Nuclear Information and Resource Service

Tell Dept of Energy: Drop outrageous loan guarantee rule proposal

The Department of Energy has submitted an absolutely outrageous proposal to weaken its existing regulations on loan guarantees for new nuclear reactor construction, and thereby increase the risk to taxpayers that loans will never be repaid.

Below is a comment letter to DOE opposing this proposed rule change. This letter is also set up to go to the White House, since it is an embarrassment that President Obama's energy department would propose such a measure to support the nuclear power industry above the interests of the taxpayers.

Please feel free to send the comment letter as it is, or to edit it however you like.

And then please ask your friends and colleagues to send in comments as well.

February 09, 2010

Subject:

David Frantz, Department of Energy

I am writing to oppose the changes in the loan guarantee program proposed by the Department of Energy (proposed rule, Loan Guarantees for Projects that Employ Innovative Technologies, 74 Fed. Reg. 29,569, August 7, 2009).

This proposed rule appears to be promulgated with only one interest in mind: that of the nuclear power industry. The public’s interest in assuring that unnecessary risks are not taken with taxpayer money would be cast aside if this proposed rule were adopted. That such a proposal could come from the Obama Administration’s Department of Energy is both embarrassing and outrageous.

The proposal appears to stem from a belief by the DOE that few, if any, nuclear reactors seeking funding under this taxpayer-backed program would be eligible under the current regulations. It is impossible to know this for sure, of course, because the DOE has been unconscionably secretive in its entire management of this program. Since it is funded with taxpayer dollars, it would seem that DOE should be bending over backwards in the other direction—to ensure the greatest possibly transparency in the program.

In particular, the proposed rule would add to the risk taxpayer money would be lost by waiving DOE’s “first lien” rights to recover loan guarantee funds. DOE would have to stand in line with foreign export-import banks and other possible financing entities that would fund portions of these reactor projects in order to have taxpayer loans repaid, especially in the event of default. This is unacceptable.

One wonders whether the DOE has learned anything from the financial crisis of the past two years; in particular, the dangers of risky, opaque investments and the enormous taxpayer bailouts that inevitably follow them. It should be telling that this program exists only because the same investment banks that a few years ago were willing to lend money to just about anyone who walked through the door were not then, and are not now, willing to take the risk of lending money for nuclear reactor construction.

Given that both the Congressional Budget Office and General Accounting Office already have warned of high risk of default on loans granted from this program under the current rules, it makes no sense for DOE to even consider adding to that risk through this proposal.

The DOE should put taxpayers first and scrap its proposed rule entirely. Instead, DOE should be working on means of reducing taxpayer risk and increasing agency transparency in this program.

Sincerely,

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Tell Dept of Energy: Drop outrageous loan guarantee rule proposal