[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

OVERSIGHT OF THE DEPARTMENT OF ENERGY'S STIMULUS SPENDING

=======================================================================

HEARING

before the

COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

__________

MARCH 20, 2012

__________

Serial No. 112-136

__________

Printed for the use of the Committee on Oversight and Government Reform

Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform

U.S. GOVERNMENT PRINTING OFFICE
74-042 WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202�09512�091800, or 866�09512�091800 (toll-free). E-mail, gpo@custhelp.com.

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana ELIJAH E. CUMMINGS, Maryland,
JOHN L. MICA, Florida Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee PETER WELCH, Vermont
JOE WALSH, Illinois JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Robert Borden, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director

C O N T E N T S

----------
Page
Hearing held on March 20, 2012................................... 1

WITNESSES

The Honorable Steven Chu, Secretary of Energy, U.S. Department of
Energy
Oral statement............................................... 6
Written statement............................................ 9

APPENDIX

The Honorable Darrell Issa, Chairman, Committee on OGR: Hearing
preview statement.............................................. 64
The Honorable Elijah E. Cummings, A Member of Congress from the
State of Maryland: Opening statement........................... 65
Chairman Issa, U.C.: Emails from Kim Dong, Emily Wheeler and
David Frantz................................................... 67
Article from the Clean Cities Energy.gov site regarding liquid
natural gas.................................................... 72
Article from Business Insider, ``The U.S. is sitting on a 200-
year Supply of Oil''........................................... 74
New York Times Article, ``Employee Lawsuit Exacerbates Issues at
Livermore Lab''................................................ 75
Chairman Issa, U.C.: Submission from the U.S. Energy Information
Administration................................................. 80
The Honorable Gerald E. Connolly, A Member of Congress from the
State of Virginia: Written statement........................... 81

OVERSIGHT OF THE DEPARTMENT OF ENERGY'S STIMULUS SPENDING

----------

TUESDAY, MARCH 20, 2012

House of Representatives,
Committee on Oversight and Government Reform,
Washington, DC.
The committee met, pursuant to notice, at 10:08 a.m., in
room 2154, Rayburn House Office Building, Hon. Darrell E. Issa
(chairman of the committee) presiding.
Present: Representatives Issa, McHenry, Jordan, Chaffetz,
Walberg, Lankford, Buerkle, Labrador, DesJarlais, Gowdy, Ross,
Guinta, Farenthold, Kelly, Cummings, Maloney, Norton, Kucinich,
Clay, Connolly, and Speier.
Staff present: Ali Ahmad, Majority Communications Advisor;
Kurt Bardella, Majority Senior Policy Advisor; Michael R.
Bebeau, Majority Assistant Clerk; Robert Borden, Majority
General Counsel; Molly Boyl, Majority Parliamentarian; Lawrence
J. Brady, Majority Staff Director; Joseph A. Brazauskas,
Majority Counsel; Drew Colliatie, Majority Staff Assistant;
Gwen D'Luzansky, Majority Assistant Clerk; Adam P. Fromm,
Majority Director of Member Services and Committee Operations;
Linda Good, Majority Chief Clerk; Tyler Grimm, Majority
Professional Staff Member; Peter Haller, Majority Senior
Counsel; Christopher Hixon, Majority Deputy Chief Counsel,
Oversight; Justin LoFranco, Majority Deputy Director of Digital
Strategy; Mark D. Marin, Majority Director of Oversight;
Christine Martin, Majority Counsel; Kristina M. Moore, Majority
Senior Counsel; Rebecca Watkins, Majority Press Secretary;
Michael Whatley, Majority Professional Staff Member; Lisa Cody,
Minority Investigator; Kevin Corbin, Minority Deputy Clerk;
Ashley Etienne, Minority Director of Communications; Jennifer
Hoffman, Minority Press Secretary; Carla Hultberg, Minority
Chief Clerk; Chris Knauer, Minority Senior Investigator; Dave
Rapallo, Minority Staff Director; and Donald Sherman, Minority
Counsel.
Chairman Issa. Good morning. The hearing will come to
order.
The Oversight Committee exists to secure two fundamental
principles: first, Americans have a right to know the money
Washington takes from them is well spent and, second, Americans
deserve an efficient, effective government that works for them.
Our duty on the Oversight and Government Reform Committee is to
protect these rights. Our solemn responsibility is to hold
government accountable to taxpayers, because taxpayers have a
right to know what they get from their government. We will work
tirelessly in partnership with citizen watchdogs to deliver the
facts to the American people and bring genuine reform to the
Federal bureaucracy. This is our mission statement.
Today, gasoline is $3.80. When this Administration took
office, it was close to half that. Whether it is 2009 at $2.05,
2010 at $2.72, or last year at $3.69, or today at $3.84, we
know that gas prices are a leading indicator of whether or not
we are on the right track or wrong track in the overall energy
fight.
The Department of Energy was produced as a separate cabinet
level position as a result of years of, in fact, declining fuel
self-sufficiency and a need to ensure that we had a full
cabinet at the President's table level department to ensure
that energy was a priority. At that time we were more energy
self-sufficient than we are today. At that time the dreams of
green energy were talked about, too.
The fact is, at that time we had a bigger percentage of our
portfolio of electricity coming from nuclear than we do today.
The fact is 51 percent of electricity produced in America today
is produced from that same dirty coal that was always used.
Thanks to the Department of Energy and others, coal is cleaner
than it was.
The fact is our reliance on coal, petroleum, natural gas,
somewhat on hydroelectric, all remain somewhat similar to what
it was, and the dreams and the investments in green energy
continue to be somewhat elusive.
That is not to say we shouldn't continue. As the Secretary
may mention today, we still invest in fusion on a limited basis
in the hopes that someday from a glass of water we will produce
green, sustainable energy at a high level, just as the sun
does.
The fact is that is not what we are going to talk about
today. I want to make it clear that administration after
administration has set lofty goals and not achieved them. We
are going to talk, to a great extent, today, and hear from the
Secretary about Department of Energy's $14.5 billion loan
guarantee program, including the much known and touted
Solyndra.
We are going to go beyond that, though. We are also going
to review the Inspector General's report. We are going to
recognize, like any large agency, it is made up of multiple
different sub-entities that must do their job, must be
respectful of internal management, must heed the Inspectors
General and other groups who find fault.
Today we are not here to find primary fault. We are here
to, in fact, ask the Secretary to respond to a number of
findings, many of which came from whistle-blowers, but even
more came from internal audits done by the Inspector General
and the Department of Energy itself.
Let's make it clear. We are the Oversight Committee, but we
are also the committee that has an obligation to ensure that
reform occurs.
Post the election of the President, the first act of the
new Congress was, for all practical purposes, to pass the
largest single expenditure of money in a relatively, at the
discretion of the President way, in history. In other words,
the stimulus was very much discretionary money. At the time
people said, no, no, it is going to be well-accounted for. I
think we know better today. We know that in fact a tremendous
amount of money, enough money to double the size of the budget
of the Secretary we have before us today, was put at his
disposal.
It is hard to spend that much money and spend it
responsibly. I believe in our Q&A today we are going to find
that, in fact, in many cases it was too much money too quickly
to be spent well. As we look at weatherization failures noted
by the Inspector General, it is going to be clear too much
money, too loose control, too much to ramp up and do well
perhaps will be the excuse, but the bottom line is we need to
learn from this mistake.
If our goal is in fact to save energy through providing
assistance for weatherization for needy families, that in fact
we have to make sure that it is done well, it is done cost
effectively, and that there be no excuse that we simply
couldn't find enough good vendors so, as a result, we found
vendors who did a shoddy job and in many cases left people
worse off, not better off, than they were before their windows
or insulation were installed.
It is very clear that the Obama DOE was DOA when it came to
delivering affordable energy to consumers. One of the
challenges we have today will be to ask did we need to have
large loans? Why did we need them? Were they proof of concepts
or were they part of a grand plan by the Administration to
ensure that enough funding to scale up green energy to make it
work was possible?
As a Californian, I am very well aware that many of the
projects would not even have been penciled out for these loan
programs if my State had not mandated that our incumbent
electric utilities buy energy at as much as 10 times the cost
of other energy sources. California and other States have made
determinations to buy green energy at whatever the cost was.
That fueled a lot of penciling of projects that could have
worked, but as we found they didn't always work.
Additionally, the Department of Energy's $5 billion
weatherization assistance program is a stunning example of
wasted billions of taxpayer dollars. Let's understand, $5
billion should have done more for needy people in America.
Perhaps the most important thing is it should have been spent
at the pace that would have allowed every weatherization
project to be done by a skilled contractor at an affordable
price, delivered and verified.
That does not mean that the Secretary before us is directly
responsible. He oversees a vast agency that has multiple
bureaucratic and appointed individuals. But we need to ask
today, Secretary Chu, can we allow this to happen again? Can we
do better? What were the lessons learned? How would you keep it
from happening again? And since weatherization programs are not
exclusive to just the stimulus, can we in fact do a much better
job? Have we found out, if done correctly, what the real
benefits would be?
Last, but not least, I would like to commend the Secretary
today for being probably the smartest cabinet officer in a
generation; for being someone who understands the potential of
technology. Our criticisms today of the Department of Energy I
believe you will find have more to do with whether or not the
people that work for you deliver the kind of product they
should have delivered; whether in fact people that you are
asked to hold accountable in fact did you do a disservice by
putting either their personal priorities or simply not being
good managers.
So as we go through today, Mr. Secretary, I, for one, am
somebody who believes that your continued participation in the
science community, your continued participation in the future
of energy and of science are essential. So as the questions get
hard, please understand they are not about you; they are about
an agency that you began to lead nearly 3 years ago.
With that, I recognize the Ranking Member for his opening
statement.
Mr. Cummings. Thank you very much, Mr. Chairman, and thank
you for calling this hearing.
And to you, Mr. Secretary, I am very glad that you are with
us today, and I want to thank you on behalf of a grateful
Congress and a grateful Country for what you do for us every
day.
One of our Nation's most important public policy goals is
to move toward energy independence and energy efficiency. We
all know the reasons for this: we want to enhance national
security by reducing our dependence on foreign oil; we want to
remain competitive with countries like China by developing
innovative technologies of the future; we want to boost our
economy while reducing our environmental footprint; and we want
to lower energy costs for American consumers.
We all agree with these goals, so how are we doing? First,
the United States is now producing more oil than any time in
the last 8 years. We are producing record amounts of natural
gas; we are now the largest producer of natural gas in the
world. The Administration has approved more than 400 permits
for additional drilling, but with safeguards to prevent the
devastation faced by the Gulf after the oil spill of 2010.
We have also become more efficient. In 2010, oil imports to
the United States fell below 50 percent for the first time in
13 years and a new agreement on fuel economy standards by the
Administration and U.S. auto companies will reduce oil
consumption by more than 2 million barrels a day by 2025.
Regardless of how much we drill and how much we save,
however, we know that these measures alone will not achieve
energy independence. We use about 20 percent of the world's
oil, but have only about 2 to 3 percent of known reserves. We
need an aggressive policy to invest in the most innovative
clean technologies of the future, and that is where the
Recovery Act comes in.
The Recovery Act has been extremely successful in
responding to the economic crisis of 2008. It allocated more
than $35 billion for more than 15,000 projects and increased
the number of people employed by between 1 million and 2.9
million, according to the Congressional Budget Office. The
Recovery Act has also made significant investments in projects
that boost the ability of private sector companies to innovate
and produce new technologies in order to generate more energy
and lower costs for consumers. These investments include
electric grid improvements, advanced energy manufacture,
geothermal businesses, and hundreds of other projects.
The United States is now on track to double renewable
energy generation by the end of this year, and companies
supported by the Recovery Act are making amazing breakthroughs
in technologies that could dramatically reduce energy costs and
generate whole new industries. For all of these reasons,
Members of Congress on both sides of the aisle have written
nearly 500 letters in support of these broad goals and specific
projects.
In addition to evaluating the overall effectiveness of the
Recovery Act, one of our jobs in this Committee is to examine
the procedures used by the Department and industry to determine
whether they can be improved. Although the bankruptcy of
Solyndra raised legitimate questions about these procedures, it
did not and does not support unsubstantiated allegations that
the Department engaged in criminal conduct or made its funding
decisions based on political favoritism, pay-to-play
relationships, or outright corruption.
We have to be responsible about our oversight. We cannot
simply attack any program that has the words Obama and clean
air attached to them. We have to base our review on the facts
and strive to serve the long-term interests of the American
people, rather than short-term interests of partisan politics.
For example, last week the non-partisan Government
Accountability Office issued a report with recommendations to
improve the procedures used by the Department to evaluate loan
guarantee applications. GAO also made this little notice of
finding: it concluded that the Department's due diligence
procedures ``may equal or exceed those used by private lenders
to assess and mitigate project risks.''
I think the Department should be commended for these
actions even as it continues to become more efficient and
effective.
As our Committee conducts its oversight of the Recovery
Act, I hope we fairly assess the overall success of the
Department's programs and focus on constructive ways to fulfill
our shared goal of energy independence and energy efficiency.
With that, Mr. Chairman, I yield back.
Chairman Issa. I thank the gentleman.
Mr. Jordan. Mr. Chairman, I ask unanimous consent for one
minute to make a statement.
Chairman Issa. Without objection, so ordered.
Mr. Jordan. Thank you, Mr. Chairman.
Chairman Issa. The gentleman is recognized.
Mr. Jordan. I appreciate that and I will be brief.
Let me just say this. The Department of Energy's budget
authority went from $23 billion in 2008 to $69 billion in 2009
when the Secretary took over. DOE was the main conduit through
which the Obama Administration sought to implement their green
energy strategy and, 3 years later, what do the American people
have to show for DOE's use of their money? A disgraceful
portfolio of loans and loan guarantees.
Solyndra, which went bankrupt in August 2011, had a credit
rating of B, B-minus when the Department of Energy gave it its
loan guarantee. And we were all shocked to find out that the
entire DOE portfolio for the 1705 program has an average
unweighted credit rating the same as Solyndra's, B, B-minus,
with several companies receiving credit ratings even below that
of the bankrupt Solyndra.
When you look at this information, I think there are only
two explanations: either gross incompetence at this agency or,
just as dangerous, decisions were not made on the merits of the
projects but, rather, on the names in the company's Rolodexes.
For a disturbingly large portion of the projects that got loan
guarantees, there are connections to the Obama Administration
too stark to ignore. In my opinion, this loan guarantee program
typifies the kind of cronyism that has made Americans across
the Country despise what they see in Washington.
Mr. Chairman, it is either incompetence at this agency or
you had to be a friend of the Administration to get a loan
guarantee, and that needs to be investigated. And I want to
thank you for having this critical and important hearing today.
With that, I yield back.
Chairman Issa. The gentleman yields back.
Members will have 7 days to submit opening statements for
the record.
Before I recognize the panel, I would ask unanimous consent
that the list of all the Republican members of this Committee
who submitted loan guarantees be placed in the record. Without
objection, so ordered. I might note that no Republican-only
requests for funding from the Department of Energy were
granted; the only one that was granted was actually bipartisan,
had almost all the Indiana members, including the Senator.
Additionally, Mr. Cummings had sent me a letter yesterday.
Here is a full response letter, along with all of the Committee
notes that substantiate the invalidity of your letter.
With that, I would recognize our first panel, first and
only panel, the Honorable Steven Chu. Secretary, as I did in my
opening, I made it clear you are undoubtedly the smartest
person to occupy your office in a very long time, if ever. Your
resume, including maybe not more patents than I have, but
patents that are certainly more long-reaching than mine, speak
for themselves.
I would, however, note that the Committee rules require we
swear all witnesses. Would you please rise to take the oath?
Do you solemnly swear or affirm the testimony you are about
to give will be the truth, the whole truth, and nothing but the
truth?
[Witness responds in the affirmative.]
Chairman Issa. Thank you. Please be seated.
Let the record reflect a yes.
Mr. Secretary, in my printed response it says, as it always
does, limit yourself to 5 minutes, look at the clock, and so
on. To be fair, take the time you need. Bear in mind that your
entire opening statement will be placed in the record, so what
is not in the record is just as valuable as what is in the
approved notes.
With that, you are recognized.

