12 reports and Congressional testimonies. 

We have found that LGP generally has been behind the curve in 

developing its standard operating procedures and guidance. For example, in 2010 we found that the LGP had issued conditional commitments for loans without going through its due diligence process. 

And in 2014, we found that the Loan Program Office had not fully 

set up or staffed its loan monitoring operation despite having made 

many loans. 

We have issued 24 recommendations to improve the loan programs, and to date, DOE has implemented fully 15 or about 63 percent of those recommendations. This is below the government-wide 

implementation rate of 80 percent. 

Under Section 1705, the LGP made its first loan in 2010, and 

through September 2011, had issued 26 additional loans. All of 

these loans were made using Recovery Act money to cover the credit subsidy costs. The loans were for commercially viable and shovelready projects that were required to break ground by September 

2011 in order to qualify. These loans also came at a time when 

international financial markets were in disarray and when the U.S. 

economy was in a deep recession. As such, the LGP provided funding that would likely have not been available privately. 

The performance of these loans has been mixed. Most of the 

loans were for utility-scale solar, wind, or geothermal projects that 

got significant additional federal support from grants or tax credits 

and also benefited from state renewable portfolio standards requiring utilities to purchase power from renewable sources. These 

projects received off-take agreements guaranteeing them a revenue 

stream sufficient to pay off their loans. None of these loans has defaulted, and the expected cost of these loans has fallen slightly as 

the projects have been completed and come online. 

On the other hand, four of the loans, three for solar panel manufacturers and one energy storage project, did not have any such 
39 

guaranteed revenue streams, and of these loans, one has not yet 

received any funds from LGP while the three that did receive funds 

all defaulted, resulting in losses to the federal government of about 

$623 million. 

Overall, the losses with these defaults can be thought of in a couple of ways: first, as a proportion of the total amount of money that 

has been disbursed through 1705. The $623 million loss amounts 

to about 4.74 percent of these disbursements. Secondly, the loss 

amounts to about 43.5 percent of the expected initial losses of all 

loans made. So when the loans were made, the credit subsidy cost 

was the expected cost, and 43.5 percent of that has now been used. 

Going forward, I believe there are two types of risk facing the 

LGP program. The first is that the program has still not fully implemented all of our recommendations. They’re taking steps to do 

so but they’re not there. Therefore, they are operating without full 

guidelines, standard operating procedures, and without being fully 

staffed. This is risky behavior from the perspective of good government. 

Secondly, it is unclear that there is much demand for LGP loans 

going forward. The program was successful in making loans when 

it had Recovery Act money to pay the credit subsidy costs and 

when financial markets were generally not loaning to these types 

of projects. However, now that credit markets have recovered and 

interest rates remain relatively low by historical standards, commercial-ready projects, even if they are deemed to be innovative 

enough to qualify for an LGP loan, may find it easier and less costly to seek private funding. On the other hand, more innovative 

projects that are less able to qualify for private funding will be, by 

their very nature, more risky, and thus will have higher credit subsidy costs. 

The LGP will require such projects to pay their own credit subsidy costs upfront going forward, but it is unclear whether such 

projects will be able to do so. So time will tell if there is a strong 

demand for LGP services going forward or if the program will end 

up mostly servicing its existing portfolio. 

Thank you. I will be happy to answer any questions the Subcommittee may have. 

[The prepared statement of Dr. Rusco follows:] 
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Chairman WEBER. Thank you, Dr. Rusco. They have called votes 

but we’re going to try to get to the testimony. 

Mr. Kats, five minutes, please. 

TESTIMONY OF MR. GREGORY KATS, 

PRESIDENT, CAPITAL E 

Mr. KATS. Thank you for the opportunity to speak with you today 

on this important issue. 

I’ve had the opportunity to invest in 40 U.S. energy companies 

and to serve on the boards of two dozen firms, two of which applied 

to the DOE Loan Guarantee Program. Based on this experience, I 

can attest that the DOE application process is lengthy and rigorous. U.S. firms and projects first seek private sector financing, 

but if the projects involve new technology, new scale, or other innovation, private sector funding may be difficult or impossible to secure until a technology or project scale has been built and demonstrated. The DOE loan program allows this to happen. 

I served for five years as the Director of Financing for Energy Efficiency and Renewable Energy at the U.S. Department of Energy 

and more recently as a member of the National Academy of 

Science’s committee developing policy recommendations to 

strengthen U.S. innovation and competitiveness. 

It remains concerning that, while the United States leads in energy innovation, too often countries like China reap the benefits by 

building the commercial plants. This happens in large part because 

our competitors provide large grants and subsidized loans. The 

U.S. DOE loan program allows the United States to retain or regain global leadership in key clean energy technology areas, including solar PV and advanced vehicles. These industries matter because the countries that lead the race to supply clean power plants 

and clean vehicles will have millions of well-paid workers in these 

global industries. 

The DOE loan program outlines broad categories of energy such 

as renewable energy or nuclear. Private sector firms decide which 

technologies and which projects and whether they apply or not. The 

requirements include having third-party engineering firms undertake independent reviews, and these are determinative for DOE 

loan decisions. The DOE loan program therefore does not distort 

the market. 

The objective of the Loan Guarantee Program is to finance 

projects that cannot otherwise get commercial financing. If projects 

are very low risk, that is investment grade, they would have access 

to commercial funding, and a DOE loan guarantee would be an unattractive option. The rigorous nature, difficulty, and cost means 

that a DOE loan guarantee is pursued by U.S. firms only when 

they cannot get competitive private sector financing. 

Like other commercial lending programs, the DOE Loan Guarantee Program assumes a default rate as normal and expected. 

DOE loan guarantee default rates have proven far lower than projected by OMB and Congress. In establishing the 1705 Loan Guarantee Program, for example, OMB budget predicted and Congress 

budgeted for $2.7 billion to cover expected defaults or partial defaults, but defaults have proven to be only 1/3 of this. 
62 

In 2011 the DOE Loan Guarantee Program provided guarantees 

to the first five utility-scale solar projects. This scale of solar is 

viewed as important but new and risky by banks and therefore require DOE loan program support. Since these five DOE-supported 

utility-scale solar projects, the private sector has funded 28 utilityscale solar projects totaling some 7 gigawatts. This represents several tens of billions of dollars in private capital and tens of thousands of good and widely distributed U.S. jobs. The DOE loan program clearly unlocks and enables expanded private capital investing in clean energy. 

As of October 2015, the DOE loan program metrics were strong with principal repayment exceeding $5 billion, interest earned by 

the U.S. Government exceeding $1.2 billion, and actual and expected losses of about two percent. This reflects a very low default 

rate. And almost any experienced investor in portfolios of projects 

or for that matter almost anyone with a knowledge of investing 

would recognize this as a very successful track record. 

