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91–446 2015

DEPARTMENT OF ENERGY OVERSIGHT: STATUS 

OF LOAN PROGRAMS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

MAY 30, 2014 

Serial No. 113–150 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Missouri 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

TIM MURPHY, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

GREGG HARPER, Mississippi 

PETE OLSON, Texas 

CORY GARDNER, Colorado 

H. MORGAN GRIFFITH, Virginia 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

DIANA DEGETTE, Colorado 

Ranking Member 

BRUCE L. BRALEY, Iowa 

BEN RAY LUJAN, New Mexico 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

KATHY CASTOR, Florida 

PETER WELCH, Vermont 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

GENE GREEN, Texas 

HENRY A. WAXMAN, California (ex officio) 

(III) 

C O N T E N T S 

Page 

Hon. Tim Murphy, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 3 

Hon. Janice D. Schakowsky, a Representative in Congress from the State 

of Illinois, opening statement .............................................................................. 4 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 5 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 7 

WITNESSES

Peter W. Davidson, Executive Director of the Loan Programs Office, Department of Energy ..................................................................................................... 9 

Prepared statement .......................................................................................... 11 

Answers to submitted questions ...................................................................... 73 

Rickey Hass, Deputy Inspector General for Audits and Inspections, Department of Energy ..................................................................................................... 17 

Prepared statement .......................................................................................... 19 

Answers to submitted questions ...................................................................... 95 

Frank Rusco, Director, Energy and Science Issues, U.S. Government Accountability Office ......................................................................................................... 30 

Prepared statement .......................................................................................... 32 

Answers to submitted questions ...................................................................... 98 

SUBMITTED MATERIAL

Committee memorandum ........................................................................................ 68 

(1) 

DEPARTMENT OF ENERGY OVERSIGHT: 

STATUS OF LOAN PROGRAMS 

FRIDAY, MAY 30, 2014 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 9:20 a.m., in room 

2123, Rayburn House Office Building, Hon. Tim Murphy (chairman 

of the subcommittee) presiding. 

Present: Representatives Murphy, Burgess, Blackburn, Gingrey, 

Scalise, Harper, Griffith, Johnson, Long, DeGette, Braley, 

Schakowsky, Tonko, Green, and Waxman (ex officio). 

Staff Present: Charlotte Baker, Deputy Communications Director; Mike Bloomquist, General Counsel; Sean Bonyun, Communications Director; Matt Bravo, Professional Staff Member; Leighton 

Brown, Press Assistant; Karen Christian, Chief Counsel, Oversight; 

Carrie-Lee Early, Detailee, Oversight; Brad Grantz, Policy Coordinator, O&I; Brittany Havens, Legislative Clerk; Sam Spector, 

Counsel, Oversight; Peter Spencer, Professional Staff Member, 

Oversight; Tom Wilbur, Digital Media Advisor; Brian Cohen, Minority Staff Director, Oversight & Investigations, Senior Policy Advisor; Kiren Gopal, Minority Counsel; Hannah Green, Minority 

Staff Assistant; Elizabeth Letter, Minority Press Secretary; and 

Stephen Salsbury, Minority Investigator. 

OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA 

Mr. MURPHY. Good morning, everyone. This is a hearing of the 

Subcommittee on Oversight and Investigations entitled ‘‘Department of Energy Oversight: Status of Loan Programs.’’ 

Today’s hearing will examine the status of the Department of 

Energy’s loan programs and will focus in particular on the Department’s efforts to manage a nearly $30 billion portfolio of 30 loans 

and loan guarantees, while the Department at the same time 

launches new initiatives to expand that portfolio with additional 

loans. These new initiatives will tap into existing loan authority 

that at present amounts to another 40 billion. Add this to the fact 

that the terms of these loans and guarantees are as long as 20 or 

30 years, and it is clear that DOE will be accountable for managing 

these programs and protecting taxpayer interests for a long time. 

So has DOE implemented the structure, policies, and practices to 

meet its responsibilities? Is it doing so rapidly and effectively? 

2 

Should it do more? And how will the agency sustain effective oversight over this program for the long term? 

It’s been evident since this committee first commenced oversight 

of these programs more that 3 years ago that protecting taxpayer 

interests is no easy task for DOE. Created under Title XVII of the 

Energy Policy Act back in 2005, the Department’s advanced energy 

technology loans authorized by Congress did not really take off 

until the stimulus funding of 2009. The stimulus created a category 

of loan guarantees that were fully subsidized by the taxpayer. In 

the ensuing years of stimulus spending, the DOE’s Loan Programs 

Office focused on soliciting, reviewing, and closing a flood of applications under what was known as a Section 1705 program. The 

agency’s focus with closing loan applications under the stimulus 

came at the expense of establishing a strong back-end program necessary to manage the risks of the loan portfolio. 

The result exhibited most prominently by DOE’s handling of the 

Solyndra loan guarantee were unnecessary taxpayer losses in the 

hundreds of millions of dollars. Today half the funds and a majority of projects in DOE’s loan portfolio are comprised of these stimulus-funded loan guarantees. 

In some respects DOE is in a different place now than it was 3 

years ago. The agency has issued only two loan guarantees since 

2011. It has put more attention to developing portfolio management capabilities and implementing other reform measures. 

So today we will take a measure of what DOE has accomplished 

and what more it should do to protect taxpayer interests. This 

oversight is particularly important because as the agency transitions focus to portfolio management, it has, in the recent months, 

launched new initiatives to generate more loans and loan guarantees. In February, the agency announced a new solicitation to tap 

into $8 billion in loan authority for advanced fossil energy projects. 

It has proposed a second solicitation to tap into $4 billion in loan 

authority for renewable energy projects, and it has reminded the 

automotive manufacturing industry that some $16 billion in authority is available for loans for advanced vehicle technologies and 

manufacturing. 

The status of these new initiatives remain an open question, but 

it is important to understand whether the agency can manage 

these new solicitations while ensuring appropriate stewardship of 

its existing portfolio; and if these new initiatives expand the loan 

portfolio, can DOE manage it. 

This past month both the Government Accountability Office and 

the DOE inspector general issued reports that evaluated certain 

elements of DOE’s management and monitoring of loans. While 

both reports found DOE had made progress strengthening oversight, both also identified continuing concerns. For example, GAO 

found that DOE has not fully developed or consistently adhered to 

loan-monitoring policies, and this inconsistent adherence means 

that we cannot be sure the agency is completing activities important to protecting taxpayer interests. 

The inspector general showed the impact of poor loan monitoring 

in its examination of Abound Solar Manufacturing, which defaulted 

on its DOE loan terms in September 2011 and declared bankruptcy 

in July, 2012. The lessons from the Abound case, the IG noted, unVerDate Nov 24 2008 12:19 Jul 27, 2015 Jkt 037690 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-150 CHRIS
3 

derscored the need for the Department to accelerate loan oversight 

improvements in light of the amount of loans in the portfolio. The 

IG noted that progress has been made, but more needs to be done. 

Frank Rusco of the GAO and Deputy Inspector General Rickey 

Hass will discuss these perspectives today, and most important, of 

course, are DOE’s answers to our questions. We have the benefit 

of hearing directly from the head of the loan program, Mr. Peter 

Davidson. So, welcome, Mr. Davidson. I look forward to perspectives on the recommendations made by GAO and the IG, and your 

view of the status of the agency’s operations and loan program 

goals and challenges. And with that, I now yield 5 minutes to Ms. 

Schakowsky for an opening statement. 

[The prepared statement of Mr. Murphy follows:] 

PREPARED STATEMENT OF HON. TIM MURPHY

Today’s hearing will examine the status of the Department of Energy’s loan programs. It will focus in particular on the Department’s efforts to manage nearly a 

$30 billion portfolio of 30 loans and loan guarantees, while the Department at the 

same time launches new initiatives to expand that portfolio with additional loans. 

These new initiatives will tap into existing loan authority that, at present, amounts 

to another $40 billion. 

Add to this the fact that the terms of these loans and guarantees are as long as 

20 or 30 years, and it is clear that DOE will be accountable for managing these programs, and protecting taxpayer interests, for a long time. 

Has DOE implemented the structure, policies, and practices to meet its responsibilities? Is it doing so rapidly and effectively? Should it do more? And how will 

the agency sustain effective oversight over this program for the long term? 

It has been evident since this Committee first commenced oversight of these loan 

programs more than 3 years ago that protecting taxpayer interests is no easy task 

for DOE. Created under Title 17 of the Energy Policy Act of 2005, the Department’s 

advanced energy technology loans authorized by Congress did not really take off 

until the stimulus funding of 2009. The stimulus created a category of loan guarantees that were fully subsidized by the taxpayer. 

In the ensuing go-go years of stimulus spending, DOE’s Loan Programs Office focused on soliciting, reviewing, and closing a flood of applications under what was 

known as the section 1705 program. The agency’s preoccupation with closing loan 

applications under the stimulus came at the expense of establishing a strong backend program necessary to manage the risks of the loan portfolio. 

The result, exhibited most prominently by DOE’s handling of the Solyndra loan 

guarantee, were unnecessary taxpayer losses in the hundreds of millions of dollars. 

Today, half of the funds and a majority of projects in DOE’s loan portfolio are comprised of these stimulus-funded loan guarantees. 

In some respects, DOE is in a different place now than it was 3 years ago. The 

agency has issued only two loan guarantees since late 2011. It has put more attention to developing portfolio management capabilities and implementing other reform 

measures. 

So today, we will take a measure of what DOE has accomplished, and what more 

it should do to protect taxpayer interests. This oversight is particularly important 

because, as the agency transitions focus to portfolio management, it has in recent 

months launched new initiatives to generate more loans and loan guarantees. 

In February, the agency announced a new solicitation to tap into $8 billion dollars 

in loan authority for advanced fossil energy projects. It has proposed a second solicitation to tap into $4 billion in loan authority for renewable energy projects. And it 

has reminded the automotive manufacturing industry that some $16 billion in authority is available for loans for advanced vehicle technologies and manufacturing. 

The status of these new initiatives remain an open question, but it is important 

to understand whether the agency can manage these new solicitations while ensuring appropriate stewardship of its existing portfolio. And if these new initiatives expand the loan portfolio, can DOE manage it? 

This past month, both the Government Accountability Office and the DOE Inspector General issued reports that evaluated certain elements of DOE’s management 

and monitoring of loans. While both reports found DOE had made progress 

strengthening oversight, both also identified continued concerns. 

4 

For example, GAO found that DOE has not fully developed or consistently adhered to loan monitoring policies. And this inconsistent adherence means that we 

cannot be sure the agency is completing activities important to protecting taxpayer 

interests. 

The Inspector General showed the impact of poor loan monitoring in its examination of Abound Solar Manufacturing, which defaulted on its DOE loan terms in September 2011 and declared bankruptcy in July 2012. The lessons from the Abound 

case, the IG noted, underscored the need for the Department to accelerate loan oversight improvements in light of the amount of loans in the portfolio. The IG noted 

that progress has been made, but more needs to be done. 

Frank Rusco of the GAO and Deputy Inspector General Rickey Hass will discuss 

these perspectives today. 

Most important, of course, are DOE’s answers to our questions. We have the benefit of hearing directly from the head of the Loan Program Office, Mr. Peter Davidson. 

Welcome Mr. Davidson. I look forward to your perspective on the recommendations made by GAO and the IG and your view of the status of the agency’s operations, and loan program goals and challenges. 

OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. I am sitting in this 

morning for the ranking member Diana DeGette and have the 

privilege of 5 minutes to give you my take on not only the loan program, but its goals. 

Thank you, Mr. Chairman, for holding this important hearing on 

the status of the Department of Energy’s loan program, and I look 

forward to hearing from our witnesses on this very important issue. 

We are at a critical moment in history. 2013 was the 6th warmest year on record; 13 of the 14 warmest years have occurred since 

2000. Earlier this month the National Climate Assessment showed 

that, without major intervention, oceans will rise as much as 4 feet, 

water shortages will increase rapidly, and the hottest days could be 

more than 10 degrees hotter by the end of the century. But we are 

privileged here to have an opportunity to fight and win the battle 

against climate change, to leave a legacy to which our children and 

grandchildren can be proud, and I believe this is an opportunity 

that we must take. 

Our approach should be multifaceted. It must include strong 

rules to reduce harmful emissions as well as a commitment to 

promising technologies that will help us achieve that goal. Investing in clean energy technologies is not only good for the environment, but it’s also in our economic self-interest. 

The clean and renewable energy sectors are among the fastestgrowing areas of the global economy and will generate almost $2 

trillion in global investment from 2012 to 2018, according to PEW. 

There are three times as many jobs created per dollar spent on 

clean energy versus fossil and nuclear fuels. We should be the undisputed leader in clean energy technologies and the jobs they support, and, with the right Federal support, we will be. 

Today we are going to hear from witnesses about the status of 

loan programs at the Department of Energy. The Government Accountability Office and the Department’s inspector general have recently issued reports assessing DOE’s loan management and oversight practices. I look forward to hearing about the progress DOE 

5 

has made in strengthening its management policies as well as 

areas for improvement. 

The Loan Programs Office has been successful in financing 

groundbreaking solar, advanced vehicle, and wind projects. These 

and other projects put the credit and confidence of our country behind our greatest innovators, allowing them to succeed where they 

otherwise might fail. That backing has paid off in a number of 

ways. Private-sector clean energy projects supported by the loan 

guarantee program have an 87 percent success rate, far outpacing 

the performance of typical venture capital firms. Their failure rate 

is only 2 percent, better than that of loan portfolios at typical 

banks. Add to this the fact that many of the recipients of DOE 

loans have trouble finding financing in the private sector, and the 

program success is all the more impressive. 

The programs have also helped ensure that our auto sector can 

make the investments needed to make top-of-the-line, fuel-efficient 

cars. Ford used a DOE Advanced Technology Vehicles Manufacturing loan to upgrade 13 factories across 6 States, including my 

home State of Illinois. That investment increased the fuel efficiency 

of Ford cars and created or maintained 33,000 jobs at a time our 

auto industry was in trouble. 

Tesla Motors, another success story, paid off its entire loan last 

year, 9 years before full payment was due. I wish I could afford a 

Tesla. Each of the 18 large-scale renewable energy projects backed 

by DOE’s 1705 program have secured power purchase agreements 

that will ensure the loans are paid back on time and in full. 

And finally, the programs have encouraged significant private investment in clean energy technologies. The Solar Energy Industries 

Association estimates that DOE loan programs have sparked $25 

billion in private investment in solar alone. We need to continue 

to support nascent technologies until they can attract significant 

private investment. 

Let me just say that in an environment where so many of my colleagues are denying the existence or the importance of climate 

change and global warming, nonetheless there ought to be an embrace of programs that create—that stimulate our ability to be 

leaders around the world in energy technology and clean energy 

technology, and I look forward to learning from our witnesses how 

DOE’s loan program can be improved and strengthened moving forward. And I yield back. 

Mr. MURPHY. Thank you for yielding back. 

I now recognize Mr. Burgess for a 5-minute opening statement. 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. Thank you, Mr. Chairman, and thank you for holding this hearing because it is an important follow-up to work that 

this subcommittee and subcommittee staff has been performing 

over the past 3 1⁄2 years. 

Certainly the exposition of some of the poor handling of the 1703 

loan guarantee program has been one of the principal efforts of this 

committee, because, as we now know, the loss of hundreds of millions of taxpayer dollars occurred. 

6 

The Department of Energy even went so far as to subordinate 

the United States’ interest in being paid back its money and allowed private investors to be first in line to receive funding, a move 

that many people believe was done in direct conflict with the very 

plain language of the law that authorized the loan guarantee program in the first place. 

Following this committee’s work, Herb Allison, the former Assistant Secretary of the Treasury, looked into the mismanagement of 

this program by the Department of Energy and released a report, 

and released a set of recommendations into how the program could 

be more efficiently operated and still stay within the confines of the 

authorizing statute. 

In the wake of the disastrous results of the first round of loan 

guarantees, which, you’ll recall, ended in bankruptcy announcements of companies like Solyndra, Abound Solar, Beacon Power, 

the Department of Energy suspended making any further loan 

guarantee approvals. In June of 2013, Secretary Chu told the San 

Francisco Chronicle, we’re going to have more bankruptcies. Sometimes it will be like Solyndra where you get 3 cents on the dollars; 

others, it will be 80 cents or something like that. 

You know, the dismissive tone of the former Secretary making a 

statement about losing such a profound amount of American taxpayer money was really upsetting to a lot of us on the committee. 

Following a not-brief-enough 3-year hiatus, it’s really been since 

September of 2011 since there have been any more loan guarantees, I would question whether any more should be made, but the 

Department of Energy announced this year that it would actually 

breathe new life into the program. Current solicitations include 

loan guarantees for efficiency automobiles and solar energy. 

The subcommittee today must look into how the Department of 

Energy intends to operate this program going forward. Does Secretary Moniz agree with his predecessor’s view that more bankruptcies in this program are inevitable? Following the Allison report, what changes have been implemented within the agency to 

ensure that such failures are minimized? What is the Department’s 

vision for this program going forward? 

The loan guarantee program was really accelerated right after 

the inauguration of President Obama in 2009, was part of a massive stimulus bill, and the President said it was essential for creating jobs and helping to steer the country out of an economic recession. Six years later is this still the goal of the program? At that 

time, in early 2009, credit markets were essentially frozen to American companies. Does this continue to be the case? 

If those things have changed, what is the government’s role in 

any loan guarantee program? If the investment is so inherently 

risky that it cannot attract private capital, why should the American taxpayer be the one that’s put at risk? 

The loan guarantee programs that the Department of Energy 

will be approving apply to loans issued for 20- and 30-year timeframes, two or three decades. Given that, when the fact that the 

Department will need to monitor these loans for decades to come, 

what safeguards are in place within the Department to ensure continuity of oversight over the two- to three-decade lifetime of the 

loan? 

7 

Moreover, during our last set of hearings over the failures of the 

Department of Energy to properly oversee the program, it became 

clear that the Department of Energy actively excluded the Treasury Department from any meaningful input into the decisionmaking of which company should be receiving loan guarantees. 

What has happened to the cooperation between the two Departments? Does that lack of cooperation continue to exist, or will the 

Department of Energy be soliciting more economic expertise from 

the Department of Treasury? 

These are some of the many questions that are going to come up 

today, and I hope they are answered in today’s hearing. I look forward to hearing from our witnesses and welcome them in their 

time in the committee. 

I yield back to the chair. 

Mr. MURPHY. The gentleman yields back. 

I now recognize Mr. Waxman for a 5-minute opening statement. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you, Mr. Chairman. Thank you for holding 

this hearing. We’re here today to discuss DOE’s loan programs. We 

should focus on the success of the program and the need for clean 

energy financing as the threat of climate change becomes even 

more dire. 

In 2011 and 2012, and maybe in 2014, this committee was almost obsessed with the Solyndra loan that went bad. We reviewed 

over 300,000 pages of documents, issued multiple subpoenas, conducted over a dozen interviews, and had 4 hearings. We found no 

evidence of the wrongdoing to support the wild claims of House Republicans, but we ignored the big picture, that the overall loan 

portfolio was strong, and that the loan program was helping to enable new breakthrough technologies to hit the market and employ 

tens of thousands of Americans. 

Tesla Motors, the Caithness Shepherds Flat wind farm, the Agua 

Caliente Solar project, these are the exciting success stories of the 

Loan Programs Office, and they are far more representative of the 

program as a whole than the handful of programs that have not 

worked out. 

Ensuring that America generates a much larger share of its energy from clean sources should be a top priority for our Nation’s 

energy policy. Doing so is critical to allowing America to compete 

for leadership in the global clean energy market, to helping reduce 

America’s energy cost by improving efficiency, and to combating climate change. 

For the past several years, the Loan Programs Office has helped 

meet these goals. Earlier this year the Intergovernmental Panel on 

Climate Change, the world’s preeminent authority on climate 

science, issued a stark warning on the consequences of failing to 

take action to address manmade climate change. The report found 

that climate change is already happening and will get much worse 

if we do not take action immediately. 

In order for the planet to avoid the worst consequences of climate 

change, the United States has to be a leader in reducing carbon 

8 

pollution, and yet Republicans in Congress continue to feed the 

myth that there is a scientific debate about whether climate change 

is happening, despite glaciers melting, despite more powerful and 

prolonged hurricane and wildfire seasons. The wild fire season in 

California doesn’t even end anymore. My Republican colleagues 

continue to bury their head in the sand. 

This committee should be finding solutions to address climate 

change, but House Republicans offer no solutions. They reject every 

policy that would reduce our carbon pollution. They say no to a 

price on carbon. OK. But then they say no to cap-and-trade, and 

then they say no to EPA rules. They even reject financial support 

for climate science in DOE’s loan program, which was originally established with bipartisan support. 

Denying the science and rejecting all potential solutions is not a 

plan. So as we discuss the Loan Programs Office today, let’s avoid 

the attempts to make political hay out of Solyndra. Instead, we 

should learn what loan program leaders have learned from past 

problems and what they are doing to ensure the program’s success 

as it begins to accelerate the pace of new loans. 

These loan programs can help us develop an energy strategy for 

the future that creates jobs, saves money, and positions us as a 

leader in the effort to mitigate the worst impacts of climate change. 

I thank our witnesses for being here with us today and to share 

their expertise on how we can make sure that the loan program 

achieves this vision. 

Thank you, Mr. Chairman, and I yield back my time. 

Mr. MURPHY. The gentleman yields back. 

We will now proceed with our witnesses to speak. I wanted to 

add and tell Members, because we are limited on time, we’ll have 

a quick gavel at 5 minutes, so please go under your time, so we 

will cut you off there so that all of us can ask questions. 

So, Mr. Peter Davidson is the Executive Director of the Loan Programs Office at the United States Department of Energy. In this 

role he oversees the program, more than 30 billion portfolio of clean 

energy and advanced vehicle loans and loan guarantees, making it 

the largest project finance organization in the U.S. Government. 

Mr. Rickey Hass is the Deputy Inspector General of Audits and 

Inspections at the United States Department of Energy. In this role 

he directs a Federal workforce of professional auditors and inspectors, serving at 13 major Department of Energy sites across the 

country. 

And Mr. Frank Rusco is the Director of Natural Resources and 

Environment of the United States Government Accountability Office. In this role he leads audits and reviews on a broad spectrum 

of energy, science, and DOE programmatic issues for Congress and 

the committee. 

I will now swear in the witnesses. 