STATEMENT OF THE HONORABLE STEVEN CHU, SECRETARY OF ENERGY,
U.S. DEPARTMENT OF ENERGY

Secretary Chu. Thank you, Chairman Issa, Ranking Member
Cummings, members of the Committee. Thank you for the
opportunity to discuss the Department of Energy's work through
the Recovery Act to strengthen the U.S. economy and promote a
secure energy future.
When President Obama took office, the United States was in
the midst of the greatest economic crisis since the Great
Depression.
To meet this challenge, we had to respond quickly and
forcefully. In February 2009, President Obama signed into law
the American Recovery and Reinvestment Act to jump start the
economy and lay the foundation for our future prosperity.
Today we are moving in the right direction and the economy
has added private sector jobs for 24 straight months. The
nonpartisan Congressional Budget Office estimated that at its
peak the Recovery Act was responsible for up to 3.6 million
jobs nationwide.
The Energy Department received more than $35 billion
through the Recovery Act, supporting more than 15,000 projects
across the Country and helping the United States compete in the
global clean energy race.
Since the summer of 2010 we have consistently supported
between 40,000 and 50,000 direct jobs each quarter. The
Department takes its obligation to the American taxpayers
seriously, and from day one our mission was to get the Recovery
Act funding out the door quickly, responsibly, and
transparently.
Oversight has been a top priority for the Department and
me. We have put in place an aggressive monitoring system to
ensure that the Department and its grantees spend Recovery Act
funds wisely. The Department takes any case of waste, fraud, or
abuse very seriously.
To date, less than one-tenth of a percent of the
Department's Recovery Act projects have resulted in a criminal
indictment or conviction for waste, fraud, or abuse. Each of
these cases was unacceptable. We have taken action to address
issues early on and hold responsible parties accountable.
Moreover, the Department has cooperated, and will continue to
cooperate, with the Inspector General's investigations.
I have spent my career as a scientist. Rigorous peer review
and double-checking someone else's findings are fundamental to
sound scientific progress, and I believe the same is true in
the government. So I welcome any and every sincere effort at
oversight and where we find mistakes we have and we will move
swiftly to correct them.
I hope today can be an opportunity to have a serious,
substantive dialog. The American people expect all of us to
honestly assess the investments we have made and chart our
course for the future. Ultimately, we share the same goal:
ensuring that America wins the clean energy race.
While any case of fraud, waste, or abuse is unacceptable
and deserves swift and appropriate action, oversight also
requires us to examine the overall effectiveness of our
Recovery Act programs. These investments are helping to
modernize the ways we produce and use energy so we can compete
for energy jobs of the 21st century. We have made strong
progress in several areas.
Through the Recovery Act we have helped families and
communities save money by saving energy. We have put
construction workers, contractors and others to work
weatherizing 680,000 homes. Thanks to the Recovery Act
investments, the United States has nearly doubled the renewable
energy generation since 2008. Projects supported by the 1603
program, the 48(c) tax credit, and the Section 1705 loan
program are putting tens of millions of Americans to work
building and installing the clean energy technologies that will
power our future.
The Recovery Act is also helping to diversify our
transportation sector to protect consumers from high gas prices
and to reduce our dependence on imported oil. We are supporting
advanced biofuel facilities and strengthening our electric
vehicle manufacturing industry.
Through the Recovery Act, we are upgrading the grid to a
more secure, stable electrical system. We are investing in
cutting-edge research so the United States can maintain our
leadership in science and technology.
The Department of Energy's Recovery Act efforts are
working. They have created jobs and put us in a stronger
position to compete in the global clean energy economy. Last
year the United States reclaimed the title from China as the
world's leader in total clean energy investments. However, our
comeback was due in large part to the programs and tax
incentives that have expired or are set to expire soon.
America has reached a crossroad. We can play to win in the
clean energy race, investing in America's workers, industries,
and innovations, or we can wave the white flag and cede
leadership to other countries. I believe the United States can
and must win this race. The Recovery Act gave us a strong
foundation to build on, but we must move forward with fierce
urgency.
Thank you, and now I welcome your questions.
[Prepared statement of Secretary Chu follows:]