Defaults tend to occur early in the loan cycle, so additional de- fault in the existing loan portfolio are unlikely. With some $32 billion in loans and loan guarantees issued, interest repayment back 

to the U.S. Government will exceed $5 billion. A full accounting includes the tax impact of additional federal taxes from the jobs created. Conservatively, assuming 50,000 jobs created at an average 

salary of $50,000 indicates $2.5 billion in taxable wages plus additional corporate taxable income generating over $500 million annually in federal revenue. 

Overall, the net federal earnings from the DOE loan program will be about $10 billion, making the DOE Loan Guarantee Program very profitable for the federal government. By any reasonable 

measure, this is a notably cost-effective and successful program 

and has played a large role in allowing the United States to allow 

a global leadership position in clean and advanced energy. 

For parties interested in U.S. competitiveness, the DOE loan program has proven highly successful. Whether the United States 

wins or loses in the clean energy race matters a great deal because 

the outcome will shape future U.S. employment, economic strength, 

and the linked threats of security and climate change. 

Thank you. I’d be happy to answer any questions. 

[The prepared statement of Mr. Kats follows:] 
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Chairman WEBER. Thank you, Mr. Kats. We were going to recess 

after your testimony. 

Mr. Loris, you’re recognized for five minutes. 

TESTIMONY OF MR. NICK LORIS, 

HERBERT AND JOYCE MORGAN FELLOW, 

THOMAS A. ROE INSTITUTE FOR 

ECONOMIC POLICY STUDIES, 

HERITAGE FOUNDATION 

Mr. LORIS. Great. Chairmen Smith, Weber, Loudermilk, Ranking 

Members Grayson and Beyer, and distinguished members of the 

subcommittees, thank you for this opportunity to discuss the Department of Energy’s loan and loan guarantee programs. The views 

I express in this testimony are my own and should not be construed as representing any official position of the Heritage Foundation. 

The number of investment opportunities is broad and expansive, 

but the capital to finance them is not. This requires that choices 

be made among different investments. Through a number of financing mechanisms of their own, the federal government distorts these 

decisions at the risk of the taxpayer and to the detriment of innovation and the American economy. Quite simply, it is not the role 

of the federal government to play venture capitalist or prop up specific energy technologies. Private stakeholders should take the risk 

and reap the benefits or suffer the losses using their own money. 

My submitted written testimony examines each loan and loan 

guarantee recipient and finds several problematic themes pervasive 

throughout the portfolio. I’ll briefly address four. 

First, DOE’s loan portfolio contains obvious failures that couldn’t 

survive even with generous support from the federal government. 

Second, when subsidies influence investment decisions, companies 

divert funds to projects that have higher political rates of return 

than economic ones. This process skews the rules of free enterprise 

and creates tremendous opportunity costs. A dollar invested in a 

taxpayer-backed project could not simultaneously be invested into 

another company. 

DOE loans and loan guarantees pull capital out of the market 

and dictate who should receive it. For example, private investors 

sunk over $1 billion each into the failed companies Fisker and 

Solyndra, but much of that private financing came after DOE announced and closed the respective loan and loan guarantee. 

Private investors look at government loans as a way to substantially reduce their exposure. A project may be an economic loser 

but will attract private investment when the government covers a 

substantial portion of the downside with guaranteed loans. It essentially becomes, heads, the investor wins or, tails, the taxpayer 

loses. 

Third, it is important to stress that whether a governmentbacked investment is profitable or goes bankrupt, the policy itself 

is a failure. Proponents of DOE loan programs often argue a few 

failures are worth the risk because these success stories far outweigh bankrupt companies or ones struggling financially. But it is 

a mistake to attribute a project’s success to the loan guarantee. 
73 

Companies receive private investments all the time because their 

technology is promising and worth the risk. In these cases, especially when the government-backed loans go to more established 

companies, the DOE’s involvement partially offsets private sector 

investments that would have been made without the federal support. 

Many of the allegedly successful projects within DOE’s loan portfolio are nothing more than corporate welfare. In numerous cases, 

perhaps out of fear of more bankruptcies, DOE distributed loan 

guarantees to companies with huge market capitalizations and 

were backed by some of the largest financiers in the world, including Goldman Sachs, Berkshire Hathaway, NRG Energy, Exelon, 

General Electric, Google, among others. These are companies that 

do not need the taxpayers’ help. 

And fourth, the business model companies built for these projects 

in the loan portfolio rely on many subsidies. For example, many 

companies collected cash grants from the Treasury Department as 

part of the 2009 stimulus bill. Businesses can take advantage of 

state renewable portfolio standards that effectively guarantees a 

customer for their product, which they can sell at a premium. They 

also benefit from federal tax credits, state subsidies, and other 

DOE spending programs. A project artificially constructed by subsidies should not be labeled a success. 

And what is most perverse is that these subsidies significantly 

obstruct the long-term success of the very technologies they intend 

to promote. Instead of relying on a process that rewards competition and innovation, subsidies prevent a company from recognizing 

the true price point at which they will be economically viable. Sure, 

you’ll end up with a handful of subsidized wind farms and maybe 

a few nuclear power plants, but government lending handouts will 

stunt the long-term growth and trap valuable resources in unproductive places. 

And to be clear, there’s absolutely nothing wrong with more renewable energy or alternative fuels replacing conventional sources 

of energy, but that shift will be more effective and sustainable 

when driven by market forces, not forced through with government 

playing favorites. 

The fact of the matter is energy is one of the last sectors of the 

economy that needs help from the federal government. When left 

unencumbered, the laws of supply and demand work quite well. 

The demand for energy to light this room, to heat our homes, and 

to fuel our cars, among many other things, isn’t going anywhere 

anytime soon. In fact, the global energy market is a multi-trillion 

dollar opportunity. So any successful technology won’t need help 

from the federal government or be created by any federal government program. 

The prophet incentive reward groundbreaking ideas. Entering 

into this market is not a problem of the so-called valley of death 

where good ideas are unable to attract substantial investment. It 

is a valley of wealth waiting to be had. Private actors will make 

these investments if it is in their best interest to do so, but rather 

than privatizing the gains and socializing the losses, as DOE loan 

programs do, risk and reward should be properly aligned. 
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In conclusion, the market, not the federal government, is much 

better at determining how to allocate resources to meet consumer 

demand. The government’s interference in capital markets significantly distorts that process. 

Thank you, and I look forward to your questions. 

[The prepared statement of Mr. Loris follows:] 
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Chairman WEBER. Thank you, Mr. Loris. We will now recess and 

be back after the last vote. 

[Recess.] 