Are you all aware that this committee is holding an investigative 

hearing and, when doing so, has had the practice of taking testimony under oath? Do you have any objections to taking testimony 

under oath? 

All of them say no. 

The chair will then advise you that under the rules of the House 

and the rules of the committee, you are entitled to be advised by 

9 

counsel. Do any of you desire to be advised by counsel during your 

testimony today? 

All the witnesses say no. 

So, in that case, if you would please rise, raise your right hand, 

I’ll swear you in. 

[Witnesses sworn.] 

Mr. MURPHY. Thank you. All of the witnesses have answered in 

the affirmative. You are now under oath and subject to the penalties set forth in Title 18, section 1001 of the United States Code. 

You may now each give a 5-minute summary of your written statement. Mr. Davidson, we will begin with you. 

STATEMENT OF PETER W. DAVIDSON, EXECUTIVE DIRECTOR 

OF THE LOAN PROGRAMS OFFICE, DEPARTMENT OF ENERGY; RICKEY HASS, DEPUTY INSPECTOR GENERAL FOR AUDITS AND INSPECTIONS, DEPARTMENT OF ENERGY; AND 

FRANK RUSCO, DIRECTOR, ENERGY AND SCIENCE ISSUES, 

U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

STATEMENT OF PETER W. DAVIDSON 

Mr. DAVIDSON. Chairman Upton and Chairman Murphy, Ranking Members Waxman and DeGette, members of the subcommittee, 

thank you for the opportunity to appear before you today. My name 

is Peter Davidson. I’m the Executive Director of the Department of 

Energy’s Loan Program Office, or LPO, a role I assumed almost 

one year ago. 

LPO issues loans and loan guarantees to accelerate the commercial deployment of clean energy projects and advanced vehicle manufacturing in the United States. The program was designed to fill 

a critical role in the marketplace, because the initial commercial 

deployment of innovative energy technology is often limited by a 

project developer’s ability to secure sufficient full-term debt financing to build the project. 

Every transaction supported by the loan program is a public-private undertaking. While the Department issues loans and loan 

guarantees to provide the necessary debt financing for these 

projects, the project sponsor must provide sufficient project-level 

equity investments of at least 20 percent of the total cost of every 

project, and usually represents more than 30 percent. DOE will not 

issue a loan or a loan guarantee until substantial private equity 

support is committed to the project. The LPO supports these innovative projects by administering two separate programs, the Title 

XVII and the Advanced Technology Vehicle Manufacturing, or 

ATVM, Program. 

We currently manage a portfolio of more than $30 billion of loan 

guarantees, loans, and conditional commitments, of 31 projects. As 

the committee knows, our projects include the first new nuclear 

power plant to be licensed and constructed in the United States in 

more than 30 years, some of the largest utility-scale solar facilities 

in the world, dozens of retooled auto manufacturing plants producing some of America’s best-selling vehicles, the world’s largest 

solar thermal energy storage systems, and a variety of other 

groundbreaking projects. Overall, these loans and loan guarantees 

have resulted in more than $50 billion in total project investment. 

10 

Under the Title XVII program, the LPO currently has 17 electricity generation projects in operation that produce enough clean 

energy to power more than 550,000 homes annually, and this number is increasing as new projects come online. 

The auto program has supported the production of over 4 million 

vehicles and approximately 35,000 direct jobs across 8 States: 

Michigan, California, Illinois, Missouri, Ohio, Kentucky, New York, 

and Tennessee. 

So even in the context of the program’s statutory mandate to 

take on technology risk, losses to date are approximately 2 percent 

of the entire portfolio; 98 percent of the portfolio is operating and 

money good. We believe our performance is strong and compares 

favorably to the private sector. 

Now, the Department of Energy takes its responsibility to the 

American taxpayer very seriously. As a result, the LPO underwrites and structures its loan and loan guarantees to protect the 

interests of the taxpayer and maximize prospects for full repayment. Before making a loan or a loan guarantee, we conduct extensive due diligence on the application with rigorous financial, technical, legal, and market analysis by our professional staff, which 

includes qualified engineers, financial experts, and outside advisors. And as noted in previous GAO reports, some private lenders 

have observed that the LPO’s due diligence process is as rigorous, 

if not more rigorous, than the reviews performed in the private sector. 

Despite these efforts we have experienced some losses and thus 

constantly seek to improve every aspect of our operations. We have 

benefited greatly from recommendations for improvement, which 

have come from Congress, from the GAO, from the DOE’s inspector 

general, and independent consultants such as former Treasury Department official Herb Allison. DOE has adopted many of these improvements, including streamlining the application process, adding 

transparency to the approval process, filling key positions with experienced professionals, clarifying authorities, strengthening internal oversight of the program, developing a state-of-the-art workflow 

management system, establishing a robust early warning system, 

and improving reporting to the public. We continuously look for 

ways to improve our underwriting and asset-monitoring activities, 

to incorporate lessons learned, and ensure best practices to protect 

taxpayer interests. 

In conclusion, securing economic leadership in the future requires the support of clean energy innovation and deployment 

today. The LPO provides one of the most important tools to achieve 

those goals, and, as our global competitors have learned, that is 

debt financing on reasonable terms, wisely targeted, and responsibly deployed. 

The achievements of the LPO, I believe, to date are solid, but 

they are not enough, and we need to do more to compete on the 

global stage, starting with our recently issued advanced fossil energy project solicitation, and continuing with other remaining authority, we aim to do just that. 

Mr. Chairman, I thank the members of the subcommittee, and I 

look forward to answering your questions. 

Mr. MURPHY. Thank you. 

11 

[The prepared statement of Mr. Davidson follows:] 


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Mr. MURPHY. Mr. Hass, 5 minutes. 

STATEMENT OF RICKEY HASS 

Mr. HASS. Mr. Chairman and members of the subcommittee, I 

appreciate the opportunity to testify on the work of the Office of 

Inspector General regarding the Department of Energy’s loan—— 

Mr. MURPHY. Could you pull that microphone real close to your 

mouth, please? 

Mr. HASS. Little better? 

Mr. MURPHY. That’s much better. Thank you. 

Mr. HASS. Because of the significant taxpayer funds involved, the 

Office of Inspector General has, over the years, performed a series 

of reviews of the Loan Programs Office. These reviews have identified needed improvements in both the origination and monitoring 

of loans. 

My testimony today will focus on our review of the Department’s 

implementation and recommendations that resulted from an administration-requested review of the LPO by Mr. Herbert Allison 

in January of 2012. Prior to doing so, however, I will discuss our 

recent report on the failure of the $400 million Abound loan guarantee to provide a benchmark for understanding the Department’s 

progress and actions yet to be completed. 

Although the Department had identified and taken steps to mitigate risk, and had reduced its financial exposure by suspending 

funding when Abound did not meet its project milestones, our audit 

identified several weaknesses in the administration of the loan. 

Specifically we found that the program had not notified the Department’s credit review board of material change in the credit subsidy 

used to cover potential loan losses. It had not resolved conflicting 

opinions of technical advisors, adequately documented assumptions 

used in its financial modeling, and conducted ongoing formal financial and market analyses. 

We concluded that the issues we identified occurred because the 

program had not established comprehensive policies, procedures, 

and guidance for awarding, and monitoring and administrating 

loans. We also pointed out that the weaknesses in the financial 

market and monitoring of Abound occurred when the program had 

limited staff and was just establishing its portfolio management division. 

The Department’s experience with the Abound loan guarantee 

provides useful lessons learned for program improvements, which 

were generally incorporated in the independent consultant recommendations. The purpose of our most recent review was to the 

determine whether the Department adequately addressed the independent consultant’s twelve recommendations to enhance program 

oversight and management. 

Our review found that the Department had completed actions to 

address four of the twelve recommendations, including filling a 

number of key positions and establishing and communicating management goals. While the Department did not fully concur with our 

findings, we consider efforts to address the remaining eight recommendations to be ongoing, because policies, procedures, and 

other plans and efforts were not yet complete and in place. Examples of remaining actions include strengthening internal oversight, 

18 

clarifying authorities, and incorporating lessons learned into policies and procedures. 

We also identified other needed improvements. Specifically we 

noted that the Department had not finalized changes in policies 

and procedures necessary to address Mr. Allison’s recommendations, and had not developed a formal adjudication process for resolving differences of professional opinion. Finally, we found that 

the program had created a potential conflict of interest by appointing the Director of Portfolio Management as a member of the program’s risk committee. 

While the Department’s actions show promise and substantial 

progress had been made, we were unable make a determination at 

the time of our report as to whether the efforts will be ultimately 

fully successful, because, as previously noted, a number of actions 

are still ongoing. 

Given the significant amount of funding available for loans and 

loan guarantees and the previously identified weaknesses, we’ll 

continue to monitor the loan-related activities as part of our normal risk-assessment process. In our view, the loan guarantee program warrants special attention by Department officials, and as 

such has been one of our management challenge watch list items 

since 2011. 

Mr. Chairman, this concludes my statement, and I will be 

pleased to answer any questions the subcommittee may have. 

Thank you. 

Mr. MURPHY. I thank the gentleman. 

[The prepared statement of Mr. Hass follows:] 

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Mr. MURPHY. I now recognize Mr. Rusco for 5 minutes. 

STATEMENT OF FRANK RUSCO 

Mr. RUSCO. Thank you. Chairman Murphy, Ranking Member 

DeGette, Ms. Schakowsky, and members of the subcommittee, I am 

pleased to speak to you today about DOE’s loan programs. 

Since 2009, DOE has made a total of 38 loans under 3 programs. These loans amount to about $30 billion, and DOE has about $45 

billion in remaining loan authority. Five of the thirty-eight loans 

have defaulted, and another four were either deobligated or withdrew prior to disbursement of the loans. DOE is in the process of 

unraveling the defaulted loans and calculating the losses to the 

Federal Government. 

The Section 1703 Loan Guarantee Program was authorized by 

Congress in 2005 and was designed to encourage investment in 

commercial use of new or innovative energy technologies. This program issued its first two loans in February 2014 to support two nuclear reactors under construction in Georgia. The total amount of 

these two loans was about $6.2 billion, and DOE has about $29 billion in remaining 1703 loan authority. 

For 1703 loans, the loan recipients are generally required to pay 

for the expected costs of the loans at the time the loans are made. 

These expected costs are referred to as credit subsidy costs. The 

Advanced Technology Vehicles Manufacturing Loan Program was 

authorized by Congress in 2007 and is designed to encourage the 

automotive industry to invest in vehicle technologies resulting in 

greater fuel efficiency of vehicles and components. DOE made five 

loans under the ATVM Program between September 2009 and 

March 2011 for a total of $8.4 billion and has $16.6 billion in remaining loan authority. For ATVM loans, the Federal Government 

pays the credit subsidy costs. For the five loans made to date under 

this program, these credit subsidy costs were $3.3 billion. 

In 2009, as part of the Recovery Act, Congress created the Section 1705 Loan Guarantee Program to support commercial energy 

projects that use renewable energy, electric-power transmission 

systems, or leading-edge biofuels. Congress also appropriated funds 

to pay the credit subsidy costs for 1705 loans. Thirty-one loans 

were made under 1705 between September 2009 and September 

2011, when loan authority expired. The total value of the loans 

made were $15.7 billion, and the credit subsidy costs for the loans 

were $1.9 billion. 