[GRAPHIC] [TIFF OMITTED] T4042.004

[GRAPHIC] [TIFF OMITTED] T4042.005

[GRAPHIC] [TIFF OMITTED] T4042.006

[GRAPHIC] [TIFF OMITTED] T4042.007

[GRAPHIC] [TIFF OMITTED] T4042.008

[GRAPHIC] [TIFF OMITTED] T4042.009

Chairman Issa. Thank you, Mr. Secretary. I will recognize
myself for 5 minutes.
Let me start by saying you were still speaking in the
present tense. My understanding is the Recovery Act is expired.
You can't spend funds under the Recovery Act now, is that
correct?
Secretary Chu. The Recovery Act has expired. There are
programs put in place, for example, in the loan program we
still have the majority of disbursements to go forward with. So
there is recovering due diligence that has to be done in the
Recovery Act.
Chairman Issa. So from a pure standpoint of stimulus
Recovery Act, it was all supposed to be spent in a year or two
in order to get the economy going again. We are 3 years past
its passage and you haven't spent it all. Would you say that in
fact much of the money that you have left to spend legitimately
is in fact not stimulus per se, but in fact simply a plussing
up of what you got to do for your entire 4 years as Secretary?
Secretary Chu. No, I respectfully disagree. The requirement
was we would have to work toward obligating the funds.
Chairman Issa. No, no, I understand the law. What I want to
hit you on is a little bit more of your undergraduate
economics. Stimulus was supposed to get the people working
again, it was not anticipated, nor was it designed, to go 4
years. But in fact you are saying today it is going to go four-
plus years. You will still be spending or obligating these
funds, particularly from the loan programs, after a full 4
years at the current run rate, meaning that the money rushed in
quickly and spent, basically $800 billion, was in fact an
effective doubling of your budget for the entire 4 years.
Secretary Chu. Not exactly. Not really, in fact, because if
you look at the things that were funded under the Recovery Act,
they were proportioned considerably differently than what the
earlier Department of Energy budgets had been doing.
Chairman Issa. Well, I didn't head this Committee when
President Bush was doing the plus-ups for war, but I watched
the Department of Defense simply decide how much to put in one
pot and how much to put in the other pot, and basically what
happened is DOD got a huge windfall going into the war that let
them catch up with a lot of things they wanted to do.
The point I think that we are making here today is your
weatherization program--would you put the weatherization slide
up? This is from your own IG. You rushed quickly and you
effectively, and these are hard to see, but these are actual
finished products where the vendor left and the IG went in, and
the IG's report says basically you didn't have the controls in
order to ensure that vendors like this were quickly fired and
the job was corrected.
So on one hand weatherization was effectively doing a
shoddy job. I don't think most of us would like to have that
particular improved blanket over our hot water heater, although
I have been told it might be somewhat effective.
Realistically, on one hand you had a lot of money coming in
quickly and on the other hand you had projects like Solyndra
and so on, and many other that are still going to be ongoing
and funded well into the future, is that correct?
Secretary Chu. We have some projects that are ongoing and
funded, as you note, in the future, but as I noted virtually
all the money has been obligated.
Chairman Issa. Okay, well, obligated is not stimulative.
Now, let me just ask one basic question. In an earlier
hearing you gave yourself an A minus. In weatherization do you
give yourself an A minus?
Secretary Chu. Actually, I do.
Chairman Issa. Okay. In controlling the cost of gasoline at
the pump do you give yourself an A minus?
Secretary Chu. Well, the tools we have at our disposal are
limited, but I would say I would give myself a little higher in
that since I became Secretary of Energy I have been doing
everything I can to get long-term solutions.
Chairman Issa. Well, and I appreciate that. Now, the
President took two pieces of credit in the State of the Union
that I want to just question you on factually. First of all, he
said that the Department of Energy created fracking. He took
credit for that in the State of the Union. My understanding is
fracking was created 60 years ago and enhancements to fracking
which the Department of Energy participated in in funding the
improvements occurred before you came to office, is that
correct?
Secretary Chu. It is absolutely true that there were
earlier ventures into fracking it was producing at the very
earliest times less than a percent of the natural gas. The
Department of Energy, in 1978 to 1992, I believe, invested in
fracking. We got out when Schlumberger got in.
Chairman Issa. Okay. So when the President says the
Department of Energy is the reason, that is great. The only
problem is he was still in high school when the Department of
Energy started investing in that. I just want to make sure we
understand the time line of this particular President's claims.
Last, but not least, if you had to do it all again, would
you have made the large scale investments that you made in
Solyndra and all these others, or would you in fact have made
smaller scales? In other words, was it essential to put tens of
billions of dollars at risk, hundreds of billions of dollars at
risk in some ways? Was that scale responsible or in fact proof
of concept, some sort of a scaling up, where we could have had
a Solyndra bankruptcy for less?
Secretary Chu. That is an excellent question. So as Herb
Allison and his committee report commented, our loan portfolio
can be divided into essentially three tranches. One was the
tranche of investing in the deployment of innovative
technologies; solar, wind, others, geothermal. Virtually all of
them had power purchase agreements. That actually requires a
considerable amount of money, but as Herb Allison said, on
balance, those are lower risk.
The higher risk ones included innovative manufacturing
because you don't really know how things are going--but on that
innovative manufacturing we think that some loan assistance
played a very useful purpose.
And then, finally, there were two major auto loans to Ford
and Nissan which at the time were regarded as risky, especially
the Ford loan, and did not have, at the time, a reasonable
rating, but that turned out to be a very successful loan and we
saved a lot of jobs, created a lot of jobs, and Ford has
bounced back tremendously.
Chairman Issa. I am sure we will get to other questions
about the term innovation.
With that, I recognize the Ranking Member.
Mr. Cummings. Thank you very much, Mr. Chairman.
Mr. Secretary, yesterday the Chairman made a new
allegation, he said that in reviewing a loan guarantee for an
Arizona-based company called First Solar, the Department of
Energy ``manipulated analysis, ignored objections from career
professionals, and strategically modified loan evaluations in
order to force project funding out of the door.'' Mr.
Secretary, prior to issuing its report, did the Committee
contact you about that allegation or ask you for an
explanation?
Secretary Chu. Yes, it did.
Mr. Cummings. And did you provide them with one?
Secretary Chu. I believe we did.
Mr. Cummings. And can you tell us now are these allegations
true?
Secretary Chu. No. What was happening was that there was a
series of emails and internal debate among our career
professionals. Internal policies establish that we wanted these
loans to support deployment of innovative technology, and there
is a robust discussion between our career professionals as to
whether it met the self-imposed criteria, and in the end the
person who was looking and trying to decide within his own
group said, no, these we think are innovating and crosses that
threshold.
Mr. Cummings. Did the Department manipulate the analysis,
ignore senior officials, and force this funding out the door
for political reasons?
Secretary Chu. No. In fact, this was discussion all with
the career employees. Who by the way, I would have to say I
know some of these individuals. They are truly outstanding
individuals.
Mr. Cummings. Was your career employee overruled by
political appointees in order to defy his own scientific
judgment? Is any of that true?
Secretary Chu. No, it is quite the opposite. Again, it was
all in the career staff and in internal discussion.
Mr. Cummings. Mr. Secretary, I don't know if you are aware,
but in March 2011 Arizona Governor Jan Brewer issued a
statement praising First Solar's projects in the State and she
said, ``First Solar's presence in Arizona has been a great
engine in driving our renewable energy sector forward.'' She
also noted that First Solar's Mesa facility project, would
create 600 quality jobs ``and the potential for hundreds more,
and would help in promoting Arizona's Commerce Authority's plan
for business attraction, retention, and expansion.'' In October
2011, Governor Brewer touted First Solar's DEOE projects as
part of Arizona's ``ascension as a national and global leader
in solar energy.''
Were you aware of those statements?
Secretary Chu. Perhaps distantly.
Mr. Cummings. And can you tell us did you take any action
because of her political support of First Solar?
Secretary Chu. No. As I have said repeatedly, we evaluate
each loan application on its technical merits.
Mr. Cummings. Now, Governor Brewer was not alone. Senator
John McCain also praised First Solar's decision to build in
Arizona and he stated, ``First Solar's announcement to build a
new factory in Mesa and deploy their domestically manufactured
modules in solar projects like Agua Caliente in Yuma County
will not only create jobs for Arizonans, but also represents
another important step toward greater energy security.''
Were you aware of that?
Secretary Chu. Again, I don't read all of those statements,
so I am not really sure.
Mr. Cummings. Mr. Secretary, one last question. On
September 20, 2011, the Chairman went on national television
and condemned the Department's entire loan guarantee program as
a ``broad scandal'' that ``has been driven by political
favoritism, accusations of pay-to-play relationships.'' He
stated that having politicians involved in selecting winners
and losers is how we ``end up with corruption in government.''
Is there any truth at all to the allegation that you base
your findings and decisions on political favoritism or on pay-
to-play relationships or on outright corruption?
Secretary Chu. No, there is none.
Mr. Cummings. Now, you said, in answering one of the
Chairman's questions, he asked you about grading yourself with
regard to weatherization, I think you gave yourself an A or an
A minus, and gas at the pump you gave yourself an A.
Mr. Chairman, you took a little longer than I did. Can I
have a little extra time?
Chairman Issa. Continue.
Mr. Cummings. All right.
Let me ask you this. Explain why that is. I am just
curious.
Secretary Chu. Sure. Very, very quickly, because I see time
is running out. If you looked at, for example, the
weatherization program, we set up a system where, before you
are reimbursed for work done, everything had to be inspected.
Our money went to the State, the State went to local
organizations, and local organizations then arranged for
contractors. In addition to that, that you have to verify the
work had been done, we also set up through the States, insisted
on an independent audit. At least 5 percent of the work had to
be seen and its value done independently.
And what we found in this audit was there were about 3 or 4
percent of the work fell into three categories. One category is
perhaps the family didn't qualify because there was a maximum
of 200 percent above poverty line; in some cases, if the work
was not done adequately or shoddily done; and, finally, if not
all the stones were unturned, there could have been other
weatherization work in that program. I don't have the
breakdown, but it is lumped into those three.
So what they found was roughly 3 or 4 percent went into
those three categories in an independent audit. Then the DOE IG
and the Government Accounting Office did another independent
check on what this independent group found, and my
understanding is they found very little beyond what our IG
found. So in 3 or 4 percent of the cases and in all cases where
there were things as shown in those pictures where, yes, it was
a very badly done job, the contractors were asked to go back
and fix it on your own dime.
So if you look at that 3 or 4 percent, this is not that bad
in an area where a lot of insulation and things like that are
largely invisible. So it was the mere fact that we set this
robust oversight. And then the third independent oversight
wasn't really finding anything more, it told us that it was
more or less all right.
But again let me stress, and I will say this, we are not
happy with those instances where there was shoddy workmanship.
We are not happy with any of it.
Mr. Cummings. Thank you, Mr. Chairman.
Chairman Issa. You are very welcome.
I would ask unanimous consent now that the email records,
and I apologize, Mr. Secretary, your people provided no Bates
stamps and delivered only on paper, so I will read a little
bit. The document dated Tuesday, February 1st, 2011, at 1:57
p.m., from David Franz, which, by the way, is the one that
says, Isn't that a carbon copy of Agua Caliente? His answer is,
it is.
Something prohibited within the regulations. It is in your
report too.
Second, the document dated February 1st, 2011, 12:12 p.m.,
from Sarah Huizinga; and, third, the document dated Thursday,
June 23rd, 2011, 12:34 p.m., from Kim Dong, who I understand
is, or Dong Kim. I am reading, unfortunately, his form rather
than his name. Dong Kim, who is Director, Technical and Project
Management Division LP 30 Loan Program Office.
Without objection, so ordered.
Mr. Cummings. Mr. Chairman, may I have copies of those?
Chairman Issa. Of course. You already have copies.
Mr. Cummings. Where are they?
Chairman Issa. They were all delivered to you in the same
fashion, with no Bates stamps by the Department of Energy, who
chose to print off of computer paper so they would be extremely
hard to go through. We were delivered 50 boxes. You were
delivered the same boxes.
With that we recognize the gentleman from North Carolina,
Mr. McHenry, for 5 minutes.
Mr. McHenry. Thank you, Mr. Chairman.
Secretary Chu, thank you for being here. My constituents
commute, on average, 25 minutes a day to work. Eighty-four
percent of them drive themselves. Public transportation is not
readily available in western North Carolina. Tell me what you
have done to reduce the price of gas at the pumps. What
policies have you put in place to reduce the price of gas at
the pumps?
Secretary Chu. Well, I can tell you what the Administration
has done and then I will narrow it down to what the Department
of Energy can do and has done. Certainly, a lot of Federal
lands have been put up for auction for production of oil.
Although due to a complex set of reasons, it is certainly true
that, since the President took office, the amount of oil
production in the United States has gone up and----
Mr. McHenry. My question, Secretary Chu, as you know, the
production of oil on public lands has actually gone down under
your Administration's watch. What policies and production has
gone up on nonpublic lands? For instance, in the Dakotas, the
Bakken Shale is fantastic, wonderful technology advancements,
but what policies has this Administration put into effect to
help reduce the price at the pumps?
Secretary Chu. Well, there was one policy, I would say, a
reaction to an oil interruption due to the Libyan incident, but
in the tools that the Department of Energy has at its disposal,
what we have done is we have worked with manufacturers to
improve the efficiency of internal combustion engines to reduce
those costs.
We are very aggressive in trying to look for alternatives
other than petroleum, if adopted worldwide, could have a
moderating effect on the price of gasoline, bring those prices
down. For example, we were very enthusiastic about the
development of natural gas, shale gas, especially over the last
5 and 10 years, and the Department of Energy has been very
active looking at ways to use natural gas for long-haul
trucking, for centralized delivery trucking.
We just put out an announcement saying we want to see if we
can reduce the cost of storage of natural gas in automobiles
and short-haul trucks that can be readily available. If we can
do this, we can move to what are called bi-fuel cars, so that
the same internal combustion engine can burn natural gas or
gasoline or diesel. But one of the barriers is the very high
cost of that carbon fiber tank or the very high pressure. So we
have pushed forward a program to develop better storage.
So those are examples. Battery, electrification
alternatives. Right now the electric cars are fairly expensive,
$32,000 for a Nissan Leaf. Before subsidies, the Chevy Volt is
about $40,000. Very aggressive about adding battery development
so that we can dramatically bring down the cost of
electrification to $20,000, $22,000.
Mr. McHenry. Well, Secretary Chu, you have mentioned a
number of things. At what point will those have an effect of my
constituents' cost of purchasing gas at the pumps?
Secretary Chu. Well, as you know and as we all know, you
look at all the tools available in our chest and we looked at
all those tools, but as the President has repeatedly said,
there is no single bullet. Yes, we want to increase production.
Yes, we want to do all those other things. And mostly we want
to diversify to give our consumers a choice to decrease----
Mr. McHenry. So at what point will those have an impact on
the market?
Secretary Chu. Natural gas long-haul trucking, very
quickly. A consortium of companies----
Mr. McHenry. Before the next election, perhaps?
Secretary Chu. Yes. Their plan is to have invested $300
billion in liquid nitrogen fueling stations by December 2012.
Mr. McHenry. My time is short. You have listed a long list
of things that this Administration has done. I have not yet
heard that they are trying to increase the supply of American
oil or our refining capacity, or limit the regulations in the
diversity of blends that are required. I have heard nothing
from you today that indicates a policy this Administration has
put in place that will meaningfully impact the price at the
pumps, other than driving it up.
The policies this Administration has put in place have
actually increased the cost of fuel at the pumps; they have
increased the cost of commuting for my constituents. And to
tell my constituents, with 10 percent unemployment in western
North Carolina, that you need to go buy a Nissan Leaf, that in
order to commute for 50 minutes a day, you are going to have an
employer who is wonderful enough to provide you a place to plug
in your car so you can get home is absolutely ridiculous.
And the anger that my constituents have of the cost at the
pumps is very real. And if the President doesn't get this, if
the Secretary of Energy doesn't get this, we have a real
problem here. We doubled the budget of the Department of Energy
in 2009----
Chairman Issa. The gentleman's time has expired.
Mr. McHenry [continuing]. And yet we are paying twice as
much at the pumps. This is absolutely ridiculous. We have seen
Solyndra----
Chairman Issa. The gentleman's time has expired.
Mr. McHenry. We have not seen a reduction at the pumps.
Chairman Issa. I thank the gentleman.
Mr. Secretary, I know there wasn't a question there, but
would you like to restate what I believe was a quote that they
are investing these billions in liquid nitrogen?
Secretary Chu. Sorry, a misstatement. Liquified natural
gas. Thank you.
Chairman Issa. Correct. Without objection, we will also
place the article from the CleanCitiesEnergy.gov site on liquid
natural gas. With that we recognize the gentlelady from the
District of Columbia. You are recognized for 5 minutes.
Ms. Norton. Thank you very much, Mr. Secretary, for being
here.
We live in a bubble; it is called the United States of
America. But when I think of oil, of course, I think of the
increasing consumption by the rest of the world. I was
astonished to learn that we have only about 2 percent of the
world's known oil supplies, and yet consume 20 percent of the
oil supply, and noted this in a report by the managing director
senior analyst covering oil and gas for Oppenheimer & Company,
who said if we drill in the middle of Manhattan and everybody
drill in their backyard, we would not have enough oil to move
the global market.
Would you explain what he is talking about?
Secretary Chu. Well, the oil markets are an international
market because one can ship oil fairly inexpensively anywhere
in the world, and, yes, it is true that America has increased
its oil production in the last 4 years. That is a good thing
because it means we import less oil, and we are all for that.
But there are other countries, for example, Canada has become a
major oil exporting country, and yet, aside from the difference
in taxes, the average Canadian and U.S. prices bob up and down
exactly the same. Of course, there are differences in provinces
and States because of taxes.
So the issue here is it is an overall supply and overall
demand, and there are what I would call concerns with the
Middle East that also tend to drive up prices. The overall
demand is dominated by developing countries, notably China and
India. The demand in the United States is quite moderate; in
fact, it is essentially flat, which is good news, especially as
we increase our oil production. That is why our imports have
gone down from 60 percent to, let's say, 45, 46 percent. And it
will continue to go down because we are going to increase oil
production in the U.S. because of new technologies.
So the direct tie is really this world oil price, in large
part driven by growing demand in developing countries. In large
part there is an issue having to do with excess reserve
capacity that also makes people concerned. And then, finally,
worries of the Middle East.
Ms. Norton. Yes. So what countries do in their own
territories doesn't much affect the world market and the world
demand for oil, which brings me to going to other forms of
energy. Do we have the same competition for other forms of
energy that we have for oil and gas. The way they are coming at
us in China and India for the oil, are they coming at us? Do we
have any head start at all for alternative forms of energy?
Secretary Chu. Yes. Absolutely. Natural gas is one. The
infrastructure for liquefying and shipping natural gas around
the world, it is starting but it doesn't really exist, so there
are big differences in natural gas prices, and that is why the
Department of Energy is so keen on offloading some of our
transportation energy to natural gas.
Biofuels is another possibility because we have great
agricultural resources, just as we have great natural gas
resources. So beginning to create biofuels without subsidy is
our goal that can offset petroleum is another big deal for us.
So those two things create wealth in the----
Ms. Norton. So instead of everybody joining the race to
apparently nowhere for oil, understanding that we have to get
as much of that as we can, we have to join other races as well.
Does the funding of some of the alternative sources in the
Recovery Act help in this race toward at least some form of
energy which would be usable and affordable? And, if so, how
did the Recovery Act help in that?
Secretary Chu. Well, the RP was funded, started in the
Recovery Act. RP has been instrumental in many of the
innovative biofuels, batteries, electrification. Also, an RP
company has actually doubled the world record for lithium ion
energy density, and we think that the cost of manufacturing
will remain the same or perhaps even go down, so you have just
cut in half the price of electric batteries.
If we can cut it to one-third, one-quarter, we can really
talk about a $20,000 car that can pay for itself in 5 years. It
would be cheaper than the $16,000 car, and that will bring
immediate relief to all the families who are trapped in
situations where they have long commutes. And we do feel that
pain and we are working as hard as we can to give the American
public those technologies.
The good news is those technologies could also be used
worldwide and deployed worldwide. That would have a downward
impact on the price of oil because the demand will be
moderated.
Ms. Norton. Thank you, Secretary Chu.
Chairman Issa. I thank the gentlelady.
I now ask unanimous consent that the article be placed in
the record, ``The U.S. is sitting on a 200 year oil supply.''
This is from the Business Insider. It quotes President Obama.
