Washington (Platts)--4Feb2009

A nuclear industry official said Tuesday that the US Department of Energy
has done such a poor job of running a program to provide federal loan
guarantees to clean-energy projects that it may be time to move the program to
another agency that is better equipped to handle the job.

Derrick Freeman, senior director for government affairs at the Nuclear
Energy Institute, said in an interview that DOE is taking far too long to
issue the billions of dollars in federal loan guarantees that Congress
authorized in major energy bills in 2005 and 2007.

"DOE's inability to move the program, to get the program going full steam
ahead is of great concern for a lot of folks," Freeman said. "Democrats and
Republicans [alike] are saying, 'What the heck is going on at DOE?'"

Freeman said DOE was not designed to deal with the types of issues
associated with the loan-guarantee program, including assessing applicants'
credit-worthiness and judging the economic viability of high-risk energy
projects that commercial banks are often reluctant to finance.

"There's questions about whether an agency that is not equipped and has
never taken on such a large task is adequately able to hold the program," said
Freeman, who added that the program "could be moved" to another federal
agency.

Congress created the loan-guarantee program in the Energy Policy Act of
2005 as a way of financing advanced energy projects--including wind farms,
nuclear power plants and advanced coal plants--that eliminate or sequester
carbon dioxide emissions that are blamed for global climate change.

At present, DOE is authorized to issue a total of $42.5 billion in
federal loan guarantees for a variety of energy projects. DOE has done three
rounds of solicitations since fiscal 2007 for all of that money, but the
department has yet to award a single loan guarantee.

Dan Leistikow, DOE's public affairs director, acknowledged that the
department has not moved as quickly as it would like on the loan-guarantee
program. But new Energy Secretary Steven Chu is committed to speeding up the
process, Leistikow said.

"Fixing the program is a top priority for Secretary Chu so that we can
get moving with investments that will build a new energy economy, put
Americans back to work and address the climate crisis," Leistikow said.

Several senior lawmakers have questioned DOE's handling of the
loan-guarantee program in recent years, including Senator Jeff Bingaman of New
Mexico, the Democratic chairman of the Senate Energy and Natural Resources
Committee.

At Chu's January confirmation hearing, Bingaman said "there's been a lot
of frustration here in our committee and more generally, I think, about the
length of time it's taken to implement some of what we have previously
enacted" regarding the loan-guarantee program.

"We still have no loan guarantees that have been made" under the
program," Bingaman said. "I guess my question to you is whether you are
confident that the department will be able to implement all of the new
responsibilities that are contemplated in this economic recovery bill for the
department, and do so in a rapid and responsible way."

Chu said he shared Bingaman's concern, and that he would work to improve
the loan-guarantee program.

NEI's Freeman said he backs a bill that Bingaman introduced in 2008 that
would create an independent, quasi-government corporation to issue loan
guarantees for advanced nuclear projects.

Bingaman's spokesman, Bill Wicker, said Tuesday that the energy committee
will hold a hearing soon to examine the delays with DOE's loan-guarantee
program.

Freeman said he hoped the committee would re-examine Bingaman's bill in
the forthcoming hearing.

Samuel Bodman, who served as energy secretary under former President
Bush, acknowledged at the end of his term in office that he struggled to hire
the type of financial experts needed to run the loan-guarantee program. But
Bodman said DOE ultimately put a good team in place.

DOE's loan-guarantee program could receive tens of billions of additional
dollars under the massive economic recovery package that is winding its way
through Congress. Some Washington insiders have expressed concerns about DOE's
ability to handle the infusion of federal funds.
--Dipka Bhambhani, dipka_bhambhani@platts.com