Omnibus Saves Department of Energy Loan Program and Adds New Direction

After its closest call in 14 years, the Department of Energy’s (DOE) Loan Programs Office (LPO) – which issues loans to innovative energy technology projects that cannot otherwise access commercial financing – has been saved from elimination by House and Senate appropriators in the Consolidated Appropriations Act of 2018. Last Friday, President Trump signed the $1.3 trillion omnibus spending package into law – albeit reluctantly – funding the federal government through the rest of the current fiscal year (FY)¹ and preventing an impending government shutdown. The omnibus bill also protected programmatic authority for the DOE’s loan program, appropriated funds for continued administration of the program, and most notably, issued explanatory language directing the DOE LPO to continue processing applications. 

The Trump Administration originally proposed the elimination of the DOE LPO in its budget proposal for FY 2018 released last year. This proposal gained traction with Chairmen Mike Simpson and Lamar Alexander of the Appropriation Committees in Congress, given the constrained fiscal environment. In anticipation of these developments, Holland & Knight formed an informal ad hoc coalition of innovative energy companies that had already invested millions of dollars in connection with the applications to meet the government’s stringent requirements for a loan guarantee. Since last summer, the coalition has made the case that the program:

1. pays for itself through application fees and interest paid by loan recipients;
2. supports American infrastructure and energy “dominance”; and
3. is win-win-win for taxpayers, American energy innovation, and the communities and states where these investments are being made.

These sustained outreach efforts culminated in the top appropriators and their committee staff markedly shifting their positions on the perceived value and longevity of the DOE LPO. Most notably, it was not widely understood how valuable the LPO could be to driving the development of new energy infrastructure and innovation at a minimal cost to the U.S. taxpayer.

The FY 2018 omnibus spending bill not only maintained full loan program authority of over $24 billion dollars, but also saved the credit subsidy cost appropriations of $170 million dollars, which helps to reduce the cost of financing of renewable energy technology projects. Further, DOE Secretary Rick Perry has also gone on the record saying, “If this committee and Congress collectively decides to go forward with that program, then we will operate it with the type of oversight and transparency and results that you will be proud of.”²

Accordingly, the program has clearer congressional direction and greater on-record support than it has had since the American Recovery and Reinvestment Act of 2009 was signed into law. For companies that have been eyeing these programs – perhaps remaining or returning to the sidelines as all of this political uncertainty was sorted out – Holland & Knight’s energy advisors are available to discuss eligibility, strategy, and the long-term prognosis for prospective applicants.

Notes

¹ The federal fiscal year begins on October 1 and continues through September 30. 

² Senate Energy and Natural Resources Committee. “Full Committee Hearing to Examine the President's Budget Request for the Department of Energy for Fiscal Year 2019.” 20 Mar 2018.