President Obama said the U.S. possesses 3 percent of the
world's oil reserves, or about 22.3 billion barrels, which
comes out to a 200 year supply of our need.
Without objection, so ordered. With that we recognize the
gentleman from Tennessee, Mr. DesJarlais, for 5 minutes.
Mr. DesJarlais. Thank you, Secretary Chu. Appreciate your
testimony today. Five minutes goes very quickly. If you could,
no one likes yes or no answers, but if you could answer yes or
no to these questions. I think they are fairly straightforward.
With regard to First Solar, DOE deemed both Agua Caliente
and Antelope Valley Solar Ranch as innovative projects,
correct?
Secretary Chu. That is correct.
Mr. DesJarlais. The innovative component of the Agua
Caliente projects involved inverters that benefited from fault
ride-through technology and dynamic voltage regulation,
correct?
Secretary Chu. Yes, that is correct.
Mr. DesJarlais. Thank you. And you agree that Antelope
Valley Solar Ranch's application indicated it would use the
same exact inverter related technology?
Secretary Chu. A very similar technology plus one
additional innovative technology, one-access tracking of the
sun with these lower efficiency solar panels.
Mr. DesJarlais. Okay. But since Agua Caliente has already
relied on the inverter----
Chairman Issa. Would the gentleman yield for a second? As a
Californian, I have to say Agua Caliente.
Secretary Chu. Yes. I did not want to correct----
Chairman Issa. The chairman of the Agua Caliente tribe in
my district just passed away, so I am acutely aware that today
I would like it--we will give you back the time. Agua Caliente.
Mr. DesJarlais. How did you pronounce DesJarlias the first
time?
[Laughter.]
Chairman Issa. So I was showing off.
[Laughter.]
Chairman Issa. For a long time I just said, you are next,
Doc.
Mr. DesJarlais. Okay, Caliente, is that right?
Secretary Chu. Agua Caliente, yes.
Mr. DesJarlais. Okay. But since Agua Caliente already
relied on the inverter technology, Antelope Valley needed to
find another innovation to further differentiate itself, is
that correct?
Secretary Chu. That is correct. And it had this other
differentiated technology.
Mr. DesJarlais. Okay. Are you aware that DOE deemed single
access trackers which rotate to follow the sun as the
innovation that would differentiate Antelope Valley from Agua
Caliente?
Secretary Chu. I believe so.
Mr. DesJarlais. Okay. I think that is what you were
referring to earlier. Okay.
Can we put up a slide where Dong Kim discusses the
trackers? Oh, it is already up? Thank you.
[Slide shown.]
Mr. DesJarlais. Secretary Chu, I am about to show you an
email here where Dong Kim, the Director of DOE's Technical and
Project Management Division, makes clear that these trackers
are not innovative. Can you explain this?
Secretary Chu. Trackers have been used before. They have
been used in smaller scale things. They have been used in
higher efficiency solar panels because the added cost of
tracking, the motor, the locking as the sun goes across was
something that had been used before. But when you go to very
large scale and the thin film technology, the--rods they were
using, at the time 11 percent efficient, wasn't comparing to
where you had a much higher efficiency, let's say 16 percent
silicon to track.
So the question was can you get a large project and the
additional capital expense of tracking to make it work with, at
that time, relatively lower efficiency panels, which were lower
cost to make. Now, the good news is the efficiency has gone up
to 14.5 percent, but that was the merging of the technologies.
And in the end Dong Kim decided that perhaps--and again it was
totally a discussion within that group as to what would rise to
the threshold of innovation.
Mr. DesJarlais. So you disagree with Dong Kim?
Secretary Chu. I think Dong Kim has an opinion that he then
wrote the justification of that opinion later on. So what you
see is the workings of an internal discussion with Dong, with
others within that section of the Department. So this is all
internal within the career folk. So Dong Kim, actually when he
wrote up, because in the end it is going to be a decision that
they put forward. If they decided it was not going to be
innovative, then it would not go forward.
The other email that was referred to we believe was
referring to the terms of the project finance. It is more a
finance agreement rather than technology. But I don't really
know, we are just assuming. That is the carbon copy. But I
can't put myself in the minds of Dave France, but we think it
might have to do with the terms of the finance agreement with
regard to the reference of carbon copy.
Mr. DesJarlais. Okay, thank you. So based on the facts,
Antelope Valley Solar Ranch failed to meet the innovativeness
required and, as a result, DOE made a $646 million mistake by
approving the loan. Will you personally commit to preventing
any additional money from going to First Solar's Antelope
Valley project?
Secretary Chu. Well, first, I don't really know what the
status of that is. Once we make a commitment to a loan and
begin to disburse the loans, we take very seriously the
contractual obligations. So we can get back to you on what
those contractual obligations are.
Mr. DesJarlais. Okay. And the projects need to meet
benchmarks, is that right?
Secretary Chu. That is correct.
Mr. DesJarlais. Okay.
My time is up.
Chairman Issa. Would the gentleman yield?
Mr. DesJarlais. Yes, sir.
Chairman Issa. So since they are both with the same company
and they used a carbon copy and created a false difference, one
that really didn't exist, one that could have been some units
with, some without, by definition isn't their application in
fact one that you could go back and question whether their
application claiming innovation was correct or not?
You are the owner of 15 patents, including the ones that
are pending. The fact is a patent is not a right that you can't
be reviewed for its accuracy later. Don't you have the right to
go back and look at the accuracy of claims by a company who
chose to invent, if you will, a difference where there was
none?
Secretary Chu. Well, I don't know.
Chairman Issa. From an innovation standpoint.
Secretary Chu. I think in terms of a loan guarantee, a
finance agreement, once you have decided you have made a
commitment and you go forward, as you well know, that is a
contractual basis. It was an internal debate within our career
folk as to whether the next project Antelope Valley had borne
the threshold of innovation, and those people who, as I said
before, are very, very good people, determined that it was so.
So again, once we entered into an agreement, we have to be
very careful. There are milestones, there are things of that
nature, and we will follow those procedures.
Chairman Issa. Okay, I will give the Minority a copy of
this, but I am going to enter at this time into the record a
page, page 12, which indicates no difference in the application
on the actual document. We will give you a copy, Mr. Secretary,
and come back to it in a few minutes.
Chairman Issa. With that, the gentleman from Virginia, Mr.
Connolly, is here.
Mr. Connolly. Thank you, Mr. Chairman.
Welcome, Secretary Chu. It is great to see you again, and
thank you for your leadership. I think our Country is very
fortunate to have somebody with your caliber and your
background leading the Department of Energy, and I thank you
for your leadership.
For some, Dr. Chu, the narrative here seems to be that the
stimulus bill, with respect to energy in particular, was a
complete waste of time, a boondoggle, not very transparent, and
accomplished almost nothing; in fact, maybe negative nothing
because there was fraud, there was waste, we didn't know what
we were doing.
I am just curious. Let's take weatherization, which has
been singled out. At the time we were considering the stimulus
bill, weatherization was heralded as a potential boon in terms
of energy efficiency in helping lower income folks who
otherwise couldn't retrofit their homes or businesses, it would
put people to work, and it would save on energy costs over
time. We have a report today by the Majority staff that
basically asserts that billions were wasted and that program
didn't work. Your take?
Secretary Chu. We think that aside from these isolated some
subset of that 3 or 4 percent, it was, overall, a very
successful program. Its overall impact actually can't be fully
felt, but let me just tell you a little story.
I went to one of the earlier homes that was weatherized, a
widow in Milwaukee. She was living in a small house; it was
weatherized, they put insulation in the ceiling, in the walls;
they gave her a new heating system, and she said for the first
time in as long as she can remember she can now eat breakfast
in her kitchen. Before that time it was just too cold, and this
is within 200 percent of the poverty level. This is a person
who was suffering and spending a lot of a very limited set
income on her energy bill, and that went way down. So then that
person can take that money and channel it right back into the
local economy.
So we have hundreds and thousands, actually, hundreds of
thousands of stories like that if you consider the 680,000
homes that were weatherized.
Mr. Connolly. Six hundred and eighty thousand. And do I
understand that the average saving per year for each of those
680,000 is about $437?
Secretary Chu. That has been an estimate, yes.
Mr. Connolly. So would you say that the program funded by
the Recovery Act was a success, in your view?
Secretary Chu. Yes. As I said, that is why I was willing to
give that one an A. I am actually always amused when people ask
me, as a professor, how I grade myself. I am a tough grader,
but, in any case, yes, that would, and again let me point out
in those instances where there has been shoddy workmanship, for
example, we went back and insisted they fix it with no cost to
the taxpayer.
Mr. Connolly. Yes. Well, perhaps some who have an
ideological bent against any such invention, they want to
highlight some of the problems and gloss over the preponderance
of success. But in terms of effectiveness in energy efficiency,
this program has long been touted as something that actually is
quite effective, is that correct?
Secretary Chu. Well, it is very effective and it brings
relief. And when you see it on a very personal level, when you
actually see how it affects our population and----
Mr. Connolly. Mr. Secretary, let me just, if I may, move
on. Did you say that U.S. oil production has actually increased
in every year during the Obama presidency, reversing an 8-year
trend?
Secretary Chu. Yes, I did.
Mr. Connolly. And how did that happen? I thought the
President was opposed to fossil fuel exploitation and just
liked sort of squishy renewable energy.
Secretary Chu. Well, it happened in large part because of
things that were being developed over a period of a couple
decades, notably the shale oil and shale gas liquids.
Mr. Connolly. So it went up, not down, under President
Obama?
Secretary Chu. That is correct.
Mr. Connolly. The stimulus bill, we put some R&D money into
advanced battery research, is that not correct?
Secretary Chu. That is correct.
Mr. Connolly. Did we not also put some money into advanced
battery manufacturing?
Secretary Chu. That is correct.
Mr. Connolly. And did that have any efficacious effect? Did
that change the percentage of our world market share of
advanced batteries manufactured in the U.S.?
Secretary Chu. Yes, it did. First, by producing a higher
quantity and meeting demands of Volt and Leaf and other
manufacturers, it shifted the balance. We went from producing
less than 1 or 2 percent of the world's advanced batteries to a
capability of going up to 20 or 30 percent. So it helped reduce
the price of the batteries that are going into today's cars,
and will further help reduce the price in the next generation.
Mr. Connolly. And positioning us competitively----
Secretary Chu. Right.
Mr. Connolly [continuing]. Where we were pretty much almost
eliminated.
Chairman Issa. The gentleman's time has expired.
Mr. Connolly. I thank the Chair.
Chairman Issa. The gentleman from Ohio, Mr. Jordan, is now
recognized.
Mr. Jordan. I yield to the Chairman a few seconds.
Chairman Issa. The gentleman from Virginia asked the
question and you answered it as capacity. Isn't it true that in
fact the actual amount of lithium ion and other advanced
batteries being placed in the United States is not
significantly greater and, in fact, we continue, both in
photovoltaic and in battery production, to see China
effectively continuing to see our technology that we invest in,
but ultimately be the place of choice for that purchase?
Secretary Chu. Well, actually----
Chairman Issa. When the government doesn't mandate buy in
America.
Secretary Chu. I think the biggest competition was actually
coming from Japan and Korea in the batteries. But with that
program we did see a couple of U.S. manufacturers bring
factories back home, which was very, very good. We can give you
a complete list.
Chairman Issa. We appreciate that.
I thank the gentleman from Ohio, the home of Honda Motors,
one of the great manufacturing companies. I ask unanimous
consent the gentleman have his full 5 minutes. Without
objection, so ordered.
Mr. Jordan. Thank you.
Mr. Secretary, Nancy-Ann DeParle, White House Deputy Chief
of Staff, financially entangled with Granite Reliable, did that
in any way influence your decision to give Granite Reliable a
loan?
Secretary Chu. I didn't know she had any connection.
Mr. Jordan. Yes. With her son. She actually yielded a share
to her son. Mr. Secretary, did the fact that Michael Froman,
Deputy Assistant to the President, investor in Solar Reserve,
did that in any way influence your decision to give Solar
Reserve a loan guarantee?
Secretary Chu. No. Similarly, I didn't know----
Mr. Jordan. Mr. Secretary, did the fact that David
Sandalow, Senior Advisor at Good Energies, Assistant Secretary
at Department of Energy, major investor in Solar Reserve, did
that in any way influence your decision to give Solar Reserve a
loan guarantee?
Secretary Chu. No.
Mr. Jordan. Mr. Secretary, Steve Spinner, whose wife's law
firm represents Solyndra, former bundler for the President, Mr.
Spinner was, did that in any way influence your decision to
help Solyndra?
Secretary Chu. No.
Mr. Jordan. Mr. Secretary, how about John Bryson, former
Chairman of the Board at Bright Source, now the Commerce
Secretary, did that in any way influence your decision to give
a loan guarantee to Bright Source?
Secretary Chu. No.
Mr. Jordan. How about Peter Weeks, Mr. Secretary, Clean
Energy Advisor at the Department of Energy for loan guarantee
programs. Did he have any influence on whether decisions were
based on politics, seeing how his experience on his resume says
his only experience prior to working in the Presidential
campaign?
Secretary Chu. No.
Mr. Jordan. How about, Mr. Secretary, Sanjay Wagle,
principal at Vantage Point Venture Partners, investor in Bright
Source Energy, did that in any way influence the Department of
Energy's decision to give Bright Source a loan guarantee?
Secretary Chu. No, it did not.
Mr. Jordan. Mr. Secretary, how about Larry Summers, former
Director at the National Economic Council at the White House,
formerly with DE Shaw, an investment firm with a stake in the
Cahokia Project, did that in any way influence your decision to
give a loan guarantee to Cahokia?
Secretary Chu. No, it did not.
Mr. Jordan. How about Steve Wesley, Mr. Secretary, who
bundled a half a million dollars for President Obama in the
2008 campaign? Did that have any influence on your decision to
give a $465 million loan guarantee to Tesla, the company that
he was involved with?
Secretary Chu. No, it did not.
Mr. Jordan. Did any of these individuals I mentioned today
in any way lobby you, talk to you about the respective
companies that they had a stake in during the decisionmaking
process with the 1705 program?
Secretary Chu. To the best of my knowledge, no. In fact,
this is a remarkable list because I was unaware of----
Mr. Jordan. I just mentioned nine people, Mr. Secretary, if
I could, because I have a short time. I just mentioned nine
people representing eight different companies. My understanding
is there were 27 companies in the 1705 program who got a loan
guarantee, 8 of which had connections, close connections with
the Administration, with the campaign.
Do you see any kind of pattern? This is approximately 30
percent of the recipients in the 1705 program, close
connections with the White House. Do you see a pattern or
concern there?
Secretary Chu. No, I don't.
Mr. Jordan. Do you think the American people might see a
pattern if 30 percent of the folks were bundlers for the
President, involved the Administration, sitting on the boards
of the companies who received money, particularly companies
like Solyndra that are now bankrupt? Do you think the American
people might see a pattern?
Secretary Chu. Well, if the full record is revealed, I
think you could look at some of the other financial backers of
some of our loans who were prominent Republican donors. The
fact is----
Mr. Jordan. Did the White House ever call you, ever talk to
you about any of these? Did you get someone from the White
House, Chief of Staff, someone from the White House talk to you
about these respective companies involving these individuals?
Secretary Chu. No, we did not.
Mr. Jordan. So you weren't just helping your friends? You
weren't just helping people who were politically connected to
the Administration?
Secretary Chu. That is correct.
Mr. Jordan. Even though 30 percent of the loan guarantees
went to people who had connections with the Administration?
Secretary Chu. Well, as I said, we looked at loans on their
own merits, we don't look at who is backing----
Mr. Jordan. Okay, so let me turn to that. So if you weren't
helping your buddies, and you were basing the decisions on the
merits of the loan, how do you explain the fact that 23 of the
27 recipients of the loan guarantees were rated as junk status
investments? How do you explain that fact? This is what my
opening statement was about.
If it wasn't your political buddies, it had to be
incompetence, because tell me what organization would put money
at risk in 23 companies out of 27 that are rated junk category,
B, B-minus. This is what the American people want to know
about. Because there is no other conclusion you can reach. You
helped your friends or you guys were incompetent. When you look
at the 1705 program, the facts are the facts, and I don't see
how anyone could arrive at any other decision.
Secretary Chu. When you look at the constraints and what we
wanted to do with the loan program, which was to invest in
innovative technologies, if you are a AAA rated company----
Mr. Jordan. What does junk status mean, B, B-minus? What
does that mean? It means analysts expect these companies to
fail. And yet you put millions of taxpayer dollars, American
dollars at risk in companies that S&P and Moody's expect to
fail, and you put the money at risk. So you are telling me that
is what you did because, your words, you didn't base it on the
fact that these were political friends of the White House. So
you had to base it on something, and it certainly couldn't have
been the investment ratings that they were given by the
investment companies, because that indicates that these
companies are expected to fail when they are junk status.
Secretary Chu. Well, first, if you look at the statutes in
the loan program, it said that we wanted to invest in
innovative projects but had a reasonable chance of repayment.
And if you look at the----
Mr. Jordan. Don't you think----
Chairman Issa. The gentleman's time has expired. If you
just want to get a final answer.
Mr. Jordan. I would just say a reasonable expectation of
succeeding, then why did the ratings agencies say that they
were junk status, which means that they are probably going to
fail. That is why they gave them the rating.
Chairman Issa. The Secretary may answer.
Secretary Chu. Very briefly, I think we can all look up
what these ratings mean and----
Mr. Jordan. Oh, I have. I have. I wish you guys would have
before you gave the loans.
Chairman Issa. The gentleman's time has expired.
Mr. Cummings. Mr. Chairman?
Chairman Issa. Yes.
Mr. Cummings. Mr. Chairman, I would ask, those were some
strong allegations, at least give him a chance to answer.
Chairman Issa. I am.
Mr. Cummings. Okay.
Chairman Issa. That's why I keep saying the gentleman's
time has expired.
Mr. Secretary, we want to make sure you are fully able to
answer a question. Please continue.
Secretary Chu. Mr. Chairman, thank you for that courtesy.
All I wanted to say is that B, B-minus things of that nature,
they are qualitative words. This can be quantified with FCRA
ways of dealing with this and the FCRA rules are saying that
you try to assign as best you can, it is an art more than a
science, a probability of failure. So we used those FCRA rules
to actually begin to quantify if you look up in Standard &
Poor's and Moody's, you name it, any definition of these, they
are more qualitative, they talk about potential risks, things
like that.
So then it lands down to what is the probability of
failure, and we feel that it has to have at least a 50 percent
chance of succeeding.
Chairman Issa. Well, Mr. Secretary, because I want you to
fully answer, do you have guidelines that say where you do or
don't provide funding? Is there a point at which you are not
supposed to provide funding based on these letters?
Secretary Chu. Well, we believe that it should be a 50
percent or better chance of repayment. The highest credit
subsidies we gave, actually, at the time, and this was
determined by OMB, were to a company like Ford, which turned
out to be a good choice, but at the time it was deemed by OMB
to be risky.
Chairman Issa. Thank you. I am sure there will be more
questions.
With that we go to the gentleman from Utah, Mr. Chaffetz.
Mr. Chaffetz. Thank you, Mr. Chairman. I want to follow up
on Representative Jordan's comments, and thank you, Mr.
Secretary, for being here.
Is it ethical or unethical for a Federal employee to
personally benefit from the decisions that they are involved
with?
Secretary Chu. It is unethical.
Mr. Chaffetz. Is it proper or improper for a Federal
employee to personally financially benefit from the decisions
that they are involved with?
Secretary Chu. Yes, we have rules forbidding that and very
rules so that people don't get near any gray area.
Mr. Chaffetz. So if somebody does step over that line, what
is the consequence?
Secretary Chu. We would probably turn it over to the IG for
investigation.
Mr. Chaffetz. Okay, so they go through this investigative
process. But let's say it comes to a conclusion that they have
stepped over this ethical line. What is the consequence for
stepping over that line?
Secretary Chu. Well, again, it depends on the exact nature
of what they did and the law, but we would certainly take this
very seriously and the IG would, I am sure, have a
recommendation, should that occur.
Mr. Chaffetz. Have you turned over any of the names that
Mr. Jordan talked about, or any others, over to the IG for
further investigation?
Secretary Chu. Well, in the few cases that I know, most of
those people I didn't actually know they had connections until
today, but, for example, in the case of C. Spinner, he was
actually firewalled from participating in any decisions
regarding whether we make a loan to anything that he might have
had a relationship to.
Mr. Chaffetz. What about David Prend?
Secretary Chu. I don't know David, Friend.
Mr. Chaffetz. David Prend, you don't know David?
Secretary Chu. Prend? No.
Mr. Chaffetz. He currently evidently serves on a panel that
assists the DOE with solar technology issues. What about Steve
Wesley?
Secretary Chu. Steve Wesley I do know.
Mr. Chaffetz. Has he been turned over to the IG yet?
Secretary Chu. No, because we in deciding on the Tesla
loan, he made no overtures, no phone calls, no instances to
encourage us to make that loan.
Mr. Chaffetz. What about Nancy-Ann DeParle?
Secretary Chu. I didn't know she was connected with any of
our loans.
Mr. Chaffetz. But she turned over some of the assets that
she had to her son and she sat on the board and owned interest
in Noble Power. Noble owned a company called Granite Reliable
which received a partial guarantee of $168.9 million loan from
the Department of Energy.
I guess, Mr. Secretary, one of the concerns is following up
on that ethical standard. If there isn't a true and consistent
standard that is not enforced, then it exacerbates the problem.
And as Mr. Jordan rightly pointed out, there seems to be a
pattern. There are so many names on this list. I just want to
know personally what are you doing to follow through on our