GAO has evaluated DOE’s loan programs on an annual basis 

since 2007 and has found that, over time, DOE has set up the infrastructure to solicit and evaluate loan applications, to estimate 

credit subsidy costs, and to issue or guarantee loans. DOE is also 

building its capacity to manage the risk of its existing loan portfolio. In our reports we have made many recommendations intended to improve the functioning of the programs, and DOE has 

generally been responsive in implementing these recommendations. 

There is, however, some question about whether there will be 

sufficient demand for all remaining loan authority under the 1703 

and ATVM programs. For 1703, the fact that borrowers must generally pay for the credit subsidy costs at the time the loans are 

made may prove to be a deterrent. The 1703 program has offered 

31 

numerous solicitations over the past 8 years and evaluated many 

dozens of applications, but until February of this year, it had been 

unable to make a single loan. It is also important to note that for 

the two loans it did make, the borrowers did not pay any credit 

subsidy cost because DOE estimated these costs to be zero. 

We are not questioning DOE’s cost estimates for these loans, but 

we note that under the 1705 program, when the government was 

paying these costs, the average credit subsidies were about 12.5 

percent of the loan value. If similar credit subsidy costs are assessed under the 1703 program in the future, it is unclear that borrowers would find these loans to be economically attractive. 

Further, the ATVM program has not made a loan since March 

2011, despite having loan authorization and appropriated funds to 

pay the credit subsidy costs. In a recent report, we found that as 

of March 2014, the program had only one active loan application, 

and this loan was for about $200 million, a small fraction of total 

remaining loan authority. GAO, therefore, suggested that unless 

DOE can demonstrate adequate demand for ATVM loan authority, 

Congress may wish to consider rescinding all or part of the remaining $4.2 billion in credit subsidy appropriations. 

Thank you. This completes my oral remarks. I will be happy to 

answer any questions you may have. 

Mr. MURPHY. I thank the gentleman. 

[The prepared statement of Mr. Rusco follows:] 

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Mr. MURPHY. I am now going to recognize myself for 5 minutes. 

Mr. Davidson, how long have you been running the DOE’s Loan 

Programs Office, did you say? 

Mr. DAVIDSON. Mr. Chairman, I began there in May of last year, 

so one year. 

Mr. MURPHY. And as the head of the Loan Programs Office, you 

report directly to the Secretary; am I correct on that? 

Mr. DAVIDSON. Correct. 

Mr. MURPHY. So, have you had meetings with Secretary Moniz 

to discuss the LPO? 

Mr. DAVIDSON. Yes. 

Mr. MURPHY. And what is the Secretary’s vision for how the remaining $40 billion in loan authority should be used? 

Mr. DAVIDSON. Thank you for that question. The Secretary’s 

point of view is that we move ahead and do what we believe the 

statute provides for, which is within our area, which is now the 

1703. 

Our 1705 funding, which is the stimulus act, that loan program 

is over, so now we have the 1703, which is the self-pay authority. 

Mr. MURPHY. Pull that mic a little bit closer because I want to 

make sure we hear. 

Let me ask about specifics. So has he directed you in anything 

such as fossil fuel, carbon capture sequestration, nuclear power 

plants? 

Mr. DAVIDSON. We don’t discuss specific transactions. What we 

talk about is the ability to put out solicitations. As was remarked, 

we have not put out a solicitation in a number of years. We put 

out the first new solicitation under 1703 in a number of years, 

which is the advanced fossil fuel solicitation. 

Mr. MURPHY. But I assume, as head of the LPO, you receive periodic status reports, loan applications, and the existing portfolio; is 

that correct? 

Mr. DAVIDSON. Excuse me? 

Mr. MURPHY. I’m assuming that you receive reports on the loan 

applications and the existing portfolio? 

Mr. DAVIDSON. Correct. 

Mr. MURPHY. OK. Do you regularly brief the Secretary on the 

current status of all the aspects of the program? 

Mr. DAVIDSON. The Secretary and I meet on a quarterly basis. 

Mr. MURPHY. Two years ago this committee asked the DOE to 

submit a list of projects that applied for loan guarantees. Can you 

tell me how many of the active loan guarantee applications are still 

in the queue? 

Mr. DAVIDSON. We have been providing that to certain areas of 

Congress. I’m not sure it did this committee, but we’re happy to do 

that. 

Mr. MURPHY. Do you have any idea how many are still in the 

queue, by any chance? 

Mr. DAVIDSON. Our total applicants? 

Mr. MURPHY. Yes. 

Mr. DAVIDSON. We have a number of applicants still in the 

queue. As we shut down, as the 1705 program ended, all those that 

were still in the queue were allowed to proceed if they had been 

active. So of that, we have a number of active applications. We 

48 

don’t disclose the exact number, but there are a handful of active 

applications. On the renewable side, there are a handful of active 

applications from earlier fossil solicitations we did in 2008. 

Mr. MURPHY. Can you describe the nature of those fossil solicitations in general? 

Mr. DAVIDSON. Well, Mr. Chairman, if I can go back, I’ll go back. 

As I know many of you on the committee are aware, we did a solicitation in 2008 which was really about a coal gasification. It was a 

very specific solicitation. At that time a number of applications 

came in, I think 10 or so at the time. Some of those have remained 

active. And are still in the queue, and are still being pursued, and 

are in due diligence. Many of those projects, the sponsors withdrew 

the projects primarily because of what’s happened with natural 

gas. And the decrease in the cost of natural gas has made those 

projects not economically viable, so the developers have withdrawn. 

Mr. MURPHY. Mr. Rusco, let me ask you, GAO has reviewed the 

loan program extensively, as you pointed out. What do you see as 

the largest risk in the program as it is currently run both in terms 

of the loan origination and the long term? 

Mr. RUSCO. In terms of the front-end process of the loan origination, I would say DOE does not have a perfect record of choosing 

viable projects to support. Most of their experience is in the 1705 

program, where the Federal Government paid the credit subsidy 

cost, but in that program, DOE made loans to four solar manufacturers, and of those four loans, two have defaulted, and one was 

deobligated prior to loan disbursement. In large part, these problems stem from growing competition from lower-cost producers of 

solar panels in China and elsewhere, but—— 

Mr. MURPHY. Can I interrupt you on that point, because I know 

that one of the problems we had with Solyndra when there was 

competition from China, unfortunately, is that the issue was— 

when you talk about viability, are you referring to viability of 

where the company is financially viable, if the nature of the project 

itself is going to be viable as new technologies develop, or both? 

Mr. RUSCO. Well, I think that the energy sector is changing rapidly, constantly, and keeping abreast of that and making sure that 

you are supporting projects that will remain viable is a very difficult proposition. 

Mr. MURPHY. Particularly when you are doing a 20- or 30-year 

loan. 

Mr. RUSCO. Yes, that is a concern, and—so on the back end, we 

remain concerned that DOE has not fully set up and staffed its 

portfolio risk management procedures and policies. DOE must remain vigilant to ensure it’s well informed and prepared to respond 

to any emerging risks to its existing loans, and that could include 

risks associated with lower-priced natural gas, as was mentioned, 

or any other changes in the markets. 

Mr. MURPHY. Thank you. I recognize I am out of time. I’ll now 

recognize—you ready? We’ll recognize Mr. Green first for 5 minutes, if you’re ready, Mr. Green, from Texas. 

Mr. GREEN. Thank you, Mr. Chairman. 

Mr. Davidson, just off the top of my head, why are the number 

of applications privileged, that you can’t share with a congressional 

committee? 

49 

Mr. DAVIDSON. I believe it’s our DOE policy. We state the number of applicants who have—the specific number of applicants we 

try not to release because there are potential competitive issues involved. We try and really safeguard the privacy information of 

those people that apply, trade secrets, those types of issues, and 

the feeling is if people know how many applied for a certain type 

of solicitation, it could determine if there are competitors applying 

or things of that nature. 

Mr. GREEN. I understand that, and obviously I want business 

records and proprietary information, but it seems like a public loan 

would be—at least the information for the number—I’m not talking 

about the names even, but that would be helpful, of someone who’s 

applied, but that’s separate from my line of questions. I just didn’t 

know they were—even the number of applications, I never had 

somebody say we can’t tell you how many we have. It just bothers 

me as a Member of Congress. 

In the most recent solicitations released by your office for advanced fossil energy projects, an eligible project could apply as an 

advanced resource development project. These projects include 

projects that employ new or significantly improved technologies to 

economically develop and recover and produce traditional fossil energy resources with reduced greenhouse gas emissions. Just for 

clarification, an eligible project could involve either hydraulic 

fracking as a technology or natural gas as a traditional resource; 

is that correct? 

Mr. DAVIDSON. Correct. 

Mr. GREEN. Because coming from Texas, I also know we have 

some issues that we need to do. If we want to continue the successful development of natural gas, we need to use technology, whether 

it’s private sector or public sector, to be able to safely get that product out of the ground and as clean as we can do. Is the Department 

of Energy open to something like that as a grant project? 

Mr. DAVIDSON. Yes. Thank you, Congressman, for that question. 

First of all, on the prior point, let me just say we’re happy to 

work with your staff to try and get you the information on the 

number of applicants, so we’ll follow up with you on that. 

I’m glad you brought up the advanced fossil. We are very pleased 

to be having issued that in December with the support, obviously, 

of the Secretary, and it is the first time in recent years that we’ll 

be able to move on loans that are not just in the renewable side 

and the auto side. 

We think there’s a great opportunity within the fossil fuel area. 

That’s all the way from extraction through the generation side, 

through the end use in the area of energy efficiency and combined 

heat and power. We believe developers and project sponsors will 

have many uses for the fossil fuel. 

As you know, there are four requirements for any 1703 loan to 

be—— 

Mr. GREEN. I only have 5 minutes, and let me first—under the 

ATVM Program, Secretary Moniz has stated DOE would specifically reach out to component manufacturers. Has the DOE reached 

out to similar technology companies in the hydraulic fracking sector? 

50 

Mr. DAVIDSON. We just don’t have the ability to do that the way 

our solicitation is structured. What we do is we put out a solicitation, which we have now done, and then we have to wait for companies to apply to us. We are not allowed to engage specifically 

with companies. We can’t go out and pick one company or another. 

We just have to say, the Department of Energy is open for business, here are the requirements, so please apply for the program. 

But we very much encourage companies involved in the front end, 

the extractive side of the industry, to apply to the program. 

Mr. GREEN. Mr. Chairman, this wasn’t part of the loan program 

in the 2005 act, but we did do an amendment to the 2005 act for 

directional drilling. We had a Texas company who did its best they 

could with the technology, and the 2005 act authorized, but the 

DOE lab in Wyoming—because of former Congressman Barbara 

Cubin—and they did the research so we can. And part of our success in natural gas is not only hydrofracking, but also the directional drilling, and Department of Energy, I think, helped that 

company in the industry to be able to extend that reach from 

35,000 feet to more, but—and that’s one of the successes, I think, 

of what happened in the 2005 Energy Act. It wasn’t a loan program, but it actually helped us with the success we have today. 

So I know I’m almost out of time, Mr. Chairman. I appreciate 

you and our ranking member having this hearing today. 

Mr. MURPHY. The gentleman yields back. 

I now recognize the vice chairman of the full committee, Mrs. 

Blackburn of Tennessee for 5 minutes. 

Mrs. BLACKBURN. Thank you, Mr. Chairman, and I’m going to 

try not to take that full 5, but I want to welcome our witnesses. 