Chairman WEBER. Okay. We are going to reconvene this hearing. 

Thank you. Welcome back. I appreciate the Ranking Member finally showing up. 

And the Chair now—— 

Mr. GRAYSON. Right back at you. 

Chairman WEBER. And the Chair now recognizes himself for five 

minutes. 

Dr. Rusco and Mr. McCall, we’ll start with you, Mr. McCall. We’ll 

go this way. In your prepared—well, actually, I’m sorry, you’re 

going to have the follow-up to this. Dr. Rusco, so I’ll start with you. 

In your prepared testimony you outline the number of recommendations made by the GAO to the DOE to improve the loan 

guarantee and direct loan programs. 

You also note the DOE has only implemented 15 of those 24 recommendations made by the GAO, which I did the calculations on 

that. Thank God for iPhone and the little calculators. That’s a 62.5 

percent rate and so we would call that failing in most classes that 

I grew up in. In your opinion, why has the DOE neglected to implement all of those recommendations? 

Dr. RUSCO. I think it’s a mixed answer. So some they didn’t concur with. So we felt in one report that they needed to implement 

a timetable and a consolidated system for tracking applications because applicants were telling us that they, you know, they would 

call and they wouldn’t get information they needed. 

DOE didn’t—did not concur with that, so they’re just—they just 

disagree with us. There are others that they agreed with and 

they’ve taken some steps to implement and, for example, in 2014 

we said that they needed to staff key monitoring and risk management positions, and they needed a complete monitoring and risk 

management policies and procedures. They are taking steps to do 

that and they have made some progress, but we don’t close it until 

we think they’ve made enough progress or shown sufficient staying 

power to actually get there. So once they get there, we’ll close those 

if they—— 

Chairman WEBER. You actually said in another part of your testimony that 2010 that there was commitments added before the 

DOE did its due diligence on those loans. Was that one of the recommendations to do their due diligence before making those commitments? 

Dr. RUSCO. We—yes, we recommended that they finish standing 

up their due diligence process and that, yes, that—it’s actually— 

we didn’t have to recommend that they do it other than it was 

their guidance that they should do it. 

Chairman WEBER. Right. 

Dr. RUSCO. So we said follow your guidance. 

Chairman WEBER. I got you. 

And, Mr. McCall, now your follow-up, it seems like according to 

the information we have that DOE has actually told committee 

staff on several occasions that the DOE has implemented all of the 

GAO’s recommendations. Is that true? 
101 

Mr. MCCALL. Thank you for your question, Chairman Weber. 

Yes, we track—as you know, we’ve received many recommendations and a lot of scrutiny in the program, so we’ve received recommendations from the GAO, from the IG, from Congress, and we 

have a system where we’re tracking the recommendations that 

we’ve received. And we believe that we have addressed each one of 

the recommendations that we’ve received. As Dr. Rusco pointed 

out, we haven’t concurred with each one of them, but we have tried 

to take on board the intent of them and it—— 

Chairman WEBER. Well, how do you implement something if you 

don’t concur with it? You said you—— 

Mr. MCCALL. Well, so for certain things if we really don’t agree 

with it and we’re just not going to do it, then that might be one, 

but there are some where maybe it’s just not practical to do it in 

a way that was recommended but we’re still trying to implement 

the intent of the provision. 

And I would say, you know, it’s actually been very helpful to the 

program to have these recommendations, and I feel like we’ve come 

a long way. And I think Dr. Rusco, you know, pointed out that even 

on some of the ones that are not listed as closed out we have made 

significant progress. So one of them was policies and procedures. I 

mean, we now have policies and procedures for our risk group—— 

Chairman WEBER. Well, that’s—— 

Mr. MCCALL. —and for our portfolio monitoring group. 

Chairman WEBER. I’m glad to hear that. Would you agree that 

a 62.5 percent grade as it were, 15 out of the 24, is a failing rate? 

Mr. MCCALL. I would ask you to look at the rate of recommendations that have been closed out and fully implemented plus the 

ones that we’ve made significant progress on because I think that 

would be a better and fairer—— 

Chairman WEBER. And perhaps they need to be rank ordered in 

priority. I mean, I’ll give you that. 

Mr. MCCALL. Thank you. 

Chairman WEBER. Mr. Kats, you state in your opening testimony 

that ‘‘the objective of a loan guarantee program is to finance 

projects that cannot otherwise get commercial financing. If energy 

projects were very low risk, investment grade, they would have access to commercial funding and a DOE loan guarantee would be an 

unattractive option.’’ That’s what you state in your testimony. 

Now, we heard from Mr. McCall in his testimony about how basically the program is far less risky than it actually appears and that 

the DOE recently issued a loan guarantee with a zero credit subsidy cost. That means there is no—zero risk subsidy credit cost— 

no inherent risk of the project defaulting. Is that true? 

Mr. KATS. I don’t know the specifics of all of the loan offerings. 

I would just say that the way that the private sector and the financial community looks at this loan program is that it is a secondchoice option. And so in the 40 or so energy companies that we invested in, they try and get private sector financing. When those are 

unavailable because the technology has risk attributes like it’s a 

new technology or it’s a different scale, they will go to the DOE 

loan program even though that is a very burdensome and rigorous 

process. It typically is a longer process in the private sector. So 
102 

some people have suggested that the loan program substitutes for 

private capital. 

What the financial markets and businesses and industry would 

tell you is that it doesn’t substitute for it. What it actually does is 

unlocks and enables private sector financing. 

Chairman WEBER. Well, but it is backed up by taxpayers. The 

idea of zero risk really seems like a contradiction to me. I mean, 

you wouldn’t need the program if there was zero risk in a company 

defaulting. Is the purpose of the loan program to provide financing 

to technologically advanced, risky projects that could otherwise not 

receive financing or is the purpose of the loan program to provide 

financing to safe projects with actually have what’s been labeled as 

zero risk of defaulting? How can that be? Does it—is that a contradiction? 

Mr. KATS. So two of the companies that we invested in actually 

applied for DOE loan guarantees, and those are a cumbersome 

process. It’s very much a second choice for U.S. energy companies 

that want to get funding. In each case where funding occurs that 

we’ve looked at, that enables private sector financing. 

And if you look at this program relative to China which, for ex- ample, in 2010 provided $32 billion in very low-cost loans just to 

Chinese solar, that cost the federal government of China quite a 

lot. 

In contrast, the DOE loan guarantee, because of its low default 

rate and because it generates additional tax revenue to the government is actually a profit center. And so the way the private sector 

in the United States and the finance sector thinks about the loan 

program is that it achieves a policy purpose of supporting and enabling private financing at the same time as generating profitability 

to the U.S. Government. That’s why the U.S. energy industry and 

finance industry views this as a big success. 