concerns that these people were personally financially
benefiting from the decisions? They are there in a position to
influence people, where they had major financial gain on the
upside of these loans. What are you doing about that?
Secretary Chu. Well, first, we look at any allegation and
see if there is any merit to it. Also, what I have been doing,
again, because there were no--certainly my ears would have
perked up if I got phone calls from people saying we want you
to look at this loan, we encourage you to fund this loan, but
we didn't receive those.
But since this time and since people have brought up these
connections, if you look at our loan portfolio, you also find
very prominent people who have invested in companies we have
given loans to who are very prominent Republican donors. We
simply didn't know that at the time, nor does it really matter,
because we do not give loans based on----
Mr. Chaffetz. I guess I am worried about the people that
work in your Department, work in the White House who are
Federal employees who are personally benefiting in a group
sitting there where they have an opportunity to influence
people and their decisions. That is the deep concern, Mr.
Secretary. I don't see any evidence that you are following
through and pushing these to the Inspector General. I just want
to get an assurance that you are going to do that and that
there are serious consequences for people who do step over
those ethical lines.
Secretary Chu. Well, certainly our own general counsel's
office, they look at all these allegations, as we do, and if we
think it rises to the threshold where it deserves further
scrutiny, we will turn them over to the IG.
Mr. Chaffetz. I have seconds here, but describe what that
line is. What, in your mind, becomes unethical behavior?
Secretary Chu. If it turns out that any of these people
were actually active in either actually lobbying or were part
of any decisionmaking process for the loans, I think that would
warrant----
Mr. Chaffetz. The fact that they worked for the Department
or the agency and they personally benefited, does that not
reach a threshold that is concerning to you?
Secretary Chu. There are people who work for the Department
and if they are firewalled from being part of any decision,
then that is how we manage these potential conflicts of
interest, and we do firewall them and we are very scrupulous
about trying to make sure that they have no influence on any
decision.
Mr. Chaffetz. Thank you, Mr. Chairman.
Chairman Issa. Thank you.
Mr. Secretary, they are going to bring you down an email.
It was provided in our discovery, dated April 29th, 7:28 a.m. I
would ask unanimous consent it be placed in the record.
Chairman Issa. At this time I would like you to read it and
see if you want to reconsider whether or not there were
contacts between the White House and DOE officials.
Secretary Chu. Well, okay, so Daniel Tobin I don't recall.
I don't remember him. So you want me to read it out loud or
just read it?
Chairman Issa. Please. You have said that there were no
contacts. This clearly is a DOE official asking for the
information of an entity that had not yet been given a loan,
saying the White House wanted it.
Secretary Chu. Well, I don't know what the context of this
email is, but it says, Steve, Steve Ably, I guess, Steve, can
you provide the number of jobs that will be created during the
construction and what percentage of this product is U.S.
content? I understand the majority of this equipment is from
Germany. Do you have a breakdown? Apparently, the White House
is asking for this information.
This is pure speculation as to what this was about, but
certainly when we install and we provide loans, we would like
to see a large fraction of the content, if we are installing a
wind project, to ok U.S., because it is U.S. jobs. And the good
news is, as this project went forward, we started three, four
or 5 years ago, I am not sure when the clock starts, but with
25 percent U.S. made contact, on average, and now the wind
turbines being constructed in the United States are about,
according to the wind representatives, about 65 percent U.S.
content. Automobiles manufactured by Chrysler, Ford, and GM are
about 75 percent U.S. content. So this is a good step.
So I am guessing, and it is just pure speculation, that the
concern was we don't want to be giving loans that is largely
non-U.S. content.
Chairman Issa. I appreciate that, and I would only ask that
since our discovery did find this, if you would do a follow-up
discovery under the same subpoena and deliver us succinctly all
the contents like this that appear to be involving applicants,
DOE, and the White House, since obviously there is at least one
that does involve the applicant, DOE, and the White House.
Secretary Chu. I can do that.
Chairman Issa. And we will loan you a Bates stamp, if that
helps make sure that we get numbers on the next time.
Secretary Chu. Very good.
Chairman Issa. Thank you.
With that, we recognize the gentlelady from California, Ms.
Speier.
Ms. Speier. Mr. Chairman, thank you, and thank you, Mr.
Secretary.
Secretary Chu. How are you?
Ms. Speier. I am fine, thank you. I would like to ask you a
series of questions that you can answer for the record, and I
would also like to submit for the record, Mr. Chairman, an
article from The New York Times, September 10th, 2011, that is
entitled Employee Lawsuit Exacerbates Issues at Livermore Lab.
Chairman Issa. Without objection, so ordered.
Ms. Speier. Secretary Chu, I am just going to run through
these. The details of the fees the Department of Energy has
been paying to the management company since 2008; an
explanation as to why the work force at Livermore Labs has
shrunk to 6,800 full-time employees from 9,400, while Federal
funding has remained at 2007 levels of $1.2 billion; an
explanation as to why the number of peer reviewed published
articles by Livermore Labs scientists has dramatically
decreased since the Bechtel-led coalition has been in charge
and has the contract; and, finally, what oversight actions the
Department of Energy has taken in response to cost overruns,
degradation, and capabilities and lapses in security at
Livermore Labs.
So you don't have to answer those at the moment, unless you
have some overarching comment you would like to make, but I
would like to have them made available to the Committee at a
later date.
Secretary Chu. So in respect for your remaining time, I
will not answer, but certainly I lived through that
restructuring----
Ms. Speier. I know you did.
Secretary Chu [continuing]. When it became from the
University of California to a limited liability corporation,
which include 50 percent, I believe, University of California,
and at the time, we, the Lab, people felt that this would be
some of the fallout.
Ms. Speier. Okay, thank you. According to the International
Energy Agency's World Energy Outlook, the fossil fuel consumers
worldwide received about six times more government subsidies
than the renewable energy industry. Mr. Secretary, do you know
how long we have been providing subsidies to the fossil fuel
industry?
Secretary Chu. Well, it depends on which one you are
talking about, but I believe oil started roughly 100 years ago.
But we can get you the precise types of subsidies.
Ms. Speier. All right. According to a 2010 New York Times
editorial, the oil industry has spent $340 million over the
past 2 years lobbying against cuts to its subsidies. One of the
reasons they argue for retaining the subsidies is retaining
American jobs. But I note that despite heavy subsidies between
2005 and 2009, the top five oil companies have actually reduced
the U.S. work force by more than 10,000 workers. So it does not
appear that the subsidies to oil companies are keeping jobs in
the United States.
Do you have any comments you would like to make on that?
Secretary Chu. Well, it is very complicated, but certainly
those major companies are doing well, they are large, stable
companies making hundreds of billions in profits, and a lot of
the new finds, new gas finds and new oil finds, are started by
independents, smaller entities.
Ms. Speier. So what would happen, Mr. Secretary, if we
offered similar subsidies to clean energy initiatives?
Secretary Chu. Well, we think that it would help create an
environment that would stimulate this, but I, for one, don't
believe clean energy subsidies in wind and solar, for example,
need more than, let's say, 20 years. The technology is
improving very rapidly and they can be ramped down because the
technology is improving, and will be competitive with any form
of new energy. So I think many people in this room would be
agreeable to saying that there should be sunsets in all
technology subsidies.
Ms. Speier. All right. In 2009, the University of
Massachusetts issued a study called The Economic Benefits of
Investing in Clean Energy. The study reported that investments
in clean energy initiatives create two to four times more
direct and indirect jobs compared to the same investments in
oil and gas production. The report concluded that investing $1
million to retrofit buildings to make them more energy
efficient creates three times more jobs than $1 million
invested in oil and gas.
Without getting into specifics, do you agree with the
findings of this report?
Secretary Chu. Well, I can't say to the exact numbers, but
I do say that energy efficiency especially is something by
saving energy, you save money. The energy efficiency, the
retrofits, the building of new buildings, new infrastructure in
the United States, something we know can't be outsourced, and
once you save that money, whether you are an individual, a
residence, a business, that money gets recycled right back into
the economy. So we think that that is a very good way of making
us more competitive, making us economically stronger, and
stimulating our own economy.
Ms. Speier. Thank you. My time has expired.
Chairman Issa. I thank the gentlelady.
We now recognize the gentlelady from New York, Ms. Buerkle,
for 5 minutes. Would the gentlelady yield for 10 seconds?
Ms. Buerkle. Absolutely.
Chairman Issa. Isn't it true, on a per megawatt basis, that
the subsidy to fossil fuel is a fraction of a subsidy to
renewables at this time, that those are weighted based on very
small amount of renewals, very large amount of fossil fuel?
Secretary Chu. I haven't looked at the numbers, but I would
presume so because the amount of energy generated by fossil
fuel still overshadows that of----
Chairman Issa. I thank the gentleman.
The gentlelady is recognized.
Ms. Buerkle. Thank you, Mr. Chairman, and I thank you,
Secretary Chu, for being here this morning.
I want to just refer to and reference a comment my
colleague from the District of Columbia mentioned about the 2
percent oil reserves that exist in the United States. Do you
agree with that assessment?
Secretary Chu. Well, I am not an expert on oil reserves. I
have certainly heard that. But oil reserves are a very specific
definition of what an oil reserve really means. But I have
heard that number.
Ms. Buerkle. Thank you. And we have heard the President
refer to that both during his campaign and in his State of the
Union. I think the last figure he used was 3 percent.
But I think it is important because the people throughout
the Country need to know the truth, and if I look at these
numbers here, our Country doesn't have just 2 percent of the
reserves. At least 86 billion barrels of oil in the outer
continental shelf, 24 billion barrels in shale deposits in the
lower 48 States, up to 2 billion barrels of oil in shale
deposits in Alaska, up to 12 billion barrels in Anwar, as much
as 19 billion barrels in Utah that is tar sands, according to
the Bureau of Land Management.
Now, all of these numbers are coming out of governmental
agencies. There is a massive green river formation in Wyoming
which, according to the USGS, contains a stunning 1.4 trillion
barrels of oil shale, and on it goes. Rand Corporation found
that about 800 billion barrels of oil shale are in Wyoming and
neighboring States. All told, U.S. has access to 400 billion
barrels of crude that is recoverable via existing drilling
technologies.
That is really very important for us to recognize, that we
do have more than 2 percent of oil reserves and that we can be
energy independent if we just tap what is in the United States
of America. We can become less dependent on the Middle East
oil.
And I think, as I sit here, it is so important for me to
get a feel from this Administration. Do you understand, and I
will just briefly mention my district, which is upstate New
York. No mass transit and very cold weather. So we have folks
up there who must drive to work, and we don't measure in terms
of blocks and miles like we do down here in Washington; they
drive half an hour, an hour to work, just as my colleague from
North Carolina mentioned. And, beyond that, we live in a
climate where the battery in the Leafs and the Volts, they
don't work real well because they are so light, and in the
weather and the snow that we have--last year we had over 200
inches of snow in my district. So they need heavy duty cars
that burn fuel.
So my question to you this morning is does the
Administration even begin to appreciate the pain at the pump
that the American people are feeling? Seventy percent of
Americans drive automobiles. This issue is on their minds. And
I would like to see whether or not you think the Administration
is even aware of the pain that the people of America are
feeling at the pump.
Secretary Chu. The Administration, the President and I
personally feel that very much, and we actually know this pain
because if you are in a situation where you do have to commute
and you do have to use your own car, it is causing great
hardship.
Ms. Buerkle. Then, with all due respect, why aren't we
tapping into the resources that exist in the United States of
America? And I agree, all energy exploration. But from what I
am hearing, and we talked about the stimulus and the advantage
of the weatherization program and the fact that it benefits
680,000 Americans, and I think the number you used was
approximately $437 a year in savings. That is now being eaten
up at the pumps. That is nothing.
Any benefit, if you could possibly justify it as stimulus
plan, has gone out the window because this Administration is
not willing to be aggressive and establish a sound domestic
policy here, energy policy, where we explore all energy
possibilities, but we rely on the resources that exist in this
Country.
And I think if we did we would see, and you mentioned it in
your opening comments, supply and demand, very simple. We
increase the supply of oil, we send a message to other
countries that we are not going to be dependent on you, we have
the resources here, and I think you will see gas prices drop
dramatically.
And I would ask of you to go back to the Administration and
say the American people are hurting; they need you to do
something now. They need the Keystone Pipeline initiative. They
need this Country to say, yes, we will do all forms of energy
exploration, but primarily we will drill and we will make sure
the American people have access to lower gas prices and we
access all of the resources that exist in our Country.
I see my time has expired. Thank you, sir.
Chairman Issa. Mr. Secretary, if you wanted to respond. I
don't want to have you cut off.
Secretary Chu. Again, thank you, Mr. Chairman. Very, very
quickly, the Administration is supportive of increased
production in the United States. Very aggressive program going
on now through Secretary Salazar of Interior, much more land
being offered for auction to decrease our dependency on
imported oil, because we also recognize it creates jobs in
America. So we are doing what we can in that respect.
Chairman Issa. I thank the gentleman.
We now go to the gentleman from Missouri, Mr. Clay, for 5
minutes.
Mr. Clay. Thank you, Mr. Chairman.
It is good to see you, Mr. Secretary. While some have
criticized individual and, I think, uncommon examples of
disappointing results, I know of many successful recipients of
Department of Energy grants; smart grid, clean cities, energy
efficiency, environmental cleanup, renewable energy, hybrid
technology. All of these and more are successful examples of
Recovery Act funds administered by the Department.
In my city, St. Louis, the Danforth Plant Science Center
received funds via the Recovery Act for a project to determine
how blue-green algae might be modified to produce fuel. Boeing
received a smart grid grant via the Recovery Act to modernize
the power grid. Washington University in St. Louis holds one of
46 Department-created energy frontier research centers.
Researchers at the Photosynthetic Antenna Research Center are
studying how plants harvest light and funnel energy in order to
improve solar technology.
As with all the organizations that received ARRA funds, our
park provides employment for staff at all levels. The city of
Florissant, Missouri, in my district, was awarded Recovery Act
funds through the Department's Energy Efficiency Community
Block Grant program. The funding covered installation of a new
integrated solar panel roof system for the civic center. In
addition, the grants provided funds for an energy audit and
retrofit of heating ventilation and air conditioning units for
all government-owned buildings.
These projects not only provide jobs, they save a
tremendous amount of money and energy. Also, Mr. Secretary, in
my district, in Hazelwood, Missouri, Emerald Automotive has
developed an all new lightweight range extended hybrid for
fleet operators. The Emerald vehicle has a range of over 450
miles and achieves over 160 miles per gallon the first 100
miles driven. The vehicle reduces emission by 85 percent and
saves a fleet operator considerable fuel costs. A testing on
prototypes is currently being conducted and the green vehicle
will be produced in Missouri and sold domestically and in
Europe.
Mr. Secretary, Emerald has advanced through the early
stages of the advanced technology vehicle's manufacturing loan
program process with flying colors. There have been two rounds
of questions from the Department, which have been answered
promptly and thoroughly. Over 1,000 pages were submitted in the
last round alone. The Emerald vehicle is exactly the type of
project for which the ATVM loan program was created, yet the
process has stalled. Mr. Secretary, what needs to be done to
have DOE consider the Emerald application on its merits?
Secretary Chu. Well, as I said, we, first, consider all the
applications strictly on the merits, and what we need to do is
we have to decide how do you walk this balance between a
company that is offering innovative promising technology to our
responsibility to the taxholders that there is a likely chance
of repayment, and this has always been the motivating factor in
any decision we make.
Mr. Clay. And it is projects like these that create jobs
that were the genesis of the Recovery Act, is that correct?
Secretary Chu. Yes. But, again, I can't speak specifically
about a specific loan, but it is, again, this balance between
innovation that will help spur American innovation and
leadership with the responsibilities to the taxpayer.
Mr. Clay. Could you please talk about these other Recovery
Act programs that have brought so many jobs and created so many
innovations in my city and the rest of the Country?
Secretary Chu. Well, some of those are grants. I don't know
of all of them, but I know of some of them. There are research
grants, EFRCs we believe are very successful research grants,
mostly to universities and groups to encourage professors to
get together as a group and solve a problem, rather than
working as an individual research group, ban together, because
we think that if they do get together two plus two can be more
than four and one plus one can be more than two. So we think
that that has been very successful.
The biofuels Danforth thing, again, innovative, it is a
grant. Danforth is a great organization, so, again, all based
on the merits. We are looking for ways of breaking through.
Currently, the new generation biofuels is not competitive
without subsidy, let's say an $80 barrel of oil, and that is
our goal, we want it to be competitive without subsidy.
Mr. Clay. Well, thank you very much.
Chairman Issa. I thank the gentleman. I have one question
for the gentleman, if I could. Was it wise to talk about all
the grants you already got, when you wanted to know about the
next one you wanted?
Mr. Clay. I think it is cumulative, Mr. Chairman.
Chairman Issa. It is cumulative, okay. You have done well,
my friend.
Mr. Clay. Thank you.
Chairman Issa. With that we recognize the gentleman from
South Carolina, Mr. Gowdy.
Mr. Gowdy. Thank you, Mr. Chairman.
Thank you, Mr. Secretary. I want to ask you about your
quote from 2008. Somehow we have to figure out how to boost the
price of gasoline to the levels in Europe. Was there a specific
country in Europe that you wanted to emulate, or would you have
settled for a continentwide average?
Secretary Chu. Well, as I said repeatedly since I became
Secretary of Energy, that was no longer my goal, that was no
longer what I had to do as a government servant.
Mr. Gowdy. I understand that. You made that comment a few
months before you were sworn in as Secretary of Energy, and I
assume you meant it at the time you said it or you would not
have said it.
Secretary Chu. My duties as Secretary of Energy and my
duties to serve the Administration take on different aspects,
so when I became Secretary of Energy I knew what I had to do,
and especially since we ended up going through this free-fall
recession.
Mr. Gowdy. I understand that, but I also want to understand
what you meant by that comment, which was just a few months
before you were sworn in. So when you said somehow we have to
figure out a way, who is the we? Somehow we have to figure out?
Secretary Chu. Again, I would rather dwell on what my
record has been in the Department since I became a public
servant.
Mr. Gowdy. Mr. Secretary, when you said somehow we have to
figure out a way to boost, the word boost has a specific
meaning, it doesn't mean to let elevate, boost is intentional.
What did you mean by the use of the word boost?
Secretary Chu. I am not sure I said boost, but, as I
said,----
Mr. Gowdy. What word would you have substituted?
Secretary Chu. Well, as I said, it is now irrelevant in my
present job.
Mr. Gowdy. Do you know what the average price of gasoline
in the United States was in 2008, when you made that comment?
Secretary Chu. It was not low, as I recall. We were
suffering one of these gasoline price spikes at the time.
Mr. Gowdy. It was $3.50 a gallon. Do you know what the
average price of gallon of gasoline was in Europe when you made
that comment?
Secretary Chu. Considerably higher than that.
Mr. Gowdy. About $8.00 a gallon. You have mentioned several
times, in fact, you did it several times in one quote, the
overall goal is to decrease our dependency on oil, to build and
strengthen our economy and to decrease our dependency on oil.
Twice in one quote.
The President, on the other hand, talks about decreasing
our dependency on foreign oil. Why the distinction?
Secretary Chu. Well, we want to decrease our dependency on
foreign oil because it is really exporting money out of the
United States.
Mr. Gowdy. I understand why he uses the word foreign. What
I am asking is why you don't.
Secretary Chu. I think I use foreign. I think I use oil. I
use them interchangeably because oil prices are set by an
international market.
Mr. Gowdy. You and Mr. Jordan were talking about
probability specifically with reference to bond ratings and
investability. What are the probabilities of a CCC rated
company getting millions of dollars in government loan
guarantees?
Secretary Chu. Well, CCC plus is really at the edge of what
I would consider the risk to the taxpayers.
Mr. Gowdy. So what would the probabilities of someone at
the edge getting a loan?
Secretary Chu. Well, again, going back and looking at how
the OMB, whose responsibility it is to set the credit subsidy,
and the credit subsidy as it is set is literally, if one looks
at the statute, there to offset the potential losses due to
nonrepayment of any kind, delinquencies, so the credit subsidy
score is 50 percent----
Mr. Gowdy. Chances are 100 percent if you donated $30,000
to the President's election bid.
Secretary Chu. Sorry.
Mr. Gowdy. What about the probabilities of a B rated
company getting loan guarantees? That is not a very high rating
either.
Secretary Chu. I thought we were talking about the
probability as to the FCRA method.
Mr. Gowdy. Talking about Abound Solar and Solar Power, one
of which was rated CCC, one of which was rated B, both of whom