We do thank you for being here. As you know, we have a history, 

as Dr. Burgess said, of being very concerned and very interested 

in this program and the process that takes place at the LPO. 

Mr. Davidson, I have to tell you, I found your background fascinating, and Blackstrap Communications, and the fact that you 

were in the communications world and now you moved over to the 

energy world, and how you took that name as a tribute to your 

grandfather and with his selling molasses, I thought that was really quite fascinating. And maybe we should have you come back 

when we’re talking telecommunications and broadcasting. 

A couple of questions for you. On clarification, if I can, on just 

how many loans and loan guarantees you all have closed on and 

how many you are actively monitoring, what is your total? 

Mr. DAVIDSON. Thank you, Congresswoman. Thank you first for 

those nice comments to begin. 

The total number of loans we have that we’re actively—that in 

our portfolio, we’ve lent money to, are 33. 

Mrs. BLACKBURN. So you do have a total of 33 that are out there, 

and you’re actively monitoring those. And the amount of those 

loans, is it about $28 billion? 

Mr. DAVIDSON. It’s a little closer to $30 billion now. 

Mrs. BLACKBURN. OK. So it’s closer to $30 billion. 

And how much of your total loan funds have been disbursed? 

Mr. DAVIDSON. Well—— 

Mrs. BLACKBURN. By percentage. 

51 

Mr. DAVIDSON. Well, the short answer is we have approximately 

26 billion in the 1703 authorization still available and 16 billion in 

the ATVM available. 

Mrs. BLACKBURN. OK. 

Mr. DAVIDSON. So, a little over $40 billion still remaining. 

Mrs. BLACKBURN. OK. All righty. And let me ask you this. What 

I’d like to know, since we’ve had so many questions about due diligence and how the program goes about its due diligence, describe 

for me how the LPO actually monitors that portfolio. 

Mr. DAVIDSON. Thank you, Congresswoman, for that. First let me 

say, as you mentioned, I had been in the private sector for a number of years. I was in the banking business for a while, and I’ve 

been now in government for the last 5 years, State government and 

now here, and I just would like to reassure you, from what I’ve 

seen in the private sector and what I’ve seen at the LPO in my one 

year there, I think our processes, the way we go through our due 

diligence, the way we involve both our staff and outside consultants 

when we need them, outside engineers and outside financial advisors, is really first rate, and it’s really very thorough and—— 

Mrs. BLACKBURN. I’ve only got 5 minutes. What I’m looking for 

is specifics. 

Mr. DAVIDSON. OK. 

Mrs. BLACKBURN. What are some of your benchmarks? What are 

some of the components that you’re looking for as you do this due 

diligence? And if you cannot answer that question right now, what 

we want to see is to see that in writing. 

And, Mr. Rusco, in your report, you noted that while DOE had 

implemented some reforms, they have not done written policies and 

procedures for those loan-monitoring activities; is that correct? 

Mr. RUSCO. That’s correct. There are several areas where we 

want to see additional improvements. DOE did not consistently adhere to its policies for monitoring and reporting on credit risk, for 

example, on ongoing loans. They should be reviewing that credit 

risk periodically and writing reports. 

Mrs. BLACKBURN. So, they’re still conducting their business, and 

too much of a subjective format; would that be correct? 

Mr. RUSCO. I think that what they were doing is they have not 

yet put into place specific policies and guidance that they are following consistently, and they really need to do that to ensure 

that—— 

Mrs. BLACKBURN. Sometimes we say that’s kind of making it up 

as you go along. 

OK. Mr. Chairman, I’m going to yield back. 

Mr. MURPHY. The gentlewoman yields back. 

I Now recognize the ranking member Ms. DeGette for 5 minutes. 

Ms. DEGETTE. Thank you, Mr. Chairman, and thank you for having this hearing. It’s been several years, and I think a review of 

these programs is really overdue, and I appreciate it. 

I also want to thank Mr. Green for filling in for me while I was 

at a preexisting commitment this morning. 

I have some questions about how the loan guarantee program is 

working, since this is the first hearing we’ve had since Solyndra, 

and I want to start with you, Mr. Davidson. By what metrics does 

52 

the Loan Programs Office assess whether the clean energy loan 

portfolio is performing well, and what do those metrics show? 

Mr. DAVIDSON. Thank you for the question. Primarily two ways 

we look at it. One is on the financial performance, how we’re doing 

that way. I think, as I mentioned in my statement, of the 30 billion 

portfolio outstanding, 98 percent of that portfolio is performing and 

paying back. We have had losses of 2 percent that—— 

Ms. DEGETTE. Wait. What’s the amount of those losses? 

Mr. DAVIDSON. The losses are approximately 700 million over the 

five projects that have been described. 

Ms. DEGETTE. OK. 

Mr. DAVIDSON. Of the 30 billion portfolio. So we look at the financial performance as one metric, and the others we really look 

at the intention was are we bringing new forms of energy technology to market that would not be possible without this program? 

Ms. DEGETTE. And what’s your view on that? 

Mr. DAVIDSON. We think we have been very successful in a number of ways. If you look at the utility-scale solar industry, that did 

not exist. Before the Loan Programs Office made the first five loans 

to utility-scale solar, the government made the first five loans. We 

stopped making those loans in the 1705 program, and in 2011, 

since that time, 10 new utility-scale solar facilities have been built 

without a dime of government money. That’s a success. 

Ms. DEGETTE. OK. I’m sorry. 

Mr. DAVIDSON. So, we look at the nuclear facility. No nuclear facility had been built in this country in 30 years. Now the first one 

is being built. We think that’s directly related to this program. 

And then, finally, a lot of what’s happened in the auto sector with Ford retooling 13 facilities, the $5.9 billion loan from the 

ATVM Program went to Ford for that. Nissan was able to bring the 

batteries, which they had been producing in Japan. We brought 

those and now built a factory in Smyrna, Tennessee, where we’re 

making those battery packs. 

Ms. DEGETTE. Thanks. OK. 

So now, when Congress passed the loan guarantee program, they 

did that in order to help encourage funding of programs that the 

private sector would find too risky to fund on its own; is that correct? 

Mr. DAVIDSON. That is correct. 

Ms. DEGETTE. And so, therefore, are the amount of losses that 

you had described as seeing in line of what was expected by Congress when they passed that section XVII program into law? 

Mr. DAVIDSON. Thank you, Congresswoman, for that question. 

Ms. DEGETTE. Well—— 

Mr. DAVIDSON. A member or—— 

Ms. DEGETTE. Do you think that was in line with what Congress 

expected when they passed that into law? 

Mr. DAVIDSON. I think what Congress, when they passed, there 

was kind of the credit subsidy number that was mentioned for 

ATVM, that number was 7.5 billion, and for the 1705 program was 

approximately 2 1⁄2 billion. So essentially Congress said losses es- sentially could be high as $10 billion for our program. As I mentioned, losses to date are 700 million—— 

Ms. DEGETTE. So, actually it’s less—— 

53 

Mr. DAVIDSON [continuing]. So more than 90 percent of what was 

allocated remains. 

Ms. DEGETTE. It’s less than what was expected from Congress. 

Mr. DAVIDSON. Far less than what was—— 

Ms. DEGETTE. And how has the DOE program performed compared to what we’d expect from a private-sector portfolio? 

Mr. DAVIDSON. It’s a little hard to make that direct connection 

because by law and the way Congress set up our program, we are 

funding technology risk which normally commercial lenders would 

not make. 

Ms. DEGETTE. Right. 

Mr. DAVIDSON. So you would expect our portfolio to fare worse. 

The fact that we have a 98 percent success rating, I think, is a testament to the due diligence process we do and the loan monitoring 

that we continue. 

Ms. DEGETTE. OK. But nonetheless, you have incurred losses, 

and so I’m wondering has DOE made changes and improvements 

in response to those lessons learned? 

Mr. DAVIDSON. Thank you for that question. 

We certainly have learned—and I really would like to thank the 

great work that the GAO and the IG have done. We agree fully 

with the recommendations that they have made, particularly on 

the Allison report. What we have done is our policies and procedures, as we go through our due diligence, and as we go through 

our portfolio monitoring, are very robust, and I believe that’s why 

we have such a high success rate with our loans. 

What we have not done, and what we are in the process of doing, 

is fully documenting our active policies and procedures. So we 

agree fully. We need to document what we are doing, but we are 

in the process of putting the documents together. 

Ms. DEGETTE. But the GAO report, you agree with the GAO report, you need to work on documenting? 

Mr. DAVIDSON. Exactly. And we were working very closely with 

those recommendations—— 

Ms. DEGETTE. And when do you expect to have those recommendations? 

Mr. DAVIDSON. We are working on them now. We expect to have 

them within the next few months. 

Ms. DEGETTE. Thank you very much. 

Mr. MURPHY. Thank you. The gentlelady yields back. 

I now recognize Dr. Burgess for 5 minutes. 

Mr. BURGESS. Thank you, Mr. Chairman. So, again, thanks to 

our witnesses for being here. 

Mr. Davidson, one of the factors we identified as causing problems during the Solyndra investigation was that deadlines seemed 

to be dictated by outside forces, perhaps something in the stimulus 

bill or a political deadline, rather than when the loan guarantee 

was actually ready to close. So the question is what deadlines will 

govern the review of applications that are being submitted in response to the new loan program solicitations or under the existing 

ATVM Program? 

Mr. DAVIDSON. Thank you, Congressman, for the question. On 

the timeframe of when we get back to applicants? 

Mr. BURGESS. Yes, sir. 

54 

Mr. DAVIDSON. OK. Slightly different by our programs. For the 

1703 advanced fossil solicitation, which is now our only active solicitation on the 1703 side, we have part 1 and a part 2 application. 

Part 1, applicants apply to a part 1, and there we see if they meet 

the four required criteria, which is a new technology or significantly enhanced commercial technology; does it reduce sequestered 

greenhouse gasses; is the facility located in the United States or its 

territories; and do they have the ability to pay it back, reasonable 

prospect of repayment. When applicants submit, our team conducts 

that part 1 review. 

We have only just issued that solicitation. Our first part 1 application date was in February. We had a number of applicants for 

that part 1, and I can say now, without trying to get into too much 

detail, because we just don’t do that, that those part 1s have now 

been fully vetted, and many of them are moving into the part 2. 

And that has now taken us approximately 2 or 3 months for that 

part 1. 

Mr. BURGESS. You understand the committee’s concern. When reviewing the data around the Solyndra application, it did seem that 

there were—you look through the e-mails back and forth, and it did 

seem that there were political deadlines that really—or political 

pressures that were actually impacting upon the timeline, and you 

are comfortable at this point that that is not occurring now? 

Mr. DAVIDSON. Thank you for that question. I’m very confident 

that is not occurring now. And I’m currently—as one of the missions I had when I came in, as I mentioned, I had a real business 

background, and I think it’s very important that you be responsive 

to applicants. And I think that was an issue we had before. We 

now are trying to move very quickly to be responsive to all those 

in our pipeline and all future applicants. We are very focused on 

quickly turning around part 1s, letting applicants know if they will 

move into part 2 or will they be out of the process. 

Mr. BURGESS. There’s a semiannual report to Congress from 

April 1, 2012, from the Office of Inspector General from the Department of the Treasury. In that report, on the Department of 

Treasury’s inspector general’s consultation on the Solyndra loan 

guarantee, Department of Treasury pledged to work with Department of Energy to define the circumstances that constitute a deviation from the material financial terms and conditions of the loan 

guarantee and Treasury’s consultative role. 

