Energy Industry Updates For March 2011

An Uncertain Future for the DOE Loan Guarantee Program

As discussions heat up over how to reduce the deficit in the current fiscal year, many eyes are on the loan guarantee program administered by the U.S. Department of Energy (DOE). A recent proposal from the House of Representatives essentially would cut $2 billion of the current $2.5 billion loan guarantee appropriations because, to date, only $500 million in loan guarantee funds have been obligated to specific projects.

The DOE loan guarantee program was created as part of the Energy Policy Act of 2005. Sections 1703 and 1705 of the American Recovery and Reinvestment Act of 2009 (ARRA) provided for loan guarantees, and ARRA appropriated $6 billion to the DOE loan guarantee program. That initial $6 billion appropriation was later reduced to $2.5 billion — Congress reallocated $2 billion to the "cash for clunkers" program and $1.5 billion to state aid.