As expected, the Obama Administration released former Department of Treasury official Herb Allison’s independent review on the Department of Energy’s loan guarantee program. The report focused on two goals: reviewing the current risk status of DOE’s loan portfolio and making recommendations to improve the program. On the risk side, his conclusions are not surprising, in that the greatest taxpayer risk appears to lie in what he terms the “non-utility” linked loans. Loans in this category refer to cellulosic ethanol projects, solar manufacturing companies like Solyndra, and automotive manufacturing companies.
As to the report’s recommendations, they also fall into two categories: broad management changes and early-warning systems for problems with individual projects. Many of the recommendations in the report appear to make rational sense: a change in DOE’s focus from evaluating and approving applications to long-term monitoring and management of the portfolio, clearer guidance on “reasonable prospect of repayment,” more effective external oversight, an early-warning system to allow policy-makers to make quicker decisions on loans, etc. Most importantly for the White House, the report will allow the Administration to respond to questions on Solyndra by claiming that they are taking proactive action to protect taxpayer interests.
Two things about the report will likely rankle critics of the program. First, Allison was careful not to perform a post-mortem or place blame for Solyndra and Beacon. Second, Allison’s notes make clear that he may not have been given full access to data about existing and ongoing projects, which could have compromised his risk analysis. These two issues promise to keep the attention of congressional critics on the program through the 2012 election cycle.© 2013 Bracewell & Giuliani LLP