So has the Department of Energy reached a full understanding 

with Treasury so that these definitions are now established, and a 

plan for cooperation and respective roles formulated and made public? 

Mr. DAVIDSON. Congressman, I have to say I’m not familiar with 

that issue, so if it’s OK with you, I’ll research and get back to you 

on that. 

Mr. BURGESS. So do you and Treasury talk? 

Mr. DAVIDSON. We have a very robust interagency process. Prior 

to our loans, we meet with OMB to discuss our deals, and Treasury 

is invited to that meeting. 

Mr. BURGESS. With all due respect, the information that this 

committee and the committee staff uncovered during the Solyndra 

investigation, it really didn’t seem that there was a robust relationVerDate Nov 24 2008 12:19 Jul 27, 2015 Jkt 037690 PO 00000 Frm 00058 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-150 CHRIS
55 

ship between Department of Treasury and Department of Energy, 

and really that’s what led to some of the concerns that are outlined 

in this report. 

I’m quoting here: ‘‘We found that Treasury did perform a consultation on the terms and conditions of the Solyndra loan guarantee. However, whether that consultation met the intent of applicable law and regulation is not clear because Treasury’s consultative role was not sufficiently defined.’’ 

Have we moved past that point? 

Mr. DAVIDSON. Congressman, I can’t speak to the time before I 

was here which that report indicates, but I’m very pleased now 

with the relationship we have on an interagency basis with both 

Treasury and the Office of Management and Budget. We meet with 

them regularly. They are aware of our portfolio. 

Mr. BURGESS. I would like for you for the record to go back and 

do this analysis and report, enter in writing for the committee as 

to how going forward we can maintain that expectation, that the 

consultation between Energy and Treasury will, in fact, occur the 

way it was designed to occur. 

Mr. DAVIDSON. OK. We’ll look into that. 

Mr. BURGESS. Thank you. 

Mr. MURPHY. Thank you. 

The gentleman’s time is expired. Now recognize Mr. Waxman for 

5 minutes. 

Mr. WAXMAN. Thank you, Mr. Chairman. 

The loan guarantee program is important for a number of reasons. It’s creating jobs, it is moving us closer to a renewable energy 

economy, and it represents a great opportunity to develop technologies to address the clear risks of climate change. 

Over the past century we have dramatically increased the 

amount of carbon we are emitting into our atmosphere. The scientific community has hammered home the point through report 

after report, warning of what will happen if we do not act to reverse this trend. 

We are witnessing in our very own communities the impacts of 

higher sea levels and more frequent instances of flooding, drought, 

and intense storms. The projects that these loans are supporting, 

solar and wind farms, nuclear plants, grade integration, these are 

the energy sources of the future, and they are the most effective 

way to deal with the issue of climate change because they address 

the root of the problem, which are, of course, carbon emissions. 

Mr. Davidson, how does the loan guarantee program fit into the 

President’s climate action plan? 

Mr. DAVIDSON. Thank you for that question, Mr. Chairman. We 

are a key part of the climate action plan. The President announced 

the issuance of our $8 billion advanced fossil solicitation as part of 

the climate plan announcement, and we are seen as a key component of the way to both help fund energy innovation, to work with 

the private sector, and to help reduce carbon emissions. 

Mr. WAXMAN. Can you give us an idea of the potentially transformational reductions in carbon emissions that these programs 

will be capable of, and what are we achieving in the projects that 

are already online? 

56 

Mr. DAVIDSON. Thank you for that question. The projects online 

have produced a great deal in our solar and wind facilities. One of 

the things I particularly like to remark upon is with the new nuclear facility, that is avoiding 10 million tons a year of carbon. So 

there may be controversy about nuclear power, but it is one of the 

key areas is extremely effective in reducing greenhouse gas emissions. 

The other aspect I think we’d like to talk about, as you mentioned, is the jobs impact in the solar facilities, the utility-scale 

solar facilities, that we were involved in financing. Those created 

directly 7,000 jobs in the construction and operation of those facilities. And with the 5 concentrated solar facilities that we built, 

we’ve been able to track job creation in 39 separate States across 

the Union that have participated directly into the supply chain 

there. 

So it’s not only the funding of these projects, but it’s the ripple 

effect for the supply chain, and that is 7,000 for the 10 we’ve funded. Since we’ve stopped funding, now that utility-scale solar is a 

completely bankable industry, more than 10 utility-scale solar facilities have been built, and we think the employment there is 

equally as large. And as you know, solar now employs over 140,000 

people in this country, up from virtually nothing a decade or two 

ago. 

Mr. WAXMAN. So these are programs that are now self-sufficient 

with private investment, but if we didn’t have a loan guarantee 

program, would the private sector have moved forward without this 

effort on behalf of the government? 

Mr. DAVIDSON. Thank you, Congressman. You never know what 

could have happened, but the reason Congress established this program was to provide debt financing to those projects which were 

meretricious, but could not attract financing from a private-sector 

bank. And that is why we became involved in photovoltaic solar, 

that’s why we became involved with the nuclear industry, and 

that’s why we’re hoping to find things in the advanced fossil area 

can do. There are many things; carbon capture and sequestration 

we feel is a very interesting area, and we’re looking forward towards applications in those ways. 

Mr. WAXMAN. Press reports indicate that the EPA will soon announce new standards for carbon emissions from coal-fired power 

plants. Will the breakthroughs you are helping to fund help meet 

these goals? 

Mr. DAVIDSON. Congressman, as you know, we don’t know what 

those regs will be until they’re issued, but to the extent part of it 

is how do we make coal facilities cleaner, our program is specifically set up for that, for coal operators who would like to install 

carbon capture and sequestration; our debt financing is available 

for that, or some of the newer technologies, chemical looping and 

things of that nature. That is what and one of the reasons the 

President announced in the climate action plan this $8 billion advanced fossil solicitation. 

Mr. WAXMAN. Well, Mr. Chairman, I think the DOE Loan Programs Office can continue to support break-through technologies 

that address the threat of climate change, and I fully support their 

efforts. 

57 

I yield back my time. 

Mr. MURPHY. Gentleman yields back. Now go to Mr. Griffith of 

Virginia for 5 minutes. 

Mr. GRIFFITH. Thank you, Mr. Chairman. 

Let me say upfront, I am very pleased to hear you mention chemical looping, because obviously if that works, and the plans are 

going forward on that, we don’t have any capture; we do have sequestration issues, but it eliminates the real need for capture because it comes out with just CO2. So I am very pleased to hear that 

that’s on the agenda, support good loans being made. I know 

there’s some risk involved. 

What I’m really concerned with is to make sure that we are following the laws as it was set up. This is the first time that we’ve 

been back, as Ms. DeGette pointed out, since we had a lot of hearings on the Solyndra issue, and I’m curious, because at that time, 

the last time we had a meeting, the inspector general’s office indicated that investigations were still ongoing. 

Mr. Hass, can you advise us, are the investigations still ongoing 

into what happened with Solyndra, and are we expecting any—or 

do you know if there’s any possible criminal conduct that may have 

taken place during this time period? 

Mr. HASS. I can say that investigations are still ongoing, sir. 

Mr. GRIFFITH. They are still ongoing? 

Mr. HASS. Yes, sir. 

Mr. GRIFFITH. All right. And I was a little vexed by comments 

made earlier by Mr. Waxman indicating that the hearings had 

shown that there was no wrongdoing. Whether or not there were 

ever any criminal charges that come out of this, I think there clearly was wrongdoing, and I hope that in the future we’ll make sure 

that the law is actually followed. And I feel compelled to go 

through a litany of these and ask, have we learned our lessons? 

Are we still going down this path? 

In regard to Solyndra, on December 13, 2010, DOE sends a letter 

to Solyndra advising Solyndra that they are in default. Section 

1702(g)(4)(A) indicates, quote, ‘‘If the borrower defaults on an obligation, the Secretary shall notify the Attorney General of the default.’’ That is so that under 1702 (2)(g)(4)(B) the Attorney General 

can be involved in making—or taking action to make sure that the 

American taxpayer is protected. In the Solyndra situation that was 

not done. 

If there are defaults, Mr. Davidson, are you all notifying the Attorney General so that the Attorney General’s Office can at least 

be a part of the team in trying to protect the American taxpayers 

when we try to collect on a loan that may default? 

Mr. DAVIDSON. If there is a default pursuant to the law, and we 

have to get DOJ involved, we do. 

Mr. GRIFFITH. OK. Because that did not happen in the Solyndra 

situation, and they went on to do a subordination. Furthermore, in 

regard to subordination, section 1702(d)(3) specifically says, quote, 

‘‘The obligation shall be subject’’—talking about the loan—‘‘The obligation shall be subject to the condition that the obligation is not 

subordinate to other financing.’’ 

It goes on in another section to say, ‘‘Superiority of Rights,’’ in 

1702(g)(2)(B), ‘‘The rights of the Secretary, with respect to any 

58 

property acquired pursuant to a guarantee or related agreements, 

shall be superior to the rights of any other person with respect to 

the property.’’ However, the DOE at the time decided that subordination restriction in section 1702(d)(3), referring to Susan Richardson’s memo, the subordination restrictions, section 1702(d)(3), is a 

condition precedent to the issuance of a loan guarantee and not a 

continuing obligation restricting restructuring options. 

Now, I believe it was wrongdoing to come up with that opinion, 

and, as we know, there was a memo that said, well, this is your 

best option, but there was never contact with the Department of 

Justice on making a decision to subordinate. Even though someone 

at Treasury e-mailed back and said, we don’t think you can do this, 

I believe it was wrongdoing not to consult with the Department of 

Justice. I believe it was wrong under the law to do a subordination 

in that case, and the subordination—forget the riskiness of the loan 

of Solyndra, the subordination cost the American taxpayers $170 

million, and I believe that was wrongdoing. 

Do you believe that those lessons have been learned, or do you 

all think that you still have an option of subordinating a loan, notwithstanding the clear language of the statute? 

Mr. Davidson. 

Mr. DAVIDSON. Thank you for the question, Congressman. 

Now, I realize this issue of subordination is a very important 

issue. It’s important to you. It’s very important to us in the Department. I can say we have absolutely no plans to subordinate any 

loans in our portfolio. 

Mr. GRIFFITH. Well, I hope that you not only have no plans, but 

I hope that even in a dire circumstance, that if you need authority, 

you come back to Congress because it clearly is not granted in the 

Code section. 

I’m excited about some of the things that are happening in the 

energy world. We have had a great resurgence in American energy. 

Hopefully we can find even more ways to do that, and if this loan 

guarantee program can move that forward, that’s great. I just want 

to make sure that we’re following the law, and that we are not— 

after having made a risky investment, and people can argue about 

whether that was wise or not, that when we find that somebody 

is in trouble, that we follow the law and we try to protect the 

American taxpayer at that point in time. 

Mr. Chairman, I appreciate it very much, I appreciate the witnesses being here, and I yield back. 

Mr. MURPHY. Gentleman yields back, and now we recognize the 

gentleman from Iowa Mr. Braley for 5 minutes, if he’s ready. 

Mr. BRALEY. Thank you, Mr. Chairman. 

I’m delighted to have the opportunity to be here with the distinguished panel we have in front of us today, and one of the things 

that I would like to hear a little bit more about is the response to 

the IG report. One of the things that we’d like to hear a little bit 

more about in detail is a little bit about the summary of the findings and recommendations from that report that you think have an 

impact on the work of the committee going forward. 