Chairman WEBER. Would you agree with that, Mr. Loris? You 

view that as a big success? 

Mr. LORIS. I would, and I don’t think the Department of Energy 

has any business being a profit center. And when you look at 

Southern Company’s Vogtle nuclear power plants, and here’s a 

company that said they didn’t need the loan guarantee, they went 

forward with it anyway—— 

Chairman WEBER. I’m aware of it. 

Mr. LORIS. —low risk, it’s a—I mean, when you have these huge 

companies with huge market capitalizations, you have to wonder 

why the federal government is involved in these projects at all. 

Chairman WEBER. Okay. Well, I’m out of time so I’m going to 

yield to the Ranking Member. 

Mr. GRAYSON. Thank you. Mr. McCall and Mr. Kats, you’ve had 

some major shade thrown at you this morning, I wanted to give 

you a chance to respond. One of my colleagues said earlier that the 

government is trying to do something that the private sector does 

better. Mr. McCall, is that really true or is that not so true? 

Mr. MCCALL. Thank you for your question, Ranking Member 

Grayson. Our sense is that the Congress actually recognized a gap 

in the marketplace. There is a gap in terms of what commercial 

lenders are willing to finance, and in particular, when you combine 

innovative technology and scale up—so we’re actually typically de-
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ploying new technology at the point in time where it’s scaling up 

to commercial scale, you’re simply going to find a case where commercial lenders are not going to finance those first few projects. 

But after it’s been demonstrated, then they step into that market 

and are willing to carry it forward. So our sense is that we are absolutely filling a gap in the marketplace, not competing with private lenders. 

Mr. GRAYSON. All right. Now, you were derided for offering loans 

on the basis of political favors rather than on the basis of profit. 

Is that a fair rap or not? 

Mr. MCCALL. It is not. We follow a very rigorous due diligence 

process, an application process that we follow in each case, and 

that diligence process includes technical, market, legal, environmental due diligence on—and contract due diligence. And we engage in many different ways of structuring the projects in order to 

protect the taxpayer, and so I think that we—I think the performance is in on the program and it shows that we’ve actually done 

a very good job of that. 

Mr. GRAYSON. Mr. Kats, have you seen loans issued on the basis 

of ‘‘political favors’’? 

Mr. KATS. I haven’t looked closely at every loan program. I can 

just talk about the way the VC community looks at it and the companies that apply, which is that the loan program lays out very 

broad requests in areas as broad as nuclear power and renewable 

energy. Private sector companies then make a decision to apply or 

not. Private sector companies decide what projects or companies to 

apply, whether they apply for it, when they apply for it, so that decision is all on the basis of the private sector. 

I think one of the things that makes the application process challenging is that much of the review process is outsourced to very 

well-known third-party engineering firms that undertake independent reviews of each application. Those third-party reviews are 

determinative of whether or not the loan goes forward. So the process as we’ve seen it from the private and finance sector is really 

about the private sector making the decision to apply or not, and 

third-party engineering firms and others going through the process 

of doing an independent review that ultimately determines whether 

that loan gets made. So we don’t see any politics in this. 

I will say, though, with respect to politics that this has traditionally received bipartisan support. Republican Governor of Iowa, 

Terry Branstad, writing in the Wall Street Journal wrote ‘‘the wind 

power industry is an American success story that’s helping to build 

our manufacturing base, create jobs, lower energy costs, and 

strengthen energy security.’’ 

This has been a bipartisan-supported issue until recently, and 

it’s worrying, I think, in the private sector that this—the value and 

importance of the clean energy transition is not recognized in a bipartisan way as a supportive of U.S. jobs, U.S. finance, and U.S. 

competitiveness. 

Mr. GRAYSON. Mr. McCall, another aspersion cast in your general 

direction is the idea that the Obama Administration is picking winners and losers in the energy market. What about that? 

Mr. MCCALL. Well, again, as Mr. Kats pointed out, I mean, we 

are responding to applications from private sector parties. So we 
104 

are not actually actively, you know, picking winners and losers. 

We’re simply responding to the applications that come in and evaluating them using a very rigorous and lengthy process, as was 

pointed out, and involving many third-party experts in terms of 

making that evaluation. So I wouldn’t characterize it as picking 

winners and losers. 

Mr. GRAYSON. Well, you’ve been accused today of propping up the 

solar industry. What about that? 

Mr. MCCALL. Well, so we’re very proud of the role that we played 

in particularly launching the utility-scale PV market in the United 

States. So, as you may know, prior to 2010 there were actually no 

utility-scale PV facilities in the United States and LPO stepped in 

and financed the first five of them. And then we—after having 

proven the technology, we stepped back from that market and the 

private sector has now taken over and financed 28 facilities of that 

nature. 

And one of the things that we try to do is bring in private sector 

lenders into our deal so that they get comfortable with the structure and they see the technology, and in that case we were able 

to do that. And one of the later projects, we brought in 14 commercial lenders as part of a syndicate, and that’s the group that is now 

out financing those types of projects. So we feel like we’ve been 

able to successfully launch that industry, and we’ve seen costs 

come down in that industry as a result of the early projects. 

Mr. GRAYSON. Mr. Kats, you alluded to what’s going on in other 

countries. In other countries is there any government involvement 

in the energy industry, for instance, oh, state-owned oil industries 

and so on? 

Mr. KATS. There is. One of the members mentioned—Mr. Beyer, 

I think—the $470 billion in subsidies that mostly have gone to fossil fuels. I mean, other countries are like that. In the last 15 years 

the European and Asian market intervention to support clean energy has been very, very large, tens of billions of dollars, because 

they view this as the energy strategy of the future. It makes their 

economies more competitive when they’re spending less on energy, 

when there’s less pollution, when there’s lower health costs. They 

view this as strategically important. And I think part of the traditional U.S. Congressional bipartisan support for transition to clean 

energy has been because of this competitiveness issue. 

I was part of a National Academy of Sciences—they came out 

with a book that is a good read if you have problems sleeping at 

night called ‘‘Rising to the Challenge: U.S. Innovation Policy.’’ And 

it really talks about the importance of this clean energy transition 

to U.S. competitiveness. Other countries recognize that. They put 

a lot of subsidies into supporting clean energy. 

And again, what’s remarkable about the DOE loan program is, 

despite a few problems like Solyndra, the success rate, as Mr. 

Rusco pointed out, the losses are less than half projected. And 

when you add in the full benefits back to the U.S. Government, 

this is a program that makes the U.S. Government money, unlike 

Chinese support, which has cost Chinese taxpayers a lot of money. 

