By Ben Geman and Andrew Restuccia - 11/01/11 12:36 AM EDT
The White House is facing fresh political headaches over energy loans as a second Energy Department-backed company goes bankrupt and Republicans prepare to subpoena White House internal communications on the failed solar company Solyndra.
Beacon Power Corp., the energy storage company that received a $43 million Energy Department (DOE) loan guarantee last year, filed for bankruptcy over the weekend, prompting a fresh wave of GOP criticism of the embattled DOE loan program.
The filing comes two months after California solar panel maker Solyndra — which received a $535 million guarantee in 2009 — went belly-up.
Stearns said Beacon’s woes are a “sharp reminder” that the stimulus has fallen short, adding: “Unfortunately for the American taxpayers, I am deeply concerned that other DOE programs could follow, which goes to the heart of the president’s flawed economic program.”
Stearns and others have for weeks focused their investigation on the Energy Department’s February decision to restructure the Solyndra loan guarantee in early 2011, arguing the provision “subordinating” the taxpayer interest to those of private investors violates the 2005 energy law that established the DOE loan program.
But Republicans on the committee made a tactical decision to refocus their investigation on Obama late last week, abruptly nixing plans to hear from lower-level DOE officials and scheduling a meeting Thursday to subpoena the White House for more Solyndra documents.
Beacon’s collapse will add new hurdles to White House efforts to get ahead of political attacks on the administration’s handling of the Energy Department’s loan guarantee portfolio.
It came two days after White House Chief of Staff Bill Daley ordered an independent 60-day review of DOE’s multibillion-dollar green energy loan portfolio, to be conducted by former Treasury Department official Herb Allison.
But there is little indication that Republicans, who have used Solyndra’s collapse to broadly attack the White House green energy agenda, are inclined to credit administration efforts.
Stearns said Friday night that he was “hopeful” the review would differ from White House internal reviews on other topics that he belittled as “PR campaigns without any real results.”
On Monday, Rep. Morgan Griffith (R-Va.), a member of the House Energy and Commerce Committee that’s probing Solyndra, questioned the White House’s motives in ordering the review, alleging on Fox News, “It certainly looks like they want the Department of Energy to take the fall.”
Stearns is chairman of the Energy panel’s Oversight and Investigations subcommittee, which is escalating its battle with the White House over Solyndra, with an expected vote Thursday to subpoena internal White House communications.
Stearns and other Republicans on the committee are working to paint the White House as uncooperative and secretive.
“Subpoenaing the White House is a serious step that, unfortunately, appears necessary in light of the Obama administration’s stonewall on Solyndra,” Stearns and full committee Chairman Fred Upton (R-Mich.) said in a statement last week on the subpoena vote. “What is the White House trying to hide from the American public?”
The committee says the subpoena is aimed at determining the role that high-level White House officials might have played in securing the Solyndra loan guarantee, including former White House Chief of Staff Rahm Emanuel, Senior Adviser Valerie Jarrett, former National Economic Council Director Larry Summers and Ron Klain, former chief of staff to Vice President Biden.
Republicans are hoping to show that politics played a role in the approval of the loan guarantee and the decision to restructure the financing agreement in February. The White House strongly denies those allegations.
The Republican investigation has not uncovered evidence of political favoritism. A series of emails released by the committee show that the White House pressed administration officials to make a swift decision on the Solyndra loan guarantee. They also show that there was disagreement within the administration on the wisdom of approving the guarantee.
The White House has rebuffed the panel’s requests for internal communications — including President Obama’s emails — while arguing it has been highly cooperative with the GOP probe.
The administration has noted that it released more than 70,000 pages’ worth of communications between the White House, Solyndra and other agencies about the 2009 loan guarantee.
The Solyndra subpoena comes as the Energy Department is trying to blunt criticism over the second bankruptcy of a company supported through the loan program.
Energy Department spokesman Damien LaVera said there are “many protections for the taxpayer” in the loan agreement with Beacon Power, which helped finance an energy-storage plant in Stephentown, N.Y., that began operating in January.
“The department’s loan guarantee is for the project Stephentown Regulation Services LLC, not the parent company, and the loan was set up in a way that ensures the department is not directly exposed to the liabilities of the parent company,” he said in an email Monday.
Beacon drew $39 million of the guaranteed loan to help finance the plant. Beacon’s bankruptcy filing lists assets of $72 million and debts of $47 million, according to Bloomberg.
The Energy Department sought to contrast the Beacon Power project and Solyndra, noting that Solyndra stopped manufacturing operations when it went bankrupt, while Beacon Power intends to continue operating the New York energy storage plant.
“It is important to note that this plant itself, which is operational and generating revenue, is a valuable collateral asset. In addition, under the terms of our loan guarantee agreement, Stephentown Regulation Services LLC currently has cash reserves and proceeds from the plant that it was required to hold as collateral on the loan,” LaVera said.
The Energy Department noted that the federal government retains its “senior status” for repayment in the loan agreement with Beacon Power.
In contrast, the Solyndra loan guarantee was restructured in early 2011 to put private investors — who had agreed to provide another $75 million to the struggling company — first in line for repayment if the company liquidated.
Nonetheless, the second bankruptcy is focusing fresh attention on the Energy Department’s vetting process for loan guarantees. Stearns plans to eventually expand his subcommittee’s investigation to include a series of DOE loan guarantees to other renewable energy companies.
Meanwhile, Democrats on the panel are encouraging him to also explore loan guarantees for nuclear energy projects, as well as a $267 million loan approved by the George W. Bush administration to a communications company that filed for bankruptcy this month.
At the same time, House Oversight and Investigations Committee Chairman Darrell Issa (R-Calif.) has said he plans to launch a broad investigation into the Obama administration loan guarantee program, and Rep. James Sensenbrenner Jr. (R-Wis.) said Monday he intends to float legislation requiring an independent audit of the program.
But LaVera, the DOE spokesman, said Monday that the department’s Loan Programs Office, which employs about 200 people, subjects each project that receives a loan or loan guarantee to extensive oversight.
DOE has a portfolio management team that closely monitors the projects once they receive federal financing, he said.
“Each deal has benchmarks built in, and a company can’t draw down funds until those benchmarks have been met,” he said.
The loan guarantee program was first authorized in a 2005 energy bill crafted under GOP control of Congress and signed into law by then-President George W. Bush. It was expanded under President Obama’s stimulus law.
The program was slow to get off the ground, and the first loan guarantees were not issued until the Obama administration took power.
The Energy Department, under the Advanced Technology Vehicles Manufacturing program authorized in a 2007 law, also makes direct loans to auto companies and suppliers.
Overall, the Energy Department’s Loan Programs Office has finalized loans and loan guarantees for 33 projects, totaling about $35.5 billion.