had principals who contributed mightily to the President's
reelection bid, both of whom got loan guarantees.
I have 14 seconds. I want to ask you about subordinating
taxpayer repayment for private investor repayment. Do you take
the position that if there is a loan closing in the morning
and, by statute, the taxpayers cannot be subordinated, that if
you renegotiate that afternoon, you can negotiate them to get
in line behind private investors?
Secretary Chu. No, I don't take that position.
Mr. Gowdy. What length of time has to pass before it can be
restructured?
Secretary Chu. It is not a matter of length of time. As
Herb Allison pointed out in his testimony, it is when a company
goes into difficulty and your goal is to benefit the taxpayer
as much as possible to give the chance that the U.S. Government
can get back as much as possible, then Herb Allison, in his
report, said that that restructuring is one of those tools.
Mr. Gowdy. I know I am out of time, Mr. Chairman. My point
was the statute is pretty clear. Taxpayers cannot be
subordinated to other investors. Legal counsel for the
Department of Energy has, in a case of mental gymnastics that I
am actually enviable of, says that only applies to the first
structuring of the loan, not to subsequent structurings. So my
question is can you restructure it that afternoon, according to
her legal memo?
Chairman Issa. The gentleman's time has expired. The
Secretary may answer.
Secretary Chu. Very quickly, I think there is no debate.
The statute very clearly says at time of origination it can't
be subordinated. And we follow that. The statute does not say,
when further on down the line, what you need to do, and when
asked whether it was wise to allow restructuring to continue,
many people in the financial world say if your goal is to
maximize taxpayer benefit, that should be one of the tools.
Mr. Gowdy. Thank you, Mr. Chairman.
Chairman Issa. I thank you.
For the record, because Mr. Connolly has left, I just want
to enter in--oh, good, Mr. Connolly is here. So, for the
record, from the EIA, U.S. Energy Information Administration,
we currently use about 19,497,960 barrels a day, of which we
import 11,753,000. The arithmetic on that, and I will put it in
for the record, without objection, indicates we still have not
reached that lofty more than 50 percent at the present time,
according to EIA's current figure. So we can all run around,
but we are still not getting that far and we certainly are not
doing it on public lands. With that we go to the gentleman from
Florida, Mr. Ross.
Mr. Connolly. Would the gentleman yield for 1 second?
Chairman Issa. Yes.
Mr. Connolly. My only point was that we actually had
reversed a trend in terms of domestic production. I think your
point is well taken, and obviously more progress needs to be
made.
I thank the Chair.
Chairman Issa. And I appreciate that. The problem we have,
Mr. Connolly, is that it was all reversed on private land and,
in fact, what we did was reversed the public lands being made
available made them less available.
So one of the problems we have on this debate today is,
yes, we have more oil, more natural gas, it is a result of
private people doing on private land and, in some cases, States
like Texas, who have special sovereignty, when in fact the
Federal Government, represented by the Secretary and the other
secretaries, Interior and so on, have actually reduced, they
may be reversing it now, but they reduced the availability for
oil production.
So it is one of those things where you can't take credit
for that which you are deterring just because you are being
overcome by the private sector working around it, if you will.
Mr. Ross, for 5 minutes.
Mr. Ross. Thank you, Mr .Chairman.
Mr. Secretary, thank you for being here. I want to follow
up on what one of my colleagues earlier, Mr. DesJarlais, was
inquiring, specifically with regard to single access trackers
as an innovation. It is my understanding that the Department of
Energy recognized single access trackers as an innovation, is
that correct?
Secretary Chu. As an innovation as applied to that
particular project.
Mr. Ross. And that particular project was the Antelope
Valley Solar Ranch, is that correct?
Secretary Chu. That is correct.
Mr. Ross. If you could take a look at the monitor there.
There is an email or a memo from what looks like Dong Kim to
Jeff Walker, where he states specifically someone keeps
changing AVSR, meaning Antelope Valley Solar Ranch, technical
slides to include single access trackers as an innovation. Be
clear this is not an innovation. The record will show that we
did not grade this as innovative.
Now, would you agree or disagree with that assessment?
Secretary Chu. Well, this is an email Dong Kim, and as I
tried to explain before, he later, for whatever reason, I don't
know the particulars of it, he graded that. Is it the world's
greatest innovation? Probably not.
Mr. Ross. But he indicated it was not innovation and,
therefore, Antelope Valley Solar Ranch got the loan guarantee
of $646 million. Wouldn't you say that is a mistake?
Secretary Chu. Well, you know, he actually wrote up the
justification for these things and ultimately it was a decision
he and his group made. So it was nothing, for example, I or
anybody----
Chairman Issa. Would the gentleman yield?
Mr. Ross. Yes, sir.
Chairman Issa. Mr. Secretary, I just want to make sure we
get this for the record. The ``I think it is innovative'' came
first. The ``I know it is not innovative, stop trying to inject
that'' came later. Could we agree to that? Because your
documents delivered to us indicate that clearly he earlier
allowed it to be considered innovative; later was overtly
objecting to it being called innovative and actually objected
to slides being put in that indicated it was innovative when it
wasn't. I just want to make sure we get the order right,
because the press has been given the assumption that he changed
from no to yes, when in fact he changed from yeah, it looks
okay, to hell no.
Secretary Chu. Well, I actually can't speak to that
because, again, I was not party to this back and forth
internally within the career folk. So we will gladly look at
the full email chain and get that back to you.
Chairman Issa. Mr. Ross, please continue. But we will in
fact make sure you have the paper trail you provided us back--
--
Secretary Chu. All right.
Chairman Issa [continuing]. So that you understand that
this was one of those where it is a half billion dollars that
would not have occurred had you listened to his later guidance.
And I would ask unanimous consent the gentleman have the
additional minute that I took. Without objection.
Mr. Ross. Thank you, Mr. Chairman. I would also like to ask
unanimous consent that the memo from Dong Kim, dated August 4,
2010, to several other recipients be admitted into the record.
And I will submit that to the Chairman.
Chairman Issa. Without objection, so ordered.
Mr. Ross. Mr. Chu, you indicated in your opening statement
that each one of these cases, speaking of criminal indictments,
was unacceptable and we have taken aggressive action to address
issues early on and hold responsible parties accountable. Does
it just take a criminal indictment to hold somebody responsible
and take remedial action, or have you taken remedial action on
these other matters that have resulted in absolute failure?
Secretary Chu. No, absolutely not. If you look at some, for
example, in a very small amount of the cases of weatherization,
if someone does shoddy workmanship----
Mr. Ross. Has anybody been let go as a result of any of
these failures? Have you terminated anybody's employment with
DOE as a result of these projects, whether it be Solyndra or
anybody else, and loan guarantees?
Secretary Chu. No, I haven't.
Mr. Ross. What remedial action, then, have you taken to
guarantee that this won't happen again? Or have you taken any
remedial action?
Secretary Chu. We have. We have taken remedial action, for
example, in the cases where we found shoddy workmanship, things
of that nature. We tell the contractor you have to go back, you
have to fix it on your own nickel.
Mr. Ross. And you still use these same contractors?
Secretary Chu. In some cases. Well, I can't----
Mr. Ross. I guess what I am getting at is there has not
been an established guideline that have been implemented as a
result of remedial action to be taken to make sure this doesn't
happen again, is that correct?
Secretary Chu. There were established guidelines, but you
have to also understand that in weatherization programs we give
money to the States, the States give to local organizations. We
oversee what the States and those local organizations do, and
we have very clear guidelines if there is any improper work----
Mr. Ross. So you would be willing to bet, then, that these
instances will not happen again, the Solyndras, the Antelope
Valley Solar Ranches, the excessiveness in the weatherization
program that have proved to be, as you have seen in the slides,
totally abject failures? It is your testimony today that you
have taken remedial measures to make sure that this doesn't
happen again?
Secretary Chu. We always look to ways of improving both our
oversight of the Recovery Act and our oversight of the business
we have in the Department of Energy, but it is just when
McKundo happened and we worked very hard to help stop that leak
that----
Mr. Ross. Let me shift real quickly, because I want to get
on this. We talked about oil production and we talked about oil
production being up under this Administration. Now, we are
talking about crude oil production, correct?
Secretary Chu. Yes.
Mr. Ross. We have not increased refined oil production,
have we, in the United States?
Secretary Chu. I actually don't know about that.
Mr. Ross. How much have we been exporting of our crude oil
production? Has that increased under this Administration?
Secretary Chu. I think the correct question you meant to
ask was what are the net imports or exports, because there is--
--
Mr. Ross. Of crude or refined?
Secretary Chu. I think both.
Mr. Ross. Okay, then answer.
Secretary Chu. Because depending on the refineries and how
sour or sweet the crude is. So there is a little bit of going
back and forth of crude----
Mr. Ross. But we have increased our exports of refined oil,
have we not?
Secretary Chu. Again----
Mr. Ross. And would not increase in production, even from
the drawing board, as an economist, affect the market rate of
crude oil prices, even if it takes 10 years to develop?
Chairman Issa. The Secretary may answer.
Secretary Chu. As I said, the thing that affects prices,
yes, supply and demand, very, very important. Other things that
affect prices are the amount of spare capacity. Other things
that affect prices are forward-looking things and nervousness
about international events. All those things affect the
international price of oil.
Mr. Ross. Thank you. I yield back.
Chairman Issa. I thank the gentleman.
My staff has given me the two documents we have been
talking about and we are going to post them on my website
prominently so that the August 4th, 2010 statement from Dong
Kim, which is on your website as your answer to justification
is placed next to the June 2011, 8 months later, when he says
clearly these are not, not innovative.
I would ask that you consider strongly putting the
correction, the 8 month later on the website so that the public
stops thinking that he thought it was innovative when in fact,
8 months later, well before funding, he said clearly it wasn't.
And with that we go to the gentleman from Pennsylvania, Mr.
Kelly.
Mr. Kelly. I thank the Chairman.
Secretary, thanks for being here today. You are in a very
tough position, and I really would suggest that it is really
not the pain at the pump that is affecting a lot of the
comments anymore, it is the pain at the polls. That is
certainly driving the great interest of how we are going to
solve this Nation's energy problems.
I have to tell you I was very impressed with your resume.
You certainly are, and the Chairman said earlier, one of the
smartest people that has ever been here. In your statement you
said, I have spent my career as a scientist. Rigorous peer
review and double-checking someone else's findings are
fundamental to a sound scientific process.
I believe the same is true in government. The American
people expect all of us to honestly assess the investments we
have made and chart a course for the future.
You also were talking about job creation and things that
have happened, and I am a little bit confused because when I
look at the claim that there is over 60,000 jobs created, I
say, okay, well, 33,000 of those jobs for the advanced
technology vehicles from Ford. Those people are already at
Ford, so you didn't really create those, that is just now they
are wearing a little different cap. Three thousand at Solyndra
that's bankrupt; 240 at Poet, which declined the loan; 188 at
Abound that have been laid off; and 34 at Beacon went bankrupt;
and 26 at Fisker that were laid off. Actually, the net total is
24,900.
So if we are going to inspect other people's data and other
people's findings, then we really need to get down to the
actual empirical data that we have to deal with. It is nowhere
near 60,000 jobs; it is just about half that amount. And a lot
of that is dubious also.
When I hear about this increased production in oil under
this Administration, this is not an original quote, but it is
very much like the crowing rooster taking credit for the
daybreak. Just because you happen to be sitting in a position
that is benefiting from years, years of technology coming now
into fruition, and I know a little bit about it; my family has
a 147-year background in energy production. Fracking is 60 to
70 years old, it isn't new. So I think that we sometimes get
these things twisted around when it comes to a political
reelection, as opposed to real answers for our energy problems.
And I have to tell you that I am trying to understand, as a
private citizen and one who has borrowed great deals of money
from time to time, I thought it was a great deal of money for
me because I actually had to pay it back; I had my own skin in
the game. But when I look at some of these loans, and I am
trying to understand, now, this is maybe not you, but you have
a team of people that would be approving these loans. Mr.
Jordan asked about it, Mr. Chaffetz asked about it, and my
colleagues have asked about it.
There is no way in heck anybody could have looked at these
if it was their own money, if you were truly a lender who was
responsible to a group of investors for the way your money was
being lent, you would say, no, no, no, no, we can't invest this
way. There is something called the five Cs that come up, and
most lenders would talk to you about it as character, capacity,
capital, collateral, and conditions. All those come into effect
before any loan is given out to any person trying to borrow it.
But I wonder as a scientist, and you say, I wanted to
check, I wanted to double-check. There is no way anybody
double-checked or nobody looked at these things. This isn't
science; this is a basic business model that has failed
dramatically, and it has failed with American taxpayer money.
So this idea that we are these benevolent monarchs just
showering these favors to these folks is absolutely
preposterous. We have wasted so much money.
The lady from California was asking about this. Fossil
fuels produce 78 percent of American energy, 13 percent of the
tax incentives. Renewables, they are responsible for 11 percent
of production and they get 77 percent of tax incentives. So if
you were asking which one did you want to eliminate, I would
say, you know what, I think I will put my money on a horse that
I think can win.
So I really do, I wonder. Sitting there as a private
citizen coming here for the first time, an automobile dealer my
whole life, having to fund everything myself, having
collateral, having character, having the ability to have great
deals of money, capital of my own to invest in any type of a
way-out project before any lender would even look at me, it is
incredible to me that we have gotten to this point today where
we have wasted billions and billions of hardworking American
taxpayer money on some green dream that isn't playing out very
well.
I have to tell you this is the House of Representatives
that represents the people of the United States. I don't come
here as a Republican; I come here just as an American. And I
hope my friends from either side feel the same way. The
American people deserve to know how could we have been so
careless and so casual with billions of taxpayer dollars?
In Section 1703 we were looking at nuclear, fossil, and
renewables. When we went to section 1705, you know what we
completely left out? Nuclear and fossil. It is all renewables.
I just don't understand anybody's economic model that looked at
something that was such a long shot and say, you know what, I
think this is right. I think this is what we should go for. In
fact, you know what you really drove out of the market were the
venture capitalists.
And I would like to submit for the record a letter from
Bright Automotive.
Chairman Issa. Without objection, so ordered.
Mr. Ross. I think we have a slide on this, too.
Chairman Issa. I would ask the gentleman have an additional
1 minute. Without objection, so ordered.
Mr. Ross. All right, Secretary Chu, this is February 28th.
This is very recent. Today, Bright Automotive will withdraw its
application for a loan under the ATVM program administered by
your Department. Bright has not been explicitly rejected by the
Department of Energy. Rather, we have been forced to say uncle.
As a result, we are winding down our operations. Last week
we received the fourth, near final conditional commitment
letter since September 2010. Each new letter arrives with more
onerous terms than the last. The first three were workable for
us, but the last was so outlandish that most rational and
objective persons would likely conclude that your team was
negotiating in bad faith. We hope that as their Secretary, this
was not at your urging.
And as you look at this. I mean, we really have driven a
venture capitalist out of the market because they cannot
compete with a group of bureaucrats that have absolutely no
background but are making decisions that would have been made
by them based on the likelihood of a good investment.
So the Energy Department may be well-intentioned, but has
absolutely destroyed a part of the investment industry through
an absolutely preposterous model that has no basis to be even
looked at and said, you know what, these were good decisions
based on good information. If it had a 50 percent chance of
survival? I would like to talk to one lender that would have
said thumbs up on that one, just wouldn't have happened.
I yield back my time.
Chairman Issa. Mr. Secretary? There wasn't a question
there----
Secretary Chu. I don't think there was a question, so----
Chairman Issa. Okay. With that we will go to the gentleman
from Texas, Mr. Farenthold.
Mr. Farenthold. Thank you, Mr. Chairman.
Secretary Chu, thank you for being here. I applaud your
taking the time to be here and I am happy to see we have
somebody in charge of an organization that actually has a
scientific background.
Let's talk a little bit about natural gas, if you don't
mind. Natural gas is cheap and abundant right here in America,
and lower natural gas prices in some areas of the United States
are at historic lows. Just for the record, would you say that
falling natural gas prices reduce the favorableness of the
business model for some of these alternative energy sources?
Maybe one of the reasons they are less able to compete is we
can go to a proven technology, natural gas, power plant on and
put $2.60, $2.70 natural gas in it?
Secretary Chu. I would certainly agree that falling natural
gas prices, especially where they are today, makes natural gas
very competitive with other forms of energy.
Mr. Farenthold. So now that we have relatively low natural
gas prices and we actually do see the oil and gas sector
ramping up employment, in South Texas we are under 7 percent
unemployment, actually looking at jumping under 6, we are
actually having trouble finding people to work in the oil
field. Do you think this might be an opportunity for us to
invest in technologies to export some of that natural gas to
bring money into the United States in the energy sector and
lower our balance of trade?
Secretary Chu. Well, first, we are very, very happy that
the natural gas boom and the ability to recover natural gas
where we thought, 20 and 30 years ago, was not recoverable, we
are very excited about that. As you noted, it is creating a lot
of jobs. We also think that natural gas is a good transition
fuel.
In weighing whether we export natural gas or not, the
Department of Energy is undertaking a study to see whether we
should be doing this. And I just want to add very briefly that
it lumps into two things: into fair trade countries, which we
have no choice, we approve; and non-fair trade countries, which
we have to weigh what is in the overall benefit of the United
States.
Mr. Farenthold. It just seems like we shouldn't be trading
energy any differently than we trade our farmers, our
automakers, our airplane makers. We encourage exports in those
fields and it seems like doing the opposite in the natural gas
field might be a mistake and might be an opportunity to lower.
You also mentioned the term transition fuel. Transition to
what?
Secretary Chu. Well, to a lower carbon intensive economy.
Natural gas emits about less than half the carbon dioxide of
the average conventional coal plants. While we work to do
research to help coal plants capture and sequester the carbon
dioxide, which we are also very committed to, we do see,
particularly with these low gas prices, that the power
companies will shift the balance somewhat to natural gas. They
won't go all the way because they too don't want----
Mr. Farenthold. Obviously you want a diversification of
fuels.
Secretary Chu. Right.
Mr. Farenthold. But I would encourage your Department to be
expeditious in approving permits to do exports.
Before I finish, I do want to ask you about a company
called Abengoa. I think it was $132 billion. It had the lowest
rating in the entire DOE profile, lower than Beacon Power or
Solyndra, both of which have gone bankrupt. Are you concerned
about having loaned money to this risky venture?
Secretary Chu. Well, we look at all our loans. We are very
careful, we are very mindful of risks to taxpayer money and we
monitor these situations. Frankly, what has happened in the
solar industry and solar manufacturing, no one really
anticipated that the price of solar modules, the bidding price
would drop to only 20 percent of what it used to be some 4
years ago.
Mr. Farenthold. Which brings up the issue of kind of a lack
of diversification within the DOE profile. You have Abengoa,
First Solar, Project Amp. They received about half of the 1705
program funds, or about $7 billion. Shouldn't we be
inconsistent with the all of the above energy that the
President has said and that we Republicans have been touting
all along, be looking at diversifying that over a wide variety
of different projects, rather than dumping half of it in three
questionable programs?
Secretary Chu. Well, in 1705 we invested in solar, we
invested in green, we invested in some geothermal. In our other
loan programs, for example, we invested in nuclear. We have a
conditional commitment to Vogel for their first two nuclear
reactors that we started for the last 30 years. There are loans
in the 1703 program for gasification of coal. So there are
other parts of our loan program that include those
technologies.
Mr. Farenthold. It looks like 80 percent went to solar in
1705. We will look at the numbers with respect to the other
programs, but just the heavy investment in solar has me
concerned.
I am out of time.
Chairman Issa. We will have a second round for the
gentleman, if he will remain.
Secretary Chu, I just want to verify one thing. 1703 was
essentially all the previous administration; 1705 was your
administration. So when the gentleman is talking about what was
funded under 1703, including nuclear and other forms of fossil
fuel, those were the Bush Administration. Yours is 1705, which
is essentially no nuclear, no fossil fuel, is that correct?
Secretary Chu. Not quite. I think 1705 was authorized in, I
think, 2007.
Chairman Issa. Right, but it is what you have acted on
during your administration.
Secretary Chu. Well, before this administration no loans in
1703 or 1705 went out.
Chairman Issa. Okay, I think I am not going to take it as
my time because it isn't as my time.
We now go to the gentleman from my college hometown, Mr.
Walberg, for 5 minutes.