So it’s been a terrific combination of leveraging the market, 

leveraging the private sector, and it doing it in a way that U.S. fi-
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nancial firms find very helpful and that leverages and unlocks a lot 

of U.S. capital, private capital. 

Mr. GRAYSON. Thank you. I’ll yield back. 

Chairman WEBER. I thank the gentleman. 

I would note that, you know, most of the majority would probably 

agree we’re not in favor of governments taking over the oil companies either, much less clean energy companies or the healthcare industry for that matter. 

So the Chair now recognizes Mr. Loudermilk. 

Mr. LOUDERMILK. Thank you, Mr. Chairman. 

Before I start my questioning, Mr. Loris, could you take 30 seconds and comment on the past politics in the loan program? 

Mr. LORIS. Yes, sure. I mean, if you look at what companies and 

what the DOE does, you know, this isn’t objectively deciding among 

companies. This is picking winners and losers. It’s exactly what the 

program does. And to pad the stats to give loans to companies that 

again have these huge multibillion dollar market capitalizations, 

it’s absolutely playing favoritism and making this program look 

better than it is and look necessary when it’s simply not. 

Mr. LOUDERMILK. Okay. I thank you. 

Mr. McCall, the IG investigated and issued a report last August 

regarding the much-talked and heard-about Solyndra loan guarantee. The IG found that the Department of Energy officials repeatedly failed to verify claims made by—about performance and 

sales provide by Solyndra executives. Did the IG make any recommendations in their report to you? 

Mr. MCCALL. I thank you for your question, Chairman 

Loudermilk, and of course we have taken on board the report of the 

Inspector General. And I would note that the Inspector General 

also noted in that report that the actions of the Solyndra officials 

were at the heart of the matter, and they effectively undermined 

the Department’s efforts to manage the loan guarantee process. 

And they also stated that the actions of certain Solyndra officials 

were at best reckless and irresponsible or at worst an orchestrated 

effort to knowingly and intentionally deceive and mislead the Department. 

Having said that, we are aware of the Inspector General’s comments on some of the things that the Department could have done 

better nonetheless, and we have tried very diligently to improve 

our processes. And I think you can see that in the later performance of the deals that came after that. 

Mr. LOUDERMILK. Well, I understand Solyndra is a bad player, 

and I don’t think they’re the only ones out there. So we’re going 

to be dealing with others. But have—did the IG make any recommendations to you on how to fix this process? And have you implemented any of those? 

Mr. MCCALL. So the IG in that particular report I do not believe 

they made recommendations in that report, although they have 

made recommendations to us in the past that we have taken on 

board and we have done many things to try to improve our processes and procedures. And I come from the private sector and I 

want to give you some assurance that I’ve actually been very impressed with what I’ve seen coming—I started about 7 months ago 

and so, you know, quite a long time after the events that we’re re-
106 

ferring to have transpired and am now in a position to lead the 

program sort of now in its current state. 

And what I can tell you is that the staff is very professional, very 

capable, very talented and hardworking and has a lot of experience, 

including private sector experience in terms of how to structure 

these deals and how to diligence them and how to monitor them. 

Mr. LOUDERMILK. Are you working to make this program more 

transparent, more cooperative with Congress? 

Mr. MCCALL. Absolutely. Yes, we have. 

Mr. LOUDERMILK. And the IG’s findings, of course, with Solyndra 

is, as you have even brought out in your statement there, very 

troubling to me and this committee. But what’s more troubling is 

this committee wrote the Department of Energy asking for documents regarding the IG’s findings, and this was in September of 

last year, of 2015. Are you aware of the productions made by DOE 

in response to the Committee’s request, what was provided to this 

committee? 

Mr. MCCALL. I believe we responded to that letter, Mr. Chairman, but I’m not specifically aware of the details. 

Mr. LOUDERMILK. Okay. So you weren’t aware that you provided 

zero of the communications that we requested, none? 

Mr. MCCALL. Well, we responded to the letter so we responded 

to the inquiries in that letter, and if there’s anything that was— 

that you feel that we still need to—— 

Mr. LOUDERMILK. Okay. 

Mr. MCCALL. —follow up with, we’d be happy to do that. 

Mr. LOUDERMILK. Well, you didn’t provide any of the documents 

that we asked for, and that’s completely inadequate. 

Would you commit to this committee today that you will provide 

all the communications we requested in that September 4, 2015, 

letter? 

Mr. MCCALL. We—I will certainly go back with my staff and look 

at the—look at that request, and we will continue to be responsive 

to the Committee. 

Mr. LOUDERMILK. But you’re not willing to commit to give us 

what we asked for? 

Mr. MCCALL. Well, we will review the request and see what is 

responsive to that. 

Mr. LOUDERMILK. Does Congress have an oversight authority—— 

Mr. MCCALL. Absolutely. 

Mr. LOUDERMILK. —over agencies? 

Mr. MCCALL. Absolutely. And we appreciate—— 

Mr. LOUDERMILK. Is not the right of the American people to 

know what’s being done with their taxpayer dollars? 

Mr. MCCALL. We certainly recognize and appreciate the role of 

the Committee in terms of oversight and in terms of ensuring accountability to the American taxpayers so—— 

Mr. LOUDERMILK. But yet you’re not willing—— 

Mr. MCCALL. —there’s no question—— 

Mr. LOUDERMILK. —to commit to get us the communications that 

we asked for out of our authority of having oversight and investigatory authority the Constitution gives this body on behalf of the 

American people? You’re not willing to commit to us that you will 

get us precisely what we’re asking for? 
107 

Mr. MCCALL. I am willing to commit to continuing to be responsive to the Committee and its requests. 

Mr. LOUDERMILK. Okay. I think we got our answer. 

Can I get another minute, Mr. Chairman? 

Chairman WEBER. Yes, sir. 

Mr. LOUDERMILK. Okay. Thank you. 

Mr. McCall, the Committee wrote the Department of Energy again in December of 2015 regarding Abengoa Solar and the $1.45 

billion taxpayer-funded loan guarantees your office provided in 

2010. Are you aware of that letter? 

Mr. MCCALL. Yes, I am. 

Mr. LOUDERMILK. Are you aware that the Department of Energy 

has provided the Committee zero requested communications regarding that? 

Mr. MCCALL. My impression was that we had actually made two 

productions to the Committee since the time of that letter that 

have been responsive to the Committee. 

Mr. LOUDERMILK. You did provide two productions but none of 

the communications that we asked for. Again, will you commit to 

get that to the Committee? 

Mr. MCCALL. I will commit to the—to continuing to be responsive 

to the Committee. 

Mr. LOUDERMILK. Is there a reason why we’re not getting the 

data we’re asking for? 

