July 31, 2007
Congress Should Not Bow to Nuclear Industry Demands for More Than $50 Billion in Loan Guarantees to Build New Nuclear Reactors
Senate-Passed Energy Bill Would Allow Bush Administration to Bypass Congress’ Authorization and Grant Guarantees on Unlimited Number of Highly Risky Projects
WASHINGTON, D.C. – Congress should not give up its fiscal authority over taxpayer-backed loan guarantees for the construction of financially risky energy projects, Public Citizen said today. At the same time that pending bills would strip Congress of this oversight role, the nuclear industry is seeking more than $50 billion in taxpayer-backed loan guarantees in the next two years for the construction of new nuclear power plants in the United States.
Under the Federal Credit Reform Act of 1990, congressional appropriators must provide budget authority to the Department of Energy (DOE) to commit to these loan guarantees. But language in the energy bill (H.R. 6) passed last month by the Senate would remove the authority from congressional appropriators to set an annual limit on these commitments, and the pending House energy package (H.R. 3221) includes a provision that limits congressional appropriators’ authority to exclude projects. If the Senate bill were passed into law, the DOE – which has been particularly close to the nuclear industry under the Bush administration – would be able to approve an unlimited number of loan guarantees.
These loan guarantees would put taxpayers – rather than investors – on the hook to pay back the loans should any of the plants default. According to a May 2003 Congressional Budget Office (CBO) report, the risk of default on loan guarantees for new nuclear plants is “very high – well above 50 percent.”
“With those odds, U.S. taxpayers will be on the hook for billions of dollars when the nuclear utilities default on their loans,” said Michele Boyd, legislative director of Public Citizen’s Energy Program. “This outrageous demand from the already highly subsidized nuclear industry amounts to highway robbery of U.S. taxpayers.”
Although the company receiving the guarantee is expected to pay the “subsidy cost” of the guarantee (the net present value of the anticipated cost of defaults), a June 2007 CBO report on the recently passed Senate energy bill concluded that it is “more likely that DOE’s loan guarantee portfolio will have more projects where the subsidy fee has been underestimated than overestimated.”
In a June 16, 2007, floor statement, Rep. Pete Visclosky (D-Ind.), chairman of the House Energy and Water Appropriations Subcommittee, indicated the excessive amount of guarantees sought by the nuclear industry:
“The request for guaranteed loans from the Nuclear Energy [Institute], subsidized by the Federal Government, is very large. It overwhelms what the [Energy & Water Appropriations] bill provides for the entire energy community. The administration had asked for a total of $4 billion for the nuclear energy industry and the coal industry. This does not come close to what the Nuclear Energy [Institute] has indicated they need. The Nuclear Energy [Institute] indicates a need for $25 billion in Federal guaranteed loans for fiscal year 2008 and more than that in fiscal year 2009.”
The DOE has requested authorization for a total of $9 billion in loan guarantees in FY08. The House Energy and Water Appropriations bill currently provides $7 billion for loan guarantees, but does not approve guarantees for new nuclear power plants. The Senate version of the bill does not specify any amount for loan guarantees, taking the position that Congress is not required to provide authorization for these guarantees in an appropriations bill.
“The idea that Congress would give up its oversight and fiscal responsibilities and allow the DOE carte blanche to put an unlimited amount of taxpayer money on the line for highly risky projects is mind-boggling,” said Boyd. “This is equivalent to allowing the DOE to bet the house on an unlimited number of crap shots.”
The loan guarantee program, which was established in Title XVII of the Energy Policy Act of 2005, authorizes the DOE to guarantee loans taken out by industry for 10 types of new or improved technologies that are supposed to reduce greenhouse gas emissions. “Advanced nuclear energy facilities” are included in the list.
“While more than $50 billion in loan guarantees is an outrageous subsidy and an enormous risk for taxpayers, it would cover only a handful of new reactors,” said Tyson Slocum, director of Public Citizen’s Energy Program. “Building a few more reactors wouldn’t do a thing to reverse climate change, but it would produce more radioactive waste and increase security and safety risks to the public.”
MORE INFORMATION about the loan guarantee provisions in the House and Senate energy bills.
MORE INFORMATION about the flaws of nuclear power.