Mr. DAVIDSON. Thank you, Congressman. 

The IG report and the GAO report raise some very good points. 

We are in full agreement on them about ways we can make our 

59 

policies and procedures even better. As I mentioned, we feel that 

we have taken a number of steps, partly as a result of the reports. 

Some of those I’d like to go into that we’ve taken, moved ahead 

on, are we’ve created the Risk Management Division, which was a 

key part of the reports, and we’ve hired a senior credit officer. 

We’ve also significantly staffed up that operation. We have tasked 

the Risk Management Division to prepare separate reports on each 

one of our credits. We have already been doing that as part of our 

portfolio management team, but now we have a separate set of eyes 

on every one of our credits coming out of our Risk Management Division. That began last year. They did half our portfolio. Now every 

year they will be analyzing all of our loans. 

We have updated and strengthened the charters for our two internal oversights boards, the Project Review Committee and our 

Risk and Portfolio Management Committee. These are now staffed 

by DOE personnel, but the majority of people on that are non-LPO 

members. It’s a separate set of eyes on all of our transactions and 

actively looking at our portfolio on a biweekly basis. And finally, 

we’ve developed a very robust internal electronic system to control 

our process and procedures and track things. 

So these are all part of the recommendations, but they’re also 

just part of our continuing interest in improving, because we’re 

very, very focused on making sure we are really safeguarding taxpayer money. We take that extremely seriously. 

Mr. BRALEY. When people use words like ‘‘internal electronic systems,’’ it leaves a lot of us with questions about, what the hell does 

that really mean? So can you break that down as it relates to the 

changes in this risk management system in terms of what you’re 

going to be doing differently that would lead to different outcomes 

than what we had before? 

Mr. DAVIDSON. Yes. Thank you, Congressman, and I don’t mean 

to be vague in what that was. 

Mr. BRALEY. No, no. I’m one of those people who’s just innately 

curious. 

Mr. DAVIDSON. Yes. Thank you. 

We’ve really just been automating our internal systems. We had 

a generation one. We are now on generation three, and we are 

planning to roll out generation four. This just allows people from 

throughout the organization to talk on the same platform about the 

same credit, so people on our origination team with our risk management team and portfolio management are fully impacting together on the same schedule. 

Mr. BRALEY. And is that new system fully functional at this 

point? 

Mr. DAVIDSON. Version three is fully functional, and we’re rolling 

out the next version within the next few months. 

Mr. BRALEY. And one of the things you also identified in your description was that separate reports on each one of your credits 

were going to be generated as part of this new system. Can you explain that in a little more detail? 

Mr. DAVIDSON. Yes. That’s not so much part of that system. 

That’s part of the creation of our Risk Management Division and 

being able to fully staff up, or more fully staff up, that Risk Management Division. This has always been a goal that’s been one of 

60 

the recommendations. We do extensive portfolio analysis. We have 

55 people in our Portfolio Management Division, because when we 

make a loan, we hold those loans, and we will be monitoring those 

loans for the next 25 years. That’s one of the reasons we’re taking 

the time to make sure when we document our policies and procedures, we do them absolutely correctly, because these really have 

to stay in place to manage what we do for the next 25 years. So 

we take that responsibility very seriously. 

I lost my train of thought there. 

Mr. BRALEY. Well, let me just move on to a different question, 

then. When I talk to lenders and I talk to borrowers, one of the 

things they’re always concerned about is the inordinate amount of 

paperwork associated with the processing of any loan these days, 

and sometimes the requirements don’t make sense at face to the 

people who are being asked to provide information. 

After the S&L crisis, I sold a house, bought a cheaper house, and 

was required to fill out an affidavit explaining why I was buying 

a house cheaper than the one I just sold. It didn’t make a lot of 

intuitive sense to someone whose parents grew up in the Depression. 

So as we’re looking at how you’re providing oversight and underwriting guidance, are you looking at ways to make sure that the 

oversight and the underwriting criteria make sense for the type of 

risk that’s being underwritten? 

Mr. DAVIDSON. Thank you, Congressman, for that question. 

We take that very seriously. That is the whole reason we do such 

extensive due diligence. I think the GAO has mentioned that our 

due diligence is as extensive, if not more extensive, than what happens in the private sector. 

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

Mr. MURPHY. Gentleman’s time has expired. 

Recognize Mr. Johnson for 5 minutes. 

Mr. JOHNSON. Thank you, Mr. Chairman, and I’d like to thank 

our panel for joining us today, as well. Thank you, gentlemen, for 

being here. 

Mr. Davidson, at the time of the stimulus, the credit markets for 

energy projects were in rough shape. Your project finance people 

pay close attention to credit market conditions; is that correct? 

Mr. DAVIDSON. Correct. 

Mr. JOHNSON. So what is the current condition of credit markets? 

Mr. DAVIDSON. I’m not an economist, so take that, what I say, 

with that caution in mind. But just reading the paper, credit markets have gotten better than they were certainly in 2009 and early 

into 2010. 

Mr. JOHNSON. But, obviously, if your Department is paying close 

attention to those, your team knows that that improvement has occurred. 

Has the availability of private financing for clean-tech projects 

improved since 2009? 

Mr. DAVIDSON. That’s a very interesting question, Congressman. 

Thanks for asking it. 

In certain segments it has improved, but, for instance, as I’ve 

mentioned a few times, we made the first loans to the utility-scale 

solar industry. At that time, developers—and some of these were 

61 

very big-named developers putting hundreds of millions of dollars 

into projects—they could not arrange commercial bank financing. 

We made those loans, and then we stopped making those loans. 

Mr. JOHNSON. But I’m not talking about what you did during the 

stimulus. We understand that. I’m talking about since 2009 

through today, have those credit markets for clean-tech projects improved? 

Mr. DAVIDSON. For some segments of the clean-tech market, they 

have. For others, it is still difficult. 

Mr. JOHNSON. OK. So how does that credit market improvement 

change the role of the DOE loan programs and the type of projects 

that it supports? 

Mr. DAVIDSON. Yes. Well, thank you, Congressman. I know you 

are concerned, as we are very concerned, that we make the loans 

to the right type of companies that need it, and they’re not just 

coming to us for lower-cost financing. We take the issue of making 

sure that the projects we fund are ones that would find it very difficult, if not impossible, to raise financing from a commercial 

source. 

The first alternative is always for a project to go to a commercial 

lender. If the project sponsor finds that is not possible, they come 

to us. We do not go out to anybody. We put out a solicitation, and 

we can only deal with applicants if they respond to a solicitation. 

Mr. JOHNSON. Well, therein lies part of the concern that I have 

and that many of my colleagues, many of my constituents have. If 

a project goes out to the private sector markets, and they cannot 

find funding—I’m a patent holder, and I have struggled with trying 

to raise money for tech projects myself. And so if they go to the private markets and they can’t get the money, what kind of additional 

due diligence does your Department do to determine that taxpayer 

funding should be spent on something that the credit markets say 

might not be a worthy project? 

Mr. DAVIDSON. Thank you. That is an excellent question. It’s one 

we spend a great deal of time thinking about. 

Maybe to give some comfort is we will not look at a project unless it’s brought to us by a sponsor that is committing at least 20 

percent by law, but in reality it’s always closer to 30 percent of real 

equity dollars in the project. 

Mr. JOHNSON. Yes. 

Mr. DAVIDSON. So someone has to come to us with a project that 

20 percent at least is already equity funded, and all the other parts 

of the project have to be in place. 

Mr. JOHNSON. OK. 

Mr. DAVIDSON. For instance, we do a great deal of electricity-generation projects. There has to be an off-take agreement in place. 

There has to be equity in place. There has to be regulatory approval in place. 

Mr. JOHNSON. Mr. Rusco, how would you respond to those questions? Has the private markets and credit markets improved, and 

do you believe that should change the way the DOE loan programs 

should work? 

Mr. RUSCO. Yes. The financial markets have largely recovered 

from their collapse in the run-up to the recession. I do think that 

that should be an important consideration. 

62 

I think that there is an inherent problem with the way that the 

1703 program is set up in that innovative projects that come there 

are required to pay their credit subsidy costs. The less viable they 

are in the market, the higher the risk is; therefore, the higher the 

credit subsidy costs are. And I’m concerned that may be a deterrent 

to the program actually being effective in meeting its goals. 

Mr. JOHNSON. OK. I have one more question and just a short 

time. Do you have any loan programs that you’re anticipating 

granting loans for this year? If so, when do you anticipate granting 

your next loan program? 

Mr. DAVIDSON. Well, the current active solicitation is an advanced fossil. We issued that in December. The first application 

gate or window for that was in February, a few months ago. We 

received a number of applicants. We are moving those through our 

system. We have a part 1 and a part 2. Sometimes the part 2 system, because it involves very thorough due diligence, can take anywhere from 6 months to—in the case of the Vogtle transaction, that 

took over 5 years. 

Mr. JOHNSON. So—— 

Mr. MURPHY. Gentleman’s time has expired. 

Mr. JOHNSON. OK. I yield back, Mr. Chairman. 

Mr. MURPHY. I now recognize Mr. Tonko for 5 minutes. 

Mr. TONKO. Thank you, Mr. Chair. 

I think that it’s important that we set the record straight of the 

committee’s investigation of the Solyndra loan. I was not part of 

the Energy and Commerce Committee at the time of the investigation, but there has been exhaustive review of the committee report 

and the record. And we reviewed over 300,000 pages of documents, 

issued multiple subpoenas, conducted over a dozen interviews and 

had four hearings. 

The evidence clearly demonstrated that loan guarantee decisions 

were made on merits. The committee found no evidence that loan 

guarantee decisions were influenced by political contributions or 

political considerations. There was a robust debate within the administration about the Solyndra loan, and decisions were made 

that ultimately turned out to be the wrong ones. But, Mr. Chair, 

the committee’s investigation found no evidence of wrongdoing by 

administration officials with regard to the Solyndra loan. 

With that being said, DOE’s support of the American auto industry through the Advanced Technology Vehicles Manufacturing Loan 

Program has resulted in a number of significant success stories. Director Davidson, as you mentioned in your testimony, DOE’s support of Tesla helped to create thousands of jobs in California, and 

the company repaid the entire remaining balance on its loan 9 

years earlier than required. Other auto manufactures like Ford 

have modernized factories and produced new, advanced engines 

with DOE’s support. 

I’d like to learn more today about the ATVM program and the 

innovative new technologies that it is helping to produce. So, Director Davidson, what is the purpose of the ATVM program? 

Mr. DAVIDSON. Thank you very much, Congressman. 

ATVM, the purpose of the program is to assist manufacturing for 

OEMs and suppliers in this country to help achieve the efficiency 

targets, to help boost fuel efficiency. The goal is increasing fuel effiVerDate Nov 24 2008 12:19 Jul 27, 2015 Jkt 037690 PO 00000 Frm 00066 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-150 CHRIS
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ciency for lightweight vehicles, and we do that by providing support 

for the manufacturing facilities for car makers and component 

makers. 

Mr. TONKO. So we’re creating a better product and more in keeping with the consumer’s demand? 