Mr. MCCALL. I—— 

Mr. GRAYSON. Will the gentleman yield for a question? What 

does the gentleman mean by communications and data? I’m confused at this point. 

Mr. LOUDERMILK. Emails. Emails seem to be a very popular 

thing these days. 

Chairman WEBER. Well, let’s hang on. The gentleman didn’t yield 

just yet. Hang on. 

Mr. LOUDERMILK. Okay. I will yield to his question and then I’ll 

yield to my answer immediately. We’re talking about emails, which 

is—it has been brought up again, but I reclaim my time, Mr. Chairman. 

The Abengoa Solar troubles were a shock to me and of course 

many of my colleagues on this committee. The Loan Program Office, which you’re a head of, maintains a risk list, doesn’t not? 

Mr. MCCALL. So we—thank you for your question, Chairman 

Loudermilk. And we have all of the monitoring tools that you 

would expect a program of ours in order to monitor each one of our 

projects. 

Mr. LOUDERMILK. Can you briefly explain this risk list or this 

monitoring tool? 

Mr. MCCALL. Well, sir, the Allison report recommended that we 

create certain ways to—early warning if you will reports or mechanisms so that we could track emerging risks in the portfolio. And 

so we do that through a number of tools, and we continue to monitor each one of our transactions in a very diligent and prudent 

manner, and we have—you know, for instance, we have site visits 

to each one of the projects while they’re under construction, and we 

do quite—we devote quite a bit of effort to monitoring the portfolio 

for risk. 
108 

Mr. LOUDERMILK. And again, this is—this risk list is one of the 

things this committee has asked for but yet has not been provided. 

So I know I’m running—I appreciate the Chairman’s—giving me 

a little additional time. I do have more questions, but, Mr. Chairman, I think we know what the answer will be so I’ll yield back. 

Chairman WEBER. I thank the gentleman. 

Mr. Beyer, you’re up. 

Mr. BEYER. Thank you, Mr. Chairman. 

I’d like to thank both Chairman Loudermilk, Chairman Weber 

for pulling this together and in the spirit of bipartisanship point 

out something I didn’t know about from the GAO report that the 

Loan Guarantee Program was initiated by a Republican Congress 

and a Republican President in 2005. 

Chairman WEBER. The gentleman’s time is expired. 

Mr. BEYER. And was expanded in 2007 with a Democratic Congress and a Republican President. So we’re—this is something we 

want to work together on. 

You know, according to Fitch ratings, U.S. corporate default rate 

is 2.9 percent, and the energy sector tends to have an even higher 

default rate, which is climbing to 4.8 percent in recent months. And 

if you’ll look at venture capital portfolios, the default rate is even 

worse. The National Venture Capital Association estimates that 25 

to 30 percent of venture-backed businesses fail, which seems to be 

conservative by most estimates. 

And I know this is not quite apples to apples, but I noticed that 

your loan program is 2.7 percent failure rate. I have made tens of 

thousands of auto purchase loans in the last 42 years. As my dad 

says, we never made a bad loan, they just go bad later. 

So can you—Mr. McCall, based on your experience, would you 

agree with this assessment that the loans that we’re making—that 

we’re guaranteeing on behalf of the federal government actually 

are fairly low risk compared to what’s happening in the real world, 

the private sector? 

Mr. MCCALL. Thank you for your question, Ranking Member 

Beyer. And I would certainly say that the projects that we have financed have carried technology risk and scale-up risk, and so I 

wouldn’t say that they haven’t been—they haven’t entailed a significant amount of risk at the time that we were financing them, 

but what I would point to is the rigorous due diligence that we’ve 

done on the projects and the processes and procedures that we 

have to monitor them, including the contractual stipulations that 

we put into the agreements whereby the project sponsors have to 

provide information and have to provide access to the project so 

that we can diligently monitor them. 

So I think that the good performance of the portfolio that you’re 

pointing out and particularly in comparison to other private sector 

portfolios is really due to the fact of the policies and procedures 

and the people that we have within our organization that carry out 

that work. 

Mr. BEYER. Thank you, Mr. McCall. 

It’s been pointed out—we’ve had a lot of questioning about the 

loan program’s ability to follow through with all of the GAO recommendations, trying to tighten it up. Do your folks meet regularly 
109 

with GAO to make sure you are making progress on their recommendations? 

Mr. MCCALL. And again, thank you for that question. The GAO 

routinely and regularly comes and does its work with us, and it has 

been very helpful to us to have their recommendations. And so we 

continue to track the recommendations that have been made and 

continue to address them and progress them. And so it’s our intention to get as many of those fully implemented as possible. 

Mr. BEYER. I’m just trying to put myself in your shoes if I were 

you. Looking forward to my next Congressional hearing before the 

Science, Space, and Technology Committee, I’d love to be able to 

say I’ve met all the GAO recommendations, at least the ones we 

agree with, and I’ve produced all the documents that the Committee has asked for. 

So why—I know you—everyone’s been trying to be careful here. 

And we’ve been trying to characterize you as unresponsive for not 

turning over the documents. What are the issues around emails 

that would make it inappropriate, illegal, reluctant, whatever to 

turn these over to the Committee? 

Mr. MCCALL. And thank you for that question. And in response 

to the Abengoa inquiry, we’ve responded to the letters that we’ve 

received from the Committee, and we’ve made it clear that we actually did not loan any money to Abengoa SA, which is the company 

that’s referred to in the letter. So we actually don’t have exposure 

to that company. And so, you know, we have responded, and we actually—before we received that letter, we had reached out to the 

Committee in a proactive way to try to clarify the confusion in the 

marketplace because there had been some reports in media that 

the loan program had extended loans to this company that was in 

financial trouble. 

And we tried to reach out to the committee proactively to make 

sure that the members were aware that that’s not actually the 

case, that our loans have been made to entities that are actually 

owned by a different company now and that they are in project finance structures and that we’re not concerned about the viability 

of those loans in any way. 

And so, you know, we feel that we have been responsive to the 

important thrust of those letters, and we will continue to go 

through and try to be—continue to be responsive. 

Mr. BEYER. Great. Thank you very much. Mr.—can I put this 

slide in for one sec? 

[Slide.] 

Mr. BEYER. Mr. Chairman, can I request an extra 60 seconds to 

Mr. Kats? 

Chairman WEBER. You bet. 

Mr. BEYER. Thank you, sir. 

Mr. Kats, this is a chart of venture funds loaned by industry, the 

fourth quarter, and we see IT is at the very top and about the fifth 

or sixth over industrial energy, only 7—.7 billion. Obviously, it’s a 

huge difference in capital investment infrastructure and the like. 

Is—do you see—is this part of the whole picture about why we 

need the loan program in terms of making investments in energy? 

