Environmental groups are protesting a proposed $50 billion increase to an existing federal loan guarantee program for "innovative" energy technologies that could expand funding beyond renewable energy to include nuclear power and certain kinds of coal plants.
The proposal is part of the Senate's $884 billion version of the government's stimulus package. It is just one example of the number and size of items buried in the proposal and an illustration of the battles that loom as the House and Senate try to reconcile their proposals.
During its consideration of the stimulus package, the Senate Appropriations Committee adopted an amendment from Sen. Robert F. Bennett (R-Utah) that was supported by some leading Democrats including Senate Energy and Natural Resources Committee Chairman Jeff Bingaman of New Mexico.
Bennett's amendment took $500 million away from $10 billion initially allotted to a new loan guarantee program for renewable energy and electric transmission projects and moved it to an existing loan guarantee program established under the Energy Policy Act of 2005. The existing program covers a much wider variety of energy projects, including "advanced nuclear" power plants, plants that "gasify" coal or turn it into liquid form, and plants that capture and bury carbon dioxide, a greenhouse gas produced by coal power plants.
Moving the money allows the government to stretch its loan guarantees further. Because of different accounting methods used in the two programs, a $500 million appropriation would permit approximately $5 billion in loan guarantees under the renewable program but $50 billion under the broader, existing program.
The Energy Department has the ability to give out $42.5 billion in loan guarantees under the existing program. But Congress limited the amount that could go to nuclear power plants to $18.5 billion, while setting aside smaller amounts for renewable energy, coal and uranium enrichment. Utilities and power companies have already filed applications for about $122 billion worth of loan guarantees for 21 new nuclear power plants.
The additional loan guarantee authority provided by Bennett's amendment has no restrictions or quotas; more than half a dozen types of projects would qualify. The guarantees are especially important for the nuclear power industry. Without them, it is almost impossible to obtain financing for new nuclear power plants, which have huge capital costs and long construction periods.
Both nuclear supporters and foes are uncertain about how much support to expect from the new Energy secretary, Steven Chu, who is a strong supporter of action on climate change. During his confirmation hearing, Chu pledged to expedite the release of existing loan guarantees, but he avoided any commitment to an aggressive expansion of nuclear power.
Daniel J. Weiss, senior fellow and director of climate strategy at the liberal Center for American Progress, said "this could be a real contentious issue in conference" when House and Senate negotiators try to reconcile the different versions of the stimulus package.
"This is the exact kind of spending President Obama said he didn't want in the recovery package. It will take a lot of time to spend this money and, once you do, it won't create many jobs," he said.
He added that it would take years to design, permit and start building nuclear power projects, and that nuclear power companies were "hoarding these loan guarantees to use at a different time."
Nuclear power proponents maintain that that the nation needs to expand its nuclear power capacity to keep pace with electricity demands and do so in a way that does not add greenhouse gases.
Bennett's ability to leverage the relatively small $500 million into an additional $50 billion of loan guarantees stems from an arcane but important aspect of federal budgeting. Budget rules require the government to set aside a percentage of the amount of loan guarantees to account for the risk that borrowers might default. But Bennett's amendment expands a program that has different rules, effectively allowing the government to set aside a smaller amount than usual, only 1 percent.
Environmental groups yesterday were working on a letter to senators, arguing that the risk of default on the loans for nuclear and coal projects — and thus the potential cost to taxpayers — was much higher than that.
"The credit risk to the taxpayer is very significant," said Josh Dorner, a spokesman for the Sierra Club.