Mr. DAVIDSON. It’s a resource to help build the manufacturing 

capability in the United States. So for Ford, we retooled 13 facilities; Nissan, we brought in production, which had been happening 

in Japan, we brought it to Tennessee; and Tesla retrofitted a whole 

factory. That’s why we think there will be real interest in the program going forward, more on the side of the suppliers, component 

suppliers and component manufacturers. We have been hearing a 

great deal from them about interest in the program since Secretary 

Moniz made an announcement at a supplier convention last month 

that the program was open for business. 

Mr. TONKO. Well, in my district, and I’m certain in districts 

across America, congressional districts across America, the number 

one issue is jobs. How many jobs have you quantified to have been 

helped by the ATVM program? How many have we helped to create? 

Mr. DAVIDSON. The number we use, and a lot of these numbers 

come from Ford, which is the number one recipient of the money 

there, is 35,000 jobs have been created or been sustained as a result of that. 

Mr. TONKO. And how many—is there a cluster of States that 

might have seen the majority of those jobs? 

Mr. DAVIDSON. The majority of it has been in California, certainly for Tesla; and then the Ford was really up in the Midwest 

in upstate New York, Michigan, Ohio, around there. 

Mr. TONKO. Yes. 

What recent steps has the Department taken to revitalize and 

improve the ATVM program? 

Mr. DAVIDSON. Yes. Well, as I mentioned, the Secretary made an 

announcement that the program is back up and open for business, 

so there is $16 billion remaining, really for helping companies come 

in. What we have been hearing is because the auto industry is 

doing well now, there are a number of suppliers, component suppliers, overseas suppliers, that are looking to possibly build facilities elsewhere; it might be in the United States, it might be in 

Mexico or Canada. And as they look at moving to the United 

States, we think this could be a real resource to help them make 

the decision to locate and bring those jobs and investment to the 

United States. 

Mr. TONKO. And the whole move to retrofit and move into advance manufacturing, which is the current MO, I believe, by many, 

how has the ATVM program helped to support American manufacturing? 

Mr. DAVIDSON. The whole purpose is how can we retrofit facilities, build facilities, and do the software and engineering integration. That is financeable by this program, the engineering, to really 

help aid in manufacturing. 

Mr. TONKO. And the GAO has raised concerns about whether 

there is demand for ATVM loans. And in April, as you indicated, 

Secretary Moniz announced improvements to the ATVM program. 

64 

Can you build upon, you know, give us more information on some 

of those improvements? 

Mr. DAVIDSON. Yes. Thank you for that. 

As the chairman mentioned, not many loans have been made. I’m 

pleased to say there is one active loan in the portfolio now, so we’re 

working on that one very diligently. And since the Secretary has 

made his announcement, and since we’ve been actively talking with 

the supplier sector and the OEMs, we are finding there is real interest. 

There was a certain amount of confusion before about whether 

suppliers could apply, the type of things that would be required. 

We’ve been able to clarify that for them, and we are out speaking 

and communicating. We’ve had a number of meetings, and we are 

cautiously optimistic that there will be interest, and we will be seeing if loan applications come in within the next few months. 

Mr. MURPHY. We’re out of time. 

Mr. TONKO. Well, I would think that as we push in innovation 

economy, the new technologies, groundbreaking new technologies, 

are essential. So I thank you for what the program is doing, and 

I yield back. 

Thank you, Mr. Chair. 

Mr. MURPHY. Thank you, Mr. Tonko. 

I now recognize Mr. Harper for 5 minutes. 

Mr. HARPER. Thank you, Mr. Chairman, and thank each of you 

for being here. 

And, Mr. Davidson, I’d like to start with you. And what I would 

ask, I probably would ask Mr. Rusco to follow up with, on your 

thoughts on this question. You know, as we look at the program, 

try to figure out where it’s going, I believe there’s, what, $16 billion 

left in the program, is that correct, roughly? 

Mr. DAVIDSON. Congressman, there’s $16 billion on the auto side, 

the ATVM program. 

Mr. HARPER. Sixteen billion. 

Mr. DAVIDSON. In the energy program, 1703, there’s $28 billion 

remaining. 

Mr. HARPER. OK. Great. 

If you look at the existing ATVM program that you just talked 

about, you know, you see established automobile manufacturers 

such as Ford and Nissan, and you see companies that are or were 

startups comparatively, Tesla, Fisker and the Vehicle Production 

Group. So it almost appears to be two different types of projects. 

So can you elaborate what criteria you used to determine eligibility 

for the ATVM program? 

Mr. DAVIDSON. Thank you, Congressman, for that question, and 

I’m happy to respond and talk more about ATVM. 

It’s not my criteria, first of all; it’s the criteria that Congress provided for what we can do. And that is, it is to assist in funding a 

manufacturing facility, either the new build, or a rehabilitation, or 

a reequipping of a facility, that is either making the car, light vehicle— making the car or making the component that will be a part 

of an advanced vehicle. 

An advanced vehicle is defined as a light vehicle that is 25 percent more fuel efficient than the comparable car was in 2005. So 

if you can contribute to that fuel efficiency, you are then a desVerDate Nov 24 2008 12:19 Jul 27, 2015 Jkt 037690 PO 00000 Frm 00068 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-150 CHRIS
65 

ignated component or a designated auto supplier, and if you’re 

building a facility or reequipping a facility, we can finance you. 

Mr. HARPER. All right. You know, just from recent statements 

from the Secretary, it appears that maybe the program goals are 

changing. Can you elaborate? Are the goals changing? Are they—— 

Mr. DAVIDSON. Thank you for that question. 

The goals aren’t changing. It’s really a communication to the industry, because this is really a program to assist industry. And the 

communication to the industry was that suppliers, component suppliers, are very welcomed and encouraged to apply. 

Mr. HARPER. Right. 

Mr. DAVIDSON. The suppliers were in very tough shape 4 or 5 

years ago, as the whole auto industry was. Now, as we’re doing 

very well in auto assembly for the OEMs, there seems to be real 

demand from the supplier base. And as I mentioned, many of the 

suppliers are thinking of relocating to the United States. We’d like 

to help them to make that decision to relocate here. 

Mr. HARPER. Thank you, Mr. Davidson. 

Mr. Rusco, your comments on what I’ve just asked Mr. Davidson 

as far as the ATVM loans are concerned. 

Mr. RUSCO. Well, I think there is some concern about whether 

there is a demand out there, and part of the concern comes from 

our conversations with the applicants, former applicants of the 

original solicitations. Many of the applicants that we spoke with 

said that there were requirements, and the length of time it takes 

to get through this process are just not worth it, and they were not 

interested in pursuing those. 

So, I don’t know what’s going to happen in the future, and I 

know that DOE is trying to rejuvenate this program, but so far 

there has not been a lot of actual interest. There’s only one active 

application. 

Mr. HARPER. OK. Mr. Rusco, GAO has recommended that unless 

DOE demonstrates demand for new ATVM loans, Congress should 

consider ending the program. Is that correct? 

Mr. RUSCO. Yes. We think that unless there is a demand that 

can be demonstrated for these loans, that Congress may wish to rescind some or all of the remaining credit subsidy money and use 

it elsewhere. 

Mr. HARPER. Mr. Davidson, are there any additional active ATVM loan applications, since the one for $200 million reported by 

GAO in March of this year? 

Mr. DAVIDSON. Congressman, that is the only active one in the 

portfolio. I’d like to mention, the Secretary made the major announcement at the supplier event. That was just a little over a 

month ago. 

Mr. HARPER. OK. 

Mr. DAVIDSON. Since that time we’ve been—I’m the person having meetings, having a number of very interesting meetings with 

people that I believe will be applicants in the relatively near term. 

Mr. HARPER. But no active at this point since that time. 

And so we’ve only got just a few seconds, but how do you do your 

outreach to automobile manufacturing companies? How are you 

contacting them to determine if they’re eligible, or have interest, or 

create interest? 

66 

Mr. DAVIDSON. Excellent question, Congressman. And because 

the program has been fairly quiet for the last few years, that is an 

issue we are working with, and it’s all the ways we try and do communication. We’re trying to staff up to hire the right people, going 

to industry events, and we’re doing things like the Secretary, communicating very publicly that we’re open for applications. 

Mr. HARPER. When you said you had some that were interested 

that you’re looking at, if you’re talking about, let’s say, you go talk 

to 10 different potential companies, how many of those express interest? How many would you say on average might flatly refuse or 

reject that? 

Mr. DAVIDSON. Well, if they’re talking to me, they’re already interested. 

Mr. HARPER. Yes, but you have some that are not interested; you 

have some that are. Fair? 

Mr. DAVIDSON. Correct. 

Mr. HARPER. I yield back. 

Mr. MURPHY. The gentleman yields back. 

I recognize Ms. DeGette for a follow-up question. 

Ms. DEGETTE. Thank you very much. 

Mr. Chairman, I know Mr. Tonko talked about those Solyndra 

hearings that we had in 2011 and 2012, and he wasn’t on the committee, but I was, and, in fact, I was the ranking member of the 

committee. We had 300,000 pages of documents, subpoenas, interviews, four hearings that went on and on, and we never did find 

evidence of wrongdoing. It was clear that the loan guarantee decisions were made on the merits, but as Mr. Davidson said today, the 

reason we have loan guarantees is because we want to encourage 

this type of investment, and it is, by nature, risky. 

And I just also want to thank the witnesses for coming today. 

And I want to comment that I was pleased to see, number one, that 

DOE is recognizing—they’re under the losses that Congress had 

predicted and anticipated when we passed the loan guarantee program back under the Bush administration, but also that they’re implementing the recommendations of the GAO. 

I look forward to hearing how that implementation goes, because 

I think that’s important. And I yield back. 

Mr. MURPHY. Thank you. 

Another follow-up question. Mr. Hass, you’ve been quiet. We 

haven’t been asking you a lot, but I want to ask you this: You’ve 

had an opportunity to learn extensively the testimonies from Mr. 

Davidson and Mr. Rusco here, but also with the GAO report and 

analysis of what had taken place, are you satisfied that the 

changes you’ve recommended, that GAO has recommended have 

been put into place at the Department of Energy for this loan program? 

Mr. HASS. Well, sir, I will say that we have seen a lot of progress 

over the years from our evaluations, and a lot of things are still 

ongoing. We can’t say that they are 100 percent successful, but it 

looks like there’s a lot of movement. 

Now, in response to our last reports we recently issued, the Department will be providing a matrix that will set out an exact timetable on when they expect to have all of the recommendations reVerDate Nov 24 2008 12:19 Jul 27, 2015 Jkt 037690 PO 00000 Frm 00070 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-150 CHRIS
67 

solved, and we should be getting that soon as part of our normal 

process. 

Mr. MURPHY. And then will you continue to follow up with them, 

so you’ll present the matrix, and you’ll continue to monitor that to 

see that those plans are being put into place? 

Mr. HASS. Yes, sir, especially with the long nature of the loans, 

as you’ve mentioned, and the large value. They’re an important 

part of our risk assessment we do every year. We have plans in 

place to conduct some additional work this year and in the coming 

year. 

Mr. MURPHY. I thank you, and I thank the panel. And I ask 

unanimous consent that the Members’ written opening statements 

be introduced into the record, and, without objection, the documents will be entered into the record. 

And in conclusion, again, Ithank all the witnesses, all the Members that have participated in today’s hearing. I remind Members 

they have 10 business days to submit questions for the record, and 

I ask that the witnesses all agree to respond promptly to the questions. 

With that, this hearing is adjourned. 

[Whereupon, at 10:58 a.m., the subcommittee was adjourned.] 

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