Mr. KATS. That’s a great question. Most of our—I would say 

many of our big banks, including Citi and J.P. Morgan, in the last 
110 

year or two have done studies looking at the projected investment 

required for transition to clean energy, which scientists tell us we 

need to do to limit climate change and which businesses tell us we 

need to do in order to stay competitive with other countries. Current investment in clean energy is much less than it needs to be. 

It’s ramped up. It’s been a fivefold increase from a decade ago, but 

it needs to ramp up further. 

That scale-up process necessarily involves risks and new technologies that are applying it at scale have not been applied before. 

And this is where the DOE Loan Guarantee Program is so helpful 

because it allows those scale-up risks to be addressed in a way that 

allows the private sector to make the choice about what projects to 

apply to have a rigorous third-party review and screen those and 

make recommendations on those. 

Once those projects have been demonstrated at commercial scale, 

the private sector, our big banks, our financial firms can step in 

and finance the expansion to this scale that Citi, that J.P. Morgan, 

that Morgan Stanley, and others in the private sector say that we 

need to invest to get through this transition. So my hope is five 

years from now when you put that chart up the private sector investment will be a much larger number. 

Mr. BEYER. Thank you, Mr. Chairman. 

Chairman WEBER. I thank the gentleman. The Chair now recognizes Mr. Rohrabacher. 

Mr. ROHRABACHER. A couple observations. First of all, earlier on 

it was mentioned about trying to compare subsidies to the oil industry and the gas industry. The Republicans I know are against 

any subsidies to oil and gas or anybody else. We believe that, 

again, picking winners and losers or subsidizing corporations—we 

call it crony capitalism—it’s a major issue in our party and we are 

basically against it. 

I think that basically people, however, have been calling subsidies what is instead Republican position of permitting people to 

keep more of their own money as if that’s a subsidy. I think that 

the numbers that are being bandied around are based on that 

versus taking money from someone else and giving it to a large corporate entity. That is a subsidy. Perhaps permitting people to keep 

more of their own money is not. That’s one observation. 

And the other observation is, with all due respect, Mr. McCall, 

it is disconcerting that the Executive Director of a major government program is unwilling to commit, to actually commit to providing all the documents that an investigative committee of Congress has requested and that the answer is being given in using 

weasel words is what we used to call in the press. That is not 

more—it’s more than unbecoming. It’s depressing to see that someone of your stature will take that approach instead of just saying 

yes, we will provide all the documents to an investigative body of 

Congress that they have requested. And this is—to me it’s unacceptable. 

I think that, however, this reflects quite often the things we have 

faced from this Administration. Any other Administration, I would 

think, if they were being actually serious and they were being— 

wanted to reach out to Congress and goodwill would admonish 
111 

someone for not saying that they were going to be fully cooperating 

with every document that’s been requested. 

With that, let me go to a little bit about the basic philosophy of 

this program itself. And, Mr. Kats, I—who is actually making the 

loan? Where does the money come from when someone gets a loan 

guarantee from this agency? 

Mr. KATS. Good question, sir. So, as I understand it, in the companies that we’ve been involved in that have applied for the loan, 

there’s broad categories such as nuclear, renewables. The private 

sector companies try to find private sector financing—— 

Mr. ROHRABACHER. Right. 

Mr. KATS. —are not able to do so. They then apply to the Loan 

Guarantee Program, which uses third-party engineering firms to 

screen it. And if they’re successful—and one of the applications we 

made actually was not successful to the program, which reflects, we 

think, a lot of rigor, then the loan guarantee is made available, the 

project is built, it’s demonstrated a new scale, and then the private 

sector funding takes over. 

Mr. ROHRABACHER. Who is actually giving the money? 

Mr. KATS. So the DOE loan guarantee makes available a credit 

of the federal government in a way that makes this program selffinancing. So what I think the private sector would say to you, sir, 

and what industry would say to you is that this program both 

achieves a public policy purpose of making the United States more 

competitive—— 

Mr. ROHRABACHER. I understand, but whose—who lends the 

money? 

Mr. KATS. —and creates jobs, and yet it’s self-financing. 

Mr. ROHRABACHER. Let me—— 

Mr. KATS. So the money that—— 

Mr. ROHRABACHER. Okay. So does that mean the—— 

Mr. KATS. Are you asking a question—— 

Mr. ROHRABACHER. federal government is writing the check to 

the company? 

Mr. KATS. The U.S. Government in this self-financing program— 

so there’s zero net cost to the federal government of this program. 

Mr. ROHRABACHER. I—you’re not—I’m trying to get specific. Who 

actually gives the money to the company that is now able to build 

their projects? 

Mr. KATS. So the loan program makes available risk support to 

the company to allow construction of projects in order to unlock 

and leverage private capital. That gets returned back—— 

Mr. ROHRABACHER. Who is the—— 

Mr. KATS. —to the government—— 

Mr. ROHRABACHER. Okay. Now—— 

Mr. KATS. —in the form of interest—— 

Mr. ROHRABACHER. Who actually gives the company the money? 

Mr. KATS. So this—— 

Mr. ROHRABACHER. Is it a private bank? Is it a Goldman Sachs? 

Is it—who gives them the check that says, okay, you now have this 

money and you can move forward with your project? 

Mr. KATS. Let me turn it over to Mr. McCall to answer that if 

I may. 

Mr. ROHRABACHER. Okay. 
112 

Mr. MCCALL. So thank you for the question. 

Mr. ROHRABACHER. Please hurry. They just called votes again. 

Mr. MCCALL. Okay. The answer is it could be either private sector banks, so if the applicant has—is working with its own bank 

but that bank was unwilling to finance it without a guarantee from 

the government, we can issue the guaranteed to that third-party 

bank or we can issue a guaranteed to the federal financing bank. 

Mr. ROHRABACHER. Okay. But there are—it’s not coming from— 

you don’t get a—give them a check to that company? 

Mr. MCCALL. Well, the Department of Energy doesn’t. 

Mr. ROHRABACHER. There’s no federal checkbook that’s writing 

out this? It’s going to actually—the only federal check would go to 

a bank or a lending institution that is a profit-making lending institution in most cases I would imagine, so we have taken a profitmaking—Goldman Sachs or whoever—and we have told them that 

they will have a guarantee so there will be no risk that they will 

lose their money. And then they give it to the company who needed 

the investment? Is that what it is? 

Mr. MCCALL. Well, so we would issue the guarantee to the bank. 

I believe in the case of—if it’s a—— 

Mr. ROHRABACHER. Right. 

