JUNE 1, 2012
On May 31, standing in front of Solyndra’s vacant headquarters, Mitt Romney lambasted President Obama for granting the company a $528 million loan guarantee. “I’m afraid … the president fails to understand the basic nature of free enterprise in America.” Ever since the solar panel manufacturer went belly-up in September, Romney has hammered the president for interfering with the market and has vowed to abolish the entire Department of Energy loan guarantee program.
This has been the party line, but a surprising dissent can be found in Ohio Senator Rob Portman, often mentioned as a potential running mate, who has sponsored a bill that would expand the program. And since he assumed office, in 2010, Portman has relentlessly badgered Energy Secretary Steven Chu to approve a guarantee four times larger than Solyndra’s for a teetering Ohio nuclear facility. Can the GOP handle a potential veep who seems A-OK with such innovation-killing “government overreach”?
At first glance, you wouldn’t think Portman a likely cheerleader for the loan-guarantee program. As the director of George W. Bush’s Office of Management and Budget (OMB) in 2006 and 2007, he helped slow the program before it had a chance to take off.
A little background: In 2005, Congress passed the Energy Policy Act, a sweeping bill that gave the Department of Energy (DOE) the authority to grant loan guarantees for innovative clean energy projects (both green and nuclear) for the first time since the Carter administration. The point was to guarantee the debt of new and risky—but worthwhile—companies, so that investors would come aboard. The Bush White House, however, wasn’t keen. Walter Howes, the then-DOE director who designed the loan guarantee program, told me that the Bush administration, in thrall to coal and oil, intentionally blocked the loan guarantee program. DOE, he said, “went through a kabuki dance … while their general counsel was working with OMB to make sure the system grinded to a halt.”
Beginning in mid-2006, when Portman became director, OMB started reviewing the DOE’s rules for granting guarantees, slowing things further. As one congressional staffer familiar with the process put it, OMB’s requirements “made the program less flexible and probably less successful to manage.” OMB, former Deputy DOE Assistant Secretary Dave Conover told me, was worried loan guarantees were “a frivolous expenditure.” Or, as former Ohio Senator George Voinovich put it, OMB just “didn’t want the exposure.” By 2007, the loan guarantee program hadn’t budged, and Congress was getting fed up with Portman. That summer, New Mexico Senator Pete Domenici, a proponent of nuclear energy, threatened to block the confirmation of Portman’s successor if the nominee didn’t pledge to improve on Portman’s performance. Still, by the end of 2008, the Bush White House hadn’t authorized a single guarantee.
But recently, Portman seems to have changed his tune. The project he’s now backing for a loan guarantee is far from compelling. The American Centrifuge Project (ACP) is a uranium-enrichment facility in Piketon, Ohio seeking a $2 billion loan guarantee to commercialize its dicey technology. The Project has been more or less dormant for 25 years, but recently, the Maryland-based United States Enrichment Corporation (USEC) has been trying to resuscitate it. Portman, at public hearings, and through letters and private meetings with Steven Chu, has vigorously pressed its case. In December, he introduced a bill to keep ACP afloat with an extra $150 million, telling reporters he would do “everything in his power” to find the funding.
But the risks associated with ACP make Solyndra look like a great bet. For one, ACP’s technology is in no better shape than it was when DOE shut it down in 1985. In April, the Nuclear Regulatory Commission dinged the project for five violations, after a routine procedure went awry. And even when they work properly, the plant's uranium centrifuges don’t really work. They are, in fact “horribly inefficient and use large amounts of energy,” according to Matthew Bunn, an expert on the nuclear industry at Harvard’s Kennedy School. It doesn’t help matters that the company’s balance sheet is a mess. On May 15, Standard and Poor’s downgraded its credit rating to junk status, and its shares are trading at 72 cents, down from a high of $23.91 in 2007. This is why USEC so badly needs a loan guarantee: No one will invest in them without an assurance they will be paid back if the company goes bust. USEC now maintains that if it doesn’t receive its $150 million lifeline by June 15, it may have to shut down its troubled Ohio centrifuges for good.
So why has Portman been so gung-ho for such a dodgy enterprise? The likely answer is unsurprising: more than 3,000 constituent jobs depend on it. But while his loan-guarantee fervor may help him at home, it might not mesh so well with any vice presidential aspirations he might be harboring.
Simon van Zuylen-Wood is a reporter-researcher at The New Republic.