Mr. Walberg. And we are better off because of it, I am
certain.
Chairman Issa. I hope Sister Peg is listening to that as we
speak.
Mr. Walberg. She is listening and wondering why.
Michigan. Michigan, the motor capital of the world.
Michigan rebounding. Michigan, in my district and I think all
over, frustrated with the high cost of using those excellent
vehicles that are produced in Detroit and other areas of
Michigan and around this Country.
We are not going to relinquish that standard that we have
and the desire to give people resources of transportation that
they want. And I know it seems right now, at least from my
perspective and that of my constituents, that their government
is attempting to do mind-changing, whole process changing,
moving to some other direction that, frankly, they are not
accepting at this point in time.
And primarily in the nine town hall meetings I had last
week, I just heard from my constituents saying, reduce the cost
of gas at the pump. Get us what we want on that area and then
take the next 200, 600, 800 years to find all of the resources
that you think will come following that. I know they are not
committed to destroying our environment, but they want an
economy in this Country that promotes them.
In your testimony, Secretary Chu, you stated clearly that
where we find mistakes, we have and we will move swiftly to
correct them. Project Amp received a $1.4 billion loan
commitment from the Department of Energy. The Recovery Act
required projects to commence construction before 2011, by
September 2011. We checked in February 2012 and still Project
Amp had not commenced construction. What is your response to
that? Is that not a mistake? Is that not a violation? And what
will you do?
Secretary Chu. I would have to get back to you on that one,
so we will look into it.
Mr. Walberg. Well, I guess I go back and the question
stated you said where we find mistakes we have and we will move
swiftly to correct them. If indeed the requirement is that the
project where someone receives or this specific Project Amp
received a $1.4 billion loan commitment and they haven't
commenced construction yet as of February 2012, when they were
supposed to commence it by September 2011, what other answer
would be other than we ought to be withdrawing?
Secretary Chu. Again, I am going to look into the exact
things and commencing construction, whether it is an
obligation, but I will certainly look into it and get back to
you on whether it satisfies the statute of the law.
Mr. Walberg. My colleague, Congressman McHenry, asked what
you had done and this Administration had done to lower gas
prices. You spoke of programs to improve engine efficiency and
other vehicle technology. The Advanced Technology Vehicle
Manufacturing program is a Bush-era program designed to assist
manufacturers of advanced technology vehicles. Do you know
where the last ATVM loan was issued? When the last ATVM loan
was issued?
Secretary Chu. Not off the top of my head.
Mr. Walberg. April 2011. Do you know how many companies are
awaiting a loan at this time?
Secretary Chu. I, again, don't know the exact number. There
are a number of loan applicants right now.
Mr. Walberg. Well, with the lack of knowledge or seemingly
attention to this detail, why does the Department of Energy
website tout the ATVM as a jobs program?
Secretary Chu. You are asking for an exact count of the
number of loan applications that are before us, so I was just
saying that I did not know the number. It is a jobs program.
Mr. Walberg. I will take a guesstimate. Any guesstimate on
it?
Secretary Chu. Four, five, six? I don't know.
Mr. Walberg. So, again, why do we list this or tout it as a
jobs program if it seems pretty insignificant at a time when we
have energy concerns that are frustrating people at the pump?
Secretary Chu. Well, it is a program that was set up in a
previous administration. We believe that it did a lot of good.
The loans to Ford and Nissan created and saved a lot of
American jobs, and I think you would agree with that.
Mr. Walberg. One final question, Mr. Chairman, if I could.
Chairman Issa. I would ask the gentleman have an additional
minute. Without objection, so ordered.
Mr. Walberg. Thank you.
Simple question. When will oil production go up on Federal
leased land?
Chairman Issa. On Federal leases.
Mr. Walberg [continuing]. Lands? We tout all of the oil
production that is going up, but it is on private lands,
through effective efforts that have gone on with permits that
have given in past administrations, on average, 73 percent of
the permits requested were approved. This Administration, 23
percent. So when will oil production go up on federally leased
lands?
Secretary Chu. Sir, I can't rightly say. But if you look at
the amount of federally leased lands under the control of oil
companies, it is increasing. The oil companies have to make a
decision as to whether they want to develop on those lands. The
President actually has encouraged them to do this. When he
suggested begin development or lose it, there was great
objection by the oil companies. So we can do what we can to
encourage oil companies to develop their leases that they now
own on Federal lands.
Mr. Walberg. Well, thank you, Mr. Chairman, for the extra
time. I would just question if they are pushing back, there is
a significant reason why they are pushing back on using lands
that they requested to use. Thank you.
Chairman Issa. If the gentleman would yield.
Mr. Walberg. I would yield.
Chairman Issa. Mr. Secretary, how do you explain that on
private lands, where they pay at or greater than the 17.5
percent royalty they pay to the public, on public lands they
are choosing to go to private lands and you are saying, or the
Administration is contesting that they are choosing not to go
on public lands. Public lands should be cheaper based on our
typical royalty of 17.5 percent, but in fact they are going and
buying rights on private land. How do you explain that?
Secretary Chu. Well, most of the land the Government has
been leasing is in offshore, deepwater. There is Arctic also
made available. Those, by their very nature, are harder to
develop than this new technology which, over the last 10 years,
has improved remarkably. So that is why you see this great
proliferation of rigs and things of that nature; it is on land.
It has become a technology that we know how to use and the
initial up-cost investment and the time of development is much
shorter.
Chairman Issa. I appreciate that and I will mention that
Prudhoe Bay is a term that we have been using since I came here
12 years ago, and we have not approved the request they have
made in the ANWR.
With that we begin our second round with Mr. Kelly, who has
waited and kept the President even waiting for an opportunity.
You are recognized, sir.
Mr. Kelly. Thank you, Mr. Chairman.
Secretary, you didn't have much of a chance to respond.
When it comes back to Bright Automotive, there is a report that
you had a conversation with Amy Dobrikova, a former employee,
and that was as recent as March 5th, 2012, at the Green Fleet
Conference, that you knew a year and a half ago that Bright
wasn't going to be able to qualify for this loan. Is that true?
Secretary Chu. I had a conversation with the woman. That is
not what I said. We felt that for a long period of time this
looked like a very iffy proposition, and although very
sympathetic to the company and to her, so we did not ``know''
long ago, but it was on the margin for a long period of time
based on our market analysis, based on all the other things
that would entail the risk to the taxpayer money.
Mr. Kelly. And I guess that is part of the question,
because the same thing with Fisker. We are asking them to push
science forward to meet a market demand. There is not a market
demand for it, but we are saying the science has to come into
line right now, we have to do things quicker. Tell me a little
bit about Fisker, because Fisker is going through the same
situation right now; all of a sudden what they were told they
were going to get in total, they have only gotten part of it
because they haven't met some of the metrics I think that the
Department has asked them to do. What is it that they are
coming up short at?
Secretary Chu. Well, I am not going to talk specifically
about any specific loan, but I will tell you in general what we
have in our program, in our loans, and that is we have
milestones. So as we mete out and disburse the funds, companies
have to meet milestones, and if they don't we enter into
discussions with them to see what can be done. And in general
we think this is a very responsible stewardship of taxpayer
money. So not going into any details of any company, we are
just saying that we do take the responsibility to the taxpayer
very seriously.
Mr. Kelly. In some instances, not in all, because, as we
have seen before in previous instances, there were moneys given
out to companies that had this B, B-minus rating and really
didn't have the metrics in place.
Going back to the conversation you had with Amy Dobrikova,
are you saying that The New York Times misquoted you?
Secretary Chu. The conversation that I recall was that I
said we had our doubts about Bright Auto and we were trying to
work through with the company how to get the loan. So that is
the conversation I recall.
Mr. Kelly. Okay, because there is an audio of that.
But this is what I was referring to earlier. So if we are
taking people who would normally, venture capitalists who would
get involved and we have taken them out of the equation now
because bureaucrats now are making decisions on investing
capital, not their own, but taxpayer money, so tell me where
this is going, because it really does change the dynamics of
the lending environment right now. And I don't know how people
would go forward if they are not sure.
Where does the government get off? Where do the venture
capitalists have their opportunity or where is their niche in
that market?
Secretary Chu. Okay, so, first, there is a slight
definition difference. We are providing not capital, but debt.
But regarding your second statement about venture capital,
the loan program actually does not compete with venture
capital. Venture capital typically invests smaller tranches of
money in earlier funding, things that would be considered too
risky for our loan program. So it wasn't intended to compete
with venture capital.
Mr. Kelly. So let me go into Fisker. Where is Fisker right
now?
Secretary Chu. Again, I can't talk to the particulars of
any loan, so I hope you would understand that.
Mr. Kelly. Well, I understand that, but I am not sure
Fisker does, because they bought a plant in Delaware, a former
GM plant. Tesla bought a former GM plant in California. And a
lot of this is predicated on the fact that private investment
and government investment, which comes first, the chicken or
the egg; do we have to get the private money in first before we
qualify for the government money?
And from the private sector they are saying, well, unless
you have a guarantee on the loan, we are not willing to put
more money into it. So I am kind of confused. I actually have
had to borrow a lot of money in my lifetime. I am trying to
understand where is it that this fits and would give anybody
who was actually seeking one of these loans any type of a clear
avenue as to how you would obtain this funding and how you go
forward.
Secretary Chu. Well, I think those requirements we hope are
reasonably clear because it is written into the statute, that
when we offer either a loan guarantee or something of that
nature, that a minimum of 20 percent has to come from private
equity investments or investments some other way. In some
instances the government is following considerable investments
in the private sector and then the company comes forward and
says we would like to do another project which we think fits in
the scope of the definition of the loan program and, therefore,
they would ask for a loan.
Mr. Kelly. I know Fisker has run into some trouble. In
fact, their car wouldn't start when they had it at one of the
shows. They couldn't get it to start and I know they are facing
some great difficulties.
I see I have run out of time. But I do appreciate your
being here today and I know you are in a tough position, but on
behalf of the American taxpayers, we really have to be looking
into these things. It just seems to me that so far we don't
have a very good positive rate of return on what we have
invested.
Thank you, and I yield back.
Chairman Issa. I thank the gentleman for yielding back.
With that we go to the Ranking Member, Mr. Cummings.
Mr. Cummings. Secretary, a little bit earlier Mr. Jordan
asked you a series of questions where he mentioned people who
may have had some connections with the Administration or the
White House. I think we have to be very careful with those
because basically what he has asked you is to go back and to
look into that, which I know you will, and if I were those
people I would be concerned, as a lawyer, because there is an
implication that they may have done something wrong.
You said that a number of those people you didn't even
know. You knew some of them, others you did not, you may have
known them, but you didn't know they had involvement. And I
think there were one or two people that you said there had been
a firewall put up, is that correct?
Secretary Chu. Well, there are firewalls put up on any
person who works within the Department of Energy who would have
any connection with a loan applicant or actually a grantee of
any kind. And the firewalls are that that person cannot in any
way participate in any part of the selection process.
Mr. Cummings. I had asked you about First Solar and the
Washington Post said that one of Senator John McCain's, and
this is the same project, by the way, that John McCain spoke up
for and Governor Brewer, but the Washington Post went on to say
that a fellow named William Post was a top bundler for Senator
McCain and he served on the company's board of directors for
First Solar. But that had nothing to do with First Solar
getting an opportunity, did it?
Secretary Chu. No. Whether the investors are Republicans or
Democrats did not enter into any decision as to whether we were
going to fund the loan.
Mr. Cummings. Now, last November, then White House Chief of
Staff William Daley appointed Herb Allison to conduct an
independent study of DOE's loans and loan guarantees to clean
energy projects. The independent consultant was responsible for
completing three tasks: number one, evaluating the current
status of the loan portfolio; two, recommending ways of
strengthening and managing of the oversight of DOE's loan
program; three, proposing an early warning system for spotting
potential problems that could affect the value of the loan
portfolio.
Are you familiar with that?
Secretary Chu. Yes.
Mr. Cummings. Now, the independent consultant's report
acknowledged that Congress directed DOE to support
``innovative'' alternative energy projects that involved more
risk than is typical for a project in corporate debt financing.
Mr. Secretary, your agency has an important mandate to fund
these innovative clean energy projects, but to do so in a way
that does not waste taxpayers' investment. I think you have
actually said that. Can you discuss what due diligence
procedures you put in place in the loan guarantee program to
help ensure that DOE balanced both of these interests?
Secretary Chu. Sure. So, for example, our experiences, for
example, in the solar market, where the ecosystem of that
market, the costs of commodity goes down by that much, made us
acutely aware that this is something we had to monitor on a
weekly basis, if you will, and monitor very closely.
The other thing that we have instituted and we continue to
strengthen, and we agree with the Allison report; in fact, it
started this before the Allison report, was that we had to
start a separate organization within the Department of Energy,
another organization, yes, part of the loan program, but
actually is an independent set of eyes, certainly independent
from the originators of the loan that could then say, the
responsibility to the taxpayers' money, if things are in
trouble, it is often said that the parents sometimes look
through rose colored glasses at their children and originator
of a loan is in a certain sense were parents of those loans. So
we felt it very important to establish an independent set of
eyes with people not only within the loan program, but people
outside the loan program per se.
So these are examples of some of the things we have begun.
Mr. Cummings. And GAO recently issued a report finding that
your Department's due diligence procedures were as good, if not
better, than procedures used by private sector investors. Are
you familiar with that?
Secretary Chu. Yes, we hear that from our loan applicants
all the time, that we somehow put them through a lot more
diligence.
Mr. Cummings. Now, there has been this whole concept of
drill, baby, drill. Folks seem to believe--I ask unanimous----
Chairman Issa. An extra 30 seconds. Go ahead.
Mr. Cummings. Can I have a minute like the Republicans?
Chairman Issa. You can have a minute.
Mr. Cummings. Thanks.
The Republicans have been touting the drill, baby, drill,
as if that is going to reduce gas prices. I remember when we
had gas price hikes when President Bush was around. I reminded
my colleagues that there are certain limitations that we have.
It has been implied that you all are not doing all that you can
to reduce gas prices, and since the American people may see
this, I want you to be able to tell them what you are doing,
and if that drill, baby, drill thing works.
Secretary Chu. First, as noted several times, this is a
world commodity, it depends on the world structure. We actually
like the idea that the United States is increasing its
production of oil and natural gas. This is good; it means
American jobs, so we are supportive of that.
I have listed before in the previous Administration I twice
was asked to help, spent an hour and a half with President Bush
in the Roosevelt Room with a few others to try to help get
relief to the pump. He wanted to know about biofuels and things
of that nature.
I spent another time, over an hour, after working with the
Secretary of Energy, with Secretary of Treasury Hank Poulson,
with the head of NEC Jack Hubbard, and the Secretary of Energy
to look at in the previous Administration, what can the
Department of Energy do to bring relief.
So in the previous Administration I was asked to give my
ideas on what they could do. It has not changed in this
Administration, and there again I was at the service of a
previous Administration who also felt the pain of Americans at
the pump.
Chairman Issa. I thank the gentleman.
We now go to the gentleman from Ohio, Mr. Jordan, for 5
minutes.
Oh, I will notify everyone we anticipate coming out of
recess and going into a vote.
Mr. Secretary, the earlier of the two, of that vote or 1,
will be your reprieve, if you don't mind.
Secretary Chu. Thank you.
Chairman Issa. Thank you.
Mr. Jordan.
Mr. Jordan. I thank the Chairman.
Let me just pick up where the Ranking Member started his
time. I wasn't implying anything with my questions, I was
simply trying to get at how the Department of Energy made their
decisions, and that is why I referenced nine different
individuals who were either in the Administration or were
fundraisers for the Obama campaign, eight of which have ties to
companies in the 1705 loan program, if that had any bearing,
any influence on the Department of Energy's decision to give
those companies with ties to eight of those nine individuals
who are in the Administration or who are fundraisers for the
Obama campaign, if it had any bearing on their decision to give
those companies loan guarantees.
The Secretary's response was no to all nine of those
individuals. He said then we based our decisions on the merit
of the company who is going to get the loan, who is going to
get taxpayer dollars, which prompted me to ask, if it is based
on merit, why were 23 of the 27 companies who received money
rated as junk status by Fitch and Standard & Poor's.
The Secretary seems to have, since then, referred to this
independent review that was done, so I want to spend a little
time on that if I can. Who conducted the independent review?
Secretary Chu. It was led by Herb Allison.
Mr. Jordan. And did Mr. Allison have any ties to the
Administration?
Secretary Chu. I can't know the exact--oh, yes, I do know
of one tie. I think he was part of Treasury for a while.
Mr. Jordan. So the guy who did the independent review was
also formerly a member of the Obama administration?
Secretary Chu. I believe so.
Mr. Jordan. And what was his title, do you know?
Secretary Chu. I can't give you the exact title, but I
think he was part of--he was working with Freddie Mac and
Fannie Mae.
Mr. Jordan. Yes, he was Assistant Secretary at the Treasury
Department, is that right?
Secretary Chu. Again, I don't remember his exact title.
Mr. Jordan. But it is true that the guy who did the
independent review was also formerly a member of the Obama
Administration.
Secretary Chu. Yes.
Mr. Jordan. Okay. And his review said that it is okay to
give loans to 23 companies that are rated junk status?
Secretary Chu. He did not address that. His charge of his
committee and his report was, going forward, how to help ensure
the taxpayer interest and the vitality of the loan program.
Mr. Jordan. And isn't it true in his report that he said,
``serious systemic technical and management problems exist at
the Department of Energy''? Isn't that a direct quote from Mr.
Allison's review?
Secretary Chu. I don't recall those words.
Mr. Jordan. Okay, well, they are in there.
Let me back up a second. Do you think maybe the American
taxpayer who saw millions of their dollars put at risk at 23
companies with junk rated status, do you think maybe when you
have an independent review done by a former member of the Obama
Administration, do you think they might question whether in
fact it was independent, particularly when some of these
companies went bankrupt with their tax dollars?
Secretary Chu. It was a very independent review and the
high standards at which Herb Allison and his people conducted
the review have to be applauded. I should also say----
Mr. Jordan. But here is what I keep coming back to, and I
don't see how a rational person can't at least think this may
exist. Nine individuals in the Administration or raising money
for the Obama campaign, you say that has no bearing on who gets
loans. Twenty-three of the 27 companies that got loans, below
investment grade status, junk status. And then you hire someone
to do an independent review and, oh, by the way, the
independent reviewer, he also worked in the Obama
Administration.
Really? That is how you are going to defend yourself,
someone who was previously in the Obama Administration does the
independent review? That is supposed to be independent to
justify the fact that all these connections exist and 23 of the
27 companies weren't investment grade? Unbelievable.
The taxpayer is sitting back there going, are you kidding
me? This is what goes on with our tax dollars in one of our
Federal agencies? The guy who is supposed to justify all these
actions with an independent review actually worked in the
Administration. That is amazing that that goes on with American
tax dollars. That is the point that the American people find so
frustrating and so troublesome when they look at this entire
situation.
Secretary Chu. When the loan program was set up, it was set
up to fund innovative companies, and it was also set up with a
loan loss reserve, which was specifically set aside. So this
was money appropriated, not money, this is real dollars
appropriated by Congress to account for losses.
And Herb Allison's report said that the moneys available
for this loan loss reserve of about $10 billion, they estimate
that perhaps 2.7, less than one-third, is at risk, and they
also said that we don't say that they are going to lose 2.7. So
it is far less than what Congress appropriated for those
losses.
Mr. Jordan. Well, Mr. Chairman, look, you can----
Chairman Issa. Would the gentleman yield? Would the
gentleman yield for a second?
Mr. Jordan. I made my point. I would be happy to yield to
the Chairman of the full Committee.
Chairman Issa. Mr. Secretary, notwithstanding where your
independent, Mr. Allison, was before, he clearly shows us that
if not for Nissan and Ford, you would have had a disastrous
result; that, in fact, when you pulled them out, this is an
awful performing portfolio. It is only Ford and Nissan coming
back that actually improves it. And he includes things in his
own: a lack of clarity in lines of authority within the loan