Mr. MCCALL. If it’s a third-party bank, I think that we’re limited 

to only guaranteeing 80 percent of the loan, so I think the bank 

would actually have some of its own capital that—— 

Chairman WEBER. I’m going to ask the gentleman—— 

Mr. ROHRABACHER. But just one point here, and that’s—— 

Chairman WEBER. Hurry. 

Mr. ROHRABACHER. —if we are taking away the risk for people 

who—and they are making a profit on that loan in a private company, this seems like—boy, that is again picking winners and losers as well who gets to provide a risk-free loan because you’re going 

to make a certain amount of profit on it no matter what. So that 

doesn’t seem fair as well. 

Thank you very much, Mr. Chairman. 

Chairman WEBER. I thank the gentleman. 

Mr. Knight, you’re recognized for five minutes. 

Mr. KNIGHT. I’ll be quick, Mr. Chairman. 

In 2015 President Obama said that we’re going to guarantee another one billion dollars. Has any of that money been sent out? Has 

there been a guarantee on any of that money that’s been loaned 

out? And I understand from Mr. Rohrabacher’s questioning that 

this is kind of the government having their full faith and backing 

behind or they’re guaranteeing a loan but they’re not actually writing a check. But if there’s one billion dollars in more loan guarantees for basically the last year of a Presidential term, can you tell 

me how much of this money has gone out if there is any money 

that’s gone out, and if there is, projects that are coming? 

Mr. MCCALL. Thank you for the question, Congressman Knight. 

And the answer is that the President was announcing additional 

loan authority for the advanced fossil solicitation and the renewable energy solicitation in particular to support distributed energy 

projects because we have learned from the market that there is interest in those types of projects, but they are—it wasn’t clear to the 

market as to whether they would be eligible under our program. So 
113 

we issued a supplement that clarified that those types of projects 

would be eligible and devoted additional resources to that. 

But the specific answer to your question is at this time we have 

not made any of those—or we haven’t made any loans—— 

Mr. KNIGHT. Okay. 

Mr. MCCALL. —for those types of projects at this point. 

Mr. KNIGHT. Very good. And then just two more quick questions. 

The Advanced Technology Vehicle Manufacturing program, as I understand, hasn’t given out any loan guarantees in the last five 

years. Is that correct? 

Mr. MCCALL. We have—we actually have made conditional commitments, so we’ve made new commitments, but we haven’t closed 

any new loans in that—— 

Mr. KNIGHT. Okay. 

Mr. MCCALL. —period of time. 

Mr. KNIGHT. Would we say that that program has been a success 

and that’s why we don’t need it anymore and we don’t have to have 

these kind of guarantees? I guess there’s many more billions of dollars that can be either loaned out or guaranteed for loans coming 

up in the future. Is that something that we could just say we’re 

ending this right here and there is no more loan guarantees? And 

I know I’m using that term loosely, but that’s basically what we’re 

talking about. 

Mr. MCCALL. I would tell you that the program has been very 

successful, and I would tell you that what we’re seeing now is a 

shift in terms of our applications. So we’re receiving applications. 

We still have interest to make loans, and we have made a conditional commitment, as I mentioned. And the shift that we’re seeing 

is from the auto manufacturing companies themselves to component manufacturers because we all know the auto industry is doing 

fairly well at this point in time, but the component manufacturers 

are still facing stiff competition from overseas. 

Mr. KNIGHT. Right. 

Mr. MCCALL. And so as they need to upgrade their facilities to 

produce components that would go into vehicles that would assist 

the automakers in meeting their mileage standards, there are 

projects that need financing and can benefit from the program. 

Mr. KNIGHT. Okay. And I guess I just have a quick follow-up 

question. If Congress—and I’m not saying that Congress should do 

this—but if Congress worked on moving the CAFE standards or 

something like that up, as Congress liked to do in the ’70s quite 

a bit, would that again infuse this program to be more effective? 

And again, these are all hypotheticals. 

Mr. MCCALL. Thank you for the question, Congressman. And I 

think that if the mileage—you know, as the mileage standards increase, you’re going to see an increasing necessity on the part of 

the market to invest in new projects in order to meet those standards. So I would say that if the standards do increase—and they 

are scheduled to increase, I think, between now and 2025 already— 

but as they increase, you will see increasing appetite for the program. 

Mr. KNIGHT. Okay. And in my last minute, Mr. Loris, give me 

an idea in your—I’ll give you 30 seconds here—if the program goes 

away, completely goes away, do you believe that there is enough 
114 

private capital, venture capitalists out there that will take care of 

these needs without the involvement of government? 

Mr. LORIS. I do if they’re market viable, and that’s the whole 

issue. You had politicians and pundits predict that, you know, we 

would never see oil below $100 a barrel again, and look where we 

are today. And so they make these grand plans to subsidize electric 

vehicles or biofuels and put in place these programs, but markets 

time and time again have proved those politicians and pundits 

wrong. 

So I believe there will be substantial investment in renewable 

energy moving forward. You know, these are finite resources. We’ll 

see some shift in market scenarios both in the United States and 

globally, but that will happen as the market dictates. It won’t be 

necessary for the government to fund any of these programs, 

whether it’s through direct subsidies or through these loan programs. 

And one more point about your fuel efficiency standards is this 

is the big problem is you have the federal government set these 

regulations, and then you have the government subsidize them to 

meet these regulations. You have the government mandate the use 

of cellulosic biofuels, and then you have the government give out 

loan guarantees to cellulosic biofuel plants. This is not a winning 

formula for innovation and economic growth in the renewable energy industry or any energy industry. 

Mr. KNIGHT. Okay. Thank you, Mr. Chair. I yield back. 

Chairman WEBER. Thank you. I thank the witnesses for their 

valuable testimony and the members for their questions. The 

record will remain open for two weeks for additional comments and 

written questions from the Members. 

The hearing is adjourned. 

[Whereupon, at 11:32 a.m., the subcommittees were adjourned.] 
(115) 

Appendix I 

ANSWERS TO POST-HEARING QUESTIONS
116 

ANSWERS TO POST-HEARING QUESTIONS

Responses by Mr. Mark McCall 
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119 
120 
121 
122 
123 
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Responses by Dr. Frank Rusco 
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126 
127 
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(129) 

Appendix II 

ADDITIONAL MATERIAL FOR THE RECORD
130 

STATEMENT SUBMITTED BY THE FULL COMMITTEE

RANKING MEMBER EDDIE BERNICE JOHNSON
131 
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REPORT SUBMITTED BY REPRESENTATIVE BARRY LOUDERMILK
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135 
136 
137 
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139 
140 
141 
142 
143 
144 
145 
146 
147 
148 
149 
150 
151 
152 
153 
154 
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REPORT SUBMITTED BY REPRESENTATIVE DONALD S. BEYER, JR. 

Æ