program; lack of balance between those in government experience
and those with substantial private sector experience and skill
in the project. As I read it, he pretty much said you didn't do
that good a job, and he does give you credit for the loan loss
being less, but when you take Ford and Nissan out it is more,
isn't it?
Secretary Chu. Well, one can take this out, put that in,
and things of that nature. He also points out----
Chairman Issa. Well, wait a second. The reason I am asking
about take them out is these are world class huge companies----
Secretary Chu. Exactly.
Chairman Issa [continuing]. And when you take Ford and
Nissan, you are not talking about these BB, CC startup
companies with, quite frankly, as Mr. Jordan said, insiders,
friends of the President, bundlers, and so on. So they are very
different. The characteristics of the loans might be similar in
their amount, but the characteristics of the companies bear no
resemblance, do they?
Secretary Chu. Well, you can say that today and everybody
recognizes Ford has bounced back beautifully, it is a great
company.
Chairman Issa. Ford is a 100-year-old business worldwide,
and Nissan came out of World War II and has gone almost
straight up for two generations. So I think, in fairness, you
cannot compare auto companies to the startup electric companies
and so on, can you?
Secretary Chu. The credit subsidy for the Ford loan speaks
for itself, it was roughly 50 percent of the loan. So in the
eyes of the OMB, who sets that credit subsidy score, they felt
that it had a 50 percent of default at the time. But it turned
out not to be, and we applaud Ford for doing all the things it
did and it is a great company.
Chairman Issa. We all agree on that part.
Mr. Clay, would you like a second round? The gentleman is
recognized.
Mr. Clay. Thank you, Mr. Chairman.
Last July, the Brookings Institution issued a major study
providing the first comprehensive analysis of the U.S. clean
energy economy. That report made a number of findings and I
would like to focus on two.
First, the report found that the clean economy generates
good paying jobs. According to the report, the clean economy
employs about 2.7 million workers. That is more than the fossil
fuel industry. The report said this: ``Newer clean tech
segments produce explosive job gains and the clean economy
outperformed the Nation during the recession. Newer clean
economy establishments, especially those in young energy-
related segments such as wind energy, solar, and smart grid,
added jobs at a torrid pace, albeit from small bases.''
Secretary Chu, do you agree with the Brookings report that
certain segments of the clean economy, particularly those who
Recovery Act moneys have been invested, offer the potential for
substantial job growth?
Secretary Chu. I do.
Mr. Clay. And the Brookings report also makes a second
important key point, which is that the U.S. needs to support
these key sectors to remain competitive globally. Here is what
the report says: ``China now leads the world in clean economy
deployment. In 2010, China put into place a staggering $54.4
billion in clean energy investments. By contrast, U.S. private
investment in clean energy totaled $34 billion. Now the gap is
widening further.''
The Brookings report also says this: ``China, which now
produces half of the world's wind, turbine, and solar modules,
recently announced it would accelerate its clean revolution
over the next 5 years and has set out aggressive growth plans
for strategic emerging industries critical to economic
restructuring, including multiple new energy categories,
electric vehicles, and energy efficiency products.''
Secretary Chu, do you agree that the sectors that might
bring this Country greater energy independence, solar, wind,
geothermal, advanced battery development, et cetera, are
critical for the U.S. to develop to remain globally
competitive?
Secretary Chu. I agree with that.
Mr. Clay. In a press release of the company, the release of
the Brookings study, a principal at the Brookings Institution
commented on the U.S. Government's involvement in this sector
and said this, ``This is not an area where the public sector
needs to get out of the way. Government leaders at all levels
need to get in the game. Otherwise, we will watch the rest of
the world pull away from us.''
Secretary, do you agree with that statement?
Secretary Chu. I do agree because many countries, China is
one of them, but there are dozens of others who recognize the
economic opportunity in this clean energy, energy efficiency,
and that is why these countries are investing so much. So even
just to level the playing field we need to be doing something.
China has shown that it simply views this as a great economic
opportunity for their prosperity and future, both to be
deployed at home, they are going to probably be the biggest
deployer of clean energy in the world this year, but also for
export market.
Mr. Clay. So if we tamp down on our government investment
in clean energy technologies, then we will lose ground to the
rest of the world.
Secretary Chu. Well, I would say that we have great
strength in America in invention and innovation. We have the
best venture capital system in the world. We actually have
great public-private finance markets in the world. And we
should look to those strengths, and to the extent the U.S.
Government can help those great strengths move forward, we
should be doing that.
Mr. Clay. And some people argue that the U.S. Government
should not be in the business of supporting U.S. companies
competing with China for clean energy technology. My question
for you is this: What will that mean in terms of who owns the
technologies of the future and where those jobs are located?
Secretary Chu. Well, again, we made decisions in the past
that have led to our preeminence in many things;
semiconductors, computers, airplane, very competitive business,
heavy government investments.
Again, not everyone feels this way, but I certainly am one
of those who do feel this way, that going into the future these
technologies, which are going to be as cheap as new forms of
energy, including natural gas at $4.00 btu, whether it is this
decade or a decade and a half from this, this is happening, and
when that happens there is going to be a huge world market,
there is a growing world market, it is over $200 billion, it is
estimated to be, just for those things, in the next 10 or 15
years, over $400 billion. So it is a big market, and we have
the smarts and the know-how, so we would rather be exporting
than importing.
Chairman Issa. I thank the gentleman.
Mr. Clay. Thank you.
Chairman Issa. I am going to now recognize myself for a
second round and I am going to try to be lightning about this.
First of all, Mr. Secretary, you commented on something
earlier that was important to me. Under current law, we must
sell, for example, to Korea, where we have a free trade or fair
trade agreement; Mexico, et cetera, et cetera. So all of our
liquified natural gas that is currently scheduled to be
produced and online in Louisiana and I guess there are five
sites, but two are further along in Louisiana and Corpus
Christi, Texas, when those come online, for example, Korea
could buy and could force us to sell, while Japan cannot.
Does that seem like something that you should proactively
look at to make sure that, for example, our close ally, Japan,
much more heavily dependent on outside sources of energy, would
have equal access to that and be able to compete for these
lines? Because right now, as I understand, liquified natural
gas is being sold in the futures market such that the only
countries who feel comfortable bidding are those who know that
there will be a guarantee of delivery.
Secretary Chu. Well, first, we are abiding by the law and,
as I said, we are obligated to allow those countries which we
have free trade agreements, and my understanding is that in the
first liquified natural exporting plant that is being
constructed, well, it is not being constructed yet, but we are
awaiting----
Chairman Issa. It is permitted, I understand.
Secretary Chu. I think they are awaiting further FERC
approval, and that will take four or 5 years to complete, that
these contracts and the agreements that company are essentially
spoken for by the FTA countries.
Chairman Issa. I understand. So I guess the problem is
Japan can't be part of that under current law without the fear
that they wouldn't get delivery. And I am concerned only
because Russia has used energy as a weapon. I had the honor of
being in Azerbaijan with my wife, actually, for the opening of
that pipeline, which the Bush Administration backed
specifically in order to piece by piece by piece break down the
fear in Europe of energy being unavailable if you didn't do
what somebody else wanted.
Let me go through an earlier point, though, now. In the
case of the Project Amp, we have, and I will ask unanimous
consent it be placed in the record, emails exchanged with the
lobbyist for that organization that verifies that Bank of
America, the co-investor, has no current loans out, meaning we
have a reasonable assurance that in fact they have not met
their September 11th deadline to begin construction. If that is
true, Mr. Secretary, will you assure us today that that $1
billion loan commitment will not be funded, since the law
specifically says that they must begin construction by
September 2011?
Secretary Chu. You certainly have my assurance that we are
going to do what we need to do within the bounds of the law. I
actually----
Chairman Issa. The law is explicit. They had to begin
construction, this is a taillight, by September 2011. We have a
current assurance from the people that would have funded the
other part of it that they have not.
Secretary Chu. Well, I was forwarded a note from my loyal
staff behind me that said exactly what you just said, that
there was a requirement to break ground on some part of the
Prologis loan guarantee, and they tell me they have indeed
broken ground.
Chairman Issa. Okay, well, we will share the email exchange
that they have not, and, of course, we would like to make sure
they did substantially break. But it is a large amount of money
for a program that has statutorily ended, and apparently you
have put no money out. Ours was February 12th, so can your
people assure you that they broke ground by the September
statutory limit?
Secretary Chu. We will get back to you on that. We will
double-check.
Chairman Issa. Thank you. I appreciate that.
Then moving to Blue Mountain, a program in Nevada, now,
this program, oddly enough, bore your own signature on the
approval and no jobs were created, although it was a 1705 loan.
In fact, the moneys that were disbursed as a result of the loan
guarantee went to the parent company and the construction had
already been done. If that is true, will you be able to seek
any kind of a drawback for it, since under the statute it was
estimated and your own website says created 200 construction
jobs and 14 permanent jobs? Since the construction was already
done on the day that the loan was approved and funded, does
that fly in the face of what is on your website?
Secretary Chu. I would have to get back to you on that and
the particulars about the timing.
Chairman Issa. Okay. Most of this comes from discovery that
you voluntarily delivered to us.
Mr. Secretary, I want to end mine on a note that I am
particularly interested in, and I ask for 30 additional seconds
to ask the question. Without objection.
Mr. Secretary, today natural gas is plentiful. We are even
flurrying it. Natural gas has a per, if you will, mile of
driving that is substantially less than gasoline. Estimates
that I have been given are that natural gas, if used as a fuel
today, and this is assuming that you had just an out of the
tank, not all the conversion costs, would be a dollar something
a gallon equivalent to use natural gas at market price versus
gasoline at market price.
If that is true, if the American people could have nearly a
one-fourth reduction by using natural gas, and if the
difference between it being viable and not viable is in fact
getting the 3500 pounds per square inch compression that is
typical in order to put enough of it in your tank down to 400
pounds, can you give us, and please, Secretary Chu, in language
that the viewers can understand, give us the steps you believe
would have to occur in order to get from where we are today,
where the compression costs so much and has some danger
questions and some cycle life, to one in which people could
simply fill up their tank at home overnight and drive for
hundreds of miles on this fuel and, as you said earlier,
selecting fuel back and forth with this kind of a choice?
Secretary Chu. Well, Mr. Chairman, thank you for that. You
and I both share the excitement of the potential for using
American energy resources in natural gas to offload a
considerable amount of our transportation needs, because that
means more creation in the United States, less imported oil,
less oil dependence.
So with regard to that, we are talking right now about
very, very high pressures, which require a very expensive
carbon fiber tank, and we would be looking at things you put
inside the tank, materials where the natural gas can absorb
onto the surface of very highly porous, high surface materials.
So it turns out, even though it is counterintuitive, if you
have some other stuff in there and it goes and lands on a
surface instead of just the free gas, you may be able to store
as much or more material in the same volume, and if we could do
that, that would greatly reduce the costs of the fuel tank, it
would greatly reduce the pressure, it would make natural gas
filling stations much less expensive.
So we are now designing. We first had a request for
comment, but having realized this great natural resource, we
are designing a program that says, let's invest in this
research. And if it happens, and if it happens possibly in a
year or three, we don't know because it is research, but that
would have a profound impact on transportation not only in the
United States, but all over the world, because there is a lot
of natural gas now in fracking all over the world. Again, that
means the whole world diversifies and that will have an effect
on oil prices.
Chairman Issa. Thank you, Mr. Secretary.
Mr. Gowdy.
Mr. Gowdy. Thank you, Mr. Chairman.
Mr. Secretary, I realized the quote I asked you about
predated your swearing in, but, in all candor, you just
recounted for us a conversation you had with President Bush and
another member of his administration which also predated your
swearing in. So I think the notion that we have a firewall at
your swearing in as the time beyond which we can't ask any
questions is not correct.
But I don't want to quote you incorrectly, too, and you
seemed to suggest that maybe there was a word that I included
in your quote that was not correct. Do you have the quote from
2008 in front of you?
Secretary Chu. No, I don't.
Mr. Gowdy. Does your staff have a direct quote from 2008 in
front of them?
Secretary Chu. No, I don't. But let me go back to what you
said about my service to President Bush and his cabinet. I was
asked in my role as a scientist for ideas that could help
diversify the use of oil in the United States so it could bring
relief to Americans, and that advice I gave, and I was
delighted, I was honored to be asked for that and I was
delighted to give the advice. That actually has not changed at
all. I am very committed to diversifying the energy supply of
transportation in the United States.
Mr. Gowdy. Mr. Secretary, I was in no way, shape, or form
being critical of the fact that you were gracious enough to
serve two different Administrations. The fact that you would
talk to folks from both parties is laudable. What I am trying
to figure out, these were not the musings of a misspent youth.
This wasn't a private diary that somebody got their hands on.
This was a public comment that you made months before you were
sworn in.
And if the quote is correct, somehow we have to figure out
how to boost the price of gasoline to the levels in Europe. And
other quotes you made contemporaneous with that suggest that
the reason for that is to shrink demand for environmental
concerns. So the notion that we have pivoted because we are in
a recession, that doesn't impact the environmental concerns and
why you initially advocated for higher gas prices in the first
place, does it?
Secretary Chu. Well, I think you have made some logical
leaps there, but let me just say that----
Mr. Gowdy. Well, then let me ask you why did you advocate
for higher gas prices in 2008?
Secretary Chu. I have nothing more to add to that quote. I
have said and I continue to say every action that I have had as
Secretary of Energy, every action I have had as a scientist was
actually to diversify the supply of energy, which ultimately,
if adopted on a world basis, would actually decrease gasoline
prices.
Mr. Gowdy. You had a colloquy with one of my colleagues
where you all agreed that this is a worldwide commodity with
prices that are set by market pressures. So I think it is fair
to ask, assuming that, how would you boost the price of
gasoline? If it is set by the market, how would you do it?
Secretary Chu. Excuse me, I am not trying to boost the
price of gasoline. Quite the opposite. I am trying to help as a
scientist develop technologies that can diversify our energy
that we use in transportation not only in the United States
but, if successful, those technologies could be marketed by
United States companies all over the world. That would have an
effect on gasoline prices.
Chairman Issa. Would the gentleman yield for just 1 second?
Mr. Gowdy. Sure.
Chairman Issa. Secretary Chu, did you support cap-and-trade
by this Administration?
Secretary Chu. I did.
Chairman Issa. And that would necessarily increase
dramatically the cost of carbon, including gasoline, correct?
Secretary Chu. Well, I think the estimate of the cost of
gasoline was, I think, about 30 cents, something like that.
Chairman Issa. Thank you for yielding.
Mr. Gowdy. I am not trying to cross-examine what you said
in 2008; I am trying to figure out--I assume that you meant it
at the time you said it, and I assume, because you are a
thoughtful, precise person, that you put some thought into it
before you said it. And I am just trying to understand why you
felt that way in 2008, when gasoline prices were almost
identical to what they are now.
Secretary Chu. Again, we keep returning. I really have
nothing more to add. And if you look at all my actions, what I
have done as Secretary of Energy, I think everything is quite
toward the other side. How do you help the American public? How
do you actually help in real long-term solutions and mid-term
solutions, and, quite candidly, a little bit here and there,
and by that I mean on short-term solutions. Let me give you an
example----
Mr. Gowdy. I am not going to interrupt you, but I do have
one more question. I am going to let you finish that, but I
have one more question.
Secretary Chu. Go ahead with your----
Mr. Gowdy. No, no, I don't want to cut you off.
Secretary Chu. Okay. I spent a great deal of personal time
trying to help stop a leak in the Gulf of Mexico. I spent a lot
of time trying to help the Japanese with their nuclear
reactors. They have secondary effects on the prices of oil.
When the Japanese stopped generating electricity from nuclear,
they have to go to natural gas, coal, and oil. Had there been
more significant environmental impacts in the Gulf, that could
have had an effect on the development of offshore oil.
So if you look at what I do, I can attribute in all those
ways to help moderate those----
Mr. Gowdy. I actually am not questioning your motives, Mr.
Secretary. I am just wondering how a 30-second swearing in
ceremony could have called someone to pivot from advocating for
European level gas prices to now doing everything within his
power to lower gas prices. That just strikes me as being a fair
question.
But let me ask you my last one. Loan guarantees shall be
subject to the condition that the obligation is not subordinate
to other financing. Why do you think that was put in the
statute?
Secretary Chu. I think because when you initiate a loan,
the Congress felt that they did not want to put the taxpayer
behind any loan, that they actually have essentially, to use a
colloquial expression, first dibs on repayment back.
Mr. Gowdy. And that rationale would be equally sound at a
restructuring, correct?
Secretary Chu. No. The reason it would not be sound at
restructuring is at a restructuring you restructure because the
company is in stress of some kind.
Mr. Gowdy. That just strikes me that would be all the more
reason to want to protect the taxpayer, because if the company
were doing well, then you may have private investors or you may
have an alternative form of getting your loan. Only if the
company is not doing well would you need to renegotiate and
subordinate taxpayers, which just strikes me a company not
doing well has all the more reason for that clause I just read
to you, to protect the taxpayers.
Secretary Chu. Well, let me try to explain. When a company
is not doing well, typically what they would want is they would
seek extra capital to ride something out. There might be a
setback, there might be a number of reasons. This happens all
the time in the private sector. So they need extra capital.
Now, if you are a private investor, you come in and you
say, well, look, this company is not doing well and you want me
to put in extra capital, and yet you want me to be second in
line? There is no way I can do this. So those in the investment
community understand this very well and that is why when the
company is not doing well you want to use whatever your means
to maximize recovery of whatever the government put in, and it
may turn out--there are other possibilities, you could take
warrants, things of that nature.
But as Herb Allison said in his hearing, if your intent is
to maximize taxpayer recovery in these situations, this is one
of the tools you should allow to remain open.
Chairman Issa. I apologize, but we are going to have to
bring this to a close. I promised the Secretary that we would
get out.
The Ranking Member has asked for 30 seconds. The gentleman
is recognized for 30 seconds.
Mr. Cummings. Thank you very much, Mr. Chairman.
I wanted to clear up something from earlier. When Mr.
Jordan was asking questions, there was an implication that Herb
Allison, who acted as the independent consultant, and he is the
head of the troubled asset relief program, there was an
implication that he was not an independent type of party.
I just wanted to submit for the record, Mr. Chairman, this
New York Times article dated today which states that he was the
Finance Committee Chairman for Senator John McCain----
Chairman Issa. That will be entered into the record without
objection.
Mr. Cummings. Thank you.
Chairman Issa. I thank the gentleman.
In closing, Mr. Secretary, I want to say you have been a
great witness. We have not always agreed; we have not agreed at
the end. I certainly think Mr. Gowdy makes a good point that
Congress needs to look very carefully at under what cases and
with what information in the future any part of the executive
branch will be able to subordinate a restructuring, and there
was no notification in the statute for those restructurings.
But I want to thank you for being an excellent witness. I
want to close with just one pleasant thought. As we look at
Solyndra and the other losses the American people are going to
experience, there is one silver lining: Moore's law has begun
to affect photovoltaic. And, in fact, the cost of producing
electricity from the sun is getting closer and closer to a case
in which we can genuinely substitute electricity made from the
sun with other sources. I look forward to that day. I continue
to support, as I think all of us do, the real research and
development that will help get us there and limited innovation.
With that, Mr. Secretary, we thank you and we are
adjourned.
[Whereupon, at 1:09 p.m., the committee was adjourned.]
[GRAPHIC] [TIFF OMITTED] T4042.001

[GRAPHIC] [TIFF OMITTED] T4042.002

[GRAPHIC] [TIFF OMITTED] T4042.003

[GRAPHIC] [TIFF OMITTED] T4042.010

[GRAPHIC] [TIFF OMITTED] T4042.011

[GRAPHIC] [TIFF OMITTED] T4042.012

[GRAPHIC] [TIFF OMITTED] T4042.013

[GRAPHIC] [TIFF OMITTED] T4042.014

[GRAPHIC] [TIFF OMITTED] T4042.015

[GRAPHIC] [TIFF OMITTED] T4042.016

[GRAPHIC] [TIFF OMITTED] T4042.017

[GRAPHIC] [TIFF OMITTED] T4042.018

[GRAPHIC] [TIFF OMITTED] T4042.019

[GRAPHIC] [TIFF OMITTED] T4042.020

[GRAPHIC] [TIFF OMITTED] T4042.021

[GRAPHIC] [TIFF OMITTED] T4042.022

[GRAPHIC] [TIFF OMITTED] T4042.023

[GRAPHIC] [TIFF OMITTED] T4042.024

[GRAPHIC] [TIFF OMITTED] T4042.025